DTIS, Volume I - Enhanced Integrated Framework (EIF)

D. POVERTY AND HUMAN DEVELOPMENT
The recent economic shocks that the country has experienced have exposed the
constraints of an economy that is dependent essentially on the tourism sector and the
limited intra- and inter-sectoral linkages. Moreover, lack of employment opportunities
and insufficient provision of secondary and tertiary education facilities on the atolls, has
caused migration to Male’. Migratory trends were further aggravated by the tsunami. As
a result the Male’ population is now estimated at 70,000, whereas its theoretical capacity
is 50,000. Congestion and unemployment are the immediate negative impacts.
With regard to indicators of human welfare, in particular the human development index
(HDI), in 2005 the Maldives was ranked 96 (HDI=0.745), behind Dominican Republic
(0.749), Turkey (0.750) and Sri Lanka (0.751), ahead of Turkmenistan (0.738) and
Jamaica (0.738). This is actually a small slide from a ranking of 84 in 2004 when the
Maldives was ahead of Turkey (94) and Sri Lanka (96). The GDP per capita of $ 2,401 in
2004 is near that of Vietnam but below Sri Lanka and Seychelles. The Vulnerability and
Poverty Assessment (VPA) carried out by UNDP in 1997 and 2004 indicated that
absolute poverty is below one percent.
E. TRADE PERFORMANCE AND POLICIES
The Maldives economy is very open. Trade in goods typically accounts for around 75-80
per cent of GDP. If services are taken into account, trade in goods and services account
for approximately 150 per cent of GDP.
Imports of goods typically outweigh exports of goods (mostly fish and fish products) by a
factor of between three and four. However, this large shortfall in foreign exchange
earnings is to a large extent made up for by revenues from the export of services via the
tourism sector. There is therefore only a relatively modest negative current accounts
balance.
Although there is currently very limited production activity in the Maldives, there is need
to be aware of anti-export bias in the tariff structure that may impact on other sectors,
such as tourism. Apparently, this problem is being addressed through the extensive use of
discretionary duty concessions and exemptions. The total value of these in 2004 was Rf.
413 million, compared to actual collections of Rf 1,136 m, representing approximately 36
per cent of total revenue. In previous years the proportion of concessions and exemptions
has been similar (37 per cent in 2001). In 2004 main beneficiary sectors were tourism and
fisheries.
Theoretically, graduation from least-developed country status will affect the privileges
and preferences that Maldives currently enjoys under the multilateral trading system as an
LDC member of the WTO. As the graduation of an LDC is unprecedented since the
establishment of the WTO in 1995, the graduation of the Maldives will establish some
important precedents for the trade body in regard to transitional arrangements. Indeed,
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