Understanding and Developing the Role of Tourism in the Economy of Maldives - Essay Example

? Maldives and Sustainable Development Understanding and Developing the Role of Tourism in the Economy of Maldives Year Level, Section, Title Professor Date Submitted Executive Summary This paper examines the role of tourism in the economy of Maldives in order to recommend specific programs that promote sustainable development. In this light, this paper begins with a general overview of Maldives by emphasizing on its geographical features, and the unique culture of the Maldivian people. After this, an intensive look at the economy of Maldives is done by crucially studying its top three sectors: tourism, construction, and fisheries. Then, the discussion is narrowed down on tourism by having an in-depth look at current tourism statistics, current market segments, and major products and services. This part is closely linked at an analysis of the positive and negative impacts of tourism on the economy and environment of Maldives. This paper concludes with a presentation of specific programs that can be used to promote sustainable development in Maldives. I. Maldives: General Overview A. Basic Information The Republic of Maldives is an archipelago that is consisted of 26 coral atolls, located in the northern Indian Ocean. It is comprised of 1,190 islands, and 200 from which are inhabited (Maldives Marketing & Public Relations Corporation, 2009). Its capital island is called Male’. Its climate is warm and tropical, and seasonal changes are determined by the two yearly monsoons—the northeast monsoon and the southwest monsoon (Corporate Travels and Tours, 2011). The Maldives has a population of approximately 350,000. Its type of government is Independent Republic, while its primary religion is Islam. The currency used in this country is Rufiyaa (1 USD = MRF 15.42). B. People and Culture The culture in the Maldives is tightly linked with the geographical features of the country. As claimed by Red Dot (2009), the physical features of the Maldivian people differ from one atoll to the other, attributing to the genes passed on by South and Southeast Asians, Africans, and Arabs. It can be said that this racial mix has also marked the differences in the Maldivian people’s language, beliefs, and sub-cultures (Countries and their Culture, 2012). The mixing of cultures is evident in the Maldivian arts and craftsmanship. For one, the musical instrument used by Maldivian people called bodu-beru (big drum) resembles that of common African drums. Also, the dhoni is a unique Maldivian sailboat that has an overall design similar to the dow of Arabian countries. Last, the fine artistry behind the wooden beams in Maldivian antique mosques can be attributed to the architecture in Southeast Asian countries. Maldivians are known for their adaptation skills and positive outlook in life. They are generally cheerful, welcoming, and hospitable. In terms of their belief system, Maldivians still appreciate the upholding of unity and oneness in faith, but modernism has delivered a whole new culture with new sets of ideas and attitudes to the people. II. Maldives: Economy According to United States Virtual Presence Post or USVPP (2012), the economy of Maldives is based primarily on tourism and fishing. However, the other key sectors of Maldivian economy are construction, distribution, telecommunications, shipping, aviation, and banking support. A. Background on Economy The Maldives has achieved substantial economic growth over the last several decades (USVPP, 2012). In 2009, the country attained the highest GDP at around $1.3 billion, which is about $4,300 per capita. Tourism, the primary contributor of GDP, remained relatively strong due to the increase in tourist visits as evidenced by the growth in total bed-nights (The World Bank, 2011). However, it was also in 2009 when Maldivian economy shrank by 4 percent. Indeed, as USVPP (2012) further asserted, the fall in tourist arrivals, external financial, and product exports were all contributed by the global economic crisis that severely hit the country during that year As a result of this, the Maldives faced an acute currency shortage which curtailed normal business activities. Looking at the general economic activities of the country, it can be claimed that the Maldives imports most of its requirements—from staple food to hotel requirements. As such, annual imports average at $850 million. International shipping to and from the Maldives is mainly operated by private sectors. Over the years, the Maldives has received economic assistance from multilateral development organizations such as the United Nations Development Program (UNDP), Asian Development Bank (ADB), and the World Bank. B. Sectors of the Economy The three major sectors of Maldivian economy are tourism, construction, and fisheries. We intend to go through each sector in order to highlight its role in shaping the current status of Maldivian economy. 1. Tourism The tourism sector is the largest contributor to the GDP of Maldives at 27 percent or about $600 million a year. However, this sector is vulnerable to various external and internal socio-political events, such as the September 11th terrorist attacks in the United States and the 2004 tsunami disaster in Southeast Asia. As discussed by the Ministry of Finance and Treasury (2011), Maldivian tourism in 2009 has been badly affected by the global downturn which reduced government revenues and foreign exchange earnings. In order to solve this economic crisis, the Maldives implemented its massive tourism expansion plan to increase tourist visits. The tourism project included the leasing of 60 new islands for development as tourist resorts and hotels. Despite the country’s efforts to help revive tourism, it is evident that tourist arrivals in 2009 has been significantly lower than expected, which was 78 percent lower than in 2008 at 63.4 percent. With this, researchers noted that tourist spending also declined considerably. Problems were also encountered during the development of new islands as resorts and hotels primarily due to the lack of domestic financing and lack of necessary support infrastructure (Ministry of Finance and Treasury, 2011) Thus, it is the government’s task to take policy actions necessary to make investments in the tourism sector more attractive. 2. Construction The contribution of the construction sector to GDP growth has been increasing since 2004 due to the recovery and reconstruction efforts following the tsunami disaster. As such, the growth of the construction sector has been exceptional from 2004-2008, with an average growth rate of 22 percent per annum (Ministry of Finance and Treasury, 2011). However, just like the tourism sector, the construction sector also declined by 24 percent in 2009 following the global economic downturn. This can be attributed to the lack of or delay in sourcing the financing for the construction of new resorts which led to the delay in the receiving payments of the contractors. Aside from this, the low availability of foreign has also made it difficult for the sector to take advantage of the declining prices of raw materials in the international market. Although no investment projects are planned through domestic budget, the initiative of private entities to develop an inter-island transportation network can provide a much needed boost for the sector (Ministry of Finance and Treasury, 2011). 3. Fishing Fishing has always been an important activity in the Maldives as it provided employment and export earnings. Thus, the fisheries sector has remained vital in terms of trade, employment, and self-sustenance. In this light, the fisheries sector accounted from 6.6 percent to 8.9 percent of the GDP which led to the increase of fish landings from 21,542 million tons to 180,981 million tons. However, in the year 2008, fish landings have stabled. Such an event has been attributed to the increase in sea surface temperature, the increase in fuel prices, and other commodities in the world market. III. Tourism: The Lifeblood of Maldivian Economy A. Overview of Tourism As narrated by the Ministry of Tourism and Civil Aviation (2010), tourism in Maldives began in 1972 with two resort islands with mere 280 beds. Since then, the tourism sector has grown rapidly, transforming the Maldives into a quintessential tourist destination. Tourism in Maldives has progressed largely due to two project plans—the First Tourism Master Plan (1983 to 1992) and the Second Tourism Master Plan (1996 to 2005). Sustainable tourism development has been the primary mover of Maldivian tourism, which ensures positive commercial growth while protecting and maintaining the natural environment and the culture of Maldives. In this light, an elaborate regulatory framework that forms the core of the legal regime governs the environment, resort development, and operational issues (United Nations World Tourism Organization, 2010). In furthering this plan of sustainable tourism, 89 islands out of the 1190 islands in the archipelago have been developed into tourist resorts by the end of 2006 (Ministry of Tourism and Civil Aviation, 2010). An additional 51 islands have been allocated and offered for resort development. Resort construction, in this light, spread throughout the country as the volume of international visitors rose from 42,000 in 1980 to over 600,000 by 2004 (Ministry of Tourism and Civil Aviation, 2011). Thus, by the end of September 2011 there are Maldivian tourism is comprised of 100 resorts with 21,792 beds, 18 hotels with 1,503 beds, 34 guest houses with 614 beds, and 156 safari vessel with 2,492 beds. B. Tourism Market Segments There are two primary market segments in Maldivian tourism: source markets and emerging markets. To understand these markets thoroughly, let us divide the discussion into demographics, psychographics and travelling behavior. 1. Demographics Firstly, the image of the Maldives as a high quality, unique destination has effectively attracted the source markets. As further mentioned by the Ministry of Tourism and Civil Aviation (2011), the main competing destinations to the Maldives are in Southeast Asia, the Caribbean Islands, and the Middle East such as the Red Sea, but Maldives’ unique travel and relaxation experience has placed it on the top spot. In this regard, the source markets are comprised mainly of European countries that generate an average of 77.6% total tourist arrivals, which include Italy, United Kingdom, Germany, and France. On the other hand, Japan competes with the European countries as regards the number of arrivals, making it part of the top five markets of Maldives tourism,. Secondly, the formation of emerging markets has been observed in the growth in arrivals from China, Russia, and India. These markets help in increasing tourist visits during the low tourism season in Maldives. 2. Psychographics By further segmenting the tourism markets of Maldives in terms of their lifestyle, Williams (2008) claimed that both the source and emerging markets go to Maldives to experience a romantic destination, to hold company conferences and exhibitions, to maintain and enhance health and wellness, to host family holidays, and to provide an expanded holiday to the senior members. As such, the Maldives does not only appeal to family and friends, it also appeals to nature-loving tourists and sports enthusiasts. In this regard, Swagatam Tours (2011) pointed out that the three famous locations in Maldives are, firstly, the Baa Attol that is known for its handicrafts and unique clothing; secondly, the isolated island of Fuamulaku that is exceptionally fertile and mystical; and lastly, the Kudahuvadhoo island that is noted for its mysterious mounds called hawittas. 3. Travelling Behavior The tourists that visit the Maldives travel either through air, road, and water (The Travel Guide, n.d.). When going from one island to another, tourists usually ride in the ubiquitous Dhoana, a unique Maldivian boat that is hand-built by master craftsmen (SAARC Tourism, 2009). Made of strong wooden planks that are shaped and pegged to each other, the Dhoana is build to sail in all weather conditions. Aside from Dhoana, powerboats in varying designs and sizes are also commonly used by tourists in Maldives. Powerboats are used since most tourist resorts are in separate islands. Today, windsurfing is becoming a unique mode of transportation for the daring and young tourists. Aside from getting them to their destinations, tourists are provided with an exhilarating experience. Travelling in the Maldives is not restricted to boats, however. Seaplanes and helicopters are also being used to target the upper class tourists who wish to make their island hopping easier and faster. IV. Tourism: Economic and Environmental Impacts In order to more thoroughly understand the significant role being played by tourism, we intend to discuss its positive and negative impacts on the economy and the environment of Maldives. A. Economic Impacts of Tourism Tourism helps in uplifting the economy of the Maldives, firstly, through employment. In this light, employment related to tourism can be viewed in two kinds: (1) direct which involves working in a resort or in a travel agency; and (2) indirect which comprises jobs in the tourism supply sector such as the transportation companies and catering service providers to airlines. As reinforced by the Ministry of Tourism, Arts, and Culture (2009), 16% of Maldivians are directly employed by the tourism sector while 8.5% are indirectly employed. Secondly, tourism creates more profits for local businesses and entices more foreign investments. As such, the top earners in the tourism sector belong to resorts, hotels, and souvenir shops. Most local businessmen earn by putting up their own resorts, hotels, and shops, or by lending their properties to foreign businesses (Maldives Planning and Tourism, n.d.). On the other hand, tourism brings negative effects on Maldives, firstly, by relying too much on this sector. The vulnerability of the tourism sector to various natural and political threats subjects the entire Maldivian economy to such forces (Miadhu Daily, 2009). Secondly, tourism crowds out other sectors such as construction and fisheries as investments are concentrated on this sector only (Index Mundi, 2011). Thirdly, past studies have linked the growth in tourism with inflation. Inflation starts with increase in demand on local products by the visiting tourists. Since demand is high, prices of products increase. As a result, local markets and residents suffer. B. Environmental Impacts of Tourism Tourism can provide both positive and negative effects on the environment. As for the positive effects, firstly, tourism can help tighten the protective measures of the local government on nature-based resources (Bluepeace, 2010). This is currently done through the prohibition of coral and sand mining, rubbish dumping, live bait fishing, and any actions that cause disturbance on corals. Secondly, tourism can also execute local polices that aim at protecting marine sites such as the Rasfari Reef in Kaafu Atoll (Maldives Tourism, 2011). Lastly, the use of renewable energy is also promoted in order to alleviate the emission of harmful chemicals in the environment (Hello-Maldives, 2012). In Soneva Fushi Resort, for example, its local engineering team decided to use salt water to replace the air conditioner in cooling down the rooms. As for its negative effects, pollution is still regarded as tourism’s biggest issue. Waste management is being leniently implemented, especially in private resorts where government control is minimal. Aside from this, the construction and maintenance of resorts and hotels can negatively affect the coral structures, leading to ecological imbalances (Ismail Firaag, n.d.). Analysis and Conclusion As we have discussed, tourism plays a vital role in fuelling the economy of Maldives. However, we have also observed how tourism creates both positive and negative effects not only on the local economy, but also on the environment of Maldives. As such, there is a need to bolster the country’s current tourism plan by integrating economic, environmental and socio-cultural perspectives. For this matter, building on the ideas presented by Ministry of Tourism and Aviation (2010), enhancing the tourism plan of Maldives can be done in five steps. The first step highlights on facilitating sustainable growth and increasing the investment in the sector, while increasing the share of the public from the economic benefits. This begins with the creation of more attractive investment plans through: (1) extending the lease period of resorts and hotels; (2) providing stronger incentives for both local and international businesses; and (3) holding conferences on tourism to reinforce partnerships with key stakeholders. After this, the Maldives’ Department of Tourism can increase the revenues of the public from tourism by revising tax regulations. Lastly, the collection and dissemination of economic and financial data can be further developed through a closer relationship between the Department of Tourism and the Ministry of Finance and Treasury. The second step puts premium on increasing employment opportunities in the tourism sector to gain more participation from the public. This task entails the promotion of careers in tourism in local colleges and universities. Aside from this, it is also necessary to increase the awareness of the public on community-based tourism through various seminars and local promotional activities. Furthermore, it is also vital to promote the heritage and culture in the cultural centers in the Maldives such as Male’. This can be executed through the construction of a local museum and library and through incorporating the performance arts into the travel tour of visitors. The third step focuses on the development and maintaining the supporting infrastructure that is required for the growth of the tourism sector. This begins with the enhancement of the national air-transport network by adding domestic airports to serve the needs of the expanding market. Also, the marine-transport, its storage facilities, and distribution logistics can be also enhanced by: (1) developing harbor facilities for the bunkering of vessels; (2) introducing emergency evacuation, transport, and communication infrastructures; and (3) strengthening the preparedness to resort-specific crises and industry-wide disasters. Last, the medical offers of central and regional hospitals can be upgraded. The fourth step specializes on ensuring that the core principles of environmental sustainability are incorporated into the development of tourism products. This starts with the strengthening of environment regulatory regime that pertains to tourism-related products and facilities. Also, messages of environmental conservation can be enhanced through various marketing campaigns and awareness programs. Furthermore, environmental monitoring of coral reefs, dive sites, and marine protected areas can also be ensured. The last step pays crucial attention on marketing Maldives as a unique destination with innovative products by positioning it as top-class destination for relaxation and adventure. This can be done by strategically crafting the communication messages in all the promotional activities of Maldives. Also, assigning brand ambassadors can help in spreading good publicity for Maldives. Lastly, the use of social networking sites and other technologically-advanced mediums can be tapped to grab the target markets. In conclusion, it can be said that the success in attaining sustainable development in Maldives lies on the oneness in vision of all involved stakeholders. 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