Market Access Series 2024-25: The Republic of Maldives
This report is part of the PBC’s Market Access series 24-25. The report has been prepared at the request of...
This report is part of the PBC’s Market Access series 24-25. The report has been prepared at the request of the Ministry of Foreign Affairs (MoFA) & the Ministry of Commerce. The report highlights the potential for improving bilateral trade & investment relations between Pakistan and the Maldives.
The Maldives, officially known as the Republic of Maldives, is an Island nation located in the Indian Ocean. Maldives nearest neighbors are Sri Lanka and India, making these countries natural trading partners through strong cultural, economic and trade ties.
The Economy and Global Trade of the Maldives
The Maldives is a small country with a total population of about 521,000, a GDP of $6.8 billion with a per capita income of US$12.7 thousand. Availability of land is limited for both living as well as for economic activities. The limited availability of land means that available land is put to maximum productive use. This limitation on availability of land means that the Maldives demands products in low volumes even though profit margins are high.
The Maldives’ exports are concentrated in Fish Products and Tourism. In 2023, the Maldives’ goods’ trade had a trade deficit of $3.3 billion and services trade had a surplus of $2.8 billion. This trend of trade deficits in goods trade and trade surpluses in services trade has remained constant for the Maldives over the years. The Maldives’ trade deficit in goods is mostly attributed to the narrow export basket and a high dependency on imports. The Maldives is dependent on imports for food, fuel, consumer and capital goods.
The Figure below shows the Maldives’ trade balance in goods and services from 2019 to 2023.
Sources: Calculated by the Author from ITC Trade Map (2024) and UNCTAD (2024)
The Maldives’ Major Trade Partners
The Maldives’ top 4 trade partners are India, Oman, U.A.E., and China having shares of 15.1%, 14.5, 12.4%, and 11.1% respectively in Maldives trade. With these top partners, the relationship is mostly import based. In 2023, the Maldives biggest export market was Thailand, having a share of 53.9% in the Maldives’ exports and the biggest import partner was India with a total share in imports of 15.6% with a CAGR of 17.0%.
Pakistan and Maldives’ Bilateral Trade Relations
The Maldives and Pakistan have had friendly relations since diplomatic ties were established in 1966.
The Figure below shows that Pakistan’s exports to the Maldives have been increasing gradually after a fall in 2021. Pakistan has had an average trade surplus of $7.2 million with Maldives between 2019 & 2023.
In 2023, the Maldives had insignificant exports of goods to Pakistan, while Pakistan had $9.2 million exports of goods to the Maldives. In goods trade, Pakistan is the Maldives’ 33rd Trade Partner, with $9.4 million trade which makes 0.3% of Maldives’ total goods trade. Pakistan’s major exports to the Maldives comprise of vegetable products, pharmaceutical products, foodstuffs, meat and fish items.
Pakistan – Maldives Bilateral Trade Potential
Potential for Pakistan’s exports to the Maldives
Goods
Pakistan’s Top 10 Potential Export Commodities to the Maldives in 2023
Source: Author’s Calculations based on ITC Trade Map Data (2024)
In 2023, “Mineral Products” (HS 25-27) had the most export potential of $ 144.6 million, followed by “Machinery/ Electrical” (HS 84-85) of $107.3 million. “Foodstuffs” (HS 16-24) had a potential of $106.2 million and “Chemicals & Allied Industries” (HS 28-38) of $ 103.5 million. “Vegetable Products” (HS 06-15) of $97.8 million and “Textiles” (HS 50-63) had a potential of $70.5 million in 2023.
Services
Amongst services, Pakistan can expand its exports in the services of Classification 9, Telecommunications, computer and information services (mainly Fintech services), Classification 4, Travel, and Classification 5, Construction. Pakistan can also export hospitality staff to the resorts present in the Maldives.
Potential for Maldives’ exports to Pakistan
Goods
The Maldives had a potential to increase exports to Pakistan by $3.0 million as per 2023 data. The potential predominantly lies in the exports of “Metals” (HS 72-83) worth $2.6 million. “Machinery/Electrical” (HS 84-85) and “Plastics/ Rubber” (HS 39-40) which had a potential of $0.2 million.
Services
Due to diminishing purchasing power, a depreciating currency, and foreign exchange restrictions, Pakistanis are finding it difficult to travel to the Maldives.
Recommendations
Based on the findings of the report, the study recommends the following measures to facilitate trade between Pakistan and the Maldives:
Initiate Direct Communication Routes between Pakistan and the Maldives
The biggest challenge that Pakistan and Maldives bilateral trade faces is the lack of direct shipping and air routes from Pakistan to the Maldives. Despite being further away from the Maldives, Pakistan can still export to the Maldives if shipping routes and direct flights are available as China has been able to do so despite the distance.
Frequent Trade Delegations to and from the Maldives
There needs to be frequent communication between the relevant businesses, trade missions and other relevant authorities in both Pakistan and the Maldives. For this purpose, it is important for trade delegations from both countries to visit each other frequently.
Permanently Station Pakistan’s Trade Mission in the Maldives
The Trade Mission in Sri Lanka is given the additional responsibility of the Maldives with little or no on-ground presence. It is recommended that either the diplomatic mission in the Maldives be given the additional responsibility of dealing in trade related matters or a permanent trade officer be stationed in the Maldives. Till such time that this materializes, the trade commissioner in Sri Lanka should travel at least once a month to Malé.
Provide and Facilitate Primary Data Collection and its Availability
The Trade Mission responsible for the Maldives does not have the primary data available that will aid the mission in facilitating Pakistani exporters. It is recommended that a focal person or a department in the Pakistan High Commission in Malé be made responsible for primary data collection.
Facilitate Exporters
Before building diplomatic and trade ties with the Maldives, it is important to facilitate exporters through the following:
- Provide credit facilities to exporters, such as pre-shipment financing, post-shipment financing, factoring and insurance.
- Provide power and interest rate concessions to exporters.
- Reinstate tax concessions and rebates to exporters.
- Government departments such as ANF and Customs should ensure that export products are not damaged during inspections.
Facilitate Travel Packages to and from Pakistan to the Maldives
B2B partnerships between travel agencies in Pakistan and the Maldives are required to encourage travel between both countries. These partnerships should aim to introduce leisure travel packages to both countries and provide facilitation in attaining business visas.
Improve Infrastructure and Security
Pakistan needs to improve its infrastructure especially the internet infrastructure in Pakistan. Disruptions in Internet connectivity is likely to damage Pakistan’s potential to export telecommunication services from Pakistan.
There is a need to improve internal security in Pakistan, especially in the cities. Prevention of street crimes is necessary to facilitate business activities and promote tourism in Pakistan. The tourism demand from the Maldives is of city travel rather than adventure tourism as seen from Maldivian travel demand in India.
The PBC is a private sector not-for-profit advocacy platform set-up in 2005 by 14 (now 100+) of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness. More information about the PBC, its members, objectives and activities can be found on its website: www.pbc.org.pk
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