chapter  6
17 Pages

Maldives: Jagath Dissanayake and Suwendrani Jayaratne

ByJAGATH DISSANAYAKE, SUWENDRANI JAYARATNE

Located about 300 miles south west of India in the Indian Ocean, the Republic of Maldives is an archipelago of 1,192 small coral islands covering a small land area of 115 square miles (Athukorala 2004: 1402). Maldives initiated its trade liberalisation programme in 1989 initially by removing some of the import quotas and allowing private sector involvement in some of the export businesses (CIA 1996). Consequently, from the mid-1980s it has achieved an impressive economic growth, despite its sluggish economic performance since independence (in 1965). Maldives’ per capita GDP in US$ has increased by about 16 times from 1985 till now (from US$ 250 in 1985 to US$ 4059 in 2008). The country’s developments in the economic sphere have trickled down to other sectors, enabling Maldives to record impressive social indicators parallel to its growth in the economy: it has a Human Development Index (HDI) of 0.741 and ranks 100 out of 177 countries.1 The poverty levels in Maldives have also been falling rapidly. However, considerable differences exist between the capital and its 26 atolls. For example, despite the rapid fall in overall poverty levels, there are significant differences between Malé and the atolls in terms of income distribution. Furthermore, Maldives’ economy, which is based on a very narrow production base, remains highly vulnerable to external forces. Maldives, therefore, provides a unique case study of the trade and poverty

nexus in the South Asian region given its peculiarities as a Small Island Economy (SIE).2 As Josling (1998) states, standard economic policy recipes may have different impacts on these countries given the special circumstances that arise by being ‘small’ and being surrounded by water. Against this background it is interesting to study the impact that trade has had on poverty in Maldives, relative to other countries in the region. As a SIE influenced by two decades of trade reforms, this chapter seeks to analyse the Maldivian experience on the trade-poverty nexus. The chapter is structured as follows. The second section of this chapter presents the trade policy framework of Maldives. The third section describes the post-reform trade performances, while the fourth section presents the trends in growth, poverty and inequality of Maldives in the post-liberalised era. The fifth section analyses the link between trade and poverty in Maldives. Summary and conclusions are presented in the last section.

As pointed out by Athukorala (2004: 1407), ‘there is little room in the Maldives for using tariffs and other trade restrictions as means of promoting import substitution and infant industry’ because of the small domestic market and limited resource base similar to that of Singapore. Despite the trade reforms undertaken at the unilateral, regional and multilateral levels since 1989, substantially high tariffs maintained for revenue reasons and direct import restrictions that favour state trading corporations have continued to remain important features of the economic landscape of the country. We briefly review the trade and investment policy regime in this section.