2013 Index of Economic Freedom

Maldives

overall score49.0
world rank149
Rule of Law

Property Rights25.0

Freedom From Corruption25.0

Limited Government

Government Spending14.5

Fiscal Freedom98.8

Regulatory Efficiency

Business Freedom88.7

Labor Freedom64.0

Monetary Freedom70.4

Open Markets

Trade Freedom43.7

Investment Freedom30.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 0.3 million
  • GDP (PPP):
    • $2.8 billion
    • 7.4% growth
    • 6.1% 5-year compound annual growth
    • $8,731 per capita
  • Unemployment:
    • 14.5%
  • Inflation (CPI):
    • 12.1%
  • FDI Inflow:
    • $281.6 million
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The Maldives’ economic freedom score is 49, making its economy the 149th freest in the 2013 Index. Its score has decreased by 0.2 point from last year, with a significant improvement in the control of government spending more than offset by declines in labor freedom, investment freedom, and monetary freedom. The Maldives is ranked 34th out of 41 countries in the Asia–Pacific region, and its overall score is below the world and regional averages.

The Maldives’ efforts to advance economic freedom have been uneven and fragile. Impediments to sustained private-sector growth and diversification persist, in large part due to institutional deficiencies such as corruption and the weak protection of property rights.

Other weaknesses include chronically high government spending that perpetuates the inefficiency of the outsized public sector. The government still plays a large role in the economy through state-owned enterprises, severely undermining entrepreneurship. Public ownership is widespread in every sector except tourism, and the public sector remains the largest source of jobs, employing over one-third of the labor force. Severe government impediments to economic interactions with the global economy continue to degrade productivity and raise costs.

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Background

The military forced President Mohammed Nasheed to step down in February 2012 after several weeks of anti-government street protests instigated by former Maldivian dictator Maumoon Abdul Gayoom. Nasheed had been elected president in the Maldives’ first-ever democratic election in 2008, replacing Gayoom, who had ruled the country for 30 years. Waheed Hassan Manik has been named interim president until new elections are held, most likely in 2013. The Maldives has largely recovered from the devastation caused by the 2004 Asian tsunami. Tourism is the centerpiece of the economy, contributing 28 percent of GDP in 2012 and over 90 percent of government tax revenue. Fishing employs about 11 percent of the labor force, and manufacturing provides less than 7 percent of GDP.

Rule of LawView Methodology

Property Rights 25.0 Create a Graph using this measurement

Freedom From Corruption 25.0 Create a Graph using this measurement

There is little private ownership of land, but land reform is being considered. The rule of law remains uneven across the country. The inefficient judicial system is subject to political influence, and application of laws is inconsistent. In February 2012, the president was removed from office at gunpoint and replaced by his vice president. Corruption remains prevalent throughout the economy.

Limited GovernmentView Methodology

There is no income or corporate tax. Bank profits are subject to a profits tax. Overall tax revenue is 11 percent of total domestic income. Government spending remains quite high at a level equivalent to 53.4 percent of GDP. The budget deficit has been chronically high at over 10 percent of total domestic output, and public debt has reached nearly 70 percent of GDP. Recent policy slippages have undermined joint IMF and World Bank debt programs.

Regulatory EfficiencyView Methodology

The overall regulatory environment is not conducive to new business formation and operation. Although it takes only five procedures to launch a business on average, licensing requirements are time-consuming. The labor market is underdeveloped. Much of the labor force is employed in the large public sector. Lack of competition in the market has inflated price levels, hurting the standard of living.

Open MarketsView Methodology

The government relies heavily on tariff revenues to fund its activities. The trade-weighted average tariff rate is prohibitively high at 20.6 percent, and non-tariff barriers add further to the cost of trade. Heavy bureaucracy in the investment approval process and political unrest hamper the already weak investment regime. Banking has expanded, but high costs and limited access to financial services contribute to the shallowness of the sector.

Country's Score Over Time

Bar Graph of Maldives Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Maldives to other economic country groups

Regional Ranking

rank country overall change
1Hong Kong89.3-0.6
2Singapore880.5
3Australia82.6-0.5
4New Zealand81.4-0.7
5Taiwan72.70.8
6Japan71.80.2
7Macau71.7-0.1
8South Korea70.30.4
9Malaysia 66.1-0.3
10Thailand 64.1-0.8
11Kazakhstan63-0.6
12Mongolia61.70.2
13Sri Lanka60.72.4
14Azerbaijan59.70.8
15Kyrgyz Republic 59.6-0.6
16Cambodia58.50.9
17The Philippines58.21.1
18Fiji57.2-0.1
19Samoa57.1-3.4
20Indonesia56.90.5
21Vanuatu56.60.0
22Tonga56-1.0
23India55.20.6
24Pakistan 55.10.4
25Bhutan55-1.6
26Papua New Guinea53.6-0.2
27Tajikistan53.40.0
28Bangladesh 52.6-0.6
29China51.90.7
30Vietnam51-0.3
31Nepal50.40.2
32Micronesia50.1-0.6
33Laos50.10.1
34Maldives49-0.2
35Uzbekistan460.2
36Kiribati45.9-1.0
37Solomon Islands45-1.2
38Timor-Leste43.70.4
39Turkmenistan42.6-1.2
40Burma39.20.5
41North Korea1.50.5
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