No matter who is with me, I believe very strongly that Maldives has all the potentials to become high income country sooner than later. To me, it is pity that this economy is just procrastinating its growth agenda for various reasons over the years. Of course this would be only possible if there are few revolutionary changes to the economic model of the country. Change will come through either by evolution or by revolution. If you need faster changes it has to be a revolution. It does not mean in the traditional sense to bring out the people on to the roads to make revolutions. Some key revolutionary but well thought policy decisions keeping only the country in front could bring in the transformation.
One such key opportunity that I see is to pump energy and transform the financial market into more robust in order to attract more foreign capital inflow into the country. Not to downgrade the people of Maldives, but the reality is that the people here do not have the habit of savings in order to boost investments. The majority of the businesses also do want to live on borrowed money rather than developing their equity. The government too is dependent on the foreign loans for the investment projects and the foreign debts over GDP ratio is staggering. Therefore, the only way is to attract foreign investments. Though the Foreign Direct Investments (FDI’s) do come into the country primarily into the tourism sector, it is very slow through the evolutionary process.
If the economy is to attract fast and high value investments into the country, it has to create a robust financial market which could even lead to the status of a regional hub. This could be possible by two ways to my analysis. First is to bring the resort sector into the stock market for both equity and loan capital and make the stock market more robust and secondly modernize and open up the Islamic finance capital market instruments.
The hospitality sector in Maldives has managed to win the hearts of many affluent around the world in many ways. Bringing that sector to the financial market and provide opportunity for the overseas investors to invest will no doubt boost the capital market and that will lead to re-energise the economic growth of the country. Similarly, a modernized management system and robust set of products of Islamic financial instruments too will attract vast number of overseas investors into the country. Given the strengths of Maldives and the regional demands, in my view the above two strategies would lead to make Maldives a regional hub.
Though there are several related changes to be brought in in order to implement the above two strategies. However, primarily two major changes will lead to the rest.
- Simplify approval process of foreign investments in this country especially into the stock market.
- Restructure the financial market regulatory and administration system in the country by clearly identifying the mandates, authorities, powers and set goals amongst relevant institutions.
May be the above strategies are well known to the relevant authorities and the strategists. It is just to have some the guts to take some revolutionary policy decisions. This would need efforts to educate the general public and key stakeholders. I hope these types of articles would support such efforts.
Editor’s Note: Mr. Fawas Farook is a contributory writer to Maldives Business Review. He is an auteur in financial fields and a well-read financial expert.