Maldives: Market Profile
Maldives is an upper middle-income country with population of about 400,000 people dispersed over 188 islands. Maldives’s economy is mainly based on tourism and fisheries. Construction has become the main driver of growth in 2015-2017.
Sources: World Bank, BMI Research
2. Major Economic/Political Events and Upcoming Elections
Parliament passed new defamation bill.
Maldives announced it was leaving the Commonwealth.
The government said it has severed diplomatic ties with Qatar, cited its opposition to terrorism and extremism. Maldives followed the likes of Saudi Arabia, the United Arab Emirates and Egypt with the move, but its business linked with Qatar will remain intact.
Maldivian President Abdulla Yameen called a state of emergency.
Maldives' President Abdulla Yameen lifted 45-day state of emergency.
Source: BBC country profile – Timeline
3. Major Economic Indicators
e = estimate, f = forecast
Sources: IMF, World Bank
4. External Trade
4.1 Merchandise Trade
Sources: WTO, Trade Map, BMI Research
4.2 Trade in Services
5. Trade Policies
- Maldives has been a member of WTO since May 1995 and a member of the General Agreement on Tariffs and Trade (GATT) since April 1983.
- In 2011, Maldives made a unilateral Most Favoured Nation (MFN) tariff liberalisation initiative, eliminating tariffs on approximately 31.5% of tariff lines. The average applied MFN tariff rate decreased from 21.4% in 2008 to 13.9% in 2015. Agricultural products face lower tariff rates (averaging 11.3%) than non-agricultural items (14.3%).
- While average tariff protection for agricultural products was reduced, tariffs on tobacco and alcohol products were increased for health, religious and revenue purposes. Staple foods, such as ordinary rice, flour and sugar, continue to be imported mainly through the majority state-owned enterprise State Trading Organization and are sold at government-controlled prices involving subsidies.
- The high degree of openness of the Maldivian economy to international trade, and its integration into the world economy continue to be reflected by the high exports of goods and services as a percentage of GDP, which rose to 79.7% in 2016.
Sources: WTO – Trade Policy Review, BMI Research
6. Trade Agreement
6.1 Trade Updates
Maldives signed a Free Trade Agreement with China in December 2017.
6.2 Multinational Trade Agreements
- South Asian Preferential Trade Agreement (SAPTA): It was signed in 1993; however, the scope of SAPTA was limited, therefore, it was expanded to the South Asian Free Trade Agreement (SAFTA), which is a plurilateral Free Trade Agreement between Bhutan, Afghanistan, Bangladesh, India, Maldives, Nepal, Pakistan and Sri Lanka. The agreement covers trade in goods and entered into force in January 2006; Afghanistan later joined in August 2011.
- The Hong Kong and Maldives Free Trade Arrangement: This was proposed in May 2016 and has been under negotiations since May 2017. Hong Kong is Maldives' ninth largest import source, and as of 2016, Maldives imported 2.2% of its total imports from Hong Kong, with the majority of products being electrical machinery and equipment and parts thereof, sound recorders, reproducers and televisions.
Signed but not in effect
- The Trade Preferential System of the Organization of the Islamic Conference: An agreement between 41 countries that was signed in January 2014, but is not yet in effect. The main features of the agreement include the Most Favoured Nation principle, equal treatment of member countries and special treatment for least developed member countries. The preferences include tariffs, para-tariffs and non-tariff concessions.
- The People's Republic of China-Maldives Free Trade Agreement: It was signed in December 2017. China is Maldives' third largest import source, and as of 2016, Maldives imported 13.4% of its total imports from China, with the majority of products being machinery, mechanical appliances, nuclear reactors, boilers and parts thereof.
Sources: WTO Regional Trade Agreements database, BMI Research
7. Investment Policy
7.1 Foreign Direct Investment
7.2 Foreign Direct Investment Policy
- Invest Maldives is the country's investment promotion agency and falls under the Ministry of Economic Development. It is responsible for promoting, regulating and licensing foreign investments in the country, except for the tourism sector and special economic zones. The objective of the agency is to provide a one-stop-service for all investors wishing to invest in Maldives.
- Foreign investment in Maldives is governed by the Foreign Investment Law, which covers agreements between the government and investors, while a separate law governs business and trading activities by foreign nationals.
- Maldives began opening up to foreign investment in the late 1980s and currently pursues an open policy for foreign investments, although the ambiguous foreign investment laws may deter investors.
- An amendment to the Tourism Act passed in 2010 lends permission to investors to lease an island for 50 years. In April 2014, Parliament approved a law to grant the extension of resort leases up to 99 years for a payment of USD5 million. The amendments aim to incentivise 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 yet been developed. All other land may be leased for maximum periods ranging from 10-15 years, depending on the purpose for which the land was initially allocated.
- A prohibition on foreign ownership of any land ended in July 2015 when Parliament passed and the president ratified a constitutional amendment allowing foreigners who invest at least USD1 billion to own land and islands, provided at least 70% of the land is reclaimed.
- Foreign investments in Maldives have primarily involved resort management, but now also include sectors such as telecommunications, courier services and manufacturing. In October 2015, the government of Maldives held the second annual investor forum in Beijing, China and invited foreign investors to also invest in the Maldivian banking and financial sector, renewable energy, real estate, logistics, transport, healthcare, education, and construction.
- There are no country specific restrictions on foreign investment and Maldives allows foreign investment in all major sectors apart from the following areas, which are restricted for locals only: wholesaling of goods; photography and related activities; souvenir trading and related business (wholesale and retail trade); inter-island passenger transfer services by sea (foreign investors can engage in this area with 51% local shareholding); water sports and related activities (foreign investors can engage in this area with 51% local shareholding); operation of bonded warehouses in the customs area; fishing within the Exclusive Economic Zone (EEZ) of the Maldives; and the purchasing, processing and export of Skipjack Tuna.
- Maldives encourages investment projects that: establish and enhance the delivery of basic services required to be provided by the State; promote economic diversification and demonstrate potential to structurally reduce the country’s current dependence on the tourism sector; expand the export base of the economy and support import substitution; enhance the human capital development and employment opportunities for Maldivians on a significant scale; promote innovative product development and new markets for the tourism sector; bring enhanced improvements to the health and education sectors in terms of service delivery, quality, and accessibility; expand and develop sports infrastructure and services in Maldives; promote the use of renewable energy in Maldives; and promote incremental social and economic benefits from the available natural resources.
Sources: WTO – Trade Policy Review, The International Trade Administration (ITA), US Department of Commerce, BMI Research
7.3 Free Trade Zones and Investment Incentives
|Free Trade Zone/Incentive Programme||Main Incentives Available|
|Special Economic Zone (SEZ) Act was passed in 2014. The SEZ Act allows for proposals from the private sector to develop and operate the SEZs. Strategic areas considered for SEZ development include:|
- Export processing activities
- Trans-shipment port, international logistics, ports, airports, bulk breaking, bunkering, docking services
- Universities, tertiary hospitals, super specialty hospitals, and research and development facilities
- Information Communication Technology (ICT) parks and related facilities
- International financial services
- Oil & Gas exploration
- Initiatives that introduce new technologies to Maldives
|Businesses within the SEZs will receive the following incentives:|
- 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
- There is an option of acquiring freehold land by registered companies in Maldives with at least 50% local shareholding
- The Special Economic Zones Act allows foreign ownership of land for a period of 99 years and provisions on residency to foreign nationals within the SEZ
- The specific durations for tax exemption will depend on the business area of proposed the investment and the scale of the investment
Sources: US Department of Commerce, BMI Research
8. Taxation – 2018
- Value Added Tax: 6%-12%
- Corporate Income Tax: 5%-25%
Source: MIRA, EY, Deloitte
8.1 Important Updates to Taxation Information
Maldives introduced a broad-based tax system following the establishment of Maldives Inland Revenue Authority (MIRA) in August 2010. During the past eight years, effective taxation policies have allowed the country to invest in its social development.
8.2 Business Taxes
|Type of Tax||Tax Rate and Base|
|Corporate Income Tax||5% rate applies on profits over MVR500,000 for companies that earn only foreign-sourced income; 15% rate applies on profits exceeding MVR500,000 (local sourced income); and 25% rate applies to commercial banks|
|Capital Gains Tax||15%|
|Bank Profit Tax||25%|
|Green Tax||Flat rate of USD6 per day of stay - levied on tourists|
|Withholding Tax||10% of gross amount of payment made to a non-resident|
9. Foreign Worker Requirements
9.1 Foreign worker permits
- Foreigners going to work in Maldives are required to obtain a work permit from their employer.
- In order for work permits to be issued, it is required that employers deposit a sum of money for each employee's work permit.
- A monthly visa fee of MVR250 applies for foreign workers.
- Business visas also can be obtained from a Maldivian sponsor for a maximum of 90 days.
9.2 Visa/Travel Restrictions
Maldives grants visa-free or visa-on-arrival status to all citizens (except Indian and Bruneian citizens) for 30 days.
Sources: Government websites, BMI Research
10.1 Sovereign Credit Ratings
|Rating (Outlook)||Rating Date|
|Standard & Poor's||Not rated||Not rated|
Sources: Moody's, Standard & Poor's, Fitch Ratings
10.2 Competitiveness and Efficiency Indicators
|Ease of Doing Business Index ||129/189||135/190||136/189|
|Ease of Paying Taxes Index||128/190||134/190||118/189|
|Logistics Performance Index ||104/160||N/A||N/A|
|Corruption Perception Index||95/176||112/180||N/A|
|IMD World Competitiveness||N/A||N/A||N/A|
Sources: World Bank, IMD, Transparency International
10.3 BMI Risk Indices
|Economic Risk Index Rank||170/202|
|Short-Term Economic Risk Score||44.6||41.7||45|
|Long-Term Economic Risk Score||38.5||39||40.2|
|Political Risk Index Rank||123/202|
|Short-Term Political Risk Score||63.3||63.3||61.3|
|Long-Term Political Risk Score||59.3||57.8||57.8|
|Operational Risk Index Rank||105/201|
|Operational Risk Score||51.2||49.4||48.5|
Source: BMI Research
10.4 BMI Risk Summary
The Maldivian government has initiated a number of infrastructure projects to enable its citizens to move from smaller islands to Greater Malé, and construction has overtaken tourism as the main driver of growth. In the medium term, with the emphasis on construction, large current account deficits will be likely be financed by investment and infrastructure loans.
The immediate outlook for the country’s business environment remains uncertain due to the impact of the February-March 2018 state of emergency on the tourism and non-tourism sector. Due to the lack of major industries outside of the tourism sector, risks for businesses operating in tourism and key related sectors may rise in the short-term due to political volatility. The labour market also remains small, therefore, options for labour-intensive sectors remain limited.
100 = Lowest risk, 0 = Highest risk
Source: BMI Research Economic and Political Risk Indices
10.5 BMI Operational Risk Index
|Operational Risk||Labour Market Risk||Trade and Investment Risk||Logistics Risk||Crime and Security Risk|
|South Asia Average||41.6||43.7||38.9||44.0||39.7|
|South Asia Position (out of 8)||4||1||4||5||2|
|Asia Position (out of 35)||18||16||22||20||11|
|Global Position (out of 201)||105||100||131||128||65|
100 = Lowest risk, 0 = Highest risk
Source: BMI Operational Risk Index
|Country||Operational Risk Index||Labour Market Risk Index||Trade and Investment Risk Index||Logistics Risk Index||Crime and Secruity Risk Index|
|Emerging Markets Averages||46.8||48.0||47.5||45.8||46.1|
|Global Markets Averages||49.8||49.8||50.0||49.3||49.9|
100 = Lowest risk, 0 = Highest risk
Source: BMI Operational Risk Index
11. Hong Kong Connection
11.1 Hong Kong’s Trade with Maldives
|2017||Growth rate (%)|
|Number of Maldivian residents visiting Hong Kong||1,096||-27.2|
|Number of Maldivians residing in Hong Kong||N/A||N/A|
Sources: Hong Kong Tourism Board
|2017||Growth rate (%)|
|Number of Asia Pacific residents visiting Hong Kong||54,482,538||3.5|
|Number of South Asians residing in Hong Kong||36,680||1.6|
11.2 Commercial Presence in Hong Kong
|2016||Growth rate (%)|
|Number of Maldivian companies in Hong Kong||N/A||N/A|
|- Regional headquarters|
|- Regional offices|
|- Local offices|
Source: Hong Kong Census and Statistics Department
11.3 Chamber of Commerce (or Related Organisations) in Hong Kong
Maldivian Consulate in Hong Kong
Address: Rooms 201-205, Kowloon Centre, 29-39 Ashley Road, Kowloon, Hong Kong
Hours of Business: 10:00 a.m. - 5:00 p.m.
Honorary Consul: Mr Bob N. Harilela
Tel: (852) 2376 2114
Fax: (852) 2376 2366
11.5 Visa Requirements for Hong Kong Residents
HKSAR passport holders receive a visa-on-arrival in Maldives for which the duration of stay is to be determined by the competent authorities upon arrival.
Source: Visa on Demand