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Maldives is classified as an upper middle country, very small in South Asia with a population of just 0.37 million. The 2012 GDP registered two billion with an economic growth of 3.5%, which means that people may have not even felt the growth given that when a country is small, for an impact to be achieved it must achieve 6-7% according to the norm.
Inflation at 10.9% further aggravates the situation, which does not help the economic development agenda of a country. It’s a classic situation where strong policy making can catapult a country to very strong growths but political instability kills the opportunity even before it starts.
The Maldives Isles – Small miracle
Sunny, unique and unspoilt, the Maldives is an archipelago comprising of 1,190 odd low lying coral islands scattered across the equator in groups of 26 naturally occupying atolls, which are developed into 20 for administrative purposes.
The country has graduated from a Less Developed Country (LDC) to a middle income group with an impressive per capita income from $ 771 in 1984 to $ 2,514 in 2008 and today registering $ 6,658, which is a strong performance and the best performing country in South Asia.
What’s unique about the Maldives is that even though it does not have resource endowments or scale of economies or the diversity of the two billion dollar economy, the country has the best MDG+ performance in the Asian region that already makes it the ‘Small Miracle of Asia’. The country also boasts per capita spending on social indicators at a level that now can be a best practice to the South Asian region.
Best on MDGs
The Maldives just like any other country had its fair share of challenges even before the recent political backlash. It is classified as a ‘Small Island Economy,’ with the country highly geared with only tourism and fisheries sectors mainly driving income into the country with high transport and logistics costs that is usual for a island nation.
In the recent past a demographic landscape that emerged was that 65% of the population was below the 25 year age group, which has resulted in unemployment issues and skewed lifestyles that can lead to drug issues and getting into risky lifestyles that needs to be addressed as a matter of priority. One study on malnutrition levels indicated that 31% of the children are underweight, with 9% of them severely underweight. The total imports at around 1.55 billion and exports registering 0.16 billion creates pressure on economic fundamentals.
It must be highlighted that the Maldives has performed remarkably well over the last few years in the Human Development Index (HDI) along with its three other associated indices – the Human Poverty Index, the Gender Development Index and the Gender Empowerment Measure.
On the area of the Millennium Development Goals (MDGs), Maldives has achieved many of them ahead of the schedule as per the latest MDG assessment. Five of the eight MDGs have been achieved, making the Maldives South Asia’s only MDG+ country, as mentioned before.
There has been substantial progress in eradicating extreme hunger (MDG1), achieving universal primary education (MDG2), reducing child mortality (MDG4), improving maternal health (MDG5), and combating HIV/AIDS, Malaria and other diseases (MDG6).
Services – 43.3%
At one time when I met the President of Maldives, I felt the biggest strength in the country was the governance structure. A high quality leadership existed with a well-educated second tier with a strong focus to international exposure. But today the situation is very different. At that time there was a hunger for new ideas and the good ones got picked up quickly. There was also a passionate drive to implement change – very positive signs in the making of a leading economy in Asia just like what Singapore had achieved over time.
Today, sadly, we see very little progress being made of the 43.3% GDP of the service sector and the 3.5% GDP growth is essentially the tourism numbers picking up and not that the quality of life of a islander improving. This is a serious issue as the per capita income of 6,000 plus does not bring out the real income of a typical Maldivian.
Invest Maldives
The economic development agenda is focusing on investment on energy, transport, infrastructure, housing, education and health with an attractive package of benefits that I found it very easy to comprehend and put into action, but sadly the recent political instability makes many projects a no-go.
The benefits offered included permission for 100% foreign investment, legally-backed investment guarantees, provision for overseas arbitration guarantees, permission to use foreign management and technical expertise, including unskilled workers. There is no restriction on the repatriation of funds out of the country, which sure makes Maldives the ‘Small Miracle of Asia’. In fact this justifies the high ranking that the country has achieved in the ‘Ease of Doing Business’ index in the World Competitiveness report.
On the idea of setting up green industrial parks and maybe attracting organisations from Sri Lanka, Bangladesh and India, if it can attract the GSP+ trade concession from the EU, as we speak the Maldives has secured the GSP facility into the US and the chambers are in discussion in the SAAC region on how this facility can be exploited by the region for development of trade into the US.
The other areas that ‘Invest Maldives’ is showcasing is attracting ship repairing and dry docking services, privatisation of hospitals and social housing tied up to concessionary terms of operating the tourism sector. In the energy sector setting up of wind farms, and driving ICT with a linkage to BPOs, which are very attractive investment opportunities that have the potential of making Maldives the tiger of South Asia like what Taiwan was for South East Asia.
Export Maldives
The export sector will undoubtedly include driving the fisheries sector by way of canning factories, tuna processing and exporting factories targeting the EU, waste management recycling where there is a current project where a company is exporting used plastic containers into Sri Lanka.
Maybe with the GSP/GSP+ facility there will be a birth of industrialisation that will be similar to the times when Sri Lankan organisations operated out of Gan Island. This thrust will help the Maldives address the key issues of bridging the fiscal deficit, the youth bulge and engaging women into the economy.
Unique positioning
Given the visionary thinking of a President in the Maldives, the country took the high ground on carbon neutrality. The Maldives can be positioned on the platform of ethically manufactured ozone friendly merchandise, which makes it unique for a consumer in the Western world to purchase. This proposition can spruce up exports and thereby off set the import bill of 1.55 billion.
Political economy
I guess the planned elections on the 9th may present a new window to the development agenda of Maldives. For us in South Asia it’s a classic example of a situation where politics kills the economic development agenda of a country.
What many forget to see is that if the quality of life can be improved with strong policy making not only lives of the one-third of the population that lives in the capital can be improved but also that of the entire population scattered over all its islands. I guess time will reveal if Maldives can take the global positioning of ‘Small Miracle of Asia’.
(Writing is only a hobby of the author and has no links to the organisations he serves in the private and public sector.)
