New projects will supplement tourism and generate jobs for all skill sets
By P.K.Balachandran
Colombo, November 7: Maldives, which has been over-dependent on the tourism industry for decades, has begun to realize the risks of over-dependence on one sector and President Mohamed Muizzu is taking a range of steps to correct the missteps of the past.
COVID had hit tourism hard and Maldives had a hard time recovering from it. Therefore, one of the primary goals of President Muizzu government is to diversify the Maldivian economy. His administration is actively working to develop other industries, such as fisheries, agriculture, and renewable energy, an official said.
By fostering growth in these areas, the government hopes to create job opportunities, increase exports, and boost the economy’s resilience against global market fluctuations.
Fisheries
Fisheries has great potential. In 2021, nearly 71% of the animal protein consumed by Maldivians was credited to fish. The demand for fisheries and agricultural products continues to grow not only due to an increasing population, but also due to the increase in tourist arrivals, which total 2 million a year. There is tremendous scope for increasing production for consumption as well export.
In 2018, the government issued and renewed 21-year leases for 15 uninhabited islands dedicated to commercial fisheries, 50 uninhabited islands for commercial agriculture and eight additional uninhabited islands for both commercial fisheries and agriculture.
The result was that the fisheries sector contributed nearly 96% to the country’s total merchandise export of about MVR 2.7 billion (US$ 175.4 million). In 2021 exports in 2021 were MVR 1.9 billion (US$ 123.4 million).
Exports included live ornamental fish, fish roe, smoked fish, fish chips, fresh fish, chilled fish, or frozen consumable fish such as yellowfin tuna, albacore, long finned tuna and many more.
With these great values, came the responsibility of managing the fish stocks as well. But there was insufficient capacity and institutional support. In addition, lack of market access, inadequate transport as well as poor environmental management and insufficient food safety controls. There were also concerns about over-fishing.
Climate change was affecting biodiversity in marine life causing a decline in fish catches, which resulted in overfishing. The lack of air cargo and sea transportation relative to the yield of fishing was a limitation to production and sale flows.
There was also a lack of awareness on good aquaculture and high-value market products, due to which the industry fell short in reaching its full potential in the global market.
The UN’s Food and Agriculture Organisation (FAO) is one of the strongest supporting bodies for the development of the fisheries sector in the Maldives. It boosted the sustainability of rural livelihoods, with a focus on climate-smart agriculture and fisheries development. FAO provided funds for fisheries, and till 2011, it had disbursed US$ 411,120 for various projects in the veterinary, aquaculture and agricultural sectors.
Renewable Energy and Climate Change
President Muizzu is keen on renewable energy to reduce the Maldives’ dependence on costly imported fuel. Investments in solar and wind energy not only support environmental sustainability but also promise a more stable and self-reliant future.
Maldives is projected to lose 80% of its land over the next few decades. It has therefore, recognized an urgent need to chart a new course. The country has set an exceptionally ambitious target of reaching net-zero by 2030, embarking on a historic transition to clean energy with the help of the Asian Development Bank and the World Bank.
A joint investment of over US$ 300 million is helping the Maldives develop solar power facilities, increase renewable energy capacity, and remove barriers to private investment and further development.
Boosting Entrepreneurship
President Muizzu’s policies also emphasize empowering Maldivian entrepreneurs and small businesses. By providing financial incentives, grants, and training programs, the government seeks to unlock local talent and innovation. The focus on local entrepreneurship aims to generate more job opportunities across diverse fields, allowing Maldivians to benefit directly from economic growth.
Initiatives that support women and youth entrepreneurs are also expected to drive inclusivity and expand access to economic participation.
Employment
The labour market of the Maldives is characterized by a duality. On the one hand, unemployment rate remains at 28%, on the other hand, the expatriate workers in the Maldives is at par with the economically active Maldivian population. It is estimated that the economically active population of the Maldives will be doubled by the year 2054. Parallel to this growth, by 2054, expatriate workers’ population in the Maldives will surpass the economically active Maldivian population.
The growth of foreign employment in the Maldives could pose a huge challenge for locals to find employment in the future. Therefore, the way forward for us is to seek entrepreneurship and self-employment.
Entrepreneurship
According to the Pension Office (2020) statistics, there are 1971 businesses registered with it. Only 0.4% of the population are active entrepreneurs. This suggests that there is a huge potential for entrepreneurship development in the Maldives. The rise of internet, gig and shared economy have created opportunities for entrepreneurship.
Equalitarianism
To support economic development and enhance access to essential services, President Muizzu has prioritized infrastructure development, particularly in outlying atolls.
Through an ambitious decentralization program, the administration is working to ensure that more people across the country have access to high-quality healthcare, education, and public services.
Enhanced road networks, healthcare facilities, and educational institutions in remote areas aim to improve living standards, reduce urban migration, and foster sustainable development across the nation. President Muizzu’s commitment to regional development also supports the goal of creating a more cohesive society, where economic opportunities and social benefits are more evenly
Dr. Muizzu’s vision places great emphasis on social stability. The administration has committed to improving social welfare programs, providing safety nets for the most vulnerable populations, including the elderly, people with disabilities, and low-income families. These initiatives are aimed at creating a foundation of security that will foster a stable and resilient society.
Furthermore, investments in education and healthcare seek to provide Maldivians with the resources they need to lead productive and fulfilling lives. By ensuring access to quality education and healthcare, Dr. Muizzu’s government is aiming to equip the population with the tools necessary to contribute to national development.
Current Economic Condition
Be that as it may, current economic parameters give a grim picture. Domestic inflation stayed low at 0.5% in H1 2024, but food inflation surged to 6.7%, raising living costs, especially for poorer households. The trade deficit widened to US$ 1.5 billion in H1 2024 due to a 45.5% drop in fish exports and a 6.4% increase in imports.
Rising import costs and debt repayments reduced official reserves from US$ 590.5 million in December 2023 to US$ 395.4 million in July 2024, while usable reserves fell to a record low of US$ 43.7 million.
Recurrent expenditure fell by 7.2% in H1 2024, but capital spending plummeted by 47.6% due to infrastructure spending cuts. Total expenditure is set to moderate, but expenditure arrears are building up.
Revenue collections dropped by 5.7%, keeping the fiscal deficit at 12.8% of GDP. The central bank’s exposure to government securities increased to 61% of its assets by mid-2024, reflecting ongoing domestic and external financing challenges.
There’s Light
The situation is indeed grim. But there is light at the end of the tunnel. The economy is expected to grow by 4.7% on average over the medium term, slower than the pre-pandemic average of 7.4%.
Backed by substantial foreign budgetary assistance, the Maldivian budget for 2025 is for MVR 2.5 billion (US$ 168 million). Out of which, MVR 2.3 billion (US$ 149.8 million) is expected to be received from friendly countries, with India accounting for US$ 104 million of it.
Officials believe that Maldivians can look forward to a future where economic opportunities are abundant, social welfare is prioritized, and environmental sustainability is an enduring principle. Dr. Muizzu is keen on positioning the Maldives as a model for sustainable growth and stability in the region and also the world at large.
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