WT/TPR/S/221/Rev.1 Trade Policy Review 
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IV. TRADE POLICIES BY SECTOR 
(1) INTRODUCTION  
1. The Maldives is a small economy with limited natural resources and thus a narrow economic 
base;  heavy dependence on tourism services and fisheries makes the economy and trade vulnerable to 
exogenous shocks.  Although the ec onomy is relatively open with trade in goods and services 
accounting for over 150% of GDP in 2009, tariffs re main relatively high and state involvement is 
prevalent in many sectors.  High tariffs and stat e involvement tend to impede competition and thus 
result in an inefficient allocation of resources.  To be more resilient, the economy would need to 
diversify, this could be achie ved through greater private-sector involvement.  At present, 
private-sector involvement remains weak (except tourism), presumably due to crowding out by the 
state-owned enterprises and the relatively high cost of doing business in the Maldives. 
2. Fisheries account for almost all merchandise e xports and the state-owned Maldives Industrial 
Fisheries Company (MIFCO) remains dominant in the sector.  Fishing and fish processing is characterized by very little product diversificati on and low value-added pr oducts.  Export receipts 
would be significantly greater if higher value-adde d processes, such as canning, were to become more 
prevalent.  The agriculture sector is limited to 30 s quare miles of arable land,  which is used to grow 
fruits and vegetables for personal consumption.  The manufacturing sector remains weak;  it is 
protected by high tariffs, but receives government support in the form of tariff concessions on imported inputs. 
3. Tourism and related activities, such as trans port and communications, dominate services, 
contributing to as much as 70% of GDP.  There is very little direct state involvement in tourism, 
where it appears that productivity is much higher th an in other sectors of the economy.  By contrast, 
government involvement in telecommunications, fina ncial services and transport is considerable.  
However, the Government continues to further liber alize these sectors in order to make them more 
efficient and thus competitive, thereby reducing th e cost of doing business in the long-run (as these 
services are important business inputs). 
(2) F
ISHERIES AND AGRICULTURE  
(i) Fisheries 
4. Despite its declining share of GDP (from over 7% in 2002 to 5% in 2009), the fisheries sector 
continues to be of major importance to the Maldiv es economy (Table IV.1);  it accounted for nearly 
all (98.4%) merchandise exports and employed 11% of the total workforce in 2009.  
5. Due to its geographical nature, the Maldives h as considerable marine resources within its 
200 mile exclusive economic zone (EEZ).  Between 2002 and 2007, tota l fish catches were volatile, 
varying between 133,000 tonnes and 186,000 tonnes.  Tuna (skipjack, yellow fin, and big eye) account for nearly 90% of the total catch, with sn apper, grouper, and other varieties making up the 
rest.  
6. The main export market for Maldivian fish is Thailand, which takes over 30% of exports for 
use in its canning industry.  Almost all dried and sal ted fish is exported to Sri Lanka.  Fish products 
canned in the Maldives are exported mainly to Eu rope, where they benefit from tariff and quota 
preferences under the EC's "everything but ar ms" initiative for LDCs.  Since 2003, all export 
shipments require a health certificate for quality c ontrol purposes.  Fish exporters have to pay a 
value-based export charge (tax) called a "royalty",  which varies according to the species and totalled 
Rf 57.8 million in 2004.  Maldives WT/TPR/S/221/Rev.1 
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Table IV.1 
Fishing indicators, 2002-09  
  2002 2003 2004 2005 2006 2007 2008a 2009b 
Contribution to GDPc (%) 7.1 6.6 6.1 7.5 6.3 4.6 4.2 5.0 
Growth of fishing GDPc (%) 22.9 0.7 1.8 17.6 -1.0 -21.8 -2.6 15.4 
Total fish catch ('000 tonnes) 163.4 155.4 158.6 185.9 184.2 144.1 133.1 .. 
- of which:  skipjack tuna (%) 70.6 69.7 69.2 71.0 75.2 67.5 66.0 .. 
Total fish exports ('000 tonnes) 44.6 69.8 75.4 82.1 111.4 65.8 63.1 .. 
- value (US$ million) 49.2 69.1 84.4 96.6 128. 8 102.5 120.7 .. 
Number of fishermen ('000) 14.4 14.9 14.8 13.8 14.2 .. .. .. 
Number of mechanized fishing vessels  1,161 1,150 1,159 1,058 967 936 907 .. 
.. Not available. 
a Estimates. 
b Projections. 
c Based on constant 1995 prices. 
Source : Maldives Monetary Authority (2009), Monthly Statistics , April, Vol. 10 No. 4, and Annual Report (various years). 
(a) Structure 
7. Commercial fishing in the Maldives is differe ntiated by distance.  Near-coast fishing 
(0-75 nautical miles (NM)) is carri ed out using traditional wooden hulled masdhonis  and is 
concentrated on skipjack tuna.  Masdhoni  owners are required to be Mald ivian citizens;  additionally, 
the vessels must be registered and the owners must have a licence to fish.  The licence stipulates the 
permissible fishing methods, which include:  pole and line, long line, trolling and hand line;  gill 
netting is only allowed in areas designa ted for bait fishing.  In order to maintain the registration, the 
vessel needs to make a minimum of 120 fishing trip s a year.  As of 2008, there were 979 fishing 
vessels registered in the Maldives,  of which 867 were mechanized masdhonis  and 40 mechanized 
vadhudhonis  (trolling vessels). 
8. High-seas fishing takes place between 75NM and 2 00NM (the EEZ limit);  the main species 
caught is yellow fin tuna.  Licences for high-seas fishing are granted by the MED to 
Maldivian-registered companies operating foreign vessels.  At present, 43 licensed companies are 
operating in the 75NM-200NM EEZ.  High-seas fishing is regulated through quotas;  only long line 
and pole and line methods are permitted.  Additionally, trading in yellow fin tuna is restricted by a 
quota of 1,000 tonnes;  however, it would appear that the quotas are not enforced.  
9. Applied MFN tariffs on fish imports averaged 16%, which is low compared with the overall 
average applied MFN tariff (21.4%).  However, most  tariff lines relating to fish and fish products are 
not bound, which gives the Governme nt considerable leeway to raise tariffs on these products if the 
need arises.   
(b) Regulation 
10. The Maldives has no comprehensive fisheries mana gement policy.  The Ministry of Fisheries, 
Agriculture and Marine Resources (MFAMR) is re sponsible for regulating the sector as well as 
formulating policy.  Fisheries is regulated under Law 5/87 and the Regulation for Issuing the License 
to Fish in the Exclusive Economic Zone of the Re public of the Maldives, which differentiate between 
near-coast and high-seas fisheries and the permissible methods of fishing.  The regulatory instruments are applied through licensing systems. WT/TPR/S/221/Rev.1 Trade Policy Review 
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11. A fairly comprehensive draft Fisheries Bill was ci rculated in 2004, but has been withdrawn;  a 
revised Fisheries Bill is to be presented to Parliament and is expected to enter into force in 2010.  The 
bill covers recent international agreements and practices as well as standards for monitoring and 
enforcing fisheries laws.  The bill also addresses aquaculture.  If impl emented, the bill will enable a 
modern and market-oriented system of fisheries management, with the Government as the regulator 
rather than being involved in business of fisheries.  The objective of the new bill is to maximize the 
resource rent and sustainability from the sector.  As  the tuna stock in the Indian Ocean is highly 
migratory, any statistical data, such as stock levels and catches (which is essential for policy formulation and the associated regulatory framework ), will need international cooperation from all 
concerned countries in the region.  In this regard, the Maldives has become an observer to the Indian 
Ocean Tuna Commission.  In addition, the Maldives is a member of the Marine Stewardship Council, 
which provides for eco-labeling of fish and other ma rine products.  This could enable the Maldives to 
receive a premium for its marine products. 
(c) MIFCO and fish processing  
12. Purchase and processing of skipjack tuna is divide d into four zones.  Under the existing rules 
private enterprises apply for licences to process and e xport tuna.  The application is evaluated on the 
basis of procurer capacity needs in the designated zone.  Currently MIFCO, a state-owned company, 
holds exclusive rights to buy and process tuna in tw o (zones two and four) of the four zones and as 
such has monopsony power;  furthermore, MIFCO is permitted to procure fish in the other two zones, 
but it does not have the exclusive right to do so.  In each of the other two zones, two private 
companies have also been given licences.  
13. MIFCO procures the tuna through a quota-like sy stem.  MIFCO operates collector ships, 
which buy the tuna catch from the participating fi sherman.  If a quota held by a fishing vessel has 
been exhausted, the remaining catch belongs to the vessel owner to sell if possible;  the fishermen can 
sell their catch in any of the zones.  However, th is practice leads to wastage, estimated at between 
25-40% of the catch.
1  MIFCO pays a fixed, but high, price for the catch, thereb y ensuring that the 
fisherman get a fair price.  
14. There are 72 tuna-processing facilities, of which 68 produce traditional products (salted, 
smoked and dried fish).  These are destined mainly  for Sri Lanka.  There is also one cannery and 
three loining/filleting plants, all of these have EC export authorization numbers. The cannery is 
situated in the north and owned by MIFCO;  its loca tion leads to inefficiency as most of the fish is 
caught in the south and has to be transported north for canning.  The authorities are of the view that, 
with foreign assistance, the cannery could be disman tled and relocated to the southern attols, which 
would improve the potential for value-added marine  exports from the Maldives.  Furthermore, it is 
envisaged that new plants, which are under constr uction or planned, will provide facilities for the 
production of yellow fin loins, steaks, and other valu e-added products, including the use of offal for 
fishmeal production. 
(ii) Agriculture 
15. The share of agriculture in GDP has declined to  2% (Table I.2), and employment in the sector 
has also fallen.  However, agriculture continues to  be important with respect to food security and 
employment opportunities, with 40% of the rural pop ulation employed in some manner in the sector. 
16. Arable land in the Maldives is estimated at less than 30 square miles;  this has resulted in high 
dependency on food imports, which meet approxima tely 90% of the country's food demand.  The 
                                                      
1 Integrated Framework (2006). Maldives WT/TPR/S/221/Rev.1 
 Page 35 
 
 
Maldives is self-sufficient only in fish;  as a result,  food security is one of the principal objectives of 
agricultural policy. 
17. There are 32 uninhabited islands th at have been leased out for 21-year periods for commercial 
farming purposes;  these may be leased only to  Maldivian companies and individuals.  
Approximately, 75% of the inhabited islands also  have some agricultural production.  The main 
products cultivated are water melon,  papaya, coconut, and other fruits  and vegetables.  Staple foods, 
such as sugar, rice, and wheat, are imported main ly through the State Trading Organization and are 
sold at government-controlled prices (Chapter III). 
18. Under the Seventh National Development Plan  (2006-2010), government policy is to be 
focused not just on food security, but also on:  ensuring sustainability of the sector;  improving human 
resource capacity in the sector;  increasing the capac ity for technology generation and dissemination;  
improving the agricultural trade and marketing infrast ructure;  and ensuring a suitable nutrition intake 
of the population. 
(3) MANUFACTURING  
19. The share of manufacturing in GDP has declined from nearly 9% in 2003 to 7% in 2009 
(Table I.2).  Main industries include fish pro cessing, boat building, handicrafts, furniture, food and 
beverage products, PVC pipes, and soap.  Fish pr ocessing, which is the main industry, is geared 
towards exports and is dominated by  small and medium-sized enterprises.  There also appears to be 
considerable state involvement in the sector.  
20. Development of the manufacturing sector is limite d due to the low level of domestic demand 
and limited skilled labour.  As a result manufactur ing in the Maldives is dependent on imported 
materials and skilled and unskilled labour.  The average weighted  tariff on consumption goods is 
considerably lower than the duty on primary and intermediate goods.  Thus, domestic enterprises 
import intermediate goods at a high rate of duty, while competing with final consumption goods on 
which the applicable duty is much lower.  This  harms the existing domestic industry and discourages 
the emergence of new ones. 
21. Following the expiry of the Multi-Fibre A rrangement (MFA), which had set quotas on 
developing country garment exports to developed countries, five garment factories closed in 2005.  
However, the loss of these factories did not have a particularly acute effect, as most of the profits 
were repatriated and most of the labour was expatriate.   
22. Administrative reforms are under way to furthe r promote industrial investment through the 
revision of the Foreign Investment Act and the pr oposed establishment of free trade zones and special 
economic zones in designated regions of the Maldives.   
(4) ENERGY  
23. The Maldives is almost entirely dependant on imported fuel for its energy needs.  Electricity 
generation accounts for almost 80% of the imported fuel.  Until recently, the State Electricity 
Company Limited (STELCO) provided electricity to 28 islands, including Male.  Following the 
creation of seven new provinces, provincial utility companies were formed, and these now control the 
generation facilities in their respective areas.  For the remaining inhabited islands, electricity 
provision is either through community or privately-owned electricity generators. 
24. STELCO had an installed capacity of 52 MW a nd over 70% of the electricity it generated was 
consumed in Male.  Furthermore, almost 60% of all electricity (STELCO and private generation) is WT/TPR/S/221/Rev.1 Trade Policy Review 
Page 36 
 
 
consumed by the resorts.  Electricity is charge d at domestic, commercial, and government rates;  
transmission losses are low at 7%, and theft is negligible.  Due to its geographic nature, there is no national grid in the Maldives.  However, STELCO in tends to operate an inter-connected grid in the 
capital region (Male, Hulhumale, and Villingili islands). 
25. STELCO has been a loss-making entity;  it accu mulated losses of Rf 15 million between 2005 
and 2008.  The losses are mainly due to subsidized provision of electricity (electricity charges have 
not changed since 2002) and some management ineffi ciency.  The Government wants to privatize the 
company and has sought expressions of interest fo r the sale of its stake in the enterprise.
2  T h e  
authorities state that they are looking for strategi c partners with renewable energy expertise and 
11 such partners have shown interest.  The authoriti es also state that the Government will continue to 
subsidize electricity consumption, but not STELCO.  In  this respect, direct subsidies will be given to 
consumers;  however, it is not clear how this will be done. 
(5) SERVICES  
26. Services account for around 80% of GDP and 68% of total exports (goods and services).  
Tourism is the most important services subsector , followed by transpor t and communications.  
27. The Maldives has not scheduled any sector under the Uruguay Round;  however, it maintains 
a relatively liberal regime in most service sectors, such as tourism, telecommunications, financial services, and transport (although the latter is  subject to some cabotage restrictions). 
(i) Tourism 
28. The tourism sector is of immense importance to the Maldives economy; it accounts for over 
24% of GDP and 20% of total employment (Table IV.2).  However, these statistics understate the 
sector's contribution:  it is estimated that as mu ch as 70% of economic activity in the Maldives is 
linked to tourism.
3  Tourism is well integrated into the Maldives economy and is responsible for a 
significant proportion of construction, transport, telecommunications, distribution, and financial 
activity.  Although there is no corporate tax on tourism earnings, the sector accounted for 27.9% of total government revenue in 2008.  Current taxati on is based on long-term land leases negotiated on a 
per-bed basis for each individual resort island, a ta x of US$8 per person per bed night, and a one time 
airport user charge of US$10 per person.  In additi on, it is estimated that approximately 30% of the 
revenue from import duties is from tourism sales.
4   
(a) Structure 
29. Between 2002 and 2008, the number of facilities offering accommodation increased from 
208 to 235, and the number of beds increased from 16 ,131 to 19,081.  The industry is predominantly 
locally owned, and government involvement is li mited to a single hotel.  Tourist resorts/marinas 
account for nearly 87% of capacity.  In 2008, there were  94 resorts, of which 74 were leased to locals, 
8 had foreign leaseholders and 12 were leased to jo int-venture companies.  However, in terms of 
management and operation, 44 resorts were mana ged by locals, 33 had foreign management, and 
17 were managed by joint-venture firms.  In tandem with capacity growth, tourist arrivals also showed 
robust growth, rising from 484,680 in 2002, to 683,012 in 2008;  occupancy also increased from an average of 69% to 78%.  Europe (mainly Italy, th e UK, Germany, and France) accounted for 53% of 
the tourists in the Maldives, and Asia (mainly Jap an, China, and India) was responsible for 20%.  
                                                     
 
2 The low regulated electricity price is a problem and an obstacle to privatization. 
3 World Bank (2006). 
4 World Bank (2006). Maldives WT/TPR/S/221/Rev.1 
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Table IV.2 
Tourism indicators, 2002-09  
  2002 2003 2004 2005 2006 2007 2008a 2009b 
Contribution to GDPc (%) 30.9 32.7 32.4 22.7 27.4 27.9 27.2 24.6 
Growth of tourism GDPc (%) 3.3 14.8 8.3 -33.1 42.3 9.4 3.0 -10.5 
Contribution to tax revenue (%) 28.0 28.4 24.9 20.0 20.9 19.2 17.9 16.9 
Direct employment (incl. expatriates, number) .. .. .. .. .. .. .. .. 
Tourist arrivals ('000) 484.7 563.6 616.7 395.3 601.9 675.9 683.0 .. 
Percentage change 5.1 16.3 9.4 -35.9 52.3 12.3 1.1 .. 
Average length of stay (number of days) 8.4 8.4 8.3 8.3 8.0 7.9 8.0 .. 
Tourism receipts (US$ million) 337.1 401.6 470.9 286.6 512.4 602.4 644.7 .. 
Per bed night (US$) 82.9 85.4 92.1 86.9 106.3 113.8 118.3 .. 
Bed occupancy rate (%) 69.0 77.2 83.9 64.5 81.7 82.9 78.0 .. 
Bed capacity, resorts/hotels (number of beds) 16,131 16,692 16,621 13,946 16,175 17,511 19,081 .. 
Percentage change -2.1 3.5 -0.4 -16.1 16.0 8.3 9.0 .. 
.. Not available. 
a Estimates. 
b Projections. c Based on constant 1995 prices. 
Source : Maldives Monetary Authority (2009), Monthly Statistics , April, Vol. 10 No. 4, and Annual Report  (various issues).  
(b) Leasing and regulation 
30. The Maldives Tourism Act is the main legislati on regulating the leasing of islands for tourism 
purposes.  The Act also stipulates the terms a nd conditions of the lease agreements and is 
administered by the Ministry of Tourism, Arts and Culture. 
31. Under the Act, islands and land must be leased  to the best-qualified bidder through a public 
tender.  The bids are evaluated by independent pers ons with no vested interest in the process.  The 
only exemption to the process is if the Government of Maldives wishes to invest either on its own or 
through a joint venture.5  Under the current legislation, land leases vary from 25 to 50 years 
depending on ownership, size of investment, and listing on the Maldives Stock Exchange.  
32. The Government, represented by the Ministry, is the lessor of the resorts and is the owner of 
all islands developed as tourist resorts.  The Act makes a clear distinction between the ownership of 
the property on an island and the ownership of the island itself.  The Ministry, as the owner of the 
island, is in fact in partnership with the developer/operator of the tourist resort.  The Ministry has 
two distinct relationships with the leaseholders:  as the contractual landlord and leaseholder;  and as 
the regulatory authority.   
33. The general lease period is 25 years;  in the case of investments exceeding US$10 million, the 
Act allows the Government discretionary powers to extend the lease period to 35 years.  The Tourism 
Act also allows for 50-year leases for public companies, provided that they are, inter alia,  registered 
in the Maldives, owned by Maldivian nationals, a nd at least 50% of the shares of the company are 
publicly listed and traded.  At present no firms have 50-year leases. 
34. Upon expiry or early termination of the lease agreement, the ensuing bidding process must be 
the same as that for a new island.  If the lease is awarded to a party other than the previous 
                                                      
5 The conditions would be waived to enable the Government to attract potentially large investors in the 
tourism or other sectors of the economy.  For example, if a foreign airline deci ded to invest in an airline in the 
Maldives, the island and land could be offered as part of the deal for infrastructure and tourism purposes. WT/TPR/S/221/Rev.1 Trade Policy Review 
Page 38 
 
 
leaseholder, the new party must reimburse the previ ous leaseholder, via the Government, for property 
on the island.  The Auditor General determines the amount of compensation, taking depreciation into 
account.6  The compensation to the old leaseholder must be made within two years of the signing of 
the new lease. 
35. With a view to making the bidding process more transparent and easier, changes were made 
to the bidding documents in 2005.  The evaluati on process was replaced by an automatic evaluation 
system, whereby almost all participants become th e best qualified bidder and the winner is determined 
by drawing lots.  Some of the financial and management  criteria have also been relaxed.  In the event 
the successful bidder is unable to pay, it is obliged to enter into an agreemen t with a third party that 
has the required finances. 
36. Since 2004, 68 islands or lands have been leased out for development.7  Among these, 
5 resorts are operational, while 19 are expected to become operational in 2010.  To encourage faster 
development, the Government has provided incen tives such as relief with regard to building 
completion times, deferment of rent , and deferment of performance bonds.8  These incentives are 
applicable to all islands and lands leased since 2005. 
37. The Government established the Maldivian T ourism Development Corporation (MTDC), in 
2006, to provide a means for Maldivians to invest in the tourism sector and to address the issues of 
social imbalances.  The Government has a 45% st ake in the MTDC, and the remaining shares are to 
be divided among the population;  the Government  aims to have 30,000 shareholders.  The MTDC 
has been allocated 15 islands for development as tourist resorts. 
38. In October 2007, the Government released its Third Tourism Master Plan (2007-2011).  
Objectives under the plan are to:  develop the Ma ldives further as a conventions and exhibitions 
market, especially from source markets such as the Middle-East and Asia;  ensure environmental 
sustainability in the development and operation of  all tourism products;  develop the Maldives as a 
family, health, seniors, and special-interest destin ation;  and increase the public share of economic 
benefits from tourism.  In addition, the Government is promoting heritage tour ism in the inner atolls, 
whereby construction of city hotels and guesthouses would be permitted, so as to accommodate 
heritage tourists.  There are also plans to impose co rporate tax on the sector, and a bill in this regard is 
before Parliament. 
(c) Tourism and the environment 
39. New projects must have an environmental impact  assessment and mitigation plan, and certain 
standards (such as maximum ground coverage ra tios and height limitations) are stipulated.  
Developers are allowed to pierce the coral protecting the island, if necessary, to build a small harbour 
as well as to combat the effects of sand erosion.  
40. The Maldives strives to promote environmentally  sustainable tourism.  In this respect, 
regulations in the Maldives limit built-up areas to 20%  on resort islands and require the height of 
buildings to be kept below the tree line;  these c onditions ensure that the natural environment of the 
resort islands is retained.  Buildings are allowe d on the lagoon, under product diversification, but for 
every room built on the lagoon an equal amount of ope n space must be left free on the island.  All 
                                                      
6 There has been only one instance when the Auditor General had to award compensation. 
7 Of these, 49 are leased to private parties, 9 are leased to the Maldives Tourism Development 
Corporation and 10 islands have been allocated to the Airports Investments Maldives. 
8 A performance bond is a surety bond issued by  an insurance company or bank to guarantee 
satisfactory completion of a project by a contractor. Maldives WT/TPR/S/221/Rev.1 
 Page 39 
 
 
guest rooms that face the beach require a minimum of  five metres of beach length for every room.  
The harsher forms of degradation on account of cora l and sand mining, dragnet fishing, and poisoning 
and dynamiting fish, have all been outlawed in  the Maldives, while coral and sand mining are 
restricted to certain areas and protection measures are in place for the resort islands.  A number of 
important tourist dive sites and marine habitats have been established as protected areas since 1995.  
New measures under way include protection of shar k species throughout the Maldives archipelago 
and designating habitats of whale sh arks and other larger marine species as reserves and marine parks.  
All new tourism development projects must have an  environmental impact assessment and mitigation 
plan.  Furthermore, to foster an environmentally  friendly image, a number of resorts have "green" 
endorsements.  
(ii) Financial sector 
41. The financial sector in the Maldives co mprises commercial banks, non-bank financial 
institutions, and insurance companies.  In 2009,  the sector's contribution to GDP was 2.9%, down 
from 3.3% in 2003. 
(a) Structure and performance 
42. Commercial banks continue to dominate the sector.  As of April 2009, there were 
six commercial banks operating in the Maldives, fi ve are branches of foreign banks (Habib Bank 
Limited, State Bank of India, Bank of Ceyl on, Hong Kong Shanghai Ba nking Corporation, and 
Mauritius Commercial Bank9), while the Bank of Maldives is a majority (51%) state-owned domestic 
bank.10  Loans to the private sector increased from Rf 2.23 billion in 2003 to Rf 16.26 billion in 2008.  
However, growth in deposits did not keep pace, ri sing from Rf 4.2 billion to Rf 12.18 billion over the 
same period.  Consequently, the loan growth h as been financed mainly by foreign-owned banks 
borrowing from their head offices and lending in the Maldives.  The surge in  loans came about in 
2004, when the Government started leasing out new islands.  Presently, over 60% of the banks' loan 
portfolio is concentrated in the tourism sector.  Th e recovery of the tourism sector after the tsunami, 
coupled with improved banking supervision also re sulted in a decline in non-performing loans as a 
percentage total loans, from a high of 6.6% in  December 2005 to 1.7% in March 2008;  however, 
NPLs rose to over 8.5% in the last quarter of 2008.   As a consequence of the global economic crisis, 
banks in the Maldives faced liquidity constraint s (both domestic and U.S. dollar) as foreign banks 
reduced their exposure in the Maldives.  In additi on, the Bank of Maldives has a development banking 
section through which atoll development funds (ADF) are managed.  ADF funds are financed by the 
Government, UNDP and local communities and are u sed to provide credit to private small and 
medium-size enterprises.  It is reported that there is currently a 95% recovery rate on ADF loans.  
Banks are subject to a 25% business profits tax.  
43. The non-bank financial sector consists of the Housing Development Finance Corporation 
(HDFC) and the Maldives Finance Leasing Comp any (MFLC).  The HDFC was established in 
March 2004 and provides financing for the development of residential a nd commercial real estate;  at 
the end of 2007, it had an outstanding loan portf olio of Rf 176.5 million.  The MFLC provides 
medium-term finance, and had outstanding loans of Rf 313 million at the end of 2007;  major 
recipients were the transportation and fisheries s ectors.  The insurance sector comprises the Allied 
Insurance Company (owned by the State Trading Organisation), and a branch of Sri Lanka Insurance 
Corporation;  there are also sever al insurance brokers and agents.  Premium income has shown robust 
                                                      
9 Mauritius Commercial Bank commenced operations in 2008. 
10 The State Bank of India has a 41% market share;  the Bank of Maldives, 43%;  Bank of Ceylon, 
3.5%;  Hong Kong Shanghai Banking  Corporation, 9%;  the Mauritius Co mmercial Bank accounts for 1.5% of 
the market;  and Habib Bank Limited has a 2% share. WT/TPR/S/221/Rev.1 Trade Policy Review 
Page 40 
 
 
growth, and was Rf 167 million in 2007.  The insura nce policies are concentrat ed in the marine hull 
insurance, which accounts for 35% of premiums , and fire insurance, which accounts for 29%. 
(b) Regulation 
44. Banks in the Maldives are regulated by the Maldives Monetary Authority (MMA) and are 
subject to the Regulations for Ba nks and Financial Institutions.  In  addition, in Ma y 2009 ten new 
prudential regulations were promul gated.  Under the new regulati ons, all banks (both foreign and 
domestic) require a licence from the MMA.  All comme rcial banks must have at least Rf 150 million 
as paid-up capital and maintain a minimum capital ade quacy ratio of 12% of risk-weighted assets.  As 
minimum reserve requirement, banks are required to maintain 25% of their deposits at the MMA.  In 
addition, the MMA can order an examination of an  institution, if the institution is found to be 
financially unsound or acting unlawfully;  the MM A prescribes steps to rectify the situation or to 
suspend the institution's licence for six months.  The regulations also stipulate that a bank may not 
advance credit to any single entity (person or rela ted persons) in excess of 15% of the bank's capital 
base, and in the case of a corporate group the exposure is not to exceed 40% of the bank's capital base. 
45. Insurance companies are subj ect to the Insurance Industry Regulations, which are 
administered by the MMA.  Under the regulations , the MMA is the licensing authority.  The MMA 
may also issue additional regulations with respect to, inter alia :  the calculation of underwriting 
reserves;  minimum level of capital to be maintain ed by an insurance company;  asset valuation;  
calculation of underwriting liabilities;  and th e establishment and imposition of maximum and 
minimum tariff rates and premiums.  Authorized in surers are required to submit detailed quarterly 
accounts to the MMA.  Under the regulations, the mi nimum paid-up share capital is Rf 250,000 for 
non-life insurers and Rf 350,000 for life insurers.  
(iii) Telecommunications 
46. The Telecommunications sector was responsible for approximately 8.8% of GDP in 2006.  
The sector is important as it plays a key role in linking the different island and resort communities.  At present, all inhabited and some uninhabite d islands have access to telephone services. 
(a) Structure 
47. In March 2009, the Maldives had over 50,000 fixed telephone lines and over 450,000 mobile 
phone subscribers, resulting in fixed-line teledens ity of 16.28%, and an ove rall teledensity of over 
160%, up from 16% in 2001. 
48. Fixed-line (including national and international long-distance) services are provided by 
majority state-owned Dhiraagu
11, whose monopoly for the provision of these services expired at the 
end of 2008;  however, no new provider has entere d the fixed-line market.  The mobile sector has 
two providers, Dhiraagu and Wataniya , which entered the market in 2005.  Dhiraagu is the dominant 
provider.  Focus and Dhiraagu operate as the two in ternet service providers.  In 2006, approximately 
8% of the households had internet access.  Despite  a significant decline in telephone and internet 
charges, telecommunications rates remain relatively high in the Maldives, presumably due to the lack 
of competition in the sector12;  the state-owned Dhiraagu is the dominant player in the market.  
According to the authorities, mobile rates are s lightly higher than in other regional countries like 
India;  however, international call rates are lower than in India and Sri Lanka. 
                                                      
11 Dhiraagu is a joint-venture between the Government (55%) and Cable and Wireless (45%). 
12 Regulations on pricing and market dominance appl y to Dhiraagu in sectors where it is the dominant 
player in the market. Maldives WT/TPR/S/221/Rev.1 
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(b) Regulation and policy 
49. In September 2003, the Government issued the Maldives Telecommunications Regulation, 
which established the industry regulator, the Tel ecommunications Authority of the Maldives (TAM).  
At the end of 2008, TAM's mandate was widened to  include the regulation of postal services and 
information technology.  As a result, the na me of the organization was amended to the 
Communications Authority of Maldives (CAM).  The Telecommunications Regulation mandates 
CAM to promote and develop a fair and competitiv e telecommunications industry in the Maldives and 
regulate anti-competitive practices.  In this regard , all new service changes and any price changes are 
subject to approval by CAM.  CAM is also  responsible for issuing and administering 
telecommunications licences, and all operators are re quired to pay a fixed licence fee of 5% of gross 
revenue on a monthly basis.  Furthermore, CAM is  responsible for the resolution of interconnection 
disputes and for annual monitoring of the lic ensees' performance with respect to consumer 
satisfaction, consumer benefits , and the quality of service.  CAM is required to review the 
Telecommunications Regulations every three years.  In the case of disputes, parties may approach 
CAM for arbitration.  If any party is not satisfied  with CAM's decision, they have recourse to the 
Minister of Telecommunications and the Presiden t;  the latter's decision is final and binding. 
50. The new Telecommunications Policy (2006-2010) w as issued in August 2006.  The objectives 
of the policy are to, inter alia:   ensure that telecommunications  charges are non-discriminatory, 
affordable and cost oriented;  improve the tele communications infrastructure to provide basic, 
enhanced, and broadband services throughout the c ountry;  ensure autonomy of the Regulatory 
Authority by law with clearly defined powers and resources to effectively carry out its duties to 
protect consumer and operator interests;  and increase  competition.  In this regard the "the one service 
one tariff" regime whereby calls between any two po ints in the Maldives would cost the same was to 
be implemented by the second half of 2008.13  This is not yet the case. 
51. A Telecommunications Bill was to be drafted and submitted to Parliament during 2007, but 
this has not happened yet.  The Bill was to make  the role of the regulator more effective and 
transparent, provide it with the necessary legal powers, and make it inde pendent and financially 
autonomous.  In addition, the Government w as to consider creating a telecommunications 
ombudsman, to address consumer grie vances and make decisions indepe ndently and quickly.  Instead, 
two different bills are being drafted;  one will cr eate an independent communications authority, and 
the other is the Telecommunications Act.  
(iv) Transport 
52. The transport and communications sector cont ributed over 19% to GDP in 2009, up from 
14.2% in 2003.  Due to the nature of the Maldiv es' geography, maritime transport services are the 
most widely used mode of transport, followed by air transport services. 
(a) Maritime transport 
53. The maritime transport sector is regulated by the Ministry of Transport and Communications.  
The Ministry is responsible for, inter alia,  vessel registration and licensing as well as maritime policy 
and safety regulations.14 
                                                      
13 A basic telecommunication package was to be available to all inhabited islands by the end of 2008.  
The package includes 90 minutes of national voice calls and 250 MB of in ternet access at a minimum speed of 
56 Kbps, to be available on request at no more than Rf 200 per month. 
14 All vessels in the Maldives need to be registered, and all persons who operate vessels must have 
licences. WT/TPR/S/221/Rev.1 Trade Policy Review 
Page 42 
 
 
54. Inter-island services are deregulated and prices are determined by prevailing market 
conditions.  Although a number of fe rries are operated by island comm unities, private parties and the 
Maldives Transport and Contracting Company (MTCC)15, the scheduled ferry services network is 
very limited.  Most of the inter-island cargo and passenger traffic is carried by traditional boats 
(dhonis)  of various sizes.  Transportation of heavy an d large items is carried out by the MTCC using 
barges and tugs.  Tourism resorts operate their own services using a variety of boats to transport guests. 
55. The Maldives has three international sea ports :  Male Commercial Harbour (MCH), and 
two regional harbours, Khulhudhuffushi (North), a nd Hithdhoo (South).  The two regional ports were 
commissioned in 2005 as international ports.  The por ts are regulated jointl y by the Maldives Port 
Authority (MPA) and the Ministry of Transport and Communications.  However, plans are under way to establish a regional port authority, which would ow n and operate the regional ports. It is not clear 
when this would happen.  Furthermore, changes in  the role and structure of the MPA have been 
initiated so as to separate its conflicting roles of port authority and port operator. 
56. Space limitations have resulted in MCH being very congested, causing average harbour times 
of 7 days for front-loading vessels and 17 days for side-loading vessels.  Consequently, costs at MCH 
are relatively high.  The absence of container-handlin g cranes and a yard management system has also 
added to costs. 
(b) Air transport 
57. The air transport sector is regulated under the Civil Aviation Act 2001, which is administered 
by the Civil Aviation Department (CAD) in the Mi nistry of Tourism, Arts and Culture.  The Act 
specifies conditions for, inter alia :  air operators licences;  crew and pi lot registration;  air worthiness;  
registration of aerodromes;  and safe ty inspections and procedures.  The Act stipulates that all relevant 
rules and regulations must be at least at the level stated in the Annexes to the Convention on International Civil Aviation. In this  regard, it would appear that the Maldives is in line with 16 of the 
18 annexes.
16  In August 2005, rules for granting an air ope rator's certificate were amended to include 
a pre-appraisal of financial feasibility.  The rules allow the CAD to conduct financial surveillance of 
existing carriers if there are signs of service deterioration. 
58. The Maldives was audited under the ICAO universal Security Audit Programme in 2006 and 
became a signatory to the Montreal Convention on Unification of Certain Rules for International Carriage by Air in 2005.  Furthermore, the Governme nt is expected to submit bills to Parliament on 
passenger protection and the creation of an autonomo us civil aviation authorit y in 2009 and these are 
expected to be considered by Parliament in 2010. 
59. The Maldives has one registered internationa l airline, with limited overseas services
17;  
foreign airlines operate scheduled services to Male.  Frequency of services is curtailed by the single 
runway and limited apron space.  The capacity of Male  airport is five aircraft at any given time.  
Landing and take off slots are assigned according to IATA rules, based on past frequency and 
allocation.  Currently, the Maldives has 28 ai r service agreements and 15 interim air service 
agreements.   
                                                      
15 MTCC is a majority state-owned enterprise. 
16 Ministry of Planning and National Development (2007) . 
17 Island Aviation Services, a wholly government-owned entity, provides services to Colombo and 
Trivandrum. Maldives WT/TPR/S/221/Rev.1 
 Page 43 
 
 
60. Island Aviation Services (a state-owned enterprise) , Tran Maldivian Airways (a private firm), 
and Maldivian Air Taxi (foreign ow ned) provide domestic air services between the islands.  There are 
no restrictions on foreign investment or entry into the market;  however, there are cabotage 
restrictions.   
61. The Maldives has five airports;  two (Malé and Gan) are international and three 
(Hanimaadhoo, Kaadedhdhoo, Kadhdhoo) are domestic.  Airports in the Maldives come under the 
jurisdiction of Maldives Airports Corporation (MAC ), which is a state-owned entity.  MAC operates 
the Male International Airport.  Regional airpor ts are managed by the Transport, Housing and 
Environment Ministry;  however, MAC provides fuel and air-traffic control services at these regional 
airports.  The Government has sought expressions of interest from strategic partners for a 49% stake 
with management control in MAC.  Furthermore,  the Government plans to lease out the regional 
airports to private partners for a 30-year pe riod on a "build, operate, and transfer" basis.