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The Maldives


  Economy

The Maldivian economy is based on tourism and fishing. The population of  capital island ,maleí more when compared to other islands. Development has been centered upon the tourism industry and its complementary service sectors, transport, distribution, real estate, construction, and government.

Due to tsunami on December 26, 2004,the damage of Maldives estimated at $450 million (approximately 60% of GDP). Maldivesí economy fell down  by about 5% in 2005, as the  result of decreased  tourist inflows.

Since 1997, the Maldives has been running a merchandise trade deficit in the range of $200 to $260 million annually. But in 2004 the trade deficit ballooned to $386 million  as a result of increased oil price.

A 1956 bilateral agreement gave the United Kingdom the use of Gan for 20 years as an air facility in return for British aid.The British closed theGan air station as soon as the agreement ended in 1976.

 

Economic Sectors

 

Tourism: The main source of income of Maldives is tourism (beautiful, unpolluted beaches on small coral islands, diving in blue waters abundant with tropical fish, and glorious sunsets). Tourism now brings in about $210 million a year. Tourism and related services contributed 33% of GDP in 2004. The number of tourists (mainly from Europe) visiting the Maldives increased from 1,100 in 1972 to 617,000 in 2004.

Fishing: This sector employs about 11% of the labor force and contributes 6% of GDP, including fish preparation. The use of nets is illegal, so all fishing is done by line. Production was about 158,000 metric tons in 2004, most of them are skipjack tuna. About 50% is exported, largely to Sri Lanka, Japan, Hong Kong, Thailand, and the European Union. Total export proceeds from fish were about $85 million in 2004. The fishing fleet consists of some 1,647 small, flat-bottomed boats (dhonis).

Agriculture: Since Poor soil and scarce arable land, only a few subsistence crops can be cultivated, such as coconut, banana, breadfruit, papayas, mangoes, taro, betel, chilies, sweet potatoes, and onions. Almost all food, including staples, has to be imported. Agriculture provides about 2.5% of GDP.

Industry and manufacturing: The industrial sector provides only about 8% of GDP. Traditional industry consists of boat building and handicrafts. Modern industry is limited to a few tuna canneries, a bottling plant, and a few enterprises in the capital producing PVC pipe, soap, furniture, and food products. Five garment factories that had exported principally to the United States closed in 2005.

 

Economy Overview

Tourism, Maldives' largest industry, accounts for 28% of GDP and more than 60% of the Maldives' foreign exchange receipts. Over 90% of government tax revenue comes from import duties and tourism-related taxes. Fishing is the second leading sector. Agriculture and manufacturing continue to play a lesser role in the economy, constrained by the limited availability of cultivable land and the shortage of domestic labor. Most staple foods must be imported. Industry, which consists mainly of garment production, boat building, and handicrafts, accounts for about 7% of GDP.

The Maldivian Government began an economic reform program in 1989 initially by lifting import quotas and opening some exports to the private sector. Subsequently, it has liberalized regulations to allow more foreign investment. Real GDP growth averaged over 7.5% per year for more than a decade. In late December 2004, a major tsunami left more than 100 dead, 12,000 displaced, and property damage exceeding $300 million. As a result of the tsunami, the GDP contracted by about 3.6% in 2005.

A rebound in tourism, post-tsunami reconstruction, and development of new resorts helped boost GDP by about 18 percent in 2006. The trade deficit has expanded sharply as a result of high oil prices and imports of construction material.

Diversifying beyond tourism and fishing is the major challenge facing the government. Over the longer term Maldivian authorities worry about the impact of erosion and possible global warming on their low-lying country; 80% of the area is one meter or less above sea level.


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