Chapter 2

REVIEW OF 5th NDP

2.1 ECONOMIC SECTOR REVIEW

2.1.1 ECONOMIC GROWTH

Table 2.1 Macroeconomic Indicators

thThe 5 NDP has been successfully implemented and it marked a period of economic and social stability thand growth. Significant economic and social developments during the 5 NDP are highlighted in this

chapter to set the stage for development policies and strategies discussed in the subsequent chapters. The review of the economic sector highlights the growth rate in GDP and the performance of the key areas such as tourism, fisheries, transport, construction , manufacturing and telecominication. Public finance is also reviewed by considering revenue and expenditure, monetary and exchange rate managemnet and trends in the external economies. The review of the social sector focuses on education and health services, water and sanitary services and population and housing. The progress made in achieving social policy objectives in gender equity, child protection and youth participation in economic and social development are also highlighted. The chapter is concluded by reviewing the progress made on the population consolidation policy which is geard for both economic and social development.

thDuring the 5 NDP period (1997 to 2000), the Gross Domestic Product (GDP) of the Maldives grew at an average annual rate of 6.8 percent This growth rate is significantly higher compared to the South Asian average of 5.9 percent between1997-2000 and the 4.5 percent average of the Least Developed Countries (LDC) during the 1997-2000 period. However as shown in table 2.1, the GDP growth rate has been declining from year to year.

Source: Ministry of Planning and National Development (MPND); World Bank, Human Development Report 2000; Quarterly Economic Bulletin of the Maldives Monetary Authority (MMA); and the Asian Economic Outlook.

Foot note: The population growth rate for the years 1997, 1998, 1999 and 2000 are obtained from Virtual Registration System (VRS) and the population growth rate for the intercensal period (1995-2000) is obtained from Population and Housing Census of 2000.

1997 1998 1999 20001997- 2000

(Average)

Real GDP (constant, in US$ mil.) 437.9 473.7 508.8 532.2 488.2

Real Per capita GDP (in US$) 1,721 1,825 1,923 1,961 1,857

Real GDP growth (%) 10.2 8.2 7.4 4.6 7.6

Consumer Price Inflation (%) 7.6 -1.4 3 -1.2 2

Population (mid-year) 255,460 260,777 266,093 271,410 -

1.9(1995-2000)

Overall deficit(-) including grants as % of GDP -1.1 -1 -3.5 -3.5 -2.3

Overall deficit(-) excluding grants as % of GDP -3.9 -3.7 -5.9 -6.6 -5

Revenue (excluding grants) / GDP ratio (%) 28.9 30.2 32.3 35.9 31.8

Public expenditure (excluding net lending) as % of GDP 32.9 34.9 38.1 43.1 37.2

1.6Population growth rate (%) 1.9 1.8 1.6

The GDP growth was largely sustained by the expansion of the tourism sector and due to its spin-offs in sectors such as transport and communication. Tourism’s contribution to the GDP during the period fluctuated between 33.1 percent and 34.0 percent, while the contribution of the transport and communication sector increased from 13 percent to 15.7 percent. In contrast, the traditionally dominant fisheries sector, which contributed 6.7 percent of the GDP in 1997, continued its declining trend by falling to 6.0 percent in 2000.

Source: Ministry of Planning and National Development (MPND)

thThe tourism sector continued its dominance within the economy during the 5 NDP period. The sector contributed an average of 33.4 percent of GDP annually from 1997 to 2000. Tourist arrivals increased by an average of 8.5 percent per year, reaching a total of over 467,000 visitors in 2000. Tourist bed-nights also increased by 6 percent in 1998, 7.3 percent in 1999 and 5.9 percent in 2000. The growing tourism industry boosted financial receipts by 2.3 percent in 2000. The tourism tax and resort lease rent received by the Government increased during the period under review, from Rf. 400.9 million (US$ 34.06 million) in 1996 to an estimated Rf. 700.6 million (US$ 59.52 million) in 2000.

thDuring the 5 NDP period, the Government offered 15 new islands for the development of tourist resorts under Phase I of the Tourism Master Plan, after a temporary moratorium on new resort construction. Out of the 14 islands, 13 were developed and were put in operation during the Plan period. Consequently, the bed capacity of the hotels and resorts increased significantly from 12,234 in 1997 to reach over 16,000 beds in 2000. This increase in supply coupled with several other factors including economic stagnation in Germany and Italy, the devaluation of Euro, a prolonged recession in Japan and the appreciation of the US Dollar, led to a slight decline in the selling rates. Bed occupancy rate also declined by 1.3 percent in 1998, 6.5 percent in 1999 and by 1 percent in 2000. The bed occupancy rate was 77.4 percent in 1997 and declined to 68.2 percent in 2000.

thThe new resorts that were developed during the 5 NDP period were based on concepts that were more coherent and emphasized heavily on environmental protection and preservation. These resorts made the Maldives’ tourism products greener. Most of the new resorts were also based on themes that targeted more specific markets than the traditional ‘urban style’ facility intensive resorts, and therefore had fewer facilities in some instances. Furthermore, the design and architecture of most of these resorts reflected, to a large extent, the Maldivian culture and tradition.

Table 2.2 GDP Percent Share by Economic Activity 1997-2000

TOURISM

% of GDP 1997 % of GDP 1998 % of GDP 1999 % of GDP 2000

Primary Sector 10.5 10.4 10 9.4

Agriculture 3.2 3 2.8 2.8

Fisheries 6.7 6.7 6.5 6.1

Coral and sand mining 0.7 0.7 0.7 0.6

Secondary Sector 14 15.1 15.2 14.5

Construction 3.3 3.8 3.7 2.7

Manufacturing 8.2 8.5 8.6 8.5

Electricity & water 2.6 2.8 3 3.3

Tertiary Sector 79.8 80.2 80.9 82

Wholesale and retail trade 5 4.8 4.6 4.5

Transport & communications 13 14.5 15.2 15.7

Financial Services 3.5 3.5 3.5 3.4

Tourism 34 33.2 33.1 33.4

Real estate 8.4 8.2 8 7.8

Business services 3 3 3 2.9

Government administration 10.4 10.6 11.3 12

Education, health & social services 2.5 2.4 2.2 2.2

0

100

200

300

400

500

600

US

$(m

illio

ns)

1997 1998 1999 2000

YEAR

0

2

4

6

8

10

12

%

1997 1998 1999 2000

YEAR

-4

-3

-2

-1

0

%

1997 1998 1999 2000

YEAR

0

10

20

30

40

%

1997 1998 1999 2000

YEAR

G D P Consumer PriceInflation

Per Capital GDP

1,5501,6001,6501,7001,7501,8001,8501,9001,9502,000

US

$

1997 1998 1999 2000

YEAR

Overall Budget Deficit as a % of GDP

Real GDP Growth

0

2

4

6

8

10

12

Perc

en

tag

e(%

)

1997 1998 1999 2000

YEAR

Revenue / GDP Ratio

Source: Ministry of Planning and National Development (MPND)

FISHERIES

CONSTRUCTION

Over one quarter of the local labour force was employed in the fisheries sector during the period under review. The sector was the main provider of employment in a number of atolls.

thLarge fishing vessels of over 20m in length were introduced during the 5 NDP period. These vessels thexpanded the catching capacity of the local harvesting fleet. The fish catch increased during the 5 NDP

period to reach 124,000 metric tones in 1999; with tuna species constituting close to 91 percent of this catch, of which 82 percent was skipjack. Large yellow fin tuna catches also increased significantly during the period.

The period also saw the partial or full achievement of some of the goals of the fisheries sector identified in the Plan. The sector ’s gross earnings steadily increased over the Plan period, although the percentage contribution of primary harvesting to GDP declined. Critical sectoral goals and objectives articulated in

ththe 5 NDP that targeted the reversal of the declining trend in the contribution of primary harvesting to GDP, such as the privatization of MIFCO, were not fully realized due to certain constraints, policy and planning failures and implementation difficulties, compounded by unforeseen changes in international export markets.

Secondary production in fisheries increased during the period under review, primarily due to private sector initiatives. This increase in secondary production was, to a large extent, responsible for the growth in the contribution of the manufacturing sector to GDP.

thDuring the 5 Plan period, the Government initiated the formulation of a Ten-year Master Plan for the

fisheries sector. However, the turbulent nature of the world tuna industry during the past couple of years forced the Government to temporarily suspend the Master Plan project.

The construction sector contributed an annual average of 3.3 percent of GDP during the period under review. The development of 13 new tourist resorts during the period resulted in the growth rate of the sector increasing from 2.7 percent in 1996, to 3.3 percent and 3.8 percent during 1997 and 1998, respectively. The sector’s growth rate declined in 1999 to 3.7 percent as the construction work on the majority of the new tourist resorts neared completion. By 2000 the growth rate of the construction sector was slowed back to 2.7 percent, the same level as 1996.

The growth of the construction industry, during the period under review, was reflected in the bank loans provided to the sector, which increased from Rf 59.2 million in 1997 to Rf 74.1 million in 1998. It is estimated that more than 85 percent of the commercial loans, Rf 406.7 million in 1997 and Rf 554.6 million in 1998, provided to the tourism sector, was invested in the construction of tourist resorts.

The number of expatriates working in the construction sector grew from 1855 to 4,607 between 1997 and 2000, an increase of 148 percent. Expatriates working in the construction industry accounted for 16.6 percent of the total expatriate labour force in the country in 2000.

In 1999, the State Trading Organisation (STO) commissioned a cement-packing plant on the Industrial Estate Island (IEI) of Thilafushi. The plant processes cement imported from Indonesia. The opening of this factory reduced the price of cement in the country by 10 percent. Cement sales from the factory increased by 30 percent over a period of one year, reaching 731,326 tons in the year 2000.

The final draft of the Maldives’ Building Code was completed in September 1998, but was yet to be thpassed into law when the 5 NDP period ended. However, the Maldives of Housing and Urban

Development Board (MHUDB) issued several bylaws on building and construction, during the period under review, most of which were extracts from the draft Building Code.

thThere was no substantive change in the area of materials research during the 5 NDP period. However, the services of the only laboratory in the country for testing the strength of cement and concrete, which is under the Ministry of Construction and Public Works (MCPW), were extended to STO and the private sector during the period under review.

thDuring the 5 NDP period, the transport and communication sector grew by 13.4 percent. International passenger movements at Male’ International Airport, which stood at 891,134 at the beginning of the period, surpassed 1 million in October 1999 and continued to be so in 2000. International aircraft movements grew from 8,570 in 1997 to 9,245 in 1999. The Maldives was served during the period by 33 airlines, including 17 scheduled and 16 charter services.

In the domestic aviation scene, the period began with a total of 278,738 passenger movements, which grew to 466,551 by the end of 1999. Aircraft movements increase from 24,032 to 40,481. Domestic aviation services were provided by Air Maldives (Island Aviation Services Pvt. Ltd.) Maldivian Air Taxi, Hummingbird Island Airways (Trans Maldivian Airways) and Sun Express. Ocean Air, an additional carrier, began flight services to Gan on 1st November 2000. A total of 29 aerodromes serviced these carriers in 2000. The total number of trained Maldivian pilots grew to 30 pilots and trained engineers grew to 14 by 2000.

The national flag carrier, Air Maldives, which commenced flights to Europe during the period under review, ceased all international operations in the year 2000. Air Maldives also suspended all its domestic operations. The newly incorporated Island Aviation Services Pvt. Ltd. assumed the domestic responsibilities formerly undertaken by Air Maldives.

During the 5th NDP period, the Male’ Commercial Harbour handled the bulk of the country’s imports while some island ports handled the rest. Island ports also handled most of the fishery and garment exports of the country.

The Male’ Commercial Harbour is now able to dock vessels of up to 6000 gross registered tons with a maximum displacement of 15,000 DWT. With the completion of the alongside facility in June 1997, the throughput capacity of the Male’ Commercial Harbour increased to 18,184 container units, an increase of more then 62% compared to the capacity in early 1997. However, large vessels carrying bulk cargo have to anchor offshore and transfer their cargo by barge, thus, raising the freight cost.

The cargo volume handled at Male’ Commercial Harbour continued to increase during the review period from 11,246 containers in 1997 to 19,081 in 2000. Meanwhile the average turn-around period at Male’ Commercial Harbour fell from 4.5 days in the mid-1990’s to 3.68 days in 1999, and a record low of 2.92 days in August 2000. This improvement was achieved while the number of cargo ships calling into port increased from 343 in 1997 to 360 in 2000. Most of these ships were locally owned and registered.

thDuring the 5 NDP period, the Government formulated a project to develop two regional ports, one in the South and one in the North of the country. The project is expected to reduce shipping costs to the atolls and relieve congestion and environmental pollution at the Male’ International Port. The deepening of 51

thisland harbours was also completed during the 5 NDP period.

thTable 2.3 presents output estimates of the manufacturing sector for the 5 NDP period. The annual growth rates of the sector have been higher than GDP growth rates.

TRANSPORTATION

MANUFACTURING

Table 2.3 Manufacturing sector’s output and contribution to GDP

Table 2.4 Manufacturing export

Source: Maldives Statistical Yearbook 2001

According to the 2000 Census, the manufacturing sector accounted for 12.85 percent of the country’s total labour force of 86,245. However, the productivity of the sector was low compared to other major sectors that employed a similar number of workers. There were more women employed in the sector than men and only one fifth of the sector’s labour force was in Male’.

Garments constituted the primary manufactured export product of the country, followed by canned fish. The demand for these products was erratic during the period under review, probably due to their uncompetitive prices.

Source: Statistical Year book 1998,1999,2000 and 2001

thHome-based industries that were of any significance during the 5 Plan period include thatch (fangi and thoshali) weaving, lacquer-worked products, and mats (kunaa). Thatch is mostly made for roofing in tourist resorts while lacquer-worked products and mats enjoy tourist demand.

In the area of industrial manufacturing, a joint venture established between the STO and a private local company, in September 1999, set up a liquefied petroleum gas (LPG) bottling plant in Thilafushi. This enterprise helped lower the price of cooking gas in the domestic market. MIFCO Boat Yard Ltd, a subsidiary of Maldives Industrial Fisheries Company Ltd (MIFCO), which specializes in building wooden fishing boats, improved the design as well as the size of vessels to enable fishermen to continue fishing for longer periods, and to install freezing or chilling facilities on board.

A private firm initiated the production of paper bags in 1999. This was a significant development, since paper bags are environment-friendly, as opposed to imported non-biodegradable polyethylene bags. The bag factory has a capacity of 25,000 - 30,000 units per month.

During the period under review, a private company established a sawmill in Thilafushi for sawing imported timber logs into carpentry ready planks. Another company, specializing in the assembling of air conditioners, refrigeration equipment and water coolers and chillers also began operations.

thFive manufacturing companies registered as foreign investors during the 5 NDP period, and three of them started production. Two of these companies manufacture garments for export, while the third one invested in the cement bagging operation in Thilafushi. The latter operation alleviated problems associated with accumulating large stockpiles of cement on Male’.

1997 1998 1999 2000

Growth rate (%) 19.5 12.4 8.2 4.4

% of GDP 8.2 8.5 8.6 8.5

GDP growth rate (%) 10.2 8.2 7.4 4.8

Va

lue

('0

00

Rf)

%o

fto

tal

exp

ort

s

Gro

wth

rate

(%)

Va

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('0

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Rf)

%o

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tal

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s

Gro

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rate

(%)

Va

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('0

00

Rf)

%o

fto

tal

exp

ort

s

Gro

wth

rate

(%)

1997 171,300.30 20.7 40.5 192,260.50 23.3 -1.7 826,422.20 100 18.2

1998 209,962.80 23.9 22.6 196,807.80 22.4 2.4 878,346.20 100 6.3

1999 292,844.70 38.9 39.5 101,501.80 13.5 -48.4 752,706.20 100 -14.3

2000 413,872.20 46.1 41.3 127,070.70 14.2 25.2 896,824.00 100 19.1

Year

Apparel Canned Fish Total Exports

New and notable industries that emerged during the 5th NDP period include, the assembling of aluminiumdoors and windows, desalination plants, and electric panel boards.

thThe 5 NDP specified the following objectives for the telecommunications sector.

1. Strengthen the role of the telecom regulator in its role of monitoring the realization of obligations imposed on the telecom operators.

2. Provide telephone service to all atoll capitals in 1997 and telephone access to every inhabited island by the year 2000.

3. Maximize the return to the Government from its investment in the sector while maintaining affordable services and expanding services particularly to areas designated for further regional growth.

4. Assess the impact on businesses of the telecommunications sector ’s tariff structure.5. Assess any impediments to future business developments from the telecom cost structure.

thMost of these objectives were successfully met by Dhiraagu. During the 5 NDP period the telecommunications sector experienced significant progress, including the introduction of new key services such as the internet and GSM digital cellular mobile services, while broadening the telecommunication service coverage. In May 2000 the Maldives became the first South Asian country to provide a telephone within walking distance of each inhabitant. This milestone was achieved through public telephone booths set up on all inhabited islands. Residential telephone service was also made available on demand to densely populated islands including Baa Eydhafushi, Haa Dhaalu Kulhudufushi, Ghaviyani Fuahmulah, Gaafu Dhaalu Thinadhoo and all the inhabited islands of Seenu Atoll. These developments opened new opportunities for socio-economic progress and improved the quality of life of a much larger segment of the population of the country than before.

Internet services were introduced by Dhiraagu on 14th October 1996. The service is presently available on a dial-up basis and Dhiraagu currently has 1060 subscribed internet accounts. In addition, there are a number of subscription free accounts for which only usage fees are payable. Dhiraagu also provides dedicated leased line connections at 64kbps speed. Cheaper internet access is provided to educational institutions and the Government.

An analogue AMPS mobile system was installed in 1997 and was replaced by a more advanced GSM digital cellular mobile service in November 1999. The mobile telephone service presently covers Male’ and the following atolls: Kaafu, Alifu North and South and large parts of Lhaviyani and Baa. At the end of December 2000, there were more than 8 thousand mobile subscribers in the Maldives.

GSM International roaming service was introduced to the Maldives in early May 2000. This service was initially available to UK, Sri Lanka and Singapore. Presently Dhiraagu’s GSM international roaming partners include 15 operators in 12 countries.

Maldives worked actively in the field of environment during the plan period. A major milestone was achieved in the international arena of climate change in the plan period. The Kyoto Protocol was adopted in 1998. The Maldives was the first country to sign the Kyoto Protocol and to ratify the Protocol. As Maldives was party to number of international environment conventions, work were initiated to meet the reporting requirements for the United Nations Framework Convention on Climate Change, United

Nations Convention of Biological Diversity and Montreal Protocol on Substances that Deplete the Ozone Layer.

TELECOMMUNICATIONS

ENVIRONMENT

In 1998, the Environment Research Unit under the then Ministry of Planning, Human Resources and Environment was elevated to the status of Environment Research Center as to be more actively to involved in environmental research. In the same year, work was carried to improve the solid waste management in the country. A comprehensive study on The Solid Waste Management for Malé City in the Republic of Maldives was carried out with the assistance of Japan International Co-operation Agency (JICA), to assess the solid waste disposal problems in inhabited islands and resorts.

The Malé Declaration on Control and Prevention of Air Pollution and its Likely Transboundary Effects for South Asia was adopted in 1998 by Ministers of Environment at the seventh meeting of the Governing Council of South Asia Co-operative Environment Programme (SACEP) held in Male' to address the emerging issue of air pollution in South Asia. Work was initiated to develop a national air pollution action plan in the plan period.

The work to review the first National Environment Action Plan (NEAP) began in the beginning of the plan period. The second National Environment Action Plan (NEAP II) of Maldives was adopted in 1999 to address the pressing environmental challenges. The NEAP II identifies the need to take an integrated approach to the management of the environment and to work towards the goal of sustainable development.

Maldives actively contributed to the international environmental research in the plan period. In 1998 and 1999, the Maldives contributed to the Indian Ocean Experiment (INDOEX), which was carried by an international group of scientists. A climate observatory was established at Kaashidhoo in 1998 as part of the Indian Ocean Experiment (INDOEX).

Capacity building for the environmental management continued in the plan period. People were trained for Coastal Zone Management, Geographic Information System and Environmental Economics

thAt the end of the 5 NDP period, the Maldives did not have a system of direct taxation (apart from the Bank Profit Tax) in the way of income, corporation or land tax. Conventional sources of revenue available to most countries in the form of indirect taxes such as sales, excise or VAT, were also not available. The tax base of the country, therefore, remained narrow and continued to be heavily dependent on tourism.

Tourism tax and revenues from tourism related services and import duties generated 50.8 percent of public revenue in 2000. A further 11.3 percent of taxes were generated by non-tourism related imports whilst 14 percent of revenues came from public enterprises. As evident from Table 2.3, tourism, imports, and public enterprises accounted for almost 75 percent of public revenues during the period under review.

The revenue from resort lease rent, under the Tourist Resort Development Law of 1994, continued to increase during the 5 Plan period. Resort lease rent was 248.5 million Rufiyaa in 1997, 267.4 million in

1998, 351.9 million in 1999 and reached 406.6 million in 2000 (Ministry of Finance and Treasury, 2000).

2.1.2 PUBLIC FINANCE

th

Measures were taken during the 5th NDP period to broaden the tax base and to increase and consolidate the revenues collected by the Government. The Department of Inland Revenue (DIR) was established to facilitate this effort. The DIR has initiated the reform of the tax system with a view to broaden the tax base of the country. However, fiscal reforms remain to be legislated.

thThe Annual Domestic Revenues also increased steadily during the 5 NDP. The Annual Public Revenue in 1997 was 1,701.6 million Rufiyya and it has jumped to 2,347.0 million Rufiyaa in 2000.

As Table 2.5 shows, domestically revenues funded 84.5 percent of public expenditure during 2000, while ODA contributed 13.1 percent.

PUBLIC EXPENDITURE

Table 2.5 Financing public expenditure for Year 2000

PUBLIC ENTERPRISE REFORMS

FOREIGN BORROWINGS

Source: Ministry of Planning and National Development (MPND)

thExpenditure restraints remained relaxed during the 5 Plan period. It resulted in a rise in expenditure by a factor of 4 between 1995 and 1999. Consequently, the level of the monetized deficit increased in absolute terms but declined relatively due to the rise in public revenues by a factor of 1.7 between 1995 and 1999.

A Public Service Division (PSD), was established within the President’s Office in 1999, with the aim of improving the efficiency and effectiveness of the delivery of public services. This Division is expected to facilitate much needed rationalization of the civil services and create cost savings.

The Public Enterprises Monitoring Unit (PEMU), established in 1994, was changed to Public Enterprise Monitoring and Evaluation Board (PEMEB) in 1999 to oversee the performance of the various public

thenterprises (Pes). During the 5 NDP period, PEMEB continued to monitor and advise the Government regarding PEs, including advise on actions to be taken regarding PEs that do not perform well. The narrow tax base of the country constrained the ability of the Government to privatize or divest at least

thsome of the PEs during the 5 Plan period.

External debt of the Maldives increased during the period, from US$ 127.00 million in 1997 to an estimated US$ 154.98 million at the end of 2000. The debt service ratio, which stood at 3.2 percent of export earnings in 1996 increased to 3.9 percent at the end of 1999. The period also witnessed a gradual increase in non-concessional loans mainly as a result of the procurement of capital equipment under supplier’s credit schemes.

thThe 5 NDP period was also marked by a decline in ODA from US$ 46.4 million in 1995 down to US$ 26.4 million in 1997 and a rise in 2000 to US$ 30.8 million.

RF

(million)

Public

Revenues

(%)

Public

Expenditure

(%)

Tourism related revenues 1192.2

1. Tourism related taxes (tourism tax + 60% of import duties) 691.8

2. Tourism related non-tax revenues (lease rent + MAC* earning) 500.4

Non tourism import taxes (40% of total) 265.2 11.3 9.6

Income from Public Enterprises 328.6 14 11.8

Other revenues 561 23.9 20.2

ODA 13.1

50.8 42.9

PUBLIC SECTOR FINANCIAL MANAGEMENT

2.1.3 MONETARY AND EXCHANGE RATE MANAGEMENT

thThe annual average budget deficit as a percentage of GDP was held at 3.9 percent during the 5 NDP period. It demonstrated a considerable level of fiscal discipline by the Government. Revenue-GDP ratio increased during the period, from 28.9 percent in 1997 to 36.0 percent in 2000. This favourable revenue position enabled the country to expand public expenditure without exposing the budget to foreign commercial borrowings.

Public expenditure deficit has, in recent years, been accommodated by the inflow of grant ODA. However, ODA’s contribution to public expenditure declined from 28 percent in 1996 to 13.1 percent in 1999.

thPublic finances of the country continued to be highly fragile and vulnerable during the 5 NDP period due to the country’s heavy dependence on the tourism sector as shown in Table 2.3.

The main objective of monetary policy during the 5th NDP period was to support low inflationary growth, while ensuring that external reserve targets could be met. Monetary instruments utilized during the period included the minimum reserve requirements, Certificates of Deposit issued by the MMA, aggregate limits on bank credit and the spread and maximum limits set on rufiyaa interest rates.

Monetary indicators at a cumulative level show that total liquidity increased at an annual average rate of 16.5 percent between 1997 and 2000, compared to 25.5 percent during the 4th NDP period. However, developments in the two halves of the 5th NDP period reflected differing trends. During 1997-98 the public sector witnessed some repayment of the accumulated domestic public debt, while in the private sector, a high level of investment in tourism and other related industries was undertaken under the first phase of the Second Tourism Master Plan. Commercial banks borrowed internationally in order to meet the demands of the tourism sector, which absorbed almost 80 percent of total private sector credit extended during 1998. At this time, the private sector accounted for 60 percent of total domestic credit, while the Government accounted for 32 percent (after averaging around 51 percent during the 4th Plan period) and the public enterprises, 8 percent. The positive developments in the tourism sector during 1997-1998 and associated inflows of foreign exchange to the government, boosted the country's foreign reserves and the net foreign assets (NFA) of the banking system as a whole, which stood at Rf 1490.5 million by the end of 1998, as opposed to Rf 825.9 at the end of 1996. As such, there was a high growth (23 percent growth in both years) in total liquidity of the banking system during this period, fueled mainly by private sector borrowing and an increase in net foreign assets of the banking system.

On the other hand, during the latter half of the 5th Plan period, recourse was made to domestic borrowing by the public sector as a result of fiscal expansion. In addition, following the completion of many of the new tourists resorts, a sharp decline in the flow of credit to the private sector was witnessed during this period. By the end of 2000, domestic credit of the banking system stood at Rf 2586.8 having increased by 60 percent from the level at the end of the 4th NDP period. The share held by the Government had increased to 38 percent, while the private sector accounted for 54 percent. The economy was also hit by terms of trade shock as a result of increased prices of fuel and a decline in tuna prices in the international market, while some of the tourist operators had lowered their rates in order to fill the extra capacity generated. At the same time, amortisation of the tourism sector debt added to the outflows from the economy. The cumulative result was a deterioration in the net foreign assets of the banking system, with NFA declining to Rf 1312.2 million by the end of 2000. As such, broad money growth fell to 4 percent during these two years, and stood at 47 percent in terms of GDP in 2000.

The MMA has traditionally kept the value of the Rufiyaa pegged to the US dollar, and the rate of exchange had remained unchanged at Rf 11.77 since October 1994. Consequently, the Rufiyaa appreciated against many of the Maldives' trading partners during the 5th Plan period, particularly in view of the sharp depreciation witnessed in the external value of many international currencies during the Asian financial crisis. As a result, there was a positive impact on price stability in the domestic economy, and inflation remained subdued during the latter part of the 1990s.

In terms of policy, the MMA discontinued the operations of the Post Office Exchange Counter (POEC) in July 2000 in an effort to pave the way for a more liberal and orderly foreign exchange market. The POEC had been used by MMA since 1987 for transacting in foreign exchange with the general public.

thTable 2.6 Monetary Indicators during the 5 NDP

2.1.4 TRENDS IN THE EXTERNAL ECONOMY

Source: Maldives Monetary Authority

The importance of international tourism to the Maldives and the reliance on imports by all the sectors in the economy had kept the country heavily dependent on foreign trade. Consequently, the external economy remained over 160 percent of the GDP throughout the 5th NDP period, largely owing to the strong domestic growth.

The increased tourist arrivals boosted the earnings from exports of goods and non-factor services, which rose from US$405.2 million in 1997 to US$457.2 million in 2000. However, earnings from fish exports suffered a major setback with the fall in international fish prices. Imports of goods and non-factor services increased from US$401.2 million in 1997 to US$451.7 million in 2000, with the high oil prices during 1999 and 2000 significantly raising the value of petroleum imports to the country. As regards net transfers, official grant aid received by the country remained fairly stable during the period 1997-2000 at around US$17-18 million per annum. However, the remittances made by the large expatriate force in the country had risen sharply from US$27.3 million in 1997 to US$46.2 million in 2000. Hence, the current account deficit which widened to 6.8 percent of GDP in 1997 worsened to 14.6 percent in 1999, before narrowing to 9.5 percent of GDP in 2000.

The capital inflows to the country, which comprises of medium and long term official capital and private capital, averaged 11 percent of GDP during the period, 1997-2000. Net disbursements of official capital declined steadily since the mid 1990s, reflecting lower disbursements from both multilateral and bilateral creditors, as well as increased repayments of loans. However, with the strong investment activities in the tourism sector in recent years with the new resort developments (leased under the first phase of the Second Tourism Master Plan), private capital flows have been estimated at over US$40.0 million per annum during the period 1997-1999. These capital flows subsided in 2000 with the completion of most of the resorts by the end of 1999. The overall balance of payments, which had been in surplus since 1994, averaging US$25 million per year, turned to a deficit of about US$7-8 million, or about 1.3-1.4 percent of GDP, in 1999 and 2000. The gross official reserves rose from US$99.7 million in 1997 to US$128.5 million in 1999, before slightly dipping to US$ 124.1 million in 2000, providing import coverage of over 3 months in all these years.

Total external debt of the Maldives has remained fairly moderate by developing country standards, averaging at around 38 percent of GDP during 1997-2000. The debt-service ratio also remained very low during the period, and stood at 4.2 percent of goods and non-factor services in 2000.

1994-96 1997 1998 1999 2000

average

in Rf millions

Net foreign assets (NFA) 422.9 1148.5 1490.5 1405.4 1312.2

Net domestic assets (NDA) 1124.9 1154.9 1338.1 1524.3 1737.7

Domestic credit 1615.5 1764.1 2091.4 2259.3 2586.8

- Credit to government (net) 829.2 663.6 673.1 760.2 995.0

- Credit to public enterprises 156.0 103.6 165.1 196.3 184.7

- Credit to private sector 630.3 996.8 1253.2 1302.8 1407.1

o/w credit to tourism 250.6 406.7 609.5 714.4 742.5

Total liquidity / Broad money supply (M2) 1547.8 2303.4 2828.7 2929.8 3049.8

Narrow money supply (M1) 936.4 1195.4 1384.2 1585.2 1760.4

ratios

Domestic credit as % of GDP 34.0 29.9 34.5 34.3 39.5

Demand deposits as % of GDP 16.9 21.0 25.0 24.8 27.1

Table 2.7 External Sector

2.2 SOCIAL DEVELOPMENT

2.2.1 EDUCATION

Table 2.8 Enrolment in grades 1-7 (1997-2000)

Source: Maldives Monetary Authority, Ministry of Finance & Treasury

As a result of a planned effort by the Government during the period under review, the Gross Enrolment Ratio (GER) in preschool enrolment reached 85% in 2000. During the period, the Government also continued to train teachers in early childhood education to be employed by pre-schools across the country. Furthermore, several studies were initiated on the status of ECCD in the Maldives and a special project “First steps …Maldives” was designed to address the needs identified.

The Net Enrolment Ratio (NER) for the seven years of basic education was over 99%. In pursuing the priority of universalizing seven years of schooling, 300 additional classrooms were provided in the Atoll schools. The construction of two large primary schools in Male’ was also completed during the 5th Plan

thperiod. Furthermore, during the 5 NDP period the National Curriculum has been enhanced to reflect the rapid social, economic and societal changes and to prepare Maldivian children for the challenges of the

st21 century. The National Curriculum that previously comprised of grades 1 to 7 was expanded to include grade 1 to 12, leading to a comprehensive curriculum encompassing both primary and secondary.

Source: Ministry of Education

Year Female Male Total

1997 35,690 36,951 72,641

1998 36,101 37,418 73,519

1999 36,203 37,847 74,050

2000 35,764 37,758 73,522

1994-96 1997 1998 1999 2000

average rev. est rev. est rev. est rev. est

in US$ millions

Exports of goods and non-factor services (XGS) 319.9 405.2 426.9 434.3 457.2

o/w Receipts from travel (tourism) 219.0 286.0 303.0 313.5 320.7

Imports of goods and non-factor services (MGS) 307.9 401.2 410.4 462.0 451.7

Current Account Balance -12.2 -34.2 -23.3 -81.6 -53.0

Official grants 21.8 17.2 18.9 17.7 17.7

Offical capital flows (net) 16.4 21.9 14.7 5.2 -2.1

o/w Concessional flows (net) 16.1 6.9 4.4 2.2 0.5

Gross International Reserves 52.9 99.7 119.9 128.5 124.1

Overall balance of payments 22.4 27.4 29.1 -7.2 -7.9

Ratios

External economy (XGS + MGS) as % of GDP 154.8 161.0 162.4 160.3 163.4

Current Account balance as % of GDP -3.0 -6.8 -4.5 -14.6 -9.5

Total external debt as % of GDP 40.4 35.6 38.9 38.1 38.0

Debt service as % of XGS 3.3 6.9 3.5 3.9 4.2

Gross International Reserves as % of months of MGS 2.1 3.0 3.5 3.3 3.3

Overall balance of payments as a % of GDP 5.5 5.5 5.6 -1.3 -1.4

SECONDARY EDUCATION

Table 2.9 Lower secondary enrolment 1997-2000

Lower secondary (Grades 8-10) enrolment increased by 89 percent from 9,653 in 1997 to over 18,000 in the year 2000.

Source: Ministry of Education

During the Plan period a 2nd regional secondry school, Jalaluddin School in Kulhudhuffushi went into operation in 1998 offering comprehensive secondry education opportunities for students in the region. A total of twenty-four schools in the Atolls were registered as GCE O’ Level Centres by January 2000. Furthermore, the Faculty of Education of the Maldives College of Higher Education began training

thsecondary teachers at the diploma level during the 5 Plan period.

Several measures were taken during the 5th Plan period to improve the management of the education sector. The cluster schools concept whereby a group of schools in a given atoll are looked after by a trained headmaster, was introduced to achieve greater efficiency in management and the supervision of schools. The Ministry of Education (MOE) has also established an intranet in an attempt to improve efficiency and cost-effectiveness of communications within the education sector

The Maldives Accreditation Board was established in 2000 to support the development of a national framework of qualifications and a mechanism for quality assurance that would allow private parties to offer diploma and degree level academic programs.

The Non-Formal Education Center (NFEC) revised and expanded the “second chance” program designed to provide the opportunity for achieving the standards of primary education for those who have missed the opportunity to complete seven years of schooling. Futhermore, learning centers that provide certificate level skills development in computer usage, management office skills and vocational training increased during the plan period. The adult literacy was maintained at 98.9 percent during the plan period.

thThe Government’s support for Islamic education, in the Arabic medium, continued during the 5 Plan period. The Institute of Islamic Studies (secondary level) and Madhrasathul Arabiyyathul Islamiyya (preparatory level) were upgraded and strengthened to improve the quality of Islamic education. The privately run Madrasathul Islamiyya in Seenu Hithadhoo was made a Government school in 2000 at the request of the school’s management.

stThe Maldives College of Higher Education (MCHE) was established on 1 October 1998 for the purpose of consolidating the existing institutions of post-secondary education, with the aim of rationalising resources and assuring quality. The following six institutions were merged to form MCHE:· Institute of Health Sciences (IHS) · Institute of Hotel and Catering Services. (IHCS) · Institute of Management and Administration (IMA) · Institute for Teacher Education (ITE) · Maldives Institute of Technical Education (MITE) · Maritime Training Centre

The Tertiary Institute of Open Learning (TIOL) remnamed the Center for Open Learning in 2001 and the Institute of Sharia’h and Law (ISL) were formed in 1999 under the umbrella of MCHE.

Year Female Male Total

1997 4,867 4,786 9,653

1998 6,033 5,812 11,845

1999 7,471 7,060 14,531

2000 9,518 8,736 18,254

Furthermore, during the period under review, private providers began to offer vocational training and post secondary courses.

thThe health sector made considerable progress during the 5 NDP period. The intensive health education and health promotion programmes that were implemented during the period, together with universal immunization, and the improvement and expansion of the healthcare services, resulted in very positive changes such as those listed below.

· Life expectancy increased from 70 years in 1995 to 71 years in 2000, partly due to significant reductions in infantand child mortality.

· The under-five mortality rate (U5MR) declined from 39/1000 live births in 1997 to 30/1,000 in 2000. · The Infant Mortality Rate (IMR) that stood at 27/1000 live births in 1997 declined to 21/1,000 in 2000. · The maternal mortality rate (MMR) decreased from 178/100,000 in 1997 to 75/100,000 in 2000. · The contraceptive prevalence rate for the use of modern methods, increased from 17 percent in 1995 to

32 percent in 1999. · Communicable diseases such as leprosy, malaria and filaria were kept under control.

Despite the numerous achievements in the health sector, under-nourishment, stunting and wasting emerged as major public health problems during the 5th Plan period. Acute respiratory infections (ARI) were also prevalent although reliable data on the extent of ARI is not yet available. The incidence of tuberculosis declined, but the disease was prevalent. The incidence of dengue fever increased from 3 reported cases in 1997 to 138 cases in 2000, despite awareness campaigns and mosquito control programmes.

thThe 5 Plan period witnessed an increase in drug abuse among adolescents. Recognising the extent and danger of the problem, the Narcotics Control Board (NCB) and a drug rehabilitation centre were established in 1997, to address the issue. The strengthening of counselling services and the establishment of a help hotline for drug dependents led to an increase in the number of adolescents seeking help from the rehabilitation centre. Currently, there are close to 1000 people undergoing rehabilitation and the majority of them are in the adolescent age group.

The national target to achieve water supply and sanitation coverage of 100 percent for Male’ by 1999 was thmet during the 5 NDP period. The Male’ Water and Sewerage Company (MWSC) Ltd. provided more

than 10,000 piped desalinated water connections to its customers in Male’. However, groundwater remained the major source of fresh water in the Atolls.

The target of providing 10 litres of freshwater per person per day in the Atolls was not achieved during the th5 Plan period. Almost 98 percent of the freshwater requirement of the rural populace was met by shallow

groundwater aquifers. Given that the depletion and the pollution of these aquifers has become common, the Government continued to promote rainwater harvesting, through awareness raising and the provision of HDPE tanks, during the period under review. Consequently, rainwater harvesting continued to gain in popularity, particularly in the rural communities.

The target of providing 100 percent sanitation coverage for Male’ had been achieved before the end of the th5 NDP period. However, the discharge of untreated sewage around Male’ and neighbouring Villingili

remained a concern.

thIn the rural areas, access to safe means of excreta disposal reached 40 percent during the 5 NDP period, from a baseline level of 22 percent in 1990. Progress in this area was slow due to geographical, financial and logistical constraints.

thSolid waste management in maldives continued to be a challenge in the 5 NDP period. The target of reducing waste generation by 50 percent during the period was not realized as an integrated solid waste management startegy was not developed in the plan period. The amount of waste generated increased due to changing consumption pattern in the plan period.

The solid waste collection system established in Male’ reached its capcity at the end of the plan period. The landfill at Thilafushi was in operation in the plan period and received waste from resorts and industrial islands for disposal from the central regions of the country. The arrangements for receiving,

2.2.2 HEALTH SERVICES

handling and disposing solid waste, burnt fuel, hazardous waste, hospital and clinical waste, were far from adequate. Open dumping was widely practiced throughout the country.

Source: Ministry of Planning and National Development (MPND)

thEnhancing gender equality and equity were among the priorities of the Government during the 5 Plan period. Some of the important measures taken by the Government to promote gender equality and equity included:

· Campaigns to increase awareness;· The holding of advocacy workshops throughout the Maldives on gender sensitizations to improve

legal literacy and to encourage women’s participation in politics; · The introduction of micro-credit schemes for the economic empowerment of women in the

islands; · The provision of guidance to 215 Island Women’s Committees (IWCs) by the Ministry of

Women’s Affairs and Social Security (MWASS); and· The presentation of an annual award to the three most active Island/Ward Women’s Committee to

encourage active participation of women in the development of the islands.

Despite the measures taken, gender disparity is still a reality in the Maldives. The participation rate of women in economic activity remained low during the Plan period. Activities such as sewing and

thembroidery courses, proposed in the 5 Plan to economically empower women, tended to reinforce women’s stereotypical domestic roles rather than diversifying their job opportunities. Furthermore, the ‘Reproductive Health Baseline Survey’ undertaken in 1999, showed that women still have limited control over their own sexuality.

thThe Government gave special attention to the well being of children during the 5 NDP period. Consequently, several measures, the most significant measures listed below, were taken to strengthen the rights of the children.

· The rules on investigation, adjudication and sentencing with respect to child offences were strengthened.

· Work on the review of laws in relation to the provisions of UN Convention on the Rights of the Child has been initiated.

· The first draft of a framework of action for children with special needs has been prepared and circulated for comments.

th· Campaigns to raise awareness on the rights of the children continued during the 5 NDP period. · A Children’s Court and a Child Protection Unit at the police Headquarters were established. · A Child Protection System pilot project was initiated in Addu Atoll in 2000. · Special classes for children with special needs were initiated at Jamaaluddeen School in Male’.

Some of the important steps taken for the empowerment of youth during the period under review are listed below.

· A National Youth Policy document was prepared and submitted to the concerned authorities for approval.

· A plan that demarcates 9 zones for the purpose of programme implementation was implemented.

Table 2.10 Solid waste disposed at Thilafushi during the year 2000

2.2.3 GENDER EQUALITY AND EQUITY

2.2.4 CHILD RIGHTS AND PROTECTION

2.2.5 YOUTH AND SPORTS EMPOWERMENT

Total volume Volume per day

Male' (tons) 103,985.00 284.89

Vilingilli (tons) 4,669.00 12.79

Airport (dhoani) 950 2.6

Resorts (dhoani) 4,066.00 11.14

· A number of youth and sports activity centres and sports facilities were established. Among these were a training centre in Male’ and a regional centre in Seenu Gan set up to facilitate training programs related to youth and sports.

· A nation wide Youth Volunteers Program was formulated and over 80 percent of it was thimplemented during the 5 Plan period.

· A youth campsite was established in Kaafu Huraa. Arrangements were also made to accommodate visiting youths in Male’.

· A Youth Skills Program was launched in 2000.

thSports development entered a new phase during the 5 NDP period. A number of new ideas and restructuring programs were implemented within the sector. Some of the most significant of these developments are listed below.

· The two most widely played sports, soccer and volleyball, were realigned within a national competition structure.

· Sports venues have been created at the zonal level with special emphasis on a more complete sports centre at Haa Dhaalu Kulhudhuhfushi and one at Seenu Hithadhoo.

· A national conference on sports was held in 1998. The conference passed 63 resolutions reflecting the hopes of the participants for the future of sports.

The population growth rate of the Maldives declined from 2.7percent (inter-censal annual growth) during 1990-1995 to 1.9 percent (inter-censal annual growth) during 1995-2000. According to the last Census, the population of the Maldives in March 2000 was 270,101, a figure that is approximately 19,000 less than that estimated by MPND in August 1999. Nearly 41percent of the population was below 15 years of age and more than a third was between 16-35 years of age.

The number of people living in Male’ grew from 25.54 percent of the population in 1995 to 27.42 percent in the year 2000. This increase could be attributed to the development of Villingili as a suburb of Male’. Despite the slow rate of population growth in the country, Male’ experienced an increase in the population growth rate (inter-censal annual growth) from 2.5 percent to 3.4 percent between 1990-1995 and 1995-2000.

In 1995, there were 34,435 households in the Maldives and the average household size was 7.11 persons. The household size of Male’ was 9.25 whilst that of the other islands stood at 6.59 persons. With the increasing pressure on Male’ for housing, the average household size in Male’ increased to 8 persons per household in 2000.

th th thWork on the 5 and 6 phases of the Male’ Housing Project were initiated during the 5 NDP period with funding from the Chinese Government and the budget of the Government of the Maldives. The

thconstruction under these phases was nearing completion when the 5 NDP period ended. Flats will be thallocated to residents at the beginning of the 6 NDP period. These two phases will add 60 more housing

units with a total of 160 bedrooms.

2.2.6 POPULATION AND HOUSING

Table 2.11 No. of units constructed under Male’ Housing Project Ph V and VI

Source: Maldives Housing and Urban Development Board (MHUDB)

Number of units Phase V Phase VITotal

(Ph V&VI)

No. of two-bedroom units 18 8 26

No. of three-bedroom units 18 10 28

No. of four-bedroom units - 6 6

Total no. of flat units 36 24 60

2.3 POPULATION AND DEVELOPMENT CONSOLIDATION

2.4 PARTICIPATION OF NON GOVERNMENTAL AND COMMUNITY BASED ORGANISATIONS IN DEVELOPMENT

thSteps were taken during the 5 NDP period to implement the Population and Development Consolidation Programme. The Programme aims at minimising the serious diseconomies ofscale faced by the country in the provision of socio-economic services, by promoting economically viable population concentrations on large islands. The Programme employs the strategy of encouraging the inhabitants of small and remote islands to voluntarily move to larger islands where socio-economic services and employment opportunities are in place to enablethem to enjoy a better standard of living.

In implementing the Population and Development Consolidation Programme, the Phase I of a Regional Development Project was initiated in 2000. The Project is aimed at developing two regions, one in the north, Northern Development Region (NDR), and one in the south, Southern Development Region (SDR), of the country. The focus islands for development under the Project were identified during the period under review. Regional Development Management Offices (RDMO) was established on HDh. Kulhudhuffushi and S. Hithadhoo, in NDR and SDR, respectively, in 2000. Several other components of the Project in the areas of infrastructure development and environment protection were also initiated

thduring the 5 NDP period. The Project, once completed, is expected to support balanced development in the country, take some pressure off Male’, and encourage population concentration on the focus islands, thereby minimising diseconomies of scale in the provision of services.

The Government has, in recent years, attempted to structure its administration to draw upon the traditions of the past by making itself responsive to the needs of the dispersed and isolated island communities. As a result, administrative and developmental responsibilities have been devolved, to some extent, to Atoll Development Committees (ADC), the Island Development Committees (IDC) and Women’s Development Committees (WDC).

thDuring the 5 NDP period, some attempt was made to actively involve the local community, through the IDCs, in the planning and management of some development projects. These projects included the Nilandhe Atoll Integrated Development Project, the UNDP supported Noonu and Laamu Atoll Projects and most recently, the ADB supported Southern Atoll Development Project. These projects were generally aimed to mobilize island communities to identify projects, upgrade skills particularly that of women and other vulnerable groups and to facilitate them to undertake some income generating activities.

Over the last five years NGOs have carried out many successful programmes with the support of external donor agencies and through self-training. They work in various areas of specialization. The Society for Health Education (SHE) concentrates on health education, focusing on reproductive health and thalassaemia. It is also the only organization that has membership in an international NGO network and has received many international awards in recognition of its work in health education and particularly on thalassaemia. FASHAN focuses on training for development management and awareness rising on issues of gender, drug abuse and HIV/AIDS. Blue Peace and VESHI work mainly in the area of environment and development. Care Society was formed during the Plan period and it focuses exclusively on the needs of disabled people.

thDiscussions held between the MHUDB and the Bank of Maldives, during the 5 Plan period, culminated in the development of a Housing Finance Scheme targeted at providing small loans of up to Rf 90,000 for housing construction outside Male’. Consensus has been reached between MPND, MOAA and the Ministry of Finance and Treasury (MFT), that the target area for a pilot programme would be a host island designated for population consolidation (see 2.8.3). A sum of Rf. 10 million was allocated for the pilot project through the Public Sector Investment Programme (PSIP) for 2001. The results of the project will determine the extent to which the scheme will be replicated or modified to provide the necessary finance to improve the living environment outside Male’.