2010 Investment Climate Statement - Maldives
The Maldives is comprised of over 1,190 islands, of which 198 are inhabited and 95 are exclusive resort islands. The land is low lying, with 80% of the land mass only 2 meters or less above sea level, making the Maldives extremely vulnerable to climate change. The native Maldivian population is approximately 310,000, of whom 103,000 live on the capital island of Male'. There are an additional 80,000 expatriate workers. More than 680,000 tourists visit annually. In 2009 GDP totaled around $1.3 billion, or about $4,300 per capita (far exceeding the average of about $700 in the rest of South Asia). From 2000-2008, real GDP growth averaged around 6% per year except for 2005, when GDP declined following the Indian Ocean tsunami. Economic growth has been powered mainly by tourism and its spin-offs in the transportation, communication, and construction sector. Fishing remains an important part of the economy as well. However, due partially to the global financial crisis, the country is currently facing acute economic problems. In 2009, the Maldivian economy shrank by 4 percent.
While income disparity remains high, particularly between the capital and distant islands, the Maldives' growth has yielded considerable social progress. The net enrollment in primary education is close to 100 percent. Literacy rates are about 98 percent. Infant and maternal mortality are declining rapidly.
The Indian Ocean tsunami in December 2004 devastated many islands. The Maldivian economy made a remarkable recovery, with a rebound in tourism, and post-tsunami reconstruction.
In 2009, the Maldives’ economy was in recession. The global economic crisis severely hurt the Maldivian economy through a fall in tourism receipts, external financing, and exports. As a result, the Maldives is facing an acute currency shortage, curtailing normal business activities. The fiscal situation also deteriorated sharply.
In December 2009, the International Monetary Fund approved a $93 million loan for the country. The loan shores up reserves and will help smooth adjustment. In a bid to promote exports, the U.S. government restored the GSP trade preference program to the Maldives in December 2009. The United States is seeking to provide various other assistance efforts to defend against climate change, prevent drug use, and enhance U.S. investment. The Maldives became a member of the International Labor Organization in 2009.
The government has plans to substantially downsize the government workforce (currently over 30,000 employees), change the tax system to direct taxes, and privatize many industries. The government aims to move from being a service provider to a regulator, and to enhance the role of private sector. The government has launched a program to establish public-private partnerships in service provision and privatization of selected State Owned Enterprises. The programs target key sectors such as transport (ferry services), real estate (housing development), utilities (electricity, gas, water and sanitation), healthcare, education, regional airports, regional ports, and broadcasting and entertainment. The program is supported by initiatives to promote foreign and local investments which require major reform in the legal and regulatory framework of the various sectors.
The Maldives Monetary Authority (Central Bank) expects GDP growth around 3.5% in 2010.
The Maldives is ranked 87th out of 183 countries in the World Bank's (www.worldbank.org) Ease of Doing Business 2010 Index, ahead of its South Asian neighbors except Pakistan (85). The index investigates regulations that enhance or constrain business activity. Within the index, the Maldives ranked first in terms of paying taxes (the Maldives has no income or sales tax) and ninth in dealing with construction licenses. The Maldives is planning to develop a business profits tax to reduce import duties and provide more sustainable revenues. But in terms of registering property, getting credit, and closing a business, the country ranked lower, at 183, 150, and 126, respectively. The low property ranking stems from the fact that foreigners are not allowed to own property outright. Other rankings were as follows: starting a business 49, employing workers 41, protecting investors 73, trading across borders 126, and enforcing contracts 92.
The Maldives is preparing for its “graduation” from Least Developed Country (LDC) status, currently scheduled for 2011. The graduation would reduce the country's ability to access concessionary trade and finance programs, and threatens the demise of the fish export industry and the curtailment of foreign aid. The Maldives is seeking to delay the curtailment of certain benefits.
Tourism will likely remain the engine of the economy. As many as forty new resorts could open in the next few years, with at least two planned openings in 2009.
The United Nations Development Program (UNDP) (www.mv.undp.org), the World Bank (www.worldbank.org), and other multilateral and bilateral donors are active in the Maldives. They support government efforts to improve education, health and nutrition, housing and social protection, basic infrastructure, environmental protection, and improved governance, and to create employment opportunities. The United States has friendly relations with the Maldives.
OPENNESS TO FOREIGN INVESTMENT
The Maldives began opening up to foreign investment in the late 1980s. Foreign investments in the Maldives have primarily involved resort management, but also include telecommunications, accounting, banking, insurance, air transport, courier services, and some manufacturing. Invest Maldives Division (www.investmaldives.org) and the Licensing and Regulations Division within the Ministry of Economic Development are tasked with promoting and regulating foreign investments, respectively, with the notable exception of the tourism sector. The Ministry of Economic Development reviews all proposed investments prior to granting licenses.
Foreign investment in the Maldives is governed by Law 25/79, which provides for an agreement between the government and an investor. The Law of Contract governs contractual relationships and a separate law (No. 4/79) governs business and trading activities by foreign nationals. Investment agreements are for an initial period of 5 to 10 years for investments less than $1 million, and can be renewed thereafter. For larger projects, terms are negotiable.
The Ministry of Economic Development offers "one-stop shop" services to investors and incentives including import duty concessions, 100% foreign ownership, no restrictions on repatriation of earnings or profits, and no foreign exchange restrictions. Foreign investments are required to pay annual royalty fees to the government. The royalty fee is 3% of gross income or 15 percent of profits, whichever is greater, for majority foreign-owned companies. For others, the royalty is 1.5 percent of income or 7.5 percent of profits, whichever is greater. At present, personal income taxes are not imposed. Banks' profits are taxed. For the first time, the Government plans to introduce a corporate income tax (business profits tax) and a goods and services tax in the tourism sector. International arbitration is available for dispute settlement. Foreign investments within the tourism sector – such as resorts – are registered with the Ministry of Tourism, Arts and Culture.
The Ministry of Economic Development approves joint ventures in the following sectors within ten working days of submitting required documentation: 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. Proposals for joint ventures in other sectors and investments fully owned by foreigners are approved within 30 days.
The government hopes to privatize airports and harbors and develop basic services such as water, sewage systems, harbors, roads and power utilities through public/private partnerships. The Government has started a public/private partnership program in health, education, transport, and housing projects. However, some state-owned enterprises, such as the electricity and water companies, are currently losing money and they need to be made more efficient and competitive to improve their prospects of becoming more profitable prior to privatization.
The Ministry of Economic Development is looking for local and foreign investors in media and broadcasting, entertainment industry, utilities, infrastructure, health care facilities, hospital management, regional airport management, and the development of residential infrastructure (vacation homes).
The Ministry of Economic Development encourages investment projects which: (1) are capital intensive; (2) enhance technology transfer; (3) introduce new skills and offer training to local employees; and, (4) are environmentally friendly.
The following industries offer good potential for foreign investors:
Tourism: Opportunities exist in the entire range of services, including development and management of resorts, tourist activities, and land and sea transportation. New resorts require a range of equipment and products.
Value-Added Fisheries: Fish processing is open to foreign investment, particularly for new technology and capital investment. The government owned Maldives Industrial Fisheries Company (MIFCO) is identified for substantial restructuring with private investment. Areas such as fish canning, cold storage, tuna farming and aquaculture also open for foreign investment
Financial, banking, accounting, and management consulting: the Maldives' financial sector consists mainly of banks, one of which is partially state-owned and four branches of foreign-owned banks. The FISB is interested in bringing in more global banks. (Only HSBC is currently present). The lack of adequate banking laws has deterred entry, however. Financial services consulting and management services are also areas that offer potential.
Transportation and Shipping: The transport sector is dominated by maritime and air transportation. However, transportation is inadequate. There is potential to develop air and sea transport including inter-atoll transport services, bunkering, transshipment, and passenger cruises.
Telecommunications and information technology also offer potential opportunities. There are currently 3 licensed operators in the telecommunication sector. The telecommunications sector offers good potential for equipment and technology input suppliers.
Power: Virtually all electricity is provided by diesel generators. Tourist resorts consume about 60 percent of electricity used in the Maldives. There is scope to provide renewable sources such as solar, wind and biomass for energy needs. Studies have revealed good potential for wind energy-based power generation with some pilot projects underway. The Maldives has announced its objective of being the first carbon neutral nation by 2020 which would provide extensive opportunities for renewable power suppliers.
Retail trading is closed to foreign investment. The production of any items that are illegal to import into the Maldives is prohibited.
CONVERSION AND TRANSFER POLICIES
A foreign exchange shortage affecting businesses was reported in 2009. The Maldives has maintained a fixed peg of its currency with the dollar since 2001. Due to the shortage, the Maldives Monetary Authority (MMA) started rationing foreign exchange supplied to the banking system in 2009. This has led to a foreign exchange restriction and some current international transactions to be conducted in the parallel market. MMA hopes to gradually ease the rationing once foreign exchange market stabilizes.
Repatriation of funds and profits is allowed after local debts are settled.
Major international currencies can be bought and sold at banks and authorized moneychangers. Hotels and banks accept major credit cards and travelers' checks. Foreign currency accounts are available through banks. The U.S. dollar is the most widely used foreign currency and is accepted by small shops and taxi drivers in Male'.
The official exchange rate is set at 12.8 Rufiyaa to the dollar. This rate has remained unchanged since 2001. The Maldivian currency is non-convertible and its true value cannot be determined. The real effective exchange rate has appreciated recently. A new IMF program in the Maldives aims to rebuild international reserves while preserving the exchange rate peg to the U.S. Dollar. The heavy dependence on imports is a constraint for exchange rate management, although historically tourism receipts helped maintain hard currency liquidity.
Foreign reserves at the end of December 2009 were approximately $270 million compared with $241 million in 2008 and $309 million in 2007, and were sufficient to finance 3.2 months of imports.
The government has taken initial action to introduce a new public accounting system. A new Public Finance Law, an Audit Law and a Civil Service Law came into force in 2006-2007. Legislation on Anti-Money Laundering and Combating Terrorist Financing has been drafted. The Maldives has established a financial intelligence unit to combat money laundering and terrorist financing.
EXPROPRIATION AND COMPENSATION
According to the Law on Foreign Investment (25/79) the government may, with or without notice, suspend an investment, either where the 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 the Maldives, then the government will pay compensation. Capital belonging to an investment that is closed for the above reasons may be taken out of the country in a mutually agreed manner. There appears to be little risk of expropriation in the near future.
The sources of law in the Maldives are its constitution, Islamic Sharia law, regulations, Presidential decrees, international law, and English common law, with the latter being more influential in commercial matters. The Judicial Services Commission (JSC) is responsible for nominating, dismissing, and examining the conduct of all judges.
A Supreme Court was established for the first time in 2008 under the new Maldives Constitution. The Supreme Court is the highest judicial authority in Maldives. In addition to the Supreme Court, there are four courts in Male': a high court, civil court, criminal court, and a family and juvenile court. There are approximately 200 magistrate courts, one in each inhabited island. The Supreme Court serves as court of appeal. There are no jury trials. Though legal procedures are adequate, the judicial process is slow.
Pursuant to the new constitution, a prosecutor general was appointed in September 2008. The prosecutor general is tasked with the prosecution of criminal offences. The Attorney General acts as the legal advisor to the government and represents the government in all courts except on criminal proceedings represented by the prosecutor general.
The law on foreign investments guarantees the security of investments. The Maldives has no laws pertaining to arbitration. Disputes involving investments below $1 million can be referred to the courts in Maldives. Disputes over $1 million can be referred for international arbitration.
Recognizing that the existing legal and commercial framework is underdeveloped and not always fully transparent or predictable, the government is promoting administrative reforms and formulating regulations dealing with labor, the environment and industry. In recent years, the People's Majlis (parliament) has enacted a number of commercial laws, including the Law of Contract, the Negotiable Instruments of Law, and the Companies Act. The Maldives is not a member of the International Center for the Settlement of Investment Disputes (ICSID).
RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT
There is little private ownership of land. Land reform currently under consideration may result in more trade and private ownership of property. Foreign investors are not allowed to own land, but are granted lease rights ranging up to 25 years, which can be later extended to 35 years for investments over $10 million, or 50 years if 50% of the company's shares are floated on the Maldives stock market. 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 yet been developed. The government is looking at the possibility of extending the initial lease period from 25 years to 99 years.
Currently there is no property and real estate law or mechanism to allow foreign persons to hold title to land. As a result, the Maldives ranks last among 183 countries in the World Bank doing business 2010 report’s registering property indicator. Locals, however, can hold title to land.
PROTECTION OF PROPERTY RIGHTS
Currently, the Maldives lacks specific legislation to protect intellectual property rights (IPR) and has not signed any related international agreements or conventions. An IPR law is awaiting parliamentary approval. The Maldives recently established an IPR unit within the Ministry of Economic Development. The Maldives benefits from the World Trade Organization (WTO) decision to extend the transition period for least-developed countries (LDC) to provide protection for intellectual property under the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement until July 1, 2013.
EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT
The financial sector in the Maldives is narrow and dominated by the banking sector. The banking sector consists of one publicly owned commercial bank -- the Bank of Maldives -- and branches of four foreign-owned commercial banks. HSBC, the only global bank present, set up operations in 2002. The Bank of Maldives faced difficulties in 2009 and the government is seeking to restructure the bank's portfolio, recover defaulted debt, and look at a capital infusion. Non-bank financial institutions in the country consist of two insurance companies, a pension fund, and a finance leasing company. All financial institutions currently operate under the supervision of the Maldives Monetary Authority, which acts as the central bank. The Maldives Monetary Authority Act was amended in 2007 to ensure independence of the Authority. Banking supervision has recently been upgraded, moving toward international best practices. The government is seeking to put in place a stronger legal framework for the banking sector.
Most lending usually comes through the parent banks of international commercial banks. Most foreign currency loans are made to foreign currency-earning tourist enterprises. Local sources of finance are limited in scope because of the small size of the capital market and the lack of instruments that are available in more developed nations. The government commenced treasury bill auctions in 2006. Other types of financial instruments are not offered to the public. The commercial banks provide short- and long-term credit to the private sector. No specialized financial institution exists to meet the investment needs of tourism, agriculture and fisheries.
The banking system has been hit by the shortage of external financing and the economic slowdown. According to the IMF, non-performing loans have increased significantly as banks have a high exposure to the tourism sector. No problems were reported regarding domestic liquidity of foreign banks. Nonetheless, due to deteriorating economic conditions, private sector credit shrank in 2009 after several years of growth.
Due to the foreign exchange shortage, the Maldives Monetary Authority started rationing foreign exchange supplied to the banking system in 2009. As a result, a parallel market has emerged with a small premium over the official peg. In one known case, a U.S. company was unable to immediately receive its dollar-denominated payment due to lack of foreign currency at banks in the Maldives.
The Maldives Stock Exchange (MSE), first opened in 2002 as a small securities trading floor, was licensed as a private stock exchange in 2008. The legislature passed a Securities Act in January 2006 and the government created a Capital Market Development Authority (CMDA) to regulate the capital market. The MSE functions under the CMDA. At present, the only investment opportunity available to the public is a limited number of shares in the Bank of Maldives and three other state-owned public companies.
A leasing company, Maldives Finance Leasing Company (Pvt) Ltd (MFLC), was established in May 2002 as a collaborative venture between five domestic public and private sector entities and two international parties including the World Bank's International Finance Corporation (IFC). The MFLC aims to address the demand for long-term equipment financing from all sectors of the economy.
The Housing Development Finance Corporation is a government company designed to provide housing loans with long repayment terms at favorable interest rates. The company is also entrusted with drawing up the land use policy in the Maldives.
COMPETITION FROM STATE-OWNED ENTERPRISES
The prevalence of state-owned enterprises in many sectors of the economy has traditionally crowded out the private sector in the Maldives, however the current government is working to privatize many of them through private/public partnerships. Energy, water, and airport sectors are going through this process now, as are fisheries and tourism.
SOEs operate under the Companies Act with overall little government influence. The government does approve the Boards of Directors but the SOEs do not report to line ministers. It is generally rare that Board seats go to senior government officials, although some political affiliation does exist. All companies of over $1 million, whether public or private, must submit to an independent audit. SOE audits are sent to the Ministry of Finance and can be viewed upon request.
Currently the Maldives does not have a sovereign wealth fund although it is considering creating one to be used to provide low-interest loans to support the move to carbon neutrality, especially on resort islands.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
There is limited but growing awareness of corporate social responsibility among the business elite.
The Maldives has a homogeneous society of one culture, one religion, and one language. In 2008, the Maldives held its first multi-party Presidential elections, following a multi-year effort for constitutional reforms. President Nasheed took office in November 2008, replacing a thirty-year incumbent. The transition to a new government led by the former head of the opposition was peaceful. Political rallies in the Maldives generally do not turn violent, as sometimes occurred under the previous regime.
Religious extremism, involving espousal of fundamentalist views incompatible with the Maldives' generally moderate Islamic practices, is a small but growing trend. In September 2007, the Maldives experienced its first-ever terrorist attack when a bomb exploded in the capital of Male', injuring twelve tourists who appeared to be the target of the attack.
Corruption, including bribery, raises the costs and risks of doing business. Corruption has a corrosive impact on both market opportunities overseas for U.S. companies and the broader business climate. It also deters international investment, stifles economic growth and development, distorts prices, and undermines the rule of law.
It is important for U.S. companies, irrespective of their size, to assess the business climate in the relevant market in which they will be operating or investing, and to have an effective compliance program or measures to prevent and detect corruption, including foreign bribery. U.S. individuals and firms operating or investing in foreign markets should take the time to become familiar with the relevant anti-corruption laws of both the foreign country and the United States in order to properly comply with them, and where appropriate, they should seek the advice of legal counsel.
The U.S. Government seeks to level the global playing field for U.S. businesses by encouraging other countries to take steps to criminalize their own companies’ acts of corruption, including bribery of foreign public officials, by requiring them to uphold their obligations under relevant international conventions. A U. S. firm that believes a competitor is seeking to use bribery of a foreign public official to secure a contract should bring this to the attention of appropriate U.S. agencies, as noted below.
U.S. FOREIGN CORRUPT PRACTICES ACT
In 1977, the United States enacted the Foreign Corrupt Practices Act (FCPA), which makes it unlawful for a U.S. person, and certain foreign issuers of securities, to make a corrupt payment to foreign public officials for the purpose of obtaining or retaining business for or with, or directing business to, any person. The FCPA also applies to foreign firms and persons who take any act in furtherance of such a corrupt payment while in the United States. For more detailed information on the FCPA, see the FCPA Lay-Person’s Guide at: http://www.justice.gov/criminal/fraud/docs/dojdocb.html.
It is U.S. Government policy to promote good governance, including host country implementation and enforcement of anti-corruption laws and policies pursuant to their obligations under international agreements. Since enactment of the FCPA, the United States has been instrumental to the expansion of the international framework to fight corruption. Several significant components of this framework are the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Antibribery Convention), the United Nations Convention against Corruption (UN Convention), the Inter-American Convention against Corruption (OAS Convention), the Council of Europe Criminal and Civil Law Conventions, and a growing list of U.S. free trade agreements. The Maldives is country is party to the UN Convention, but generally all countries prohibit the bribery and solicitation of their public officials.
OECD ANTIBRIBERY CONVENTION
The OECD Antibribery Convention entered into force in February 1999. As of December 2009, there are 38 parties to the Convention including the United States (see http://www.oecd.org/dataoecd/59/13/40272933.pdf). Major exporters China, India, and Russia are not parties, although the U.S. Government strongly endorses their eventual accession to the Convention. The Convention obligates the Parties to criminalize bribery of foreign public officials in the conduct of international business. The United States meets its international obligations under the OECD Antibribery Convention through the U.S. FCPA. The Maldives is not a party to the OECD Convention.
The UN Anticorruption Convention entered into force on December 14, 2005, and there are 143 parties to it as of December 2009 (see http://www.unodc.org/unodc/en/treaties/CAC/signatories.html). The UN Convention is the first global comprehensive international anticorruption agreement. The UN Convention requires countries to establish criminal and other offences to cover a wide range of acts of corruption. The UN Convention goes beyond previous anti-corruption instruments, covering a broad range of issues ranging from basic forms of corruption such as bribery and solicitation, embezzlement, trading in influence to the concealment and laundering of the proceeds of corruption. The Convention contains transnational business bribery provisions that are functionally similar to those in the OECD Antibribery Convention and contains provisions on private sector auditing and books and records requirements. Other provisions address matters such as prevention, international cooperation, and asset recovery. The Maldives is a party to the UN Convention.
U.S. firms should familiarize themselves with local anti-corruption laws, and, where appropriate, seek legal counsel. While the U.S. Department of Commerce cannot provide legal advice on local laws, the Department’s U.S. and Foreign Commercial Service can provide assistance with navigating the host country’s legal system and obtaining a list of local legal counsel.
ASSISTANCE FOR U.S. BUSINESSES
The U.S. Department of Commerce offers several services to aid U.S. businesses seeking to address business-related corruption issues. For example, the U.S. and Foreign Commercial Service can provide services that may assist U.S. companies in conducting their due diligence as part of the company’s overarching compliance program when choosing business partners or agents overseas. The U.S. Foreign and Commercial Service can be reached directly through its offices in every major U.S. and foreign city, or through its Website at www.trade.gov/cs.
The Departments of Commerce and State provide worldwide support for qualified U.S. companies bidding on foreign government contracts through the Commerce Department’s Advocacy Center and State’s Office of Commercial and Business Affairs. Problems, including alleged corruption by foreign governments or competitors, encountered by U.S. companies in seeking such foreign business opportunities can be brought to the attention of appropriate U.S. government officials, including local embassy personnel and through the Department of Commerce Trade Compliance Center “Report a Trade Barrier” Website at tcc.export.gov/Report_a_Barrier/index.asp.
GUIDANCE ON THE U.S. FCPA
The Department of Justice’s (DOJ) FCPA Opinion Procedure enables U.S. firms and individuals to request a statement of the Justice Department’s present enforcement intentions under the antibribery provisions of the FCPA regarding any proposed business conduct. The details of the opinion procedure are available on DOJ’s Fraud Section Website at www.justice.gov/criminal/fraud/fcpa. Although the Department of Commerce has no enforcement role with respect to the FCPA, it supplies general guidance to U.S. exporters who have questions about the FCPA and about international developments concerning the FCPA. For further information, see the Office of the Chief Counsel for International Counsel, U.S. Department of Commerce, Website, at http://www.ogc.doc.gov/trans_anti_bribery.html. More general information on the FCPA is available at the Websites listed below.
Some useful resources for individuals and companies regarding combating corruption in global markets include the following:
Information about the U.S. Foreign Corrupt Practices Act (FCPA), including a “Lay-Person’s Guide to the FCPA” is available at the U.S. Department of Justice’s Website at: http://www.justice.gov/criminal/fraud/fcpa.
Information about the OECD Antibribery Convention including links to national implementing legislation and country monitoring reports is available at: http://www.oecd.org/department/0,3355,en_2649_34859_1_1_1_1_1,00.html. See also new Antibribery Recommendation and Good Practice Guidance Annex for companies: http://www.oecd.org/dataoecd/ 11/40/44176910.pdf
General information about anticorruption initiatives, such as the OECD Convention and the FCPA, including translations of the statute into several languages, is available at the Department of Commerce Office of the Chief Counsel for International Commerce Website: http://www.ogc.doc.gov/trans_anti_bribery.html.
Transparency International (TI) publishes an annual Corruption Perceptions Index (CPI). The CPI measures the perceived level of public-sector corruption in 180 countries and territories around the world. The CPI is available at: http://www.transparency.org/policy_research/surveys_indices/cpi/2009. TI also publishes an annual Global Corruption Report which provides a systematic evaluation of the state of corruption around the world. It includes an in-depth analysis of a focal theme, a series of country reports that document major corruption related events and developments from all continents and an overview of the latest research findings on anti-corruption diagnostics and tools. See http://www.transparency.org/ publications/gcr.
The World Bank Institute publishes Worldwide Governance Indicators (WGI). These indicators assess six dimensions of governance in 212 countries, including Voice and Accountability, Political Stability and Absence of Violence, Government Effectiveness, Regulatory Quality, Rule of Law and Control of Corruption. See http://info.worldbank.org/governance/wgi/sc_country.asp. The World Bank Business Environment and Enterprise Performance Surveys may also be of interest and are available at: http://go.worldbank.org/RQQXYJ6210.
The World Economic Forum publishes the Global Enabling Trade Report, which presents the rankings of the Enabling Trade Index, and includes an assessment of the transparency of border administration (focused on bribe payments and corruption) and a separate segment on corruption and the regulatory environment. See http://www.weforum.org/en/initiatives/gcp/GlobalEnablingTradeReport/index.htm.
Additional country information related to corruption can be found in the U.S. State Department’s annual Human Rights Report available at //2009-2017.state.gov/j/drl/rls/hrrpt/.
Global Integrity, a nonprofit organization, publishes its annual Global Integrity Report, which provides indicators for 92 countries with respect to governance and anti-corruption. The report highlights the strengths and weaknesses of national level anti-corruption systems. The report is available at: http://report.globalintegrity.org/.
CORRUPTION IN THE MALDIVES
Public sector corruption, including bribery of public officials, remains a challenge for U.S. firms operating in the Maldives. Reports indicate an improvement although the perception of corruption remains high.
Corruption was a serious problem in the Maldives, and the new government has vowed to fight it. The World Bank's Control of Corruption Index for the Maldives which showed a steady decline in recent years from +0.09 in 2003 to -0.83 in 2007 showed a marginal improvement at -0.60 in 2008. Transparency International's Corruption Perception Index surveyed the Maldives for the first time in its 2007 index, ranking the country 84th with a score of 3.3 out of a possible 10. In 2008, the Maldives slipped 31 places and ranked 115th out of 180 countries with a score of 2.8. In 2009, the Maldives slipped further to 130th out of 180 countries with a score of 2.5. This may be due in part to the fact that corruption is now openly talked about in the media as well as a “hang-over” caused by the abuses of the previous government.
The law on prevention and punishment of corruption (2002) defines bribery and improper pecuniary advantage and prescribes punishments. The law also outlines procedures for the confiscation of property and funds obtained through commission of the included offenses. An Anti-Corruption Commission was created in December 2008 following the passage of the Anti Corruption Commission Act. The responsibilities of the Commission include inquiring into and investigating all allegations of corruption; recommending further inquiries and investigations by other investigatory bodies; and recommending prosecution of alleged offences to the Prosecutor General, where warranted. The Anti-Corruption Commission is empowered to handle cases of corruption of members of parliament. It cannot investigate corruption in the private sector.
In March 2007, the Maldives acceded to the United Nations Convention against Corruption.
OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS
The Overseas Private Investment Corporation (OPIC) has just begun operations in the Maldives. The Maldives is not a member of the Multilateral Investment Guarantee Agency of the World Bank Group.
Skilled and unskilled labor is scarce, and expatriate labor is allowed in order to meet shortages. There are an estimated 80,000 expatriate workers, mostly in tourism, construction, and social and personal services. Expatriate labor is of equal cost or more expensive than local labor. Even when salaries are set lower, travel and other benefits typically make it more expensive overall to hire expatriates. Since higher education options in the Maldives are limited, young Maldivians from higher income families often travel abroad for education.
The laws covering labor were overhauled in 2008 with the enactment of the 2008 Maldives Constitution, the new Employment Act, and a subsequent amendment to the Employment Act. The new constitution recognizes workers’ right to strike and establish trade unions, for the first time. The Maldives is hoping to enact a separate trade union law providing rules for formation of trade unions and collective bargaining. The Maldives also needs to enact regulations further defining the right to association.
The Employment Act provides for the establishment of minimum wages, maximum hours of work, overtime, annual and sick leave, maternity leave and work place safety. The Employment Act created a 48-hour/week with a compulsory 24-hour break after six days of continuous work. Resort workers may accumulate the weekly rest day. Overtime is available. Workers in tourist resorts may work additional two hours a day and be paid at overtime rate. Employees are usually authorized 30 days of annual leave, 30 days of medical leave, 65 days of maternity leave, and 10 days of special annual leave to "attend important obligations.” Either parent of a newborn child is entitled to one year’s unpaid annual leave after the expiry of the maternity leave period. Employers are also required to provide a safe workplace. The law provides for entering into of agreements between the employer and the employee which guarantees the rights specified in the law.
Until recently, the government did not recognize the right to form unions or the right to strike. Hence, labor actions and disputes were rare. There are two employees associations, and collective bargaining involving employees' associations in the tourism sector began within days of the new constitution taking effect. Labor disputes arose in some resorts when employees' associations presented demands for wage increases and improvements in the conditions of work and stopped work.
Traditionally, wages in the private sector have been set by a contract between employers and employees and were based on rates for similar work in the public sector. The new employment law established a Pay Advisory Board to advise the Minister of Human Resources, Youth and Employment on setting minimum wages in the private sector.
The Employment Act granted workers the right to compensation if fired without cause. The government has established a Labor Relations Authority to implement the new employment law. The law requires the Ministry of Human Resources to issue specific rules for employment of foreign workers.
The Employment Act does not cover emergency workers, air and sea crews, executive staff of any company and persons on on-call duty.
In December 2008, following the enactment of the new Employment Act, the Maldives became a member of the International Labor Organization. In December 2009, the United States restored tariff preferences under the U.S. Generalized System of Preferences (GSP). The GSP facility to the Maldives was suspended in 1995 because the Maldives did not have a mechanism to afford internationally recognized worker rights. The Maldives is also eligible for Overseas Private Investment Credits (OPIC).
FOREIGN INVESTMENT STATISTICS
Foreign direct investment statistics are not readily available. Most of the FDI is in tourism, telecommunications and banking.
U.S. firms represented in the Maldives include Western Union, FedEx, UPS, Hewlett Packard (HP), Dell, Compaq, Coca-Cola, American Express, Hilton Resorts, Sheraton, SeaTec, Ernst and Young, PricewaterhouseCoopers, Marriott, and KPMG.
Foreign Investment Services Bureau: www.investmaldives.org
International Monetary Fund: www.imf.org
World Bank: www.worldbank.org
Ministry of Planning and National Development: www.planning.gov.mv
Maldives Monetary Authority: www.mma.gov.mv
Maldives Stock Market: www.maldivesstockexchange.com.mv
United Nations Development Program: www.mv.undp.org