MALDIVES' TRADE CONDITION AN OVERVIEW

The Maldives is a small island country located in the Indian Ocean, southwest of Sri Lanka and India. The country has a population of approximately 530,000 and is known for its crystal-clear waters, white sand beaches, and resorts. Despite being a small island nation, the Maldives has a trade-dependent economy, which makes the country vulnerable to shocks in the global economy. This article provides an overview of the Maldives' trade conditions.

The Maldives' Exports

The Maldives' economy heavily depends on its exports, which mainly consist of fish and fishing products, such as tuna, skipjack, and octopus. The country also exports small amounts of agricultural products, such as coconuts and bananas. Tuna is the largest export, accounting for approximately 70% of total export earnings. The Maldives exports its products mainly to Sri Lanka, Thailand, Japan, and the European Union. In recent years, the Maldives has been diversifying its exports, focusing on the tourism sector, which accounted for 64% of gross domestic product in 2019.

The Maldives' Imports

The Maldives heavily relies on imports, as the domestic production of goods is limited due to its small geographic area. The country imports a wide range of goods, including machinery, food and beverages, petroleum products, and transport equipment. The imports are mainly from the United Arab Emirates, Singapore, India, and Sri Lanka. In recent years, the Maldives has been trying to promote domestic production to reduce its dependence on imports. The government has launched initiatives to increase local production of fruits and vegetables, as well as fish processing.

The Maldives' Trade Balance

The Maldives' trade balance has been negative for many years, as the value of imports exceeds the value of exports. The trade deficit has widened over the years, driven by the country's heavy dependence on imports. In 2018, the trade deficit was US$960 million, which was equivalent to about 29% of gross domestic product. The Maldives relies on foreign capital to finance its trade deficit. The country receives aid and grants from various international bodies, including the World Bank and the Asian Development Bank.

The Maldives and Regional Trade Agreements

The Maldives has been a member of the South Asian Association for Regional Cooperation (SAARC) since 1985. SAARC promotes regional cooperation in trade and investment. The Maldives also participates in the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) and the Indian Ocean Rim Association (IORA). In 2019, the Maldives signed a free trade agreement (FTA) with China. The FTA allows the Maldives to export products, such as fish and tourism services, to China, duty-free. The Maldives is also negotiating an FTA with India, which is expected to boost trade between the two countries.

The Impact of COVID-19 on Trade

The COVID-19 pandemic has had a significant impact on the Maldives' trade conditions. The country's borders have been closed to tourists, which has negatively impacted the tourism sector, the largest contributor to the economy. As a result, the Maldives' exports and foreign reserves have declined. The country is heavily dependent on foreign currency to finance its imports, which has put pressure on the Maldives' economy. The government has introduced economic stimulus packages to support local businesses and industries and is seeking financial assistance from international bodies.

Conclusion

In conclusion, the Maldives' economy heavily depends on its exports, mainly fish and tourism services. The country is vulnerable to shocks in the global economy, given its small geographic area and heavy dependence on imports. The Maldives' trade deficit has widened over the years, with the value of imports exceeding the value of exports. The Maldives is a member of various regional trade agreements, such as SAARC, BIMSTEC, and IORA, and has signed an FTA with China. The COVID-19 pandemic has had a significant impact on the Maldives' trade conditions, and the country is seeking financial assistance from international bodies to support its economy.