Maldives Economy

Gross Domestic Product    |   Trade    |   Currency &  Banking    |   Employment     |   Budget
Tourism    |   Fishing    |  Transport and Telecomm

Gross Domestic Product

In the early 1990s, Maldives was ranked by the UN as one of the world's twenty-nine least developed countries. The World Bank estimated Maldives' gross national product (GNP--see Glossary) in 1991 at US$101 million and its per capita income at US$460. The 1993 estimated real growth rate was 6 percent. Between 1980 and 1991, GNP was estimated to increase at an average annual rate of 10.2 percent.

President Gayoom's development philosophy centers on increasing Maldives' self-sufficiency and improving the standard of living of residents of the outer islands. In 1994 a considerable gap continued to exist between the general prosperity of the inhabitants of Male and the limited resources and comparative isolation of those living on the outer islands. The Third National Development Plan (1991-93) reflected these objectives and aimed to improve overall living standards, to reduce the imbalance in population density and socioeconomic progress between Male and the atolls, and to achieve greater self-sufficiency for purposes of future growth.

The fishing and tourist industries are the main contributors to the gross domestic product (GDP--see Glossary). In 1992 the fishing industry provided approximately 15 percent of total GDP. Revenues from tourism were comparable to 80 percent of visible export receipts in 1992, contributing approximately 17 percent of GDP. The country had no known mineral resources, and its cropland--small and scattered over the approximately 200 inhabited islands--was inadequate to sustain a burgeoning population. Agriculture employed a little more than 7 percent of the labor force in 1990 in the limited production of coconuts, cassava, taro, corn, sweet potatoes, and fruit, and accounted for almost 10 percent of GDP. These basic foodstuffs represented only 10 percent of domestic food needs with the remainder being imported.

Data as of August 1994

Trade

Based on IMF reports, Maldives's trade deficit increased to US$110.5 million in 1992 from US$82.6 million in 1991. The current account deficit also increased to US$33.2 million in 1992 from US$9.0 million in 1991. Principal food commodities imported were rice, wheat flour, and sugar. The main imported manufactured goods were petroleum products and various consumer goods. Imports in 1991 came primarily from India, Sri Lanka, Singapore, and Britain in that order.

Principal exports consisted of frozen, dried, and salted skipjack tuna; canned fish; dried sharkfins; and fish meal. Maldives also exported apparel and clothing accessories from its small manufacturing sector. Exports were destined mainly to Britain, the United States, and Sri Lanka in descending order.

Currency and Banking

The Maldivian unit of currency is the rufiyaa (Rf). Introduced in 1981, the rufiyaa replaced the Maldivian rupee. The rufiyaa is divided into 100 laari. The January 1994 dollar exchange rate was US$1 = Rf11.1 rufiyaa. The rufiyaa has been steadily declining in value against the dollar. The 1993 estimated inflation rate in consumer prices was 15 percent.

Established in 1981, the Maldives Monetary Authority was the nation's first central bank. In 1974 the first bank established in Maldives was a branch of the State Bank of India. A branch of the Habib Bank of Pakistan was established in 1976 and the Bank of Ceylon also opened two branches. The first commercial bank established in Maldives was the Bank of Maldives, Limited. It opened in 1982 as a joint venture between the government and the International Finance Investment and Credit Bank of Bangladesh; by 1993 it was 100 percent state-owned.

Data as of August 1994

Employment

In 1992 the fishing industry employed about 22 percent of the labor force, making it the largest single source of employment in Maldives. However, a high level of disguised unemployment existed on a seasonal basis as a result of climatic conditions.

Despite its importance as a source of government revenues, tourism provides little meaningful employment opportunities to Maldivians. Tourism accounts for only about 6 percent of the country's labor force. Because most Maldivians have no education beyond primary school, most lack the required knowledge of foreign languages to cater to foreign tourists. As a result, nonMaldivians filled most of the best jobs in the tourist industry. Indigenous employment on the resort islands was also discouraged by the government's efforts to limit contact between Maldivians and Westerners to prevent adverse influence on local Islamic mores. Also, the low season for tourists, the time for rainy monsoons from late April to late October, coincides with the low season for the fishing industry.

After fishing, the largest source of employment is in the industrial sector, including mining, manufacturing, power, and construction. Although this sector also accounted for nearly 22 percent of the labor force in 1990, most employment was in traditional small-scale cottage industries. Women are mainly employed in these activities, such as coir rope making from coconut husks, cadjan or thatch-weaving from dried coconut palm leaves, and mat weaving from indigenous reeds. The ancient task of cowrie-shell collecting for export is another occupation in which only women participate. In the early 1990s, a small number of modern industries were operating, mostly fish canning and garment making. The largest garment factories are Hong Kongowned and occupy abandoned hangars and other maintenance buildings at the former British air station on Gan. They employ about 1,500 local women who are bused in and about 500 young Sri Lankan women who reside at the site working nightshift.

Other forms of employment in 1990 were minor. Government administration accounts for about 7 percent of workers; transportation and communications, 5 percent; trade, 3 percent; and mining of coral, 1 percent.

Data as of August 1994

Budget

The fiscal system in Maldives has been described as rudimentary; the country has no income tax. Tax revenues are derived from customs duties, a tourist/airport tax, and property taxes. Major sources of nontax revenues are derived from the State Trading Organization, rentals of islands to tourist resorts, and boat licensing fees.

Maldives has experienced a budget deficit since the 1980s, when more accurate accounting data became available. Government revenues in 1984 totaled Rf205.4 million. In 1992 government revenues rose to Rf1.02 billion, whereas expenditures totaled Rf1.5 billion. Of these expenditures, education received Rf223 million, atoll development projects Rf362 million, security Rf117 million, and health Rf111 million.

Data as of August 1994

Tourism

Because of its clear waters, distinctive corals, and sandy white beaches, Maldives has many features to attract tourists. As a result, tourism by 1989 had become the country's major source of foreign exchange, surpassing fishing. In 1992 tourism income constituted 17 percent of GDP. Furthermore, tourism is expected to increase as the government infrastructure improvement projects in the areas of transportation, communications, sanitation, water supply, and other support facilities are put into place.

Since the 1970s, approximately fifty resorts, mostly consisting of thatched bungalows, have been built on many uninhabited islands on Male Atoll. In 1990 a dozen new resorts were under construction on Maldives. In the following year, 196,112 tourists visited Maldives, primarily from Germany, Italy, Britain, and Japan in that order.

Tourist facilities have been developed by private companies and in 1991 consisted of sixty-eight "island resorts" with nearly 8,000 hotel beds. Tourists are not allowed to stay on Male so as not to affect adversely the Muslim life-style of the indigenous people. Wilingili Island has also been off limits for tourist accommodation since 1990 to allow for population overflow from Male to settle there.

Data as of August 1994

Fishing

Formerly, Maldives shipped 90 percent of its fishing catch of tuna in dried form to Sri Lanka. However, because Sri Lanka cut back its imports of such fish, in 1979 Maldives joined with the Japanese Marubeni Corporation to form the Maldives Nippon Corporation that canned and processed fresh fish. Also in 1979 the Maldivian government created the Maldives Fisheries Corporation to exploit fisheries resources generally.

Maldives has an extensive fishing fleet of boats built domestically of coconut wood, each of which can carry about twelve persons. In 1991 there were 1,258 such pole and line fishing boats and 352 trawlers. Based on a US$3.2 million loan from the International Development Association (IDA), most of the boats have been mechanized in the course of the 1980s. Although the addition of motors has increased fuel costs, it has resulted in doubling the fishing catch between 1982 and 1985. Moreover, the 1992 catch of 82,000 tons set a record-- for example, in 1987 the catch was 56,900 tons.

Progress has also been made as a result of fisheries development projects undertaken by the World Bank. Harbor and refrigeration facilities have been improved, leading to a fourfold increase in earnings from canned fish between 1983 and 1985. Further construction of fisheries refrigeration installations and related facilities such as collector vessels were underway in 1994, with funding both from Japan and the World Bank.

Transportation and Telecommunications

Ports: Male, Gan; merchant fleet of some twelve vessels.

Airports: Two with permanent-surface runways: Male and Gan; Air Maldives is national airline.

Telecommunications: (1994) Minimal domestic and international facilities; 2,800 telephones; two amplitude modulation (AM) stations, one frequency modulation (FM) station; one television station; one Indian Ocean International Telecommunications Satellite Corporation (Intelsat) earth station.