economic overview economic policies tourism trade fisheries banking
Despite its isolated locale, its population being spread over hundreds of kilometres of ocean, and the scarcity of its fragile soils, the Maldivian economy has made unprecedented progress over the last two decades.
The Gross Domestic Product (GDP) has grown at an annual rate of around 6.8% from 1997 to 2000, fuelled mainly by the expansion of the tourism industry, which is the largest foreign exchange earner in the country. This growth rate is significantly higher compared to the South Asian average of 5.9% and the 4.5% average of the Least Developed Countries during the same period. GDP per capita has increased from US$ 1721 in 1997 to over US$ 1968 by 2001.
After tourism and trade, fisheries is the third largest sector earning foreign exchange. Agriculture continues to play a minor role in the economy, constrained by the limited availability of cultivable land and the shortage of domestic labour.
Industry sector, which consists mainly of garment production, traditional and fibre glass boat building and home based industries like weaving, rope making and handicraft production accounts for about 18% of GDP. New and notable industries like liquefied petroleum gas bottling, paper bag production, desalination plants, electric panel boards and assembling of machinery are also emerging.
The country’s social and economic policies as set out in the sixth national development plan (2001-2005) combine a liberal economic and investment plan focusing on:
● diversifying and expanding the economy by further developing existing industries and by exploring new economic activities, while ensuring the sustainability of physical and natural resources;
● increasing private sector participation in the development process, particularly in expanding the economic base of the country.
● improving the quality and relevance of educational, health and social services while ensuring that the benefits of development are shared equitably among the population;
● developing human resource capacity by providing relevant training and employment opportunities;
● pursuing legislative, regulatory, governance and administrative reform to facilitate rapid economic and social development.
● developing a sustainable and cost-effective transportation and telecommunication infrastructure to facilitate economic, social and regional development; and
● ensuring socio-political stability and democratic participation of all in the development process while upholding the national unity and social cohesiveness based on shared social, cultural and religious values.
In less than three decades, Maldives has transformed a cluster of uninhabited coral islands into one of the worlds most sought after destinations in the world. Its wealth of natural assets such as the white beached islands, the crystalline beauty of its turquoise lagoons, the splendour of its underwater world with its variety of marine life provides the main attraction for tourists. Starting from a bed capacity of 280 in 1972, the industry has boomed to a bed capacity of 16,608 spread over 87 resort islands, each located on its own self-contained individual island. All resorts generate their own power and desalinate their own water and are fully self reliant.
As the largest foreign exchange earner in the country the tourism sector contributes nearly 70% of the country’s foreign exchange earnings. The sector contributed an average of 33.4% of GDP annually from 1996 to 2001. Tourist arrivals increased by an average of 8.5% per year, reaching a total of over 460,000 visitors in 2001.
Although about 79% of tourists originally come from western European countries like Italy, Germany, United Kingdom, France and Switzerland, tourist arrivals from Asia, Australia and Africa have also increased considerably. Asia comprised of 17% of all tourist arrivals in 1999. Japanese tourists continue to dominate the Asian market with over 54% of the total arrivals.
From small and simple to five-star plus luxury establishments, Maldivian resorts offer a variety of entertainment including water sports, incomparable diving, romantic getaways, and above all, sun, sea and sand.
Some of the international chains currently in operation in the Maldives are the Hilton, Four Seasons, Banyan Tree, Six Senses and Taj and Shangari-la.
The importance of international tourism to the Maldives and the reliance on imports by all the sectors in the economy has kept the country heavily dependent on foreign trade. Exports rose from US$ 502.7 million in 1990 to US$ 937.3 million in 2001. During the period, imports rose from US$ 131.5 million to US$ 474.1 million.
Principal Exports 2001 (in ‘000 Rufiyaa)
Total Exports
937325
Marine Exports
538337
Apparel and clothing accessories
396664
Principal Imports 2001 (in ‘000 Rufiyaa)
Total
4741042
Vegetable products
375478
Prepared food stuff, beverages, spirits etc.
411783
Mineral products
703964
Textiles and textile articles
506609
Machinery and mechanical appliances
884567
Main Export Partners 2001 (in ‘000 Rufiyaa)
USA
396,627
Sri Lanka
159,779
UK
84,725
Germany 56,849
Thailand
50,343
Main Import Partners 2001 (in ‘000 Rufiyaa)
Singapore
1204311
India
502400
Sri Lanka
619660
Malaysia
421174
UAE
397537
With the majority of it geographical features consisting of sea area, and with no other natural resources, Maldives heavily depend on the ocean for its sustenance. Fishing has served as the principal means of livelihood for the people throughout the country’s history. Tuna makes up the bulk of fish caught in the Maldives with skipjack tuna being the most common species. The predominant methods of fishing are pole and line for skipjack and trolling for surface fish such as little tuna, frigate, mackerel, wahoo and jacks. Canned, frozen and dried tuna are the country’s major exports.
The replacement of traditional sailing boats by mechanised boats, the liberalisation of the Exclusive Economic Zone (EEZ) and the increasing number of vessels in the EEZ have greatly enhanced the growth of the fisheries sector.
Fisheries was the dominant sector of the economy until the tourism industry surpassed fisheries in terms of its contribution to GDP in 1985. Although the fisheries sector’s contribution to GDP has declined from 10.7% in 1990 to 5.9% in 2001, it remains the third largest sector earning foreign exchange in the country. It is also the main provider of employment in atolls outside the tourism zone. In 2001, the value of fish exports reached over MRf 538,337 comprising 57.4% of the total exports of the country.
The government’s recent introduction of a Skipjack Industry Development Programme to further enhance the sector, allowed Maldivian companies and/or investors to engage in purchasing, processing and exporting skipjack in zone one of the four fisheries zones of the Maldives. Zone one consists of four atolls in the northern part of the Maldives. In keeping with the government’s policy to introduce private sector participation in the fisheries industry, the government proposes to open zone 3 in the near future as well.
Banking is governed in the Maldives by the Maldives Monetary Authority Act, under which the Maldives Monetary Authority, the central Bank of the country regulates all the banking activities in the country. The authority also determines the amount of reserves of banking institutions and the manner by which profits, service charges, and credits are given.
There are five commercial banks currently operating in the Maldives: the Bank of Maldives, the State Bank of India, the Bank of Ceylon, Habib Bank and the latest entrant into the banking scene being the Hong Kong and Shanghai Banking Corporation.
Additionally, the Maldives Finance Leasing Company, mainly sponsored by, the National Development Bank of Sri Lanka and The International Finance Corporation, but with the Maldives private and public sector participation has been formed recently as a non-bank financial institution.
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