Government estimates a national income loss in USD 7.8 million over no-tariff goods import from China to Maldives through the Free Trade Agreement (FTA).
While the FTA has been inked during President Abdulla Yameen's maiden state visit to China, the documents reflecting details of the agreement has been presented to parliament for further approval. In this document it is cited that China is subjected to import a total of 8,626 distinct products with a duty waive off while Maldives would export a total of 8.277 distinct products in the same manner to China.
The agreement read that from the date of FTA becoming official trade-grounds Maldives will lose income on duty around USD 4 million - which is contributed by the duty collected from goods imported from China - from "A" category goods.
Back in 2014 China had imported USD 73.43 million worth of goods to Maldives under "A" category from which USD 4 million was collected as duty. This is 40% of the total revenue collected on duties.
While the initial year of FTA establishment Maldives is expected to lose a close approximation of USD 4 million based on government statistics while this would increase on an annual rate reaching around 7.8 million by 8th year of FTA. The loss in state revenue is expected to increase each year in inverse correlation to the increase of goods and merchandise import from China - which the state expects as a high probability scenario.
Categories B and C are also expected to register losses following the FTA establishment. From category B China imports a total of 1751 different goods while the FTA will recede duty income generate under this category by USD 2.35 million. From Category C the Asian economy giant imports 433 distinct items to Maldives and likewise with the FTA in place, Maldives will lose an income of USD 1.54 million.
Back in 2014 China had imported USD 15.9 million worth goods under category B and USD 10.25 million worth under category C while Maldives collected revenues from duty at USD 2.35 million and USD 1.54 million respectively from B and C.
The agreement also cites a "sensitive list" comprising of high-duty goods which would not be subjected to no-tariff or full duty waiver. China had reportedly imported USD 5.16 million worth goods reflected in this list while Maldives made a duty-income of USD 2.16 dollars from it.
The sensitive items list includes tobacco products, pork and related produce and plastic/polymer bags along with alcoholic beverages.
To accommodate for the losses made in duty income the Maldivian government had institutionalized several trade or business approaches such as revenue generation of duty-waived off goods through GST collection. Additionally Maldives is expected to import raw materials from China in order to produce goods to be sold locally.
Furthermore the FTA will attract big-league investors from China increasing the number of foreign tied businesses in Maldives thus boosting the economy.
Though Maldives has inked the agreement, the China-Maldives free trade agreement will be acted upon once parliament approves in proceeding with it.
