Discover Maldives : Current issues

The Maldives has changed dramatically in 40 years. The early 1970s saw the opening of the country to tourism and a revolution in the fishing industry. The traditional "dhoni" were motorized and the boats brought in more and more fish. Hotels opened on uninhabited islands so as not to expose the local population to Western tourists. In the 1990s, resorts opted for luxury tourism and expanded, offering more and more rooms, services and space. The crisis of the COVID-19 sent the Maldives back to the imperative need to diversify its economy. While major infrastructure and development projects still exist to support tourism and traditional fishing, the government is now considering new options. Aquaculture and subsistence farming on small uninhabited islands are under consideration. These sectors are expected to generate employment for local people.

Fishing at the head of the bridge

With its 1,200 islands spread over 90,000 km² of ocean, marine resources are the primary source of wealth in the Maldives. Fishing is one of the archipelago's traditional activities, and its historical industrial activity. The sector underwent a major revolution in the 1970s with the appearance of motorized "dhonis". These boats, built from coconut planks, long-line for yellowfin tuna and bonito. Fishing used to account for the lion's share of GDP, but is now down to just 10% due to the boom in the tourism industry. In 2015, growth in the fishing industry contracted for the first time due to dwindling resources and falling world prices. Nevertheless, it remains the country's sole source of exports.

Tourism, a key source of income

Tourism is the backbone of the Maldivian economy. In 40 years, the country has grown from two island hotels opposite Malé to 132 island hotels spread across the archipelago. The Maldivian government created this unique concept to limit contact between the local population and Western tourists. The phenomenon spread like an oil stain, expanding in concentric circles. Investors immediately set their sights on the larger islands near Malé. Technological advances enabled further progress to be made: seaplanes to replace the slowness of boats, desalination of seawater to guarantee drinking water, solar power to compensate for oil-fired generators. By the 1990s, hoteliers were already coming up against the scarcity of large islands. They compensated by increasing the number of beds in their resorts. The Maldives went from an average of 39 beds per hotel in the 1970s to 233 in 1995. This restructuring was combined with a move towards luxury tourism. Hotels vied with each other in flamboyant ideas; rooms on stilts planted in the lagoon became the norm; services were ever more numerous. The number of arrivals has risen from a thousand in 1972 to over 1.7 million in 2023. The islands are leased by the government, which signs leases for an average of 21 years. The government also collects a tourist tax of US$6 per night per person, and an airport tax of US$25 per departing passenger. Tourism's share of GDP was 60% in 2023, or US$3.2 billion. This result means that the country's GDP per capita will be among the highest in Asia, at US$12,667 in 2023. While tourism plays a beneficial economic role at national level, it is much less so at individual level. Less than 10% of Maldivians work in the tourism sector, the vast majority of jobs being filled by immigrants from South Asian countries. Nevertheless, a law requires Maldivian management in resorts. In reality, positions are very often doubled up and filled by better-qualified Western staff. In 2010, the government decided to open the inhabited islands to tourists, so that the local population could benefit from the windfall. The simple accommodation on offer attracts tourists who can't afford a 5-star hotel, but want to enjoy the Maldivian experience. Tourists are welcomed in local homes and must abide by the rules in force: no alcohol, bathing on bikini beaches reserved for Westerners. This form of tourism cuts the bill by at least a factor of three. It attracts a younger clientele, mostly from countries in the region. So much so that some inhabited islands have become destinations, with a competitive hotel offer. On the island of Maafushi, for example, over 60 guest rooms and hotels have sprung up on its 12 hectares in just 10 years.

COVID crisis and prospects

The COVID-19 pandemic has had a devastating effect on the Maldives economy. The archipelago closed to tourism from March 27 to July 14, 2020 and only 555,500 tourists entered the country that year, generating a 67.4% drop in visitation compared to 2019. GDP collapsed by 32% (compared to a +7% increase in 2019), the poverty rate increased by 5.1% to 7.3% of the population, hotel-related tax revenues plunged by 56%. The IMF is still optimistic about a return to pre-COVID GDP by 2022-2023. The government is banking on a strong recovery in tourism by keeping the destination open and massively vaccinating its population. By August 2021, 60.7% of the population had received 2 doses of vaccine. Hotels are investing heavily to reassure tourists with strict sanitary and disinfection protocols. Many have undergone independent certification or have documented and verified internal protocols. These efforts appear to be paying off as the country recorded nearly 400,000 arrivals in the first 4 months of 2021. The pandemic has highlighted the need to diversify the Maldivian economy. A sustainable fisheries development plan drawn up with Japanese assistance is being implemented. Its aim is to modernise the fleet and port structures, and to intensify aquaculture. The lagoons are suitable for the creation of grouper or lobster farms and the mangroves for crab farms. The promotion of food-producing agriculture is particularly on the agenda. On the tourism front, inter-atoll connectivity needs to be improved to facilitate the transportation of passengers and products. India is providing financial support for the Greater Male Connectivity Project, which is expected to de-saturate the capital. A system of bridges and causeways will link the islands of Villingili, Thilafushi and Gulhifalhu. After financing the bridge linking Malé to Hulhumalé, China is participating in the renovation and expansion of the international airport. The lengthening of the runway should make it possible to accommodate A380s and new parking spaces for aircraft are planned.

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