Maldives Graduates to Middle-Income Status

1st January 2011, Male;The Maldives today officially graduated from Least Developed Country (LDC) to Middle-Income Country status, in recognition of the country's strong socio-economic development over recent years. Marking the occasion, acting Minister of Foreign Affairs, Minister of Housing and Environment H.E. Mr. Mohamed Aslam, this morning reaffirmed the Government's view that graduation should be viewed in a positive light - as an achievement and an opportunity rather than as a threat. Notwithstanding, Minister Aslam noted that the move to Middle-Income status will result in the loss of various privileges and benefits that the country has hitherto enjoyed across trade, development assistance and UN budgetary support, and that the Government is working actively to minimize any negative impacts.

The Maldives has been included on the United Nation's list of Least Developed Countries ever since the list was officially established in 1971. LDCs are those countries which are considered to possess the lowest indicators of socio-economic development (calculated on the basis of gross national income per capita, human capacity, and economic vulnerability). Following the graduation of Botswana (1994), Cape Verde (2007), and now the Maldives (2011), there are 48 LDCs - mainly from Africa but also Asian States including Bangladesh, Nepal, Bhutan and Afghanistan. Because of the particular difficulties faced by LDCs, the international community, led by the UN, offers them various preferences and benefits. For example, they tend to receive higher levels of development assistance and concessionary finance than other countries, enjoy preferential access to overseas markets, and receive support from the UN to travel to and attend international meetings.

The United Nations Conference on Trade and Development (UNCTAD) which has supported the Maldives in its preparations for graduation, has estimated that the main impacts will fall on: levels of international development assistance earmarked for the Maldives; on the country's bilateral trade with key markets such as the EU and Japan; on the level of multilateral trade obligations (under the WTO); and on the national budget as a consequence of the removal of financial support for travel to international meetings etc.

Ahead of graduation, the Government has therefore been working to minimize these negative impacts and help ensure a "smooth transition" from LDC to Middle-Income status. For example, at last year's Maldives Donors' Forum, development partners were urged to continue with current levels of donor support; in the area of bilateral trade, the Government recently negotiated with the EU to ensure that Maldivian exporters will continue to enjoy preferential access to the European market for a further three years; regarding multilateral trade, the WTO is actively assisting the Maldives implement its smooth transition and has also agreed to continue trade-related technical assistance to the Maldives under the LDC Enhanced Integrated Framework for a period of three years (with an option of a two more years); and in order to soften the impact on the Maldives' budget, the Government has negotiated with the Swiss Government to continue to subsidize the cost of renting office space for the Maldives Mission in Geneva for three further years. The Government is also in talks with the UN in New York to extend international travel support.

Longer-term, the Maldives is pushing for the establishment of a new official UN category of "Small Island Developing States" (SIDS) which would enable important preferences and benefits to continue where they are vital for SIDS development. In the WTO, the Maldives is already working with the Small and Vulnerable Economies (SVE) Group to ensure that such economies benefit from necessary flexibilities in the current round of global trade liberalization talks.

ENDS