MANILA, PHILIPPINES - A US$7.5 million loan from ADB to the Republic of Maldives will help strengthen private sector development and promote inclusive growth in one of the fastest growing economies in South Asia.
The technical assistance loan, signed at ADB Headquarters today, will begin this month and will be used to develop and expand the Maldives micro-, small-, and medium-sized enterprises (MSME), as well as build capacity to enable and promote public-private partnerships (PPP) for the development of infrastructure. This is the first loan signed and to be executed between the ADB and the new Maldivian government, which came into office in November 2008.
The Maldives, a small island economy in the Indian Ocean, has grown at an average rate of 7.9% over the past 15 years, largely driven by tourism, which accounts for 33% of GDP. Even though the Maldives is one of the fastest growing economies in the region, the benefits of growth are concentrated around the capital island of Male, home to one third of the country's 321,000 population.
"Concentration of the population in the capital is growing, especially after the December 2004 tsunami that destroyed the means of livelihood in many islands," says Mr. Ashok Sharma, Director of ADB's South Asia Department. "Income disparities between households in Male and those in remote atolls are large."
The Maldives government has identified private sector development as one of the key pillars of its 7th National Development Plan (NDP) to help promote inclusive growth in the country. The plan encourages strategies that are market-based and actively promote competition, innovation, and the development of PPP. In alignment with the NDP, the ADB conducted a survey on MSME in Maldives to identify factors impeding private sector activity, and found that major obstacles include high cost and limited access to finance, a lack of market information and business-related expertise among MSME, lack of infrastructure including poorly developed inter- island transportation and high cost of power generation, and a shortage of skilled labor.
The intended impact of the ADB technical assistance loan is a developed and expanded MSME sector leading to broad-based, private sector-led, and sustainable inclusive growth. The intended outcomes include enhanced access to finance to pilot credit assistance to MSME, strengthened capacity of MSME and improved support infrastructure through PPP.
"ADB is assisting the Government of Maldives to establish integrated and comprehensive public transport system through the islands of Maldives. The transport network will connect all the inhabited islands and lead to the reduced cost of doing business in the islands," says Mr. Sharma. "Moreover, in close consultation with International Finance Corporation, the ADB and the Maldives Monetary Authority are selecting a consulting firm which will assist the set-up of the country's first credit information system laying down the foundations for secured transactions in Maldives."