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| Photo credit: AFP/Hemis.fr |
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The Maldives was one of the 25 low-income economies
accorded least developed country (LDC) status when the
category was established in 1971. In January 2011, it
became the third to graduate from the LDC list.*
Country profile
The Maldives is an archipelago in the Indian Ocean composed
of 1191 islands, covering an area of 298 square kilometres.
About one third of the country’s 314 000 inhabitants live in
the capital island, Male, with the remaining 62 per cent scattered
around the country’s 200 inhabited islands. The Maldives is classifi
ed as a small island developing State.
Economic growth has brought significant social progress,
particularly in the area of education. Since 2002, the Maldives’s
primary and lower secondary school enrolment rate has neared
100 per cent. Literacy rates are among the highest in the region,
with 94 per cent of its population aged 15 years and older being
able to read and write.
The Maldives was governed as an Islamic sultanate under
Dutch and then British protection until 1965, when it gained independence.
Three years later in 1968, it became a republic.
In 2009, gross domestic product (GDP) was estimated at
USD 1.4 billion, or about USD 4600 per capita. Nevertheless,
16 per cent of the population live below the poverty line.
The Maldives is a service-based economy, with services contributing
77 per cent of GDP, of which 27 per cent comes from
tourism and tourism-related activities. Fishing, a traditional economic
activity of the country, contributes 7 per cent of GDP. The
scarcity of arable land and water shortages mean that agriculture
contributes just 2 per cent of GDP. Most food staples have to be
imported. An ambitious tourism expansion plan has fuelled construction,
and contributed to the deployment of telecommunication
and transport infrastructure.
There is clearly a need for economic diversification.
Dependency on tourism makes the economy of the Maldives particularly
vulnerable to the effects of climate change, especially
to the rise of sea water levels. The Maldives is prone to floods
— 80 per cent of the territory is one metre or less above sea
level. In 2004, a tsunami in the Indian Ocean devastated many
islands, critically damaging the country’s tourism, housing and
fishing infrastructure.
Unsurprisingly, the government has been active at international
discussions on climate change, attracting financial aid
from the United States and other development partners to help
it mitigate the consequences of global warming. The Alliance
Manifesto, which guides President Mohamed Nasheed’s administration,
lists ICT and the environment as essential areas
for achieving sustainable economic development. In 2010, the
President’s commitment to environmental protection was recognized
by the United Nations with the “Champions of the Earth”
environment award.
LDC status and factors contributing to graduation
The United Nations Committee for Development Policy (CDP)
originally scheduled the Maldives to graduate from LDC status
in December 2007. But just a few months after that decision,
a tsunami devastated the island nation. The General Assembly
recommended that the Maldives should be given time to recover
from the economic impact of the tsunami, and postponed graduation
until December 2010.
The Maldives engaged in a period of reconstruction, using
the relief assistance provided by diverse development partners.
Its tourism industry made a remarkable recovery. The recent financial and economic crisis, however, reduced the country’s flow
of tourism and related investments, as well as other net capital
flows and exports. As a result, the economy shrunk by 3 per cent,
and inflation rose to 4 per cent in 2009.
To deal with the increasing trade deficit and fiscal imbalances,
the International Monetary Fund approved a USD 93 million
loan for the Maldives, recommending a reduction in public expenditure.
The government has committed to privatizing several
State-owned enterprises, including telecommunications, electricity
and water. The IMF expects that proceeds from privatization
will help finance the deficit in the short term, while public finances recover.
To supplement the IMF support, the World Bank has invested
more than USD 103 million in tourism, telecommunications and
the financial sector, under its Country Assistance Strategy. The
United States is also providing financial aid to address the effects
of climate change and to improve the economy.
Connectivity now and then
Success in improving connectivity has made the Maldives
an outlier in the LDC group of countries. This island nation first
connected to the Internet in 1996, and Internet access was the
first market segment to be liberalized. Following a tender, Focus
InfoCom entered the market as a second Internet service provider
in 2002. In 2004, the mobile market was opened to partial
competition with the licensing of the mobile operator Wataniya
Telecom, which started operations in 2006.
By 2007, the penetration of mobile cellular subscriptions in
the Maldives had reached saturation and, just one year later, it
was more than 140 per cent. This rapid growth largely results
from the launch of prepaid subscriptions in 2001, the introduction
of free SMS connections in 2002, competition in the sector,
and growing per capita income. In 2007, an estimated 91 per
cent of mobile cellular subscriptions were prepaid. By 2009,
Wataniya had gained 27 per cent of the market. Both operators
(Focus InfoCom and Wataniya) are now competing in the provision
of 3G services.
Dhiraagu, the incumbent fixed telephone operator, used to
be jointly owned by the government (55 per cent) and Cable &
Wireless (45 per cent). In October 2009, the government sold
some of its shares to Cable & Wireless, reducing its holding to
48 per cent.
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Comparison of key connectivity indicators, Maldives and LDC aggregate, 2005–2010* |
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*Data for 2010 are estimates.
Source: ITU World Telecommunication/ICT Indicators database. |
The charts (see page 24) show that penetration and usage
rates for telecommunication services in the Maldives have surpassed
average rates for all other LDCs. Cheaper mobile cellular
services have also boosted penetration. According to the ITU ICT
Price Index, the cost of ICT services decreased between 2008 and
2009 by 12 per cent as a percentage of gross national income
per capita. Even the relative price of fixed broadband services has
decreased since 2008. This has contributed to a rapid increase in
the number of Internet users — about one third of the population
is now online.
Domestic connectivity across the atolls is provided via microwave
and undersea cable links, while international communications
take advantage of the Maldives’ satellite links, the
submarine cable Fiber-Optic Link Around the Globe (FLAG) and
the Dhiraagu-SLT submarine cable system inaugurated in 2006 to
link the Maldives and Sri Lanka. Dhiraagu was the only provider
of leased line services until 2008, when Wataniya was granted
permission to use its excess microwave capacity to provide leased
line services.
Although the country does not have a universal access policy
as such, Dhiraagu was obliged, as part of its licensing renewal
process in 1995, to provide universal access to telephone services
in the Maldives’s 200 inhabited islands. This was understood to
mean the installation of at least two payphones on each of these
islands by 2000; Dhiraagu succeeded in achieving this goal in
1999.
Universal service obligations are funded through cross-subsidies
between the operator’s own services. The government has
not established a specific universal access fund to support the
advancement of universal access goals, but requires operators
to provide mobile services and dial-up Internet connection at reduced
rates for educational and health care activities.
The Telecom Authority of the Maldives was established
in 2003 and regulates the sector under the Maldives Telecom
Regulation of 2003. In 2006, the Ministry of Transport and
Communications, the new policy-maker for the sector, introduced
a policy seeking to limit dependence on satellite connectivity,
and to promote connectivity through submarine cable and network
development, the aim being to provide broadband services
throughout the country.
President Nasheed has put priority on establishing “a national
infrastructure capable of providing comprehensive telecommunication
and ICT services throughout the country.” Major goals
include: strengthening the regulatory framework; promoting
private investment and the provision of services on a commercial
basis, with greater participation from civil society; setting up
affordable and non-discriminatory rates to encourage adoption
of ICT in education, health and environmental protection; and
establishing an e-governance service platform for the provision
of online services.
Connectivity as a driver of socio-economic development
Promoting the adoption of ICT in government activities to improve
service delivery has been a goal of the Maldives’ National
Development Plans for several years. The use of ICT within ministries
is widespread, and most government office workers have
IT and Internet access. The majority of government agencies in
Male are connected through a local area network.
The government plans to connect all educational institutions
in the atolls to a wide area network. The Information Technology
Development Project seeks to implement e-government through
the Government Network of the Maldives, which will connect
government and parastatal agencies in Male and 20 atolls.
The adoption of ICT in health care and environmental protection,
as well as in education, is essential for the sustainable
development of the Maldives. With the financial support of a
development partner, the country is now working on the implementation
of a national early warning system to help it mitigate
the impact of environmental shocks, such as the 2004 tsunami.
The health sector has also benefited from increased connectivity
by introducing telemedicine projects among the islands.
In December 2010, Dhiraagu announced the donation of a telemedicine
system to the Ministry of Health and Family that will
facilitate the provision of telemedicine services between remote
islands and the central hospital in Male. The system will also be
used for training medical personal in remote locations. To facilitate
its use across the country, Dhiraagu will cover the expense
of technical support, software licensing fees and broadband connectivity
charges for one year.
Challenges and goals going forward
As a graduated LDC, the Maldives faces many challenges.
Achieving sustainable development will depend largely on the
country’s ability to diversify the economy, reinforce the private
sector and keep public finances in check, while continuing on the
path of promoting increased social participation. These steps will
help the country advance towards its goal of reducing poverty in
its population.
* This article is largely based on the report “The Role of ICT
in Advancing Growth in Least Developed Countries: Trends,
Challenges and Opportunities”.
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