Bandhu Ibrahim Saleem
This article is part of Covid 19: Stimuli and Beyond edition of the Journal of the Maldives Economic Review, Volume 1, Issue 3, March 2020
Tourism in Maldives accounted for 25.2 per cent of GDP in 2018 and recorded a gross foreign exchange receipt of USD 3,157.0 million in 2019. The sector directly contributed about 90 per cent of foreign exchange income. By the end of 2019 the total of tourist arrivals to Maldives stood at 1,702,831, which is an increase of about 15 per cent over 2018. After a setback in tourist arrivals in 2018, the sector recovered in 2019.
The main markets for 2019 were European countries, which consisted, among, others, of Italy, Germany, UK, Russia and France. These markets totalled 833,904 passengers, 49 per cent of the market. The next largest markets were in the Asia Pacific region, with arrivals of Chinese and Indians totalling 705,117, which was 41 per cent. The balance was from the Americas, with 84,793 (5 per cent), and the Middle East comprising of 60,003 (about 4 percent). The government continues to invest in aviation infrastructure. At Malé International Airport, the existing single runway is to be replaced by an additional runway imminently, and a new terminal building, cargo facilities, fuel farm and harbour to handle boats are works underway. To meet the increasing demands of sea operations, an additional terminal building and sea plane docks and maintenance facilities have been developed. Regional airports in three atolls are under construction, so that easy air access to the atolls are becoming more available. Private sector continues to invest in domestic airlines as well as in seaplanes. This competition is appreciated by the tour operators, resorts, and guest house owners in the atolls. Hence Venlana International Airport at Malé is the main hub for airlines. The total room availability by the end of 2019 was 49,924 beds or 24,962 rooms. The bulk of these falls into 156 tourist resort facilities, and 607 island guest houses which are located on the outer atolls, which are for budget travellers. The floating cruisers were 156. The number of hotels in the cities were 12. All these facilities in 2019 produced 10.68 million bed nights with an occupancy rate of 61 per cent. The average length of stay was around 6.3 nights. For the year 2020 the Maldives Monetary Authority (MMA) forecasts a total arrival of 1.8 million tourists, with occupied bed capacity of 10,800 million nights. The total revenue for 2020 is estimated to be increasing at 10 per cent over the year 2019, or USD 3,622 million. With the beginning of the year 2020, the markets responded positively and growth as projected appeared likely to hold throughout the year. Tourist arrivals for the year 2020 continued steadily upwards, both in European and Chinese markets. The Chinese Lunar new year bookings were reported as steady. On or about 10th January, the news of the Corona Virus (COVID-19) were reported on press, and this was followed by cancellations from the Chinese market. Whilst the direct flights from China to Maldives continued then, on 20 February 2020 the government announced a travel advisory by the Minister of Tourism that all flights from China to Maldives were being suspended. Meanwhile the European flights continued to operate till March 14, and the government subsequently issued a further travel advisory to suspend tourist arrivals from selected parts of Italy, Germany and France.
Maldives declared Health Emergency lockdown on March 20th, under the Public Health Emergency law and informed all concerned parties that the policies and procedures were being announced due to the COVID-19 virus. Under this law quarantine facilities were established in airports and islands. The COVID-19 cases were being detected and actions taken to contain it.
United Nations World Tourism Organization (UNWTO) estimates that as a result of the impact of COVID-19 the world tourism for 2020 will declined by -1 to -3 per cent with a drop in revenue of USD 30 – 50 billion.
Whilst no estimate of cancelled bed nights is announced by the authorities, it is estimated that Chinese tourist numbers during the winter 2020 period will be very low. The industry estimates that this market will not recover till July 2020. The losses from this market alone is estimated to be between USD 30 – 40 million for the first four months of the year. The situation in European markets too began to show the effects of COVID-19. The government has already announced the suspension of tourist arrivals from Italy, followed by selected cities of France, Germany and Spain. Despite the high season (November 2019 – March 31) cancellations for the future bookings started falling. This was felt by the announcements by the resort owners and operators to close the resorts for 2-3 months from the beginning of April 2020. This results in staff pay reduction and being sent on leave.
President Ibrahim Mohamed Solih earlier announced that due to COVID-19 our GDP growth was estimated to decline, by 0.5 to -5 per cent during this year. In terms foreign exchange the preliminary shortfall was estimated to be about USD 650 million.
To address this issue government announced several packages to support the economy. Bank of Maldives announced USD 2.5 million relief loan per resort for two years or more to those worst affected. The Ministry of Fisheries and Agriculture is extending MVR 100 million to support the fishing industry. The Ministry of Finance announced a stimulus package of MVR 2.5 billion to support and to meet the short-term working capital needs of businesses, which will be channeled through the banking system at a favourable interest rate of 6 per cent for a three-year repayment period. The Maldives Monetary Authority announced a USD 150 million facility for commercial banks to support their operations.
The future of tourism is in uncertainty, because COVID-19 has not been fully controlled in tourism generating markets. The result may push many resorts in Maldives to suspend operations for about 2-3 months. The promotions for the recovery are essential to begin now for generating markets to minimise the damage.
Maldives Tourism Promotion Board (MTPB) announced that they are embarking on campaigns in India and Russia soon followed by promotion in China. This will be a good boost for the tourism industry. Together with the possible upturn of generating markets, and the government working with the industry, there will be a slow but steady recovery by the end of summer season 2020.
About the Author Mr. Bandhu Ibrahim Saleem commenced his Government Services at the Office of the Prime Minister in 1967. He served at Maldives Shipping Limited. Ministry of Finance. MMA and also at the Audit Office of the Government Mr. Saleem has managed MTCC plc and MACL and started and managed Island Aviation Services Limited and has also served as Vice Governor to the World Bank, member of the Board of Directors of Dhiraagu, MNSL, MTCC and MFLC. Today he is the Chairman of Solarelle Insurance Company and Director at the Cyprea Group