After the war

David Lang, the Attorney General of a small and flourishing island territory that for an instant will remain nameless, is outraged at the very notion. "Restrictive immigration policy?" he splutters. "We're not anti-people-coming-in, but we must do it at a manageable pace, so we don't have unrest and problems that we can't handle."

David Lang, the Attorney General of a small and flourishing island territory that for an instant will remain nameless, is outraged at the very notion. "Restrictive immigration policy?" he splutters. "We're not anti-people-coming-in, but we must do it at a manageable pace, so we don't have unrest and problems that we can't handle."

Now what is this paradise in the southern seas, to which the world is flocking? Tahiti perhaps? The Seychelles, or Singapore? No, the country in question is the Falkland Islands, best known for sheep, penguins and emptiness - where the last recorded instance of "unrest" was the 1982 invasion by Argentina. Almost two decades on, the place is scarcely recognisable.

Back then, Britain was almost visibly desperate to wash its hands of a tiny, moribund appendage of empire in the far south Atlantic, largely bereft of strategic value since the opening of the Panama Canal. A territory half the size of Wales was owned by expatriate landowners, who ran a stagnant, virtually feudal economy based upon sheep and all things pertaining to them.

"If we hadn't been invaded we would have been Argentine by now," says Bill Luxton, one of the eight councillors who make up the Falklands' elected parliament-cum-administration. "We'd have been forced into dependency; probably, we would have crumbled in seven to 10 years. Before 1982, we were under massive pressure. Our lifeline was through Argentina. If somebody shot their mouth off, the fuel boat wouldn't come in. All the good things that have happened since, the investment - all were because of the Falklands war."

General Galtieri, however, couldn't wait for the prize to fall into his lap. Britain could not and would not fight back, his courtiers murmured in his ear; and what self-respecting dictator can resist the role of conquering hero? So he launched what turned out to be the most unusual of wars: a quarrel between allies that was utterly avoidable and tragically pointless - but that would bring nothing but good to the parties involved.

Britain gained a colossal injection of self-confidence, Argentina regained democracy, and the Falklands enjoyed a veritable rebirth. "For us, the war was like the divide between BC and AD," says Mr Luxton, and you will hardly find a Falklander who will not acknowledge that in the longer run, the conflict was the best thing that could have happened to the islands.

Outwardly, the image of beleaguered back-end of nowhere holds. As the Tristar flight from RAF Brize Norton approaches Mount Pleasant airbase, a couple of Tornados materialise by the wingtips to escort the aircraft on the last few minutes of its journey - even though not a soul believes Argentina is contemplating a repeat of 1982. As you wait for your luggage to arrive, a couple of soldiers climb aboard the carousel to deliver a lecture about mines. And if you're still nervous, you may take comfort from the permanent garrison of 1,500 British troops - which, given that there are only 2,200 islanders, makes the latter, on a per capita basis, one of the best-defended peoples on earth.

Seen from above, from one of the tiny government-operated Islander aircraft that link the capital, Stanley, with the scattered settlements, the Falklands at the dawn of the 21st century look very much as they did through the 20th and 19th centuries before it. Treeless, beige-coloured expanses are broken up by rocky outcrops, dark peat bogs, inlets and broad estuaries. The colours of the water change constantly, from grey and foam-flecked in the raking, ever-present wind, to glistening gold and silver as the sun breaks out of the clouds.

The landscape is harsh, uninhabited and endless. The only living things seem to be sheep, scattered about as they eke out an existence from the poor grazing-land. Until they move, they, too, look like grey rocks. But on the ground, you realise at once that the Falklands are very much alive - and being transformed by the modern world.

Yesterday, they were a dying little outpost of Britain, built on sheep. Today, Britain is still "home" even for Falklanders who've hardly set foot there. But no longer does the islands' wealth depend on the wool it still sends to Bradford, but on fish, or more precisely two species of squid. One is the illex, found to the north-west of the Falklands and greatly appreciated in the Far East. The other is the much smaller loligo squid, found in the eastern and southern waters, which provides the calamari fritti on the menu at your local Italian restaurant.

The price of wool may have plunged 40 per cent since 1995, but in 1986, the islands started selling licences to fish in their 150 miles of territorial waters. This year those licences will net £22m, and joint ventures between local and European - mostly Spanish - companies have spawned a new local species, the Falklands millionaire. On the humble squid rests an economy that would elicit an approving smile from even the dour Mr Gordon Brown.

Mike Blanch, head of the council in Bromley, Kent, until he was appointed the islands' chief executive last year, reels off the figures with delight. "GDP here is £55m, 15 times more than in 1982. In terms of income per head, we're on a par with south-east England", though, he admits, prices are 40 per cent higher thanks to the costs of transporting goods (a single orange in one of Stanley's post-war supermarkets costs 60p). "Our pension funds are fully funded; we've no debts. Our reserves are £70m, enough to tide us over three or four bad years."

In short, the Falklands are entirely self-financing, barring defence; and even that may change if they hit the real jackpot - offshore oil. Right now, a second exploration phase is about to start, and no one expects commercial production before 2010. But the first phase was promising enough for Shell to estimate potential reserves at between 20 and 60 billion barrels. That is North Sea size, and though monster fields like Brent and Forties are unlikely, there should be enough to permit the islands to reimburse Britain for the £70m it spends each year on maintaining Mount Pleasant.

Already, however, Stanley feels like a boom town. In the Falklands, of course, all things are relative; the town is still so tiny that the arrival of a decent-sized cruise ship can double the population for 12 hours. But new estates are sprouting up; there is a business district, even a bypass. The streets are so thick with new Land Rovers and four-wheel drives that Stanley's first set of traffic lights cannot be far off.

Its inhabitants enjoy the services of five doctors and two dentists and a handsome new hospital. Life is ordered and safe. The jail tacked on to Stanley's police station has four cells, but crime is virtually unknown; of what little there is, 97 per cent is solved. With just three weekly flights out, all through Mount Pleasant military airport, where do you run?

Education is free for all. Class sizes at the spanking new community school range from 13 to 20 pupils, with no graffiti in sight. The atmosphere is warm and polite, a million miles from the inner-city UK comprehensives that several of the school's teachers have fled in relief. The forlorn, decaying, pre-1982 Stanley is a distant memory.

But even at this distance, the islands cannot escape the world's problems. Here, as in Britain, the US and the world over, the city sucks the life from the countryside, or Camp, as they call it in the Falklands. Stanley may be a tiny El Dorado, but only 360 are left in Camp. On West Falkland, almost the size of East Anglia, only 120 people are left. The main settlement of Port Howard is down to 30; set on a bay of idyllic beauty, it offers the most breathtaking night sky anywhere on earth, but just a single child attends the schoolhouse on the hill.

Goose Green, on whose bleak hillsides was fought the battle where Lieutenant Colonel H Jones died 19 years ago, is even sadder, an Arizona ghost town with boarded buildings, an empty school, and old wooden houses rotting away by the water's edge. Harry Sarney, the Falklands' oldest inhabitant before he died a couple of years ago at the age of 92, used to remember the old Goose Green of the First World War, when the British fleet stood off the shore, and there were enough children for an 11-a-side football match. Now there are fewer than 22 people of any sex or age.

Schemes are afoot to revitalise Camp. Pasturage improvement projects are under way that may double the number of sheep. They have imported 60 reindeer from South Georgia as a first step toward livestock diversification, and later this year, a new abattoir conforming to EU standards will start operation, ending the absurdity whereby all the meat for the garrison must be imported from the UK.

The islands tout themselves as the world's first all-organic agricultural producer, "with no disease, no mosquitoes and no Chernobyl", as the agriculture chief, Bob Reid, puts it. With Europe on tenterhooks over foot-and-mouth, the formula could be a winner. So, too, could plans to develop tourism. The Falklands are a natural stop on the fashionable south Atlantic/Antarctica cruise circuit, with an extraordinarily rich wildlife, fabulous river fishing and the potential to become a huntsman's paradise - perfectly placed, in short, for both eco-tourism and shamelessly high-priced "cast and blast" holidays.

But in the end there is no escaping the obvious. Unemployment does not exist, and 15 per cent of people in Stanley have second jobs; what the Falklands need is not more money but more people. No one is talking of a stampede; the place will always be an acquired taste. If the world is your oyster, the Falklands are not for you.

There are no daily newspapers, and the single TV channel runs an amalgam of British programmes and a local broadcasting service with the delightful acronym Fibs. A weekly Chilean flight links the islands with Santiago; once a month, it calls in Argentina to pick up relatives to visit war graves in the war cemetery in Darwin - though these days few come. But for troops, islanders and most tourists, the lifeline remains the 18-hour, 8,000-mile Tristar run from Brize.

But if labour is desperately short, the gaps are mostly plugged by contract workers. To become a resident, you must have a guaranteed job. The caution in part reflects an understandable fear of being swamped by economic migrants from Argentina, but also a determination that this small paradise should rest undisturbed.

"What we don't welcome is people with no work coming here," says Councillor Mike Summers. "We're hard-pressed enough to house our own people. Do we really want to create an underclass for the benefit of a few greedy businessmen?"

But the Falklands' critics are not asking that; only enlightened self-interest - and a mite more willingness to share their current good fortune with others.