China is the world's largest economy. Maldives is one of the smallest economies. The two nations are set to sign a free trade agreement this year. This will facilitate bigger markets and concessions to the businesses. What are the benefits of such an agreement to the Maldives? What are the opportunities that would be opened to Maldivian businesses from this FTA?
"This is one of the projects that will create the biggest opportunities for local businesses. Local businesses should seize the opportunity," Economic Minister Mohamed Saeed said.
The discussions to establish the FTA have already begun. The first round of discussions had been completed, with additional discussions to commence next month. The Government is targeting to sign the agreement this year.
China is the one of the biggest exporters to the Maldives. As of last year, China had sold MVR 2.2 billion worth of goods. This January, China had sold MVR 182 million worth of goods. China accounts for the highest tourist arrivals to the country. China based tourism, airlines and businesses are rapidly being established and developed. The FTA will open bigger and better collaboration between the two economies.
"Maldivians have many opportunities in Tourism sector in China. There are some bureaucratic hurdles to overcome. If those issues can be resolved, then tourism can rapidly expand," a hotelier in the guesthouse sector said.
The bigger question is what will be the benefits of such an FTA to the country?
The FTA between the two nations will open China to the local exporters. This is especially true for fish and fish products. Local fish production companies will be able to market their existing and test potential products on a mass scale in the Chinese market. China is a major consumer of fish and mariculture products. Maldives currently exports certain varieties of fish to the Chinese market.
Minister Saeed said the main line of discussions will be to open Chinese markets to Maldivian products. He said the Government was negotiating to ensure that local products are duty exempt products.
"We have the green light to export fish and mariculture products to China market. We are discussing on giving 0 percent tariff on over 400 products," Saeed said.
Maldives is rapidly expanding the fisheries sector, adding various products to the product range. Government's main fish packing factory at Felivaru, is undergoing upgrades. The upgrades are to be completed within a month. Once completed, the factory will be able to produce up to 50 tons of fish and produce canned fish and pouches. The projections for zero tariff exports show high profits.
Local exporter, Ensis Fisheries Managing Director Mohamed Waseem said if duty exemption was granted to local exporters, then the Fisheries sector will enjoy a boom.
"Right now a 50 percent duty is levied on products. If this can be stricken off, the profits for the sector will rise," Waseem said.
Statistics published by Fisheries and Agriculture Ministry show that over 77 products are marketed by six cooperatives operating in the country. High quality taro products, lacquer products and souvenir products are produced, packaged and marketed by those cooperatives. The quality of these products can be raised and marketed to China.
Minister Saeed said if 30 percent of the product is manufactured in the country, the product can be designated as a Maldivian product and marketed to China.
"If 30 percent of the total value is produced in Maldives, we can facilitate discussions for sale to China. Local talent or human resources has to be used to be designated as a Maldivian resource. We are pushing for zero or low tariffs, even in the worst case, or at 40 percent," Saeed said.
What will be the benefits to importers? This is a key question they have regarding the FTA.
Minister Saeed noted that local importers will be given many concessions from this agreement.
"Airlines such as Maldivian, Mega Maldives. Those airlines have to return back to Maldives for even a small issue such as maintenance. We will negotiate to acquire licenses to travel from one destination to the other for maintenance. All bureaucracies attached with importers, border customs, shipping will be removed," Minister said.
The FTA is clearly a historic move for both nations. New opportunities will be available for Maldivian businesses. The question remains whether the businesses are ready for the FTA.