Regions and Countries

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p. 13 of 19 BACK | NEXT I. Country Performance Assessment II. Country Operational Strategy III. Sector Strategies A. Infrastructure B. Social Infrastructure C. Governance Dimensions of ADB Operations D. Gender Dimensions of ADB Operations E. Private Sector Operations IV. Regional Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - Maldives : III. Sector Strategies

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E. Private Sector Operations

39. The recent Private Sector Strategy Study and Strategic Thrust on the Financial Sector for Maldives²⁰ by ADB concluded that one of the key constraints to further growth of the private sector in Maldives is access to long-term finance, particularly for tourism and fisheries development, the backbone of the country’s economy. Key issues that need to be addressed to further develop the financial sector include promoting competition among banks, transforming the existing Provident Fund into a national vehicle for mobilizing and channeling long-term savings, gradually developing a domestic capital market, and improving legal and institutional framework for macroeconomic and financial management. Particular attention also should be paid to the implication of private sector activities on environment, and the improvement of legal and institutional framework on private sector activities will be of importance to promote sustainable natural resource management.

40. ADB's public sector loan and TA program has been assisting the Government in creating a suitable environment for the expansion of private participation in the economy, including recent support for private sector participation in port operations.²¹ Because of the country's small size, ADB to-date has not funded any private sector operations. The Government requested ADB to further assess possibilities particularly in support of tourism development through ADB’s private sector window. The International Finance Corporation (which started with a loan of $6 million for a resort development in 1996 in Maldives) and the National Development Bank of Sri Lanka have recently made a proposal to establish a leasing company.

41. The corporatization of MPA would be completed by 2000, when the new Maldives Port Company will start operation following the Companies Act. Notable progress in public enterprise reform/private sector development includes the ongoing work in corporatization of Maldives Airports Authority, and in further opening to private sector participation in frozen fish exports, which has been under the monopoly of the Maldives Industrial Fisheries Company Ltd. At a future time and subject to request of the Government, ADB could consider providing further assistance, either for privatization of or for improvement of corporate governance of the public enterprises remaining in the public sector. Scope also exists in strengthening the Public Enterprise Monitoring Unit, which was established by the Government in 1995 to look systematically into institutional improvements of the 19 parastatal public enterprises. To date, six of the 19 public enterprises have been opened to minority private participation, ranging from 49 percent of equity for Air Maldives down to 25 percent for the Bank of Maldives.

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