Economy of Maldives
Encyclopedia
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.
Nowadays, the mixed economy
of the Maldives is based on the principal activities of tourism
, fishing
and shipping
.
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 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 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.
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.
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.
s). Since the dhoni
s 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.
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. http://www.billanderson.com.au/Gazetteer-Patents.htm
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.
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.
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
GDP - real growth rate: -3.60% (2006)
GDP - per capita: - $2,483 (2005)
GDP - composition by sector: (2004 est.)
Inflation rate (consumer prices): - 3% (1995-2004 average); 5.6% (2005 est.)
Labor force: estimated
Labor force - by occupation: (1995)
Unemployment rate: - NEGL%
Budget: (2004 est.)
Industries:
fish processing
, tourism, shipping, boat building, coconut processing, garments, woven mats, rope, handicrafts, coral and sand mining
Industrial production growth rate: estimated
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:
Imports - commodities: - petroleum products, ships, foodstuffs, textiles, clothing, intermediate and capital goods
Imports:
Imports - major partners: - Singapore, India, Sri Lanka, Japan, Canada
Debt - external: estimated
Economic aid - recipient: - $NA
Currency: - 1 rufiyaa (Rf) = 100 laari
Exchange rates: - rufiyaa 12.80(Rf) per US$1 (2006)
Fiscal year: - calendar year
Maldives
The Maldives , , officially Republic of Maldives , also referred to as the Maldive Islands, is an island nation in the Indian Ocean formed by a double chain of twenty-six atolls oriented north-south off India's Lakshadweep islands, between Minicoy Island and...
were renowned for cowries, coir
Coir
Coir is a natural fibre extracted from the husk of coconut and used in products such as floor mats, doormats, brushes, mattresses etc. Technically coir is the fibrous material found between the hard, internal shell and the outer coat of a coconut. Other uses of brown coir are in upholstery...
rope, dried tuna
Tuna
Tuna is a salt water fish from the family Scombridae, mostly in the genus Thunnus. Tuna are fast swimmers, and some species are capable of speeds of . Unlike most fish, which have white flesh, the muscle tissue of tuna ranges from pink to dark red. The red coloration derives from myoglobin, an...
fish (Maldive Fish), ambergris
Ambergris
Ambergris is a solid, waxy, flammable substance of a dull gray or blackish color produced in the digestive system of and regurgitated or secreted by sperm whales....
(Maavaharu) and Coco de mer
Coco de mer
The Coco de Mer , the sole member of the genus Lodoicea, is a palm endemic to the islands of Praslin and Curieuse in the Seychelles. It formerly also was found on St Pierre, Chauve-Souris and Ile Ronde in the Seychelles group, but has become extinct on these islands...
(Tavakkaashi). Local and foreign trading ships used to load these products in the Maldives and bring them abroad.
Nowadays, the mixed economy
Mixed economy
Mixed economy is an economic system in which both the state and private sector direct the economy, reflecting characteristics of both market economies and planned economies. Most mixed economies can be described as market economies with strong regulatory oversight, in addition to having a variety...
of the Maldives is based on the principal activities of tourism
Tourism
Tourism is travel for recreational, leisure or business purposes. The World Tourism Organization defines tourists as people "traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes".Tourism has become a...
, fishing
Fishing
Fishing is the activity of trying to catch wild fish. Fish are normally caught in the wild. Techniques for catching fish include hand gathering, spearing, netting, angling and trapping....
and shipping
Shipping
Shipping has multiple meanings. It can be a physical process of transporting commodities and merchandise goods and cargo, by land, air, and sea. It also can describe the movement of objects by ship.Land or "ground" shipping can be by train or by truck...
.
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 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 inhabited. The population is scattered throughout the country, and the greatest concentration is on the capital island, Malé
Malé
Malé , is the capital and most populous city in the Republic of Maldives. It is located at the southern edge of North Malé Atoll . It is also one of the Administrative divisions of the Maldives. Traditionally it was the King's Island, from where the ancient Maldive Royal dynasties ruled and where...
. Limitations on potable water
Drinking water
Drinking water or potable water is water pure enough to be consumed or used with low risk of immediate or long term harm. In most developed countries, the water supplied to households, commerce and industry is all of drinking water standard, even though only a very small proportion is actually...
and arable land
Arable land
In geography and agriculture, arable land is land that can be used for growing crops. It includes all land under temporary crops , temporary meadows for mowing or pasture, land under market and kitchen gardens and land temporarily fallow...
, plus the added difficulty of congestion are some of the problems faced by households in Malé
Malé
Malé , is the capital and most populous city in the Republic of Maldives. It is located at the southern edge of North Malé Atoll . It is also one of the Administrative divisions of the Maldives. Traditionally it was the King's Island, from where the ancient Maldive Royal dynasties ruled and where...
.
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.
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 | Per Capita Income (as % of USA) |
|---|---|---|---|
| 1980 | 440 | 7.58 Rufiyaa | 3.11 |
| 1985 | 885 | 7.08 Rufiyaa | 3.85 |
| 1990 | 2,054 | 9.55 Rufiyaa | 4.34 |
| 1995 | 4,696 | 11.76 Rufiyaa | 6.29 |
| 2000 | 7,348 | 11.77 Rufiyaa | 6.77 |
| 2005 | 10,458 | 12.80 Rufiyaa | 5.33 |
| 2011 | 10,458 | 15.40 Rufiyaa | 7.43 |
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
2005 Sumatra earthquake
The 2005 Sumatra earthquake, referred to as the Nias Earthquake by the scientific community, was a major earthquake on 28 March 2005, located off the west coast of northern Sumatra, Indonesia. Approximately 1300 people were killed by the earthquake, mostly on the island of Nias...
, 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
United Nations Development Programme
The United Nations Development Programme is the United Nations' global development network. It advocates for change and connects countries to knowledge, experience and resources to help people build a better life. UNDP operates in 177 countries, working with nations on their own solutions to...
, Asian Development Bank
Asian Development Bank
The Asian Development Bank is a regional development bank established on 22 August 1966 to facilitate economic development of countries in Asia...
, and the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
. Individual donors, including Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
, India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
, Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
, and European and Arab
Arab
Arab people, also known as Arabs , are a panethnicity primarily living in the Arab world, which is located in Western Asia and North Africa. They are identified as such on one or more of genealogical, linguistic, or cultural grounds, with tribal affiliations, and intra-tribal relationships playing...
countries (such as Islamic Development Bank
Islamic Development Bank
The Islamic Development Bank is a multilateral development financing institution located in Jeddah, Saudi Arabia. It was founded by the first conference of Finance Ministers of the Organisation of the Islamic Conference , convened 23 Dhu'l Qa'dah 1393 AH.The bank officially began its activities on...
and the Kuwaiti Fund) also have contributed. See: Economic Aid to Maldives
Economic aid to Maldives
Before the 1980s, the Maldives received limited assistance from UN specialized agencies. Much of the external help came from Arab countries such as Saudi Arabia, Kuwait, and the UAE, for use on an ad hoc basis rather than as part of comprehensive development plan...
In 1956, a bilateral agreement gave United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
access to Gan
Gan
Gan may refer to:-Computing and telecommunications:*.gan, the file extension for documents created by GanttProject*Generic Access Network formerly known as Unlicensed Mobile Access *Global Area Network- Mythology :...
in Addu Atoll
Addu Atoll
Addu City is a city in Maldives consisting of the inhabited islands of the southernmost atoll of the archipelago....
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.
Tourism
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.
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 (dhoniDhoni
Dhoni or Doni is a multi-purpose sail boat with a motor or lateen sails that is used in the Maldives. It is handcrafted and its use within the multi-island nation has been very important. A dhoni resembles a dhow, a traditional Arab sailing vessel.The traditional dhoni is one of the oldest known...
s). Since the dhoni
Dhoni
Dhoni or Doni is a multi-purpose sail boat with a motor or lateen sails that is used in the Maldives. It is handcrafted and its use within the multi-island nation has been very important. A dhoni resembles a dhow, a traditional Arab sailing vessel.The traditional dhoni is one of the oldest known...
s 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.
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.Industry
- See also: Industries in MaldivesIndustries in Maldives- Pole and Line Fishing :Since time immemorial, the method of fishing employed in the Archipelago has been the pole and line method. The types of fish caught by this method are tuna, skipjack tuna, frigate and mackerel. The main catch is tuna, which is used in the daily diet of the inhabitants, as...
The industrial sector provides only about 7% of GDP
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
. 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. http://www.billanderson.com.au/Gazetteer-Patents.htm
Other
Traditional economic activities such as mat weaving, jewelry making and lacquer work are also found in the Maldives.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.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
International Union for Quaternary Research
The International Union for Quaternary Research was founded in 1928. It has members from a number of scientific disciplines who study the environmental changes that occurred during the glacial ages, the last 2.6 million years...
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.
The Asian brown cloud
Asian brown cloud
The Asian brown cloud is a layer of air pollution that covers parts of South Asia, namely the northern Indian Ocean, India, and Pakistan. Viewed from satellite photos, the cloud appears as a giant brown stain hanging in the air over much of South Asia and the Indian Ocean every year between January...
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.
Investment in education
The government expenditure for educationEducation
Education in its broadest, general sense is the means through which the aims and habits of a group of people lives on from one generation to the next. Generally, it occurs through any experience that has a formative effect on the way one thinks, feels, or acts...
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
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
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
Statistical data
GDP: - US$817 million (2005)GDP - real growth rate: -3.60% (2006)
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 average); 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
Fish processing
The term fish processing refers to the processes associated with fish and fish products between the time fish are caught or harvested, and the time the final product is delivered to the customer...
, 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
External links
- Global Economic Prospects: Growth Prospects for South Asia The World Bank, December 13, 2006
- "Doing Business in Maldives" The World Bank Group