Trade policy review



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World Trade

Organization

RESTRICTED




WT/TPR/G/221

22 September 2009







(09-4369)







Trade Policy Review Body

Original: English




TRADE POLICY REVIEW
Report by
Maldives



Pursuant to the Agreement Establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), the policy statement by the Maldives is attached.



Note: This report is subject to restricted circulation and press embargo until the end of the first session of the meeting of the Trade Policy Review Body on the Maldives.



CONTENTS

Page

I. introduction 5

II. OVERVIEW OF THE ECONOMY 7

(1) Production, Prices and Employment 7

(2) Public Finance/Fiscal Policy 7

(3) Financial Sector and Monetary Development 11

(4) Balance of Payments and External Sector 13

III. TRADE POLICY AND PERFORMANCE 14

(1) Trade Policy Objectives and Framework 14

(2) Law on Export and Import and Law on Prohibited Imports 15

(3) Customs Valuation 16

(4) Sanitary and Phytosanitary (SPS) Measures 16

(5) Environmental Measures 17

(6) Services 17

(7) Trade Related Intellectual Property Rights 18

(8) Bilateral Trade Arrangements 18

(9) Regional Trade Agreements 19

(10) External Trade Performance 20

IV. INDUSTRIAL DEVELOPMENT AND DIVERSIFICATION 22

(1) Industrial Development 22

(2) Measures for Industrial Development 22

(3) Industry Diversification 23

V. FOREIGN DIRECT INVESTMENT AND PRIVATISATION 24

(1) Privatization and Public Private Partnership 26

(2) Increasing Flows of Foreign Direct Investment 27

(3) Providing Investments Opportunities to SMEs 27

VI. GRADUATION 28

(1) Graduation of the Maldives from LDC Status 28

(2) Trade Impact of LDC Graduation 28

(3) Implications for Trade Related Technical and Financial Assistance 29

(4) Actions Towards Achieving a Smooth Transition 29

(5) Continued Access For Trade Related Technical And Financial


Assistance 30

(6) Future Outlook 30


introduction


1.Maldives has experienced uninterrupted economic growth along with political stability and social harmony for the last three decades. Since gaining independence from Britain after 78 years as a protectorate, the country has continued on a path of development and building self-confidence in many aspects of economic and social development.

2.Over the last six years since its first trade policy review in 2003, Maldives has continued to achieve excellent levels of economic development relative to its neighbours, despite the devastating tsunami of 26th December 2004. It has pursued these developments within the context of a liberalized economy with much improved and transparent trade policies.

3.In June 2004 the former government announced a political reform programme, instituting a new process of reform and modernisation of democratic institutions, with the introduction of the "Roadmap for Reform". This reform agenda envisaged fully-functional democratic governance and fuller participation of the people in national development. The most distinct elements of the reform programme included the amendment of the Constitution, allowing the formation of political parties for the first time in the country's history, accession to international human rights treaties and the tabling of a modern penal code in line with international legal norms, as well as the establishment of independent institutions vital for ensuring good governance and accountability.

4.With the introduction of these changes the country has emerged strong and with more than 12 registered political parties, which provided the citizens with a robust democratic arena to express their aspirations and at the same time made it possible to build political consensus on issues of national significance. The international community welcomed the institution-building efforts of the government, and provided sustained support to these efforts.

5.The presidential election in October 2008 ushered in a new era of participative democracy and the first democratic, multiparty presidential election in the history of the Maldives. This election also brought to an end a regime which had been in power for 30-years. A new President was elected by majority of Maldivians with a strong mandate to continue the process of governance reform, while preserving, protecting and promoting the national character of Maldives in the great task of development and modernization. The first pluralist, multiparty Parliamentary election was held on 9th May 2009, with a total of 455 candidates completing for 77 seats in the new Majlis.

6.This nascent democracy requires a broad-based government policy and strong engagement from the international community to support the pro-democracy efforts of Maldivians. In addition, continued support from the international community to address the income inequality between Male’ and atoll is needed.

7.The Asian tsunami of 26 December 2004, which had a devastating impact on the socio-economic environment, was another major event that took place during the review period. This event suddenly disrupted the steady growth of the economy, bringing tourism, the most dynamic industry of the country, to a halt while badly damaging physical and social infrastructure. The losses from the disaster account over US$470 million or 62% of Gross Domestic Product (GDP).1 However, the losses would be much higher if costs such as environment costs and the value of the top-soil and reclaimed land that was washed away by the tidal wave, are included.

8.Although loss of life was limited, the tsunami virtually eliminated 14 inhabited islands, and more than 15,000 people became homeless. Immediately after the tsunami Maldivians, especially those in island communities, experienced serious psychological stress, health threats, and loss of property as well as threats to their livelihoods.

9.At the same time the tsunami severely damaged the mainstays of the economy, namely the tourism and fisheries sectors, by causing the closure of a quarter of the resorts and almost completely destroying 8% of fishing vessels. Even six months after the devastation, the resorts were running at half the rate of 2004 and employees working in these resorts were badly affected through reductions in their net income.2 Damages to equipment for traditional fish processes reduced the output in this sector in the year 2005.

10.Government made swift efforts of providing temporary accommodation to those internally displaced persons (IDP) as the first and most immediate concern after the tsunami. And as early as February 2005, the international community such as International Federation of Red Cross and Red Crescent Societies (IFRC) agreed to help the Government meet demand by financing the construction of additional temporary shelter.

11.As agreed 855 temporary apartments and 396 individual rooms and relief to the IDP in twenty two islands in eight atolls were delivered and completed by end of 2006.3 Provision of temporary or upgraded schools, health posts, sports grounds, community health centres and safe-play areas in displacement locations and community projects are also part of the assistance programs which are been regarded as important aspect of livelihoods recovery for people of different communities to live together peacefully.

12.The National Recovery and Reconstruction Plan (NRRP) outlines the objectives and strategies for meeting urgent needs in housing and infrastructure development, reviving livelihoods, and creating the conditions for sustained economic recovery. The plan contains projects and programs proposed by different sectors to restore key industries and provide social and economic services and facilities4.

13.Four years since the tsunami, the country made considerable progress in rebuilding the country especially in the economic sector recovery. All the tsunami affected resorts are open again for business, most of the homes are being rebuilt and livelihoods restarted. However, the recovery process remains under funded in certain key sectors such as transport, housing, livelihood, power and energy and the recovery program still requires considerable sum of external funds to bridge the funding gap.5

14.The country experienced mixed economic effects. Islands which acted as hosts and received people who were displaced saw substantial rises in income through increases in their economic activity, while the people who were forced to move to these islands suffered economic losses. The main business hub of the country, the capital city Male', experienced a fall in trade as well as disturbances in the property markets.

15.The United Nations Millennium Declaration in 2000 set 2015 as the target date to achieve the eight goals. In 2007, an assessment was made in order to tracks the progress of Maldives on 13 Millennium Development Goal (MDG) targets and assess whether the Maldives will achieve the targets by 2015 using the latest data from 2006 Census. Based on this assessment, rapid progress was made on poverty, education and health targets. Significant improvement is seen on empowerment of women as well. However, considerable efforts are needed to achieve nutrition and environmental targets.




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