The Maldives: A Development Success Story

Challenge

The Maldives consists of 1,192 small tropical islands that cross strategic shipping routes, and it has a richly diverse marine environment. With more territorial sea than land, marine resources have played a vital role in shaping the contours of economic development, with nature-based tourism and fishing being the main drivers of economic growth.

Environmental sustainability is the fundamental development challenge in the country. Indeed, it is so critical to the future development and prosperity of the country that the new Constitution mandates the protection of the environment as a key human right.

Maldives’s vulnerability to climate change calls for innovative solutions on adaptation and mitigation. Maldives is particularly vulnerable to projected adverse consequences of climate change, including sea-level rise, increases in sea surface temperature, ocean acidification, and frequency/intensity of droughts and storms

The slowdown in tourism due to the global financial crisis coupled with macroeconomic imbalances have seen growth rates fall from 7.5% in 2011 to 3.6% in 2012.

The country’s fiscal position has been under much stress following the tsunami of 2004 and continues to weaken in the face of unsustainable high public expenditures. The policy response to the 2008-09 global financial crises was partial and has left the country in a vulnerable position to withstand additional shocks.

Solution

The World Bank Group’s strategy in the Maldives supports the government’s Strategic Action Plan 2009-2013 (SAP), the national planning document that guides the development processes, works as an instrument of budget allocation, and serves as a mechanism of accountability to the citizens. It emphasizes the following issues:

• A nationwide transport system
• Affordable living costs
• Affordable housing
• Quality health care for all
• Prevention of narcotics abuse and trafficking.

The Bank’s assistance program has focused on the main productive sectors (fisheries and tourism), their related infrastructure, human resource development (particularly education), building government capacity, and post-tsunami recovery and reconstruction. The Bank is increasingly supporting the government’s investment in human capital.

The World Bank is helping support the action plan by supporting education and access to finance while strengthening the delivery of social assistance and health programs through building efficient management practices, cost containment mechanisms, and institutional capacity, including monitoring and evaluation systems.

Results

Improving teacher development, school leadership, teaching and learning materials, and facilities: The number of trained teachers increased from 3,400 in 2009 to around 6,000 in 2011, with 6,000 teachers countrywide trained.

The first independent Auditor General’s Office (AGO) in 2008: The first annual statement of the execution of the budget for 2009 was produced in 2010 and widely shared.

Access to finance: World Bank Group support in the financial area modernized the banking payment system, and established mobile banking to ease the constraints that a difficult geography places on access to credit.

A comprehensive and modern pension system: A Pension Law, effective in mid-2009, set the basis for the new pension system and led to the creation of the Maldives Pension Administration Office (MPAO). The new pension system combines two pillars. The first pillar provides a basic pension (2,000 rufiyaa) to all Maldivians over age 65, which is subject to a partial offset if the individual has significant pension income based on employment. All eligible Maldivians are already receiving the mandatory payments. The second pillar is a defined-contribution plan that covers public and private sectors. Around 70,000 eligible individuals have registered and are contributing.

Improving human and institutional capacity for environmental management: The Maldives Environmental Management Project (MEMP) has trained high-level technical staff abroad, and a university-level environmental management program has been initiated that provides basic training. The project has improved the capacity of the Marine Research Centre to develop a knowledge base and monitoring systems, as well as involving communities in monitoring and awareness creation.

Bank Group Contribution

The Maldives has eight active projects with a current portfolio of $37.21 million in IDA commitments. The IFC has a portfolio of $45 million.

Partners

The European Union (EU) and the Australian Agency for International Development (AusAID) contributed EUR 6.5 million and AUD 1.0 million to the Maldives Climate Change Trust Fund, which the World Bank will administer until March 31, 2015. The funds have prepared a comprehensive climate change program, including energy efficiency initiatives. This program will implement three projects — Clean Energy for Climate Mitigation (CECM), Wetlands Conservation and Coral Reef Monitoring for Adaptation to Climate Change (WCCM) and Ari Atoll Solid Waste Management Pilot (AASWM).

Moving Forward

The Bank and other multilateral development banks are working to enable Maldives (as one of selected six islands) to receive up to $180 million in funding for renewable energy.