Raisina : Small States, Big Questions

It’s the modern paradox at the heart of being a small island state in the contemporary world : never have these states been more strategically important , but rarely have they felt more exposed.

That paradox sat at the centre of a session at the Raisina Dialogue on Friday, moderated by Asia New Zealand Foundation Chief Executive Suz Jessep, and bringing together voices from the Maldives, Indonesia, Tonga, and Malta to grapple with a question that is becoming increasingly urgent: can island and archipelago nations convert their geographic location into a workable leverage — or are they destined to remain objects of great-power competition in the coming century ?

The answer, the panel broadly agreed, depends on choices being made right now, and whether those choices are made on the islands' own terms.

The session could not have arrived at a sharper moment for the Asia-Pacific. The dismantling of USAID under the Trump administration and the introduction of new tariffs have dealt a serious blow to island economies, while Washington's relative withdrawal from the region has opened the door for China to expand its influence.

Fane Kite, Chief Operating Officer of the Royal Oceania Institute in Tonga, picked up on the central dilemma : the infrastructure loans that rebuilt the business district in the capita; Nuku’ alofa  after the 2006 riots now mean that China's EXIM Bank accounts for nearly half Tonga's total external debt, with annual repayments to Beijing amounting to around 4% of GDP.

“Infrastructure upgrades require assistance from outside, its true.” she said. “ Recently we had an upgrade to our port .. partly funded by the World Bank.”

“We have the loans, and we’re paying them off.”

China maintains a roughly 31-to-1 ratio of loans to grants across its Pacific lending- a ratio that concentrates leverage in the lender's hands while leaving the borrower with roads, ports, office buildings, and sometimes some awkward obligations.

A Tongan parliamentary select committee later claimed the loan to rebuild Nuku’alofa was actually illegal in that it failed to meet requirements under Tonga's own Public Finance Management Act, and that more than half the funds were spent on things outside the original agreement, including an extension to the Royal Palace.

The loan issue is one faced by numerous other island states in Oceania, including  Tuvalu, Tonga, Samoa, Papua New Guinea, Micronesia, Kiribati, and Vanuatu. All of these governments face constrained sovereignty, narrowed policy space, and governments whose fiscal choices are to some extent influenced by the power of distant creditors.

Mohamed Nasheed, former President of the Maldives and Secretary-General of the Climate Vulnerable Forum, continues to insist this debt story has an important climate dimension. The Maldives, where approximately 80% of islands sit just one metre above sea level, faces an existential problem: the cost of coastal protection, desalination, and climate adaptation is measured in billions the government does not have.

Despite this, Nasheed says the Maldives will endure the ravages of climate change. “We’re not going anywhere, we’ll live on stilts, we’ll do what we have to do.” He told the audience.

Nasheed has argued consistently that the debt sustainability models created by international institutions sustain the debt rather than repay it, trapping countries in cycles of borrowing to service existing obligations. The question of how to break that cycle — and whether climate adaptation finance can be designed to strengthen island  sovereignty, rather than weaken it.  

New Delhi's Taj Palace Hotel, venue for this years Raisina Dialogue/ image AMC

Dino Patti Djalal, founder of the Foreign Policy Community of Indonesia and one of the Indo-Pacific's most seasoned diplomatic voices, brought a large-scale perspective.

The FPCI is a non-profit forum advising the Indonesian government on foreign policy, and Pak Djalal is himself a former ambassador to the US and vice Minister for Foreign Affairs in Jakarta.

His recent work looks at the transition from a Western-led world order to a new, uncertain structure, and the rising role of middle powers like Indonesia as navigators of that transition. At Raisina 2026, he was an essential voice to hear from.

Indonesia's experience -as an archipelago of over 17,000 islands, and the world's largest Muslim-majority democracy, is a nation that has historically insisted on a "free and active" foreign policy, which offers a working model to copy for small island states.

The phrase was coined by Mohammad Hatta, Indonesia's first Vice President, in 1948 - before Indonesia had even fully secured its independence. The context was the early Cold War, when newly decolonised nations were being pressured to choose sides between Washington and Moscow. Hatta's argument was that Indonesia should not be a passive player in the struggle of others, but an active subject determining its own course. It developed into eventually what became the “non-aligned movement.”

For Pak Djalal, the challenge for smaller Pacific states is that they lack Indonesia's scale. They cannot play great powers off against each other, but what they can do - and what the session argued they are increasingly doing - is exercising collective power through regional institutions like ASEAN, using their natural resources as bargaining chips, and speaking up in venues like the UN or the Pacific Islands Forum, to make sure they have a voice in the rule-making process.

He harked back to 1957 for a salient example of Indonesia taking control of its own resources, explaining the details of the The Djuanda Declaration, where Jakarta unilaterally declared waters around all of its islands as part of its national territory.

“What we did was something very illegal at the time, and it was challenged over decades by maritime states, but thank god there was the UN Law of the Sea declaration in 1982, and what was illegal became international law.”

The implicit argument for smaller Pacific island states is: you don't need to be powerful to reshape the rules. You need patience, legal creativity, coalition-building among like-minded states, and a strategy.

Asia New Zealand Foundation Chief Executive Suz Jessep moderated the discussion / image AMC

The digital dimension of this competition is also intensifying. Subsea cables, satellite networks, and data infrastructure are not merely commercial assets - they are strategic ones. Whichever power builds and operates the communications arteries of the Asia- Pacific shapes the information environment, the intelligence picture, and ultimately the policy choices of the governments connected to them.

The session explored whether small island states can leverage their position as indispensable connection points in those networks,, rather than simply hosting them, to generate development revenue and to maintain meaningful control over their own digital future.

It was a refreshing discussion on the issue, as conversations about small island nations and their development often leans towards “what is to be done?” for these nations by the developed world. This discussion was more about what the nations are already doing for themselves, and how they can do it better.

In a world order where great powers are retrenching and multilateral institutions are under pressure, the countries that will prevail are not those waiting for any external rescue. They are those that have already begun, in Raisina's own words, the work of “assertion” -converting their identity and resources into a strategy.

As the conference itself noted, regions once considered peripheral have now staked their claim to a new kind of centrality.

Asia Media Centre