Original scientific paper Vol. 53, No. 1/ 2005/ 33-44 UDC: 338.486(548.

82)

The economic cost

of tourism in Maldives
Faizal Yahya
Faculty of Arts and Social Sciences, National University of Singapore, Republic of Singapore

Ashvin Parameswaran
Faculty of Arts and Social Sciences, National University of Singapore, Republic of Singapore

Inaz Ahmed
Faculty of Arts and Social Sciences, National University of Singapore, Republic of Singapore

Rodney Sebastian
Faculty of Arts and Social Sciences, National University of Singapore, Republic of Singapore

SUMMARY The socioeconomic impact of tourism in the Maldives is discussed here. Based on extensive interviews
with residents and the latest statistics, we analyse this impact in terms of Gross Domestic Product, tourist
arrivals, air linkages, resort development, cultural effects, and employment. We describe the pervasive
external control of the industry and show that the benefits realised by locals are a small fraction of that
enjoyed by foreigners. Specifically, the net national income accruing from tourism is less than 13% of total
receipts. Long term damages such as economic instability, underdevelopment of other sectors, and
environmental damage are difficult to quantify, but also significant. Next, alternatives to resort island
tourism are proposed. These include marine tourism and capturing the Muslim tourist market. However,
ensuring that locals benefit more depends on the viability of the industry and distribution of power within
it. To limit the economic cost of tourism the government has to get its citizens involved; the trade-off is
that they will interact more with foreigners. This is an unavoidable choice. Finally, we suggest that over
reliance on tourism is fraught with problems and Maldives should develop other sectors such as fisheries
and financial services. Potential areas for related research are also listed.

Keywords:
Maldives; economy; cost; residents perceptions of tourism

INTRODUCTION

The Maldives is an archipelago of about 1192 small
islands distributed amongst 26 natural atolls and
grouped in 20 administrative units; most islands also
have a land area of less than 2km2 (Ghina 2003). Like
other small island developing states (SIDS), its economy
is dependent on tourism. However, unlike SIDS in the
Caribbean, few works have addressed the impact of
tourism in the Maldives.
Most of those that have can be distinguished by their
exclusive reliance on secondary data (Adhikary 1997;
Baron 1998; Brown, Turner, Hameed and Bateman
1997; Domroes 1993; Dissanayake 2000; Fisher 2000;
Ghina 2003). The best work to date comes from
Sathiendrakumar and Tisdell (1985, 1988, and 1989).
Based on primary and secondary research they consider
socioeconomic costs and benefits, tentatively conclu-

33
Faizal Yahya, Ashvin Parameswaran, Inaz Ahmed and Rodney Sebastian
ding that while tourism is generally beneficial Maldives
has not maximised its gains from the industry (Sathien-
drakumar and Tisdell 1989).
This paper extends theirs in three ways. First, it updates
their findings with the latest tourism statistics. Second,
it elicits qualitative views of residents from diverse
occupations to better understand the industrys impact.
Third, it quantifies the deficit between potential and
actual revenues, making explicit the economic cost of
tourism to the Maldives.
STUDY METHODS
A strategy of multiple triangulation guides our metho-
dology. It brings varied perspectives to bear on a single
phenomenon, in order to execute a more rigorous
investigation. Three kinds of triangulation investi-
gator, data, and method (Denzin 1989) are used here.
An Insider/Outsider research team (Bartunek and Louis
1996) comprising Maldivians (insiders) and non-
Maldivians (outsiders) worked jointly in designing the
research, collecting data, and analyzing the results.
Data triangulation involved four sources: the academic
perspective (existing journal articles), the institutional
perspective (documents from the Asian Development
Bank and World Bank), the government perspective
(policy papers and statistical information), and stake-
holders perspective (Maldivian residents perceptions
and attitudes). While the primary method for collecting
information on the first three perspectives was library
research, eliciting the latter was more complex.
A maximum variation qualitative sampling strategy
(Patton 2002) was employed to capture a diverse range
of viewpoints. Accordingly, residents were split into
three broad categories - those working in the
government sector, those working in the tourism
industry, and those not working in the tourism
industry. Within each category, efforts were made to
include as many occupational types (maximum
variation) as possible; examples are, directors in the
Ministry of Tourism (MOT), employees in the Maldivian
Tourist Promotion Board (MTPB), government emplo-
yees in other ministries, hotel managers, souvenir shop
owners, bar tenders, fishermen, businessmen, engi-
neers, and teachers. Over 30 of these stakeholders were
visited and questioned individually.
34
Vol. 53, No. 1/ 2005/ 33-44
A set of standard, open-ended questions were asked of
each respondent. This was followed by an unstructured
discussion with the interviewer. Some key questions
asked were:
What are the economic and social effects of tourism
in Maldives?
How do you feel about this?
What changes do you suggest?
Respondents oral answers, some of which were in
Dhivehi (the Maldivian national language), were
immediately transcribed in English by the interviewer.
Additionally, participant observation was also under-
taken by the Maldivian author. The value of this
multifaceted approach towards obtaining residents
responses lies in generating high quality detailed
descriptions and important shared patterns that cut
across cases (Patton 2002).
THE ECONOMIC COST
OF TOURISM
The tourism industrys share of Maldives Gross
Domestic Product (GDP) has been above 30% since the
mid 1990s. This is more than double that of its nearest
competitor, the transport and communication sector.
Table 1 summarises the composition of GDP by sector
origin between 1998 and 2002. The industrys
importance to the economy has also increased
significantly since the 1980s; in 1984 its share of GDP
was only 13.4% (Sathiendrakumar and Tisdell 1989).
This dominance has undesirable consequences. For
instance:
The narrowness of the nations economy makes the
Maldives highly vulnerable to external shocks beyond
its control, which can seriously damage the economy
to the point of stagnation and underdevelopment. It
limits the employment generating capacity and
revenue generating capacity.Long term sustainable
development will not be secure with over reliance on
tourism (Government of Maldives 2001:9).
Residents also recognise a crowding out effect that
inhibits expansion of other sectors. A student said:
Faizal Yahya, Ashvin Parameswaran, Inaz Ahmed and Rodney Sebastian Vol. 53, No. 1/ 2005/ 33-44

Tourist arrivals

After spending so much on tourism the government
does not have enough resources to spend on other
sectors.a cautious approach also needs to be
followed so as not to repeat the mistakes of tou-
rism.Thirdly, there are a number of big families
whose self interest has meant that the tourism industry
is privilegedthey also control much of the fisheries
and ship building sectors which are not being operated
efficiently and are not opened to competition.
The major market supplying tourists to Maldives is
Europe. This is shown in Table 2 which summarises
tourist arrivals by continent between 1998 and 2002.
Specifically, the top three nations supplying visitors in
2002 were Italy (23.7%), the United Kingdom (16.6%),
and Germany (13.0%) (MPND 2003: Table 10.1). The
reason for the reliance on international visitors is that
domestic tourism is not a viable option due to the small
size of Maldives population, the prohibitive cost of a
resort stay, and the resort culture which caters to
the needs of mass tourists, not locals.

Table 1
COMPOSITION OF GROSS DOMESTIC PRODUCT BY SECTOR ORIGIN, 1998-2002

Item 1998 1999 2000 2001 2002

GDP 100.0 100.0 100.0 100.0 100.0

Primary Sector 10.2 9.9 9.4 9.5 10.4

Agriculture 2.9 2.8 2.8 2.8 2.7

Fisheries 6.6 6.4 6.0 6.1 7.1

Coral and Sand Mining 0.7 0.7 0.6 0.6 0.6

Secondary Sector 14.2 14.9 14.4 15.1 15.5

Manufacturing 7.7 8.0 8.0 8.1 8.7

Electricity and Water Supply 2.8 2.9 3.2 3.4 3.6

Construction 3.7 3.9 3.2 3.5 3.3

Tertiary Sector 79.6 79.2 80.1 79.3 78.0

Wholesale and Retail Trade 4.8 4.6 4.5 4.4 4.2

Tourism 32.8 32.7 33.0 31.9 31.1

Transport and Communications 14.6 14.1 14.5 14.2 14.2

Financial Services 3.4 3.4 3.4 3.4 3.4

Real Estate 8.2 8.0 7.8 7.7 7.6

Business Services 2.9 2.9 2.9 2.9 2.9

Government Administration 10.5 11.2 11.8 12.7 12.4

Education, Health and Social Services 2.3 2.2 2.2 2.1 2.0

Financial Services Indirectly Measured -4.0 -4.0 -3.9 -3.9 -3.9

Source: Table 16.3, Ministry of Planning and National Development (MPND) 2003.

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Faizal Yahya, Ashvin Parameswaran, Inaz Ahmed and Rodney Sebastian Vol. 53, No. 1/ 2005/ 33-44

The Eurocentric tourist arrival pattern is explained by
connections shared between many resorts with tour
operators headquartered in Europe. Collusion between
them is a significant factor determining the predomi-
nant nationalities, in this case Europeans, staying at a
particular resort (Pattullo 1996).
Another cause of this pattern is that 76% of the Maldi-
vian Tourist Promotion Boards advertising, in the form
of trade fairs between 2000 and 2003, took place in
Europe (MTPB 2003). This strategy is consistent with
its objective to position Maldives as a premium desti-
nation targeted at middle and upmarket clientele
(MTPB 2003). Also, studies indicate that holiday
participation in a country rises along with increases in
per capita income (Zhen-Hua 1998). Thus, these
Eurocentric arrival patterns may change with the incre-
asing affluence of Asian countries.
Excessive dependence on international tourists has left
the economy vulnerable to external shocks. For exam-
ple, due to the incident of Colombo airport bombings
in August 2001, the arrivals from UK declined (MTPB
2003). In addition, as a result of the September 11th
terrorist attacks, and the subsequent fear of flying
overseas, tourist arrivals which had seen growth rates
averaging about 8.2% in the preceding five years dipped
sharply, and registered negative growth of -1.3% in
2001 (MPND 2003: Tourism Ten Year Indicators). This
was the first time in the 30 year history of Maldives
that the tourism industry experienced zero growth
(Hideaki 2002). Significantly, the downturn also had
spill over effects to other sectors. This contributed to
the weak performance of the economy as a whole
(Hideaki 2002); the GDP growth rate in 2001 was 3.5%
compared with an average rate of about 8.3% between
1996 and 2000 (MPND 2003: Table 16.2).

Table 2
COMPOSITION OF TOURIST ARRIVALS BY CONTINENT, 1998-2002
Year 1998 1999 2000 2001 2002
Continent

Europe
Numbers 304, 905 340, 469 362, 196 364, 105 373, 428
% 77.0 79.2 77.5 79.0 77.0

Asia
Numbers 71, 738 74, 935 86, 524 80, 825 94, 986
% 18.2 17.4 18.5 17.5 19.6

Africa
Numbers 7, 168 1, 846 2, 311 2, 060 3, 002
% 1.8 0.4 0.5 0.4 0.6

Americas
Numbers 6, 120 6, 082 7, 108 6, 814 7, 489
% 1.5 1.4 1.5 1.5 1.5

Oceania
Numbers 5, 794 6, 334 9, 015 7, 180 5, 775
% 1.5 1.5 1.9 1.6 1.2

Total
Numbers 395, 725 429, 666 467, 154 460, 984 484, 680
% 100.0 99.9 99.9 100.0 99.9
Note: Numbers may not add up due to rounding.
Source: Tables 11-19, MOT 2002

36
Faizal Yahya, Ashvin Parameswaran, Inaz Ahmed and Rodney Sebastian
A resident sums up the situation accurately in this way,
the sudden departure by these tourists would be a
blow to the economy.
Tour operators can exert undue influence over sovere-
ign authorities through their ability to divert tourism
to destinations in alternative countries at short notice
(King 1997). If agents and operators become un-
favourably disposed to a country for reasons such as
excessive price increases, a perception that the range
or quality of product available is inadequate, or political
instability, they have the power to redirect bookings
to alternative destinations (King 1997). Hence,
overdependence on foreign tour operators may work
against the Maldives, causing economic shocks. On the
other hand, many overseas visitors seek the reassu-
rance of well established international chain brands
(King 1997).
Air linkages
Air travel into Maldives is only possible via a foreign
airline. The lack of a national carrier capable of making
international flights is detrimental. In 1998, for
instance, 6,583 South African tourists visited the
country; in 1999 this number shrank dramatically to
1,437 due to the discontinuation of the South African
chartered flight to the Maldives (MOT 2002). Additio-
nally, one reason for the low tourist arrivals from the
United States is the lack of a direct flight from the
continent to Maldives; currently, passengers from
North America must make a connection from cities in
Europe, the Middle East or the Far East (Fisher 2000).
The size of some foreign airlines also enables them to
elbow out local competitors who cannot match their
resources. Consequently, the most recent attempt at
launching a national carrier, Air Maldives (a joint
venture between the Maldivian government and the
Malaysian company Naluri Berhard), went the way of
its doomed predecessors, Maldives Airways and
Maldives International Airlines, and ceased operations
in February 2000 due to financial difficulties (Fisher
2000). The centre-periphery dynamics have become
entrenched in the Maldives since foreign companies
are able to pursue strategies of vertical integration by
purchasing a controlling stake of inbound operators
or share of resorts or both.
Vol. 53, No. 1/ 2005/ 33-44
Tourism development
Male atoll (which comprises the capital Male and other
islands) receives the lions share of economic benefits
from tourism because it has the largest number of
resorts and greatest share of bed capacity (see Table
3). This has engendered a centre-periphery relationship
of another sort; in the outer atolls there are few job
opportunities, low wages, and generally poor standards
of living. This relationship worsens existing regional
inequalities because the main mission of the tourism
industry in developing countries like the Maldives is to
generate foreign exchange, not to ensure development.
Also, it is more cost effective to develop tourism in
relatively well developed and easily accessible regions
(Zhen-Hua 1998). Estimates suggest that disparities, in
income and access to essential infrastructure, between
Male atoll and the outer atolls are 2:1 and 4:1
respectively (Ghina 2003). One respondent notes:
Out there, there is barely a cliniceven if there is one,
there is no physician or the waiting time is very
long.sick residents in the outer atolls have to take a
boat, sometimes taking two or three days to reach
Male.even when they reach Male the treatment is
very expensive for them.
This unbalanced development has negative conse-
quences for the capital as well. The combined effects
of being the centre of the tourism industry, being the
commercial/financial hub of the nation, having a loca-
tion next to the only international airport and suppor-
ting increasing migration from the outer atolls, have
left it overpopulated and over congested. In 2000, Male
had 74,069 inhabitants (MPND 2003: Table 3.3) and a
population density of 50,000 persons/km, making it
one of the most densely populated cities in the world
(Ghina 2003). One resident observes:
My family has land in the capital, but for those who
come from the outer atolls it is very difficult. Male is
the centre of everything in the Maldives and it is getting
overpopulated.but there are no jobs anywhere
else.renting a house in Male is expensivethose
who come spend their salary on accommodation and
do not have much left..because it is expensive to set
up infrastructure in every atoll, the government has
started to reclaim a large piece of land next to the
capital..it will eventually be three times the size of
Male.the government hopes to relocate most
residents from the outer atolls here and also reduce
the population density in Male.
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Table 3
NUMBER OF RESORTS, BED CAPACITY AND DISTANCE FROM AIRPORT BY ATOLL, 2002
Bed capacity Average
No. of
dist. from
resorts
no. % airport (km)
Atolls 87 16, 400 100.0 56.9

Male 43 7, 910 48.2 23.0

North Maalhosmadulu 1 430 2.6 130.3
South Maalhosmadulu 5 1, 034 6.3 109.6
Faadhippolhu 4 1, 090 6.6 127.9
North Ari 12 1, 844 11.2 63.5
South Ari 15 2, 864 17.5 86.9
Felidhu 2 294 1.8 40.0
Mulakatholhu 2 380 2.3 128.7
North Nilandhe 1 250 1.5 120.7
South Nilandhe 2 304 1.9 126.9
Note: Numbers may not add up due to rounding.
Source: Table 10.3, MPND 2003.

Ironically, this reclamation strategy exacerbates the
centre-periphery relationship; if successful it would
further increase the disparities between Male atoll and
those who remain behind in the outer atolls. Moreover,
the benefits accruing from tourism are neither uniform
nor equitable; some locals, especially those from the
propertied and business class, will benefit immensely
from the tourism industry (Mowforth and Munt 1998)
while others gain nothing (Harrison 1992).
Resort enclaves
Resort islands function as the only places of accommo-
dation and the main sites of activity for most tourists
in Maldives. A total of 87 resorts were operational in
2002 (MPND 2003: Table 10.4). Each has its own island,
thereby isolating tourists. Sathiendrakumar and Tisdell
offer an excellent description which still holds true:
are normally taken at the resort. Boats belonging to
the resort or leased by the resort are used for the
excursions. Thus almost all expenditure by the tourist
goes into the accounts of the resorts (Sathiendrakumar
and Tisdell 1989:262-263).
One resident pointed out that this enclavic structure is
generally beneficial for the industry, while simulta-
neously allowing the government to achieve its social
objectives. While this maybe the case, these benefits
do not trickle down to the locals in general. This is
because nearly all the 87 resorts are under the direct or
indirect control of foreigners. 48 resorts were owned
and/or managed (to varying degrees) by foreigners in
2002 (MPND 2003: Table 10.5,). Residents also revealed
that apart from these direct controls, even resorts that
on the surface seem entirely Maldivian (owned and
managed exclusively by locals) are, in reality, influenced
significantly by foreign backers. In one residents words:

Most international tourism to the Maldives is pre-
arranged by tour operators or tourist agents and only
a few tourists travel on their own. On arrival at the
airport, the tourist is picked up by the resort
representative where prior booking has already been
made by the overseas travel agent and taken to the
resorts by boats either owned or leased by the resort.
The tourists stay a week and during the stay all meals
Question: From the statistics it seems that less than
half of the resorts are under some degree of foreign
control, is this correct?
Answer: No.most of the remaining resorts are
actually foreign backed, the capital is raised from
foreign sources and the local owners and managers
also have links with these foreigners.

38
Faizal Yahya, Ashvin Parameswaran, Inaz Ahmed and Rodney Sebastian
The Maldives seems to conform to the tourism profile
of other SIDS economies such as Vanuatu and the Cook
Islands, with the large presence of foreign owned hotels
impeding the direct involvement of more locals in the
industry (Milne 1997). Local Maldivian residents are
aware of this trend and one respondent opined that
more locals need to be encouraged to invest, only then
can we assess the impact of locals versus foreig-
ners.currently we cant. An additional concern is
that over 85% of the US$ 170 million spent on resort
construction and upgrading between 1997 and 2000
(MOT 2003) was financed by foreign capital. Maturity
of some of these loans has lead to large direct secondary
leakages in the form of repayments required to service
these debts.
A significant source of constant revenue leakage among
resorts is import dependency. In 2000, about 80% of
tourist inputs - which included items such as food,
beverages, diving and water sports equipment, bed
linen, and vehicles were imported (MOT 2003). Put
another way, this means that 80 cents of every dollar
spent on these inputs flowed out of the country into
the hands of foreigners. One reason for this dependency
is the severe resource constraints that Maldives, like
other SIDS, faces. Another cause is that tourists often
demand that their ecological bubble be recreated.
Consequently, resorts are obliged to cater to their
tastes, even when it costs them a lot to do so. However,
the government is not blameless either. It has not made
a concerted attempt to develop diagonal integration
between local industry, small businesses and resort
economies. Diagonal integration occurs when a
business forms an association with other businesses
to be able to offer a range of complementary products
to an identified group of consumers (King 1997:85). Of
course, some linkages are present; one resident says I
can say from my business point of view I am surviving
because of the industryI supply vegetables and other
goods to resorts. Another remarked that we get the
chance to sell fish at times to resorts (emphasis added).
The point is that at times is not good enough. Inte-
gration needs to be well planned and comprehensive,
not haphazard and sporadic, in order for sustained and
substantive economic benefits to be realized by locals.
Though short term losses arising from pervasive
external control of the industry are significant, the long
term losses are potentially more damaging. Tight
governmental regulation on foreigners role in local
enterprise coupled with strict citizenship requirements
Vol. 53, No. 1/ 2005/ 33-44
means that while they control a substantial portion of
tourism revenue, they have little economic or social
incentives to reinvest in the general Maldives economy.
Further, even if entirely Maldivian resorts do exist,
they do not compete on equal terms with foreign big
boys (Pattullo 1998:21) who have considerably more
resources and expertise at their disposal. This means
that the current condition, in which foreigners
dominate the industry, is likely to continue in the
foreseeable future.
Cultural commoditisation
Although there are a number of hotels and guest
houses, all of which are located in the capital, these
are relatively unimportant to the tourism sector. One
reason why tourists do not generally stay in these
places is because they only visit the capital for
shopping or a morning sightseeing, as there is little to
hold the average tourists interest for much longer
(Sathiendrakumar and Tisdell 1989:259). Another
reason is that the governments tourism policy is
deliberately isolationist; it does not want tourists to
mix freely with locals. Geographically this policy is a
practical course of action because it minimises
competition between residential and tourism develop-
ment. Socially it is also reasonable as the government
wishes to limit the negative social impacts often
attributed to tourism such as crime, prostitution, and
drugs. However, its primary motivation is to prevent
the erosion of Maldivian religious and cultural values.
This is especially important because the national
religion is Islam and being Muslim is a citizenship
requirement, a state of affairs which the government
wishes to preserve.
While state promoted tourism in similar island settings
such as the South Pacific readily package cultural forms
as market commodities (Linnekin 1997), otherwise
known as cultural commoditisation (Moreno and Littrel
2001), this is not the case here. The extent of interaction
between foreign tourists and locals determines the
degree to which locals take on the values of tourists.
This is also influenced by the type of tourists such as
those on the lower income scale who may back pack
and mingle more with locals than those staying in more
costly resorts (Harrison 1992). In the Maldives, the
resort enclaves are aimed at the higher end of the
tourism market and isolationist policies have effectively
decreased the scope of interaction.
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This cautious approach to developing tourism arises Table 4

SALARY IN RESORTS AND HOTELS, 2000
from the concern that unregulated activity could
destroy local cultural values and tradition (Sofield 1996). Foreign
Category (as %
of local)
Employment
Front Office
Expatriate labour in the Maldivian tourism industry is General Manager 188
significant. In 2000, about 13,000 locals and 11,000 Manager 119
expatriates were employed by it (MOT 2003). About Asst. Manager 173
60% of the expatriate labour force in this industry
Reservation Manager 150
occupies skilled and semi-skilled positions such as
managers, diving instructors, chefs and technicians Receptionist 135
(MPND 2003: Table 5.3). The total wage bill for these Accountant 121
foreigners was over US$ 25 million in 2000 (MOT 2003). Accounts Clerk 124
In many cases, expatriates are also paid far more than
locals, for the same occupation. Table 4, calculated Public Relations
based on statistics provided by the Ministry of Tourism, Tour Guide 207
summarises occupations in this industry with Airport Representative 143
differential salaries biased in favour of expatriates (only Animator 179
those occupations in which expatriate salaries are at
least 500Rf more than locals are shown). As a result of Food and Beverage
all this, there is greater competition for jobs in general, F&B Manager 184
fewer opportunities are available to locals in skilled or
F&B Supervisor 127
semi skilled occupations, and wage discrimination
means that locals are paid less than foreigners in many Chef 180
of the jobs that they do get. One commentator says Cook 127
while employment [in the tourism industry] is a major Waiter 133
economic benefit in many countries, in the Maldives,
it is actually an economic cost in the long run (MOT House Keeping
2003:75). Supervisor 120
Head Room Boy 129
Some of the reasons advanced to explain the reliance House Keeper 165
on imported labour include: high local labour turnover
due to low real wages, stability of expatriate labour, Maintenance
month long vacations taken by locals during the fasting Foreman 140
month, locals lack of professional skills, and the scarcity
of Maldivian females willing to work in the industry Diving Base Personnel
(in 2000, females constituted only 3% of the local labour Diving Instructor 119
force in this sector) (MOT 2003, MPND 2003, Sathiend- Assistant Instructor 137
rakumar and Tisdell 1989). Residents seemed well
Diving Guide 146
aware of both the positive and negative employment
outcomes. Typical positive comments were, I am in a Compressor Boy 154
job because of them, what else do you need? Jobs! Windsurfing Instructor 162
and we gain lots of things from them like professio- Assistant Windsurfing Instructor 188
nalism and working practices and many more.
Examples of negative responses are, we depend on Male Office
foreign owned tourist resorts for employment.there Accountant 138
are some positive effects.but we need not be blind Purchase Officer 156
to the negative effects, foreign workers are given Office Boy 156
priority, and giving preference to foreign workers in Source: Table 27, MOT 2001

40
Faizal Yahya, Ashvin Parameswaran, Inaz Ahmed and Rodney Sebastian
management. In the long run, the Maldives has to
invest more in training well educated and motivated
employees for the tourism industry. The service quality
and values of the workers in the tourism industry
should be placed in a competitive context for the
sustainable development of Maldives island tourism
(Conlin and Titcombe 1995).
Net national income
Total tourist expenditure, measured by total receipts,
was US$484 million in 2000; however, only US$147
million was spent in Maldives itself (MOT 2003). The
remainder, US$ 337 million, comprises transactions
conducted outside the Maldives and had no income
generation capacity. These external transactions
include tourists expenditure on international travel
and payments to tour operators; 91% of tourists in 1991
were on package tours and overseas tour operators
dealt with all but 0.6 percent of tourists whose
arrangements were made through domestic Maldives
tour operators (Brown et al 1997:320). Of the US$ 147
million that entered, just US$58 million was left after
deducting all leakages. The multiplier effect, the
cumulative value after this sum is circulated in the
domestic economy, is also low. Although sufficient data
to calculate a precise multiplier is not available,
estimates suggest that it is about 1.06 (MOT 2003). This
is consistent with that of similar SIDS dependent on
tourism; the 1989 multipliers for these countries
Jamaica (1.23), Antigua (0.88), Bahamas (0.79) and
Cayman Islands (0.65) - are also minimal (Pattullo 1996).
Thus, the net national income accruing from tourism
in 2000 was only about US$61.5 million, less than 13
percent of total receipts. This figure does not include
the value of opportunity costs of keeping other sectors
underdeveloped, economic instability due to over
dependence on a single sector, negative consequences
to the environment, and structural rigidity of the
economy. Incorporating these costs, which are difficult
to quantify, will likely make the net economic impact
of tourism negative.
ALTERNATIVE TOURISM
DEVELOPMENT STRATEGIES
All SIDS face multiple external and internal develop-
mental constraints. These may include: lack of land
based resources, population dispersal, an open
Vol. 53, No. 1/ 2005/ 33-44
economy, limited internal markets, problems of
providing basic infrastructure across so many islands,
isolation from other countries, vulnerabilities to natural
calamities, shortage of qualified manpower, and limited
access to capital (McElroy and Albuquerque 2002).
Although they should look to other sectors in the
economy, tourism is almost certain to remain a key
industry (Wilkinson 1989). Sustainable tourism is
tourism which is in a form which can maintain its
viability in an area for an indefinite period or time
(Wall 1997). One way to achieve this in Maldives is to
diversify the product (away from resort islands), or
market (away from European tourists), or both.
In terms of product, marine tourism is an appealing
option. Although Maldives total land area is a mere
300 km2, the maritime area under the jurisdiction of
the state is 895,000 km2, a difference of over 2,983 %
(Ghina 2003). Marine tourism is the term associated
with a diverse range of activities conducted in the
foreshore, offshore, and coast zones (Wilson and Garrod
2003). Examples can include snorkelling, scuba diving
(Tabata 1992), sight seeing trips on boats, fishing, and
visiting marine theme parks. This product caters to a
different demographic than that of resort islands. In
general, Maldives could expect to receive more tourists
who are older, more highly educated, male, frequent
travellers, and adventurous (Wilson and Garrod
2003:5). Marine tourism is not, however, a panacea.
The cost of developing and promoting this product is
potentially prohibitive, and will not be recouped in the
short run. Further, marine pollution - caused by
reclamation activities, improper sewage disposal, litter,
poor channel clearance, and badly engineered coastal
constructions can degrade Maldives coral reefs and
pose a health hazard to its residents.
In terms of market, Maldives is well positioned to tap
into the supply of Muslim tourists from the Middle East
and Asia. Currently, tourists from Muslim majority
nations such as Bangladesh, Pakistan, Malaysia, and
the Middle Eastern states total less than 2% of annual
visitors to Maldives (MPND 2003, Table 10.1). Since the
states foundational claims are explicitly Islamic, and
emphasise this identity in its origin myths (Ahmad
2001), Muslim tourists would likely feel comfortable in
this setting.
If developed as an alternative to, rather than a subset
of, resort island tourism, these diversification strategies
reduce the risk of a single external shock crippling the
41
Faizal Yahya, Ashvin Parameswaran, Inaz Ahmed and Rodney Sebastian
industry. However, sustainable tourism does not
guarantee that locals will benefit any more than they
do now. The only way for Maldives to reduce the
economic cost imposed by tourism is to limit external
control within it. Ensuring that more benefits are
realised by locals requires a redistribution of power
(Britton 1989). Changes must be initiated at both
macroeconomic and microeconomic levels. Possible
measures include: human resource development so that
locals are equipped with professional skills equal to
their foreign counterparts (Asim 2001), legislation
limiting the degree of foreign ownership of resorts,
policies encouraging foreign capital to be reinvested
in the general economy, formation of public enterprises
that aggressively compete with foreign tour operators,
gradual increase in state investment in the industry,
development of agricultural and manufacturing sectors
to reduce dependence on imports, and facilitating local
businessmens involvement at all levels of the industry.
Tourism is predicated on human interaction. The
dilemma facing Maldives is not one of implementation.
The political structure confers near unilateral authority
on the President, allowing him to swiftly execute many
of these measures if he decides to. One respondent says,
Although Maldives is a republic, the President is just
like a king. There are no political parties and he can
pretty much do anything he wants. The problem boils
down to choice. Placing control of the industry in the
hands of locals inevitably means that they will interact
with foreigners (tour operators, airlines, tourists etc.)
far more than they do now. The question is simply
whether the government feels the social costs of
greater resident participation in the industry are worth
the corresponding economic gains. The government
must answer this for itself. However, existing research
suggests that although many nations, especially
Muslim majority states, pursue isolationist policies (Din
1989, Poirier 1995), the reality is that interaction is often
perceived as culturally beneficial (Ap, Var, and Din 1990,
Besculides, Lee and McCormick 2002). Thus, the social
costs may not be as large as Maldives fears. Greater
local participation will bring more benefits to locals
but will also result in significant exposure to other
cultures; this is a trade-off that cannot be circumvented.
CONCLUSION
In summary, tourism in the Maldives is still beneficial.
As economist Pierre Encontre from the United Nations
42
Source: Ontario Parks (2003)
Vol. 53, No. 1/ 2005/ 33-44
Conference on Trade and Development (UNCTAD) notes,
Even with high import content for example in the
Maldives much value added remains (UNCTAD 2001).
Yet, the economic costs associated with this industry
are significant. In terms of revenue less than 13% is
retained by the nation or its people. The potential long
term damages, such as economic instability and
deformation of the economic structure, are more
disturbing. Though the proposed alternative develop-
ment strategies outlined can help mitigate or reverse
the detrimental consequences of tourism in the Maldi-
ves, the government should pay close attention to
Tisdell and McKees insight and consider alternative
developmental options such as fisheries, marine rese-
arch, and financial services:
Small island nation states need to realise that deve-
lopment of a tourist industry is not a magical means
of overcoming their economic difficulties. It can be a
disappointing means of promoting decentra-lisation
of population and industry and stemming the
depopulation of outer islands and may prove to be an
inadequate means of raising host country incomes and
employment. It can worsen income distribution, reduce
welfare and have adverse consequences for the balance
of payments, traditional industries and the environ-
ment. It is a volatile and risky export industry subject
to disturbance from a wide range of factors including
political instability and difficult to sustain should
environmental deterioration occur, for instance as a
result of pressures caused by tourism itself (Tisdell and
McKee 2001:188).
Methodological aspects of this study can be improved
upon in the future. The qualitative paradigm adopted
could be better supplemented by quantitative survey
data. Additionally, more responses from residents living
in the outer atolls are required; nearly all interviewees
in this paper were residing in Male. Tourists views
should also be incorporated in order for a more
comprehensive research design. This is important
because visitors offer outsider perspectives which may
differ significantly from residents views. For example,
one recent visitor claimed that Maldives does not seem
like a Muslim country at allin fact I didnt see any
indication of their religion. Since, without exception,
all residents stated that Islam is fundamental to their
way of life, this contrary opinion is worth investigating
further. Finally, most extant secondary sources are
either government generated or sponsored. Conse-
quently, independent studies need to be carried out to
Faizal Yahya, Ashvin Parameswaran, Inaz Ahmed and Rodney Sebastian
ensure that these reports are not biased and self ser-
ving.
Key areas for future, tourism related research can also
be identified. There is a need to investigate the political
(Abeysinghe 1993; Bilveer 1989) and cultural (Chaud-
hury 1996) profile of Maldives in order to gain a more
holistic understanding of its dependency on the indu-
stry. The environmental impact is also crucial to any
discussion of costs and benefits and requires a separate
study. Further, a more explicitly futures oriented
approach which offers better specific solutions to the
problems plaguing the industry would certainly be
welcome. Comparative studies of Maldives with other
small island developing states and with other tourism
dependent economies in South Asia (such as Nepal,
Bhutan, and to a lesser extent, Sri Lanka and parts of
India) are also necessary. Additionally, investigating
the potential for regional competition and cooperation
between tourism in the Maldives, South Asia and South
East Asia would be valuable.
The greatest profits from tourism go to those who con-
trol and are able to take advantage of resource flows.
Since the Maldivian economy centres on the tourism
industry, and because the components of this industry
are largely controlled by foreigners, it is they, not locals,
who benefit the most. It is imperative that policy
makers in SIDS consider carefully the questions, who
benefits? and by how much? before pursuing
tourism as the central developmental strategy.
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Submitted: 08/21/2004
Accepted: 03/11/2005