22 Mar Interview with the Honorable Mohamed Saeed, Minister, Ministry of Economic Development and Trade, Maldives
According to the World Bank, the real GDP in Maldives was expected to grow by 6.5% in 2023 and the average is expected to grow by 5.4% from 2024 to 2025. With a strong tourism sector driving growth, your Ministry actively promotes more private sector investment and new, diversified areas to support the President’s vision of sustainable economic development. Could you provide an overview of the Maldives’ current economic landscape, and highlight some of the flagship projects that demonstrate the ministry’s innovative approach to fostering sustainable economic growth?
Since President Dr. Mohammed Muizzu assumed office on the 17th of November 2023, we have embarked on a new era of development. A lot of it is related to economic diversification because tourism is our petroleum, if you like, our core strategic commodity. However, while we acknowledge that tourism is a key product, we must diversify the economy into other sectors and see what results we can achieve. We have embarked on new policy areas, starting from obviously strengthening tourism with the industry and diversifying tourism within. That includes the formation of what we call the Visitor Economy Council.
The purpose of the Visitor Economy Council is to engage non-economic sectors and bring them into mainstream economic activities, and to tourism. Therefore, we spread tourism across sectors that have their own attractions, for example, in health, sports, culture and heritage and capitalize on them, while preserving earmarked environmental areas.
You are amplifying what the tourism product is at the moment.
Diversifying tourism within. That is one sector we are giving a lot of emphasis to.
Another sector we are exploring right now is the maritime economy. That includes ports, logistics, and related services, including free zones. Recently, we have formed a new company called Maldives Industrial Development Free Zone company to achieve economic security and then focus on export. That is our key driver.
The financial and digital economy, which is a growing new reality, is something else we are propulsing. Because of our situation in the Indian Ocean we can develop this sector, including aviation of course. That is why we have developed the Maldives Airport Economic Zone, a driver for the aviation sector, and the new regulatory institution, the Maldives International Financial Services Authority.
You could say we are strengthening tourism, which we still believe is our core business activity. We are diversifying within tourism, and we are looking into new areas for development. Regarding sustainability and development goals, in all these things, our environment and the climate remain fundamental, and we are committed to climate resilience.
United States goods exports to Maldives in 2022 were US $99 million, up 140.5% (US $58 million) from 2021, and up 230% from 2012. What factors do you attribute to this surge in exports? Are there specific industries or products driving this growth, and what strategies or initiatives are in place to further enhance trade relations between the 2 nations?
I am glad you mentioned trade between our 2 countries. To the US we mostly export fish and fish products, including crustaceans, mollusks, skipjack, yellowfin and seafood preparations. However, in terms of volume we have a challenge exporting our tuna, not only to the United States but also to Europe due the high tariffs. We are in the process of negotiating with the United States, our counterpart, about the possibility of relaxing the tariff or perhaps looking into a product-specific free trade arrangement. We also have what we call a TIFA arrangement between our 2 countries.
We are in dialogue and hopefully I will be accompanying a business delegation to an upcoming bilateral in Washington in July. As far as the imports are concerned, we mostly import electronics and technology-related items. If we continue to focus on mutual business cooperation, we can deepen our ties and increase the trade volume between our 2 countries.
As far as tourism is concerned, we have some of the best US hotel brands and management companies already doing business in the Maldives. That includes Westin, Marriott, St Regis, Sheraton, Radisson Blu, and several other companies. We have real estate businesses as well, led by large conglomerates and companies from the United States. That is on the rise and is good news as well. As far as arrivals are concerned, we have several US tourist arrivals to Maldives.
In 2009 the Maldives and the United States signed a Trade and Investment Framework Agreement (TIFA). What discussions or planned initiatives, do you think can further deepen ties? And which companies are going to be joining you when you go over to the States in July?
I am expecting a program for July. I believe most of the businesses that will be joining will be seafood and fisheries companies, real estate, companies working in digital space, finance and tourism. We can’t have a program without tourism.
In January you highlighted that the preparations for the dredging works required to initiate the Maldives Economic Gateway project are underway and that The Maldives Industrial Development Free Zone Public Limited has been designated as the master developer of the project. What milestones have been achieved so far, and what timelines are being considered for the project’s initiation and subsequent phases?
We are getting preparations underway to carry out physical work for the Maldives Economic Gateway. The purpose of having this very bold initiative is to capitalize on the trade that is passing through the Eight Degree Channel in the north, where billions of dollars are traded yearly as goods are carried from east to west, and vice-versa. That is one of the most popular maritime highways in the Indian Ocean. The other channel is the One and Half Degree Channel. Both pass through Maldivian waters. We believe we can, with proper infrastructure and concerted efforts, capitalize on business there. The purpose of creating the Maldives Economic Gateway is to do precisely that.
Regarding the Maldives Industrial Development Free Zone (MIDFZ), we formed this company through the share allocation of 5 State companies because we would like a Maldivian company to be assigned as the master developer. Then the idea is to progress phase-by-phase, starting slow and small, and increasing as it continues to develop.
Which State companies are we talking about?
The State Trading Organization (STO), Maldives Airports Company Limited (MACL), Housing Development Corporation (HDC), Maldives Ports Limited (MPL), and Maldives Transport and Contracting Company (MTCC).
The National Single Window (NSW) Project, conducted in partnership with the Asian Development Bank, aimed to leverage information and communication technology to boost efficiencies for all stakeholders involved in international trade. Could you provide insights into the success of the implementation of this project and highlight the advantages that it has brought to importers, exporters, and investors?
This is to visualize maritime activities, especially the customs cargo, including clearance of imports, exports, etc. The purpose of having a single window is basically to ease the transactions and all kinds of dealings for businesses through customs.
In an era where digital solutions are necessary, we can’t be isolated. The national single window will bring solutions and reduce bureaucracy. That is an ongoing program that will improve port efficiency. Our technical teams are engaged, and then, as you said, we have our donor assistance continuously provided. The work is underway, and a lot of milestones have been achieved so far, over the past few years. During Covid, there were some delays, but now the program is back on track.
You spoke about the connectivity and the new bridges and roadways that will be connecting the 2 islands. Above obvious benefits of connectivity, do you think there are any specific areas or projects where you feel US firms and investors could play a crucial role?
Aviation is certainly one area that the US can explore, as well as ports, logistics, real estate, finance, tech companies in the United States and startups. For example, we have opportunities for skydiving, flying schools, recreational flying, pilot training, aircraft engineering, private jet operations, private jet handling, and cargo handling. There are various opportunities in the Maldives because of our location.
The Assistant Secretary of State, Mr. Donald Lu, made some very positive remarks about the Maldives when he visited recently. I believe his intention is to invite US investments to the Maldives because we are not a small island country anymore. We are a large ocean country, comprising almost 1 million square kilometers in the Indian Ocean, providing a lot of opportunities. We’ve been tested in tourism by US companies and the result is very fruitful. However, the Maldives is not only about pleasure. Beyond that, big things can be achieved here.
A month ago, the Maldives introduced a new SME hub to assist local businesses, fostering entrepreneurship, promoting economic growth, and creating job opportunities. Are there specific initiatives or support mechanisms within the SME hub that you anticipate will contribute significantly to the success of small and medium-sized businesses in the Maldives?
We intend to have a holistic system where SMEs are supported. That includes startup finance, incubator systems, and necessary care to bring startups. There can be slight fiscal difficulties at times, but I believe that as a country we have succeeded in creating and nurturing a proper ecosystem to support micro businesses.
As we speak, we have more than 6 incubator services across the Maldives. We have established an SME hub, which is operating under the Business Center Corporation. The President has recently formed the Youth Advisors Board to give him advice about not only on startups but also engaging and developing a creative, youthful economy in the Maldives.
Also, we now have shops specialized in selling authentic, Maldivian products, including at the international airport, various parts of the Maldives, and in tourist resorts. Just yesterday we devised a logo specially for home-based workers. When you see this logo, it indicates that the product is made in the Maldives by home-based workers. A large proportion of our home-based workers are women and the main purpose of recognition through logos and labelling is to engage women on the islands to produce their food delicacies and crafts. We then provide the label and shelf space to sell those items in shops.
In a nutshell, our idea of having SME hubs is to consolidate and establish a proper ecosystem to support SMEs.
Is there any lasting message that you would like to portray to the American readers?
The Maldives is not a small island country in the Indian Ocean. We believe we can diversify into many more areas than tourism. We have developed the Special Economic Zone Act that gives a 10-year tax exemption and several other incentives to purposely encourage large-scale businesses to come and invest in areas such as export, manufacturing activities, transshipment ports, international logistics services, ports, airports, bulk breaking bunkering and docking services, universities, super specialty hospitals and the establishment of world-class research facilities.
Information communication technology parks and facilities related to ICT, international financial services and international trade hubs are also very interesting areas for investment, as is renewable energy, a very important sector to which we have also received applications. Review processes are ongoing.
We also have projects that introduce new technologies to the Maldives, projects focused on enhancing food security in the country and, interestingly, gas exploration. All these and other specially incentivized areas have been highlighted in the Special Economic Zone Act.