Maldives has the highest income per capita in South Asia in less than three decades helped by luxury tourism, but the economy needed broad-based growth, according to a new study conducted by Asian Development Bank, or ADB.
The bank said strong economic growth driven by luxury tourism has upgraded the country to middle income status, but weaknesses in the transport, education and financial sectors need to be addressed for cutting inequality, support private investment and boost economic diversity.
The country diagnostic study, Maldives: Overcoming the Challenges of a Small Island State, recommends priority reforms and policies to promote more private investment in the country.
"... the gains from tourism haven't been spread evenly and broad structural reforms are needed to diversify the economy, encourage greater private investment, and reduce income and job disparities between the capital Malé and outer atolls," ADB Chief Economist Shang-Jin Wei said.
The government should push ahead with its Maritime Transport Master Plan, which aims to develop a strong regulatory environment to help draw private sector investment into regional port infrastructure, transport services and port management, the report noted.
The bank suggested that adopting a medium-term budget framework would help improve resource allocation, while new taxes and fees could be considered to further increase revenues.
A lack of access to finance is holding back the expansion of the micro, small and medium enterprises. A regulatory framework for secure branchless banking would help those firms lacking access to banking services.
The report suggested that Maldives should ensure fiscal resources for responding to extreme economic and climate shocks. The priority area includes implementing adequate risk mitigation and preparatory measures to handle natural disasters, with stepped-up coordination among government agencies, the private sector, donors and civil society.
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