Economy of the Maldives
|Economy of Maldives|
Malé, commercial centre of Maldives
|Rank||165th (nominal) / 168th (PPP)|
|Currency||1 Rufiyaa (Rf) = 100 Laari|
|Fiscal year||Calendar year|
|Trade organisations||WTO, SAFTA|
|GDP||$1.944 billion (nominal: 165th; 2011 est.)
$2.754 billion (PPP: 168th; 2011 est.)
|GDP growth||7.4% (2011 est.)|
|GDP per capita||$8,800 (2011 est.)|
|GDP by sector||agriculture (5.6%), industry (16.9%), services (77.5%) (2009 est.)|
|Inflation (CPI)||6% (2010 est.)|
below poverty line
|16% (2008 est.)|
|Labour force||110,000 (2010 est.)|
|Main industries||fish processing, tourism, shipping, boat building, coconut processing, garments, woven mats, rope, handicrafts, coral, sand mining|
|Exports||$163 million (2009 est.)|
|Main export partners||France 16.9%, Thailand 16.5%, India 15.2%, UK 9.1%, Sri Lanka 8.9%, Italy 7.3%, Philippines 4.4%, Germany 4.2% (2011)|
|Imports||$967 million (2009 est.)|
|Import goods||petroleum products, ships, foodstuffs, clothing, intermediate and capital goods|
|Main import partners||Singapore 23.1%, UAE 17.9%, India 8.9%, China 7.1%, Malaysia 6.6%, Sri Lanka 5.3%, Thailand 4.9% (2011)|
|Gross external debt||$943 million (2010 est.)|
|Public debt||$316 million (2004 est.)|
|Revenues||$758 million (2010 est.)|
|Expenses||$362 million; including capital expenditures of $80 million (2004 est.)|
In ancient times the Maldives were renowned for cowries, coir rope, dried tuna fish (Maldive Fish), ambergris (Maavaharu) and Coco de mer (Tavakkaashi). Local and foreign trading ships used to load these products in the Maldives and bring them abroad.
Tourism is the largest industry in the Maldives, accounting for 28% 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 play 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 the Maldives consists mainly of garment production, boat building, and handicrafts. It accounts for around 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 inhabited. 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 households in Malé.
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.
|Year||Gross Domestic Product||US Dollar Exchange||Per Capita Income
(as % of USA)
For purchasing power parity comparisons, the US Dollar is exchanged at 12.85 Rufiyaa only. Mean wages were $4.15 per manhour in 2009.
The 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%; however, the economy rebounded in 2006 with a 13% increase.
The 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 an air facility in Gan in return for British aid. However, the agreement ended in 1976, shortly after the closing of the Gan air station.
As of 2007, the Maldives has successfully promoted its natural assets for tourism. The beautiful, unpolluted beaches on small coral islands, blue waters and 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.
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 15.2 in 2002.
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.
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. There are no Patent Laws in the Maldives. 
Traditional economic activities such as mat weaving, jewelry making and lacquer work are also found in the Maldives.
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.
In April 1987, high tides swept over the Maldives, inundating much of Malé and nearby islands which prompted Maldivian authorities to take global climatic changes seriously. 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. There is also concern over the questionable shark fishing practices in place in the island. Shark fishing is forbidden by law, but these laws are not enforced. The population of sharks has sharply decreased in recent years.
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 planned to support post-secondary education development in Maldives
|Parts of this article (those related to Investment in education) are outdated. (February 2012)|
Poverty, Income and Gender Inequality
Maldives has successfully achieved their Millennium Development Goal (MDG) of halving the proportion of people living under the poverty line to a mere 1% as of 2011. Starvation is non-existent, HIV rates have fallen and malaria has been eradicated. Despite these accomplishments and progressive economic growth, developmental issues remain. In particular, the country needs to address income and gender disparities. Development in Maldives has occurred predominantly in the capital Male’; islands outside the capital continue to encounter high poverty vulnerability, lower per-capita income, lower employment and limited access to social services. A country-wide household income survey in 1997-1998 showed that the average income in the capital Male’ was 75% higher than in surrounding islands. Maldives’s Gini co-efficient stands at 0.41 and 0.3 million Maldivians continue to live on less than $1 a day.
Poverty and Income Disparity
The factors that have led to Maldivians falling into or remaining in poverty are:
- Geography: Residents of the Northern regions of Maldives tend to remain in poverty more than other regions due to the relatively lower level of development in the North;
- Health: Maldivians who do not work due to poor health remain in poverty possibly on account of lower accessibility to health services in the country;
- Young household members: Larger proportion of young family members results in a lower overall household income;
- Female household members: Lower female labour participation rate and therefore, households with a greater proportion of females will have lower household income.
The difficulty of accessing social services and infrastructure in the outer atolls has meant that geography is a key reason for poverty and income disparity in Maldives. In islands far from the capital, there tends to be lack of production, inadequate use of fishery resources, low value chain development and insufficient credit for small-scale producers and entrepreneurs. The scarcity of land and water, the underdeveloped farming practices and absence of support services in atolls has meant low production and thus low incomes in these regions.
Maldives also faces gender inequality. In a nationwide survey in 2007, it was established that one in every three Maldivian women between the ages of 15-39 has been a victim of domestic violence. The labour force participation rate of women decreased from 60% in 1978 to 37% in 2005. Maldives faces skill shortages and human resource development constraints causing fewer women to be employed.
The government has recognized these issues of income and gender disparities and with the United Nations Development Programme (UNDP), Maldives has implemented policies that directly address these issues. In 2011, President Nasheed said, “The most important facility for a country’s development is its people… and since women are half of the population in any country, for a certainty their full participation will speed up the pace of development.” 
- U.S. State Department estimate
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