Maldives

GDP (US$ Billion)

4.51 (2016)

World Ranking 156/192

GDP Per Capita (US$)

12,527 (2017)

World Ranking 62/192

Economic Structure

(in terms of GDP composition, 2017)

Services
(67.37%)
Industry
(12.83%)
Agriculture
(5.63%)

External Trade (% of GDP)

155.4 (2016)

Currency (Period Average)

Maldivian Rufiyaa

15.39 per US$ (2017)

Political System

Multiparty republic

Overview

Maldives is an upper-middle income country with a population of about 400,000 people dispersed over 188 of its 1,190 islands. Maldives' economy is mainly based on tourism, construction and fisheries. Construction became the main driver of growth in 2015-2017 due, in part, to the government's efforts to encourage people to move from smaller islands to the Greater Malé region to promote more efficient public expenditure.

Sources: World Bank, Asian Development Bank, Fitch Solutions

Major Economic/Political Events and Upcoming Elections

August 2016

Parliament passed a new defamation bill.

June 2017

The government announced that it had cut diplomatic ties with Qatar, but its business links with Qatar will remain intact.

February 2018

President Abdulla Yameen declared a state of emergency after the Supreme Court overturned convictions of political opponents.

March 2018

President Abdulla Yameen lifted the 45-day state of emergency.

September 2018

Opposition leader Ibrahim Mohamed won presidential election, beating (former) President Abdulla Yameen.

April 2019

Parliamentary elections are scheduled.

Sources: BBC Country Profile – Timeline, Fitch Solutions

Major Economic Indicators
Graph: Maldives real GDP and inflation
 
Graph: Maldives real GDP and inflation
 
Graph: Maldives GDP by sector (2017)
 
Graph: Maldives GDP by sector (2017)
 
Graph: Maldives unemployment rate
Note: No data from IMF
 
Graph: Maldives unemployment rate
Note: No data from IMF
 
Graph: Maldives current account balance
 
Graph: Maldives current account balance
 

e = estimate, f = forecast

Sources: International Monetary Fund, World Bank, Fitch Solutions

Date last reviewed: March 17, 2019

External Trade

Merchandise Trade

Graph: Maldives merchandise trade
 
Graph: Maldives merchandise trade
 
 

Source: WTO

Date last reviewed: March 17, 2019

Graph: Maldives major export commodities (2017)
 
Graph: Maldives major export commodities (2017)
 
Graph: Maldives major export markets (2017)
 
Graph: Maldives major export markets (2017)
 
Graph: Maldives major import commodities (2017)
 
Graph: Maldives major import commodities (2017)
 
Graph: Maldives major import markets (2017)
 
Graph: Maldives major import markets (2017)
 

Sources: Trade Map, Fitch Solutions

Date last reviewed: March 17, 2019

Trade in Services

 

Graph: Maldives trade in services
 
Graph: Maldives trade in services
 
 

Source: WTO

Date last reviewed: March 17, 2019

Trade Policies
  • Maldives has been a member of the World Trade Organization (WTO) since May 1995 and a member of the General Agreement on Tariffs and Trade (GATT) since April 1983.

  • Maldives is a member of the South Asian Association for Regional Cooperation (SAARC). Other members are Afghanistan, Bangladesh, Bhutan, India, Nepal, Pakistan and Sri Lanka. SAARC was established on December 8, 1985 to accelerate economic growth in South Asia, to promote and strengthen collective self-reliance and to strengthen cooperation among member states in international forums on matters of common interests.

  • In 2012, Maldives embarked on 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 in the high exports of goods and services as a percentage of GDP, which rose to an estimated 125.5% in 2018.

Sources: WTO – Trade Policy Review, Fitch Solutions

Trade Agreement

Trade Updates

Maldives signed a free trade agreement (FTA) with mainland China in December 2017. It is Maldives' first FTA with a single country. The new Maldivian administration has threatened to withdraw from the FTA.

Multinational Trade Agreements

Active

  • South Asian FTA (SAFTA): SAFTA is a plurilateral FTA between the eight members of the SAARC: Afghanistan, Bhutan Bangladesh, India, Maldives, Nepal, Pakistan and Sri Lanka. The agreement covers trade in goods and entered into force in January 2006. Afghanistan only joined the FTA in August 2011. SAFTA covers approximately 2.0 billion people and aims to eliminate customs on all traded goods within the free trade area. SAARC is an important trade partner for Maldives, accounting for 20.4% of Maldives imports and purchasing 21.2% of its exports.

Under Negotiation

  • Hong Kong-Maldives FTA: The FTA proposed in May 2016 and has been under negotiation since May 2017. Hong Kong is Maldives' 14th largest import source, accounting for 1.4% of total imports. Hong Kong is also an important export destination for Maldives, with fish and fish products as the most valuable export.

Signed But Not in Effect
 

  • Trade Preferential System of the Organisation of the Islamic Conference (TPS-OIC): The agreement between 41 countries was signed in January 2014, but is not yet in effect. The main features of the agreement include the MFN 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 TPS-OIC aims to promote trade between OIC members. As a trading bloc, the OIC is an important trading partner for Maldives, accounting for 26.6% of total trade, and is the source of 30% of total imports.

  • Mainland China-Maldives FTA: The FTA with mainland China was signed on December 8, 2017. In addition, a Memorandum of Understanding was also signed, bringing Maldives into the Maritime Silk Road, a component of the Belt and Road Initiative. Under the FTA, tariffs on over 95% of goods will be reduced to zero. Mainland China is Maldives' fourth largest source of imports, accounting for 11.9% of all goods imported into Maldives. The new Maldivian administration has threatened to withdraw from the FTA.

Sources: WTO Regional Trade Agreements database, Government websites, Fitch Solutions

Investment Policy

Foreign Direct Investment

 

Graph: Maldives FDI stock
 
Graph: Maldives FDI stock
 
Graph: Maldives FDI flow
 
Graph: Maldives FDI flow
 

 

Note: No data available for Outward FDI Stock

Source: UNCTAD

Date last reviewed: March 17, 2019

Foreign Direct Investment Policy

  1. 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. The objective of the agency is to provide a one-stop service for all investors wishing to invest in Maldives. The Ministry of Tourism is tasked with facilitating investments into the tourism sector.

  2. Foreign investment in Maldives is governed by the Foreign Investment Law, which covers agreements between the government and investors.

  3. The Special Economic Zones (SEZs) Law covers all investments within Maldives' SEZs. SEZs aim to facilitate strategic development projects. The SEZ board has the powers to freeze potential investors' local assets if the permit is terminated and the investor has any outstanding debt. Investments within SEZs have to align with the strategic priorities of the government. Investors in these zones are granted specific incentives.

  4. The Ministry of Economic Development screens and internally reviews all foreign investment proposals. The process includes standard due diligence efforts and a background check, as well as seeking the opinions of other participants in the sector. The Ministry of Economic Development makes the final decision in a fairly transparent process.

  5. 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.

  6. 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.

  7. 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.

  8. 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.

Sources: WTO – Trade Policy Review, ITA, US Department of Commerce, Invest Maldives, Ministry of Economic Development, Fitch Solutions

Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive Programme Main Incentives Available
The SEZ Act was passed in 2014. The SEZ Act allows for proposals from the private sector to develop and operate the SEZs. Plans are underway to begin SEZ developments across a number of sectors. 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 parks and related facilities

- International financial services

- Oil and gas exploration

- Initiatives that introduce new technologies to the Maldives
- Exemption from business profit tax

- Exemption from goods and services tax

- Exemption from import duties for materials imported for development, management and operation of the zone

- 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 SEZs 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 investment and the scale of the investment

Sources: US Department of Commerce, Ministry of Economic Development, Fitch Solutions

Taxation – 2018
  • Value Added Tax: Varies: 6%-12%
  • Corporate Income Tax: 0%

Source: Maldives Inland Revenue Authority

Important Updates to Taxation Information

Maldives introduced a broad-based tax system following the establishment of the 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.

Business Taxes

Type of Tax Tax Rate and Base
Business Profit Tax Although a tax specifically applicable to corporate profits does not currently apply, a tax of 15% is imposed on the business profits of any 'person' deemed to be carrying on a business. A 'person' includes, but is not limited to, corporations, partnerships and individuals. The taxable profits or losses of a partnership for a year are computed as if it were a body corporate.



Resident and nonresident banks are subject to a tax of 25% on taxable profits.
Capital Gains Tax 15%
Value Added Tax
 
General goods and services: 6%

Tourism goods and services: 12%
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

Source: Maldives Inland Revenue Authority

Date last reviewed: March 17, 2019

Foreign Worker Requirements

Foreign worker permits

Foreigners intending to work in Maldives are required to obtain a work permit from their employer. Employers need to obtain a foreign worker quota from Maldives Immigration, after which an Employment Approval (EA) needs to be obtained for each individual worker. Employers are required to pay a security deposit to Maldives Immigration to employ each foreign worker. Security deposits are refunded once the foreign worker departs the country. A temporary Business Visa can be issued to foreign workers for a maximum of 90 days.

Corporate Resident (CR) Visa

Significant long-term investors in the Maldives are eligible for the Corporate Resident Maldives Visa Scheme and can enter, reside and exit the country without having to undergo frequent visa applications or renewals. Various requirements need to be met, depending on the category of the Corporate Resident Visa.

Visa/Travel Restrictions

Maldives grants visa-free or visa-on-arrival status to citizens of most countries for up to 30 days.



Sources: Government websites, Fitch Solutions

Risks

Sovereign Credit Ratings


 
Rating (Outlook) Rating Date
Moody's
 
B2 (Negative) 25/07/2018
Standard & Poor's Not rated N/A
Fitch Ratings
 
B+ (Stable) 15/05/2018

Sources: Moody's, Standard & Poor's, Fitch Ratings

Competitiveness and Efficiency Indicators


 
World Ranking
 
2017 2018 2019
Ease of Doing Business Index
 
135/190 136/190 139/190
Ease of Paying Taxes Index
 
134/190 118/190 117/190
Logistics Performance Index
 
N/A 86/160
 
N/A
Corruption Perception Index
 
112/180 124/180 N/A
IMD World Competitiveness N/A N/A N/A

Sources: World Bank, IMD, Transparency International, Fitch Solutions

Fitch Solutions Risk Indices


 
World Ranking
2017 2018 2019
Economic Risk Index Rank N/A 167/202 161/202
Short-Term Economic Risk Score
 
41.7
 
45 45.4
 
Long-Term Economic Risk Score 39 39.6 41.6
Political Risk Index Rank N/A 121/202 120/202
Short-Term Political Risk Score 63.3 61.3 61.3
 
Long-Term Political Risk Score 57.8
 
57.8 57.8
Operational Risk Index Rank N/A 104/201 100/201
Operational Risk Score 49.4 48.2 48.8
 

Source: Fitch Solutions

Date last reviewed: March 17, 2019

Fitch Solutions Risk Summary

ECONOMIC RISK

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 likely be financed by investment and infrastructure loans.

OPERATIONAL RISK

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 as well as the newly elected government. Due to the lack of major industries outside 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.



Source: Fitch Solutions

Date last reviewed: March 15, 2019

Fitch Solutions Political and Economic Risk Indices

Graph: Maldives short term political risk index
 
Graph: Maldives short term political risk index
 
Graph: Maldives long term political risk index
 
Graph: Maldives long term political risk index
 
Graph: Maldives short term economic risk index
 
Graph: Maldives short term economic risk index
 
Graph: Maldives long term economic risk index
 
Graph: Maldives long term economic risk index
 

100 = Lowest risk, 0 = Highest risk

Source: Fitch Solutions Political and Economic Risk Indices

Date last reviewed: March 17, 2019

Fitch Solutions Operational Risk Index


 
Operational Risk Labour Market Risk Trade and Investment Risk Logistics Risk Crime and Security Risk
Maldives Score 48.8 50.3 45.6 39.5 59.9
South Asia Average 41.9 43.7 40.2
 
43.4 40.5
 
South Asia Position (out of 8) 4 1 3
 
5 2
Asia Average 48.7 50.6 48.2 46.0 50.1
Asia Position (out of 35) 18 16 18 20 11
Global Average 49.6 49.7 49.9 49.0 49.8
Global Position (out of 201) 100 100 119 128 68

100 = Lowest risk, 0 = Highest risk

Source: Fitch Solutions Operational Risk Index

Graph: Maldives vs global and regional averages
 
Graph: Maldives vs global and regional averages
 
Country
 
Operational Risk Index Labour Market Risk Index
 
Trade and Investment Risk Index Logistics Risk Index
 
Crime and Security Risk Index
India 50.7 44.6 53.7 61.8 42.8
Bhutan 50.6 44.5 44.6
 
51.0
 
62.5
Sri Lanka 50.1 45.0 49.0
 
58.2
 
48.4
Maldives 48.8 50.3 45.6 39.5 59.9
Bangladesh 38.4 50.1
 
28.9
 
39.0
 
35.5
Nepal 37.5 40.9
 
33.3
 
34.9 41.1
Pakistan 34.9 36.9 38.3 43.1 21.4
Afghanistan 24.5 37.3 28.5 19.7 12.3
Regional Averages 41.9 43.7 40.2 43.4 40.5
Emerging Markets Averages 46.7 48.1 45.5 47.4 46.0
Global Markets Averages 49.6 49.7 49.9 49.0 49.8

100 = Lowest risk, 0 = Highest risk

Source: Fitch Solutions Operational Risk Index

Date last reviewed: March 17, 2019

Hong Kong Connection

Hong Kong’s Trade with Maldives

 

Graph: Major export commodities to Maldives (2018)
 
Graph: Major export commodities to Maldives (2018)
 
Graph: Major import commodities from Maldives (2018)
 
Graph: Major import commodities from Maldives (2018)
 

Note: Graph shows the main Hong Kong exports to/imports from Maldives (by consignment)

Graph: Merchandise exports to Maldives
 
Graph: Merchandise exports to Maldives
 
Graph: Merchandise imports from Maldives
 
Graph: Merchandise imports from Maldives
 

Note: Graph shows Hong Kong exports to/imports from Maldives (by consignment)

Exchange Rate HK$/US$, average

7.75 (2014)

7.75 (2015)

7.76 (2016)

7.79 (2017)

7.83 (2018)

Sources: Hong Kong Trade Statistics, Census & Statistics Department

Date last reviewed: March 17, 2019


 
2017
 
Growth rate (%)
 
Number of Maldivian residents visiting Hong Kong 1,096 -27.2

Sources: Hong Kong Tourism Board, Fitch Solutions


 
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
 

Sources: Hong Kong Tourism Board, Fitch Solutions

Date last reviewed: March 17, 2019

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

Chamber of Commerce (or Related Organisations) in Hong Kong

Honorary Consulate-General of the Republic of Maldives in the Hong Kong SAR

Address: Rooms 201-205, Kowloon Centre, 29-39 Ashley Road, Kowloon, Hong Kong

Email: info@maldivesconsulhk.com

Tel: (852) 2376 2114

Fax: (852) 2376 2366

Source: Honorary Consulate-General of the Republic of Maldives in the Hong Kong SAR

Visa Requirements for Hong Kong Residents

Hong Kong residents receive a 30-day tourist visa-on-arrival in the Maldives.

Source: Honorary Consulate-General of the Republic of Maldives in the Hong Kong SAR

Date last reviewed: March 17, 2019

 

 

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