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TRADE POLICY REVIEW: MALDIVES
15 and 17 January 2003

Concluding remarks by the Chairperson

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See also:
Press release: Continued structural reforms could improve economy's efficiency


This, the first Review of the Maldives, has enabled Members to obtain a much better understanding of its trade regime. The positive and constructive comments raised during this Review by Members and the discussant together with the responses from the Maldivian delegation contributed to what I feel has been a very successful collective consideration of the Maldives' trade policies and measures.

Members commended the Maldives for its impressive growth and success in improving general living standards. Inflation and unemployment are relatively low, and steady growth since 1980 has lifted the Maldives to a lower middle income country level with per capita income of over US$2,000. This has been achieved despite the economic and development challenges facing the Maldives, a small island developing economy. These include a narrow production base heavily reliant on tourism and fishing, vulnerability to external developments, and a small and scattered population over many islands. Members supported the Maldives' ambitious plans for a more diversified export-oriented economy and sought clarifications on the objective of becoming a ôregional free trade hubö by 2020.

Members were highly supportive of the Maldives' trade and economic policies, and efforts to meet its WTO commitments. They appreciated the heavy demands this placed on its stretched administrative capacities and encouraged the Maldives to continue with these efforts. Members urged the Maldives to pass legislation implementing WTO Agreements and revised trade and investment rules. Members felt that the macro-economy had been well managed, although recent fiscal pressures needed to be addressed. The authorities are considering introducing an efficient direct tax system to broaden the internal tax base and thereby reduce the heavy reliance on tariff revenue; such a reform by easing fiscal pressures could also facilitate further tariff reductions.

Although Members felt that the Maldives' trade and investment regimes were relatively open, transparency needed to be improved. Tariffs are the main trade policy instrument. Members urged the Maldives to quickly rectify those cases where applied rates exceeded bound levels, and to reduce the significant gap between bound and applied duties. Non-tariff barriers are few; import licensing is mainly automatic and import quotas apply only to rice, flour and sugar.

Efforts to privatise and restructure state owned enterprises to improve efficiency and facilitate greater private sector involvement were welcomed by Members. They encouraged the deregulation of key services, in particular, the intended abolition of the basic telecommunications monopoly in 2008, to improve the economy's efficiency.

LDC graduation is a major challenge for the Maldives. Members were sympathetic to the possible implications this may have on its economic performance, especially by the loss of significant EU tariff preferences on fish exports. Several Members agreed with the Maldives that the sudden withdrawal of such preferential treatment upon graduation could retard its development, and believed that any such graduation needed to consider factors other than income levels, including some 40% of the population still below the poverty line and vulnerability to external shocks.

On sectoral issues, Members noted recent efforts to end the export monopoly on tuna and sought details on the policy challenges in the fisheries sector, including the current fish export licensing scheme. While lease periods for island resorts had been increased, the conditions attached to the new 50-year lease were rather restrictive.

Members also sought clarification on several specific issues, including:

  • tax reforms, including greater reliance on consumption taxes;

  • foreign investment requirements, including the proposed revised legislation, and investment incentives;

  • regional trade initiatives, including formation of SAFTA;

  • benefits of unilateral preferential arrangements;

  • introduction of WTO-consistent intellectual property legislation;

  • sanitary and phytosanitary arrangements;

  • government procurement;

  • import licensing;

  • customs valuation and use of minimum prices;

  • plans to introduce legislation on contingency remedies; and

  • technical assistance requirements

Members expressed their appreciation of the oral and written responses provided by the Maldivian delegation. They looked forward to receiving the written answers to outstanding questions.

This concludes our Review of the Maldives. It has highlighted the commitment of the Maldivian authorities to the WTO and its efforts to maintain a relatively open economy, despite its developmental challenges. I would encourage the Maldives to continue these efforts, and to focus on domestic policy reforms to address the supply side constraints that limit the economy's diversification and compound its vulnerability to external developments. I would also urge that Members play their part by extending greater non-discriminatory market access to the Maldives and providing sufficient well targeted technical assistance for it to fully integrate into the multilateral trading system.