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The Economy of the Maldives

The Maldives is an island nation, and islands depend upon the ocean for their sustenance. In ancient times, the Maldives were famous for dried fish, ambergris and the cowrie shells used as currency all up and down the East African coast. Today, the Maldives is still a fishing nation, but it's far better known as a beach getaway. Tourism generates almost 30 percent of the Maldives’ per capita GDP (gross domestic product), while fishing, including processing fish for export, only accounts for 10 percent. Other Maldivian industries include shipping, agriculture and manufacturing.

While tourism has been an enormous boon for the Maldives, the island nation remains poor. Its per capita income is only approximately £1390 per year.

Agriculture is constrained by the lack of arable land. According to the World Health Organization (WHO) the Maldives’ agricultural sector produces only 10 percent of the food needed to feed its population. The country is forced to import rice, its dietary staple, from trading partners. It also imports wheat flour, sugar, dairy products, and meat and eggs. The Maldives runs a negative trade deficit, exceeding £ 12.5 million annually.

Lack of energy and mineral resources also hold back economic development in the Maldives. The islands are also highly susceptable to natural disasters like the December 2004 Asian tsunami

In recent years the Maldives have depended heavily upon assistance from economic development organizations like the World Bank, the Asian Development Bank and the UN (United Nations) Development Program in order to meet its fiscal obligations.

Maldives Tourism

Ibrahim Nasir, the first President of the Second Republic of Maldives, deserves credit for creating the Maldivian tourism industry. When the UN sent a business development mission there in the 1960s to explore the Maldives’ potential as a resort destination, the delegates returned with a negative report. The islands, claimed the UN officials, were unsuitable for tourism because of the lack of any sort of hospitality infrastructure. Nasir promptly set about addressing this deficiency. The Maldives welcomed its first group of tourists in 1972, 22 Italians who debarked from an Air Ceylon charter on to Hulhule Island’s narrow airstrip for 12 days of snorkeling, spear fishing and basking in the sun on white sand beaches.

In 2010, nearly 800,000 holiday seekers visited the islands, says the Maldivian Ministry of Tourism. Fifteen percent of them came from China and the remainder largely from Europe, traveling from the UK, German, France, Italy and Russia. For the most part, Maldivian tourists do not explore the local sights but remain cloistered in resorts. Tourism brings in close to £65 million in revenues every year.

There’s no denying that tourism has been has been a powerful engine fueling the island nation’s economic growth . In its first decade, the burgeoning tourism industry helped the Maldivian GNP grow by a whopping 265 percent. Tourism has been a source of jobs and much needed access to foreign capital. But some see tourism as a mixed blessing. The jobs are concentrated in resort areas. In order to work, Maldivians must travel from their homes to live in towns whose infrastructures are not prepared to support the influx of workers crowding into them. And foreigners have filled almost 44 percent of the new jobs created by tourism. Additionally, factors that influence tourism can have a huge negative impact on the Maldivian economy. When the recession in Europe cut the number of tourists visiting the Maldives in half during the first six months of 2009, the nation’s GDP contracted almost 20 percent.

Maldives Fishing

Fishing employs 20 percent of the Maldivian workforce. If you include ancillary industries like fish preparation, fish packaging, and transporting and exporting fish, that percentage is much higher. Over 1200 species of fish can be found in the oceans off the Maldives, but the most important, from an economic standpoint, is the tuna which fresh, frozen, dried, salted and canned, accounts for 84 percent of all the Maldives’ marine exports. Fish catch levels have been declining since 2006, possibly due to changing ocean currents, and the fisheries sector is perceived as a drag on economic growth.

Fishing nets are against the law in the Maldives for environmental reasons. All fishing is done by line. Though fishermen themselves work in the private sector, the processing, distribution and export of tuna is controlled by a government-run company called the Maldives Industrial Fisheries Company (MIFCO.) The Maldives Nippon Corporation, a joint business venture between the Maldives and Japan, also oversees the canning and processing of fresh fish. Additionally, Japan and the World Bank are underwriting the development of new fisheries off the islands’ coral reefs that, if successful, may help the Maldives revitalize its fishing industry.

Other Maldives Industries: Shipping, Manufacturing and Traditional Handicrafts

Shipping: The Maldives has an active merchant shipping fleet consisting of ten cargo ships, one container vessel and an oil tanker. The government-owned Maldives Shipping Management Ltd is the country’s largest shipping company but private companies do most of the Maldives’ importing and exporting.

Manufacturing: There is some boat building and garment manufacturing in the Maldives but no heavy manufacturing. Manufacturing in the Maldives is constrained because the islands are so small and so geographically dispersed that logistics presents a major challenge. Access to energy is also a concern, as is the fragile environment itself, which could be negatively impacted by industrial pollution.

Handicrafts: The tourism industry has been a boon to the Maldives’ traditional handicrafts. In ancient times, the Maldives were renowned for a rope called coir, woven from coconut fibers, and coir mats still a popular Maldivian souvenir today. The town of Rin'budhoo in Dhaalu Atoll is famous for its beautiful gold jewelry, while Hulhudel on the same atoll is just as famous for its silver. Other popular craft items include wooden objects and ceramics lacquered with a tree resin product called laajehun that is highly prized among the Chinese, hand loomed Maldivian cloth, and objects carved from coral and stone.

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