Economy of Maldives

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1 Economy Overview
2 Macro-economic trend
3 Economic Sectors
4 Environmental concerns
5 Investment in education
6 Statistical data
7 References
8 See also

[edit] Economy Overview

The mixed economy of the Maldives is based on the principle activities of Tourism, Fishing and Shipping.

Tourism is the largest industry in the Maldives, accounting for 20% of GDP and more than 60% of the Maldives' foreign exchange receipts. It powered the current GDP per capita to expand 265% in the 1980s and a further 115% in the 1990s. Over 90% of government tax revenue flows in from import duties and tourism-related taxes.

Fishing is the second leading sector in the Maldives. The economic reform program by the government in 1989 lifted import quotas and opened some exports to the private sector. Subsequently, it has liberalized regulations to allow more foreign investment.

Agriculture and manufacturing plays a minor role in the economy, constrained by the limited availability of cultivable land and shortage of domestic labour. Most staple foods are imported.

Industry in Maldives consists mainly of garment production, boat building, and handicrafts. It accounts for about 18% of GDP. Maldivian authorities are concerned about the impact of erosion and possible global warming in the low-lying country.

Among the 1,900 islands in the Maldives, only 198 are uninhabited. The population is scattered throughout the country, and the greatest concentration is on the capital island, Malé. Limitations on potable water and arable land, plus the added difficulty of congestion are some of the problems faced by the households in Male'.

Development of the infrastructure is mainly dependent on the tourism industry and its complementary tertiary sectors, transport, distribution, real estate, construction, and government. Taxes on the tourist industry have been plowed into infrastructure and it is used to improve technology in the agricultural sector.

[edit] Macro-economic trend

This is a chart of trend of gross domestic product of Maldives at market prices estimated by the International Monetary Fund with figures in millions of Rufiyaa.

Year	Gross Domestic Product	US Dollar Exchange
1980	440	7.58 Rufiyaa
1985	885	7.08 Rufiyaa
1990	2,054	9.55 Rufiyaa
1995	4,696	11.76 Rufiyaa
2000	7,348	11.77 Rufiyaa
2005	10,458	12.80 Rufiyaa

For purchasing power parity comparisons, the US Dollar is exchanged at 8.36 Rufiyaa only.

Maldives has experienced relatively low inflation throughout the recent years. Real GDP growth averaged about 10% in the 1980s. It expanded by an exceptional 16.2% in 1990, declined to 4% in 1993, and, over the 1995-2004 decade, real GDP growth averaged just over 7.5% per year. In 2005, as a result of the tsunami, the GDP contracted by about 5.5%.

Maldives has been running a merchandise trade deficit in the range of $200 to $260 million since 1997. The trade deficit declined to $233 million in 2000 from $262 million in 1999. In 2004 it was $444 million.

International shipping to and from the Maldives is mainly operated by the private sector with only a small fraction of the tonnage carried on vessels operated by the national carrier, Maldives Shipping Management Ltd.

Over the years, Maldives has received economic assistance from multilateral development organizations, including the United Nations Development Programme, Asian Development Bank, and the World Bank. Individual donors, including Japan, India, Australia, and European and Arab countries (such as Islamic Development Bank and the Kuwaiti Fund) also have contributed. See: Economic Aid to Maldives

In 1956, a bilateral agreement gave United Kingdom access to Gan in Addu Atoll in the far south, to establish air facility in Gan in return for British aid. However, the agreement ended in 1976, shortly after the closing of the Gan air station.

[edit] Economic Sectors

[edit] Tourism

In the present day, Maldives is successfully promoted for its natural assets for tourism. The beautiful, unpolluted beaches on small coral islands, blue waters and glorious sunsets attract tourists worldwide, bringing in about $325 million a year. Tourism and other services in the tertiary sector contributed 33% to the GDP in 2000.

Since the establishment of the first resort in 1972, over 84 islands have been developed as tourist resorts, with a total capacity of some 16,000 beds. The number of tourists (mainly from Europe) visiting the Maldives increased from 1,100 in 1972 to 280,000 in 1994. In 2000, tourist arrivals exceeded 466,000. The average occupancy rate is 68%, with the average number of tourists staying for 8 days and spending about $755.

It is recorded that over 500,000 tourists visited the islands in 2003.

[edit] Fishing

This sector employs about 20% of the labour force and contributes 10% of GDP. All fishing is done by line as the use of nets is illegal. Production in the fishing sector, was approximately 119,000 metric tons in 2000, most of which were skipjack tuna. About 50% of fish is exported, especially to Sri Lanka, Germany, UK, Thailand, Japan, and Singapore. Almost 42% of fish exports consist of dried or canned fish, and another 31% is frozen and the remaining 10% is exported as fresh fish. Total exports of fish reached about $40 million in 2000. The fishing fleet consists of some 1,140 small, flat-bottomed boats (dhonis). Since the dhonis have shifted from sailing boats to outboard motors, the annual tuna catch per fisherman has risen from 1.4 metric tons in 1983 to 5.6 in 1999.

[edit] Agriculture

Due to the availability of poor soil and scarceness of arable land in the islands, agriculture is limited to only a few subsistence crops, such as coconut, banana, breadfruit, papayas, mangoes, taro, betel, chilies, sweet potatoes, and onions. Agriculture contributes about 6% of GDP.

[edit] Industry

See also: Industries in Maldives

The industrial sector provides only about 7% of GDP. Traditional industry consists of boat building and handicrafts, while modern industry is limited to a few tuna canneries, five garment factories, a bottling plant, and a few enterprises in the capital producing PVC pipe, soap, furniture, and food products.

[edit] Other

Traditional economic activities such as mat weaving, jewelry making and laquer work are also found in the Maldives.

[edit] Environmental concerns

There is growing concern towards the coral reef and marine life due to coral mining (used for building and jewelry making), sand dredging, solid waste pollution and oil spills from boats. Mining of sand and coral has destroyed the natural coral reef that once protected several important islands, now making them highly susceptible to the erosive effects of the sea. The destruction of large coral beds due to heat is also a growing concern.^[1]

In April 1987, high tides swept over the Maldives, inundating much of Malé and nearby islands which prompted Maldivian to become interested in global climatic changes. An INQUA research in 2003 found that actual sea levels in the Maldives had dropped in the 1970s and forecasts little change in the next century.^[2]

The Asian brown cloud hovering in the atmosphere over the northern Indian Ocean is also another concern. Studies show that decreased sunshine and increased acid rain from the cloud.^[3]

[edit] Investment in education

The government expenditure for education was 18% of the budget in 1999. Both public and private schools have made remarkable progress in the last decade. Further, there are private institutions that are staffed by community-paid teachers without formal training who provide basic numeracy and literacy skills in addition to religious knowledge.

The modern schools are run by both the government and private sector, providing primary and secondary education simultaneously. As the modern English-medium school system expands, the traditional system is gradually being upgraded. By early 1998, more than 30 islands were equipped to provide education for grades, 8, 9, and 10. Some 164 islands provided education up to grade 5, 6, or 7. In Malé is the only school for grades 11 and 12, with a school in the southern most island of Gan scheduled to offer the final 2 years starting in 2002.

Seven post-secondary technical training institutes provide opportunities for youth to gain skills that are in demand. The World Bank has already committed $17 million for education development in 2000-04, and plans to commit further $15 million for human development and distance learning during this period. Over 2001-03, the ADB is planning to support post-secondary education development in Maldives.

[edit] Statistical data

GDP: - US$817 million (2005)

GDP - real growth rate: - +7.6% (1995-2004 avearge); -5.5% (2005)

GDP - per capita: - $2,483 (2005)

GDP - composition by sector: (2004 est.)

agriculture: - 20%

industry: - 18%

services: - 62%

Inflation rate (consumer prices): - 3% (1995-2004 avearge); 5.6% (2005 est.)

Labor force: estimated

1995 - 67,000

2000 - 88,000

Labor force - by occupation: (1995)

agriculture 22%,

industry 18%,

services 60%

Unemployment rate: - NEGL%

Budget: (2004 est.)

revenues: $265 million (excluding foreign grants)

expenditures: $362 million; including capital expenditures of $80 million

Industries: fish processing, tourism, shipping, boat building, coconut processing, garments, woven mats, rope, handicrafts, coral and sand mining

Industrial production growth rate: estimated

1996 - +4.4%

2004 - -0.9%

Electricity - production: - 85 GWh (1998) and 135 million kWh (2003)

Electricity - production by source: - fossil fuel: - 100% (2005)

Electricity - consumption: - 79 GWh (1998) and 125.6 million kWh (2003)

Agriculture - products: - coconuts, corn, sweet potatoes; fish

Exports - commodities: - fish, clothing

Exports: - $123 million f.o.b. (2004 est.)

Exports - partners:

1998 - US, UK, Sri Lanka, Japan

2005 - Thailand 30.6%, UK 13.8%, Sri Lanka 13.4%, Japan 13.3%, Algeria 5.8%

Imports - commodities: - petroleum products, ships, foodstuffs, textiles, clothing, intermediate and capital goods

Imports:

1998 - $312 million f.o.b.

2000 - $372 million f.o.b.

2004 - $567 million f.o.b.

Imports - major partners: - Singapore, India, Sri Lanka, Japan, Canada

Debt - external: estimated

1998 - $188 million

2000 - $237 million

2004 - $316 million

Economic aid - recipient: - $NA

Currency: - 1 rufiyaa (Rf) = 100 laari

Exchange rates: - rufiyaa 12.80(Rf) per US$1 (2006)

Fiscal year: - calendar year

[edit] References

^ Sheppard, Charles R.C. (Sept 18, 2003) "Predicted recurrences of mass coral mortality in the Indian Ocean" Nature 425(6955): pp.294-296
^ Mörner, Nils-Axel; Tooley, Michael; and Possnert, Göran (2004) "New perspectives for the future of the Maldives" Global and Planetary Change 40: pp.177–182;
^ Srinivasan, J. et al. (2002) "Asian Brown Cloud – fact and fantasy" Current Science 83(5): pp.586-592;