The Republic of Maldives comprises 1,190 islands in 20 atolls spread over 348 square miles in the Indian Ocean. Tourism is the main source of economic activity for Maldives, directly contributing close to 30 percent of GDP and generating more than 60 percent of foreign currency earnings. The tourism sector experienced impressive growth, from 655,852 arrivals in 2009 to 1.7 million in 2019, before a steep decline in 2020 resulting from the COVID-19 pandemic. Tourism began to recover in late 2020 and reached 1.3 million in 2021. This recovery in tourism will likely continue to drive the economy. Following the COVID-19 outbreak, the government re-emphasized the need to diversify, with a focus on the fisheries and agricultural sectors.
GDP growth averaged six percent during the decade through 2019, lifting Maldives to middle-income country status. Per capita GDP is estimated at USD 6,698 in 2020, the highest in South Asia. However, income inequality and a lack of employment opportunities remain a major concern for Maldivians, especially those in isolated atolls. Following the COVID-19 outbreak, GDP fell 33.5% percent in 2020. With the tourism industry’s recovery, GDP grew 31.6 percent in 2021.
Maldives is a multi-party constitutional democracy, but the transition from long-time autocracy to democracy has been challenging. Maldives’ parliament ratified a new constitution in 2008 that provided for the first multi-party presidential elections. In 2018, Ibrahim Mohamed Solih of the Maldivian Democratic Party was elected president, running on a platform of economic and political reforms and transparency, following former President Abdulla Yameen whose term in office was marked by corruption, systemic limitations on the independence of parliament and the judiciary, and restrictions on freedom of speech, press, and association. The MDP also won a super majority (65 out of 87) seats in parliamentary elections in April 2019, the first single-party majority in Maldives since 2008. President Solih pledged to restore democratic institutions and the freedom of the press, re-establish the justice system, and protect fundamental rights. Corruption across all sectors, including tourism, was a significant issue under the previous government and remains a concern.
Serious concerns also remain about a small number of violent Maldivian extremists who advocate for attacks against secular Maldivians and may be involved with transnational terrorist groups. In February 2020, attackers stabbed three foreign nationals – two Chinese and one Australian – in several locations in Hulhumalé. ISIS claimed responsibility for an April arson incident on Mahibadhoo Island in Alifu Dhaalu atoll that destroyed eight sea vessels, including one police boat, according to ISIS’ online newsletter al-Naba. There were no injuries or fatalities. Speaker of Parliament and former President Mohamed Nasheed was nearly killed in a May 6, 2021, IED attack motivated by religious extremism. Nasheed sustained life threatening injuries and several members of his security and bystanders were also injured. Nine individuals have been charged in connection with the attack, with one already convicted.
Large scale infrastructure construction in recent years contributed to economic growth but has resulted in a significant rise in debt. The Maldives’ debt-to-GDP ratio increased from 58.5 percent in 2018 to an estimated 61.8 percent in 2019 according to the World Bank (WB); this further increased to 138 percent in 2020 according to the Ministry of Finance (MoF), an increase driven by a sharp drop-off in government revenue.
Maldives welcomes foreign investment, although the ambiguity of codified law and competition from politically influential local businesses act as deterrents. U.S. investment in Maldives has been limited and focused on the tourism sector, particularly hotel franchising and air transportation. In 2021, construction, transportation, fisheries, and renewable energy also benefited from increased FDI.
On December 28, 2020, Maldives submitted an updated Nationally Determined Contribution (NDC) which includes an enhanced ambition of 26 percent decrease in emissions and carbon neutrality by 2030, conditioned on receiving financial, technological, and technical support.
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
Maldives opened to foreign investment in the late 1980s and currently pursues an open policy for foreign investment. A weak and, in some cases, arcane system of laws and regulations deters some investment. Foreign investment in Maldives has primarily involved resort management, but also includes telecommunications, accounting, banking, insurance, air transport, real estate, courier services, and some manufacturing.
Invest Maldives, an organization within the Ministry of Economic Development, is the government’s lead investment promotion arm. Services provided by Invest Maldives include promoting Maldives as an investment destination, providing information to potential investors about Maldives, guidance on investment approval and business registration, and facilitating the licensing of business. Every year, Invest Maldives holds forums in collaboration with foreign consulates and embassies, business councils, and other institutions to attract foreign investment. Invest Maldives plans to expand its reach with the aim of diversifying Maldives economy.
Limits on Foreign Control and Right to Private Ownership and Establishment
Maldives allows foreign parties to register companies and partnerships but does not allow foreign parties to register cooperative societies or as a sole proprietor. Under a new Foreign Direct Investment policy established in February 2020, foreign investment is allowed in all major sectors of the economy apart from the following areas, which are restricted for locals only:
Mining of sand
Other mining and quarrying
Manufacture of tobacco products
Manufacture of wood and of products of wood and cork except furniture
Manufacture of rubber and plastics products
Manufacture of handicrafts and souvenirs
Wholesale trade in sectors except construction materials
Land transport services and transport via pipelines
Postal and courier activities
Logistics activities (in transportation and storage)
Operating picnic islands
Food and beverage service activities (including café, restaurants, bakeries, and other eateries)
Programming and broadcasting activities
Legal activities (law firms etc.)
Photography and videography
Rental and leasing activities (including lease of heavy-duty machineries etc.)
Employment activities such as employment agencies and recruitment services
Travel agency, tour operator, reservation service and related activities
Services to building and landscape activities
Public administration and defense; compulsory social security
Clinics except physiotherapy clinics
Repair of computers and personal and household goods
The following sectors are open for foreign investment, but with a cap on equity ownership:
Manufacture of fish products (75 percent)
Manufacture of agricultural products (75 percent)
Printing and reproduction of recorded media (49 percent)
Manufacture of furniture (75 percent)
Repair and installation of machinery and equipment (75 percent)
Installation of equipment that forms an integral part of buildings or similar structures, such as installation of escalators and elevators (40 percent)
Construction of buildings (65 percent)
Civil engineering (65 percent)
Wholesale trade of construction materials (75 percent)
Franchising in international airports and approved locations (including products & services) (75 percent)
Sea transport services (including ownership of vessels) (49 percent)
Air transport services (including freight services) (75 percent)
Warehousing and support activities for transportation (75 percent)
Guest houses in approved locations (inclusive of all services) (49 percent)
Real estate activities (65 percent)
Accounting activities (75 percent)
Architecture and engineering activities; technical testing and analysis (75 percent)
Advertising (60 percent)
Other professional, scientific, and technical activities (75 percent)
Veterinary services (75 percent)
Security and investigation activities (75 percent)
Office administrative, office support and other business support activities (75 percent)
Universities and colleges (75 percent)
Private schools (75 percent)
Computer training institutions (75 percent)
Vocational and technical educational institutes (75 percent)
Sports and recreation education (75 percent)
Engineering schools (training and conduction of courses related to aircraft engineering) (75 percent)
Educational support activities (75 percent)
Residential care services (75 percent)
Social work activities without accommodation (75 percent)
Physiotherapy clinics (75 percent)
Creative, arts and entertainment activities (excluding live music bands and DJs) (75 percent)
Libraries, archives, museums, and other cultural activities (75 percent)
Sports activities and amusement and recreation activities (75 percent)
Water sports activities (49 percent)
Dive centers and dive schools (75 percent)
The following conditions are applied to foreign investments in the construction sector, as per the foreign contractor regulation:
Construction companies valued below USD 5,000,000 are required to be at least 35 percent Maldivian owned.
Construction companies valued above USD 5,000,000 may be 100 percent foreign owned.
There is little private ownership of land; most land is leased from the government, but Maldivians are permitted to hold title to land. In August 2019, parliament repealed a July 2015 constitutional amendment that allowed foreigners to own land and islands in connection with major projects, provided they invested at least USD 1 billion and at least 70 percent of the land was reclaimed. Currently, there are no property and real estate laws or mechanisms to allow foreign persons to hold title to land.
The Land Act allows foreigners to lease land on inhabited islands for up to a maximum of 50 years, but there is no formal process for registration of leasehold titles. The Uninhabited Land Act allows foreigners to lease land on uninhabited islands for purposes other than tourism for a maximum of 21 years for investments amounting to less than USD 1 million and up to a maximum of 50 years for investments over USD 10 million. A 2010 amendment to the Tourism Act allows investors to lease an island for 50 years in general. A subsequent 2014 amendment allows the extension of resort leases up to 99 years for a payment of USD 5 million. The changes aim to incentivize investors, make it easier to obtain financing from international institutions, and increase revenue for the government. Leases can be renewed at the end of their terms, but the formula for assessing compensation value of a resort at the end of a lease has not been developed. In 2016, Parliament approved additional amendments to the Tourism Act, whereby islands and lagoons can be leased for tourism development based on unsolicited proposals submitted to the Tourism Ministry (Law No: 13/2016).
The Ministry of Economic Development screens and reviews all foreign investment proposals. The process includes standard due diligence efforts such as a local police screening of all investors, determining the financial standing of the proposed shareholders through a bank reference, and performing a background check on the investors involved. According to the government, each case is reviewed based on its merits accounting for factors such as the number of existing investors in the sector and the potential for employment and technology transfer. In practice, the investment review process is not as transparent as policy would indicate, with potential for corruption to influence the decision-making process.
The approval procedure for foreign investments is as follows:
Submit a completed Foreign Investment Application form to the Ministry of Economic Development, available at .
Walk-in consultations are available for foreign investors wishing to discuss their proposals prior to submitting an application.
The standard processing time is three working days; however, if relevant ministries must be consulted, the approval may take 10-14 days.
Register a business vehicle
Once approval is received, an investor must register as a company, partnership, or a company which has been incorporated in another jurisdiction.
Application forms for registering as a legal vehicle are available from the ministry’s website.
Sign the Foreign Investment Agreement with the Ministry of Economic Development.
This Agreement outlines the terms and conditions related to carrying out the specific business in Maldives. For tourism sector investments, a Foreign Investment Agreement is not required as the land lease signed with the Ministry of Tourism governs all matters relating to tourism businesses in Maldives.
Obtain licenses and permits.
Sectors which require operating licenses include fisheries and agriculture, banking and finance, health, tourism, transport, construction, and education.
Other Investment Policy Reviews
The most recent World Trade Organization trade policy review was conducted in March 2016:
Maldives ranked 147 out of 190 on the World Bank’s Ease of Doing Business index in 2019, scoring especially low on getting electricity; registering property; trading across borders; protecting minority investors; getting credit; and resolving insolvency. On average, it takes six steps and 12 days to start a business.
The Ministry of Economic Development manages the process for business incorporations, permits, licenses and registration of logos, trade markets, seals, and other processes. The Ministry’s website details relevant policies and procedures: http://www.trade.gov.mv
The Ministry of Economic Development also maintains an online business portal at https://business.egov.mv to access the following services: Name Reservation; Business Name Registration; Sole Proprietorship registration submission; Company Registration Submission; SME Categorization; Issuance of Corporate Profile Sheet; Logo Registration; Seal Registration; Trade Mark Registration, Request for Certificate of Incumbency; Request for Letter of Good Standing; and a Request for re-issuance of registration certificate. Foreign investment companies, including entities with any foreign shareholding, must receive foreign investment approval before they can register online.
As of March 2022, the government had completed draft amendments to the Companies Act, which are scheduled to be submitted to parliament during the first session of 2022. As of March 2022, the Electronic Transactions Bill has been submitted to parliament and was undergoing committee review. A Bankruptcy Bill was submitted to Parliament in 2020 and was in the committee stage as of March 2022. The passage of these bills could affect business facilitation. In June 2019, the government signed a USD 10 million project with the Asian Development Bank to develop a National Single Window project designed to establish a national single window system for international trade and reengineered trade processes which was still ongoing as of March 2022.
The government does not promote or incentivize outward investment but does not restrict domestic investors from investing abroad either. According to UNCTAD’s 2019 World Investment Report, Maldives has not registered any outward investment since 2005.
2. Bilateral Investment and Taxation Treaties
The United States does not have a bilateral investment treaty with Maldives. Maldives signed a trade and investment framework agreement (TIFA) with the United States and held its first meeting in October 2014. The second meeting was held in June 2019. The Maldives and the United Arab Emirates signed an Agreement on the Promotion and Reciprocal Protection of Investments in October 2017.
India and Maldives signed a trade agreement in 1981, providing for export of essential commodities. Maldives signed and entered into the South Asian Free Trade Area (SAFTA) in 2006 and signed but has not ratified the Trade Preferential System of the Organization of the Islamic Conference in 2014.
Maldives first signed an Agreement on Trade and Economic Cooperation with the People’s Republic of China (PRC) in 2004 and then signed its first bilateral free trade agreement with the PRC in December 2017. However, the agreement is not in effect. The Government of Maldives also completed negotiations on an FTA with Hong Kong in 2017, but an agreement has not been signed.
The United States has not signed a bilateral taxation treaty with Maldives. Maldives signed a Double Tax Avoidance Treaty with the United Arab Emirates, which entered into force in January 2017. In April 2016, Maldives and India signed an agreement to avoid double taxation of income derived from air transport and an agreement to share information on taxes, both of which are currently in force. In 2005 Maldives signed a double taxation avoidance treaty which is a limited multilateral agreement between members of the South Asian Association for Regional Cooperation (SAARC) for avoidance of double taxation and mutual assistance in tax matters.
The Ministry of Finance is drafting amendments to the GST Act which are scheduled to be submitted to parliament in the third session of 2022. Maldives is a member of the OECD Inclusive Framework on BEPS, and the government has agreed to the October 2021 Statement on a Two-Pillar solution, including Pillar Two, which will introduce a global minimum corporate tax rate.
3. Legal Regime
Transparency of the Regulatory System
Maldives’ Parliament (the People’s Majlis) formulates legislation, while ministries and agencies, primarily the Ministry of Economic Development, develop regulations pertaining to investment. The Ministry of Tourism develops regulations relevant to the tourism sector. Certain business sectors require sector-level operating licenses from other ministries/agencies, including fisheries and agriculture, banking and finance, health, tourism, transport, construction, and education. The Maldives Monetary Authority (MMA) regulates the financial sector and issues banking licenses. The Capital Market Development Authority develops regulations for the capital market and pension industry and licenses securities market intermediaries. The current Parliament, sworn in in April 2019, regularly makes draft bills and regulations available for public comment.
Since its inauguration in November 2018, the Solih administration has taken steps to improve fiscal transparency. For example, beginning in December 2018, the MoF began issuing weekly updates on fiscal operations on its public website. A limited write-up on total annual debt obligations for 2022 and projected annual debt obligations for 2023 and 2024 were included in a “budget book” published on the MoF website, along with the 2022 proposed budget. It includes the total amount of debt, disaggregated into the totals of domestic and foreign debt; however, it does not include details of contingent or state-owned enterprise (SOE) debt. Statistics on Central Government debt and on debt guaranteed by the government are published on the MoF website on a quarterly basis. Details of government-held debt are published bi-annually. Quarterly debt statistics include details on disbursed outstanding debt (both domestic and guaranteed), active external loans, external grants, and active sovereign guarantees. Quarterly debt can be found at https://www.finance.gov.mv/debt-management/debt-statistics.
The website of the Attorney General’s Office (AGO) (www.mvlaw.gov.mv) publishes the full text of all existing laws and regulations, but most of the documents are in the Dhivehi language. The AGO is establishing an English language database of laws and regulations while the Judiciary is working on a database of court judgements.
Environmental, social, and governance (ESG) reporting is voluntary. Listed PLCs voluntarily report on sustainability aspects and Corporate Governance reporting is mandatory for all listed companies. Annual Reports of listed companies: https://www.cmda.gov.mv/en/public/listed-companies.
International Regulatory Considerations
Maldives is a member of the South Asian Association for Regional Cooperation (SAARC) and is a signatory of the South Asian Free Trade Area (SAFTA).
Trade and investment related legislation and regulation are influenced by common law principles from the United Kingdom and other western jurisdictions. The judiciary has cited foreign case law from jurisdictions from the United Kingdom, the United States, and Australia when interpreting local trade-related statues.
Maldives is a member of the World Trade Organization (WTO) and has submitted some of the notifications under Technical Barriers to Trade. However, the Ministry of Economic Development reports that technical assistance is required for Maldives to fully comply with WTO obligations.
Legal System and Judicial Independence
The sources of law in Maldives are its constitution, Islamic Sharia law, regulations, presidential decrees, international law, and English common law, with the latter being most influential in commercial matters. The Maldives has a Contract Law (Law No. 4/91) that codifies English common law practices on contracts. The Civil Court is specialized to hear commercial cases. The Employment Tribunal is mandated to hear claims of unfair labor practices. A bill proposing the establishment of a Mercantile Court has been pending in Parliament since 2013. The Judicial Services Commission is responsible for nominating, dismissing, and examining the conduct of all judges. The Attorney General acts as legal advisor to the government and represents the government in all courts except on criminal proceedings, which are represented by the Prosecutor General.
A Supreme Court was established as the highest judicial authority in Maldives in 2008 under the new Maldives Constitution. In addition to the Supreme Court, there are six courts: the High Court; Civil Court; Criminal Court; Family Court; Juvenile Court; and a Drug Court. There are approximately 200 magistrate courts, one in each inhabited island. The Supreme Court and the High Court serve as courts of appeal. There are no jury trials. In February 2020, President Solih stated his intent to submit a bill introducing a circuit court system in Maldives. As of March 2022, the government was working on legislative amendments to the Judicature Act to establish the circuit court.
Historically, the judicial process has been slow and, often, arbitrary. In August 2010, the Judicial Services Commission (JSC), the judicial watchdog, reappointed—and confirmed for life—191 of the 200 existing judges. Many of these judges held only a certificate in Sharia law, not a law degree. The Maldivian judiciary is a semi-independent institution but has been subjected frequently to executive influence, particularly the Supreme Court. The United Nations Office of the High Commissioner for Human Rights in 2015 stated the judicial system is perceived as politicized, inadequate, and subject to external influence. An estimated 25 percent of judges have criminal records. The media, human rights organizations, and civil society had repeatedly criticized the JSC for appointing judges deemed unqualified.
This history led President Solih’s administration to make judicial reform a top priority. In 2019, the JSC was overhauled; it removed the former Supreme Court bench and initiated investigations into ethics standards complaints against several judges from the High Court, Criminal Court, Civil Court, Family Court, and several island magistrate courts. In August 2019, Parliament amended the Judicial Service Commission Act to return control of the Department of Judicial Administration (DJA), which is responsible for the management of courts, to the JSC. This amendment was intended to overcome longstanding issues of the former Supreme Court using its direct supervision of the DJA to punish judges exhibiting judicial independence by transferring them to a lower court or another island as retribution.
Laws and Regulations on Foreign Direct Investment
Foreign parties can invest in Maldives through the Foreign Investment Law or the Special Economic Zones (SEZ) Act. Details are available on the Ministry of Economic Development’s Doing Business in the Maldives Guide and in the tax guide:
Invest Maldives (https://investmaldives.gov.mv) is the primary website for investments and provides information on areas that are open for investment in Maldives. Sector-wise, broad investment opportunities are presented on the website with links to conceptual project briefs for which Invest Maldives is seeking investment from potential investors.
A Foreign Direct Investment (FDI) policy was published in February 2020 to consolidate existing practices and introduce new guidelines, including two new routes to get government approval for foreign direct investments and new caps on equity ownership for investments in certain sectors. The first and second amendments to the FDI policy were announced on June 13 and 15, 2021 respectively. The policy is available at https://trade.gov.mv/laws-regulations under Foreign Investment Act.
Foreign investment in Maldives is governed by Law No. 25/79, covering agreements between the government and investors. The Business Registration Act (18/2014) requires foreign businesses to register as a company or partnership. The Companies Act (10/96) governs the registration and regulatory and operational requirements for public and private companies. The Partnership Act of 2011 governs the formation and regulation of partnerships. Foreign investments are currently approved for an initial period of five years, with the option to renew.
Maldives introduced income taxes through an Income Tax Act in December 2019. Taxation under the act was set to commence on January 1, 2020 but remuneration was to come within the purview of income effective April 1, 2020. The Business Profit Tax regime imposed under the Business Profit Tax Act and the Remittance Tax regime imposed under the Remittance Tax Act was repealed with the commencement of the Income Tax Act. Under the Act, tax rates remain unchanged for banks at 25 percent on profits, while taxes of 15 percent on profits that exceed USD 32,425 (MVR 500,000) would be levied on corporations, partnerships, and other business entities.
In September 2020, President Solih ratified the sixth amendment to the Employment Act, which provides a standalone regulatory framework for overseas employees. It includes guidance on registering with the online x-pat system (work permit processing portal), grant of quotas, collection of quota fees, grant of entry passes and work permits to enter and remain in the country for work, deposits and refunds, accommodation arrangements and standards, regularization and penalties for breaches.
In November 2020, President Solih ratified the second amendment to the Maldives Immigration Act. Under the new amendment, there are two additional visa options for foreigners travelling to Maldives: a corporate resident visa and a meeting visa. The corporate resident visa is a permit issued to foreigners who have invested over $250,000 in Maldives or by maintaining $250,000 in a fixed deposit account in a Maldivian bank for five years. According to the amendment, shareholders and partners of companies registered and operating in Maldives may acquire a corporate resident visa for themselves and their families under the established rules and regulations. The meeting visa is a short-duration permit under which foreigners may visit Maldives for professional reasons. This may include attending a business conference, professional convention or a meeting approved by a government agency. A meeting visa is issued according to the guidelines defined by the Registrar of Businesses.
Competition and Antitrust Laws
In 2019, Maldives drafted the Competition and Fair Business Practices Act to ensure a fair market and equitable opportunities for all small and medium enterprises. President Solih ratified the bill on August 31, 2020, and it came into force in February 2021. The Ministry of Economic Development is the principal agency responsible for implementing the Act, including hearing, reviewing, and acting on competition-related complaints. No competition-related cases have been submitted to Ministry of Economic Development as of March 2022.
Expropriation and Compensation
According to the Law on Foreign Investment (No. 25/79), the government may, with or without notice, suspend an investment when an investor indulges in an act detrimental to the security of the country or where temporary closure is necessary for national security. If, after due investigation, it cannot be concluded within 60 days of the temporary closure that the foreign investor had indulged in an activity detrimental to the security of Maldives, the government will pay compensation. Capital belonging to an investment that is closed for these reasons may be taken out of the country in a mutually agreed upon manner.
In December 2012, the Maldivian government took over operation of the Malé International Airport from GMR Infrastructure Limited, an Indian company, after the Maldivian government repudiated the 2012 contract. In 2016, the Maldivian government paid GMR USD 271 million in damages as ordered by a Singaporean Arbitration Tribunal.
ICSID Convention and New York Convention
Maldives is not a Party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. In September 2019, Maldives acceded to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards, which came into force in Maldives in December 2019.
Investor-State Dispute Settlement
Maldives does not have a Bilateral Investment Treaty (BIT) or Free Trade Agreement (FTA) with the United States. An Arbitration Act modeled on the United Nations Commission on International Trade Law (UNCITRAL) model law was passed in 2013 and provides for implementation of international arbitral awards. However, the judgments of foreign courts cannot directly be enforced through the courts. Judgments of foreign courts must be submitted to domestic courts, which then make a separate judgment. In April 2019, President Solih established the Maldives International Arbitration Centre, a requirement under the 2013 Act.
In 2013, Maldives-based Sun Travels and Tours terminated a foreign corporation’s 20-year management agreement for a luxury resort. The business took the case to the International Court of Arbitration in Singapore and was awarded USD 27 million in damages. The Court dismissed a USD 16 million counterclaim by Sun Travel and Tours. In 2015, the foreign corporation then filed the case in Maldives High Court to enforce the ruling of the arbitration center. In 2016, Sun appealed the arbitration center’s decision in Maldives’ Civil Court, which ruled in Sun’s favor and ordered the foreign corporation to pay USD 16 million to Sun as compensation for violating the terms of their agreement to manage the resort. This ruling was overturned by the Maldivian High Court on July 7, 2020, and led to the Civil Court ordering freeze on bank accounts of Sun. In February 2022 the Civil Court withheld the passports of and issued a travel ban against the directors of Sun for failure to pay $27 million in damages to the foreign corporation.
International Commercial Arbitration and Foreign Courts
An Arbitration Act modeled on the United Nations Commission on International Trade Law (UNCITRAL) model law was passed in 2013 and provides for implementation of international arbitral awards. However, the judgments of foreign courts cannot directly be enforced through the courts. Judgments of foreign courts must be submitted as a fresh action and established as a judgment by the local courts that may then be enforced. In April 2019, President Solih established the Maldives International Arbitration Centre, a requirement under the 2013 Act. Dispute resolution for significant investments can take years, and it can be a challenge to collect payment for any damages from the government or from Maldivian companies.
Maldives scores 33.3 out of 100 on resolving insolvency in the World Bank’s Ease of Doing Business Distance to Frontier index. Maldives does not have a bankruptcy law, although corporate insolvencies are dealt with under the Companies Act. Debtors and creditors may file for liquidation. There is no priority assigned to creditors and there is very limited legal framework to protect creditors following commencement of insolvency.
4. Industrial Policies
Maldives introduced a Special Economic Zones Act (Law No.: 24/2014) in September 2014, with the goal of encouraging private investment in large-scale projects in priority areas, including: export processing activities; transportation and transshipment; universities, hospitals, and research facilities; information communication and technology parks; international financial services; oil and gas exploration; and initiatives that introduce new technologies. SEZ investments in excess of USD 150 million qualify for special tax and regulatory incentives guaranteed under the SEZ law. The list of priority sectors is reviewed by the President on a yearly basis.
Incentives under the SEZ law include:
Exemption from business profit tax
Exemption from goods and services tax
Exemption from withholding tax:
Flexible procedures in foreign employment
Exemption from taxes on sale and purchase of land
Option of acquiring freehold land by registered companies in Maldives with at least 50 percent local shareholding
The duration of these tax exemptions depends on the business area of the investment and the scale of the investment.
As of March 2021, no companies have invested in Maldives under the SEZ law.
There are no discounts or tax incentives for clean energy investments issued through the government budget. However, there are some active Power Purchase Agreements between public utility companies and renewable energy investors. There is no set feed-in tariff. However, project proponents may propose a cost-effective tariff. There is no specific discount for electricity generated from renewable energy sources. Depending on the size and type of the investment, the government grants import duty exemptions, such as for items imported for renewable energy and energy efficiency projects.
Foreign Trade Zones/Free Ports/Trade Facilitation
As mentioned immediately above Maldives introduced a Special Economic Zones Act (Law No.: 24/2014) in September 2014. Please refer to the above section for details of investment incentives provided for under the Act.
Performance and Data Localization Requirements
The Law on Foreign Investments requires Maldivian nationals to be employed unless employment of foreigners is a necessity. Qualifying employers are provided a quota, limiting the number of expatriates who can be employed. Quota levels depend on the sector and size of the investment. Employers obtain quotas from the Ministry of Economic Development before applying for employment approval. SEZ investments receive some exceptions to these rules. A report by the International Labor Organization (ILO) found that the quota system is cumbersome and difficult to implement and that inefficiencies and red tape create unnecessary administrative burdens while doing little to increase local employment. In addition, the ILO reported that when labor is not available because of quota requirements, employers often resort to the irregular labor market, providing incentives to the phenomena of visa trading.
5. Protection of Property Rights
Secured interests in property, movable and real, are recognized and enforced under the 2002 Land Act, and the councils on each island maintain registries. Rights in real estate are governed by the Land Act, the Uninhabited Islands Act (20/98) and the Tourism Act (2/99). Foreign parties cannot own land but can lease land for periods no longer than 99 years for business activity under the remaining regimes.
Intellectual Property Rights
Although the government has an intellectual property unit within the Ministry of Economic Development, it is not active. The government has not yet signed international agreements or conventions on intellectual property rights. A Trademarks Bill is in the legislative agenda for 2022 and Ministry of Economic Development is in the final stages of drafting process of the bill which is planned to be submitted to Parliament during the first parliamentary session of 2022.
The World Intellectual Property Organization (WIPO) is providing assistance to the government on the drafting of bills regarding trademarks and geographical indicators. For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en
6. Financial Sector
Capital Markets and Portfolio Investment
Maldives Stock Exchange (MSE), first opened in 2002 as a small securities trading floor, was licensed as a private stock exchange in 2008. The Securities Act of January 2006 created the Capital Market Development Authority (CMDA) to regulate the capital markets. The MSE functions under the CMDA. The only investment opportunities available to the public are shares in the Bank of Maldives, Islamic Bank of Maldives, five state-owned public companies, a foreign insurance company, a foreign telecommunications company, and a local shipping company. The market capitalization of all listed companies listed was 1.25 billion dollars as of March 2022.
Foreigners can invest in the capital market as both retail and institutional investors. Capital market license holders from other jurisdictions can also seek licenses to carry out services in the Maldives capital market. There are no restrictions on foreign investors obtaining credit from banks in Maldives nor are there restrictions on payments and transfers for current international transactions.
Money and Banking System
The Maldives financial sector is dominated by banking. The banking sector consists of eight banks, of which three are locally incorporated, four are branches of foreign banks and one is a fully owned subsidiary of a foreign bank. There are 52 branches of these banks throughout the country of which 33 are in the rural areas. Additionally, at the end of 2017 there were 116 automatic teller machines (of which 51 were in rural areas) and 230 agent banking service providers. Maldives has correspondent banking relationships with six banks. Maldives has not announced intentions to allow the implementation of blockchain technologies (cryptocurrencies) in its banking system. In October 2021, following an announcement by an international resort management company saying it would accept cryptocurrencies as payment for their services, the MMA announced that Maldivian law does not permit cryptocurrencies for valid business transactions. International money transfer services are offered by four remittance companies through global remittance networks. Two telecommunications companies offer mobile payment services through mobile wallet accounts and this service does not require customers to hold bank accounts.
Non-bank financial institutions in the country consist of four insurance companies, a pension fund, and a finance leasing company, a specialized housing finance institution and money transfer businesses. Maldives Real Time Gross Settlement System and Automated Clearing House system is housed in the MMA for interbank payments settlements for large value and small value batch processing transactions respectively. There has been an increase in usage of electronic payments such as card payments and internet banking. All financial institutions currently operate under the supervision of the MMA.
Foreign Exchange and Remittances
Rules relating to the foreign exchange market are stipulated in the Monetary Regulation of the MMA. Both residents and non-residents may freely trade and purchase currency in the foreign exchange market. Residents do not need permission to maintain foreign currency accounts either at home or abroad and there is no distinction made between foreign national or non-resident accounts held with the banks operating in Maldives. The exchange rate is maintained within a horizontal band, with the value of the Rufiyaa allowed to fluctuate against the U.S. dollar within a band of 20 percent on either side of a central parity of MVR12.85 per U.S. dollar. In practice, however, the rufiyaa has been virtually fixed at the band’s weaker end of Rf 15.42 per dollar, according to the IMF.
Rules regarding foreign remittances are governed by the Regulation for Remittance Businesses under the Maldives Monetary Authority Act of 1981. There are no restrictions on repatriation of profits or earnings from investments. In 2016, the government imposed a three percent remittance tax on money transferred out of Maldives by foreigners employed in the Maldives. However, Maldives Inland Revenue Authority (MIRA) repealed the remittance tax effective from January 1, 2020, to reduce “out-of-bank” money transactions that had become commonplace following implementation of the tax.
Sovereign Wealth Funds
In 2016, Maldives Finance Minister announced plans to establish a “Sovereign Development Fund (SDF)” that would support foreign currency obligations incurred to executive public sector development projects. The government has not published any documents related to the SDF and does not have a published policy document regulating funding or a general approach to withdrawals regarding SDF. As of March 2022, the MoF is in the process of drafting a Sovereign Development Fund Act.
Allocations to the SDF are included in the budget and published in the MoF’s weekly and monthly fiscal development reports published regularly on its website. The Ministry reported two sources of funding for the SDF – revenue gathered through Airport Development Fees charged to all travelers entering and departing Maldives and ad hoc allocations made by the MoF at its discretion. Expected ADF receipts are included in the Revenue Tables of the Budget. Reports from the MoF show that the size of the SDF fund had amassed USD 206.5 million as of February 25, 2021.
7. State-Owned Enterprises (SOEs)
The Maldives Privatization and Corporatization Board (PCB) monitors and evaluates all the majority and minority share holding companies of the government of Maldives. PCB reported 32 operational SOEs in 2022, 22 of which are 100 percent state owned. The government is a majority shareholder of Bank of Maldives, Maldives Transport and Contracting Company Plc, Malé Water and Sewerage Company Private Limited, State Trading Organization Plc, Addu International Airport Private Limited, and SME Development Finance Corporation Private Limited. The government also holds minority shares in Maldives Tourism Development Corporation Plc, Dhivehi Raajjeyge Gulhun Plc (one of the two telecom providers), Housing Development Finance Corporation Plc, and Maldives Islamic Bank Plc. (https://www.finance.gov.mv/public-enterprises)
Maldivian SOEs do not strictly adhere to OECD Guidelines on Corporate Governance for SOEs. When SOEs are involved in investment disputes, domestic courts tend to favor the government enterprise. SOEs also follow different procurement regulations than government offices. As a result, SOEs have been a major contributor to fast rising Maldives’ public debt levels.
A 2013 Privatization Act governs all privatization and corporatization efforts by the government. The Privatization and Corporatization Board monitors and evaluates all the majority and minority share holding companies of the Government of Maldives (https://www.finance.gov.mv/privatization-and-corporatization-board). The Government of Maldives has announced plans for a privatization program in its 2021-23 budget, and the MoF is in the process of developing an action plan for the privatization strategy. Further, an in-depth study will be undertaken for each SOE identified, and policy decisions to privatize will be based on these studies. A preliminary analysis identified 12 SOEs that potentially could be privatized. A detailed assessment of these SOEs is ongoing to recommend the best suited model for privatization, their readiness for privatization, and the timeline and process for offering them to the market. This work is expected to be completed by May 2022.
8. Responsible Business Conduct
There is limited but growing awareness of responsible business conduct (RBC) or corporate social responsibility (CSR) among the business elite and tourism resort owners. All new government leases for tourism resorts contain CSR requirements and individual resorts often implement their own RBC programs. However, the government does not have a consistent policy or national action plan to promote responsible business conduct. As of March 2022, the Ministry of Economic Development is in the final stages of drafting an Industrial Relations bill and an Occupational Health and Safety bill. Both bills are scheduled to be submitted to Parliament during the first session of 2022.
Several workers’ organizations monitor and advocate for RBC regarding workers’ rights, the most active of which is the Tourism Employees Association of the Maldives (TEAM). Further, many NGOs advocate for RBC in environment-related issues. Civil society organizations (CSOs) often work together to campaign for the introduction of new laws such as an Industrial Relations Law and an Occupational Health and Safety Law. These CSOs can function without harassment from the government, though COVID-related restrictions during the pandemic made conducting their activities difficult.
On December 28, 2020, Maldives submitted its updated Nationally Determined Contribution (NDC), which includes an enhanced ambition for a 26 percent decrease in emissions and carbon neutrality by 2030, conditioned on receiving financial, technological, and technical support. The new NDC lists various actions the government must undertake to achieve the targets:
Increase renewable energy electricity production, including storage and grid stabilization.
Increase supply and demand side efficiency. Increase generator efficiency and upgrade electrical grids to minimize loss. Implement a standard labelling program and improve building standards for energy efficiency.
Increase waste to energy conversion. Complete installation of 8 MW production facility in Thilafushi and 1.5 MW production facility in Addu City, optimizing electrical production and grid connectivity for both.
Establish vehicle/vessel emissions standard and an efficient transport management system. Promote hybrid-vehicles.
Use Liquefied Natural Gas (LNG) for electricity generation within the greater Malé region. Replace diesel power production in the greater Malé region with the proposed LNG plant in Thilafushi.
The government grants import duty exemptions on all items imported for renewable energy and energy efficiency projects. As of March 2022, the government was in the process of developing a natural capital accounting mechanism. The Ministry of Finance is working with the Ministry of Environment, Energy, and Climate Change to develop policies on sustainable procurement for all government agencies.
Maldives made significant progress in its efforts to increase its transparency, jumping from 130 out of 180 countries in the Transparency International Corruption Perception index in 2019 to 75th in 2020. Its score increased from 29 out of 100 to 43 out of 100, surpassing that of regional competitors like Sri Lanka, India, and Pakistan. In 2021, Maldives fell ten spots in the rankings and saw its score fall to 40. Still, corruption practices exist at all levels of society, threatening inclusive and sustainable economic growth.
The Solih administration has publicly pledged to tackle widespread corruption and judicial reform. As part of President Solih’s first 100 business day agenda, he established a Presidential Commission on Corruption and Asset Recovery to investigate corruption cases originating between February 2012 and November 2018. As of March 2022, the commission had not issued a report of its findings. Additional measures towards increased transparency include requiring public financial disclosures for cabinet members, political appointees, and all members of parliament. On December 15, 2021, the Parliament voted to dismiss all members of the Anti-Corruption Commission (ACC) following a performance audit, which found that more than 16,000 cases were still pending.
Maldives law provides criminal penalties for corruption by officials, but enforcement is weak. The law on prevention and punishment of corruption (2000) defines bribery and improper pecuniary advantage and prescribes punishments. The law also outlines procedures for the confiscation of property and funds obtained through the included offenses. Penalties range from six months to 10 years banishment, or jail terms. According to non-governmental organizations, a narrow definition of corruption in the law, and the lack of a provision to investigate and prosecute illicit enrichment, limited the Anti-Corruption Commission’s work.
Maldives acceded to the United Nations Convention against Corruption in March 2007, and under the 2008 Constitution, an independent Anti-Corruption Commission was established in December 2008. The responsibilities of the Commission include inquiring into and investigating all allegations of corruption by government officials; recommending further inquiries and investigations by other investigatory bodies; and recommending prosecution of alleged offenses to the prosecutor general, where warranted. The Commission does not have a mandate to investigate cases of corruption of government officials by the private sector.
Maldives is a party to the UN Anticorruption Convention. Maldives is not a party to the OECD Convention on Combatting Bribery.
A number of domestic human rights groups generally operated without government restriction, investigating and publishing their findings on human rights cases. Government officials, however, often have not been cooperative or responsive to their views. Upon assumption of office, President Solih’s administration pledged to submit a new NGO bill that would increase protections for non-government organizations. The bill completed parliamentary debate and is undergoing committee review as of March 2022.
Resources to Report Corruption
Contact at the government agency or agencies that are responsible for combating corruption:
Maldives is a multi-party constitutional democracy, but the transition from long term autocracy to democracy has been challenging. Maldives gained its independence from Britain in 1965. For the first 40 years of independence, Maldives was run by President Ibrahim Nasir and then President Maumoon Abdul Gayoom, who was elected to six successive terms by single-party referenda. August 2003 demonstrations forced Gayoom to begin a democratic reform process, leading to the legalization of political parties in 2005, a new constitution in August 2008, and the first multiparty presidential elections later that year, through which Mohamed Nasheed was elected president.
In February 2012 Nasheed resigned under disputed circumstances. President Abdulla Yameen’s tenure, beginning in 2013, was marked by corruption, systemic limitations on the independence of parliament and the judiciary, and restrictions on freedom of speech, press, and association. Yameen’s tenure was also characterized by increased reliance on PRC-financing for large scale infrastructure projects, which were decided largely under non-transparent circumstances and procedures. External debt rose rapidly during his tenure.
In September 2018, Solih won his campaign for president running on a platform of economic and political reforms and transparency. His party, the MDP, then won a super majority (65 out of 87) seats in parliamentary elections in April 2019, the first single-party majority since the advent of multi-party democracy. President Solih pledged to restore democratic institutions and the freedom of the press, re-establish the justice system, and protect fundamental rights.
There is a global threat from terrorism to U.S. citizens and interests. Attacks could be indiscriminate, including in places visited by foreigners and “soft targets” such as restaurants, hotels, recreational events, resorts, beaches, maritime facilities, and aircraft. Concerns have increased about a small number of potentially violent Maldivian extremists who advocate for attacks against secular Maldivians and are involved with transnational terrorist groups. For more information, travelers may consult the 2020 Country Reports on Terrorism at https://www.state.gov/reports/country-reports-on-terrorism-2020/maldives/.
Maldives has a history of political protests. Some of these protests have involved use of anti-Western rhetoric. There are no reports of unrest or demonstrations on the resort islands or at the main Velana International Airport. Travelers should not engage in political activity in Maldives. Visitors should exercise caution, particularly at night, and should steer clear of demonstrations and spontaneous gatherings. Those who encounter demonstrations or large crowds should avoid confrontation, remain calm, and depart the area quickly. While traveling in Maldives, travelers should refer to news sources, check the U.S. Mission to Maldives website and https://travel.state.gov/content/travel/en/international-travel/International-Travel-Country-Information-Pages/Maldives.html for possible security updates, and remain aware of their surroundings at all times.
Expatriate labor is allowed into Maldives to meet shortages. Maldives Immigration reported approximately 200,000 registered expatriate workers in the country in 2019, mostly in tourism, construction, and personal services. The government reported 63,000 unregistered expatriate migrant workers, but non-governmental sources estimate the number is even higher. During May 2020, President Solih announced that the government would repatriate unregistered Bangladeshi nationals in the Maldives, following which the Ministry of Foreign Affairs, the Ministry of Economic Development and the Bangladeshi High Commission collaboratively began a repatriation exercise, with the assistance from the Bangladeshi government. Close to 9,000 unregistered migrant workers were repatriated under the program as of March 2022.
Notwithstanding the labor shortage, unemployment in Maldives is high, as many youths leaving lower secondary school have few in-country avenues to pursue higher secondary education. Although resorts may offer employment opportunities, locals are less likely to take advantage of these jobs as resort employment practices require employees to live and work on the island for long stretches of time, away from family. Religious and cultural reasons also discourage women from seeking employment on distant islands.
The Law on Foreign Investments requires Maldivian nationals to be employed unless employment of foreigners is necessary. See section on “Performance and Data Localization” for more detail.
The 2008 the Employment Act and a subsequent amendment to the Employment Act recognize workers’ right to strike and establish trade unions; however, current law does not adequately govern the formation of trade unions, collective bargaining, and the right to association. While the constitution provides for workers’ freedom of association, there is no law protecting it, which is required to allow unions to register and operate without interference and discrimination. As a matter of practice, workers’ organizations are treated as civil society.
A regulation on strikes requires employees to negotiate with the employer first, and if this is unsuccessful, then the employees must file advance notice prior to a strike. The Freedom of Peaceful Assembly Act effectively prohibits strikes by workers in the resort sector, the country’s largest money earner. Employees in the following services are also prohibited from striking: hospitals and health centers, electricity companies, water providers, telecommunications providers, prison guards, and air traffic controllers.
Maldives became a member of the International Labor Organization in 2008 and has ratified the eight core ILO Conventions. Maldives has not ratified the four priority governance ILO Conventions. In 2019, the ILO called on the Government to take the necessary measures to eliminate child labor, including through adopting a national policy and a national action plan to combat child labor in the country. In November 2019, President Solih ratified the Child Rights Protection Act, which prohibits child labor. On August 2020, the government published the General Regulations under the Child Rights Protection Act.
12. U.S. International Development Finance Corporation (DFC), and Other Investment Insurance or Development Finance Programs
Development Finance Corporation (DFC)/Overseas Private Investment Corporation (OPIC) began operations in Maldives in 2011, but no projects have been identified. Maldives became the 165th member of the Multilateral Investment Guarantee Agency on May 20, 2005.
13. Foreign Direct Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source*
USG or international statistical source
USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
Host Country Gross Domestic Product (GDP) ($M USD)