DTIS, Volume I - Enhanced Integrated Framework (EIF)

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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, xii
WTO members (through the Committee for Trade and Development, CTD) have responded cautiously and agreed to grant the Maldives a transitional period based on a roadmap for graduation to be prepared by the Maldives government. However, in tangible terms, there are two major consequences of Maldives graduating from LDC status: loss of preferential market access; and possible reduction in trade related technical cooperation. F. BUSINESS ENVIRONMENT AND PRIVATE SECTOR DEVELOPMENT The business environment in the Maldives is liberal – the result of which is particularly visible in the tourism sector. As a result, the Maldives comes out fairly well in the World Bank ‘Doing Business Survey’ of such issues as ease of entry and establishment or free repatriation of profits (see the Appendix to this chapter). Indeed, given the specificity of tourism sector ‘resource-seeking’ investment, or perhaps more aptly in the Maldives case, ‘resort-seeking’ investment, a benign approach is primarily what is required to attract the necessary flows. But the business environment in the Maldives is also one in which there are significant gaps in the underlying policy, institutional and legal framework for business development and private sector support. This is reflected in the general weakness of the domestic private sector and thin national portfolio of SMEs engaged in value added activities in the dominant tourism and fishery sectors, forging stronger intraand inter-sectoral linkages, and achieving a more diversified economy. It is also true that as a small island developing economy, the business environment in the Maldives poses formidable challenges for the investor and entrepreneur. Aside from Male’, the capital, there is no significant population centre. Local markets are also difficult to reach given the exceptionally wide dispersion of people. There are therefore serious limitations on the extent to which economies of scale can be exploited. High costs of transportation, infrastructure, energy and water, complete dependence on imported technology, and unavailability of a wide range of skills are further constraints on attaining a competitive business environment. These difficulties were dramatized in the collapse of garment manufacturing when the Multi Fibre Agreement (MFA) expired at the end of 2004. The challenge for the Maldives is to put in place the necessary framework to enable it to take full advantage of its comparative advantage in the tourism and fishery sectors and strong potential in other sectors such as horticulture, port services, handicraft, aquaculture, etc. There is considerable scope for value-added business opportunities in the two main sectors and for dynamic linkages between these and other sectors. As the Appendix illustrates, on some key aspects of the business environment, the record of the Maldives is mixed. xiii
Page 1 and 2: FINAL R E P O R T Volume 1 MALDIVES
Page 3 and 4: GSP HACCP HDFC HDI HIES HH HRD HS I
Page 5 and 6: TRIPS TRTA TSA TTMP UAE UK UNCTAD U
Page 7 and 8: CHAPTER 6: CUSTOMS SERVICES AND TRA
Page 9 and 10: major stakeholders as the basis of
Page 11: C. ECONOMIC TRENDS Buoyant GDP grow
Page 15 and 16: The recommendations cover these iss
Page 17 and 18: Requirements Action no. Action reco
Page 25 and 26: government, and lawmakers are elect
Page 27 and 28: . 4
Page 29 and 30: to Sri Lanka. However, by 2004 the
Page 31 and 32: This relatively high proportion of
Page 33 and 34: On an annual basis, total NFA of th
Page 35 and 36: elow provides data on the public in
Page 37 and 38: According to the estimates prepared
Page 39 and 40: Table 2.8: Damage to agricultural f
Page 41 and 42: II. Imports - Merchandise There has
Page 43 and 44: the relatively high rate of unemplo
Page 45 and 46: A. DESTINATION OF MERCHANDISE EXPOR
Page 47 and 48: Penetration of international market
Page 49 and 50: Overall, the importance of foreign
Page 51 and 52: on goods deemed luxury goods (e.g.
Page 53 and 54: the Japan and USA markets. 11 Fish
Page 55 and 56: The Modalities provide that the res
Page 57 and 58: emoved. However, in order to provid
Page 59 and 60: EBA. Appropriate transition arrange
Page 61 and 62: Several provisions such as Article
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CHAPTER 4 POVERTY REDUCTION AND HUM
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Table 4.2: Poverty Gap Ratios per R
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produced locally and are readily av
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commerce, information and communica
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Table 4.3: Fishery Sector employmen
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This also requires policies that ta
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with routine functions of administe
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Applying for a license to invest in
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E. MINISTRY OF FISHERIES, AGRICULTU
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K. PRIVATE SECTOR STAKEHOLDERS Priv
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Overall, it is estimated that the c
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The cash is held and disbursed by t
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difficult to reach given the except
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system of micro-credit intermediari
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F. LAND, RAW MATERIALS AND SUPPLIES
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B. LABOUR MARKET REFORM About 44 pe
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Appendix The mixed record of the Ma
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legislation incorporates the initia
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CHAPTER 6 CUSTOMS SERVICES AND TRAN
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Maldives Port Authority • Respons
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the correct amount of customs duty
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suspense procedures, thus eliminati
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A new domestic terminal at MIA will
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There is need to clarify MAC’s na
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Changes in the role and structure o
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Significant improvements have been
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CHAPTER 7 THE TOURISM SECTOR Chapte
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British market in 2001. In 2004, be
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Similarly, considerable demand was
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for imports of support infrastructu
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government revenues from the supply
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number of trainees that have been t
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established as a quality tourism de
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Maldives' unspoiled marine environm
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The Faculty works very closely with
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TOURISM ACT A key objective of the
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HRD studies and conduct of necessar
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D. ESTABLISH AN ENABLING BUSINESS E
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Main Recommendation No. 5: review a
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Main Recommendation No. 6: Scale-up
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CHAPTER 8 FISHERY SECTOR Chapter Pl
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processing under-performing more th
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per cent - see Table 8.4. The secto
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In the light of these market trends
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documentation, and administration.
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monitoring and evaluation dates fro
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and catering industry chefs demand
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It is expected that the trial fishe
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• Can seaming and retorting; •
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DTIS, Volume I - Enhanced Integrated Framework (EIF)

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