RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/TPR/G/221 
22 September 2009  
 
(09-4369) 
Trade Policy Review Body Original:  English 
   
 
  
 
TRADE POLICY REVIEW 
 
Report by 
 
MALDIVES 
 
  
 
Pursuant to the Agreement Establishi ng the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), the policy statement by the Maldives is attached. 
 
 
Note: This report is subject to restricted circ ulation and press embargo until the end of the first 
 session of the meeting of the Trade Po licy Review Body on the Maldives. Maldives WT/TPR/G/221 
 Page 3 
 
 
CONTENTS 
    P a g e  
I. INTRODUCTION 5 
II. OVERVIEW OF THE ECONOMY 7 
 (1) P RODUCTION , PRICES AND EMPLOYMENT  7 
 (2) P UBLIC FINANCE /FISCAL POLICY  7 
 (3) F INANCIAL SECTOR AND MONETARY DEVELOPMENT  11 
 (4) B ALANCE OF PAYMENTS AND EXTERNAL SECTOR  13 
III. TRADE POLICY AND PERFORMANCE 14 
 (1) T RADE POLICY OBJECTIVES AND FRAMEWORK  14 
 (2) L AW ON EXPORT AND IMPORT AND LAW ON PROHIBITED IMPORTS  15 
 (3) C USTOMS VALUATION  16 
 (4) S ANITARY AND PHYTOSANITARY (SPS)  MEASURES  16 
 (5) E NVIRONMENTAL MEASURES  17 
 (6) S ERVICES  17 
 (7) T RADE RELATED INTELLECTUAL PROPERTY RIGHTS  18 
 (8) B ILATERAL TRADE ARRANGEMENTS  18 
 (9) R EGIONAL TRADE AGREEMENTS  19 
 (10) E XTERNAL TRADE PERFORMANCE  20 
IV. INDUSTRIAL DEVELOPMENT AND DIVERSIFICATION 22 
 (1) I NDUSTRIAL DEVELOPMENT  22 
 (2) M EASURES FOR INDUSTRIAL DEVELOPMENT  22 
 (3) I NDUSTRY DIVERSIFICATION  23 
V. FOREIGN DIRECT INVESTMENT AND PRIVATISATION 24 
 (1) P RIVATIZATION AND PUBLIC PRIVATE PARTNERSHIP  26 
 (2) I NCREASING FLOWS OF FOREIGN DIRECT INVESTMENT  27 
 (3) P ROVIDING INVESTMENTS OPPORTUNITIES TO SME S 27 
VI. GRADUATION  28 
 (1) G RADUATION OF THE MALDIVES FROM LDC  STATUS  28 
 (2) T RADE IMPACT OF LDC  GRADUATION  28 
 (3) I MPLICATIONS FOR TRADE RELATED TECHNICAL AND FINANCIAL ASSISTANCE  29 
 (4) A CTIONS TOWARDS ACHIEVING A SMOOTH TRANSITION  29 
 (5) C ONTINUED ACCESS FOR TRADE RELATED TECHNICAL AND FINANCIAL   
ASSISTANCE  30 
 (6) F UTURE OUTLOOK  30 Maldives WT/TPR/G/221 
 Page 5 
 
 
I. INTRODUCTION 
1. Maldives has experienced uninterrupted economic  growth along with political stability and 
social harmony for the last three decades.  Sin ce gaining independence from Britain after 78 years as a 
protectorate, the country has continued on a path of development and building self-confidence in 
many aspects of economic and social development.  
2. Over the last six years since its first trade policy review in 2003, Maldives has continued to 
achieve excellent levels of econom ic development relative to its neighbours, despite the devastating 
tsunami of 26th December 2004.  It has pursued these developm ents within the context of a liberalized 
economy with much improved and transparent trade policies.  
3. In June 2004 the former government announ ced a political reform programme, instituting a 
new process of reform and modernisation of demo cratic institutions, with the introduction of the 
"Roadmap for Reform".  This reform agenda e nvisaged fully-functional democratic governance and 
fuller participation of the people in national developm ent.  The most distinct elements of the reform 
programme included the amendment of the Constituti on, allowing the formation of political parties 
for the first time in the country's history, accession to international human rights treaties and the 
tabling of a modern penal code in  line with international legal norms , as well as the establishment of 
independent institutions vital for ensuri ng good governance and accountability.  
4. With the introduction of these changes the count ry has emerged strong and with more than 
12 registered political parties, which provided the c itizens with a robust democr atic arena to express 
their aspirations and at the same time made it possible to build political  consensus on issues of 
national significance.  The international community welcomed the institution-building efforts of the 
government, and provided sustained support to these efforts.  
5. The presidential election in October 2008 ushere d in a new era of participative democracy 
and the first democratic, multiparty presidential electi on in the history of the Maldives.  This election 
also brought to an end a regime which had been in power for 30-years.  A new President was elected by majority of Maldivians with a strong mandate to continue the process of governance reform, while 
preserving, protecting and promoting the national character of Maldives in the great task of 
development and modernization.  The first plura list, multiparty Parliamentary election was held on 
9
th May 2009, with a total of 455 candidates co mpleting for 77 seats in the new Majlis.  
6. This nascent democracy requires a broad-based  government policy and strong engagement 
from the international community to support the pro- democracy efforts of Maldivians.  In addition, 
continued support from the international community to address the income inequality between Male’ 
and atoll is needed. 
7. The Asian tsunami of 26 December 2004, whic h had a devastating impact on the socio-
economic environment, was another major event that  took place during the review period.  This event 
suddenly disrupted the steady growth of the economy, bringing tourism, the most dynamic industry of 
the country, to a halt while badly damaging physi cal and social infrastructure.  The losses from the 
disaster account over US$470 million or 62% of Gross Domestic Product (GDP).1  H o w e v e r ,  t h e  
losses would be much higher if costs such as envi ronment costs and the value of the top-soil and 
reclaimed land that was washed away by the tidal wave, are included.  
8. Although loss of life was limited, the tsunami vi rtually eliminated 14 inhabited islands, and 
more than 15,000 people became homeless.  Imme diately after the tsunami Maldivians, especially 
                                                      
 1 A Joint Need Assessment carried out early in 2005 by the World Bank, ADB and UN. WT/TPR/G/221 Trade Policy Review 
Page 6 
 
 
those in island communities, experienced serious ps ychological stress, health threats, and loss of 
property as well as threats to their livelihoods.  
9. At the same time the tsunami severely damaged the mainstays of the economy, namely the 
tourism and fisheries sectors, by causing the closure of a quarter of the resorts and almost completely 
destroying 8% of fishing vessels.  Even six months after the devastation, the resorts were running at 
half the rate of 2004 and employees working in the se resorts were badly affected through reductions 
in their net income.2  Damages to equipment for traditional fi sh processes reduced th e output in this 
sector in the year 2005.  
10. Government made swift efforts of providing temporary accommodation to those internally 
displaced persons (IDP) as the first and most immediate concern after the tsunami.  And as early as 
February 2005, the international community such as International Federation of Red Cross and Red 
Crescent Societies (IFRC) agreed to help the Gove rnment meet demand by financing the construction 
of additional temporary shelter.  
11. As agreed 855 temporary apartments and 396 indi vidual rooms and relief to the IDP in twenty 
two islands in eight atolls were de livered and completed by end of 2006.3  Provision of temporary or 
upgraded schools, health posts, s ports grounds, community health centres and safe-play areas in 
displacement locations and community projects are also part of the assistance programs which are 
been regarded as important aspect of livelihoods r ecovery for people of different communities to live 
together peacefully.   
12. The National Recovery and Reconstructi on Plan (NRRP) outlines the objectives and 
strategies for meeting urgent needs in housing and infrastructure development, reviving livelihoods, 
and creating the conditions for sustained economic  recovery.  The plan contains projects and 
programs proposed by different sectors to restore key industries and provide social and economic services and facilities
4.  
13. Four years since the tsunami, the country made considerable progress in rebuilding the 
country especially in the economic sector recovery.  All the tsunami affected  resorts are open again 
for business, most of the homes are being rebuilt and livelihoods restarted.  However, the recovery 
process remains under funded in certain key sectors su ch as transport, housing, livelihood, power and 
energy and the recovery program still requires cons iderable sum of external funds to bridge the 
funding gap.5  
14. The country experienced mixed economic effects.  Islands which acted as  hosts and received 
people who were displaced saw substantial rise s in income through increases in their economic 
activity, while the people who were forced to move  to these islands suffered economic losses.  The 
main business hub of the country, the capital city Ma le', experienced a fall in trade as well as 
disturbances in the property markets.  
15. The United Nations Millennium Declaration in 200 0 set 2015 as the target date to achieve the 
eight goals.  In 2007, an assessment was made in order to tracks the progress of Maldives on 
                                                      
 2 Monthly salary, service charges and tips. 
 3 Report – "The Maldives:  Two years after the tsunami" by the Department of National Planning 
(formerly known as Ministry of Planning & National Development).  
4 Report:  National Recovery and Reconstruction Plan: Programs and Project, 2005. Ministry of 
Planning and Natio nal Development.  
 5 Report:  National Recovery and Reconstruction Plan: Programs and Project, 2005. Ministry of 
Planning and Natio nal Development.  Maldives WT/TPR/G/221 
 Page 7 
 
 
13 Millennium Development Goal (MDG) targets and assess whether the Maldives will achieve the 
targets by 2015 using the latest data from 2006 Cens us.  Based on this assessment, rapid progress was 
made on poverty, education and health targets.  Significant improvement is seen on empowerment of 
women as well.  However, considerable efforts ar e needed to achieve nutrition and environmental 
targets.  
II. OVERVIEW OF THE ECONOMY 
(1) PRODUCTION , PRICES AND EMPLOYMENT  
16. Maldives has achieved robust growth during the pe riod under review.  Both per capita income 
and per capita GDP have risen substantially, accompanied by a marked improvement in social 
indicators during this period.  Real GDP grew at an  average rate of more than 7% for the review 
period, stimulated by a strong rebound of the t ourism sector following the Asian tsunami and the 
boom in construction industry.  But with the current  global turmoil, the economy is expected to grow 
at a modest rate of around 1.3%.  
17. The absence of land based mineral resources, the limited scope for expansion of the 
agriculture sector, vulnerability to natural disasters and dispersed population have all contributed to 
the country’s continued reliance on the tourism and fish eries sectors.  They ar e also the major sources 
of foreign earnings, accounting for 31% of the GDP at the end of 2008.  The construction and real 
estate sectors have become one of the most dynamic sectors in the economy, contributing to a considerable extent to the sustained high growth ra te of the economy during the review period.  At the 
end of 2008, these sectors taken together contributed 12% to GDP.  
18. As Maldives is a highly open economy, domestic price movements are very much influenced 
by price developments in the international market.  Price movements in the domestic economy during 
2008 were largely influenced by soaring global food  and oil prices coupled with high domestic fish 
prices, which reached peak levels during the first ha lf of the year.  However, it should be noted that 
the direct impact on the domestic consumer price index (CPI) of high oil prices, which rose to a record high in July 2008, remained limited, given th at oil-related products such as petrol account for a 
relatively small share in the CPI bask et, and also that the administered price of local electricity tariffs 
remained unchanged throughout.  
19. Another major factor, perhaps, the most signi ficant factor, which contributed to higher 
inflation, was the rise in demand for goods and servi ces due to the increase in money supply.  This 
increase is due to the monetization of the govern ment budget deficit via the Central Bank (the 
Maldives Monetary Authority - MMA).  At the end of 2008, inflation in the economy was recorded at 
12.3%, approximately a 20% increase compared to 2006.   
(2) P
UBLIC FINANCE /FISCAL POLICY  
20. Government involvement in the commercial ac tivities is still strong, with around 20 state-
owned enterprises (SOEs) dominating the delivery of a wide variety of services and goods.  Most of 
these enterprises operate on the basis of monopoly concessions granted by the regulatory and policy 
ministries. 
21. The new government, sworn in on 11th November 2008, is committed to reduce government 
involvement in commercial activities.  It has alre ady listed some of these SOEs for privatization. 
Maldives Airports Company Ltd is first of many su ch businesses that are going to be privatized under 
the new government policy.  The main reasons fo r this policy change are to increase efficiency, WT/TPR/G/221 Trade Policy Review 
Page 8 
 
 
transparency and accountability of the enterprises, an d also to create and distribute wealth among the 
people of the country on a more even basis.   
22. The government's fiscal policy aims to redu ce the level of government expenditure, while 
increasing revenues through sustainable measures, and thereby to reduce the large deficits that have 
accrued over past years.  The budget for the year 2009  had to be presented to Parliament by the end of 
November 2008, leaving the new government without enough time to re-evaluate the budget in terms 
of its new priorities.  The budget was therefore pre sented to Parliament as it stood with only minor 
changes, and with the request that the government  be allowed to submit a new revised budget, based 
on a medium term fiscal framework (MTFF) w ithin three months.  The new budget for 2009 was 
presented to the Parliament in early April 2009, and was passed just before the Parliamentary Election 
in May 2009. 
23. Domestic revenue growth for the period 2003 to 2005 was on average 12%.  However 
revenues increased by 40% in 2006, largely due to  ad-hoc measures such as advance lease rent 
payments on the islands which were leased in 2006 for development of new resorts.  Growth in 2007 
was again fuelled by such advance payments, as well as by increased import duty receipts resulting 
from higher imports of building materials due to th e boom in construction, especially in the tourism 
sector.  
24. Growth in domestic revenues declined in 200 8, as the advance lease rent payments levelled 
off. For 2009, according to the initial budget that w as passed, revenues are estimat ed to decline by 9% 
for the year.  
10%23%40%
13%13%15%12%
01,0002,0003,0004,0005,0006,0007,0008,000
2002 2003 2004 2005 2006 2007 20080%5%10%15%20%25%30%35%40%45%Figure II.1:  Domestic Revenue, and Growth in Domestic Revenue, 2002-2008
Rf. Millions
Total revenue Growth in Domestic Revenue  
25. Due to the absence of a broad based tax system , the main sources of government revenue are 
import duties, tourism taxes, resort lease rents a nd dividend payments from state owned enterprises.  
These account for 31%, 10%, 20%, and 16% respectivel y.  Tourism-related sources and import duties 
account for about 30% of domestic revenue each.  As such, 60% of total domestic revenue is 
generated from only two main sources, increasing the vulnerability of govern ment revenue and the 
economy, especially since tourism-related revenu es are very vulnerable to external shocks.  
26. Historically, project grants made up a cons iderable proportion of  government revenue, 
averaging around 3% of total revenue during 2003 a nd 2004.  It should however be noted that the Maldives WT/TPR/G/221 
 Page 9 
 
 
trend in grants received during the last three years was declining at a faster rate, with grants as a 
percentage of revenue in 1995 at 14%.  In 2005, how ever, in the aftermath of the tsunami disaster, the 
amount of grants received was recorded at 18% of to tal revenue.  This trend is  expected to decline in 
the coming years, as reconstruction following the tsuna mi disaster is completed, and due to aid flows 
to developing countries drying up as a result of  the current global financial crisis and most 
importantly when Maldives graduates from Least Developed Country (LDC) status.  
9%14%14%18%
2%4%5%
0%2%4%6%8%10%12%14%16%18%20%
2002 2003 2004 2005 2006 2007 2008Figure II.2:  Grants as a Percentage of Total Revenue and Grants, 2002-2008
 
27. Government expenditure grew in both 2003 and 2004 at an av erage rate of 10% per annum, 
while revenue growth was on average 12% per annum for the same period.  In 2005, however, total 
expenditures increased by 53% compared to 2004, as the country struggled to recover from the effects 
of the tsunami.  The years 2006 to 2008 saw expend iture increase by 21% per annum on average, due 
mainly to an increase in salaries of civil servants.  The current policy direction is to reverse this 
adverse trend, and to ensure that expenditures are at a more sustainable level.  
24%
18%22%53%
6%13%8%64%
62% 60%60%
38%40% 38%
02,0004,0006,0008,00010,00012,000
2002 2003 2004 2005 2006 2007 20080%10%20%30%40%50%60%70%Figure II.3:  Expenditure, Expenditure Growth and Expenditures as a Percentage of GDP, 2002-2008
Rf. Millions
Expenditure Growth in Expenditure (%) Total Expenditure as a % of GDP 
 WT/TPR/G/221 Trade Policy Review 
Page 10 
 
 
28. Expenditures on public services and social servi ces together accounted for approximately 
85% of total expenditure over the review period.  Economic services6 accounted for an average of 
12% per annum over the same period, while interest  on public debt accounted for 4% per annum.  
29. Public services include expenditure on genera l administration, defence, public order and 
internal security, and environmental protection.  General administration and public order taken 
together accounted for 40% of the total expenditure  on public services in 2008.  In 2005, the Maldives 
National Defence Force (MNDF) and the Maldives Po lice Services (MPS) were divided into separate 
entities, thereby increasing expenditure on each entity.  
30. Expenditures on social services include health, education, welfare and community 
programmes. The latter includes all expenditures re lated to the tsunami disaster, and hence this 
category increased by 178% in 2005.  The government focus on economic services has been on the regulatory and administrative aspects, and as a result, this sector receives a smaller portion of the total expenditure package.  
33% 34% 35% 34% 34%37% 37%49% 47% 47%52% 52%53% 52%14% 15% 15%12% 12%7% 8%4% 4% 4% 3% 3% 3% 3%
0%10%20%30%40%50%60%70%80%90%100%
2002 2003 2004 2005 2006 2007 2008Figure II.4:  Functional Classification of Government Expenditure, 2002-2008
Public services Interest on public debt Economic services Social services
 
31. The declining and highly vulnerable sources of domestic revenue, combined with sharp 
increases in expenditures over the past two to three years, have led to unsustainable deficits which 
have been largely financed thro ugh domestic sources, mainly throu gh borrowing from Central Bank.  
The option of borrowing from the public has not b een possible, owing to the absence of a well-
developed financial market, and of  government debt instruments.  The new government is seeking to 
develop the financial market in the short-to-mediu m term, and to introduce debt instruments which 
could be purchased by the public.  
32. The MTFF is based on reducing the fiscal defic it over the medium term, while ensuring that 
basic levels of services are not affected.  Unde r the MTFF, expenditure for 2009 is estimated at 
around Rf 11.3 billion, and regular domestic revenue  is estimated at around Rf 5.5 billion.  This 
domestic revenue envelope will be augmented by additional revenue from the proceeds of 
privatization of SOEs, and from the extension of resort lease periods, increasing total revenue to 
Rf 9.6 billion.  The resulting deficit in 2009 is now est imated to be 7.4% of GDP.  These forecasts are 
based on public sector employment reform, and on the assumption that proceeds from privatization of 
SOEs and from extension of resort leas e periods will be realized in 2009.  
                                                      
 6 Include regulatory and administrative aspects. Maldives WT/TPR/G/221 
 Page 11 
 
 
33. The fiscal deficit for 2010 is estimated to be around 3% of GDP, for which the government 
will seek external financing.  This reduction in the deficit compared to 2009 is based on new revenue 
to be realized from the privatization initiative,  as well as on structural tax measures such as the 
introduction of an environmental tax to be levied on visitors to the Maldives, changing the current bed 
tax of US$8 per night to an ad valorem  tax, and implementation of a business profit tax in 2010.  With 
the addition of a goods and services tax to be introduced in 2011, it is estimated that the fiscal position will be in surplus in 2011.  The government is s upported by the International Monetary Fund (IMF), 
the World Bank and the Asian Development Bank (ADB), as well as by the United Nation (UN) 
system, in its objectives of achieving the above targets and introducing much needed reforms in 
public finance.  
(3) F
INANCIAL SECTOR AND MONETARY DEVELOPMENT  
34. The financial sector in Maldives is very narrow and is dominated by the banking sector.  The 
banking sector consists of one locally owned commercial bank7 and branches of five foreign owned 
commercial banks.8  In addition to commercial banks, the sector consists of many non-bank financial 
institutions.  These include insurance companies, a finance leasing company, a specialized housing 
finance institution, money services businesses and s ecurities market intermediaries.  All banks and 
non-bank financial institutions except for the secu rity market intermediaries operate under the 
supervision of the MMA.  
35. The MMA is also endowed with the regular pow ers and obligations of a central bank under 
MMA Act (1981).  Under this mandate  it is responsible for the issuing of Maldivian currency (the 
Rufiyaa), regulating money supply, and promoting price stability.  Apart from this, the MMA 
regulates and supervises the operations of a ll commercial banks and the non-bank financial 
institutions except for the securities market intermed iaries.  It formulates and implements monetary 
policy and advises the Government on issues relating to  the economy and financial system in order to 
foster an environment conducive to the orderly an d balanced economic development of the country.  
36. The total deposits of the commerc ial banks stood at 76% of GDP at the end of 2008, while the 
stock of credit extended by the banks to the priv ate sector accounted for 101% of GDP.  Total private 
sector credit has been rising, reflecting an annual gr owth of 33% at the end of 2008 as opposed to 7% 
annual growth at the end of 2003.  Meanwhile moneta ry aggregates of the past  few years indicate that 
broad money growth increased in annual terms by 15%  in 2003 and by 24% in 2008.  Net government 
borrowing increased significantly during 2008 and was 275% higher than in 2007, due mainly to the 
rapid increase in government expenditure which cau sed a huge budget deficit.  In the meantime, Net 
Foreign Assets of the banking system, after a gr owth of 58% in 2003, witnessed a decline over the 
past few years and since July 2007  has recorded a net foreign liabilities position.  In 2008, net foreign 
liabilities of the banking sector increased by Rf 2,11 4.1 million and reached Rf 2,572.4 million at the 
end of 2008.  
37. With effect from April 2007, as provided unde r the amended MMA Act, the post of the 
Governor of the MMA was separated from the post of  Minister of Finance.  The Governor and the 
Deputy Governor are appointed by the President with  the approval of the Parliament.  Other members 
of the Board of Directors are appointed by the President on the recommendation of the Governor.  The Board of Directors of the MMA is responsible for the policy and affairs of the Authority.  
                                                     
 
 7 Bank of Maldives established in 1982.  Since 1993 it is owned by government of Maldives. 
 8 State Bank of India (SBI), established in 1974; Habib Bank Ltd (HBL), established in 1976; Bank of 
Ceylon (BOC), established in 1981;  the Hong Kong and Shanghai Banking Corporation (HSBC), established in 
2002; and Mauritius Commercial Bank Ltd (MCB) which was granted a banking licence in 2007 and commenced its oper ations in 2008. WT/TPR/G/221 Trade Policy Review 
Page 12 
 
 
38. The main purpose of this change in the administration of monetary policy was to ensure 
macroeconomic stability through price stability and to ma intain an adequate level of external reserves.  
To achieve these objectives the MMA uses the exchange  rate peg of the Rufiyaa to the United States 
(U.S.) dollar as the intermediate target.  The Minimum Reserve Requirement (MRR) for commercial 
banks was reduced from 30% to 25% in June 2 006, while with effect from September 2006 MMA 
also started issuing Treasury Bills (T-Bills) on be half of the Government, replacing the former MMA 
Certificates of Depositories (CDs).  The T-Bills , which are open to commercial banks and public 
enterprises, are issued at maturities of 28 days and 91 days with interest rates respectively of 5% and 
5.25%.  With effect from July 2007, the interest ra tes on T-Bills were raised to 6% for 28 days and 
6.25% for 91 days.  At the same time, starti ng from November 2006, MMA introduced a Repurchase 
facility to replace the Lombard facility and Redisc ount facility, in order to develop the secondary 
market in T-Bills.  
39. Capital market activities in Maldives have grow n rapidly within the past few years.  The 
Maldives Security Act (MSA) 2006 set up the Cap ital Market Development Authority (CMDA), 
which acts as a specialized agency regulating th e securities market intermediaries and also has 
statutory powers to license these intermediaries includi ng brokers, dealers and investment advisers, as 
well as stock exchange and central depositories.  Pr ior to this Act, the regul ation and supervision of 
securities market was carried out by MMA.  
40. In 2008, the Security Trading Floor and the Maldives Security Depository, both regulated by 
the CMDA, were licensed as a private sector Stock Ex change and Securities Institution respectively.  
At present five companies are listed on the Maldives Stock Exchange (MSE).9  Meanwhile, there are 
three licensed dealing companies, which include Stockbrokers Maldives Pvt Ltd, First Option Pvt. 
Ltd., and Aariya Securities Pvt. Ltd.  
41. A Bill concerning Collective Investment Sche mes (CIS), a Trust Bill and a Securities 
Depository Bill have been sent to authorities to be presented to the Parliament.  These Bills will 
strengthen the existing regulatory regime for the capital market and will facilitate more 
investment/financing opportunities.  CMDA has been  encouraging private sectors to raise finance 
through the stock market and also to open the door for foreign investments through the capital market.  
42. Non-banking financial institutions in the country include insurance companies and 
intermediaries, a finance leasing company, a specia lized housing finance company and money transfer 
businesses. 
43. The Allied Insurance Company of Maldives, in corporated in 1984 and owned by the State 
Trading Organization Plc Ltd (STO) is the only local insurance company in the country and the only composite insurance company.  The Sri Lanka Insura nce Corporation Ltd, being the oldest insurance 
service provider, established its branch office in the country in 1976.  Several other insurance 
companies and market intermediaries from Sri La nka operate in the country through their appointed 
local agents.  Ceylinco Insuran ce, Company Limited (Sri Lanka) is  represented in the country through 
its local agent, RSH Financial Service Pvt Ltd wh ile Amana Takaful (Sri Lanka) has been providing 
general insurance business in Maldives since 2005 through an agent;  HMS private limited.  
44. The insurance market has been virtually unre gulated until September 2004, when a new set of 
regulations was introduced with the objective of faci litating the orderly development of the insurance 
sector.  As an interim measure under the re gulations, insurance undertakings and market 
                                                     
 
 9 These five companies are Maldives Transport and Contracting Company Plc (MTCC), Bank of 
Maldives Plc (BML), State Trading Organization Plc (STO), Maldives Tourism Development Corporation 
(MTDC) and Dhivehi Ekuveri Kunfuni (DEK). Maldives WT/TPR/G/221 
 Page 13 
 
 
intermediaries operating in the country as at September 2004 have been granted a temporary 
registration for a period of one financial year duri ng which all such parties are required to meet all 
necessary conditions to qualify for full-fledged licen ses in their respective categories.  Reinsurance 
businesses relating to the activities of these companies are currently being provided by overseas re-
insurers.  
45. Under the assistance from the World Bank’s FIRST initiative, MMA initiated a project to 
establish a supervisory regime for the Insurance s ector.  This is a comprehensive project which 
includes drafting an Insurance Act, other subsidiary  regulations and standard  templates and procedure 
for collecting reporting returns.  The first mission under the project took place during May 2008.  
During this mission, the first draft of the proposed Insurance Act was produced.  
46. The Maldives Finance Leasing Company Pvt. Ltd. (MFLC), established in May 2002, is the 
only player in the finance leasing market.  The company was setup as a collaborative venture between 
five domestic public and private sector entities and tw o international parties, in order to address the 
demand for medium to long-term equipment financing from all sectors of the economy. 
47. The Housing Development Finance Corporati on Ltd (HDFC), setup in March 2004, is an 
initiative of the Government of Maldives to provide the much needed financin g in the residential and 
commercial housing sector to address the pressing demand for housing. HDFC Plc was registered as a public company on the 9th of February 2006.  The shareholders' agreement for privatization between 
the Government of the Maldives, ADB, Intern ational Finance Corporation (IFC), and Housing 
Development Finance Corporation – India (HDFC-I) was signed on 23 July 2008.  The initiative to 
restructure the capital and restart the business of HD FC Plc became effective in February 2009 with 
the first equity disbursement by the international shareholders whose commitment also comprises of a 
multi-lateral loan component by IFC and ADB.  The structure of new shareholding is 49% by the 
Government of the Maldives, with the balance 51% being shared as IFC (18%), ADB (18%), by 
HDFC-I of (15%).  After having re -structured its capital and with new lines of long-term credit HDFC 
Plc has re-entered the market for mortgage loans for housing needs of individuals and families.  
48. Money transfer services businesses in the country  include three local companies operating as 
agents of international money transfer compan ies.  The services of these companies are largely 
targeted towards the expatriates in the country who utilize their services for outward remittances from 
Malé. 
(4) B
ALANCE OF PAYMENTS AND EXTERNAL SECTOR  
49. As Maldives depends mainly on imports for consumption, the lack of import substituting 
industries and of manufacturing capacity for exports results in a current account deficit.  The current 
account continued to be in deficit over the review period and the deficit for 2008 stood at 
US$651.3 million.  This is a 139% increase when comp ared to the current account deficit in 2005, 
which stood at US$273.0 million .  This huge increase in the deficit is due to the ever widening trade 
balance over the years, which recorded a defic it of US$890.9 million.  The current account deficit 
averaged around 40% of GDP between 2004 and 2008.  In 2008, more than 98% of Maldives 
commodity exports consisted of fish and rela ted products, amounting to US$125.9 million, a 29% 
increase when compared to 2005.  
50. As a result of the December 2004 tsunami which resulted in a devastated Maldivian economy 
with huge infrastructure losses, large amounts of foreign aid and insurance compensation were 
received, increasing the transfers received which peak ed in 2005 at a total of US$211.5 million.  The 
balance on current transfers in the year 2005 stood a surplus of US$142.0 million, which declined to a WT/TPR/G/221 Trade Policy Review 
Page 14 
 
 
deficit of US$52.2 million at the end of 2008.  Th e greater part of the deteriorating balance was 
decline in transfers' credit (grants).  
51. The official medium and long-term flows of loan capital for direct investment dominate the 
financial account of the balance of payments.  A m odern capital market, which is at present only at 
the infant stage, needs to be developed in order to attract portfolio investment.  The lack of a 
statistical framework for collecting data on exte rnal debt means that only public sector and 
commercial bank debt is captured.  Up to now data  on private debt are not available.  The total 
recorded external debt stock of the economy averag ed 76.9% of GDP during the review period.  The 
total debt stock of the economy at the end of 2008 was US$969.2 million. 
52. There is no exchange control legislation in th e Maldives.  Both residents and non-residents 
may freely import and export capital through the forei gn exchange market and residents do not require 
permission to maintain foreign currency accounts eith er at home or abroad.  There is no distinction 
made between foreign nationals residing in Maldives and Maldivians in terms of accounts held with 
the banks operating in the Maldives.  Inward dir ect investment requires prior government approval. 
However, once permission is granted there are no restrictions on the repatriation of profits.  
53. The Maldives has a pegged exchange rate system , whereby the Rufiyaa is pegged to the U.S. 
dollar at a market reflective rate.  As per IMF Staff report of 2008, the real effective exchange rate has 
depreciated by 27% including 1.9%  depreciation since the end of 2006.  At present the buying and 
selling rates of the Rufiyaa in terms of US do llar are Rf 12.75 and Rf 12.85 respectively.  
III. TRADE POLICY AND PERFORMANCE 
(1) TRADE POLICY OBJECTIVES AND FRAMEWORK  
54. Maldives, a country strategically situated in th e middle of the Indian Ocean has always been 
closely intertwined with international commerce since 10th century when Arab and Persian traders 
began visiting the country.  Apart from pearls, spic es, coconuts, dried fish, their attractiveness was 
very much on the abundance of cowry shells wh ich were accepted as currency from Africa to China 
until the 16th century.  Soon after Arabs, East-African and European began to make the Maldives a 
transit point before they reached Far East.  
55. The central objective of Maldives trade policy is to establish conducive environments for 
brisk commerce and economic activity focusing on di versifying the economy with export-oriented 
trade in services and industrial development fo cusing to achieve the main objectives – poverty 
alleviation and improvement in the st andard of living – of Maldives.  
56. Over the years, Maldives maintains a relatively open trade policy, with no major direct trade 
measures, low tariffs and keeping non-tariff measures to an absolute minimum.   The free trade policy 
will be maintained and improved in accordance with government development policies and priorities.  
Further bilateral, regional and multilateral a pproach to free trade will be pursued.  
57. Maldives imports virtually everything which is  consumed in the economy.  As a result, 
imports accounted for more than 75% of total trade in goods during the review  period.  Trade in goods 
typically accounts roughly 20% of the country's GD P.  Trade in goods and services taken together 
accounts for approximately 150% of GDP.  However, th is large shortfall in foreign exchange earnings 
is to a large extent made up for by revenues fro m the export of services especially via the tourism 
sector.  Maldives WT/TPR/G/221 
 Page 15 
 
 
58. Maldives' economy comprises a very limited ra nge of productive activities.  Tourism and 
related services such as transport and communica tion accounts as much as 70% of GDP.  However, 
fisheries sector, the main productive sector contin ues to play a vital role in the economy.  
(2) LAW ON EXPORT AND IMPORT AND LAW ON PROHIBITED IMPORTS  
59. The main law governing international trad e is the law on export and import of 197910, which 
stipulates the conditions and procedures for the imports  and exports of goods a nd entrusts the Ministry 
of Economic Development (MED) as the aut hority to regulate export and import.  
60. The Law mandates the authority to determine the customs tariffs on the products imported 
into the country.  The tariff remains the main tr ade policy measure, and is mainly used as a revenue 
instrument accounting for nearly two third of tax recei pts.  Some tariffs are levied on environmental, 
health and religious grounds.  
61. The basic MFN tariff structure remains the same over the review period with all duties being 
levied on ad valorem  basis except a specific duty of Rf 0.30 per stick on cigarette.  Maldives customs 
Services (MCS) as the implementing ag ency charges 11 different rates11 as stipulated by Law, using 
the 2007 version of World Customs Organization's Harmonised System (HS-2007).  With effect from 
1st of January 2006, a separate set of duties is being applied to goods importing from South Asian 
Association of Regional Cooperation (SAARC) me mber countries under the South Asian Free Trade 
Area (SAFTA)'s Tariff Liberalization Program (TLP).  
62. Government has the discretion to exempt dut y, especially if these imports are use for 
industrial purposes and development of infrastructur e and tourist resorts.  However, Government 
stopped duty exemption on imported items that are to be used for resort development since 2006.  
63. Government aims to reduce the dependence on import revenue as an income source for 
government expenditure and recently proposed much wider tax reforms.  In this background, in 
June 2009, government proposed amendments to th e export-import law to eliminate import duties on 
foods items and lower it for other commodities.  This  proposal is part of a much wider amendments 
government will bring to the export-import law in th e next two-three years, where government intends 
to bring down all applied rates to a level whic h have a positive impact on the economic development 
needs of the country and in accordance with in ternational obligations including World Trade 
Organization (WTO).  
64. The proposed amendments to the import and ex port law intend to address three broad policy 
considerations which include economic developm ent objectives, environmental objectives and WTO 
obligations during its formulation.  
65. The government foresees that the proposed amendmen ts will be initially costly.  Therefore, in 
order to compensate the loss of revenue government has also submitted a corporate tax bill in parallel 
to parliament as a part of new broader tax regime  which includes income tax and goods and services 
tax. 
66. There are no changes to the Law12 on Prohibited Imports since last trade policy review.  
Under this, goods are prohibited on the basi s of national security and religious grounds.  
                                                      
 10 Law No: 31/79. 
 11 10 ad valorem  and one specific duty. 
 12 Law No: 4/75. WT/TPR/G/221 Trade Policy Review 
Page 16 
 
 
(3) CUSTOMS VALUATION  
67. Since 2003, various efforts are being made towa rds the implementation of the provisions of 
the WTO Customs Valuation Agreement.  One of the milestones achieved during the review period 
includes setting up of valuation database.  One of the major impediments to implementing the 
agreement is the passage of the Customs Act (CA) th rough the Parliament, due to numerous bills of 
the more urgent political reform agendas.  Draft CA  to adopt the WTO valuation provisions has been 
prepared and the Bill is currently under review by the Attorney General Office. 
68. Currently custom valuation done by MCS is b ased on their valuation database compiled from 
the rates generally declared to customs by importer.  
(4) SANITARY AND PHYTOSANITARY (SPS)  MEASURES  
69. Importers are required to submit state veterinary certificate when they import live animals, 
birds and plants.  Ministry of Fisheries and Ag riculture (MOFA), implements the regulation on the 
importation of live animals into the country.  The regulation states the required standards of health 
requirement of the non-prohibited imported live anim al, along with the health standards of importing 
vessels.  The Plant and Animal Quarantine Unit of MOFA monitors plant and animal quarantine in 
coordination with the MCS.  Mini stry of Health and Family (MOHF) regulates food safety and human 
quarantine. 
70. In addition to the import license, importers ar e still required to obtain specific license from 
the MOHF when importing pharmaceutical drugs and traditional or herbal medicine.  Importers are 
required to seek approval of the suppliers of those medicines mentioned prior to importation.   
71. Maldives Foods and Drug Authority (MFDA) under the MOHF in close collaboration with 
MOFA, MED and MCS randomly inspect  food and beverage products imported and also issues health 
related certificates required for expor ts.  It is important to note, that  all these functions are carried out 
with a very limited trained personnel.  MED ma y suspend or prohibit imports of a good based on 
public health, religious, environm ental or other grounds, upon r ecommendations by the relevant 
ministry, department or agency.  
72. There is no National Standard applied to any pr oduct which is imported and exported.  Export 
standards for fish and fishery products follow the importing countries standards such as following 
European Union (EU) regulations/Council's Directiv es when exporting to EU.  Nevertheless, efforts 
are undertaken by MED to strengthen the national st andards regime through United Nations Industrial 
Development Organization (UNIDO) – SAARC Mark et Access and Trade Facilitation Support or 
Asian LDCs through strengtheni ng Institutional and National Cap acities Related to Standards, 
Metrology, Testing and Quality (SMTQ) project  funded by Norwegian Agency for Development 
Cooperation (NORAD). 
73. In order to strengthen phytosanitary and qua rantine procedures, MOFA set-up a Plant and 
Animal Quarantine Unit at th e International Airport in Hulhulhe.  However, much needs to be done to 
fully implement the SPS agreement. Government pl ans to set-up similar Plant and Animal Quarantine 
Units at its main ports and also establish le gal framework required for such establishments. 
Government is also considering the development of a national phytosanitary certificate based on the 
Food and Agriculture Organization (FAO) – Intern ational Plant Protection Convention (IPPC) model 
and good manufacturing practices a nd national standards for fish a nd fish products based on Codex 
standards.  Maldives WT/TPR/G/221 
 Page 17 
 
 
74. Maldives is a member of World Health Orga nization (WHO)/FAO Codex Alimentarius from 
March 2008, International Office Epizootics from November 2007, and IPPC from October 2006.   
(5) ENVIRONMENTAL MEASURES  
75. The Environment Protection and Preservation Act (Law 4/93) is the key legal instrument 
guiding formulation of environmental policies, ru les and regulations that are deemed necessary for 
environmental protection and preservation.  
76. Government believes that the lack of full sci entific evidence shall not be an excuse to 
postpone actions when there is a threat  of serious or irreversible damage. 
77. The regulation13 that requires a special license which are need for the importation of vehicles 
such as cars, lorries, vans, cranes, excavators, forklifts, and dumpers were abolished from 
January 2006.  Ministry of Housing, Transport and Environment (MOHTE) levies restrictions on environmental grounds in registering of the above vehicles if only items are imported after five years 
from the date of manufacture. 
78. In March 2009, the President unveiled a plan
14 to make Maldives, the first carbon-neutral 
country by virtually eliminating the use of fossil fuel by the year 2020.  The plan include a new 
renewable electricity generation and transmission infrastructure with large wind turbines, half a 
square kilometre of rooftop solar panels, and a biomass plant burning coconut husks.  The experts 
believe, this would not only power the homes and bu sinesses, but also be able to run vehicles, and 
marine vessels which now use petrol and diesel gr adually been replaced with electric versions.  
79. This plan is more ambitious than any other15, not just in terms of its shorter time period but 
also it aims to totally decarbonize the local economy.  This ten year plan is estimated to be about 
$110 million a year.  And it is expecting that this  plan should pay for itself quite quickly since 
Maldives will no longer need to import oil products for electricity generation, transport and other 
functions.  
(6) SERVICES  
80. Since early 1970s, with the introduction of tour ism to the country, services contribution to the 
economy has been increasing.  According to best estimates16, commercial services account more than 
65% of GDP, in addition to 16% of Government services and 72% of employment.  Apart from marine resources, Maldives lacks the natural resour ces needed for further deve lopment in agriculture, 
manufacturing and mining.  With all this background  and tourism dominating the service sector (and 
with its limited capacity for development), furthe r development of the economy must take place 
predominantly in services beyond tourism sector.   
81. Maldives is currently engaged in negotiations fo r the further liberalization of international 
trade in services with South Asian Association of  Regional Cooperation (SAARC) and within the 
WTO.  
82. Government is currently working on a National Strategy, in which Government is intending 
to identify the services sectors that are essential fo r the development of domestic economy;  identify 
                                                     
 
 13 Public Announcement N: A-34/2000, of 26 September 2000, of the Ministry of Trade and Industries. 
 14 Prepared by British climate change experts Chris Goodall and Mark Lynas. 
 15 Norway is aiming to be zero-carbon by 2030. 
 16 Sufficient data of the sector limits the real  contribution of services to the economy. WT/TPR/G/221 Trade Policy Review 
Page 18 
 
 
those sectors which have the best potential for de velopment and growth;  identify the sectors which 
are already engaged in, or have future potential fo r selling services internationally;  and determine the 
priority for Maldives in the ne gotiation for liberalization of trade in services both with SAARC17 and 
WTO. 
83. This strategy constitutes the nationally agreed basis for further development of the services 
sectors in Maldives.  The Government does not inte nd to select or control the sectors, within which 
development shall take place, nor to direct or restrict the processes of development including 
development financing, other than through the confor mation of internationally agreed standards.  The 
Government will be guided by the current policies on corporatization and privatization; and principles 
and priorities set out in this National Strategy in order to create a favourable environment for services 
development, including a framework of laws and regulation which is conducive to development of 
priority services in Maldives.   
(7) TRADE RELATED INTELLECTUAL PROPERTY RIGHTS  
84. Maldives became a member of World Intellect ual Property Organization (WIPO) in 2004. 
There are currently no Intellectual Property (IP) laws  in Maldives.  The Government is working with 
WIPO to set up an IP regime before graduation. An  IP law together with an action plan has been 
drafted. 
85. The Government set up an IP function in the ME D in 2007.  Currently its main function is to 
work towards the establishment of a modern IP regi me in Maldives and be ready for the time when 
the country graduates out of LDC status.   
86. Copyright law is drafted while laws on Tradem arks, Patents and Geographical Indications are 
also in the drafting process.  The copy right legisla tion is expected to come into force in 2010, while 
the rest are expected to come into force in 2013. 
87. At present Copyrights are registered by the Nati onal Bureau of Classification (NBC).  Prior to 
the registration, the work needs to  be verified by a Committee to confirm its originality.  The works 
eligible for such protection are: stories, computer  programs, speech, drama, audiovisual work, artistic 
creations, illustration, photographic works, sketch  work, songs, lyrics, musical drama, stage shows 
etc.  
88. Though International Trademarks are not regi stered or protected in Maldives, foreign 
advertisers print advertisements in  local newspapers through local ag ents to give Cautionary Notices 
on protection of their Trademarks.  
(8) BILATERAL TRADE ARRANGEMENTS  
89. The oldest bilateral arrangement, as identified in  the first Trade Policy Review report, is the 
agreement in force since 31 March 1981 which is known as "Trade Agreement between the 
Government of the Republic of Maldives and the Government of the Republic of India".  
90. A preferential Zero Tariff Agreement  was signed between Maldives and China on 
23rd July 2006.  After having several discussions be tween Maldives and China regarding rules of 
origin, the Agreement is now in effect as of 1st February 2009.  
                                                      
 17 Currently Maldives is participating in the fina lization of draft Agreement on South Asian Trade in 
Services (SATIS). Maldives WT/TPR/G/221 
 Page 19 
 
 
91. The Agreement promotes the economic deve lopment of Maldives and strengthens the 
economic and trade relationship between the two c ountries.  Under this Agreement, non-reciprocal 
preferential tariff treatment is given by the Gove rnment of China to 278 products exported from 
Maldives. 
92. Maldives currently enjoys tariff-fre e entry to the EU for canned18 and fresh fish19 under the 
Everything But Arms (EBA).  The EU market is the second most important market for Maldives’ 
exports, accounting for more than 30% of total e xports.  Maldives will continue to receive this 
preference until it graduates out of LDC status.  
(9) REGIONAL TRADE AGREEMENTS  
93. The SAARC was founded in 1985. Started as a political association, SAARC took up 
economic cooperation on its agenda in the early 199 0s.  Prior to SAFTA, a preferential arrangement 
known as the SAARC Preferential Tradi ng Agreement (SAPTA) was signed on 11th April 1993.  This 
followed a positive list approach to tariff liberali zation.  Its narrow product coverage, narrow margins 
of preferences and the inability to address non-tari ff barriers lead to the broader SAFTA Agreement.   
94. Maldives is also one of the seven original signatories of a more recent trade integration 
initiative of SAARC, namely the SAFTA20 signed at the 13th SAARC Head of States Meeting held in 
Islamabad on January 2004.  The objective was to  strengthen intra-SAARC economic cooperation and 
to realize to the maximum possible the region's poten tial for trade and development for the benefit of 
the member states, in a spirit of mutual accommoda tion and with full respect for the principles of 
sovereign equality, independence and territorial integrity of all member states, inter alia :  
a) eliminating barriers to trade in, and f acilitating the cross-border movement of goods 
between the territories of the contacting states;  
 b) promoting conditions of fair competition in the free trade area, and ensuring equitable 
benefits to all member states, taking into account their respective levels and patterns 
of economic development; 
 c) creating effective mechanisms for th e implementation and a pplication of this 
Agreement, for its joint administration and for the resolution of disputes;  and  
 d) establishing a framework for further regi onal cooperation to expa nd and enhance the 
mutual benefits of this agreement.  
95. SAFTA entered into force on 1 January 2006.  Following the commencement of the TLP in 
July 2006, trading started  under SAFTA provisions.  The relevant SAARC mechanisms are also 
pursuing the implementation of trade facilitati on measures including harmonization of standards21, 
and Customs rules, procedures, and documentation. 
96. SAFTA only covers trade in goods.  Howeve r, subsequent SAARC Summits noted the 
importance of liberalization and re gional integration in the area of trade in services under SAFTA.  
                                                      
 18 Normally 24.3% import duty. 
 19 Normally 12% import duty. 
 20 Afghanistan became the 8th Contracting Member States of SAFTA after the Heads of signed the 
Protocol on Afghanistan for Accession to SAFTA at the 15th Summit in Colombo, August 3rd 2008. 
 21 The Heads of State signed the text of the Agreement on the Establishment of the South Asian 
Regional Standards Organization at the 15th Summit held in Colombo, August 3rd 2008. WT/TPR/G/221 Trade Policy Review 
Page 20 
 
 
97. The SAFTA Agreement is being implemen ted through six instruments, namely: 
 a) trade liberalization program (TLP) 
 b) rules of origin  c) institutional arrangements 
 d) consultations and dispute settlement procedures 
 e) safeguard measures, and  f) any other instruments that may be agreed upon.  
98. Tariff reductions under the TLP are divided in to two phases.  Under phase one, Non-LDCs 
must reduce existing tariff rates (except for items in cluded in national sensitive lists) by at least 20% 
within the first-two years from the date of coming in to force of the Agreement, while for LDCs, tariff 
rates (for items not in the sensitive lists) have to  be brought down to 30% over the same period.  
99. Under the second phase of the TLP all Non-LDCs have  to bring down all tariffs to a range of 
0 - 5% at the beginning of 2013.  For LDCs, the same  reduction has to be achieved at the beginning of 
2016. 
100. The Agreement puts special emphasis on special and differential treatment for LDC member 
states, specifically: 
 a) giving special regard to the situation of  the LDCs when considering the application of 
anti-dumping and/or countervailing measures. 
 b) greater flexibility in continuation of qu antitative or other restrictions provisionally 
and without discrimination in critical circ umstances by the LD C member states on 
imports from other Contracting States. 
 c) considering, where practical, taking dir ect trade measures with a view to enhancing 
sustainable exports from LDC States,  
 d) establishing an appropriate mechanism to compensate the loss of customs revenue  of 
LDCs arising from the implementation of TLP, until an alternative domestic arrangements are formulated to address this situation.  
101. A separate article on special and differential tr eatment for Maldives is also included in the 
Agreement stating that after graduation, Maldives w ill receive no less favourable treatment than that 
accorded to LDC member states.  
102. Maldives is a party to the Trade Negotia tion Committee (TNC), a committee that is 
negotiating to establish a Trade Preference system spec ific to Organization of Islamic Countries (OIC) 
member states.  Maldives joined organi zation of Islamic Countries on August 1974. 
(10) E
XTERNAL TRADE PERFORMANCE  
103. The country's total export in 2008 grew by Rf  1,384 million to Rf 1,61 7 million, a growth of 
16.8% over the year 2007 (Table III.1).  Average grow th rate for the past years is 18.8%.  With 98%, 
marine products are the main exports.  Figure III.1 represents an upward trend in exports from 2002 to 
2008.  However, due to tsunami disaster, there was a slight downturn in the exports in year 2005. 
Starting from 2006, there is a fluctuation trend until 2008, with an estimate of 16.8% increase by the 
end.  Maldives WT/TPR/G/221 
 Page 21 
 
 
104. The biggest single shares in the marine products category were attributable to fresh, chilled or 
frozen tuna (80.6%), salted fish (7.8%), dried fish (5.5%) and canned fish (1.3%). 
105. Imports grew at an average rate of 15% for th e last ten years, as presented in Table III.1 and 
Figure III.1.  
Table III.1 
Export, import and balance of payment 
  2002 2003 2004 2005 2006 2007 2008 
EXPORTS          
Total (f.o.b. in RF ‘000) 1,161,415  1,445,922 1,572,277 1,329,830 1,735,722 1,384,589  1,617,306 
Total (f.o.b. in U.S. ‘000) 90,382  112,523 122,356 103,489 135,076 107,750  125,860 
Marine Products  
   (f.o.b. in RF ‘000)    
716,429      978,733  
1,155,306  1,308,330    1,709,989    1,357,190     1,591,794 
Clothing Products  
   (f.o.b. in RF ‘000) 443,664      462,439   
408,955         7,731                  -                    -                    -   
   Other Products  
   (f.o.b. in RF ‘000)    
1,321          4,750   
8,016       13,769         25,733         27,399          25,512 
% Marine Products  62  68 73  98 99  98   98 
% Other products 38  32 27 2 1 2  2 
                
IMPORTS                
Total (c.i.f. in RF ‘000) 5,014,062   6,026,026 8,215,256  9,534,267  11,859,521  14,032,513   17,760,114 
Total (c.i.f. in U.S.‘000) 391,724  470,783 641,817 744,865  926,525 1,096,290  1,387,509 
 BALANCE OF PAYMENTS (in millions of US$ ) 
          
 Trade Balance  (212.3)  (262.3) (383.8) (493.8) (590.1) (736.8) (890.8) 
 Current account balance  (35.6)  (31.3) (122.3) (273.0) (302.0) (437.8) (651.3) 
 Overall balance  40.2  26.5 44.2 (17.3) 45.1 76.9  (67.8) 
 Services (net)  251.7  311.7 350.2 109.8 320.7 379.8  355.7 
 Current transfers (net)  (39.6) (42.3) (53.6) 142.0 8.2 (13.7) (52.2) 
 Capital and financial account  73. 9  50.7 153.2 263.8 290.6  442.0  499.2 
 
02004006008001,0001,2001,4001,600
2002 2003 2004 2005 2006 2007 2008Figure III.1:  Import and Export Trends, 2002-2008
US$ million
Source:  Maldives Customs Service.Exports Imports
 WT/TPR/G/221 Trade Policy Review 
Page 22 
 
 
IV. INDUSTRIAL DEVELOPMENT AND DIVERSIFICATION 
(1) INDUSTRIAL DEVELOPMENT  
106. The manufacturing sector is small and limited by  the low level of domestic demand and the 
shortage of skilled domestic labor.  The sector's c ontribution to the overall GDP continues to decline 
over the review period from 8.8% in 2002 to 6.9% in 2008.  Though the sector employs 19,25922 
people in 2006 compared to 12,08223 people in 2001, its contribution to the overall employment fell 
from 18.05% in 2001 to 17.47% in 2006.    
Table IV.1 
Manufacturing contribution to GDP, 2002 -2008 
 Manufacturing contribution to GDP, 2002-2008 
  2002 2003 2004 2005 2006 2007 2008 
Percentage of GDP 8.8 8.5 7.9 7.5 7.3 7.0 6.9 
Source: MMA . 
107. Most of the traditional home based industries such as manufacturing of coir (a rope made 
from dried coconut fibres) and lace-making (han dmade pillow lace), mat weaving, weaving on 
hand-operated looms were no longer regarded as major economic ac tivities in the country since they 
have lost demand in the domestic market for cheap er substitutes.  And, though products such as 
coconuts, copra, shells, and handicrafts are made locally, they do not reach the export markets simply 
because apart from handicraft, there is no export market for these products and handicrafts are targeted for the local tourism market.  
108. Fish processing, boat building, handicraft s, furniture, food a nd beverage products, 
brick-making, PVC pipes, and soap are the main indu stries in Maldives.  Fish processing, which is the 
main industry, is geared towards exports and is  dominated by small and medium enterprises.  
Maldives Industrial Fishing Company (MIFCO),  a SOE, plays a vital role in the sector. 
109. Garment industry played a major role in diversifying the country production and also 
contributed favourably in the country's export.  Maldives enjoyed the special preference accorded 
under from USA and EU Multi-Fibre Agreement (MFA) till 2005.  In the aftermath of MFA, all the 
garment factories were closed in 2005.  
110. Since the use of nets is illegal, Maldivian fi shermen use the traditional line and pole in their 
fishing.  The mechanization of the traditional sailing boat – dhoani – in 1974 revolutionized the 
fishing fleet of the country from sails to  outboard motors.  The new generation of dhoanis , designed 
especially now target for fishing beyond the coastal zone.  
(2) M
EASURES FOR INDUSTRIAL DEVELOPMENT  
111. In March 2009, the Government decides to revi ew the guidelines for fishing in the Exclusive 
Economic Zone (EEZ) by ceasing granting of addition al license to do fishing within EEZ.  Licenses 
for fishing in the EEZ of the country are issued under Article 6 of the Fisheries Act of the Maldives.  
                                                      
 22 Census 2006, Department of National Planning (former Ministry of Planning and National 
Development).  
23 Department of National Planning (Former Ministry of Planning and National Development). Maldives WT/TPR/G/221 
 Page 23 
 
 
112. Government export promotion policy envisages as  core strategies the introduction of a quality 
assurance system for Maldivian goods and services, and alleviation of supply and market bottlenecks 
in the export of goods and services.  Monitoring of markets and prices in order to maintain competitiveness is also identified as a strategy for promoting fair trading and healthy competition.  
113. The Export Promotion Section (EPS) within the Invest Maldives Division of the MED 
together with the MOFA, provide institutional sup port to the promotion of export competitiveness.  
Participation in international trade fairs is fac ilitated by these ministries and financial assistance is 
also provided to some extent.  
114. In addition to the EPS, the Maldives Standard s and Metrology Unit (MSMU) has also been 
established within the MED with th e aim of building the export capacity of the country.  The national 
metrology laboratory, covering calibration, certificat ion, metrology standards and regulation, exists 
within the MSMU so as to guide and facilitate exporters. 
115. MED with technical assistance from UNIDO aims to develop national capacity related to 
trade and market access requirements and to id entify manufacturing sub-sectors which have the 
greatest export potential for development in the country. 
116. Nevertheless, Maldivia n exporters face a number of difficulties when exporting products. 
Some of these constraints are specific to the ke y export sector, fisheries, and some are general 
constraints.  Some of these difficulties include; fi nancing; limited export promotion services, transport 
and logistics issues.  
117. The on-going infrastructure and institutional de velopments initiated by the new Government 
will address these supply side constraints to a cons iderable extend.  In particular, the proposed 
Integrated Transport Network will facilitate ma rket linkages, trade facilitation and industrial 
development and diversification activities.  
(3) I
NDUSTRY DIVERSIFICATION  
118. The new administration, under its economic dive rsification strategies will implement policy 
measures to reduce the country's dependency on two major economic activities.  As such, the 
following policy measures will be put in place to achieve industry diversification in the medium to 
long term. 
(i) Tourism 
119. As the pivotal sector, the Government plan s to expand eco-friendly sustainable tourism 
further based on available resources in a manner that will increase the local value added by 
encouraging greater local participation.  In partic ular measures will be put in place to introduce new 
products such as cultural and health tourism, privat e islands and internationa l hotel schools to provide 
world class hospitality training.  The existing regress ive tax regime and financ ing constraints will be 
addressed to encourage local SME Investments and participation in the tourism sector. 
(ii) Fisheries 
120. As a major employment generating sector, meas ures will be put in place to expand the scope 
of the fisheries sector in the country's economy a nd to address its declining trend in GDP share.  
Towards this end, the market would be further lib eralized to enable local fishermen benefit more 
directly with less intermediaries in the market.  While the policy of sustainable fisheries would be 
continued and promoted to prevent over expl oitation, new measures such as introduction of WT/TPR/G/221 Trade Policy Review 
Page 24 
 
 
mariculture, research and training facilities are consider ed to further diversify the sector.  In addition, 
participation of SME in value addition activities with in the sector will be promoted.  Surveillance of 
the Exclusive Economic Zone will be strengthened in order to address existing impediments to the 
effective management of fishery industry. 
(iii) Agriculture 
121. Agriculture in Maldives is limited due to the sa linity of the soil and due to smallness of land 
available for arable production.  Nevertheless, as  a net food importing country, small scale farming 
practices will be promoted and encouraged to in crease food security and livelihood opportunities for 
locals.  New technology, such as hydroponics and auto-pot cultivation systems, and new crop varieties 
conducive to the climate and geography will be introdu ced to further diversify the sector.  Incentives 
will be provided to increase production of locally marketable crop verities and small scale value 
addition activities will be encouraged in support of  SME development activities.  Recognizing the 
importance of the sector for domestic food security, the government is considering formulation of comprehensive agribusiness development policies in the immediate future to encourage small scale 
industrial development. 
(iv) Energy 
122. Increasing energy security and diversification is an important policy measure pursued by the 
new administration. Dependency on imported fuel  products is aimed to  be reduced through 
encouraging use and investment in alternative fuels and renewable source of energy.  In addition, the 
fuel market will be opened up for competition a nd decentralized service delivery models will be 
introduced to enhance sector competitiveness.   
V. FOREIGN DIRECT INVESTMENT AND PRIVATISATION  
123. The legal and regulatory framework for Foreign Direct Investments (FDI) in the Maldives is 
simple and transparent.  The Law
24 on FDI governs foreign investments in the country, which requires 
both the investor and the government to enter into  an agreement.  The foreign investment law 
guarantees security for foreign25 investments.  
124. The new Administration's legislative agenda fo r the coming two to three years will address 
the existing legal and regulatory ga ps for improving investment and business climate.  Legislations 
under consideration include Company's Act, Impo rt-Export Bills, Corporate Taxation, Property 
Rights, Intellectual Property Rights, Banking and Consumer Protection. 
125. The Maldives' liberal trade environment, dyna mic private sector and development-oriented 
legal structure all contribute to a climate conduciv e to trade and investment .  Since 2000, a total of 
59 foreign investments were approved.  However, a ll the approved investments are not in operation 
currently.  
                                                      
 24 Law No: 25/79, Law on Foreign Investments in all areas except foreign investments in tourism 
sector, and there has not been any change or  amendments brought to the law since then. 
 25 Both 100% foreign and joint venture investments. Maldives WT/TPR/G/221 
 Page 25 
 
 
02468101214
2000 2001 2002 2003 2004 2005 2006 2007 2008Figure V.1:  Approved Foreign Investment in the Maldives, 2002-2008
Number of FDIs
YearApproved 
 
126. Right to 100% foreign ownership, legally b acked investment guarantee, overseas arbitration 
of disputes, freedom of repatriation of profits an d capital, long term lease of land for large scale 
projects, freedom to use foreign managerial, technical and unskilled workers and no exchange 
controls are some of the attrac tive incentives offered by Maldives.  
127. The process of registering a foreign investment, as required by Law, is simple and straight 
forward.  The new administration encourages foreign investments in all commercial areas except that 
are prohibited by the constitution.  Foreign investment s will get their approval within ten days if that 
area is included in the Positive list.  The company h as to be registered and an Agreement has to be 
signed before starting the operation. 
Box V.1 
Options for registering foreign investments 
Option I 
Proposal for registering Joint Venture 
investments whose proposed 
activity(s) is in the "positive list" Option II 
Proposal for registering Joint Venture 
investments whose proposed 
activity(s) is NOT in the "positive list" Option III 
Proposal for registering Wholly 
owned by foreigners or legal Entities 
incorporated outside of the Maldives 
 
 
128. A decision on all inward investment proposals, wh ich meet the conditions, stated in Option I, 
are made and communicated to the investor within ten working days, while all foreign investments, 
which meet the conditions stated in either in Option II or Option III are made and communicated to 
the investor within 30 working days, upon subm ission of all the relevant documentations.  WT/TPR/G/221 Trade Policy Review 
Page 26 
 
 
Box V.2 
List of investments approved by the Government 
Positive List – List of invest ments approved by the Government  
1. Financial consultancy 
2. Auditing services 
3. Insurance services 
4. Water sports services 5. Commercial diving (salvage) 
6. Domestic air transport services 
7 Catering services for airlines 8. Big game fishing 
9. Technical support services i.e. phot ocopies, elevators, ATM machines, etc 
10. Manufacturing of garments 11. Water production, bottling and distribution 
12. Consultancy in public relation, editori al, advertising and translation services 
13. Packing and distribution of cement 14. General Sales Agency, Passenger Sales Agency and Cargo Sales Agency for airlines and  shipping 
 lines 
15. Spa operations and management 
16. Water treatment plants 
17. Boat building 18. Software development and related support services 
19. Domestic maritime ferry services 
20. Financial leasing services 21. Fish processing activities 
22. Traditional medical services 
23. Production of underwater photography, video-graphy and post cards  24. Block ice making 
25. Speciality restaurants 
26. Professional business  valuation services 
27. Flying school 
28. IT system integration and implementation services  
129. Current government is committed to pursue a vigorous investment policy by opening up the 
economy for more private sector participa tion through three-pronged approach of: 
(1) PRIVATIZATION AND PUBLIC PRIVATE PARTNERSHIP  
130. The new wave of privatization process of the gove rnment began at the end of 2008.  As part 
of an extensive privatization program, a privati zation committee composing of high level state and 
private sector representative has been  established by the government un der the direct supervision of 
the President.  The key components of the priv atization strategy of the government involve 
privatization of the state-own enterprise s and seeking public-private partnership.  
131. The first phase of privatization involves approximately 20 projects involving different models 
of privatization from outright sales of shares in SOEs, management contracts, joint venture partnerships and service agreements.  
132. Clear guidelines on procurement are being followed with high level partic ipation of both the 
private sector and civil society.  The government  strongly believes in raising awareness for public 
private partnership initiative and holds regular  stakeholder meetings to stress the positive 
consequences of the initiative as well as how to mitigate the associated risk of the initiative.  Maldives WT/TPR/G/221 
 Page 27 
 
 
133. Key expertise from multilateral agencies is also an important aspect of this program.  
Agencies such as the International Finance Cor poration of the World Bank Group are acting as 
transaction advisors for the government in the privatization of vital SOEs. 
(2) INCREASING FLOWS OF FOREIGN DIRECT INVESTMENT  
134. The key government agency in charge of prom oting investment into the country is Invest 
Maldives26, an agency operating under the MED.  Th e functions undertaken by former Foreign 
Investment Services Bureau (FISB) was overtaken by Invest Maldives with its own corporate logo, 
website, rules and organization structure.  
135. The overall task in the short-to-medium term is  to conduct targeted investment promotions 
efforts, particularly concentrating on South-Sout h FDI inflows from within the region and Asia.  
Greater emphasis is now placed on not just promoting investment, but also on servicing investments in the Maldives.  Non-traditional and cost-effective avenues for advertising and marketing, such as 
marketing investment opportunities to high-net worth individuals that visit the country are being evaluated.  Greater use will be made of Maldiv ian embassies abroad, and more will be done to harness 
the attractiveness of Maldives as a tourist destination to bring potential investors to our doorsteps.   
136. In support of these strategies, the new Administration is considering a move away from a 
Positive-List approach and to adopt a Negative-Li st approach to facilitate a more transparent 
investment environment and increase inflow of FDIs.  
(3) P
ROVIDING INVESTMENTS OPPORTUNITIES TO SME S 
137. Small and medium enterprises (SMEs) sector is one that has been very much ignored in the 
economic history of the Maldives.  However, SMEs are viewed as a source of flexibility and 
innovation, and make a significant contribution to th e country's economic development.  In Maldives, 
SMEs play an important role in the developmen t and acceleration of the economic growth through 
employment creation, resource utilization, income  generation and sustainability of economy through 
building up a middle income population.  The lack  of adequate information on SMEs makes it 
difficult to measure the exact contribution they play  in both social and economic development of the 
country.  
138. As evidenced by research conducted by vari ous authorities and institutions including the 
ADB, some of the obstacles impeding the deve lopment of SMEs in Maldives include skill 
deficiencies, costs, asymmetric market informati on, the inadequate level of business development 
services especially in the atolls, and the exorbitant  costs of inter-island tr ansportation and generation 
of power.  In addition to these noted challenges, stru ctural issues related to both tourism and financial 
sectors act as major impediments to SME development.  
139. In the absence of a proper tax regime, a si gnificant proportion of government revenue has 
come from a direct lease payment or rent per bed.  Demand for resort permits are heavily oversubscribed, with competitive bidding pushing up th e rental value per bed.  With the upward trend 
in rent payments, the required returns from the t ourism sector has become profitable only to large 
investments at the expense of crowding out small and medium size participation in the tourism sector.  
140. Furthermore, the financial system of the country  is characterized by a lack of any centralized 
credit rating system – one of the crucial reasons that  force the commercial banks  to rely on high levels 
of collateral for each loan given.  Factors such as high MRR, limited competition and legal limitation 
                                                     
 
 26 www.investmaldives.org. WT/TPR/G/221 Trade Policy Review 
Page 28 
 
 
in using land as collateral limit the lending ability of  the service providers.  As a result, the financial 
sector is very shallow and the financial products av ailable to public are limited, in particular for 
SMEs.  
141. To address the structural challenges facing SMEs , the Government will focus on policies such 
as creation of more opportunities for SME participation in the three main industries, tourism, fisheries 
and agriculture, through the formulation of relevant  policies.  Such include development of human 
resources in SME sector, provision of business support services and making access to finance more readily available to SMEs.  Towards this end, th e government, with technical assistance from United 
Nations Development Program (UNDP) and ADB, is exploring the feasibility of establishing an SME 
Development Bank to operate as a one-stop facility to render SM E financing and support services 
across the country by middle of 2010.  
142. The key distinction of an SME bank would be to provide greater support mechanism to 
borrowers through business advisory services as we ll as different modes of credit, including both 
traditional and Islamic financing scheme.  
143. The SME Advisory Committee formed under the direction of the Minister of Economic 
Development with close coordination by the Natio nal Planning Council of the Ministry of Finance 
and Treasury is responsible for coordinating SME policy. 
144. Furthermore, the MMA is in the process of setting up a country-wide credit rating system 
with the assistance of the World Bank and the UNDP.  This is expected to ease credit constraints for 
the SME borrowers, and restrict upward movements in interest rates.  It is expected that once the 
system is operational, greater participation by the private sector in the both the provision of finance 
and borrowing will take place.  
VI. GRADUATION 
(1) G
RADUATION OF THE MALDIVES FROM LDC  STATUS  
145. The United Nations General Assembly decided in December 2004 to graduate Maldives and 
to remove it officially from the list of LDCs.  Mald ives was to be granted a three year pre-graduation 
transition period so that the country could work with its development pa rtners on modalities for a 
smooth transition.  However, the decision was revisi ted in the aftermath of the devastation caused by 
the Indian Ocean tsunami, which temporarily destroye d two thirds of the country's GDP and destroyed 
key infrastructure.  The new arrangement agreed by the UN is for the three year transitional period to 
run from 2007 to 2010, whereby Maldives would graduate from LDCs list in 2011. 
146. Maldives by virtue of being an LDC enjoys preferential market access and receives technical 
and financial support and assistance from multilate ral and regional as well as bilateral sources. 
Graduation in 2011 means that the country will face a range of new challenges caused by removal of 
trade preferences and the loss of several typ es of technical and financial assistance.  
(2) TRADE IMPACT OF LDC  GRADUATION  
147. Graduation will inevitably lead to loss of benef its from preferential mark et access to the EU 
under the EBA Scheme, resulting in the loss of margin  of preference, and an immediate imposition of 
the EU's 24.3% MFN tariff on canned tuna and 12 % for fresh tuna.  At present, roughly 30% of 
Maldives exports of tuna goes to EU which is the second largest single export market following 
Thailand (41%).  Clearly this could be a detrimental to tuna  exporters as market share would be lost to 
more competitive MFN exporters, but also to LDCs such as the Solomon Islands and non-LDC Maldives WT/TPR/G/221 
 Page 29 
 
 
African Caribbean Pacific countries such as Papua New Guinea and Fiji which can continue to export 
fish products on a duty free basis to the EU under the Cotonou Agreement.  
(3) IMPLICATIONS FOR TRADE RELATED TECHNICAL AND FINANCIAL ASSISTANCE  
148. After graduation, the Maldives will no longer benefit from most of the forms of Special and 
Differential treatment such as the participation cost  in major events.  At the same time, graduation 
will also increase its level of obligations in the WTO in terms of both commitments and time.  Further, Maldives will also see substantial reducti on of financial assistance provided by the WTO for 
participation in different events organized by WTO such as Ministerial Conferences, seminars, 
workshops and training courses.  
149. There will also be implications for the Integr ated Framework (IF) and Enhanced Integrated 
Framework (EIF) programmes for trade related technical assistance, which are only available for LDCs.  At present the Maldives benefits from a numb er of Technical Assistance (TA) projects from 
the IF participating agencies.  Apart from the IF , the Maldives also benefits from a range of TA 
programmes that could be subject to payment when the country graduates from LDC status.  
(4) A
CTIONS TOWARDS ACHIEVING A SMOOTH TRANSITION  
150. The Government fully understands the importa nce of ensuring a smooth transition from LDC 
status and realizes that 2011 is now approaching fast , and that it is vital for an effective transition 
strategy be put in place.  With this in mind,  the Government of Maldives has established an 
inter-ministry "Working Group on Smooth Transiti on from LDC Status" with the main task of 
preparing a transition strategy in partnership with international partners such as UNCTAD and 
UNESCAP. 
151. In order to provide a platform for discussi on and dialogue between the Government and its 
development partners on key development objectives, Maldives began in 2006 to host an annual 
Partnership Forum with bilateral donors and multilate ral aid agencies.  The 2009 Forum was focused 
specifically on the issue of graduation and on form ulating economic policies and strategies geared to 
tackle the challenges of middle income country stat us.  At the same time, the government is also 
making other arrangements and plans to increase dom estic resource mobilization and to gear up to 
attracting more foreign investment. 
152. The Government is also working to comply w ith the eligibility criteria for the EU's GSP+ 
scheme (special incentive arrangement for sustai nable development and good governance) especially 
for vulnerable countries with special development ne eds.  The Maldives has already acceded to many 
of the requisite international conve ntions and is in the process of ratifying the remaining conventions 
including the conventions of International Labour  Organization (ILO), to fulfil this requirement. 
153. As part of the smooth transition strategy, Mald ives has taken the leadership and tabled a 
resolution requesting UN ECOSOC to assess the stru cture and effectiveness of UN support for Small 
Island Developing States (SIDS).  In this re gard, the resolution called on the Committee for 
Development Policy to submit its independent vi ews and perspectives on UN support for SIDS, and 
for the independent assessment to be considered by  ECOSOC in its substantive session in 2010.  The 
resolution was passed and the Committee for Development Policy will conduct a review on aid 
framework for SIDS.  
154. The Government of Maldives is also in the fi nal stages of signing the Trade and Investment 
Framework Agreement (TIFA) with the United States.   TIFA will open doors for entering into the US 
Generalised System of Preferences.  Simultaneous ly linked with TIFA and GSP, Maldives will also WT/TPR/G/221 Trade Policy Review 
Page 30 
 
 
be eligible for assistance from Overseas Private Investment Corporation and the Millennium 
Challenge Corporation.   
(5) CONTINUED ACCESS FOR TRADE RELATED TECHNICAL AND FINANCIAL ASSISTANCE  
155. Securing a smooth transition for Maldives requi res continued and sustained assistance from 
the international community, particularly from the de velopment and trading partners in the form of 
technical assistance and access to predictable financing.  It is imperative that support be continued to 
address major gaps in supply side and productive cap acities, in particular enhancing trade related 
infrastructure, trade and investment financing, improving national competitiveness, building human capital and technological know-how and capacity.  Th e country need extensive support in diversifying 
the economy, industries and its export-base, to upgrade and strengthen th e legal and regulatory 
framework to facilitate trade and investment activiti es and to develop support services for enterprise 
and SME development. 
156. It is in this context and in light of the Government's new economic reform program that 
continued access to EIF funding is pertinent for Ma ldives in order to support implementation of 
priority trade capacity building activities identified in  the IF Action Matrix. Extension of EIF benefits 
post graduation for a 'reasonable timeframe' is pertinen t to ensure that the efforts initiated belatedly is 
not adversely affected.  To this effect, Maldives is working closely with the IF Board to explore 
possibilities to secure EIF benefits post graduation.  
(6) F
UTURE OUTLOOK  
157. The trade policies of the new Government with  respect to each major economic activity are 
stated in the Government manifesto.  The document is succinctly in specifying policy targets for short 
term and medium term for major economic sectors su ch as fisheries, agricultu re, energy, tourism and 
other essential services.  
158. The new Government's policy shifts intend to address the country's existing structural and 
economic challenges.  The manifesto explicitly sp ecifies the continuation of the open and liberal 
approach that new Government wishes to make as the hallmark of its economic policies.  The 
openness pledged however, is within the context of sustainability, good governance and targeted 
towards boosting the long term productive supply capac ity of the country.  The policies also put a 
particular emphasis on diversifying the productive and tradable sectors as well as the broader social 
objectives.  
159. The proposed policy changes will contribute to wards more private sector development, 
involvement and participation in the local econom y and thereby contribute to increase flow of 
investments.  
160. Further, the policy changes will encourage i ndustry diversification,  value addition and 
employment generation poten tial of tourism, fisheries and agriculture sectors.  
161. In addition to strengthening th e open economic regime, the polic ies will in parallel develop 
the internal market, thereby allowing Maldives to ta ke advantage of, and to integrate better into the 
global economy.  
162. The policies will address the existing distribu tional inequalities in wealth and income and 
involvement of SMEs in the local economy. 
__________