Starting a business 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.
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.
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