The Free Trade Agreement (FTA) between the Maldives and China, set to take effect on 1 January 2025, is expected to bring substantial changes to the country’s trade dynamics. Economic Minister Mohamed Saeed, speaking at an event on Monday, outlined the potential benefits and addressed concerns surrounding the agreement.
One of the key provisions of the FTA is that Maldivian importers will benefit from up to 90% reductions in import duties on many goods within the next five years. This could lead to significant cost savings for businesses, particularly in sectors that rely on imports. Additionally, Maldivian exporters will gain zero-tariff access to China for 296 fish products, opening up new opportunities in the Chinese market.
Despite these potential benefits, the agreement has faced criticism, particularly from opposition parties. Concerns have been raised over the impact on the Maldives’ long-established trade relationships, notably with countries like India and the United Arab Emirates (UAE). Minister Saeed acknowledged these concerns but emphasised that the government is working to diversify its trade relationships to mitigate any adverse effect.
Minister Saeed also addressed concerns about the loss of revenue from import duties due to the FTA. He explained that the government plans to compensate for this through alternative revenue sources, such as the Goods and Services Tax (GST) and other taxes. He cited the example of a local guesthouse project, where the agreement could save businesses up to MVR 600,000 on construction materials.
The FTA was initially signed in December 2014 during the presidency of Abdulla Yameen Abdul Gayoom, after two years of negotiations. Although it was approved by the Maldivian Parliament in November 2017, it was not implemented during the administration of President Ibrahim Mohamed Solih. With the election of President Dr Mohamed Muizzu in 2023, the agreement is now being put into effect.
Trade between the Maldives and China currently amounts to about USD 700 million annually, and under the terms of the FTA, this is expected to increase to USD 1 billion over time.
Minister Saeed concluded his remarks by urging Maldivian businesses to take advantage of the new opportunities that the FTA presents, while acknowledging the need for careful management of the country’s broader trade strategy.
