Maldives - a small nation with great potential

By T.K. Premadasa

Sri Lanka-Maldives relations have been revitalised with the recent visit of the Maldivian President Abdulla Yameen Abdul Gayoom to Sri Lanka.

He made his first official visit to Sri Lanka on January 21, on the invitation of President Mahinda Rajapaksa. This visit

provides ample space to renew bilateral relations in trade and economics.

During his tenure as the Minister of Trade and Industries, he enhanced trade relations with Sri Lanka. He brought change and modernisation to Maldivian trade and attracted more investment to the country.

"I have personally encountered the cooperation extended by President Abdulla Yameen Abdul Gayoom as Minister of Trade and Industries during my stay in Maldives from 1995 to 1997 as the Director of the Sri Lanka Trade Centre in the Maldives."

The early relations between the Maldives and Sri Lanka dates back several centuries. Geography has undoubtedly favoured the two countries in developing fraternal bonhomie.

Located almost seven hundred kilometres south west of Sri Lanka, the Maldives identifies Sri Lanka as its geographically closest neighbour and an important ally in international fora.

Sri Lanka has been a strong influence on the Maldives from early times. The cultural and linguistic factors of the Maldives thus reveal that the early settlers of the Maldives were of South Indian origin and from Sri Lanka.

The great Sri Lankan chronicle Mahavamsa describes the Maldives as Mahiladvipika, an island to which some troupes of Prince Vijaya drifted to, setting up early settlements in the archipelago around 500 BC. Enriched with natural resources and blessed with a strategic location in the Indian Ocean, both islands have identified themselves as valued trading partners.

The mutual cooperation and diversification of trade has taken a strong foothold in bilateral relations between Sri Lanka and the Maldives.

Sri Lanka has been trading with the Maldives from ancient times as one of the leading trading partners of Sri Lanka. Most of the older generation can still recall the Maldivian traders who visited Sri Lanka in their traditional Dohni, the Maldivian sail boats to sell sweets such as Bondi Aluwa and Riya Hakuru. Today, the trade pattern of Sri Lanka and the Maldives has been subjected to massive change.

The Maldives is an open economy based on free enterprise. Most of the production and commercial units are privately owned. The Maldives has set up its own enterprises in the fishing industry, one of its largest and prominent fields due to strategic reasons.

The Maldivian economy is stable and has an annual growth rate of 4 percent.

The Maldivian government has formulated micro-economic policies and created an environment conducive for the growth of the economy to encourage the private sector.

Today, the Maldives is a priority market for Sri Lankan products and services. Even though the Maldivian market is considerably small with a population of 390,000, the potential for Sri Lankan products is high compared to some other markets.

The most important goods exported to Maldives are agricultural products, fruits and vegetable, electrical items, construction products, confectionery items, mineral water, tea and wooden furniture.

The Maldives is the leading export market for dried ice, mineral water, oxygen and construction products while dried fish, Maldive fish and canned fish remain Sri Lanka's leading imports from the Maldives.

A significant feature of our exports is the large vegetable and fruit market of the Maldives which is second to Sri Lanka's vegetable and fruit exports to the Middle East.

Sri Lanka's exports to the Maldives has had fluctuations. Statistical data shows that in 2004, Sri Lankan exports to the Maldives was approximately US$ 61 million which Sri Lanka has failed to reach over the past ten years. Moreover, the position of the Maldives in the Sri Lankan export rankings too has had a significant drop. In mid-1990s, Maldives was the 10th or 12th leading market of Sri Lankan exports which is now below the 25th position.

Sri Lanka has been the major supplier to the Maldives in 1980s but gradually over the years the Sri Lankan market share in Maldivian trade has decreased. Today, South Asian countries cover over 50% of Maldivian imports, yet Sri Lanka barely manages only 5 percent.

During my tenure at the Sri Lankan Trade Centre in Maldives from 1995 to 1997, I compiled a complete market survey for agricultural products in the Maldives which covered the entire gamut of agriculture in the Maldives.

"I highlighted the future threats and the challenges faced by Sri Lanka in its exports to the Maldives. Although this survey was carried out to fulfill board decisions and discussed at various fora, no steps were taken to address the challenges and threats faced by Sri Lankan exporters to the Maldives due to unknown reasons."

Today, Sri Lanka exports a range of nearly 200 to 250 products to the Maldives. This is a significant feature which is not seen in Sri Lanka's trade with any other leading market. After all, the Maldives is the ideal market for SMEs.

Trade statistics reveal that the majority of Sri Lankan suppliers to the Maldives are SMEs.

The Maldives has a conducive environment for trade with little trade barriers. Even the small land area of the Maldives facilitates trade as the purchasing offices are within the two square metre area of Male, the capital of the Maldives where business visits could be concluded covering all offices within two days.

The potential of the Maldivian market is mainly based on two factors. One is the development of the lifestyle of the Maldivian people and the other, the rapid development of its tourist industry.

The market segments can be divided into three main sectors such as the tourist sector, the local Maldivian community and the expatiates from South Asia, especially India, Pakistan, Bangladesh and Sri Lanka.

Sri Lanka should serve all these sectors in trading with Maldives. Even today, Sri Lanka has a great opportunity to expand her market share with the Maldives by increasing exports and introducing new products to the Maldivian market as Maldivian buyers still hold some preference to trade with Sri Lanka due to traditional relations over the years.

The products sold in the Maldives hold a great similarity to the Sri Lankan taste in design and size due to the common cultural, linguistic and traditional attributes shared between the nations from early times. Imports from Sri Lanka, too hold an important place to the Maldivians due to Sri Lanka's close proximity.

The Maldives with robust development relative to its demography with rapid modification in the lifestyle of its people. These factors should be taken into consideration by Sri Lankan suppliers when trading with the Maldives.

Most Maldivians are now moving from price consciousness to brand consciousness. The best example being mineral water products where world famous brands of mineral water such as Evion and Perrier are freely available in the supermarket chain of the State Trading Organisation.

Therefore, suppliers should divert their attention to quality and the needs of buyers.

The setting up of the Sri Lanka-Maldives Business Council is a significant step taken by the business community.

The Council should address the difficulties faced by exporters. The Business Council could collaborate with the Maldivian National Chamber of Commerce and Industries, which is the leading Chamber in the Maldives.

Sri Lanka Trade Centre (SLTC) in the Maldives was set up by the Sri Lanka Export Development Board in 1993 to promote and develop Sri Lankan exports to Maldives. It was closed in 2004 due to various reasons. The SLTC played a huge role in promoting and protecting Sri Lanka's investments in tourism and trade with the Maldives.

The Sri Lanka Trade Centre in the Maldives should be re-established by the new Chairman of the Sri Lanka Export Development Board with the support of the business community.

In addition to the export trade, there are great opportunities to further strengthen economic ties between both countries. Cooperation in the tourist industry and encouragement for joint ventures are key areas to enhance relations.

It is also important to explore the possibility of obtaining licences to fish in the Exclusive Economic Zone of the Maldives.

These licences permit fishing in the sea area beyond 75 miles from the baseline of the islands at the outer edge of the atolls of the Republic of Maldives.

The new President of the Maldives has vast experience in trade and great interest in developing economic cooperation.

Thus, the visit of the Maldivian President to Sri Lanka is the best opportunity to forge new economic ties with the Maldives while exploring new paths in trade and strengthening trade ties.

The writer is a former Head of Corporate Affairs and Communications, Sri Lanka Export Development Board and Ex-Director of Sri Lanka Trade Centre in Maldives. He can be reached at [email protected]