The Maldives, an archipelago nation consisting of over 1,000 islands in the Indian Ocean, has experienced consistent economic growth throughout the latter part of the last decade with annual real GDP growth averaging 6%.
The Maldivian economy is primarily dependent on tourism – more than 700,000 tourists visit annually – and auxiliary industries such as transportation, communication, and construction. Fishing remains an important aspect of the economy as well, though catch has dropped substantially in recent years. The government has begun to privatize certain sectors, starting with the main airport, and is partially privatizing the energy sector. In addition, the government is aggressively promoting the construction of new island resorts throughout the islands.
Stock Market:
The Maldives Stock Exchange (MSE) is located in Male and was established in April 2001. Currently the MSE lists six companies: Maldives Transport and Contracting Company Plc, Bank of Maldives, State Trading Organization, Maldives Tourism Development Corporation Plc, Amana Takaful Maldives and Dhivehi Raajjeyge Gulhun Plc. MSE has a total market capitalization of USD 500 million as of August 2014.
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AFC Country Report: Maldives
Perhaps you are surprised to see that this month’s country report focuses on the Maldives, a tiny island nation consisting of a chain of over 1,000 islands surrounding 26 atolls in the middle of the Indian Ocean and Arabian Sea. Roughly 600 km southwest of India and 750 km southwest of Sri Lanka, the Maldives are certainly best known for their luxurious beaches and world-class resorts, providing a remote paradise for well-heeled holidaymakers accessible via direct flights from Singapore, Dubai, and Istanbul, amongst others.
Malé, Capital of Maldives – 5th most densely populated island on earth
With a population of under 400,000, the country is heavily dependent on tourism to support its USD 2.3 billion economy, and the tourism industry accounts for approximately 40% of GDP, according to the Asian Development Bank (ADB). Transport and construction are two other major economic sectors intricately linked to the tourism industry and the demand from hotels and resorts. Traditionally, fishing was the backbone of the Maldivian economy, and the sector still employs 20% of the labor force and accounts for 10% of GDP. About half of the catch is exported, primarily to Asia and Europe, and all fishing must be done by line – nets are illegal.
Environmental issues are a serious concern for the Maldives, which is the lowest country in the world in terms of elevation. Climate change activists have warned that the Maldives is at risk of disappearing as ocean levels rise due to global warming, and the nation is also prone to floods, damaged marine life, and natural disasters due to its vulnerable location and lack of natural barriers or storm deterrents. The government has made climate change a focal area of its public policy and plans to eliminate or offset all of its carbon emissions by 2020.
Economic growth is projected to pick up moderately to 4.5% in 2014, according to the ADB, primarily due to favorable economic prospects in Asia and an increasing number of high-end tourists from China, India, and other emerging markets in Asia. There is a large number of airlines connecting the Maldives to destinations in Asia, Europe, and the Middle East, and budget carriers have also recently entered the market, including Air Asia (to Kuala Lumpur), Tiger Air (to Singapore), and flydubai (to Dubai). However, the island wants to retain its strategy of being a high-end tourist destination, and the average rate per night at most hotels and resorts is USD 400-500, with 5-star resorts ranging up to USD 4,000 / night!
The Maldives Stock Exchange (MSE) is located in the capital, Malé, and started as a Securities Trading Floor in 2002. The exchange currently has six listed companies in the financial services, tourism, trading, transport & construction, insurance, and telecommunications sectors, and as of August 2014 had a total market capitalization of USD 500 million. The country’s Capital Market Development Authority (CMDA) is working with the Ministry of Economic Development & Trade to facilitate foreign portfolio investment in the Maldives, but currently the bourse is not open for foreign investment.
Investment opportunities in the country also exist via Sri Lankan companies with assets located in the Maldives. Aitken Spence is a Sri Lankan blue chip conglomerate that is listed on the Colombo Stock Exchange and is the largest foreign resort operator in the Maldives. Aitken Spence also offers freight forwarding, cargo, and event management services in the Maldives and serves as a survey and claim settling agent for Lloyd’s of London, covering the principal commercial port in the Maldives. John Keells Holdings is a similar Sri Lankan conglomerate that operates five resorts in the Maldives and trades in Colombo. Other Sri Lankan companies that are publicly-listed on the Colombo Stock Exchange and have business operations in the Maldives include Ceylinco (insurance), Amana Takaful (insurance), eChannelling (healthcare/ICT), and Sierra Cables (wire/cable manufacturing).
Interest in the Maldives has extended beyond just regional businesses. In February 2013, international private equity firm The Blackstone Group purchased a controlling stake in two Maldivian seaplane companies, Maldivian Air Taxi and Trans Maldivian Airways. The terms of the transaction were not disclosed, but the deal highlighted the prominence of the country’s tourism industry and its international appeal.
As developed economies in the West recover and incomes in Asia continue to produce a new pool of high-end tourists, the Maldives should experience robust tourism growth that will bring much-needed foreign exchange reserves and cash to the economy. But given the serious of threat of global warming and the potential consequences it may have on the tiny island nation, Maldivians are increasingly concerned about their nation’s future and how it will be affected by environmental changes that are largely beyond its control.
Source – www.asiafrontiercapital.com
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