DTIS, Volume I - Enhanced Integrated Framework (EIF)

Infrastructure is a major challenge in the Maldives with its highly dispersed population
and insularity. The priority that was given by the government to the development of
telecommunications infrastructure has paid off in terms of connectivity throughout the
country. Mobile telephony has also grown substantially. But inter-island transport
remains difficult with many of the smaller islands lacking adequate harbours and jetties.
In addition, ferry services to connect the more distant atolls are inadequate. The main
port at Male’ is congested and various options that have been considered for further port
development need to be acted upon. While the international airport at Hulhumale’ has
been expended in particular to service the tourism industry, there is scope for upgrading
airfields in various parts of the country. A strategic approach to the management of intermodal
transport services is required if the country is to overcome the various gaps in its
transport infrastructure.
Competitiveness is also reduced by high factor costs. In addition to transport costs there
are also generally higher costs of labour, energy, electricity and water supply relative to
the neighbouring countries. These additional factor costs impose further limitations in the
competitiveness of investments in outlying atolls and generate time delays in deliveries.
Moreover, this is aggravated by the limited port capacity and transport service delivery
system, which augments costs for transport companies and their clients. In addition,
uncertainty regarding delivery induces the need to keep additional stocks which places
further strains on cash flow and credits needed for business operations.
Efficiency and cost of communication services is another important consideration for
investors, especially given the geographical characteristics of Maldives. The
communications sector has experienced substantial foreign investment during recent
years both as regards establishment of service providers, physical infrastructure (cables
and masts), and consumer end products. Sales of mobile telephones tripled in the last two
years. International fibre optic cables that will provide broadband access are coming to
Maldives through India and Sri Lanka and should eventually link the main atoll groups.
However, it is likely that the small size of the market composed of public institutions, the
business community and private consumers could limit the number service providers and
thereby competition in the longer term.
E. LABOUR MARKET
As the country has become richer, wage rates have also increased. Maldivian wages are
on average 40 per cent higher than wages in neighbouring countries. As a result, private
businesses in dynamic sectors such as tourism, construction and transport and
communications have increasingly imported the skills they require from the South Asia
region, although to some extent, this is also due to the shortage of relevant skills among
Maldivians. There are other major labour market rigidities related to cultural and
traditional norms, especially concerning women. In 2004, there were 38,000 expatriate
workers in the Maldives, which is 44 per cent of the work force.
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