Ambitious plans mark recovery from COVID and a short-lived Indian boycott 

Tourism is the single most important source of livelihood in the Maldives, directly contributing close to 30% to GDP and generating more than 60% of foreign currency earnings. However, the Maldives Association of Tourism Industry (MATI) reported in April 2024 that the tourism sector experienced a notable downturn in revenue in 2023.

The figures reveal a decline in resort revenue of US$529 million. In 2023, total resort revenue had already plunged to US$3.9 billion from US$4.4 billion in 2022.

In recent times, Maldivian tourism had suffered two significant shocks: the first from COVID 19, which brought down arrivals by 67%, and the second from an unofficial Indian boycott for a few months in 2003-2024, resulting in a loss of US$158 million in earnings. Even today, there is a shortfall of 55,000 in Indian arrivals, says Ibrahim H. Shihab in a report in Maldives Republic.

Indian Boycott

The unofficial Indian boycott began in January 2024, as President Mohamed Muizzu’s tried to oust Indian military personnel from the country and revisit agreements entered into with India by his predecessor Ibrahim Mohamed Solih. Some uncharitable remarks made by three junior Maldivian ministers against Indian Prime Minister Narendra Modi added fuel to fire.  

Seeing the consequences of these for the Maldivian economy, President Muizzu mended fences with India. The Ministry of Tourism launched campaigns such as “Welcome India” and held roadshows in Indian cities. The President entered into a compromise with India on the question of the Indian military’s operating the inter-island emergency medical evacuation service by allowing the Indian military to be replaced by Indian civilians.

The three junior minister who made insulting remarks against Modi  left the government. Further, the President prevailed upon the parliamentary committee set up to go into past agreements with India to suspend its work. Muizzu also met Modi in New Delhi in June when the latter took oaths as Indian Prime Minister for the third term in succession.

Muizzu described the visit as a “success” as India buried the hatchet.  To prevent the Maldives from going back to China’s embrace, India extended much-needed financial help to the country as it  was teetering at the edge of default due to a severe foreign exchange shortage. To avoid default, the Maldives needed to pay US$114 million in 2024, US$ 557 million in 2025, and US$ 1.07 billion in 2026. This was a tall order when gross foreign currency reserves in August were only US$ 437 million, enough only for 1.5 months of imports.

The Maldives received a US$50 million emergency loan in September and is set to receive a U$400 million currency swap arrangement. The swap deal would effectively be an Indian bailout to help the Maldives make impending interest payments.

Meanwhile, Maldivian tourism was able to increase arrivals from China and Western Europe. President Muizzu visited Beijing in January and sought enhanced Chinese arrivals.  As a result, as of 25 September, 1.47 million tourists had visited the Maldives, a 10% increase over last year. On average, 5,457 tourists arrived daily, with average stays recorded as 7.7 days per visitor.

There was also an increase in Indian visitors, rising from 209,198 in 2023 to 214,780 in 2024 so far. However, China remained the top source market, accounting for 14.6% of arrivals, while India accounted for just 6.05%.

According to the Ministry of Tourism in September 2024, there were 43, 009 beds in 175 resorts for international tourists, 1,956 beds in 14 hotels, and 2,968 beds in 152 safari vessels.

Muizzu’s Moves

President Muizzu anticipates two million tourists this year, with an expected average annual growth rate of 10.3% in the medium term. He announced the “Asseyri Tourism Project” in Addu City, aiming to diversify and expand the tourism sector. This initiative includes the establishment of a seaplane hub in Addu City, the inauguration of 20 new resorts, and the revitalisation of non-operational resorts, according to Corporate Maldives.

The government, collaborating with various ministries and councils, is also working on completing 63 tourism development projects across different islands. Additionally, the ‘Visitor Economy Council’ has been established to broaden tourism services, with a focus on MICE tourism, education, culture, heritage, health, and environmental tourism.

In transportation, President Muizzu disclosed plans to construct two new airports and introduce advanced, secure helicopter services. The ongoing projects for building domestic airports are nearing completion, enhancing the country’s transport infrastructure. Additionally, the national airline, Maldivian, plans to acquire two new wide-body aircraft and introduce seven new international destinations, Corporate Maldives says. 

The Muizzu administration has amended the ‘Regulation Governing Foreign Tourist Vessels Cruising and Harbouring in Maldivian Waters’. It stipulates that only Maldivians can serve as agents for foreign tourist vessels arriving in the country. Under the new amendment, only companies with Maldivian shareholders are permitted to act as agents for foreign vessels.

India’s Contribution

India has invested around US$220 million in Addu Atoll. It has partnered with the Maldives on the Addu Reclamation and Shore Protection Project to find a sustainable way to develop Addu as a regional hub. The reclamation of 184 hectares of land was concluded earlier this year. This ambitious programme, valued at US$80 million, involves reclamation for tourism development purposes as well as for the overall economic development of Addu.

Another important project is the redevelopment of Addu’s roads and drainage, with an outlay of US$70 million. India constructed the Addu Detour link road.

With Indian funding, the Maldives is redeveloping the Gan International Airport, a connectivity project with an outlay of US$29 million that will bridge the gap between Addu Atoll and the rest of the world. It will boost tourism in Addu and other southern atolls.

5TMC

The Maldives already has a detailed blueprint worked out during Ibrahim Mohamed Solih’s presidency – the Fifth Tourism Master Plan 2023-2027 (5TMP), developed with the assistance of the Asian Development Bank (ADB).

By incorporating recommendations from the UN Sustainable Development Goals and international best practices, the 5TMP’s vision is to position the Maldives as the world’s leading destination in sustainable tourism. The aim is to double income from tourism to US$6 billion by 2027. The 5TMP envisions a 50-60% increase in accommodation and 25-40% increase in international air connectivity.

The 5TMP also envisages an increase in the range of tourism products, ensuring the inclusion of Maldivian native specialities while keeping the environment safe from degradation. Achieving net zero emissions is the aim, as the Maldives is already exposed to a variety of environmental threats.

Resorts should be facilitated to use solar power instead of diesel. As of now, each room, each day, uses 46 litres of diesel, which is too much, 5TMP points out.

One of the important areas of development envisaged is the recruitment of highly motivated young people who opt to work in the tourism sector instead of choosing desk jobs in Malé. Motivational and training programmes have been recommended. 

The Maldives is keen for tourism to be accessible to all classes of society so that it becomes a societal movement. Societal norms developed around tourism will greatly contribute to its development and sustainability.

Community participation in maintaining the right environment for international tourism is essential, and for this, awareness should be created, and incentives provided, the 5TMP says. Furthermore, the atolls must be encouraged and facilitated to pursue organic agriculture, and locals motivated to keep the atolls clean with proper sanitation. Proper water and waste management, as well as power management techniques, must be adopted in the resorts and atolls.

Research, data analytics, and a “whole of government” approach are urged to obtain accurate assessments and ensure effective execution with the best results.

Tourism needs investment, especially in far-off atolls, and for this, incentives like tax concessions could be considered. However, care should be taken to ensure that the desired results are attained and that the foreign exchange earned is retained in the Maldives, the 5TMP states.

Since tourism improvement and expansion require funds, the government should issue Treasury Bills and bonds and take steps to retain the foreign exchange earned by the sector, the 5TMP advises.

The Maldives should also take steps to attract tourists from non-traditional markets such as Hungary, Ireland, Brazil, Saudi Arabia, the UAE, and, of course, China, which is still not measuring up to its potential. The industry and government should also devise means to attract tourists during the off-season (June to September), as proposed in the 5TMP.