72672 v1 World Trade Indicators 2009/10 Maldives Trade Brief Trade Policy the cost of living.1 However, the bill is still being deliberated in parliament where members are The Maldives is a small country composed of 200 discussing whether to extend the bill to also cover inhabited islands that is very dependent on imports. tariffs on more items such as agricultural goods and The simple average of the MFN applied tariff rate has cooking oil and also whether to address new additional been virtually unchanged since 2000, and now stands concerns like burdensome customs procedures. As of at 20.4 percent. It remains significantly higher than the June, the bill had been sent to the economic affairs average for the South Asia region and lower-middle- committee.2 income countries, at 13.5 and 11.4 percent, respectively. Based on the MFN applied tariff, it ranks as the 173rd of 181 countries, where 1st is least restrictive. There is External Environment little difference between the treatment of agricultural and non-agricultural goods, with the latter having a The simple average of the rest of the world tariff faced slightly higher average tariff. Taxes on imports of non- by the Maldives’ exports is 9.7 percent. When taking agricultural goods are a means of taxing tourism, as a into account the volume of exports it is 3.9 percent, large share of merchandise imports is directly related to with only a small difference between agricultural and the provision of tourism services. Since 2006 the non-agricultural goods. The exchange rate of the Maldives has increased its maximum tariff on all goods Maldivian rufiyaa is pegged to the U.S. dollar and as a (excluding alcohol and tobacco) from 112 to 142 result, it depreciated in value by 3.5 percent against the percent. In 2006 this maximum tariff was applied to Thai baht, the currency of its largest export market, plastic packaging materials. The trade policy space, as making exports relatively less expensive.3 However, measured by wedge between bound and applied tariffs the weakening of the euro against the dollar since the (the overhang), has decreased slightly since 2000, now latter part of the 2008 has also made Maldivian standing at a relatively low 16.8 percent, compared vacations more expensive for Europeans, the primary with 54.8 percent on average for its regional neighbors tourist market. and 29.5 percent for lower-middle-income countries. Regarding the extent of its trade liberalization in services, Behind the Border Constraints the Maldives ranked 142nd out of 148 countries according to the GATS Commitment Index. The government In terms of the conduciveness of its institutional plays a large role in the economy although environment to business, the Maldives is ranked 87th privatization in on the agenda of the new government. out of 183 countries in the Ease of Doing Business index for 2009. Globally, it ranks the best in the In November 2008, the government announced that it Paying Taxes sub-index, and ranks the worst in would introduce a bill, now called the Import Export Registering Property. In the South Asian region, it Bill, to reduce import tariffs on diesel fuel, medical ranked second highest after Pakistan. In the Trading supplies, and certain food items in an attempt to lower Across Borders sub-index, which is a proxy for trade facilitation that measures the number of documents, time, and container cost to import and export, the Maldives ranked 126th. Unless otherwise indicated, all data are as of August 2009 and are drawn from the World Trade Indicators 2009/10 Database. The database, Country Trade Briefs and Trade Outcomes Trade-at-a-Glance Tables, are available at Total trade grew by 25.7 percent during 2008 in http://www.worldbank.org/wti. nominal U.S. dollar terms.4 Total exports (which were If using information from this brief, please provide the less than one tenth the value of imports in 2008) following source citation: World Bank. 2010. “Maldives increased by 16.8 percent in 2008, although there was Trade Brief.� World Trade Indicators 2009/10: Country Trade no growth in the last quarter. The Maldives’ export Briefs. Washington, DC: World Bank. Available at sector has a low degree of diversity. The largest export http://www.worldbank.org/wti. industry is tourism, which accounts for almost two- World Trade Indicators 2009/10 Maldives Trade Brief thirds of exports and 28 percent of GDP. The 4. All data in this section is from IMF (2009) unless majority of tourists are Europeans, leading to otherwise noted. expectations that the global economic slowdown will 5. U.S. Department of State, 2009. cause a contraction in 2009. Exports in the first 6. Maldives Monetary Authority, 2009, pp. 40. quarter of 2009 fell by 53.2 percent over the same 7. Sadr-Kiani. July 1, 2009. quarter 2008 in nominal U.S. dollar terms. Fishing is the next largest industry, making up 5 percent of GDP in 2007.5 The garment sector, which used to References contribute to a substantial portion of exports, all but Asian Development Bank. 2009. Asian Development disappeared in 2005.6 A majority of the Maldives’ Outlook 2009: Rebalancing Asia’s Growth. Manila. exports are sent to Asian countries, with Thailand and International Monetary Fund (IMF). August 2009. Sri Lanka being the destination for almost 60 percent International Financial Statistics (Country Tables). of all exports. IMF, Washington, DC. The economy of the Maldives is very import- Maldives Chronicle. December 16, 2008. “Duty Exemption dependent, relying on imports to provide a significant Will Benefit People if Prices Decrease.� portion of food and fuel. In 2008 goods imports were India Environment Portal. November 25, 2009. equal to 110 percent of GDP. Total imports grew by “Government to Remove Import Duty on Diesel, 26.6 percent in 2008, largely driven by the increases in Medical Supplies, Essential Foods.� . imports fell, decreasing by 8.1 percent in the fourth Maldives Monetary Authority. July 2009. “Monthly quarter. In the first quarter of 2009, imports fell 41.7 Statistics.� . percent year-on-year. The drop in imports is also ———. August 2, 2006. Overview of the Maldivian Economy. affected by a shortage of foreign exchange. However, . this has been somewhat ameliorated by a credit line Miadhu News. June 11, 2009. “Majlis Debates Import extended by the Export-Import Bank of India in the Export Act.� . amount of US$50 million, which is now being used by ———. June 18, 2009. “Majlis Sends Bill on Import the major traders.7 Singapore, the United Arab Export Act to Committee.� . imports. Foreign direct investment inflows accounted Sadr-Kiani, Aida. July 1, 2009. “Indian Bank lends for 1.4 percent of GDP in 2007. Maldives US$300 Million.� Minivan News. . U.S. Department of State: Bureau of South and Central 1. India Environment Portal, 2009; Maldives Chronicle, Asian Affairs. December 2008. “Background Note: 2008 Maldives.� Washington, DC. 2. Miadhu News, June 11, 2009; June 18, 2009. 3. IMF, 2009.