Maldives and ADB: Linking Islands

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Development

EffectivenessBrief

Maldives Maldives and ADB: Linking Islands





Development EffectivenessBrief

MalivesMalives an Adb: Linking Islans



© 2013 Asian Development Bank

All rights reserved. Published in 2013.Printed in the Philippines.

Publication Stock No. ARM125208

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iii

Contents

Maldives Development Indicators iv

Maldives and ADB: Connecting Communities 1

ADB’s Contribution to Development and Poverty Reduction 4

Education: Founding a New University 5

Transport and Information and Communication Technology:Closing the Gaps 7

Tsunami Emergency Assistance: Build Back Better 9

Energy: Providing Uninterrupted Supply 11

Public Sector Management: Managing Finances 12

Multisector: Servicing Outer Islands 13

Operational Effectiveness: Improving Performance 15

Future Challenges 16



iv

Development Indicators

Maldives

Non-Millennium Development Goals

Population (million) (2011) 0.32

Annual population growth rate (%) (2012) 1.28

Population in urban areas (%) (2011) 0.13

Millennium Development Goals

Population living on less than $1.25 a day (%) –

Population living below the national poverty line (%) (2010) 15.0

Adult literacy rate (%) (2007) 97.0

Population using an improved drinking water source (%) –

– = not available.

Source: World Bank. 2012. World Development Indicators Database.



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Maldives and ADB:

Connecting CommunitiesThe Maldives has the highest real per capitaincome among countries in South Asia, drivenlargely by its luxury tourism industry. However,15% of the population of about 330,000(excluding foreign nationals) still lives belowthe national poverty line, and there are broadincome disparities between the capital, Malé,and the outer atolls.

The country consists of over 1,100 islandsstretching 900 kilometers north to south,but only Malé has a population of more than10,000 and only 15 islands have a populationof more than 2,000. There is little available

land for agriculture while freshwater resourcesare also limited. With a highest point of justover 2 meters above sea level, the country isextremely vulnerable to natural disasters andclimate change.

The devastating tsunami of December 2004caused losses equivalent to about 62% of thecountry’s total gross domestic product (GDP).

The rising of ocean levels linked to the effectsof global warming presents a threat to thecountry’s very existence, a point made starklyclear in 2009 when the government held acabinet meeting underwater.

The low-lying islands of the Maldives are highly vulnerable to rising sea levels linked to climate change

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Development Effectiveness Brief:

Maldives

2

growth and reduce regional economicdisparities. Assistance has been provided forthe information and communication technologysector, resulting in increased competition

and improved connectivity. In education,a postsecondary education development projectlaid the groundwork for the first university inthe country. ADB also helped the country getback on its feet after the 2004 tsunami withemergency assistance.

Under its country partnership strategy for2007–2011, the ADB-assisted EconomicRecovery Program contributed to theintroduction of a goods and services tax inJanuary 2011, which has helped to broadenand increase government revenue. The country

partnership strategy also focused on capacitydevelopment assistance to strengthen thegovernment’s ability to efficiently managepublic expenditure and to create an enablingenvironment for private sector development.

ADB’s multilateral development partners inthe Maldives include the World Bank, theInternational Monetary Fund, the UnitedNations Development Programme, theIslamic Development Bank, and the EuropeanInvestment Bank, and it also works withbilateral donors, such as the Japan Bank for

International Cooperation.

Cofinancing support for ADB operations as ofthe end of 2011 totaled $4.7 million, includingthree investment projects and two technicalassistance projects.

Despite these hurdles, annual GDP growth hasaveraged about 10% since the mid-1970s,

coming in at 7.5% in 2011, driven by thebooming tourism sector, construction,

and fisheries. Five of the eight MillenniumDevelopment Goals have been achieved, or areon track to be realized before 2015. In January2011, the Maldives was officially categorized asa middle-income country.

Since joining the Asian Development Bank (ADB)in 1978, the Maldives has received ADBassistance of $170.8 million for 22 loanand grant projects (as of December 2012),spread across nine sectors (with public sectormanagement, transport and informationand communication technology, and energy

accounting for nearly two-thirds of the funds).All assistance has come from ADB’s AsianDevelopment Fund (ADF), a concessional financingwindow for developing member countries.

ADB’s assistance has been targeted at prioritiesidentified by the government in its own nationaldevelopment plans, including economicgrowth, social equity, environmental protection,private sector development, good governance,and recovery and reconstruction in the wake ofthe 2004 tsunami.

ADB-assisted projects, most of which wereimplemented or were ongoing between2002 and 2010, have upgraded the country’scommercial and domestic harbors andstrengthened the quality of power suppliesto the capital and the outer islands to boost

Loan and Grant Approvals ($ million)

1981–2006 2007 2008 2009 2010 2011 Dec 2012

111.48 5.33 7.50 36.50 – – 9.95

Loan Disbursements ($ million)

8.59 6.90 5.30 25.90 7.06 19.93

– = no approvals for the year.



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Maldives and ADB:

Connecting CommunitiesADB-assisted projects haveupgraded the country’scommercial and domestic

harbors and strengthened the quality of power supplies to the capital, Malé, and the outer islands to boostgrowth and reduce regionaleconomic disparities

Finance, Industry and Trade

Education

Transport and Information and Communication Technology

Public Sector Management

Water Supply and Other Municipal Infrastructure and Services

Sector Distribution of Active Loans

and Grants Portfolio

(as of December 2012)

25.65%

5.89%

7.59%51.78%

9.09%



4

ADB’s Contribution

to Development andPoverty Reduction

ADB was the country’s leadmultilateral development partnerprior to 2004, providing over 12%of total development assistance

from 1994 to 2004

The Indian Ocean archipelago suffers frommany of the development challenges typicalof scattered island states: a narrow economicbase, government capacity constraints, andcommunication difficulties. While there is aheavy reliance on expatriate workers, who

number over 75,000,

local unemployment ishigh, particularly among the youth.

Over the past decade, the economy hasbeen confronted by many external shocks,including a slump in prices for its valuable tunacommodity, spikes in the cost of importedfuel and food, and volatility in visitor numberscaused by events such as the 11 September2001 attacks in the United States and theglobal financial crisis of 2008. A sharp rise ingovernment spending after the tsunami, as wellas an expansion in civil service and social service

costs, has led to an increasingly unsustainablefiscal deficit.

In response to these challenges, multilateraldevelopment agencies, including ADB,contributed loan and grant assistance totalingalmost $590 million between 2005 and 2010,with bilateral development partners contributingover $135 million in the same period.1

ADB was the country’s lead multilateraldevelopment partner prior to 2004, providing

over 12% of total development assistance from1994 to 2004. With its share from 2006 to2011 at nearly 8%, ADB became the Maldives’second–largest multilateral contributor. It hasbeen a major provider of external assistancefor the postsecondary education sector;

has been a large external contributor to thepower sector, with assistance of more than$30 million; and has also played the leadingdevelopment agency role in maritime transportimprovements.

Project completion reports for 2005–2011 showthat ADB trained over 2,470 teachers whileover 22,000 students benefited from schoolimprovement programs. It installed electricitygenerating capacity of nearly 26 megawattequivalent, providing 930 households withnew power connections, while road upgrades

benefited 40,000 people. Sixty householdsreceived new sanitation connections.

1 Figures tallied by adding total loan and grant assistance figures for multilateral and bilateral donors listed on p.14of the 2011 Country Assistance Program Evaluation report for the Maldives.



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ADB’s Contribution to Dev

and Poverty ReductionDevelopment Outputs from ADB-Supported Projects

Core Sector OutputsOutputs Achieved

(2005–2011)

Education

Classrooms built or upgraded (number) 2

Teachers trained (number) 2,478

Students benefiting (number) 22,776

Energy

Energy generation capacity installed (MW equivalent) 26

Distribution lines installed or upgraded (km) 20

Additional households connected to electricity (number) 930

Transport

National, provincial, district, and rural roads built or upgraded (km) 14

Beneficiaries of road projects (number) 40,000

Water

Households served with new sanitation connections (number) 60

km = kilometer, MW = megawatt.

Note: Outputs delivered were based on project completion reports circulated in 2005–2011.

Source: Asian Development Bank estimates.

Education:Founding aNew UniversityADB has been a substantial provider of externalassistance for postsecondary educationwith over $14 million in loan, grant, andtechnical assistance to the sector. The otherkey multilateral development partner, workingelsewhere in the sector, is the World Bank.

The Postsecondary Education DevelopmentProject (ADF loan $6.3 million equivalent),which ran from 1999 to 2007, paved the wayfor the creation of the Maldives College ofHigher Education—now the Maldives National

University—by rationalizing the operations ofseven ministry-based institutions. A nationalquality assurance framework to developcurricula and courses of international standardwas set up, the Maldives Accreditation Boardwas established, 46 full-time teaching staffreceived overseas fellowships or regionalstudy assistance to develop skills, and aninternationally recognized software system for

full management of student information wasput in place.

A central administration building, a studentdormitory and study center, a language andcomputer laboratory, and a lecture theater were

established, benefiting thousands of students.The project also supported the developmentof programs at three outreach campuses inouter atolls, with funding assistance for traineeteachers to help establish courses there.

“People now have confidence in highereducation, that we have the ability to runcourses of international standard,” said HussainHaleem, deputy vice-chancellor, Administrationand Finance, Maldives National University.“Before the College of Higher Education, therewere no degree programs. Now every faculty

runs them, and we offer master’s and even PhDprograms for some.”

At project completion, the college wasproducing an average of 1,200 graduatesa year, with females making up nearly 60%and students from outer atolls about 85%of the total—considerably higher than theoriginal targets of 45% and 50%, respectively.




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Diploma graduates at project closing totaled3,167, with more than 60% female, whilecertificate graduates totaled almost 5,000 withmore than 50% female.

ADB also provided a $6 million ADF loan in2003 for the Employment Skills Training Project,which ran from August 2004 to February 2012,and aimed to get more Maldivians into work.Key parts of the labor force, including tourismand construction, are dominated by expatriateworkers, while many Maldivians, especiallywomen and youths, are excluded, due to arange of factors such as limited access andskills training.

The project, which established technicalvocational skills training programs focused onfive key sectors (transport, tourism, fishing andagriculture, social sector, and construction),was broadly successful, training 5,829 youths—of whom 38.5% were women—out of a targetof 6,000.

“It helped pave the way for students to gointo technical and vocational jobs, with about

75% of those in the programs absorbed into thelabor force, although not always into the areasin which they trained,” said Mariyam Noordeen,assistant executive director of the Technical andVocational Education and Training Authority.

Estimates indicate that the labor participationrate in the country increased from 59.1% in2003 to 65.3% in 2009. At project completion,the estimated participation rate of women inthe workforce was about 59% in 2012, up from16% in 2000.

Females are well represented in the student body at the Maldives National University

The Postsecondary EducationDevelopment Project, whichran from 1999 to 2007, paved

the way for the creation of theMaldives College of HigherEducation—now the MaldivesNational University

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and Poverty ReductionTransport andInformation and

CommunicationTechnology:Closing the GapsWeak communications, congested port facilitiesin Malé, and inadequate interisland transportservices have been a serious drag on theMaldives, undermining government efforts toreduce development disparities between thecapital and the outer islands.

ADB, with total sector assistance of$32.6 million, has been the leading donor inmaritime transport, and its interventions overmore than 20 years have reduced capacityconstraints at ports, resulting in a tenfoldincrease in international and interisland cargo

handling capacity. Its projects have sharplyincreased vessel turnaround times at both thecommercial and domestic harbors in Malé.

ADB’s port projects did not have externalcofinanciers, but other development partnersin the transport sector include the Kuwait Fundfor Arab Economic Development, the SaudiFund for Development, the Islamic DevelopmentBank, and Agence Française de Développement.

At the commercial harbor—the gateway for thecountry’s imports and exports—ADB fundeda new wharf and freight loading, handling,and storage facilities. Before the start of theSecond Malé Port Project (1993–1998, ADFloan $8.8 million), annual cargo throughput

totaled 273,000 freight tons, with the amountrising to 855,000 freight tons at completion in1999—more than double the forecast. In 2011,throughput was over 1 million freight tons.

The average turnaround time for foreign cargovessels fell from over 18 days in 1991 to just

A ship berthed at the ADB-funded commercial harbor wharf in Malé

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Maldives

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over 11 in 1997, and has been slashed to justover 2 days as of 2011. The wharf has also cuttime and costs linked to double handling ofcargo, with decreased need for smaller boats

(lighters) to transfer freight from ships to shore.

“We estimate that losses and damage havebeen reduced by as much as 30%–40%,” saidAli Ahmed, general manager and head ofoperations at Maldives Ports, the operator ofthe commercial and domestic ports.

The container facilities have allowed increasedexports of canned, frozen, and dried fish, aswell as the development of a thriving trade inincreasingly valuable scrap metal, which is soldin India for recycling.

ADB also financed a new quay and onshorefacilities in the adjacent North Harbor, whichis the main hub for the distribution of goodsto the rest of the country. Before the DomesticMaritime Transport Project (2007–2011, ADFloan $5.3 million), limited berthing capacity

caused long delays in freight handling and boatmovements, often resulting in spoilage of freshgoods and increased costs.

“The vessel turnaround time has vastlyimproved. Before, they had to queue for aweek to 10 days; now it has been broughtdown to about 5 days or less,” said AbdulNasir Mohamed, deputy director general of theMaldives Transport Authority. “This also meanscost reductions for the boat owners, becausethere are shorter waiting times for the crewsthey hire.”

The port improvements coincided with strongGDP growth, which averaged 6.3% in real termsbetween 1991 and 1998, while GDP per capita

doubled over the same period.

The Information Technology DevelopmentProject has led to increased sector competition,improved connectivity and reduced internetcharges to support greater regional integrationand better business communications.

Island communities are earning cash for trash by recycling scrap metal

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and Poverty Reduction

Under the Information Technology DevelopmentProject (2002–2009, ADF loan $9.5 million

equivalent), a national computer center and20 internet kiosks for the public wereestablished and telecommunications regulatoryreforms were carried out. Over 100 governmentoffices and 20 outer atolls are now linked byfiber optics and microwave technology, whileinternet charges have been reduced from about$108.70 equivalent for 1,000 megabytes in2007 to just over $13.00 in 2011.

An ADB-funded wharf at Malé’s domestic North Harbor

ADB-assisted port projectshave sharply reduced capacity

constraints at ports, resultingin a tenfold increase ininternational and interislandcargo handling capacity

TsunamiEmergencyAssistance:Build Back BetterOn 26 December 2004, a massive underseaearthquake with its epicenter off Sumatra inIndonesia triggered a series of devastatingtsunami waves across the Indian Ocean. Thelow-lying Maldives was not spared. More than

80 people died, about 1,300 were injured, and39 islands suffered heavy damage. Losses wereestimated at about $470 million—equivalent toover 60% of GDP.

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Maldives

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In the aftermath, the donor community,including ADB, the International Committee ofthe Red Cross, the United Nations DevelopmentProgramme, the World Bank, the European

Union, and the Japan Bank for InternationalCooperation, moved quickly to put together anaid package to help the country get back onits feet.

ADB’s contribution included a $20 million grantfrom the Asian Tsunami Fund, an ADF loan ofabout $1.8 million and technical assistance,including a $1 million grant from the JapanFund for Poverty Reduction. Under the TsunamiEmergency Assistance Project, which ran from2005 to 2008, ADB provided quick-disbursingfunds for the purchase of imported materials

and equipment, helped repair and upgradedamaged infrastructure, and supportedlivelihood restoration, particularly in thefisheries sector.

Six electricity supply systems were rebuiltor installed, benefiting 430 households.One sewage treatment system was built onGuraidhoo Island of Thaa Atoll benefiting325 households, and close to 1,000 fishers

benefited from training programs andnew equipment.

A key harbor on Dhidhdhoo Island of HaaAlif Atoll in the far north of the country wasupgraded with environmental protectionelements, including long-lasting rock in seawalls

and steel piling for the quay. This has allowedlarger supply vessels to dock, resulting in timeand cost savings, while the number of fishingboats using the facility has more than tripledcompared to 2005 levels.

The support from ADB, along with that ofother donors, saw the economy recover quickly,with real GDP growth rebounding sharply in2006 after declining by 4.7% in 2005.

The support from ADB, alongwith that from other donors, saw

the economy recover quickly,

with real GDP growth reboundingsharply in 2006 after decliningby 4.7% in 2005

ADB financed a new wharf on Dhidhdhoo Island after the 2004 tsunami

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and Poverty ReductionEnergy: ProvidingUninterrupted

SupplyUnreliable, intermittent, and inadequatepower supplies in Malé and the outer islandshave been a major constraint to growth andeconomic opportunities in the past and alsoundermine quality of life, especially on poor,remote islands.

In response, ADB has provided total assistanceof $31.1 million and is one of the majormultilateral donors in the sector.

In Malé, ADB provided ADF loans totalingover $22 million for three power systemdevelopment projects. The Second PowerSystem Development Project (1992–1996,$9.2 million loan) increased total generating

capacity in the capital by 7,940 kilowatts,resulting in an end to power restrictions andblackouts, and provided 3,000 new residentconnections. The need for additional capacity

was shown by a rise in electricity consumptionof 13.5% a year between 1991 and 1997.

The Third Power System Development Project(1997–2004, $7 million loan), which receivedcofinancing of $5.1 million from the NordicDevelopment Fund and $4.72 million fromDanida, added an additional 12 megawatts ofgenerating capacity for Malé, developed an11-kilovolt distribution system, and boosted thetechnical and managerial capabilities of StateElectric Company Ltd.

The Outer Islands Electrification SectorProject (2002–2009, ADF loan $8 millionequivalent) provided new or upgradeddiesel-fueled power systems on 19 islands,serving about 5,700 households, or almost29,000 people. The systems have improved

ADB-funded power generation sets are improving lives in remote communities

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the reliability and quality of electricity supply,resulting in opportunities for residents in newbusinesses such as restaurants, small shops,

and guesthouses.

The sector assistance coincided with asignificant economic expansion in the Maldives,with non-tourism-related GDP growing at acompounded annual rate of 8.5% between2002 and 2008. Since tourist resorts have theirown generator sets, this GDP growth can bepartly attributed to the improved power supply.

Public Sector

Management:Managing FinancesThe Maldives suffers from a narrow economicbase and limited revenue streams. Theseconstraints, along with a spike in governmentspending after the tsunami, a rapid expansionof the civil service, and recent increases in pricesof key commodities including food and fuel,have put public finances under severe pressure,with the fiscal deficit growing to over 20% of

GDP in 2009.

In response, ADB, along with multilateraldevelopment partners the World Bank and theInternational Monetary Fund, has providedwide-ranging loan and technical assistancesupport to help the government strengthenfinancial management and medium-term

The Second Power SystemDevelopment Project increased

total generating capacity in the capital by 7,940 kilowatts,resulting in an end to powerrestrictions and blackouts

Fathima Mohamed from Baarah Island says a regular power supply allows her son-in-law to run a small tailoring business

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and Poverty Reductionmacroeconomic planning, to develop nationalstatistics, to strengthen audit and accountingfunctions, and to carry out structural reforms torationalize public spending.

ADB’s total assistance for public sectormanagement from its ADF resources totalsalmost $52.5 million, with the bulk of thefunds, or $39.5 million, earmarked forthe ongoing Economic Recovery Program,which was approved in 2009 to help thegovernment respond to a sharp expansion inits fiscal deficit. The program was providedin conjunction with commitments of almost$87 million from the International MonetaryFund and $13.7 million from the World Bank for its economic stabilization and recovery

programs. The assistance from the threedonors supports a wide range of policy actionsdesigned to improve fiscal management, reduceexpenditure, and boost revenue. ADB’s focushas been on measures to increase revenue.

There have been a number of positive outputsto date. An ad valorem goods and servicestax (GST) was introduced in 2011 to boostrevenues, which had two components: atourism goods and service tax (T-GST) for thetourism sector and a general goods and servicestax (G-GST, or generally referred to as GST) for

all other sectors. T-GST was set at 3.5% whenintroduced in October 2011, then increasedto 6% in January 2012, and is set to increaseto 8% from 2013 onward.2 Revenue from theT-GST for 2011 reached $56.63 million.

An approved 15% business profit tax is alsoexpected to come into force in the near future,while the program has helped strengthen staffcapacity and collection systems at the MaldivesInland Revenue Authority, which was created inMarch 2010.

The fiscal deficit, after spiking at 21% of GDP in2009, eased back to 10.2% in 2011, but costslinked to the establishment of island and atollcouncils under a decentralization law as wellas a new government health insurance schemehave brought about a recent rise in spending.

A 3.5% ad valorem goodsand services tax wasintroduced in 2011

to boost revenues

Many of the 18 technical assistance projectsdesigned to support financial and debtmanagement reforms and privatization of state-owned enterprises have had only limited successdue to staffing constraints, implementationdifficulties, and a lack of consensus over someof the policy recommendations.

Multisector:ServicingOuter IslandsSmall communities, limited employmentopportunities, and a lack of basic services havecaused significant development divides betweenMalé and the outer atolls, and also growingenvironmental problems.

In response, ADB and its development partners,including the Islamic Development Bank, havetargeted upgrades in basic services on the outerislands, particularly in water and sanitation,solid waste management, and transportconnectivity.

ADB’s multisector assistance totals almost$17 million, with the main interventionscoming through the Regional DevelopmentProject, with $14 million in ADF loans. Theproject, which was approved in 1999 and wasphysically completed on 31 December 2012,has been rolled out in two phases, with thefirst covering 13 islands in the northern andsouthern development regions, and the secondcovering 3 islands in the center. The IslamicDevelopment Bank cofinanced the project witha loan of almost $5.9 million.

2 The Government proposes to the Parliament an increase of T-GST rate to 15%, which will result in an amendment tothe GST Act if approved.




Maldives

14

In the first phase, about 5,000 rainwater tankswere provided, while a pilot sewage treatment

system was established on KulhudhuffushiIsland of Haa Dhaalu Atoll. Two solid wastemanagement centers were constructed, anda link road with bridges and a causeway fromGan Island to Hithadhoo Island in SeenuAtoll was built. The water and sanitationupgrades have increased drinking watercapacity by an estimated 40.3 megaliters ayear, reduced shortages in dry periods, andsubstantially cut the incidence of waterbornediseases, with Kulhudhuffushi Hospital’sannual reports showing a 60% reduction inreported cases of diarrhea over the projectimplementation period.

The recently completed second phase of theproject has built sewage treatment plantson two of the three focus islands to improvegroundwater quality and provided equipmentfor solid waste management centers. Training

has also been conducted for communitiesand government staff in areas such as

environmental awareness, engineering, financialmanagement, and administration.

The sewage treatment plant on MahibadhooIsland of Alif Dhaal Atoll, although physicallycomplete, had not yet begun operations as ofMay 2012 because of the absence of a utilityservice provider.

ADB assistance for basic services such as sewage treatment on remote islands has improved health and the environment

The water and sanitationupgrades have increased

drinking water capacity byan estimated 40.3 megalitersa year, reduced shortages indry periods, and substantiallycut the incidence ofwaterborne diseases

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In its country assistance program evaluationreport for the Maldives, ADB’s IndependentEvaluation Department (IED) found ADB’soverall operational performance from 1978 to2010 to be partly successful , with the programbroadly effective in achieving targeted outputsand outcomes. The development impact wasrated partly satisfactory , with operations in thetransport and information and communication

technology, energy, and education sectors themost successful in reaching intended targets.

In 2011, 75% of completed sovereignoperations and 67% of completed technicalassistance projects were rated successful .Some projects have incorporated innovativedesign features, such as the Outer IslandsElectrification Sector Project, which providedlow-noise generator sets with vibrationdampeners and extended ventilation systemsto minimize impacts on communities and thesensitive tropical environment.

However, the IED report found the efficiency ofoperations to be below par , with substantialproject implementation delays seen acrossthe portfolio. While the average ADB projectdelay period between 2001 and 2010 fellto 24.8 months from 33.2 months between1991 and 2000, in the Maldives it almostdoubled to 43.5 months.

The causes for the delays and other difficultieshave been various, including the tsunami,government capacity constraints, designchanges, transfer of project managementresponsibility among governmentministries, staff reassignments, state agencyreorganizations, and problems in findingsuitable consultants and contractors. Low or

no fees for many services, including domesticharbors, water supply, sewage treatment,and solid waste management, have raisedquestions about their future sustainability. Theneed to rely on government subsidies to coveroperational costs of utilities puts pressure onstate finances.

To address these issues, IED recommended that

ADB remain carefully selective of the sectors towhich it provides assistance and that it work more closely with development partners toimprove overall development effectiveness.Another suggestion was to prepare long-term strategic sector support plans thatcan form the basis for future infrastructureoperations. Providing adequate projectpreparation support, using a phased deliveryapproach, and allocating sufficient time forimplementation are other important steps thatcan help improve operations.

A dedicated focal point in ADB’s Sri LankaResident Mission, or a liaison office in Malé,could also be considered to improve interactionwith local counterparts, including projectimplementing agencies.

Operational Effectiveness:

Improving Performance

The Independent EvaluationDepartment recommended thatADB remain carefully selective of

the sectors to which it providesassistance and that it workmore closely with developmentpartners to improve overallaid effectiveness



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Providing education and other opportunities for the young in remote island communities remains a challenge

Future Challenges

2012–2013. The partnership focuses onmicro, small, and medium-sized enterprisesdevelopment; transport; and energy. ADB willalso explore ways of strengthening human skillsdevelopment to help the Maldives meet itsneeds for a modern workforce. Under a countryoperations business plan for 2013–2015,ADB has earmarked indicative sovereignlending assistance of $18 million, includingproposed renewable energy, education foryouth development, and transport developmentprojects. ADB is also looking to boost its

nonsovereign operations in areas such as cleanenergy and small and medium-sized enterprisefinance. However, the lack of convertibility ofthe rufiyaa and the country’s weak sovereignrating remain deterrents to private investment.

Given its more-than-3-decade-long involvementand role as one of the largest multilateraldevelopment partners in the country,ADB is well placed to continue to assistthe Maldives in its drive to boost inclusivegrowth and to promote environmentallysustainable development.

In the 33 years since it joined ADB, the Maldiveshas made substantial progress. Real per capitaincomes had risen at a compounded annualgrowth rate of 5% up to 2010, while most ofthe Millennium Development Goals have beenachieved ahead of schedule, and basic physicalinfrastructure and social services have beenextended to the outer islands. The country hasestablished itself as a premier tourist destination,with the number of visitors from Asia expectedto expand strongly in coming years.

However, the economy remains highlydependent on tourism, imports, foreign aid,and foreign workers, leaving it vulnerable toexternal shocks. Rising prices for imported foodand fuel have caused a spike in inflation, whichreached 12.8% in May 2012. The country’saccession to middle-income status will see areduction in concessional aid going forward,and climate change will pose a growing threat.

To address the challenges, ADB and theGovernment of the Maldives have approvedan interim country partnership strategy for





Printed in the Philippines

Development Effectiveness BriefMaldives

Since joining the Asian Development Bank (ADB) in 1978, the Maldives has received assistanceof nearly $200 million on loans, grants, and technical assistance projects. ADB helped thecountry toward economic recovery in the wake of the 2004 tsunami and 2008 global financialcrisis by providing the Tsunami Emergency Assistance and the Economic Recovery Programs.The Maldives has made substantial progress—real per capita income had risen at an averageannual growth rate of 5% and the country graduated from the United Nations’ LeastDeveloped Country designation to Middle Income Country status on 1 January 2011.

About the Asian Development Bank

ADB’s vision is an Asia and Pacific region free of poverty. Its mission is to help its developingmember countries reduce poverty and improve the quality of life of their people. Despitethe region’s many successes, it remains home to two-thirds of the world’s poor: 1.7 billionpeople who live on less than $2 a day, with 828 million struggling on less than $1.25 a day.ADB is committed to reducing poverty through inclusive economic growth, environmentallysustainable growth, and regional integration.

Based in Manila, ADB is owned by 67 members, including 48 from the region. Its maininstruments for helping its developing member countries are policy dialogue, loans, equityinvestments, guarantees, grants, and technical assistance.

Asian Development Bank 6 ADB Avenue, Mandaluyong City1550 Metro Manila, Philippineswww.adb.orgPublication Stock No. ARM125208

January 2013

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Maldives and ADB: Linking Islands

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