Maldivians adapt to Temu tax as dollar crisis persists

For 25-year-old student Nauma, the math still works in Temu's favour. Ordering from the popular Chinese platform is still cheaper than buying from shops in Malé, she suggested.

"So why wouldn't people buy? And it's not a problem either. In this economy everyone wants to stretch their money," she observed. "In the end, these items are brought to Malé and advertised on an Instagram page at a 100 percent higher price. People would get angry at having to shop like that, wouldn't they?"

The 30 percent transaction fee took effect on July 1, targeting six e-commerce sites: Temu, Shein, Alibaba, AliExpress, Lazada and eBay. According to the national bank, online shopping prior to the fee represented 75 percent of foreign purchases by BML customers. The six merchants – five Chinese and one American – accounted for a third of e-commerce transactions (from a total of US$ 34 million a month).

Temu alone made up US$ 7 million, “mostly used for business purposes,” according to BML, referring to local resellers of Temu products. 

With the shift to social media-based retailers, local entrepreneurs imported goods themselves and sold through Instagram and other platforms. Two months after the transaction fee was introduced, resellers appear to be offering prices that split the difference between the now-taxed Chinese sites and traditional Malé retailers.

"I usually buy things that aren't available in Malé. Then I drop small items that I see into the cart," said Hassan Zayaan, a 37-year-old taxi driver. 

The free shipping offered by Temu was a key factor behind the appeal. "I used to buy from Amazon before. From the US. But that was very costly. Now we're getting the same products directly from the manufacturer's side at a nice rate," he said.

A 31-year-old customs officer echoed the sentiment: "When we shop from Temu, people ask why. But look at how cheap things are. Why shouldn't we? This is happening because of how expensive things are in Malé."

A month after Temu launched free shipping in partnership with the Maldives Post in April this year, the state-operated post office sought to hire new staff for mail clearing and delivery as an influx of Temu packages created a backlog in delivery and PikPost operations. Long queues stretched outside collection centres in Malé and Hulhumalé.

But shopping from Temu often involved a trade-off between price and quality.

A 33-year-old investment consultant shared both the risks and rewards: "I buy mostly household stuff. It's so much cheaper and if you look at the reviews and do good research, you get really top quality products too. I know a friend who ordered a carpet for less than one dollar and got scammed with a photograph. But that's because he just ordered without actually checking out the product. I haven't had any issues like that."

As the tax has pushed consumers toward more careful, research-driven purchasing –potentially reducing the impulse buying that platforms like Temu are designed to encourage – it provided unexpected benefits for those seeking to break out of problematic shopping habits.

"It's not just useful items. Sometimes you'd just buy something for fun because it's cheap. It's a bit addictive really. When I'm bored or sad, I find myself opening the app," a 29-year-old stay-at-home mother reflected.

The government-controlled bank slapped the fee on Chinese platforms despite the current administration’s earlier decision to implement a controversial free trade agreement with China. The FTA, which the previous administration kept on hold by refusing to enact the required legislative changes, came into force in January. 

On Wednesday, Economic Development Minister Mohamed Saeed announced plans to host a one-day workshop in collaboration with Chinese e-commerce giant Alibaba, “aimed at supporting online and e-commerce businesses in the Maldives.” 

“The initiative is designed to help Maldivian entrepreneurs create seller accounts on Alibaba.com enabling them to register, promote, and sell their products without barriers. This effort is part of ongoing discussions with Alibaba.com, supported by the Chinese government, as we work to strengthen bilateral ties under the China-Maldives Free Trade Agreement,” he said.

Behind the seemingly contradictory policies lies a more fundamental problem – the country's deepening foreign currency shortage. 

In late June, as the announcement of the shopping fee sparked widespread public anger, the Bank of Maldives defended the restrictions as necessary to “support essential payments." 

The 30 percent fee mirrors the parallel market premium as the black market rate for US dollars continues to hover over record highs above MVR 20. The central bank has been struggling to maintain the MVR 15.42 official exchange rate under increasing pressure from rising debt servicing costs and an elevated import bill. 

The amount of US dollars needed for foreign transactions was threefold higher than the amount of foreign currency the bank purchases from customers, former BML CEO Karl Stumke explained in August last year.

"The card usage impacts our ability to provide foreign currency support to our business customers and we have this anomaly where the bank provides 75 percent less foreign currency to the economic sector than we do for discretionary spend on cards dominated by travel and online shopping,” he said at the time.  

Asked about the impact of the fee over the past two months and whether it has significantly reduced foreign currency outflow, the Bank of Maldives' public relations manager said data from July and August will be made public at a later date. "We are in the process of compiling them," he told the Maldives Independent.