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The economy has grown consistently at a very impressive pace over the
last two decades. Annual GDP growth has averaged 7.9 percent over the
last 15 years, while inflation has been maintained at modest levels.
The Maldives economy is largely based around two industries—tourism
and fishing. Other complementary activities to tourism, including retail
and wholesale trade, construction, communication and transportation,
are increasingly becoming important sectors. Prudent macro-economic
management and a stable political environment have enabled the
Maldives to achieve uninterrupted economic growth in the past. The
Maldives’ economy, although small and largely dependent on just two
key sectors, has proven to be very resilient to external shocks.
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Tourism is undoubtedly the main driver of the economy. Tourism
contributes over a third of the GDP. It is the largest foreign exchange earner,
contributing approximately 70 percent of gross foreign exchange receipts.
Over 32 percent of government revenue in 2004 was generated from
tourism. Tourist arrivals have increased from 83,814 in 1984 to 616,717 in
2004, with average annual increases of about 9 percent. The main tourism generating
markets are concentrated in Europe and Asia. In Europe, Italy,
France, Germany, Switzerland and the United Kingdom are the main
markets. While in Asia, arrivals from Japan, Hong Kong and China are
significant.
Tourism in the Maldives has evolved from modest beginnings. Maldives
celebrated 34 years of international tourism in 2006. During this period, the
structure and the size of the industry have changed significantly. Today, the
Maldives is one of the most sought-after holiday destinations in the world
and offers resorts that cater for most budgets. Several internationally
renowned hotel brands including Hilton, Four Seasons, Club Med, One and
Only and Taj have their properties in the Maldives, catering to the upmarket
clientele, while many regional and local brand names are fast consolidating
their positions in the market.
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Since time immemorial, the fisheries industry is the bloodline of the
Maldivian economy. Prior to the introduction of international
tourism, Maldivians derived their livelihood from fishing. The fisheries
sector has, however, undergone much change over the years. The once
very informal sector has been modernised to take advantage of the more
advanced and efficient fishing techniques of today. One of the notable
changes is the gradual replacement of traditional sailing boats by larger,
mechanized boats and also the use of Fish Aggregating Devices (FAD’s).
Furthermore, the recent opening up of the Exclusive Economic Zone (EEZ)
to both local and foreign investors in the Maldives and the increased
number of vessels operating in this zone has enhanced the growth of the
fisheries sector.
Fishery contributes about 7 percent to the national GDP and, like tourism,
is a vital source of foreign exchange. Fish caught in the Maldives caters to
local demand and is exported to Asia, Europe and the United States in
both processed and unprocessed forms. |
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Economic Policies and
Development Objectives |
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The quality of the business environment in a country is crucial for the
success of any business in it. The following sub-section provides a brief
overview of some of the areas relevant for successful business
development in the Maldives. |
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The country has a very young and literate population with a high rate of
school enrolment. Public education is free. Education in the majority of the
schools is conducted in the English medium. The formal education system
in the Maldives comprises three stages - primary schooling, secondary schooling
and higher secondary schooling. Students following the formal education
system sit the Cambridge University IGCSC examinations on completion of
their secondary education. After this, students may choose to study and sit
the university of London, Advanced Level Examinations, join the Maldives
College of Higher Education, or seek further education in an overseas
university or college. The Maldives College of Higher Education offers
diploma level and degree level courses in affiliation with reputed
international colleges and universities in various fields including,
management, accounting and finance, information technology, law,
nursing and community health, education, tourism and hospitality studies
and various disciplines of engineering. Furthermore relevant policies are
set in place for skills development and training.
According to the 2000 national census, the country’s domestic labour force
stands at about 88,000. The labour force participation rate is 47.7 percent.
The local labour force is supplemented by the employment of over 54,000
expatriate workers in 2006. The government adopts very liberal foreign
employment policies to facilitate the need of investors. The Maldives has no
labour law in place, and issues relating to labour are governed by labour
regulation and guide lines set out by the Ministry of Higher Education,
Employment and Social Security.There is no minimum wage or a formalized
wage structure in the Maldives. Wages and working hours in the private
sector are largely determined by negotiation between employers and
prospective employees. However, the public sector has standardised
working hours and a salary scale. The nation enjoys good industrial relations
and greatly emphasizes the need for safety standards for the success of its
investments. |
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The Maldives possesses the basic infrastructure required for successful
growth of business and investments. The Maldives is conveniently linked
by air to many countries in Asia, the Middle East and Europe. The
international airport at Huluhule Island caters to most types of aircraft.
Currently, Male’ Commercial Port is the principle port for handling
international cargo. There are regular cargo services from the Far East and
Europe. Total throughput in 2004 was 364,976 metric tonnes, with the bulk
of this figure being imports into the country, comprising a host of
consumer goods, construction materials and petroleum products. Under
the regional development initiative of the government, two regional ports
one in the south and the other in the north of the country, commenced
their operation in 2006, providing direct links to international ports.
Telecommunication services were solely provided by Dhiraagu Pvt. Ltd., a
company in which the government holds a majority share. However, this
sector is gradually being opened up for competition. A 100 percent
Kuwaiti-owned company, Wataniya Telecom Maldives Pvt. Ltd., has
recently been issued with a 15-year licence to provide mobile
communication services alongside Dhiraagu Pvt. Ltd. The new entrant has
made the telecoms market more efficient overall, providing additional
mobile services and enhancing the product range available to customers.
The liberalization of the telecoms sector has benefitted the public with
better services atmore affordable rates
The electricity supply for the Maldives is provided by the 100 percent
Government-owned State Electric Company (STELCO). STELCO, through
its 27 power-generating outlets, caters to the energy demands for most
islands excluding the resorts and the airport. Current generating capacity is not
utilized to full potential but STELCO has an ongoing program of
expansion and modernization.
Due to the geographic characteristics of the Maldives, inter-island
transportation is crucial. Air links have been established to four points
across the archipelago, with the government-owned Island Aviation
Services Ltd providing regular flights to these regional airports. Maritime
transport is largely unscheduled, but passenger and cargo carriers
operate to Male’ from most inhabited islands. With the expansion of
tourism and trade, inter-island transportation has become increasingly
regular and frequent. |
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Industrial development and manufacturing in the Maldives will continue to be based on the recognition that income-earning opportunities lie in winning a niche in global markets because of the small size of the population and the lack of a sizeable domestic market. Administrative reforms are underway to further promote industrial investment by making the already hospitable policy environment more transparent. This is being done through revision of the Foreign Investment Act and the proposed establishment of Free Trade Zones and Special Economic Zones in designatedregions of the Maldives. |
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Banking and financial services |
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Local sources of finance are limited in scope in the Maldives because of the absence of a mature capital market and other sophisticated financial instruments usually available in developed world. There are five commercial banks providing credit mainly to tourism and other businesses. Commercial banks in the Maldives follow normal international banking practices and are regulated by the Central Bank, the Maldives Monetary Authority. Maldives is home to internationally reputed accounting and audit firms such as Ernst & Young, Price WaterhouseCoopers and KPMG. Several insurance companies, both local and foreign, operate in the Maldives and a wide range of insurance products catering to both business and private needs are available throughthese companies. |
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Legal and regulatory aspects |
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The source of law in the Maldives is based on the Constitution and on the Islamic Sharia'. Bills passed by the Citizens Majlis (the Parliament) become law after ratification by the President. The President is also empowered by the Constitution to legislate by decree. Judicial matters are referred to courts in Male' or in other inhabited islands. The courts are presided over by magistrates. The High Court of Maldives, headed by the Chief Justice, is the highest court in the Maldives. There is also the right of appeal to the President in the event of dissatisfaction with the decision of the High Court. A number of legal firms and lawyers, with most professional personnel trained overseas, offer legal services to the business community. |
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Brief summary of
the major legislation on
trade and investment |
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