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Beyond Tourism: The evolving narrative of Maldives’ growth

Op-Ed written by World Bank's Country Director to Maldives, Faris H. Hadad-Zervos

21 March 2022, MVT 14:04
(FILE) Photo of Dhigali Maldives: Maldives has been seeing a steady increase in tourist arrivals after the country reopened its borders -- Photo: Dhigali Maldives
21 March 2022, MVT 14:04

The Covid-19 pandemic brought global tourism and travel to a standstill. Although the health impact of the pandemic has been fairly contained in Maldives, its economic consequences for the tourism-dependent economy have been devastating. To contain the spread of the virus, the country closed its borders for the first time in history, between March 27 and July 15, 2020. This led to a sudden stop in tourism – the main driver of growth, jobs, and revenues.

But with the virus now contained and more than two thirds of the country’s population fully vaccinated, tourists have been steadily returning since late 2020. After an 18-year record low visitor number of just 555,494 in 2020, the country attracted 1.3 million visitors in 2021. Maldives has also successfully attracted tourists from new and emerging markets to supplement shortfalls in arrivals from previously high-performing markets like China. India and Russia were the leading markets in 2021, accounting for 22.1 percent and 16.8 percent of total tourists, respectively.

There is no doubt that tourism, which propelled Maldives into the ranks of middle-income countries and enabled it to narrow the gap with more advanced economies, has been key to the country’s development success. As the sector rebounds, it will continue to be vital to its future.

But disruptions stemming from the pandemic and new shocks from the war in Ukraine highlight the risks associated with reliance on a single economic activity. Tourism and related services directly contribute to 40 percent of the economy, 80 percent of exports and half of total revenues. With most Maldivians dependent on tourism and fisheries for their livelihoods, any impact on tourism will be felt across all corners of the archipelago.

The good news is that young, innovative Maldivians are helping build a more diverse and dynamic economy of the future.

When the Maldives imposed a lockdown in April 2020 to stop the spread of Covid-19, Siyah Khaleel and a group of his friends were stuck on a remote island. They were looking for ways to get back to Male, but they could not find any online. That’s when it hit them: the country’s sea transport industry, which is made up of numerous individual players, needed a solution to centralize bookings for the different services.

OdiApp was born from that experience. With the app, travellers can book tickets from a transport service provider of their choice with just a click of a button. I was impressed with these local solutions Maldivian entrepreneurs like Siyah Khaleel and his team are designing for local problems. Meeting them and other entrepreneurs during a recent High-Level Roundtable on Digital Development in Male showed me the potential Maldives’ services-led economy has in expanding beyond tourism into emerging industries. This evolution will be made possible by the digital technologies of today and tomorrow.

As the country emerges from the unprecedented impacts of the pandemic and new shocks linked to global conflict, economic diversification is now more important than ever.

With the demand for high-speed internet and contactless services on the rise due to the pandemic, digital technologies have the potential to unlock new markets for Maldivians across the archipelago and enable the government to provide better services. Recognizing this potential, the Government Strategic Action Plan 2019-2023 outlined an ambitious agenda for digital development as a key step towards economic diversification. Already, over 60 percent of households use the internet. High-speed fiber internet is available to more than 70 islands and 80 percent of the population. However, 20 percent of the population lives on outer islands and atolls that lack fixed broadband, which constrains access to digital services, transactions, and economic opportunities.

The importance of fostering digital development and diversifying the Maldives’ economy was front and center at the High-Level Roundtable on Digital Development where young Maldivian entrepreneurs like Siyah and others demonstrated how they are innovating and creating competitive businesses for the digital economy.

What can Maldives do to ensure that future generations are able to follow in Siyah’s footsteps to create opportunities and add value to the economy?

To close the existing digital divide, investments in digital infrastructure and technologies are needed to reduce internet and mobile costs, and to offer better services. Improving digital literacy can allow the country to address the issue of low adoption of technologies like e-wallets and mobile payment platforms, prepare the young generation for jobs in the ICT sector, and allow Small and Medium Enterprises (SMEs) access new markets and ways of financing. At the same time, laws on electronic transactions and combating cybercrime are instrumental for digitalizing government and commercial services, and for protecting users.

While digital development is one key area for the World Bank’s collaboration with the Government on Maldives’ recovery and future growth, there is so much more the country can do to better rebuild for green, resilient, and inclusive growth in the post-Covid era. Policies that encourage entrepreneurship and investments in new and emerging sectors such as renewable energy, enable SMEs access funds and expand their market base, get more young Maldivians especially women to work, and create a level-playing field for the private sector are just as important to maintain the Maldives’ services-led recovery and supercharge the country’s development for future generations.s

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