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WELCOME2

MALDIVES

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A

PRESENTATIONON

STUDY OF MICRO & MACRO ECONOMY OF

MALDIEVES

BY

MAYUR.V. PATEL{092034}

BATCH-M1(A)

SUBMITTED TO

PROF.SUHRUD NEURGAONKAR

MITSOT(Pune)

2009-11

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Maldives comprises an approximate populationof 385,925 people spread over about 1900islands. Mixed economy is one of the major

features that include tourism, fishing andshipping industry. Struggling with the post-impact of Tsunami in 2004, Maldives economyhas managed to find stable ground by achieving

US $1.588 billion GDP and a growth rate of6.6% till 2007.

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` About 99% of the territory of Maldives comprises water. Nowonder, this has proved to be one of the major reasons for thesuccess of tourism and fishing industry. Since the land is notfertile enough, agricultural possibility is restricted. The vegetationis limited to the growth of few tropical fruits, vegetables and rootcrops. Dearth of proper resources has resulted in poor

manufacturing prospects of basic essentials and consumergoods. So, almost everything is imported in Maldives.

` Mixed economy is an important aspect of the Maldives economyand is based on the prime activities of tourism, fishing andshipping. In 1989, the economic reform program implemented by

the government lifted the import quota and encouraged exportsto the private sector. Later on, the liberalized conventionsallowed more foreign investments.

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2004 85.65 2005 71.48 2006 84.33 2007 87.02 2008 83.43

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1996 8.2 1999 5.57 2002 6.04 2005 6.5 2007 6.5

1997 8.2 2000 6.13 2003 6.5 2006 6.5 2008 6.5

1998 8.2 2001 6.03 2004 6.5

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20

18

2

primary

secondary

tertiary

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PRIMARY AGRICULTURE

SECONDRY INDUSTRY

TERTIARY SERVICES

Agriculture:Due to the availability of poor soil and scarceness

of arable land in the islands, agriculture is limited toonly a few subsistence crops, such as

coconut, banana, breadfruit, papayas, mangoes, taro,betel, chilies, sweet potatoes, and onions. Agriculturecontributes about 6% of GDP

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` Industry:

The industrial sector provides only about 7% ofGDP. Traditional industry consists of boat building

and handicrafts, while modern industry is limited toa few tuna canneries, five garment factories, abottling plant, and a few enterprises in the capitalproducing PVC pipe, soap, furniture, and food

products. There are no Patent Laws in theMaldives

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` SERVICES:The Maldives has successfully promoted its natural assets

for tourism. The beautiful, unpolluted beaches on small coralislands, blue waters and sunsets attract tourists

worldwide, bringing in about $325 million a year. Tourism andother services in the tertiary sector contributed 33% to theGDP.Since the establishment of the first resort in 1972, over84 islands have been developed as tourist resorts, with a totalcapacity of some 16,000 beds. The number of tourists (mainlyfrom Europe) visiting the Maldives increased from 1,100 in

1972 to 280,000 . In 2000, tourist arrivals exceeded 466,000.The average occupancy rate is 68%, with the averagenumber of tourists staying for 8 days and spending about$755.

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` SAARC(2ND AUGUST 1983)

` WTO(27 SEP 1981)

` UNESCO(18 JULY 1980)

` UNISEF(6 APRIL 1971)

`

INTER

POL(4 SEP 1984)` IMF(13 JAN 1978)

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` The gross domestic product (GDP) or grossdomestic income (GDI) is a measure of acountry's overall economic output. It is the market

value of all final goods and services made withinthe borders of a country in a year. It is oftenpositively correlated with the standard of living.

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PER CAPITAINCOME :-

$5,000 (2009 est.)

NNP :-Total $1.357 billion (2009 estimate)

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` As a collection of thousands of secluded tropicalislands, the Maldives should have little impact on theworkings on the elite economics of the G20 nations, yetthe United Nation's World Tourism Organization(UNWTO) believes the country can have a vital role in

the global development debate.As a major touristeconomy, the Indian Ocean archipelago is seen by theglobal tourism body as offering an important indicator ofthe role that the seemingly carefree world of holidaymaking can have on aiding developing countries to meetthe social and economic goals outlined by groups likethe United Nations.

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The comments come ahead of next month's G20 summit meetingin Seoul, South Korea, where the T20, an unofficial analoguegroup consisting of the same 20 member states' tourismministers, are pledging to try and play up the developmentopportunities afforded by a well managed holiday industry.

The G20 summit are a set of ongoing meetings between thefinancial leaders of the world's 20 most influential economicpowers, which aim to try and tackle issues of development andpoverty all over the world - despite leading to its fair share ofcriticism and controversy along the way from some non-governmental organisations (NGOs).

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` Three fourths of the total revenue in Maldives come fromimport duties, tourism tax, state own enterprises andresort lease rents. Other taxes include bank profitstax, land rent, royalties, administrative fees and

charges, work permit and interest receipts. Most of thetax revenues income from two sources: import dutiesand tourism tax. Dividends from the state-ownedenterprises and the resort lease rents are the principal

sources of nontax revenues.

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Bank profit tax is the only direct tax imposed inMaldives. A bank profit tax of 25% on its taxableincome is charged to all commercial banks. Itcomprises 2% of the total governmentrevenue.However there are many indirect taxes in

Maldives, the major two are:

` 1. Import duty

Import duty is a duty levied on imported commodities.

It is a percentage charged on the cost, insurance andfreight (CIF) of imports. The duty charges range from5% to 200%. Import duty is about one quarter of thegovernment revenue .

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2. Tourism tax.Tourism is the largest industry in Maldives anddevelopments in tourism drive the other sectors ofthe economy at present. Tourism has experiencedphenomena growth since its inception some 30years ago, with an 8% average annual growth intourist arrivals. Tourism tax composes 13% ofgovernment revenue. This contribution is

generated through the tourist bed tax levied at aflat rate of US$6

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Strengthening and diversifying the economy:

The economywill continue to be dominated by fisheries and tourism. Thesesectors can be strengthened, while moves are made todiversify other economic sectors.

Tourism: The governments recent decision to increase thespeed of issuing new resort leases represents a fundamentalchange in Maldives policy of expanding the sector gradually.As part of the proposed expansion, the Government iscreating a public enterprise that would hold leases at

low, preferential rates in a number of islands, and sell these tonew operators. It would also sell some shares on the stockmarket to local residents.

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Fisheries:

Successful sector performance requires policy andstructural adjustments over the next five years to

support a multitude of actions by the governmentand the private sector. A transition strategy for themain species, skipjack tuna, must be based on theprivate sector and government reaching a

negotiated consensus on critical adjustments

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` ABOUT ECONOMY .

Maldives had a strong reputation for many commoditiesto include cowries, dried tuna,ambergns, coco demer, and coir rope. Because of this, it was common forboth ships coming to Maldives from local regions andforeign countries, loading up on the goods and thenreturning home with a full cargo. However, in morerecent times, Maldives has experienced economic

fluctuations and while fishing and shipping are still a partof Maldives exports, other industries to include tourism isalso big business.

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` Maldives trade shows that for Maldives exports, bothfish and clothing are the top two commodities with anestimation of $123 million. The current partners forMaldives exports include the United States, the United

Kingdom, Sri Lanka, Japan, Thailand, andAlgeria. For Maldives import, this involves a variety ofcommodities such as ships, foods, petroleumproducts, clothing, textiles, capital goods, andintermediate goods. The estimated value of more

than $550 million involves Singapore, Japan, SriLanka, India, and Canada.

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` ABOUT TOURISUM SECTOR

Maldives trade, tourism is the primary industry,accounting for close to 30% of the countrysGDP. In addition, tourism currently accounts forapproximately 60% of all foreign exchange

receipts. In the 1990s alone, tourism in Maldivesreached a whopping 115%. At that time, some90% of tax revenue for the government wasassociated with duties for Maldives imports, as

well as tax discounts connected to this industry

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` ABOUT FISHING INDUSTRY

fish is still an important industry forMaldives. Thanks to the 1989 reform, quotas forMaldives imports were lifted, which meant the

private sector could now benefit from some of theMaldives exports available. This reform alsohelped create more flexible regulations wherebyforeign investment could participate more in the

overall Maldives trade market.

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