Lessons from Maldives

OVER the last three years Sri Lanka has become used to being at the forefront of development potential and political stability in South Asia but interestingly, neighbour Maldives has had the highest per capita income in the region and continues to lead the way in investment and economic growth.

 

A study done by a group of academics titled the ‘Binding Constraints to Economic Growth in the Pacific Islands: Some Comparative Insights’ points out that while Maldives has not enjoyed political stability in the past few years, it has nonetheless been transformed from one of the poorest countries in the world to having the highest per capita income in South Asia.

Over some 30 years, its development efforts concentrated on tourism and fisheries. Today, Maldives enjoys a tourist arrival rate per head of population exceeding that of any other small island state. Its fishing industry, which was the lifeblood of the economy for a long period of time, has also made tremendous strides through mechanisation and modernisation. The Maldives’ poverty rate has fallen dramatically in recent years; and by 2005 the country had achieved the highest education index in South Asia.

These are all achievements that still elude many South Asian nations including Sri Lanka and the study goes onto observe the reasons for such an impressive transformation.

Firstly, in the Maldives, the constraints to development were identified at independence. Secondly, plans were developed and followed to overcome the constraints. Third, from the beginning, Maldives had leaders who were strongly committed to development plans; and there was political stability over a sustained period. Fourth, it was welcoming of private foreign investment and built the necessary institutions such as security of land rights and impartial contract enforcement.

Aspects that Sri Lanka has yet to master since politicisation, inefficiency and corruption still mar the investment environment of the country. In the Maldives, a broadly participatory development process was embraced. The government recognised early on that it had to modernise its fishing industry and develop its infant tourism industry.

Committed leadership and political stability were important, with President Gayoom in office for 30 years (1978-2008). Foreign investment played a leading role in the development of tourism and the fishing industry, backed by strong enforcement of the rule of law. The long-term leasing of state land has been made possible for both domestic and overseas investors; such leases may be used as collateral for commercial loans.

The Maldives also recognised the critical importance of human capital, and by 1998 the adult literacy rate reached 98 per cent. Policymakers saw that if the economy was to diversify and develop quickly, domestic skills should be supplemented by overseas labour. Therefore, the government streamlined the application process for expatriate worker visas.

Attention to basic requirements of investment was beneficial for the rest of the country with the Maldives providing a better standard of life for its people than what is enjoyed by other nations in the region. Despite having limited resources, challenging geography and little capital the country has managed to emerge into a top position.

Undoubtedly there are many lessons for Sri Lanka to learn from Maldives. Since both are island nations it is interesting to see how similar challenges have been met with different success. Perhaps future events will put the two countries in a more equal footing.