Regions and Countries

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Country Strategy and Program Update 2006–2008: Maldives

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Implementation of the Country Strategy and Program

A. Progress in Poverty Reduction

12. Preliminary data from the update of the Vulnerability and Poverty Assessment (VPA) suggests that poverty declined substantially between 1998 and 2004.⁹ The Government, which remains committed to poverty reduction, seeks to reach the poorest populations in the outer atolls and provide them with basic social and physical infrastructure. Over the past 6 years, ADB has supported the Government’s efforts to provide basic transport access, electricity, economic development, water supply, sanitation, and solid waste management to the outer islands population.

13. The vulnerability of the poor has increased following the tsunami due to (i) destruction and damage of basic social infrastructure; (ii) damage to maritime infrastructure, limiting safe travel; (iii) damage to public utilities and discontinued power supply; and (iv) destruction of livelihoods in agriculture and fisheries. Poor and disadvantaged households, especially those headed by women, are more vulnerable to these shocks and face a greater risk of becoming marginalized further. An estimated 70% of the population outside of Malè has incomes equivalent to the bottom 20% in Malè, and close to 52% of the affected population is female. The impact of the tsunami could increase poverty by exacerbating regional disparities, magnifying gender differences, and increasing internal migration to Malè.

B. Progress in the Country Strategy and Program Focus Areas

14. Regional/Atolls Development. Before the tsunami, the main focus of ADB’s operational programs in the Maldives was regional or atolls development, which was in line with the Government’s development priorities. Economic development initiatives in key islands, supported by investment in physical and social infrastructure, are priorities to spur regional economic growth. The tsunami did not change these fundamental priorities, and ADB continues to assist the Government in improving electricity, water supply, sanitation, and solid waste management in the outer islands. Information technology development also is being supported to improve the working relationship among Government agencies through electronic information networking. Plans to promote interisland and intra-atoll economic and social development also are continuing. These include the development of the transport network, public utility services and regulation, and comprehensive regional planning.

15. Water Supply, Sanitation, and Solid Waste Management. On the outer islands, water is supplied almost entirely through groundwater extraction, mainly through domestic wells, and rainwater tanks for drinking water. Increasing groundwater extraction, resulting from population and development pressures, is depleting the freshwater lens rapidly. This leads to saline intrusion into the groundwater aquifer, restricting its resource value. Consequently, more individual and communal rainwater tanks are needed as the principal source of drinking water. The tsunami, which damaged the water lens on many islands, exacerbated this situation. The recovery period for the aquifer is uncertain.

16. The tsunami caused an estimated $13.1 million in damage to the water supply, sanitation, and solid waste management sector. However, the sector will need an estimated $45.6 million for the recovery, which will focus on (i) the immediate provision of safe water and basic temporary sanitation facilities to affected areas, (ii) the rehabilitation of sanitation infrastructure, and (iii) the commencement of a solid waste management program for clearing and recovery of debris.¹⁰ Through the Regional Development Project (Phase I), ADB has assisted the Government in this sector. ADB’s support will continue with the Regional Development Project (Phase II), Environmental Infrastructure and Management, which was approved in April 2005. This project will have a strong community-based approach to implementation, and will support the establishment of cooperatives for operation and maintenance to optimize the participation of the private sector.¹¹ TEAP includes a project component of $4 million to rehabilitate and provide water supply, sanitation, and solid waste management and services for the 69 most severely affected island communities.

17. Education. Since 2000, all children in the Maldives have had access to the first 7 years of formal schooling—a major achievement for a country whose students are scattered over 198 inhabited islands. Secondary schools are available in atoll capitals and on the islands with larger populations. In 2004, the country had 225 schools with primary classes, 117 schools with lower secondary classes, and 15 schools with higher secondary classes. ADB assists the postsecondary education provided mainly by the Maldives College of Higher Education (MCHE), and employment skills training provided by the Ministry of Employment and Labor. MCHE has five campuses throughout the country. Under a planned second postsecondary education development project, ADB might follow up its assistance to MCHE with project preparatory technical assistance (TA) for 2007.

18. In the education and training sector, the tsunami’s impacts ranged from damaged school infrastructure to insufficient teaching staff due to the departure of expatriate teachers.¹² The tsunami spared 63% of schools in the atolls, which had minimal or no damage and were ready to reopen immediately. The remaining 37% of the schools required varying degrees of repair and rehabilitation to resume operations. Despite these problems, all schools started their new academic session on time on 25 January 2005. Recovery of damaged education sector infrastructure is estimated at $21.1 million, excluding the postsecondary education subsector.

19. Transport. An important dimension of human poverty in the Maldives is limited transportation, which adds to the remoteness and isolation of the poor in the atolls. ADB assisted the Government in developing a transport master plan to guide institutional capacity building and future sector investments from a long-term perspective in line with the Government’s regional development strategy. Based on the master plan, ADB is assisting the Government in preparing the domestic maritime transport project standby in 2005 and firm in 2006. The project aims to spur economic activity and improve access to social services by developing more reliable, frequent, and safer domestic maritime services. These would include a network of regular domestic maritime services, based on the improvement of harbor facilities and appropriate sector policies.

20. The tsunami damage to transport and communication infrastructure (harbors, jetties, causeways, navigational aids, airports, and telecommunications) was about $20.3 million. However, an estimated $24.5 million will be needed to restore the damage within 2 years. TEAP includes a transport project component of $2.9 million for the rehabilitation of damaged jetties, repair of sea walls and quay walls, and rehabilitation of Male’ International Airport. In addition, the quick disbursement component of the project will cover emergency projects for immediate implementation, including the rehabilitation of maritime navigation aids and procurement of interisland transport capacity for reconstruction works.

21. Energy. A reliable and efficient electricity supply also is important to reduce regional disparities and vulnerability of the poor on the outer islands. The Outer Island Electrification (Sector) Project, approved in 2001, was designed to improve electricity supply systems on about 24 selected islands. The first contract covering half of the selected islands was approved shortly before the tsunami. The second contract is being processed to take into account several islands affected by the tsunami. Many more islands need similar assistance, and a second project is planned in 2007, which ADB expects to support with a project preparatory TA in 2006. The requirement to establish new legislation that will enable legal recognition of communityowned power supply companies or cooperatives on the islands (the Cooperative Law) is being processed under the project. However, a presidential decree to cover cooperative regulation is being expedited as a condition for loan effectiveness for the Regional Development Project (Phase II), Environmental Infrastructure and Management.¹³

22. The tsunami damaged the electric power supply system on 95 islands (about 48% of the islands with electricity), and left the population without electricity for several days. Damage in terms of lost assets was estimated at $4.65 million. The Government plans to restore the electricity supply system in all affected islands to pre-tsunami level. In the first 6 months, priority was given to the replacement of the damaged distribution network and the repair of damaged generators. The next step, to be completed in 1.5–2 years, will include the installation of new generators, construction of powerhouses, installation of a new switchboard, and streetlights. TEAP includes a component of $2.5 million for the rehabilitation of the damaged power supply system.

23. Agriculture. Agriculture’s contribution to the country’s economy, currently only 3% of GDP, must be expanded, especially on the outer islands with large landmasses. ADB is supporting the implementation of a small-scale TA to assist the Government in assessing and identifying key elements of an agriculture commercialization strategy. The TA also will explore the agricultural potential as new income generating activities, especially for the atoll population. The tsunami demonstrated that the Maldives, which has a narrow economic base relying mainly on the tourism and fisheries sectors, needs to promote economic diversification to reduce its vulnerability to external shocks.

24. The tsunami damage to the agricultural sector is estimated at about $11 million.¹⁴ TEAP includes a grant component of $2.5 million to support affected farmers in the perennial and field crop sectors by providing them with farm inputs, tools, and equipment, as well as working capital to help them rehabilitate their farms and restore their livelihoods. Further, ADB approved in April 2005 a TA grant to restore the livelihoods of the tsunami-affected farmers on the most severely affected islands. The TA for $1 million is to be financed from the Japan Fund for Poverty Reduction. Another project for Saving the Tsunami-Affected Trees in the Maldives was approved for grant financing of $250,000 under the Poverty and Environment Program.

25. Good Governance, Transparency, and Accountability. The Government will continue to focus on improving governance and financial management in the public sector. It also will try to improve and strengthen institutional capacity of Government agencies to ensure efficient and effective public administration. ADB is assisting the Government in (i) strengthening project monitoring and evaluation at the Ministry of Finance and Treasury; (ii) capacity building for the Public Service Division, Office of the President; and (iii) assisting the Ministry of Planning and National Development’s preparation of a results-oriented 7NDP.

26. ADB’s TEAP incorporates measures to ensure transparency and good governance, including a special Government Web site for disclosing information to the public on the administration of funds under the project. The purpose of the Web site is to provide the public with information to ensure that the funds are used properly and for the intended beneficiaries. Another measure to enhance transparency and accountability is a grievance review mechanism, which will be established under TEAP to facilitate the just disposition of complaints submitted by individuals or communities. To enable individuals or communities to use such a mechanism and to access assistance under the project, facilitation units will be created with the active participation of community-based organizations.

27. ADB supports the Government of the Maldives in strengthening its public accounting system and improving governance, transparency, and accountability in public sector operations. The Strengthening of the Public Accounting System Project¹⁵ is a major component of ADB's assistance in the financial sector development program. The TA loan is designed to support institutional and procedural changes in the public finances of the Maldives. It will be the foundation for ADB’s other expenditure- and revenue-related support to the Maldives to develop a social security system, diversify revenue sources, and manage domestic and foreign public debt.

28. Private Sector Development. Enhancing and strengthening private sector participation in national development has been one of the Government’s priorities under the 6th National Development Plan (2001–2005). After the tsunami, local and international private sector entities were involved in the national recovery and reconstruction efforts. ADB is assisting the Government in developing small- and medium-sized enterprises (SME) in the atolls. The project preparatory TA will be processed in 2005, with the loan standby in 2006 and firm in 2007.

29. Regional Economic Cooperation. In its efforts to diversify its economy, the Maldives recently has been more active in pursuing closer trade ties with neighboring countries in South Asia, as well as with selected countries in South East Asia. In line with ADB’s efforts to promote regional cooperation in South Asia, a study was conducted to explore economic cooperation opportunities between the Maldives and other South Asian countries. The study found that economic cooperation opportunities exist in tourism, fisheries, trade and investment, finance, education, and information technology. Furthermore, ADB is preparing a regional cooperation strategy and program (RCSP) for South Asia. Consistent with this RCSP, ADB will work closely with the Maldives and other South Asian countries to help promote economic cooperation in areas of mutual interest.

C. Highlights in Coordination of External Funding and Partnership Arrangements

30. Coordination with key development partners, especially with the United Nations Development Programme (UNDP), the World Bank, and the International Monetary Fund (IMF), has been good, particularly following the tsunami. Shortly after the tsunami, a joint needs and damage assessment mission was fielded involving the United Nations System, the World Bank and the Japan Bank for International Cooperation (JBIC). The Government’s Disaster Response and Mitigation Committee has coordinated effectively the development partners’ response to the tsunami. The Government chaired the Development Partners’ Meeting for Post-Tsunami Response, held in Manila on 17 March 2005. ADB, the Islamic Development Bank, UNDP, and the World Bank cosponsored the meeting. JBIC, the European Commission, the UN System, and representatives of bilateral development partners also participated in the meeting. During the processing of ADB’s TEAP, the mission leader held a development partners briefing and coordination session in Colombo, Sri Lanka, where a number of bilateral development partners’ embassies covering the Maldives are located.¹⁶ In conjunction with its lending program, ADB will continue to pursue cofinancing from official and commercial sources to address effectively the important thematic priorities for ADB operations in the Maldives. ADB will maintain its dialogue with the Government to identify appropriate financing for its development projects.

31. Joint ADB-WB Extended Mission in the Maldives. In response to the Government’s request for special support and assistance to facilitate effective coordination and speedy implementation of emergency assistance projects, ADB and the World Bank agreed to establish a temporary joint extended mission in the Maldives for up to 2 years. The ADB Extended Mission in the Maldives (EMM) will be responsible for coordinating and implementing ADB’s TEAP and other emergency projects, and also will coordinate with other development partners. The EMM is expected to be operational by early August 2005.

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