2016 World Bank estimates show that the highest 10% of income earners account for 25.2% national income and the highest 20% account for 39.8% of national income.
By Ibrahim Athif Shakoor
The extraordinary development that the country is witness to, is without a doubt, largely due to the impressive performance of the tourism industry. Our per capita income had risen from 268.29 US $ in 1980 to 10,6626.51 US $ in 2019 and social development indicators too, like infant mortality, life expectancy at birth, among others have shown consistent and remarkable improvements.
Yet, it is also evident that development have largely evaded a majority of the population. 2016 World Bank estimates show that the highest 10% of income earners account for 25.2% national income and the highest 20% account for 39.8% of national income. Meanwhile, the lowest 10% of the population account for only 3.4% of national income. During this nigh on 50 years of tourism development, we have also not managed to diversify our economy and the primary sector has halved from the 1980’s. Analysis also shows that that the increase in bed capacity had been outperforming the increase in arrivals and the overall occupancy levels have not been quite as impressive as those of yesteryears.
Meanwhile, investor confidence have been in decline even before the Covid pandemic hit, with the bidding in December 2019 for 23 new islands resulting in just 1 submitted bid. Despite the discouraging results and as even as global commentators were cautioning about opening new greenfield sites for tourism investment, the state hastened to do so by announcing 16 new properties for tourism development in April 2021 and the minimum LAC (Least Acquisition Cost) was reduced by 30% (to MMPRC levels) in May of 2021. Only 9 bidders expressed interest for 7 of the 16 properties offered in April 2021 and just 1 award has been made.
Meanwhile, Finance Ministry have just announced that the government plan to raise 900m in the next 2 years through additional developments in the tourism industry.
As the tourism industry bloomed in the 1990’s and its achievements became evident, the default model for development for governments, all governments, have been to build castles in the air on the anticipated revenue of the tourism industry- tax revenue, land rent and initial lease payments. This method of consuming the country’s non-renewable natural asset base to finance present consumption, has gained momentum since the advent of multi-party democracy. Politicians sprinted to air-build even more bigger and opulent castles, with golden turrets and rivers flowing with honey and milk. Confident that they could, when elected, sit down to figure out how many extra islands needed to be sold off to finance the excesses of today. However, the heyday of tourism development in the Maldives have been in decline for more than a decade now. There are a total of 118 properties ‘being developed’ while some had been without a stable investor for a decade with no revenue to the state, to the lease holder or any input to the economy. ROI’s have increased from around 3 years to 10+ years with borrowed capital.
Once upon a time, the people of the country viewed the impressive development of the industry as the solution- the goose that lay the golden egg, for all national ills and personal deprivations. However, today, it has started to dawn on the citizens that the bounty of the industry have been largely by-passing them.
Locals are today aware that employment in the resorts are at the behest of being on the good books of the management as they watch powerlessly as injury and insult is visited upon employees who do not toe the line. With a probable 300 resorts operating in the country soon, in a country where the populace resides only in 188 islands, island folks watch helplessly as the islands of their atolls, being slowly spirited away, like being caught in a nightmare version of the Japanese arcade game PAC-MAN. The unhappiness of local communities as even more islands in their atolls are being sold off for resort development- with their overarching denial of access to the island, the reef or the marine riches, continue to manifest themselves in a myriad of ways in the society.
There is no doubting the growing evidence of ‘state capture’ by the tourism industry in every facet of public life. It is slowly being accepted that the tourism industry, as it is structured today, have not offered the solutions that the many were hoping for and that dramatic changes need to be made.
Our politicians, for more than 2 decades now, have built castles in the air by offering ever more grand and opulent promises and the public has consistently, ignored the obvious and elected those who promised the largest and the grandest of would-be air castles. When in government, all governments, have defaulted to calculate just how many new resorts need to be sold out to generate the revenue that would be necessary to implement half of the promises made.
However, as the country has recorded its highest debt to GDP ratio today, Fitch and Moody’s outlook is for a V shape depression on the near horizon.
Politicians should not ignore the fact that the old methods are not working and that the realities of post-pandemic invest climate is different. Meanwhile, the public are being increasingly unhappy and making their discontent manifest.
It is hight unlikely that new islands will emerge from neath the waves such that politicians can continue, forever, the endless game of ‘going around the mulberry bush’. Investors too, need to see that we are mature and sober and are willing to take bold steps to improve the macro-economic fundamentals before they re-gain confidence in the economy. The limited natural resources of the country are not the ‘property’ of this generation alone. They are the assets our children would need to leverage their future on. For this, it is imperative that they remain available to them instead of being mortgaged today to satisfy the unquenching thirst of successive governments.
Maybe, its time now to take a pause and reflect on the default model of selling out more of our natural wealth to finance present consumption. Yes, it is time to reflect, to ponder on and change the present development model.
NOTE: Athif is the co-founder and co-editor of the Maldivian Economic Review and has been publishing on matters economic for more than 20 years.