In ancient times, the Maldives were renowned for cowry shells, coir rope, dried tuna fish (Maldive Fish), ambergris (Maavaharu), and coco de mer (Tavakkaashi). Local and foreign trading ships used to load these products in Sri Lanka and transport them to other harbors in the Indian Ocean. From the 2nd century AD, the islands were known as the ‘Money Isles’ by the Arabs who dominated the Indian Ocean trade routes. The Maldives provided enormous quantities of cowry shells, an international currency of the early ages. The cowry is now the symbol of the Maldives Monetary Authority.
The Maldivian Government began an economic reform program in 1989, initially by lifting import quotas and opening some exports to the private sector. Subsequently, it has liberalized regulations to allow more foreign investment. Real GDP growth averaged over 7.5% per year for more than a decade. Today, the Maldives’ largest industry is tourism, accounting for 28% of GDP and more than 60% of the Maldives’ foreign exchange receipts. Fishing is the second leading sector.
In late December 2004, the major tsunami left more than 100 dead, 12,000 displaced, and property damage exceeding $400 million. As a result of the tsunami, the GDP contracted by about 3.6% in 2005. A rebound in tourism, post-tsunami reconstruction, and development of new resorts helped the economy recover quickly and showed an 18% increase in 2006. 2007 estimates show the Maldives enjoy the highest GDP per capita $4,600 (2007 est.) amongst south Asian countries excluding Persian Gulf countries such as Qatar which has the second-highest GDP in the world.
Tourism is the largest industry in the Maldives, accounting for 28% of GDP and more than 60% of the Maldives’ foreign exchange receipts. It powered the current GDP per capita to expand 265% in the 1980s and a further 115% in the 1990s. Over 90% of government tax revenue flows in from import duties and tourism-related taxes.
Fishing is the second leading sector in the Maldives. The economic reform program by the government in 1989 lifted import quotas and opened some exports to the private sector. Subsequently, it has liberalised regulations to allow more foreign investment.
Agriculture and manufacturing play a minor role in the economy, constrained by the limited availability of cultivable land and shortage of domestic labour. Most staple foods are imported.
Industry in the Maldives consists mainly of garment production, boat building, and handicrafts. It accounts for about 18% of GDP. Maldivian authorities are concerned about the impact of erosion and possible global warming in the low-lying country.
Among the 1,900 islands in the Maldives, only 198 are inhabited. The population is scattered throughout the country, and the greatest concentration is on the capital island, Malé. Limitations on potable water and arable land, plus the added difficulty of congestion are some of the problems faced by households in Malé.
Development of the infrastructure is mainly dependent on the tourism industry and its complementary tertiary sectors, transport, distribution, real estate, construction, and government. Taxes on the tourist industry have been channelled into infrastructure and it is used to improve technology in the agricultural sector.
Economy – overview
Tourism, the Maldives’ largest economic activity, accounts for 28% of GDP and more than 60% of foreign exchange receipts. Over 90% of government tax revenue comes from import duties and tourism-related taxes. Fishing is the second leading sector. Agriculture and manufacturing continue to play a lesser role in the economy, constrained by the limited availability of cultivable land and the shortage of domestic labor. Most staple foods must be imported. The Maldivian government implemented economic reforms, beginning in 1989 that initially lifted import quotas, opened some exports to the private sector, and liberalised regulations to allow more foreign investment. Real GDP growth averaged over 7.5% per year for more than a decade, and registered 18% in 2006, due to a rebound in tourism and reconstruction following the tsunami of December 2004. GDP slowed in 2007-08, then contracted in 2009 due to the global recession. Falling tourist arrivals and fish exports, combined with high government spending on social needs, subsidies, and civil servant salaries contributed to a balance of payments crisis, which was eased with a December 2009, $79.3 million dollar IMF standby agreement. Diversifying the economy beyond tourism and fishing, reforming public finance, and increasing employment opportunities are major challenges facing the government. Over the longer term Maldivian authorities worry about the impact of erosion and possible global warming on their low-lying country; 80% of the area is 1 metre or less above sea level.