Countries and Regions

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p. 2 of 7 BACK | NEXT Executive Summary I. Development Agenda II. ADB's Development Experience III. ADB’s Strategy IV. Operational Approach V. Three-Year Assistance Program VI. Performance Monitoring and Evaluation

Country Strategy and Program Update 2002-2004: Maldives

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I. Development Agenda

A. Key Features

1. The Maldives comprises about 1,200 islands, grouped into 20 administrative atolls.¹ Each atoll is a coral reef surrounding a lagoon. Malé is the capital city and the designation for one of the administrative atolls. Almost all of the islands are very small, with an average land size of only 16 hectares. Over 80 percent of the landmass is less than 1 meter above mean sea level, exposing the population to tidal waves, storms, and the risk of an increase in the sea level resulting from global warming.

2. The population of 270,000 is scattered among 199 inhabited islands² and 86 resort islands. A quarter of the population reside on Malé. About 15 islands have more than 2,000 people and 42 islands have 1,000–2,000. The population growth rate has dropped sharply from 3.4 percent in 1985–1990, but in 1995–2000, remained high at 1.9 percent.

3. The Maldives has no known mineral resources and has scarce arable land resources. It has been transformed from a subsistence-oriented, fisheries-based economy into a commercial and monetized economy. Tourism and fisheries dominate the economy, with the two combining for nearly 40 percent of gross domestic product (GDP) and three quarters of foreign exchange earnings. The combination of a small domestic market, remoteness, a dispersed population, and high internal transport costs poses formidable constraints to diversifying economic activity and delivering public services.

B. Current Political, Macroeconomic, and Social Trends

1. Political

4. The Maldives is a republic with a democratic government organized on a presidential model. The current President, in office since November 1978, is guiding the modernization of the nation. As no organized political parties exists, candidates contend independently for elective offices. A more pluralistic form of political decision making is gradually emerging. The new constitution broadens the right to participate in presidential elections and strengthens democratic processes. In 1998, for the first time, five candidates contested the presidency.

2. Macroeconomic

5. Although the Maldives was one of the poorest South Asian states in the early 1970s, it now has one of the highest per capita GDP in the region. The economy grew by 7.4 percent annually during 1991–2000. In 2000, GDP growth slowed to 4.8 percent mainly due to a slow increase in tourism revenues, a decline in resort construction, and a reduction in the level of fish catches.³ While GDP per capita is estimated at $2,049 in 2000, disposable income, in purchasing parity terms, is estimated at about $1,400 per capita. The main reasons that per capita disposable income is two thirds the level of per capita GDP are large factor income outflows and the high cost of living for import-dependent, remote islands.

6. Tourism, which accounted for about one third of GDP during the last decade, had a key role in the rapid economic growth of the country. But the share of fisheries in GDP declined from 10.8 percent in 1991 to 6.0 percent in 2000. Tourism development has been fostered by a large number of joint ventures in the 1990s. Bed capacity has doubled since the mid-1980s, with some 87 resorts and 17,000 beds scheduled for completion by the end of 2001. However, tourism has come under pressure due to a modest decline in capacity utilization and a shortening of the length of the average visit. The tourism industry mainly relies on just three primary European source markets. Fish production has increased due to the replacement of the traditional (smaller) pole-and-line vessels with second and third generation fishing vessels. Despite higher output, fisheries incomes grew at a sluggish pace, due to the fall in global skipjack tuna prices to historic lows, the low level of fish catches in 2000, and inadequate marketing capacity.

7. A key feature of the labor market is the increasing number of foreign workers, currently estimated at about 28,000, or about a quarter of the total labor force. Most of the foreign workers occupy both the most skilled (e.g., accounting, business management, teaching, and technical trades) and the least skilled (e.g., construction workers, resort cleaners, and garment producers) segments of the labor market.

8. In 1999, the economy weathered external shock due to a 50 percent decline in global tuna prices and a near-doubling of the cost of petroleum imports. This shock, coupled with a civil service wage award, caused the fiscal deficit to widen and public debt to increase in 1999 and 2000. In monetary policy, the Central Bank took key measures to liberalize the financial market. The bank-specific credit ceiling imposed on banks in 1995 was withdrawn in July 2001, the maximum spread on rufiyaa interest rates was eliminated in August. The growth rate of the money supply has slowed since 1995 and Government borrowing from the Central Bank gradually declined in the 1990s due to fiscal restraint. A fixed exchange rate policy, with the rufiyaa pegged to the dollar, was maintained from 1994 until July 2001 when the rufiyaa was depreciated by 8 percent. The combination of fiscal restraint, falling fish prices, and a nominal exchange rate anchor has had a favorable impact on inflation.

9. Between 1996 and 2000, the trade balance deficit remained high at about 42 percent of GDP, but this was offset by a large surplus on the services account. Net outward private remittances are estimated at about $26 million per annum. The current account deficit has been in the range of 5–10 percent of GDP during the past five years due to an ambitious program of private capital investments for new resort developments.

10. The economy is volatile to external shocks. Until the 11 September attacks on the United States, the economic recovery was forecast at 7 percent growth for 2001. The performance of tourism was strong and a decline in fish export earnings was mitigated, although the fiscal deficit was predicted to widen to 5.2 percent of forecast GDP and inflationary pressures were high due to the impact of the depreciation in July 2001. The favorable economic performance until August was threatened by the global impact of the 11 September attacks. Tourist bednights declined by 3 percent and 14.5 percent in September and October compared with the same months in 2000. The slowdown in tourism will substantially deteriorate the fiscal accounts since tourism tax and import duty account for 90 percent of total tax revenue and 40 percent of total revenue.

3. Social

11. In the early 1980s, just a quarter of the population had access to health care services and less than a quarter of the school-age population were enrolled in secondary school. By the first half of the 1990s, more than three quarters had access to modern health care services, practically all children attended primary school, and nearly 40 percent of the school-age population were enrolled in secondary school. Such social development can also be assessed by the International Development Goals (IDGs). The goals for primary enrollment and gender equity in education are essentially achieved, and child mortality is far lower than the average in South Asia (Box 1).

12. Total student enrollment increased substantially during the 1990s. The vast majority of the increase was in the atolls. The number of students enrolled in primary schools stabilized, while the number in middle (grades 6–7), secondary (grades 8–10), and postsecondary schooling (grades 11-12) increased three-fold. The Government established the Maldives College of Higher Education (MCHE) in 1998, consolidating the six existing institutions formally offering postsecondary education.

13. Since the mid-1980s, more than a decade has been added to life expectancy (Appendix 1), and mortality rates have declined significantly. Several debilitating diseases have either been eradicated or have negligible transmission rates. Infant malnutrition levels, while still high, declined from 56 percent in the early 1980s to 43 percent on average in the late 1990s. Although contraceptive prevalence is estimated at only 15 percent, the population growth rate fell sharply from 3.4 percent in the early 1980s to 1.9 percent in the late 1990s. As a result of the rapid demographic transition, more than half of the population are under 15 years of age. Over the next decade, nearly 100,000 young people will enter the labor market.

14. The Maldives ranks highest among all South Asian countries according to the gender development index of the United Nations Development Programme (UNDP). Nonetheless, Maldivian women continue to suffer from certain forms of gender bias. Very few women hold senior administration posts. A women’s empowerment study⁴ found that the single most pressing constraint to women’s development is the lack of strong political support for women’s empowerment by island chiefs and other functionaries. Another obstacle to women’s empowerment has been the limited range of income-generating opportunities available to women living in the atolls. ADB’s Gender Briefing Paper (2001) identifies the Ministry of Women’s Affairs and Social Security (MOWASS) as playing a vital role in raising gender consciousness and mainstreaming gender concerns.

C. Current Development

1. Poverty Situation

a. Assessment

15. While abject poverty and severe malnutrition are almost nonexistent, a large segment of the Maldives’ population subsists on very low incomes and is considered to be “poor.” The Vulnerability and Poverty Assessment (VPA)⁵ reports that 43 percent of the population subsist on per capita income of Rf15 ($1.3) per day⁶ or less (Appendix 2); about 90 percent reside in the atolls. In contrast with the social development, the Maldives’ poverty status does not measure well against the IDGs (Box 1).

16. A high degree of vulnerability is a key characteristic of poverty in the Maldives (Box 2). Vulnerability, at an aggregate level, arises because the economy is very narrowly based, with a high degree of dependence on tourism and fisheries. Further, the country has to import practically all essential consumption items, amounting to nearly two thirds of current GDP. Therefore, the effects of external shocks are quickly transmitted to the poor. Vulnerability also affects the poor directly because of remoteness, limited savings, a low level of human resource development, and a narrow range of productive employment opportunities. The magnitude and nature of vulnerability explains why the Government has to play a major role in income smoothing and in developing opportunities to diversify economic activity.

17. Isolation is an important element of human poverty in many atolls. The VPA found that more than 60 percent of the atoll population seldom see a newspaper and more than 50 percent reported not having access to a radio. Most islands have just one telephone, and its use is limited by high costs and long lines. One third of the atoll population report that opportunities to travel to Malé were limited to 2–3 sailings per week.

18. Weaknesses in the health service also contribute to poverty. High interisland transport costs impede the use of regional health centers for emergency curative services. Poor sewage and sanitation practices contribute to a range of waterborne pests and diseases. An important cause and consequence of poverty is malnutrition. More than a third of the children are reported to be malnourished. Causes of malnutrition include limited availability of fruits and vegetables in the atolls, and dietary habits and preferences.

19. The limited provision of technical and postsecondary training contributes to skill shortages and therefore indirectly contributes to poverty. While primary school coverage is almost complete, more than 40 percent of the primary school teachers in the atolls are untrained and many schools lack adequate facilities including classrooms. In the atolls, the vast majority of the children in low-income households leave school after primary or middle school.

20. Most of the poor are either self-employed or work in small and medium enterprises (SMEs). Opportunities to increase productivity, employment, and incomes in SMEs are hindered by a dearth of investment finance, technology, markets, skilled laborers, and economic infrastructure, and by public policies that tend to favor state enterprises over the private sector. The financial markets typically provide few services other than trade finance for SMEs.

21. Poverty in the Maldives cannot be addressed effectively without highlighting regional inequity. Based on Rf15 per day, the income poverty incidence disparities between Malé and the atolls were found to be in the order of 2.5:1. The VPA identified inequalities between Malé and the atolls in access to social and physical infrastructure and services to be far more pronounced, averaging 4:1 on a composite vulnerability index (Box 2).

b. Pro-Poor Growth

22. Balanced regional development aims at equitable development among the atolls on the one hand and promotion of economic growth in the little developed atolls on the other. Balanced development is crucial for ensuring that the poor benefit from growth in the Maldives. Historically, much of the development effort has been concentrated in Malé. For the past three decades, public investment in Malé was more than 50 percent higher than in the atolls. This trend was reversed in 1999 and 2000, with public investment levels in the atolls exceeding that of Malé for the first time.

23. To stimulate regional development, the Government formulated a new strategy.⁷ Its two main components are (i) the creation of two regional growth centers, one focused on Haa Dhaalu in the north (the Northern Development Region) and one on Addu (Seenu) in the south (the Southern Development Region); and (ii) a major land reclamation project, which, when completed over the next few decades, will quadruple the land area of the capital. Ongoing ADB investments support the Government’s strategy of creating focal points for economic growth in the north and south atolls.

24. The Government has launched policies aimed at encouraging the population to consolidate in a smaller number of islands out of about 200 inhabited islands. The Government also has plans to develop three additional regional growth poles, in the north-central, central, and south-central atolls. A combination of efforts on decentralized management, infrastructure improvement, and private sector promotion is aimed at improving the regional spread of growth and employment opportunities.

25. Tourism’s contribution to poverty reduction has increased. Some of the newer resorts have provided workers with housing suitable for families. Others have begun to cultivate fruits and vegetables on nearby uninhabited islands to supply tourists. The upgrading of the airport in the south to allow for international flights will pave the way for developing a 2,000 bed resort in that atoll. A combination of the development of new resorts and the provision of ancillary visitor services (e.g., cruises, tours, yachting, and boat repair) is expected to fuel strong demand for skilled and semiskilled labor in the atolls.

26. Fisheries, the single most important source of employment for the poor, is therefore of central importance to poverty reduction. The key barriers to modernizing the fisheries industry are an excessive dependence on low-value skipjack exports, weak marketing capacity (including antiquated harbors), lack of access to lending to upgrade harvest capacity, and overfishing of selected reefs. Limited research and extension capacity hinders the Government’s attempts to foster adoption of higher value mariculture technology and to involve communities in better reef management practices.

27. To reduce vulnerability, a key challenge is to diversify employment opportunities from the narrow base of tourism and fisheries. The Government plans to nurture a number of new industries, including port-related boat building and transshipment activity, expansion of indigenous agriculture, and promotion of offshore financial services. While industrial development has met with some measure of success, its impact on poverty reduction has been limited because of the tendency for such firms to rely mainly on foreign labor. The planned introduction of social protection legislation is expected to make formal employment more attractive for the Maldivian workforce, and in so doing, to increase the poverty-reduction payoffs from industrial activity.

28. Electricity is a prerequisite for social and economic development, and the reduction of vulnerability and regional disparities. Most of the atoll population are connected to some form of electricity. However, since power systems have been developed on an ad hoc basis and unprofessionally by island communities, they are characterized by unreliable supply, low efficiency, poor quality, and high costs.

29. Harnessing modern information technology for a wide range of electronic activities can also expand the range of possible economic activities. Malé has a high rate of access to telecommunications. By contrast, most inhabited outer islands have only one public telephone booth. Only 10 islands have full network facilities, and telecommunications charges in the Maldives are several times higher than in neighboring countries. The local telecommunications monopoly, while an example of a profitable public-private partnership, does not appear to have aggressively spread access to the Internet or other modern communication facilities. Making telecommunications more accessible and affordable in the atolls will facilitate the introduction of a wide range of possible electronic activities (e.g., order processing, office functions, and consumer response services).

c. Governance

30. The Maldives’ development plans highlight good governance as one of the key development and poverty reduction objectives. Establishing a modern public administration, a comprehensive and transparent set of laws, and an impartial and competent judiciary is emphasized as priority goals in the Government’s development agenda. The Government has been working on institutional capacity building of public institutions to improve their efficiency and effectiveness. Progress has been already made for the public accounting and auditing system, and public expenditures are also drawing attention (Box 3). Another area of concern is the decentralization of responsibilities for the planning and management of development to the atoll and island levels, to promote island development through more accountable and responsive governance by increasingly involving island communities in the decision-making process. While there is little evidence of corruption, the Government has taken important precautionary measures aimed at expanding the authority of the Anti-Corruption Board. Improved accounting and auditing skills are being developed to investigate accounting-related corruption and fraud.

31. Limited access to information and connectivity in the atolls weakens the capacity of government agencies to integrate operations, respond in a timely manner to requests originating from the atolls, and extend electronic education and health services to underserviced communities. The National Science and Technology Master Plan (2001) envisions the creation of a government Internet network linking Malé, atolls, and selected islands. This will also involve the development of multipurpose community telecenters to provide a range of remote services to local communities.

d. Social Development

32. The Government is planning to upgrade the quality of primary schools through a new system of decentralized education management. Primary schools in atolls will be divided into 38 clusters that will be supervised regionally by a local school headmaster. With the support of the World Bank, a new secondary school was developed at Gan in the southern atoll and a secondary school teacher training program was developed. A third World Bank education sector loan now under way aims to improve primary and secondary education quality, and increase access to secondary schools while training qualified nationals. An ADB project⁸ is helping expand access to and improve the quality of postsecondary education. The project is also helping establish MCHE as an umbrella organization to manage and coordinate postsecondary administration and academic programs for the postsecondary institutes. The concentration of secondary and postsecondary education institutions in Malé has contributed to large migration from the atolls to Malé, which hampers development in the atolls and aggravates overcrowding in Malé.

33. The number of lower secondary school graduates has increased to 5,000 per year, creating a tremendous demand for postsecondary training. Some 300 private providers of postsecondary education were established during the 1990s to meet this demand, but they are not accredited and many suffer from acute lack of space in which to establish operations. To improve accreditation, the Maldives Accreditation Board was established in 2000. The Government plans to assist private providers in locating suitable training sites. The Government also plans to expand enrollments in MCHE by increasing the range of subjects that are not covered by private providers (e.g., agriculture) and by developing branch facilities for higher education in selected atolls.

34. As a long-term health objective, the Government aims to ensure that a basic level of curative care is provided on each inhabited island. At present, about 40 health centers on individual islands offer curative care, and another 50–60 will be established during the next decade. Rapidly rising health care costs and a shortage of trained personnel impede the delivery of essential health care in the atolls. Introduction of some form of health insurance and bulk purchase of generic drugs from neighboring countries are two of the strategies adopted by the Ministry of Health for containing explosive growth in health care costs. The World Health Organization has assisted the Maldives with health sector planning and priority setting, and the development and financing of in-country training programs for nurses and paramedical staff, and international training programs for medical doctors. A combination of direct nutrition interventions and improved public education, particularly for women, is needed to improve nutrition status. To combat malnutrition, the National Nutrition Program has started a monitoring program for growth, a pilot deworming program, and a vitamin A distribution program.

35. Women continue to experience unequal opportunities. Just one fifth of the women are in the labor force, compared with nearly 70 percent three decades ago, owing largely to the modernization of fish processing where the women used to be engaged. Better education, improved representation in government, and a broader range of employment opportunities are needed to resolve gender inequality. The Government has created MOWASS to highlight gender concerns and to lead the mainstreaming of gender considerations in all public sector activities. To this end, MOWASS has held a series of gender sensitization workshops for senior Government officers and private sector employers. A better understanding of gender concerns, constraints, and opportunities for improvement is an important initial step toward gender equity.

2. Private Sector Development

36. The Government now recognizes the importance of the private sector as the engine for growth and is creating an environment for it to flourish. While the Government initially took a leading role in fisheries, wholesale trade, banking, and the public utilities, more responsibilities have been accorded to public-private joint ventures and to the private sector. The private sector dominates tourism, fishing, interisland transport, construction, and retail trade. Just under 80 percent of all employment is provided by the private sector. Foreign direct investment has had a role in tourism; however, the role has been hampered because of a lack of incentives for investors, such as small domestic markets, and lack of access to relevant information.

37. An ADB private sector strategy study⁹ identified the following as key impediments to increased private sector participation: weaknesses in the legal and regulatory environment, a lack of institutional capacity to promote the private sector, skill gaps, a shallow financial system, the high cost of telecommunications and other utilities, high interisland transport costs, and the small domestic market. Private sector business associations call attention to the lack of access to long-term finance and preferential treatment accorded to government companies operating in commercial activities as important barriers to developing the private sector.

38. Some progress has been made in reorienting the financial system to better serve the private sector. A greater degree of regulatory autonomy has enabled the Maldives Monetary Authority to improve prudential safeguards and begin to shift away from the use of direct credit controls. A capital markets authority has been introduced and financial market legislation developed to support a range of nonbank financial institutions. An ADB study¹⁰ found that financial sector development could be promoted if (i) the public sector’s demands for deficit financing are reduced; and (ii) the Government promotes competition and encourages new entry among the banks, transforms the national Provident Fund into a vehicle for mobilizing and channeling national savings, encourages the banks to introduce new services aimed at supporting the SMEs, gradually develops a capital market, and sustains prudent macroeconomic and financial sector management. Improvements in the legal and institutional framework, particularly in the areas of commercial law and dispute resolution, will also be required to improve investor security and to ensure fair competition.

3. Environment

39. The Maldives faces a growing number of environmental problems resulting from increased population pressure and limited environmental awareness. Population and income growth has increased demands for clean water, energy, and consumer goods. Rising consumption levels have, in turn, contributed to increased domestic waste. In inhabited islands, the sewerage system does not have treatment facilities. Most inhabited islands have no drainage and sewer systems; wastewater is often directly discharged into the coastal areas, and refuse (including toxic matter, oil, and medical wastes) is dumped as well. Consequently, coastal water pollution and groundwater contamination have become serious environmental problems. At the same time, depletion of natural resources, such as coastal fisheries, mangrove, and coral reefs, weakens the sustainability of fisheries and tourism. Coastal erosion occurs in almost all islands. Because all the islands are only about 2–3 meters above sea level and the Maldives’ land area is only 13 square kilometers, the country is vulnerable to sea level rise. The increasing exposure to waves is caused by the changing natural pattern of ocean currents and monsoon waves, and is also due to human activities such as mining of coral and sands, poorly planned dredging for sea transport facilities, improper reclamation, and construction of poorly designed seawalls and coastal infrastructure.

40. To prevent and minimize environmental problems, the Government integrated its environmental mitigation agendas into the National Development Plan. It adopted the Environmental Protection and Preservation Act in 1993. Environmental impact assessment is mandatory for projects with significant impacts on coastal and marine resources. The second National Environmental Action Plan (1999–2004) was adopted in 1999. The Government established 15 protected areas, and at present, is preparing its biodiversity action plan.

4. Regional Cooperation

41. The Maldives is a member of the South Asian Association for Regional Cooperation (SAARC) through which it has actively participated in the negotiations for a South Asian Free Trade Area (SAFTA). The Government recognizes that the Maldives could eventually be a beneficiary from intraregional trade liberalization. Intraregional trade already constitutes a significant proportion of the Maldives’ imports and exports. The Maldives is also a member of the South Asian Cooperation on Environment Program (SACEP), under which it receives Global Environment Facility (GEF) grants for a multinational reef management and conservation program.

D. Development Priorities and Outlook

1. Objectives and Priorities

42. The Government’s Vision 2020¹¹ affirms that the Maldives will be a firmly democratic, top-ranking, middle-income nation in less than two decades. It envisions that the Maldives will become a more urbanized and equitable society, with a highly educated population engaged in an increasingly diverse array of productive activities. Gender equality is to be achieved, good quality medical care and 10 years of formal schooling will be available to all, protective measures will be taken to combat global environmental threats, and environmental friendly lifestyles will be adopted. Vision 2020 declares that the Maldives could develop into an information and communication technology center, a regional service center with modern port and airport facilities, and an offshore banking and financial center serving the Indian Ocean.

43. The medium-term development objectives and priorities are defined in the Sixth National Development Plan (6NDP) (2001–2005). The 6NDP sets out the following medium-term policies to realize the objectives of Vision 2020: (i) eradicating poverty and ensuring equitable distribution of benefits from economic development; (ii) ensuring macroeconomic stability and promoting economic diversification and growth; (iii) enhancing and strengthening private sector participation in national development; (iv) accelerating regional and atoll development to remove disparities in employment opportunities, economic benefits, and basic social services; (v) ensuring good governance through land, legal, and judicial reforms, and efficient public administration; and (vi) strengthening social harmony and fortifying national unity and religious values. The policy design of the 6NDP is, therefore, structured around the following three themes derived from the objectives: (i) sustaining economic growth, (ii) developing and implementing a social agenda to promote equitable development and poverty eradication, and (iii) effectively implementing the 6NDP through improved participative governance.

2. Public Finance and Investment

44. Foreign loans and grants financed closed to two thirds of public investment in the 1990s. Foreign grants ranged from $13 million to $21 million in the 1990s, or between a quarter and a third of all capital outlays. Foreign loans varied year by year, but averaged some $20 million between 1991 and 1998. The role of external assistance is important also in terms of providing technical advice and assistance to build institutional capacity. Practically all major infrastructure projects have been designed and developed using foreign sources of technical expertise.

45. Few sources of commercial finance are available to fund public investment. While some state-owned trading corporations have obtained offshore finance, this has largely been limited to short-term, trade credits arranged by overseas suppliers. The prospects for long-term commercial finance for public sector investment appears slim due to the lack of a capital market, limited interest by international banks or nonbank financial institutions in the Maldives, a lack of a sovereign credit rating, and limited fiscal capacity to assume domestic and external debt on commercial terms.

3. The Role of External Assistance

46. During the latter half of the 1990s, official development assistance to the Maldives averaged about $40 million per annum, or about 7 percent of GDP, evenly split between grants and concessional loans. The Government’s contribution to public sector investment ranged from $24 million in 1997 to $31 million in 1999 and $30 million in 2000. Japan is the main bilateral funding agency, providing about $10 million per annum for infrastructure projects, such as outer islands electrification and seawall construction. ADB, World Bank, and the United Nations (UN) agencies are the main multilateral funding agencies. The Islamic Development Bank and the Kuwait Fund provide assistance on a case-by-case basis, with Australia and Canada providing small and periodic contributions.

47. At the sixth round table meeting for aid coordination in 1999, the Government of Japan announced its continued grant assistance at about the same level to the Maldives over the next five years. The World Bank (2000) has announced a three-year concessionary lending program of $10 million–$15 million over the next five years, which would involve a shift from projectbased to more programmatic support. A public expenditure review, being conducted jointly with ADB and the International Monetary Fund (IMF), will identify areas for World Bank program lending support to the social sectors.

4. ADB’s Assessment of the Government’s Development Agenda

48. The Government has rightly identified the spread of economic and social opportunities to the atolls as the single most important development priority, aimed at reducing poverty and vulnerability. While these broad objectives are widely subscribed to, the cost, institutional challenges, and imperative of complementary central Government policy reform have yet to receive adequate attention. However, compared with the past three decades, the costs of providing economic and social infrastructure in the outer islands have become very high and aid terms are hardening.

49. Developing new growth centers, as a means of spreading the regional benefits from private-sector led growth, will mean adopting quite a different strategy from what had successfully worked in Malé and its surrounding atolls. First, the private sector will need to be more involved in delivering and maintaining infrastructure. The private sector, rather than Government parastatals, will need to play a lead role in commercial activity. Second, to capitalize on opportunities and capacities that differ from island to island, local government and community-based organizations will need to be given more authority to allocate resources and design public investments. Local administrations will need to be strengthened, atoll infrastructure will need to be improved, and the quality of atoll schools has to be substantially enhanced. This will require a vast improvement in the human resource base in the atolls. And third, a wide array of policy, regulatory, and institutional changes are needed to manage the transition of the Government from a direct provider of development services to an enabler of private and community initiatives. The 6NDP and Vision 2020 endorse such a transformation in the role of the Government. But as yet, the specific measures required to put these changes into effect remain to be defined.

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