Starting a business in Maldives
Starting a business in Maldives
Business Environment in Maldives
Let discuss on advantage and disadvantage of starting a business in Maldives . The economic growth of Maldives has been powered mainly by tourism which spin-offs in the transportation, communication, and construction sector. Real GDP growth was recorded around $1.5 billion in 2010 and it is growing 4% according to the preliminary information. But Maldives fell in the problematic situation in the time of Tsunami of 2005 and in 2009 when GDP shrank by 3 percent because of the declining of tourist arrivals at the same time capital flows hindered in the wake of the global financial crisis. The government of Maldives took tight monetary policy which helped to recover from the financial crisis and reduced excess liquidity and curbed inflation to about 6% through mainly focusing on the tourism sector.The government has planned to cut down expenditure through shrinking the number of public servants.
Advantage and disadvantage for the foreign investors
There are many advantage and disadvantage of starting a business in Maldives as foreign investor. The government of Maldives opened the opportunity of foreigners in the late 1980. The foreign investors mainly focused in the sector of resort management, telecommunication, accounting and banking related sector including insurance, courier service, manufacturing and air transport. To promote and attract foreign investors, Invest Maldives Division and the Licensing and Regulations Division within the Ministry of Economic Development are working jointly. Foreign investors should bear in mind that all proposed investments are reviewed by the Ministry of Economic Development prior to granting license. Foreign investors should follow the law 25/79 which governs the agreement or negotiation between the government and foreign investors.
- US$ 1 million is required for the 5 -10 years initial agreement and foreign investors will get the opportunity to renew the agreement later but all kinds of terms and conditions will be facilitated for the larger projects.
- One-stop shop services are offered by the Ministry of Economic Development for the foreign investors and they will get the facilities of importing duty concessions, ownership up to 100% along with facing no restriction on sending their earning profit to the own countries.
- The foreign investors should pay the royalty fees to the government of Maldives in annual basis which is 1.5% of gross income or 7.5 percent of profits and for the big companies,it could be greater in 3% of gross income or 15 percent of profits.
- Personalincome taxes have not been imposed in Maldives yet but the bank profits are counted as tax and the tax on tourism sector has been passed by the parliament of Maldives in 2010.
- Joint venture company registration has been approved in Maldives in the following ten sectors such as financial consultancy, auditing, insurance, water sports, commercial diving, domestic air transport, airline catering, game fishing, technical support services, apparel manufacturing, water bottling, cement, agencies, spa operators, water purification, boat building, software development, ferry services, finance leasing, fish processing, traditional medicine, underwater photography, ice making, restaurants, valuation, flying schools and IT services.
- The total time of completing the whole process for approval could be taken within 30 days.
- Besides, the door of foreign investments is opening in more broadly because government is looking more foreign investors in the media and entertainment industry along with the utilities and hospital management.
- The government encourages new skills new projects which are environment friendly and offers training to local employees. The government has an intention to move from being a service provider to a regulator through enhancing the role of private sector and establishing public-private partnerships in selected state-owned companies.
Disadvantage of starting a business in Maldives
Conversion and Transfer Policies
The currency exchange rate has been settled at 12.8 Rufiyaa to the dollar officially and this rate unchanged in the time from 2001. This currency is non-convertible and mainly dependent on imports. In the financial year of 2009 and 2010, foreign exchange shortage affected business. After that, the parliament imposed some restrictions on the foreign exchange and some international transactions that is another disadvantage of starting a business in Maldives.
Exportation and Compensation
The government of Maldives can suspend any kind of foreign investment with or without notice at any time according to the Law 25/79 if the foreign investors violate the security act of the country is disappointed of starting a business in Maldives.
As a Muslim country, the constitution of Maldives is based on Islamic Sharia Law. Some business law could be critical to maintain for the foreign investors. They also should bear in mind that there are no laws for pertaining to arbitration and such foreign investment which has disputation below US$ 1 million will be referred to the courts.
The political violence is going on in Maldives from 2008 from their first multi-party presidential election and before that Maldives faced terrorist attack through bomb busting for the first time in 2007 which hindered the investment and discouraged the foreign investors starting a business in Maldives.
Corruption in Maldives
Corruption is a big problem in Maldives. The public sector and the public officials are engaged in bribery and this kind of trend is disappointed starting a business in Maldives. So, sometimes foreign investors think of the negativity on investment because of the safety issue.
Maldives-S & F Consulting Firm Limited
Secondary phone: +601136901890