Even though Maldives enjoys a robust tourism industry and its revenue contributes to roughly one third of the country’s GDP, the wealth from the tourism sector lies with the top 10% of the country’s rich and affluent. The poorer Maldivians, especially those who live in the small i
slands far away from the capital are almost totally deprived of the benefits of the Tourism sector, whether as employment or tourism related businesses. Hence there is a need to address this disparity in the distribution of wealth by formulating robust and realistic policies.

There have been a few policies introduced in the past, which have worked to some extent but back fired in other instances due to circumstances. I will try to look at four important policy alternatives including two policies already in effect, to address the problem of unequal distribution of wealth from the tourism sector.

1. “Public Shareholding”

Provided that corruption and inefficiencies within the administration are eliminated, this policy will ensure the distribution of wealth from the tourism industry through the public company, MTDC. This company is the biggest public holding company in the Maldives and 45 percent of its shares are owned by the state and 55 percent by the public. It has licenses to develop more than a dozen new tourist resorts, some of which will be wholly developed by the company and others through joint ventures. The profit generated through the development of these resorts will be transferred to the general public through its shares. However, looking at the current situation, this seems far from effective as mentioned in my previous post, due to problems within the bureaucracy.

2. “Bringing tourism to the atolls”: This policy is already underway to a limited extent. This involves the introduction of tourism within the atolls further away from the capital by spreading resort development and hence generating employment on the resorts in terms of construction and development and once completed, as staff on the resorts. Moreover, this will provide numerous opportunities for private businesses for the islanders closer to the resorts such as provision of food items, sale of souvenirs, numerous construction and maintenance jobs etc.

3. “Tax to the grants”: This alternative requires an increase in the current Tourist Bed Tax of flat 8% to be increased through a progressive tax and using the additional revenue for provision of subsidies and grants to the island communities, to stimulate agricultural, fishing or tourism related businesses. In addition to this, revenue could also be used for direct provision and development of services such as health, education and transport within the atolls where such services are lacking or insufficient. This will ensure transfer of wealth from the rich elites to the poorer island communities.

4. “Earmarking for atolls development”: This alternative does not require an increase in the Tourist Bed Tax rate as it could be highly controversial due to elite opposition. Rather it requires earmarking 2% of the total revenue from Tourist Bed Tax for the development of atolls as mentioned in the previous “Tax to Grants” alternative.

These are four of the many options and alternative policies our government can implement to ensure transfer of wealth in order to reduce income inequality and foster more productive economic activities within the less affluent areas in the country.

Related posts:

  1. Does tourism help the poor in the Maldives?
  2. Tax Reforms in the Maldives?
  3. Maldives, a paradise in trouble.
  4. How Maldives can climb out of its fiscal dark hole
  5. What happens now that Maldives seeks a new home!