2014 Index of Economic Freedom

Maldives

overall score51.0
world rank145
Rule of Law

Property Rights20.0

Freedom From Corruption21.9

Limited Government

Government Spending43.8

Fiscal Freedom97.4

Regulatory Efficiency

Business Freedom87.4

Labor Freedom71.7

Monetary Freedom69.4

Open Markets

Trade Freedom43.8

Investment Freedom25.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 0.3 million
  • GDP (PPP):
    • $3.1 billion
    • 3.5% growth
    • 5.1% 5-year compound annual growth
    • $9,235 per capita
  • Unemployment:
    • 28.0%
  • Inflation (CPI):
    • 10.9%
  • FDI Inflow:
    • $284.0 million
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The Maldives’ economic freedom score is 51.0, making its economy the 145th freest in the 2014 Index. Its score has increased by 2.0 points, with a significant improvement in the control of government spending and labor freedom outweighing declines in investment freedom, property rights, and freedom from corruption. The Maldives is ranked 32nd out of 42 countries in the Asia–Pacific region, and its overall score is below the world and regional averages.

The Maldives’ economic freedom was first assessed in the 2009 Index, and there has been no overall progress since then. Declines in six of the 10 economic freedoms, notably labor freedom, monetary freedom, and investment freedom, have offset significant improvement in the control of government spending. The rule of law, measured through property rights and freedom from corruption, has deteriorated substantially. The Maldives’ economy is rated “mostly unfree,” the same as it was six years ago.

With no system of direct taxation, the government relies heavily on import taxes, tourism taxes, and income generated by state-owned enterprises. Weaknesses include chronically high government spending, an inefficient and outsized public sector, and widespread corruption. The state still plays a large role in the economy through state-owned enterprises, limiting private-sector activity. Public ownership is widespread in every sector except tourism and remains the largest source of employment, hiring over one-third of the formal labor force.

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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 dictator Maumoon Abdul Gayoom. Fresh elections in September 2013 were annulled by the Supreme Court due to voting irregularities and were to be rescheduled by the end of the year. Tourism is the centerpiece of the economy, contributing 28 percent of GDP and over 90 percent of government tax revenue.

Rule of LawView Methodology

Property Rights 20.0 Create a Graph using this measurement

Freedom From Corruption 21.9 Create a Graph using this measurement

In recent years, a new, independent auditor general has provided greater transparency and shed light on pervasive corruption. The tumultuous political situation in the wake of the removal at gunpoint of the president and replacement by his vice president in 2012, however, at times has paralyzed the government. The rule of law remains uneven, and the inefficient judicial system is subject to political influence.

Limited GovernmentView Methodology

The Maldives has no corporate or individual income tax. Commercial banks are subject to a 25 percent tax. The overall tax burden is 16.2 percent of gross domestic income. Government expenditures continue to rise at 43 percent of GDP. Public debt reached about 78 percent of the size of the domestic economy in the most recent year. Political uncertainty and expanding security spending have increased budgetary uncertainty.

Regulatory EfficiencyView Methodology

The non-transparent and costly regulatory framework continues to discourage the emergence of entrepreneurial dynamism. Labor regulations are not enforced effectively, and there is no efficient countrywide labor market. A large share of the workforce is employed in the informal sector. The new government has increased spending and the inflation rate remains over 10 percent.

Open MarketsView Methodology

The average tariff rate is 20.6 percent, and import quotas are imposed on some agricultural imports. Political unrest deters foreign investment. Banking has expanded, but costs are high and access to financial services is limited. As part of efforts to enhance private-sector development, the state, which owns over half of the largest telecommunications company, has embarked on a mobile phone banking project.

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 Kong90.10.8
2Singapore89.41.4
3Australia82-0.6
4New Zealand81.2-0.2
5Taiwan73.91.2
6Japan72.40.6
7Macau71.3-0.4
8South Korea71.20.9
9Malaysia 69.63.5
10Kazakhstan63.70.7
11Thailand 63.3-0.8
12Azerbaijan61.31.6
13Samoa61.14.0
14Kyrgyz Republic 61.11.5
15The Philippines60.11.9
16Sri Lanka60-0.7
17Vanuatu59.52.9
18Mongolia58.9-2.8
19Fiji58.71.5
20Indonesia58.51.6
21Tonga58.22.2
22Cambodia57.4-1.1
23Bhutan56.71.7
24India55.70.5
25Pakistan 55.20.1
26Bangladesh 54.11.5
27Papua New Guinea53.90.3
28China52.50.6
29Tajikistan52-1.4
30Laos51.21.1
31Maldives512.0
32Vietnam50.8-0.2
33Nepal50.1-0.3
34Micronesia49.8-0.3
35Burma46.57.3
36Uzbekistan46.50.5
37Kiribati46.30.4
38Solomon Islands46.21.2
39Timor-Leste43.2-0.5
40Turkmenistan42.2-0.4
41North Korea1-0.5
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