Economic Development

There are considerable challenges to the development of the Maldives. The main issue is the disparity which exists between the outer atolls and Male’. In the atolls there is a lack of infrastructure, education and health care services. As a consequence the economic development is hindered. This has resulted in mass migration to the capital. It has lead to congestion in the capital and difficulty in providing housing. In order to reduce congestion and provide housing the government has embarked on a project to build flats and sell land in the reclaimed island Hulhumale. However the project has been difficult to implement due to unavailability of finance for the public company Hulhumale Development Corporation.
The incomes are also low in the atolls compared with Male’ due to fishing being the main economic activity in most of the islands. There are many tourist resorts, however they are not all distributed evenly. In order to ensure that there is a more equitable distribution of income the government has created a public company Maldives Tourism Development Corporation. This company has also not been very effective in building resorts in the atolls. The leasing of islands for developing of tourist resorts involves a high advance rent and this is also one of factors which discourage firms. As, there is no transport system in the atolls, the costs are high for firms. This can be achieved through building a regional airport in every atoll and having a regular inter-atoll ferry system.
One of the key aspects of development is to increase the standard of living and achieve sustainable growth. In the outer atolls access to health services, education, in particular secondary and higher education, safe water and sanitation is a problem, especially for some of the more remote atolls. In the Maldives absolute poverty and severe malnutrition do not exist. However, there are about 22 percent of the populations estimated to live below the income poverty line of Rf 10 per person day (US$0.85). In Male’, the incidence of poverty for both income poverty lines is half of what is found in the outer atolls. The main poverty problem is caused by the disparity in living conditions between people living in the capital and those living in remote atolls. Also, the development of the Maldives has been impeded by a critical skills shortage. The country has to rely on the services of a large number of expatriates, which takes a heavy toll on the limited foreign currency available to the Maldives. Addressing this critical skills shortage is essential for the sustainable development of the Maldives economy. The economy is also vulnerable to external shocks because of heavy dependence on tourism and fisheries sector. This requires diversification of the economy and developing new sectors. Potential sectors which can be developed are Port and Logistics Services, Information and Communication Technology, and Offshore Banking and Financial Centers.