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“
Although small in size, our strategic significance in the Indian Ocean remains unquestionable. We are capitalizing on this advantage to allow the nation to access previously untapped, but financially boundless possibilities.” His Excellency President Abdulla Yameen Abdul Gayoom
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MINISTER’S NOTE INVEST MALDIVES THE MAGAZINE
This is an exciting time to do business in the Maldives. The legal and regulatory regime for doing business has gone through a major overhaul, which in turn has made doing business in the Maldives smoother, safer and smarter. The Special Economic Zones Act introduced in 2014, offers investors attractive tax and non-tax incentives, internationally recognized standards for investment security, and speedy processes to commence and continue business in the Maldives. I am confident that this law will play a crucial role in bringing about transformational change to our country. The Parliament has also recently removed the constitutional restriction on foreign ownership of land. The amendments set out the basic rules for acquisition of land by foreigners in connection with large-scale development projects carried out in the country. Our open-door policy for foreign direct investment has numerous lucrative opportunities on offer in all major sectors of the economy, be it banking & finance, real estate, logistics, transport and tourism. We are proudly open for business, and we want to make doing business in the Maldives as simple and as attractive for you.
Mr Mohamed Saeed Minister of Economic Development
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MAIN CONSULTANT:
OTO CREATIVE ADVERTISING
PUBLISHER:
Ministry of Economic Development Boduthakurufaanu Magu, Male’, Maldives
ADVERTISING INQUIRIES:
Invest Maldives Ministry of Economic Development info@investmaldives.org
CONTRIBUTORS:
Ministry of Education Ministry of Health Ministry of Youth and Sports Ministry of Environment and Energy Ministry of Fisheries and Agriculture Ministry of Home Affairs Ministry of Housing and Infrastructure Ministry of Tourism Maldives Inland Revenue Authority Nasheed, Anil & Co. Bank of Maldives Plc Hotelier Maldives DLA Piper Capital Market Development Authority Maldives Pension Administration Office Shah, Hussain & Co. Dr. Ahmed Adham Abdulla Mohamed Ali Janah
PHOTO/ARTWORK: OTO Creative Mohamed Muha Shifah Saeed Ali Simah Ibrahim Adam Ahmed Mifrah Stock
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MESSAGE FROM AMBASSADOR OF THE MALDIVES TO CHINA MOHAMED FAISAL Maldives is today the most popular holiday destination for the Chinese people in South Asia. In less than a decade, the name Maldives has become synonymous with natural beauty, serenity and friendliness amongst the Chinese people. Maldives is not an unfamiliar name to the Chinese though. There are records of interaction between the Maldives and China dating back to the Tang Dynasty. Maldives was also a transit point in the ancient spice route for sailors travelling the busy Indian Ocean trade routes between South East Asia or China and East Africa. As we hold the Maldives Investment Forum in Beijing, our two countries are enjoying a golden period of bilateral relations. The State visit by President Xi Jinping to Maldives last year and the official visit by President Yameen to China in 2014 and in June this year, has helped take our relationship to a new level of small and major power relations. The golden period of Sino-Maldives relations is a time of promise and hope for our two peoples. Maldives is now an official partner with China in establishing the Maritime Silk Route, Maldives is also one of the founding members of the Asian Infrastructure Investment Bank. We have also embarked together to construct the China-Maldives Friendship Bridge between Male’ and Hulhule, which once completed will stand as a testament to the close and friendly relations between our two countries - a relationship that is built on mutual trust, respect, and win-win cooperation. The Maldives economy is undergoing substantive transformative reforms, with new legislations, policies and frameworks to enable foreign direct investment that will herald a new era of economic and social development for the people. In the meantime the Chinese Government has embarked on a “Go Global” strategy to encourage Chinese companies to invest overseas. China’s overseas financing is becoming increasingly influential globally. Since 2010 Chinese state owned-banks such as China Development Bank and the ExportImport Bank of China have provided more money annually to other developing countries than the World Bank. China is poised to lead the new package of global financing through the BRICS Development Bank, the Asian Infrastructure Bank and the Silk Road Fund. Today outbound investment flow exceeds USD100 billion making China the world’s third largest overseas investor. China is changing from the manufacturer of the world to the investor of the world. Given the enhanced relations, and economic cooperation between China and Maldives, it is no surprise that the Maldivian Government decided to hold the 2nd edition of the Maldives Investment Forum in China. Showcasing the best of Maldives, the MIF opens a window of opportunity for Chinese companies to seek information on investing in the most beautiful country in the world. Ancient Chinese sailors found a safe haven in Maldives during their travel to the east. The modern Chinese travelers are finding a place of beauty and peace in the Maldives. The discerning Chinese investor will find in Maldives not only a rewarding investment destination, but the opportunity to be part of the transformation of Maldives into an economic powerhouse in the Indian Ocean.
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INVESTMALDIVES.ORG opportunities in an international port
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THE SUNNY SIDE IN NUMBERS Total Population: Area:
90000 sq km
EEZ 895000 sq km
Exchange rate:
1192 islands, 20 Atolls, 198 inhabited islands, 112 tourist resorts
USD 1 = MVR 12.85 +/- 20%
341,256 Gross Domestic Product
2014: USD 3,024 Million 2015: expected growth: 10.5%
Largest contributors: Tourism (1.4 Million tourists) 2014 Most growth expected: Tourism and Construction sectors
Gross International Reserve:
USD
615 Million as at the end of 2014
Nominal GDP per capita
6,722
USD Est. 2014
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INVEST MALDIVES
INVESTMALDIVES.ORG
Invest Maldives is the government’s investment promotion arm housed within the Ministry of Economic Development, entrusted with promoting foreign investments to the country. It is the first port of call for all foreigners keen on investing in the Maldives.
SERVICES PROVIDED BY INVEST MALDIVES:
Invest Maldives paves the way for speedy commercial operations by providing assistance in every stage of the investment process, from establishment to operations. It is the one-stop shop for all investors wishing to invest in the Maldives.
i) Market and promote the Maldives as an investment destination
We welcome any queries you have about your business venture in Maldives.
ii) Inform prospective investors about Maldives and the potential areas for investment iii) Inform and guide on investment approval and business registration iv) Facilitate business operating licences for investors through co-ordination with line ministries v) Maintain the co-ordination and dialogue process of government strategic investment projects
Please contact us for any queries in investing in the Maldives. Website: www.investmaldives.org Email: info@investmaldives.org
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DEVELOPING A NEW
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COMMERCIAL PORT AT THILAFUSHI International port facility with a modernized container terminal.
Freezone with warehousing facilities and central logistics hub.
BACKGROUND Male’ Commercial Harbour (MCH) is the main point of entry for inbound cargo into the Maldives. It has already reached its maximum physical capacity and this is a limiting factor for the growth of the Maldivian economy, which is largely dependent on trade, particularly imports. OCTOBER 2015. INVEST MALDIVES
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The Maldivian economy is booming. Driven by a successful tourism industry, and high rates of growth in the construction, transport and other complementary sectors, GDP is expected to grow at 10.5% in 2015. Considering the growing trade volumes and projections for growth in businesses in the future, a new expanded port for the Maldives is a necessary piece of infrastructure, to deliver the government’s economic vision. The new port shall become the central logistical and distribution hub for all inbound international cargo into the country. Given the limited space in Male’, the capital of Maldives, the government is seeking port development and management partners to relocate the main international maritime gateway to the nearby island of Thilafushi.
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Relocation of Malé Commercial Harbour (MCH) to Thilafushi
DEMAND Inbound cargo is expected to grow at 16 % annually
Inbound cargo is expected to grow at an annual average rate of 16%, passing 126,000 TEU by 2032, even by the most conservative of estimates. Furthermore, the Government has a number of mega infrastructure projects in the pipeline and currently ongoing, which further signifies the need for an
expanded central port for the country. This growth is only expected to increase in the future, if the new development projects along with normal growth of the economy is taken into consideration.
80,000
67,377
70,000 60,000 50,000 TEU
49,627
53,062
54,820
57,232
40,000
15
30,000 4.4%
5
3.3% 2010
%
10
6.9%
10,000 0
25 20
17.7%
20,000
30
2011
2012
2013
2014
0
YEAR Throughput handled by Malé Commercial Harbour (TEU’s)
% Change
The Concept
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Port Zone 480,000 TEU
750m
19.3 Ha
USD 480 Million
Capacity
Quay length
Reclamation
Estimated Capex
Free Zone Warehousing & Logistics 1500m
35.2 Ha
Domestic logistics operations quay for dhonis, landing crafts and other small vessels
Reclamation
•
Maldives being located at the junction between the Europe–Asia maritime route and the East Africa–Asia maritime route, is ideally placed to capitalize on the maritime traffic between those routes
•
The topographical advantage of being an archipelago with shallow lagoons within atolls, provides economic solutions for reclamation materials while providing sheltered waters near harbor facilities
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Relocating MCH will allow better utilization of land, thereby enabling the development of a world class port and logistics hub.
•
Naturally deep water near islands provide for easy construction of deep water berths for large vessels with reduced costs of maintaining draft depth
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Project Components Summary •
•
Provide infrastructure for domestic logistical operations. i.e. roads and quay walls
Procurement of equipment for port operations
Construction of an office complex for Customs and Immigration authorities as well as the port operator.
•
•
Designated area for reefer containers
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Construction of warehouses for cargo storage
Provide necessary equipment for port operations
•
Provide bunkering, water, electricity and sewage facilities
Establishment of multipurpose operations area.
•
Reclamation of allocated area
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Construction of quay walls
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Pavement of container storage area
• •
Special Economic Zone Incentives General Incentives Business Models Import duty exemption on importation of capital goods for development management and operation of the project.
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Right to 100% foreign ownership.
•
•
Exemption from Business Profit Tax for first 20 years
Legally backed investment guarantee.
•
•
Exemption from Goods and Services Tax for first 10 years
Provision for overseas arbitration of disputes
•
•
Exemption from Withholding Tax for first 10 years
Long term contractual agreements and long term lease of land
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Relaxation of rules for foreign employment
•
Freedom to use foreign managerial, technical and unskilled workers
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Additional incentives can be negotiated based on investor’s proposal
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No foreign exchange restrictions
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No restrictions on the repatriation of earnings or profits
•
JV
BOT
EPC+F
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INVESTMALDIVES.ORG opportunities in an international port
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MALDIVES A GREAT PLACE TO DO BUSINESS
Maldives is a lot more than a honeymoon
hotspot and with the support of a visionary government, the country is setting out its stall as one of South Asia’s most attractive centres for Foreign Direct Investment. In this article, Andrew Healy, CEO and Managing Director at Bank of Maldives, talks about why companies should consider Maldives as their Asian hub and about the banking considerations for inbound investors. OCTOBER 2015. INVEST MALDIVES
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Maldives is of course best known as one of the world’s most idyllic holiday destinations with the country’s natural beauty and warm welcome combining to attract tourists from all over the globe. However, Maldives’ attractiveness as a place to do business across industries as diverse as financial services, energy, transportation and marine technology, is less well known. The supportive legal, taxation and trade environment provides strong inducements to invest in Maldives. With a rate of economic growth that has averaged 7% over the past 20 years and the highest GDP per capita in South Asia, it is little wonder the World Bank has described Maldives as a “development success story”. Foreign Direct Investment (FDI) has contributed significantly to this success with internationally renowned brands such as Hilton, HSBC, Four Seasons, Dusit Thani and Ernst & Young investing in this beautiful country over the years. The current government has clearly prioritised taking inward investment to the next level and it is encouraging that a coherent and articulate strategy is in place to attract business from overseas.
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WHY COME TO MALDIVES? The country’s strategy is simple – create a conducive investment climate for Foreign Direct Investment and then make the process of setting up the business as painless as possible. The main ingredients of this strategy can be summarised as follows.
Supportive Legal and Taxation System Maldives has a stable and transparent legal system which gives certainty and confidence to foreign companies who are planning to establish their business here. The country has a low tax environment. Workers are not required to pay income tax, while corporate tax is at a rate of just 15% of profits. A recent example of the country’s desire to proactively attract foreign investment is the passing of the Special Economic Zones Act which provides excellent incentives for investors and developers operating in key parts of the country where strategic development projects are being undertaken. These incentives include the exemption of import duty on capital goods as well as exemptions from paying Business Profit Tax for the first 10 years.
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With the right to incorporate businesses with 100% foreign ownership, no restrictions on repatriation of profits, Maldives promotes a liberal trade environment with all sectors of the economy open for foreign investment.
Liberal Trade Environment
Natural Resources
With the right to incorporate businesses with 100% foreign ownership and no restrictions on repatriation of profits, Maldives promotes a liberal trade environment with all sectors of the economy open for foreign investment. Supported by the aforementioned low taxation environment, investors of all kinds are encouraged to enter and operate in Maldives.
Maldives is endowed with 1,200 tropical islands and a marine environment which is pristine and rich in biological diversity. The size of the country’s coral reefs are significant on a global scale being the seventh largest in the world and covering an area of 9,000 square kilometres. The vast untapped potential in natural marine resources presents a range of opportunities for investors, particularly in areas such as aquaculture, fish processing, marine based products and related infrastructure.
Excellent Returns on Investment Strong strategic management and promotion of the tourism sector has led to returns on investment, which are among the highest globally (5 to 8 years on average). In terms of other sectors, the government is of the view that its similarly coherent, strategic approach to the attraction of inward investment – evidenced by its proactive legal, taxation and trade policies – will help foreign investors achieve rates of return that can outstrip those to be earned in other markets.
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BANKING REQUIREMENTS Once a business has decided to establish itself in Maldives, the choice of a strong and supportive banking partner is always a top priority. Some of the key considerations include: Experience: The bank should have experience in dealing
with foreign businesses and their unique requirements in order to ensure a smooth process from account opening to payment processing to ensuring the availability of the right products and services. Does the bank have a dedicated unit for Foreign Direct Investment with staff who will understand the needs of your business?
Relationship Manager: Access to a dedicated,
welcoming and capable Relationship Manager to guide and support your business is a must. This manager will be your point-of-contact and he/she should help to anticipate issues and to highlight opportunities that you may not have considered.
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The bank should have experience in dealing with foreign businesses and their unique requirements in order to ensure a smooth process from account opening to payment processing to ensuring the availability of the right products and services. Access to a dedicated, welcoming and capable Relationship Manager to guide and support the business is a must.”
Regulatory Requirements: Banks in all markets these days have to comply with stringent Know Your Customer and Anti-Money Laundering Regulations. However, your business should have access to a bank and relationship manager who will guide you professionally and seamlessly through the account opening process.
Geographic Reach: In particular if a new business is
establishing or operating outside the capital city, Male’, a bank with wide geographic reach in terms of branches, services and personnel may be a requirement. Businesses may not want to be spending large quantities of time travelling to meet their bank.
CONCLUSION Foreign investment opportunities in Maldives are significant across a wide range of industries and the country has a conducive and welcoming environment to attract new business. The legal and taxation framework is progressive with numerous incentives in place to positively differentiate Maldives from other countries. It seems reasonable to expect that a decade from now, many new and exciting businesses will have been attracted to join those already operating in this wonderful Indian Ocean location. OCTOBER 2015. INVEST MALDIVES
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Andrew Healy is CEO and Managing Director of Bank of Maldives, the country’s largest bank. At Bank of Maldives, a dedicated and experienced Foreign Direct Investment team is on hand to offer support to inbound businesses. For more information, you can contact Andrew at andrew@bml.com.mv or Ahmed Zeenad, Head of Foreign Direct Investment at zeenad1694@bml.com.mv
GOING GREEN FOR A SUSTAINABLE FUTURE
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Join hands with the biggest name in Maldivian water and sewerage services as the Maldives Water And Sewerage Company sets to deliver greener nationwide solutions for a sustainable future. Sustainable development and value-added services have contributed to MWSC’s fast-paced growth, and the company has outlined ambitious plans to cater to the requirements in the water and sewerage sector emerging from the new economic initiatives being rolled out by the Government.
Green Energy Development Project I Project Components
- Installing solar systems on rooftops at each Operation Centre - Grid connection and transformation, including power banks for solar power storage
Business Model
Joint Venture / Development and Operation / other models
Site Location
Malé & Hulhumalé
Green Energy Development Project II Investment Value
USD 3-5 Million for each island
Project Components
Design and building of integrated utility services in outer islands
Business Model
Long-Term Contractor Financing / Joint Venture
Scope
20-30 islands with populations ranging from 500-5000 people
Design & Implementation of Sewerage Treatment Plants Project Components
Design & implementation of sewerage treatment plants
Business Model
Joint Venture
Site Location
Malé & Hulhumalé
Establishment of ice plants in outer atolls Project Components
Design & installation of an ice manufacturing plant
Business Model
Contractor Financing / Joint Venture
Site Location
Nothern and Southern atolls of the Maldives.
Re-development of Utility infrastructure:
“
Water service provision is a profitable business segment. We have major expansion plans for the next 5 years with our main developments focused in the greater Male region”
Project Components
Design & implementation of rainwater harvesting mechanisms and storage facilities in Malé and Hulhumalé
Business Model
Contractor Financing / Joint Venture
Site Location
North and South Atolls
www.mwsc.com.mv OCTOBER 2015. INVEST MALDIVES 18
A SHARE OF
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PARADISE
“Underpinned by its liberal trade environment, increasing dynamic private sector and robust growth in visitor arrivals, we expect investor interest in the Maldives to remain strong.” (JLL, Hotel Destinations Indian Ocean, 2015)
According to the report published by JLL Hotels & Hospitality Group Asia Pacific in June 2015, which analyses the demand-supply fundamentals that govern the Indian Ocean’s leading hotel markets, trading performance and outlook, Maldives is the stand-out hot spot for overseas investors. With the strength of solid local professional services, and the support of lending and financial services offered by international institutions and commercial banks, the Maldives has continued to successfully attract inward investments and remain an appealing destination for foreign investments in the region. Through recent legislative changes, the Government of Maldives has made it a priority to create an increasingly favourable investment environment for foreign investors. Under the Special Economic Zone Act 2014, exemptions for business profit tax and import duties, amongst other attractive incentives, are offered to qualified foreign investors and developers operating in an extensive list of industries, including hotel and tourism, commercial real estate, manufacturing, logistics, transportation, port development and communication service, education, health, housing, sports, financial services, development and operation of airports, research and development, etc.
It is clear that the overall goals of the Maldives Government are to attract more foreign investors to the country, optimise the structure of foreign investment, and to further reform and simplify the foreign investment administrative system. OCTOBER 2015. INVEST MALDIVES
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Initially, the legal system of this Islamic country, the regulatory framework in which to establish business, the restricted areas of investment and the rules on tax law, employment and other areas, can be difficult to understand. We hope that you will find this Shah, Hussain & Co guide useful in explaining some key legal issues affecting your planned or existing investment in the Maldives. It aims to explain those legal areas and act as an introduction to the issues to the reader as an overseas investor.
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MALDIVES LEGAL SYSTEM The Maldives has a source of law based on a written constitution (the Constitution of the Republic of Maldives 2008), convention or tradition and Islamic Law (shari’ah). Laws in the commercial sphere primarily derive from:•
•
Legislation, which includes statues/ Acts of Parliament (the People’s Majlis), is approved by the President before it becomes law. The Consolidated Laws of Maldives, a recent initiative by the Attorney General, containing all of the Maldives statues translated into English, and a platform with bi-lingual search capabilities, LexisMaldives, are expected to be completed by the end of 2016. Regulations; enacted by Government Ministries and Departments and have the effect of law. They often serve the purpose of providing guidance on particular areas of a statue or present the law on an area not addressed in the legislation.
The Maldivian court process is an adversarial system, and lawyers representing both claimant and defendant are required to present evidence and/or call for witness testimony in support of their respective cases. The Judiciary Act 2010, containing the court procedural rules, prescribes that commercial claims are to be submitted to the Maldives Civil Court. Judgements can be appealed to the High Court within 10 days. The Supreme Court acts in general as the final court of appeal. There is a regulation on enforcement of judgments that stipulates various actions the Court may take in general cases of a proven debt. The Arbitration Act 2013 provides an alternative dispute resolution mechanism for commercial disputes, in accordance with the procedures laid down by the United Nation Commission on International Trade Law (UNCITRAL). The Law of Contract 1991 expressly permits contracts to be governed by the laws of a foreign law. Parties to a contract may also freely agree to the jurisdiction of a foreign court. Although the Maldives is not yet a signatory to a treaty permitting automatic enforcement of foreign judgments, such judgment may have persuasive value in the Maldives Courts.
FOREIGN INVESTMENT AND BUSINESS LAWS Investments from overseas are regulated by the Ministry of Economic Development, which acts as a ‘one-stop’ point for the foreign investment registration process and business registration for all entities engaging in business in the Maldives. Under the Business Registration Act 2014, the investor is required to register either as a company or a partnership before carrying on business in the Maldives. There is also an option for the overseas entity to register as the overseas branch of a foreign incorporated company in the Maldives.
The laws applicable to businesses will generally apply equally to both local business and foreign investments registered in the Maldives. Commercial legislation in the Maldives is largely based on English common law principles. Some of the key statues are: Contract Act 1991; Companies Act 1996; Maldives Tourism Act 1999; The Copyright and Associated Rights Act 2010; Business Profit Tax Act 2011, Goods and Services Tax Act 2011, Partnerships Act 2011 and Business Registration Act 2014, the key areas of which are discussed in this guide.
There is no general restriction on the level of foreign equity interests, and no requirement to include local partners. The foreign investor will be required to submit to the Ministry a Foreign Investment Application Form, and upon approval, enter into a Foreign Investment Agreement with the Government of the Maldives. OCTOBER 2015. INVEST MALDIVES 20
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TAX AND REPATRIATION OF PROFITS The Business Profit Tax Act 2011 imposes a tax of 15% on all legal persons resident or carrying out business in the Maldives whose annual income sourced from the Maldives exceeds MVRÂ 500,000 or approximately US$ 32,550. A 10% withholding tax is imposed on amounts made to entities that are not resident in the Maldives. The Goods and Services Tax Act 2011 imposes a goods and services tax (GST) on the value of goods and services supplied in the Maldives. There are two categories of GST, namely tourism-related goods and services tax (T-GST) charged at 12%, and general goods and services tax (G-GST) at 6%. Subject to the Anti-Money Laundering and Counter-Terrorism Financing Act 2014, there are no foreign exchange control restrictions of repatriation of funds comprising of profits or dividends.
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INTELLECTUAL PROPERTY The Copyright and Associated Rights Act 2010 grants protection to the owners of intellectual property rights concerning works originated from the Maldives and abroad (produced by Maldivians or foreign entities), if the latter are protected under international treaties to which the Maldives is a party. The Maldives is a signatory to the World Trade Organization (WTO) - Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement).
ACQUIRING AND INVESTING IN PROPERTY Foreign investors may acquire property in the Maldives under a lease of up to 99 years. An amendment to the Constitution in July 2015 now guarantees foreign ownership of land in the Maldives, subject to certain conditions, including an investment of over US$ 1 billion, project approval by the Parliament, and reclamation of 70% of the land by the investor. It is predicted that the 2014 trend of heavy investor interest in the Maldives will continue to stay strong, “as investors scramble to get their share of paradise”. We would welcome the opportunity to discuss any of the legal issues with you. Please feel free to get in touch with one of the partners at Shah, Hussain & Co. Partners at Shah, Hussain & Co. Barristers and Attorneys:Shuaib. M. Shah (shuaib@shclawyers.com) Dheena Hussain (dheena@shclawyers.com) Mohamed Fizan (fizan@shclawyers.com) Asma Chan-Rahim (asma@shclawyers.com)
Brief profile of author: Asma Chan-Rahim, LL.B (Hons) (London, UK), LL.M (London, UK), Solicitor (England & Wales) Partner Asma is a Solicitor of the Supreme Court of England and Wales, with a Masters of law in International Business Law. She is recently retained by a China-based multinational full-service construction company, a subsidiary of a Global Fortune 500 Company, advising on foreign investments relating to Maldives infrastructure development projects. Her diverse client base includes Hitachi Plant Technologies (Japan and India), the World Bank and owners of five-star world class luxury Maldives island resorts. She is noted for her experience in public-private partnership projects involving the Male’ International Airport and Male’ Water and Sewerage Company. She is counsel to numerous multinational enterprises advising on foreign investments in the Maldives, initial set-up of a local presence, and on-going commercial and corporate matters. T: +960 3333 644, M: +960 79 555 36/ +44 7985 479 040, E: asma@shclawyers.com OCTOBER 2015. INVEST MALDIVES
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The Government’s policy is geared towards expanding and improving the quality of early childhood care and developing and improving the quality of basic education through consideration of the relevance and outcomes of the structure, content and process of basic education.
PUBLIC PRIVATE PARTNERSHIP IN
EDUCATION T
he education system continues to face new challenges, with the current Government policy focusing on access to and equitable distribution of educational opportunity regardless of geographical location.
As the largest education provider with over 12,000 staff, the MOE delivers: •
Public education to almost 80,000 students through 215 Government schools;
•
Tertiary education and vocational education to about 10,000 students through the Maldives National University and Maldives Islamic University;
•
Scope
Direct and indirect support to private and community-owned schools and preschools.
•
Regulatory services and assistance to colleges and training providers;
The Government is seeking private partners to invest and manage the Maldives Polytechnic, to ensure the following:
•
Quality assurance in schools and higher education through the Quality Assurance Department and Maldives Acreditation Board respectively.
It is also looking into expanding secondary education opportunities in an equitable manner across the country, introducing vocational technical education at school level, developing higher secondary education and diversifying educational opportunities for youth and adults through nonformal education.
•
Investment in infrastructure where necessary
•
High quality and affordable education and training for students
•
Enrolment demands of the population and academic fees for the students are sustainaby met.
•
Maintenance and refurbishment of the institution and facilities to ensure effective and safe delivery of service
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Project Components Founded in 1975 as the Vocational Training Center, the institution has evolved over the years, with its most recent rebranding in 2010, as the Maldives Polytechnic. Having produced over 4000 young people equipped with technical training of various trades within the last ten years, the Polytechnic focuses on demand driven skills development, supporting economic growth, catering to the demand for skilled jobs and continuity of employment in the trades. The proponent would be required to bring improvements to training through investing in innovative teaching methods, improvement to facilities, introduction of new services and training programmes for students. Furthermore, considerable investments in infrastructure and training equipment are required from the proponent over initial periods of the arrangement.
•
The partner selected to manage Maldives Polytechnic will be granted a concession term of a total of 40 years, of which 10 years will be rent-free.
•
Looking at the market potential, over 8,000 students leave secondary schools every year in Maldives so it is estimated around 2,000 students would be absorbed in technical and vocational education and training at the Polytechnic centers throughout the country.
•
Maldives Polytechnic land and its existing buildings and equipment is worth over MVR 150 million.
All expenses regarding the maintenance of the Polytechnic, including staffing and employment shall be borne by the proponent. Furthermore, the proponent can charge fees to the students, however, will also have to outline in the proposal the amount that the government is expected to pay for each subsidized student – which may or may not differ from the amount they charge as their student fees.
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INVESTMALDIVES.ORG
SEA OF RICHES, LITERALLY! Maldivians are sea folk! With nothing but vast seas surrounding small islands, Maldivians have become masters at the art of fishing, navigation, boat building, fish preservation and supplementary sectors. With marine resources intimately linked with the livelihoods of Maldivians, the fisheries and tourism industries stand as examples of how these resources have made up the core of the Maldivian economy. Fisheries and aquaculture sector is the second biggest contributor of foreign currency to the economy of Maldives, and has great potential for growth with untapped resources still to be developed.
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Tap into the resources of the vast blue oceans of Maldives, with huge investment prospects that combine modernity and the age-old knowledge and practices passed down for generations from the people of the seas.
For centuries, Maldivians have practiced a highly sustainable pole and line fishery, and recently with a global demand for yellowfin tuna, handline practices have made a significant mark in the industry. Fish is an integral part of local cuisine, also fish exports play a vital role in the country’s economy. Canned tuna, fresh yellowfin and big eye tuna and processed fish products make up the majority of the sector’s exports, but delicacies like groupers, sea cucumbers and other reef fish have a high international demand and is seen as a major booming sector.
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Value addition from fisheries sector:
Mariculture development:
Maldives aims to further diversify the pole and line skipjack tuna fishery and the hand line yellow fin tuna fisheries. Maldives is currently developing a local fleet targeting large bigeye tuna for the high-end Japanese and Korean markets. Longline fishery requires specialized equipment such as winches, line throwers, haulers, radio buoys etc. which are not readily available in the Maldives. Furthermore, longline fishing vessels are not manufactured in the Maldives, being heavily imported. Other amenities to support longline fishery operation, such as bait, is also imported occasionally from abroad.
Maldives is currently developing marine aquaculture as a new economic sector that would exist in harmony with the fisheries and tourism sectors. The new mariculture sector is expected to diversify the country’s economy and generate income as well as employment opportunities.
The processing sector for skipjack and yellowfin tuna is lucrative and the government encourages foreign investments in these areas to improve the quality of fish that is exported, and to diversify the products that are being exported, while also improving the socioeconomic status of the fishermen and the fishing communities. A large proportion of skipjack is still exported in the “raw� form as frozen fish to Thailand.
Mariculture development in Maldives targets high valued species such as groupers, sea cucumbers and marine ornamental fish. Broodstock of these animals can be currently obtained locally.
To improve value addition in the fisheries sector, the Government of Maldives is promoting other fisheries related services, such as the provision of amenities required for fishermen in the form of ice, fuel, water and fishing gear. Development of amenities in close vicinity to fishing communities requires reinforcements in the form of quality investments. Ice, particularly is of high demand in the harvesting sector.
The country offers diverse environments for mariculture, which include protected shallow and deep waters within reefs, and more open deeper waters in the atoll basin. For land based facilities, existing islands can be used, or land can be reclaimed following appropriate environmental considerations.
Cultured commodities can be exported, or they can be channeled to the well-established and expanding local tourist resorts, where the tourist numbers and diverse nationalities offer opportunities for mass and niche marketing. In addition to commercial mariculture, Maldives also welcomes research and development investments in the culture of coral reef organisms, either as separate activities or in conjunction with commercial mariculture operations.
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The largest international airline of the Maldives MEGA Maldives Airlines has pioneered non-stop flights between Maldives and China. Since then, it has now become the premier international airline of the Maldives, with over 50% market share among airlines flying direct to China and bringing over 10% of all tourists to the country. Fully privately owned and led by an experienced multinational team from the US, Europe, China and the Maldives, 2016/17 will see it diversifying into new routes and connecting more countries to the Maldives and beyond.
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SMART, SUSTAINABLE, GREEN!
INVESTMALDIVES.ORG
Maldives fame for its beauty is matched by concern that it is on the verge of disappearing. Smart, sustainable and green energy solutions are the best option for the preservation of this nation.
Significant investments made by state utility companies, community powerhouses, and individual industrial operators have resulted in Maldives being one of the few countries in South Asia to universally enjoy 24-hour electricity access nation-wide. The country is now ready to welcome private investments into the sector to augment the ambitious renewable energy scaling-up program and aims to enhance energy security by reducing fuel dependency. Apart from the high dependency on imported fossil fuel, uneven geographic dispersion and unplanned support infrastructure development with high indirect subsidies for fossil fuel based energy generation pose significant challenges to energy development. However, Maldives – with year-round equatorial sunshine - provides immense potential for solar energy generation. Additionally, studies have also revealed the potential of wind and waste to energy technologies, which can be further explored with relevant tools and a conducive regulatory structure. Preliminary studies show great potential for renewable energy development in the Maldives as it is not only sustainable, but ensures cost savings and a competitive return compared to the high unit cost in diesel-based energy generation.
SUSTAINABLE ENERGY AROUND THE GREATER MALE’ REGION Malé power system consumes the largest amount of diesel in power generation, and demand continues to increase at an exponential rate. Meeting this demand is tough, especially given the high volume of large scale developmental projects underway and more planned. This has created a number of opportunities for investors to tap into the sustainable energy market.
Installation of 11MW roof-mounted grid-connected solar PV systems in Male’ and nearby islands. Private investors can enter into power purchasing agreements with STELCO to sell electricity generated from these systems under a Feed-In Tariff (FIT) scheme
Key Information: • • • • • • •
Maldives is one of the most oil vulnerable countries globally; 20% of GDP was spent on fuel imports in 2014. Many remote and rural island communities have little or no access to modern and affordable renewable energy services. At population centers energy generation and distribution in the past year was consolidated to three government owned utilities (STELCO, FENAKA and MWSC) Most of the energy generation is still based on fossil fuel imports Energy generation in industrial islands is under private owners Pilot demonstration projects and feasibility studies on renewable energy have concluded that solar, wind and wasteto energy are feasible technical and commercial options for Maldives.
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Waste-to-Energy facilities at Thilafushi Island Thilafushi a manmade island which functions as the largest waste management centre in the country. With a landmass of over 0.43 km² it receives more than 330 tonnes of rubbish a day. If utilized for energy generation, about 200 tonnes per day is estimated to produce about 4MW of electricity using waste-to-energy (WTE) technologies. In addition
GREEN SOLUTIONS FOR THE RESORTS
to using it as a landfill site, a number of industrial operations are also carried out at the island. The island currently consumes more than 6MW of electricity. The electricity generated from WTE facility can be used to meet the electricity demand of the island and water generated as the byproduct can be used to generate additional revenue.
Develop ‘plug and play’ hybrid smart-grid energy generation systems for resorts There are 111 tourist resorts currently operating in the country, each having their own electricity generating and distributing facilities. They collectively consume as much power as the rest of the nation. The unit cost of electricity generation in resorts is more than the unit cost of electricity generation from renewable energy sources. There is potential to develop ‘plug and play’ hybrid smart-grid connected energy generation systems targeting resorts by anchoring renewably energy electricity generating facilities in inhabited islands located close to tourist resorts. A total of 21 resorts have expressed interest for interconnection with neighbouring inhabited islands.
UNTAPPED RESOURCES IN THE OUTER ISLANDS Waste-to-Energy Preliminary studies conducted around the country show great potential for waste-to-energy systems, diversifying the energy mix, for technically and financially viable, sustainable energy solutions. Some islands identified for installation of waste-to-energy projects include: Addu City (capacity to generate 50TPD of waste), HDh. Kulhudhuffushi (potential to generate 20TPD of waste), and R.Vandhoo (potential to generate 40TPD of waste). With combustion and incineration based solutions, energy generation expectations are: up to 1MW of electricity and 95 TPD of water in S.Hithadhoo, Addu City, 1MW in R.Vandhoo and 76TPD of
potable water at HDh.Kulhudhufushi. Interested parties have the opportunity to invest either in any one single island or in all three islands and sell electricity and water produced under a pre agreed FIT.
100% Renewable Energy With a vision of complete green solutions in most islands, the government has identified islands with annual electricity consumption between 25MWh- 1GWh for a complete migration to renewable energy sources. Interested investors can select the islands of their choice separately or can group islands to transform entire island/s to RE based electricity consuming island/s. There are 62 inhabited islands identified under this category. Electricity generated can be sold to the utilities companies under an FIT scheme in accordance with the power purchasing agreements entered into between the utility provider and the investor.
30% RE Islands Islands with annual electricity consumption greater than 1GWh per year are identified to install RE energy generating facilities up to 30 percent of the daytime peak load of the island. These investments would be supported with an FIT mechanism sold to local utilities companies. OCTOBER 2015. INVEST MALDIVES
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SMART GRID OPTIONS IN URBAN CENTERS Currently each island identified for smart grid integration has its own power generating and distributing systems. These systems were built on an ad-hoc basis and the system may not be able to accept energy intermittent sources.
Felivaru Urban Region The Felivaru Urban Region provides significant opportunity for investment in renewable energy. The region, in Lhaviyani Atoll, consists of the islands: Naifaru, Madivaru, Felivaru, Gaaerifaru Hinnavaru Felivaru is well known in the atoll as the hub of industrial activities. A common power plant for the region that is relatively large-scale and based on renewable energy can offer opportunities to streamline operations, reduce costs and overheads of electricity generation, and present more favourable conditions for cogeneration projects. A solar, wind and diesel hybrid can be implemented for the region to provide electricity for the residents of the two inhabited islands and the industrial island. Considerations are to install a PV system, with PV panels located at the roof top of the Felivaru Fish Canning Factory to supply power to the network during daytime. There is potential for wind turbines to be installed in Felivaru, well away from the residents or the factory. A regional power grid interconnected with the power grids of each island would establish a common power production facility for the entire region. Submarine cables required for smart grid connection is approximately 3.88 km in length.
Thinadhoo Urban Region The Thinadhoo Urban Region in Gaafu Dhaalu Atoll consists of: Thinadhoo, Kaadehdhoo Regional Airport Madaveli Hoadedhoo Solar, wind and diesel hybrid systems can be implemented for the region to provide electricity for residents of the three inhabited islands and the airport island. Options are considered to interconnect electric grids of each island via a submarine cable, in order to connect the commercial centres and the airport island. Grid interconnection in this region is expected to improve the existing distribution system and provide reliable electricity to the island communities while generating favorable conditions for potential cogeneration projects, which in turn will cut unit costs of electricity production.
Laamu Urban Region Laamu Atoll is the second largest atoll in the country in terms of land area. Laamu is dotted with 73 coral islands with almost 12 thousand people living in the 12 inhabited islands. One island, (Olhuveli) is leased to operate a luxury tourist resort; three additional resorts are planned for two more islands (Gasgandufinolhu, Bodufinolhu and Thumburi Maldives’ first integrated resort development island). One island (Mendhoo) is entirely agricultural, three are industrial, and the remaining 54 are uninhabited. The majority of the population resides in the islands of Isdhoo, Gan, Maavah and Fonadhoo. A common power plant that is relatively large-scale and based on renewable energy can offer opportunities to streamline operation, reduce costs and overheads of electricity generation, and additionally present more favourable conditions for cogeneration projects. Solar, wind and diesel hybrid systems can be implemented for the region to provide electricity for the residents of the inhabited islands and the industrial island. As the key population centers in Laamu Urban Region are connected by land, these provide potential grid interconnections to allow for distributed generation and to provide economy of scale.
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PROJECT HIGHLIGHT:
CONNECT THE EMERALD ISLES
DIGITALLY
Partner up with the Communications Authority of Maldives in implementing the National Broadband Policy 2014-2018, taking broadband services across the nation to world class standards. Valued at USD 30 Million, the Domestic Optical Fibre Network project aims to develop the national broadband infrastructure, expanding the network to enable high speed internet services to all parts of the nation.
Investment Value
Approx. USD 30 Million
Project Components
- To build a fibre optic submarine cable network to include the key areas which do not have presence of fibre; - To have a second cable segment to cross the One and Half Degree Channel (Huvadhoo Channel) in preparation for any unforeseen damages to the existing cable which will interrupt all communications to the southern atolls.
Business Model
Financing for the project through supplier’s credit or through lending agencies for development work.
Site Location
Maldivian waters
For interested parties, direct visits to related agencies can bring about more awareness and facilitate the exchange of information. For more information regarding this project, you may get in touch with CAM at: Communications Authority of Maldives Telecom Building, Husnuheenaa Magu, Male’ 20117, Republic of Maldives, Fax: +(960) 332 0000 Phone: +(960) 332 3344 Email: secretariat@cam.gov.mv Website: www.cam.gov.mv
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PROJECT HIGHLIGHT:
BE THE FORCE FOR CHANGE IN HEATH SERVICES
With geographic disparity and low population concentrations, the health service industry is the most vulnerable sector in need of a major transformation. Join forces with the Maldivian government to bring about a revolutionary change to the industry with major projects set to roll out in the next few years.
ALTERNATIVE AND COMPLEMENTARY MEDICINE CENTER •
This venture set to provide alternative and complementary medical services within the country has the potential to attract patients who wish to have complementary medical treatments to cater to complex medical conditions for improved wellness, or relief from acute medical symptoms.
ESTABLISHING A NATIONAL DIAGNOSTIC CENTRE AND HOSPITAL •
AIR AMBULANCE SERVICES
To improve access to quality diagnostic services in a timely manner.
•
Reduce the need for referrals abroad for diagnostic and impove cost effectiveness of services.
•
Be part of the revolution! For more information;
To ensure quick and efficient service delivery across the archipelago
Ministry of Health SosunMagu, Male’ Republic of Maldives Tel No: 960 332 8887 Fax No:960 332 8889 Email: mohf@health.gov.mv
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MALDIVES:
AN EVOLVING INVESTMENT LANDSCAPE
PROSPECTS THROUGH OUR LENS The Maldives we see today is the result of an entrepreneurial turn which took place in the 1970s. The picturesque, pristine virgin islands were slowly developed by young entrepreneurs, who had little knowledge of what they were about to create. The Maldivian economy stepped up tremendously over the past three decades. Prior to this day, fishery resources used to be its bread and butter. Today,
Tourism is the largest industry accounting for 30% of GDP and more than 60% of the Maldives foreign exchange receipts. Investments in tourism and tourism-related sectors have paid off positively, creating employment and raising the bar of overall living standards. As a result, there has been an increase in economic activities, creating demand for goods and services. While acknowledging the critical contribution of the tourism sector to the country’s economy, the government has announced plans to diversify the economy with a view to broadening the array of business activities.
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Construction and transportation remain as growth sectors keeping pace with the rising demand for real properties and the increased traffic of goods and passengers. The growth of tourism and complementary sectors continue to attract new players to the field and existing ones to expand their horizons. This has naturally driven up the demand for financing. In order to keep abreast of the ever-growing demand for finance, the government has announced financial sector liberalization as a key policy area. The current financial architecture is based on the “Asian Development Model” where businesses rely heavily on bank credit. Non-bank financial institutions in the country range from finance leasing to insurance and transfer agents. However the rising number of development projects is now spurring the demand for alternative sources of financing. On the demand side renewable energy projects, tourist property construction, integrated resort development, commercial and residential area development, boat-building, import and logistics handling are seeking finance. From the supply side, government agencies’ tasked with financial sector development are looking South and East of Asia to introduce financial products which will suit the growing demand for investment finance.
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“OLD” TO “NEW” The government is eager to stimulate investment in the financial sector given the need to match the financing needs of new projects. There is considerable scope for investment in the following financing models.
Private Equity Maldives is well positioned for private equity funds targeting hybrid ownership structures in the tourism industry. Private Equity groups have made their appearance in the Maldives, engaging in the development of tourist properties. Integrated tourism development projects in islands and reclamation of lagoons for tourism-related projects continue to be attractive investment opportunities for private equity firms.
Investment Funds The Maldives capital market recognizes sophisticated investment regimes in the world. The current regulatory framework allows foreign incorporated investment funds to invest in local businesses and various investment projects by setting up investment funds. Investment strategies of such funds may target various sectors, ranging from renewable energy, health and wellness, tourism and real estate. Currently, Maldives Retirement Pension Fund is the only large-scale institutional investor investing in various securities, in line with its investment strategy. So there is considerable scope for other players to enter the market.
A NEW FOUNDATION Maldives has a competitive advantage over countries in the region due in large part to its world class tourism industry. Maldives’ investment framework is geared towards welcoming foreign investors by offering a simple policy environment. Maldives offers projects with high returns coupled with numerous benefits for foreign investors. Firstly, in the absence of capital controls, the foreign exchange market allows businesses to freely engage in capital transactions without prior approval from a regulatory agency. Recent changes to the legal framework, brought by the Special Economic Zones Act (SEZ) - a ‘nextgen’ investment
regime for megaprojects - allows investors to develop, operate or oversee the maintenance of the economic zone. The Act provides a catalog of concessions and exemptions, a relatively freer regulatory environment, and long term land lease options of up to 99 years. To give a competitive advantage to investors, SEZ Act also allows Offshore Banks to extend its services to residents through a local intermediary. The new foundation laid by the ‘nextgen’ investment regime allows investors to engage in medium to large scale investments in both pre-announced and feasible areas of business activities. Unsolicited proposals can also be made to the government, targeting investments in multiple sectors.
NASHEED ANIL & CO. We are a full service law firm in the area of commercial and corporate law with a team of well reputed lawyers and professionals who bring together years of law practice and experience. We function as a one-stop shop to our clients with a catalogue of services on offer. These include legal advice, structuring solutions, legal drafting, litigation, documentation, corporate services, investment facilitation, company secretarial services, tax, compliance and regulatory matters.
For more details you may reach us on office@nasheedanil.co
Nasheed Anil & Co LAW PRACTICE 3rd Floor, H. Magmaa Sikka Goalhi, Male’ 20082 Tel: ++ 960 331 8558 Website: www.nasheedanil.co
Please feel free to get in touch with our team at Nasheed Anil & Co. for any matters related to investing in Maldives:
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OPPORTUNITIES
INVESTMALDIVES.ORG
IN THE CAPITAL MARKET OF MALDIVES
INTRODUCTION The Maldives has come a long way in the short span of its involvement in the Capital Market, with the country’s first ever equity shares being offered to the public in 1981, at a time of absence of an appropriate legal infrastructure or regulatory oversight. The scene has significantly changed since then giving way to the development of a wide array of legislation governing the numerous aspects of capital market operations overseen and implemented by an independent regulator. The current market also comprises of a privately owned stock exchange and a central depository for securities. This seemingly rapid development is however not an indicator that the market has reached its’ full maturity whilst it marks a stepping stone in the long and arduous journey towards a vibrant capital market. Over the past years, the Capital Market Development Authority (CMDA) as capital market regulator, has
implemented a number of strategies and initiated various projects towards further development of the market. The most recent of which is the Capital Market Strategic Plan 2015 2019, which details strategic priorities and provides directions on the strategies to be used for specific objectives under those priority areas. Naturally, the action plan has been drafted to boost currently existing opportunities within the capital market as well as to create new avenues for investment.
The CMDA Strategic Plan will boost currently existing opportunities within the capital market as well as open up new prospects for capital market services.
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ISSUANCE OF SECURITIES Since and before the initial IPO in 1981, Maldives has been open to public offerings of securities, both debt and equity. Nevertheless, over the duration of almost two and a half decades, despite numerous difficulties faced in accessing finance via the banking sector, a very few number of businesses have approached the capital market; with most of the issuers being Government owned or controlled. The most prominent and visible cause for this dynamics is the lack of awareness on capital market and the process of going public as well as poor awareness of the market’s crucial role in the development of businesses. It is imperative to abolish any misconceptions about the capital market and to understand that it not only provides the opportunity to raise finance through issuance of shares but also offers other similarly favorable means such as customized shares, debt securities and investment funds. It is also important to be aware of the opportunity for any company, privately or publicly owned, to raise finance via the capital market is universal. Furthermore, it would be of great interest to smaller businesses looking to benefit from the capital market, that an ‘Introductory Board’ has recently
been created by the Maldives Stock Exchange and will enable such entities to issue securities and subsequently list those securities on the stock exchange in order to make them tradeable.
An “Introductory Board” has recently been created by the Maldives Stock Exchange which will enable small businesses to issue securities and subsequently list those securities on the stock exchange Unlike most other countries, securities can be, and has been issued in US Dollars as well. This provides the opportunity for foreign investors to participate in such issuances.
DUAL LISTING The capital market of the Maldives has until now been limited only to the local market, and there has been minimal integration with other foreign Stock Exchanges. Thus, with the aim of broadening the access to finance and investment opportunities, Maldives Stock Exchange has already signed MOUs with two foreign stock exchanges. As such, strategic alliances with such Exchanges will not only provide opportunity of tapping into their markets, but also access
to their knowledge and expertise in this field as well. This will also provide access to the Maldives market for foreign companies.
Maldives Stock Exchange has signed MOUs with two foreign stock exchanges.
INVESTMENT IN AND TRADING OF GOVERNMENT SECURITIES Another viable opportunity within the capital market comes with the listing of government securities in the Stock Exchange. Currently, the government issues short term Treasury Bills which are subscribed by Banks, SOEs, and a handful of private parties. The introduction of a secondary market for such securities, would remedy the current dynamic of rolling over the investments upon reaching maturity by increasing the term and converting them into instruments OCTOBER 2015. INVEST MALDIVES
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that can be traded over the stock exchange in the secondary market. The structuring of such government securities is currently ongoing and will be done with emphasis on the financing needs of the government as well as the investment needs of institutional and other qualified investors.
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SME DEVELOPMENT AND VENTURE CAPITAL FUND It is a common belief among the general public that the capital market is a place for businesses of a certain size. Bearing in mind that there are in fact certain requirements with regard to the participation of a business in the capital market, it remains approachable for businesses of all sizes. Arrangements are being made in order to establish a Small and Medium Enterprise (SME) Development Fund, which would enable SMEs from among the significant number of over ten thousand businesses operating in the Maldives, to access finance through the capital market. The establishment of this fund aims to eliminate the difficulties such as collateral requirements, heavy interest rates and single borrower limits, which are faced by such businesses in obtaining finance via banks. In addition to this, the financiers of the fund will have the comfort of knowing that their investment is one that is well regulated and will further benefit from the growth and
development of the SMEs that are financed by the fund. Simultaneously, work is also underway to create a platform for establishing venture capital funds to promote entrepreneurship and innovation. This will create a mechanism to match the demand and supply of funds i.e. create a link between individuals and firms with surplus funds and those that possess financing needs whilst operating under the skillful guidance of qualified fund managers supervised by the regulator. While this will allow businesses to raise finance through the capital market without the need to go public, it will also be an opportunity for listed companies to make private placements to the most attractive private equity and venture capital funds, allowing both local and foreign investors to engage in investments.
SHARIA’H COMPLIANT PRODUCTS Since the inclusion of ‘shariáh compliant’ or ‘Islamic securities’ within the definition of securities under the Maldives Securities Act in 2011, it has been a high priority and an important objective to promote shariáh compliant capital market products parallel to the conventional market. As such, the capital market of the Maldives offers a wide array of Islamic finance products including debt and equity products. As such, businesses have the option to issue shariáh compliant securities giving investors the opportunity to
subscribe for those securities. Investors can be assured that the shariáh compliance of their investments will be closely monitored by the qualified experts on the Capital Market Shariáh Advisory Council established within the CMDA. Future plans are also in motion to promote more investable products to investors having various preferences. These include shariáh compliant counterparts of investment funds, private equity and venture capital funds.
CONCLUSION The capital market in Maldives provides a viable and sustainable form of financing for businesses; with a variety of debt and equity products as well as the promising and well desired prospect of new and more innovative products. In addition to this, it is important to highlight that the capital market is not only a platform for a specific genre of businesses seeking to obtain financing, whilst it is a hub that links businesses of various sizes and types with eager investors and financiers.
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OPPORTUNITES BEAMING ON THE SUNNY SIDE In 1972, a small group of Italian writers and photographers embarked on a journey to an undiscovered travel destination, lighting the spark for an unparalleled industry now synonymous with the name of the country itself.
What started off as a small business venture in 1972, slowly growing from the greater Male’ region has rapidly transformed this island nation to become the multi-million dollar economic engine, driving the nation, all across the archipelago. Maldives is now a global brand and nature’s custom-made answer for holidaymakers seeking luxurious island hospitality in the infamous tropical settings of the sun, sand and sea.
The Maldives tourism product is comprised of over 582 registered tourist facilities providing accommodation in 33,056 tourist beds located in 112 tourist resort islands, 19 city hotels, 281 tourist guest houses, and 171 liveaboard vessels locally known as “safari boats” that cruise the atolls. OCTOBER 2015. INVEST MALDIVES
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For the past 5 years these resorts and hotels have maintained an impressive 76% average occupancy rate. The high-end tourism developed in these islands provides the main source of revenue to the state and its economic benefits are redistributed to the population to address the nation’s development challenges. Tourism directly contribute approximately 30% to the GDP. The indirect contribution is expected to be much higher. The growth of tourism has been supported by capital accumulation through investment in tourist resorts and support infrastructure.
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The industry also serves as a link and stimulus to almost all other sectors of the economy such as transport, communications, construction, trade and financial services. Foreign investments in advancing the communication infrastructure and establishment of the regions largest fleet of seaplanes are examples of how tourism has contributed to the growth of these sectors. Employment within tourism and the consequential growth in other sectors has also created increased demand for labour.
In 2014, Maldives received over 1.2 million international visitors. Traditionally the European markets make up the highest arrivals to Maldives. However, the top generating market share today is dominated by East Asian arrivals, due to the increasing popularity of Maldives among Chinese travellers.
In 2014, Chinese tourists accounted for 30.2% of arrivals during the year.
2014 2013 (%)
2012 2011 2010 01
Europe Asia and Pacific Americas Middle East Africa
02
03
04
05
06
07
08
09
01
2010
2011
2012
2013
2014
63.8 31.6 2.3 1.5 0.7
57.7 37.5 2.5 1.6 0.7
54.0 40.1 2.8 2.3 0.7
46.9 46.6 2.9 2.8 0.7
43.9 48.9 3.4 3.1 0.7
Tourist Arrivals and Market Share by Region (2010-2014)
00
International visitors flock to the islands for a variety of reasons ranging from honeymoons (15%) and romantic private holidays to enthusiasm for scuba diving (7%) and snorkeling (10%) in the diverse reefs and marine environment to pure relaxation (63%) and rejuvenation under the sun. Maldives Visitor Survey conducted in February 2014 confirmed these findings while indicating an astonishing 29% tourists are repeat visitors and 94% are satisfied that the holiday “met their expectations�.
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FOREIGN INVESTMENT IN THE TOURISM SECTOR Tourism is one of the first sectors to have opened up their doors for foreign investment in the Maldives and continues to attract a large number of investments. The majority of investments are made to develop tourist resort/hotel infrastructure and their operation and management. Though led by local brands in the beginning, the industry now boasts a large number of top international hotel brands operating profitably in the Maldives. Four Seasons, Hilton,
Jumeirah, One & Only, Shangri-La and Club Med are someto name a few of the award-wining international and regional brands now operating in the Maldives. While resort islands leased to local parties have a total bed capacity of 16,968, bed capacity represented by foreign companies was 2,620. Resorts leased to joint ventures had an aggregate total of 4,329 beds at the end of 2014.
Investment by type (local/Foreign) in resort and hotel sector
management
Operator
Lease Holder
05
,000
10,000 No. of Beds
Joint Venture Foreign Local
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15,000
20,000
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POTENTIAL INVESTMENT AREAS AND INCENTIVES IN TOURISM Resort development and operations are the most attractive foreign investments in the tourism sector, but with new legislation enacted especially to attract foreign investments, (including the Special Economic Zones Act) a vast array of investment opportunities have opened up in tourism and support sectors. These include;
While the industry shows a clear trajectory for growth, the need for foreign investment in tourism are matched and facilitated by the government of Maldives with incentives. These incentives include;
• • • •
•
• • •
Tourist resort/hotel development and operation Dive Centre operations Banking and development financing Investments in domestic airports and upgrading of international airports Renewable Energy services to the tourism sector Special Economic Zones development Lease of Villas/Accommodation units from private Tourist Resort islands
•
• • • • • •
Extension of the lease up to 99 years upon payment of a lease extension fee for tourism projects Provision of sovereign guarantee upon request for tourism development loans where the interest on such loans are 4% or less A 100% waiver of import duty for materials imported for tourist resort development. A grace on land rent during specified construction and development period A 3 years construction period for new tourist resorts development projects Allocation of quota for recruitment of foreign management staff and labour Right to 100% foreign ownership Forming wholly or partial joint venture companies with foreigners and locals
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INVEST IN MALDIVES
到马尔代夫投资
Financing Reclamation Shore Protection Road Networks Harbour Construction Warehousing
Thilafushi Corporation Thilafushi Corporation (TCL) is a fully government owned company formed with the broad mandate to manage and develop the industrial island of Ma.Fen Building level 4, Ameenee Magu Male’ Maldives, T: 960 3307513 | F: 960 3307514, E: info@tcl.com.mv | W www.tcl.com.mv
Thilafushi. The company’s vision is to make Thilafushi a world class industrial zone, which is ready for investors with guaranteed returns.
SPECIAL ECONOMIC ZONES IN THE MALDIVES
INVESTMALDIVES.ORG
T
he Maldives has just 298km2 of land spread over 90,000km2 of territory and the local population of 340,000 people inhabit only 10% of the nation’s 1,192 islands. The country’s distinctive geography and picturesque landscapes have led to strong international investment in the tourism sector and a strong domestic fishing sector, but these have also constrained development in a number of more traditional growth sectors and presented unique challenges around energy generation and transmission. Whilst the tourism sector is expected to remain the principal driver for economic growth in the medium term, economic diversification remains a key issue faced by decision makers.
Diversifying and stimulating the economy through SEZs Special economic zones (SEZs) around the world have generally been successful in attracting foreign investment, developing industry, creating jobs, diversifying the economy, enhancing transfer of knowledge and technology, contributing to the construction or improvement of transportation, communication and utilities infrastructure, and acting as a trial region for new government policies. The Government of the Republic of the Maldives is looking to replicate these successes within the Maldives through the introduction of the SEZ Act. Following his ratification of the SEZ Act on 1 September 2014, President Abdulla Yameen highlighted the importance of the Act for the economic transformation and unparalleled development of the Maldives. The SEZ Act is described as an integral part of the ongoing work to stimulate economic growth in the Maldives.
SEZ Act - the first 12 months In its first 12 months, the SEZ Act has attracted interest from a number of potential developers for projects that may not have otherwise been proposed to be undertaken in the Maldives at this time. Whilst no SEZs have yet been established, the regulations under the SEZ Act are soon to be published and the first SEZ(s) may follow soon thereafter. OCTOBER 2015. INVEST MALDIVES
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THE SEZ ACT Establishment of zones The SEZ Act allows for unsolicited proposals from the private sector to develop and operate SEZs. A developer can apply for a ‘permit’ from the Board to develop a zone, with the permit application to set out the proposed economic activity to be conducted within the zone, and the proposed geographical location of the zone. The President will issue a presidential decree each year which will set the minimum investment threshold required for a zone (currently USD150 million). At the time of the passing of the SEZ Act, the Chairman of the Board of Investments stated that the Board will decide on development applications based on the potential for each atoll and will prioritise investment proposals based on the type of infrastructure investment. It is likely that preference will be given to developers constructing multi-faceted developments across value-adding sectors that aid in diversifying the Maldives economy. Investments in health, education, IT, export-oriented manufacturing, ports or finance (for instance) are likely to be preferred. Indeed, the SEZ Act contemplates several types of zones, including industrial estates, export processing zones, hi-tech parks and free trade zones, which underlie the diversification focus of the SEZ Act.
A permit will specify the incentives available to the developer (and its sub-developers) which will generally include a range of tax exemptions, exemptions from import duties on capital goods imported for the development, management and operation of the zone, entitlement to a 66 + 33 year lease of the land on which the zone is established, a reduction in restrictions on the employment of expatriates, and unrestricted inward and outward capital remittances.
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The President has the discretion to grant incentives over and above those listed in Schedule 1 to the SEZ Act. A developer and the Board will also enter into an Investment Agreement which, among other things, may provide the mechanism for the resolution of disputes between the Board and the developer (which can include international arbitration) and may provide a mechanism for calculating the compensation due in the event of expropriation.
Like the permit, the investment licence will set out the incentives available to investors, which are generally the same as available to developers however the length of the tax exemptions available are capped. The length of these exemptions is generally between 2 and 20 years, dependent on the industry. In general, the exemptions are shorter for tourism, sports and other business industries, and longer for the port-building manufacturing, logistics, transportation, communication, and service industries.
Board of Investments - one stop shop
Asset protection
The SEZ Act empowers a Board of Investments to oversee SEZs in the Maldives. The Board is a ‘one stop shop’ and is authorised to coordinate with all Maldivian Government departments to facilitate approvals, permits and licenses within zones and generally to make policies for zone development.
In addition to investment incentives, the SEZ Act also seeks to address the other key aspect of encouraging investors into the Maldives SEZs - asset protection.
Once established, each zone will have its own ‘one stop shop’ established within its boundaries, and will have a Zone Superintendent, who will monitor the activities within the zone and report back to the Board.
Investors The developer is responsible for bringing investors into the zone. Investors will enter into an investment agreement with the developer, but must also obtain an investment licence from the Board.
Under the SEZ Act there is a requirement for adequate compensation for any expropriation of a development or investment by the Government. However, the SEZ Act gives a large carve out for action that may be taken by the Government for which no compensation will be payable.
The SEZ Act also provides for protection to developers and investors from new or increased taxes, with the President able to grant an exemption from these where they adversely affect the incentives available.
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CHALLENGES FOR INVESTORS While the SEZ Act is a significant step forward, there are aspects of the current legislative framework within the Maldives that may present challenges for some potential developers or investors: •
•
The SEZ Act restricts employment of expatriates in senior management positions to 10% (although exemptions are available at the discretion of the Board, an exemption will not be given in excess of five years). Wider legislative reform that would support the success of the zones (including around land registration, securities, insolvency and enforcement of foreign arbitral awards) has not yet been undertaken (however we are aware that the Government is currently working on revising a number of laws that have been considered restrictive to foreign investment, in particular in the areas listed above).
CONCLUSION While famous worldwide for its unique and picturesque landscape, the passing of the SEZ Act may well be the catalyst for genuine economic diversification and sustained growth for this young and emerging democracy. The SEZ Act is a positive development, likely to be well received by both local and foreign developers/investors. The coming 6 months will be instrumental in terms of the efficient implementation of projects under this new framework.
For further information regarding this article, please contact:
STEPHEN WEBB
Partner, Finance & Projects, Brisbane Head of Energy, Asia Pacific T +61 7 3246 4208 stephen.webb@dlapiper.com
ABOUT DLA PIPER DLA Piper is a global law firm with 4,200 lawyers located in more than 30 countries throughout the Americas, Asia Pacific, Europe and the Middle East, positioning us to help companies with their legal needs anywhere in the world. We strive to be the leading global business law firm by delivering quality and value to our clients. We achieve this through practical and innovative legal solutions that help our clients succeed. We deliver consistent services across our platform of practices and sectors in all matters we undertake. DLA Piper was recently named Law Firm Of The Year at the 2014 Legal Business Awards and ranked No.1 in the AmLaw100 2014 for being the largest law firm in the world by revenue. For more on DLA Piper, www.dlapiper.com
ABOUT STEPHEN WEBB Stephen is Head of DLA Piper’s Asia Pacific Energy Sector and leads the Renewable Energy & Climate Change Group. He advises on projects across the Asia-Pacific, the Middle East, Africa and South America. His experience includes advising on all forms of power projects, pipelines, transportation, oil and gas, petrochemical and mining projects. Recently Stephen has been advising on a number of economic zone projects in Asia and oil and gas projects as well as maritime boundary matters, including in the Timor Sea. He was recommended in this year’s Chambers and Legal 500 reports, listed in the Global IFLR1000 and in the Australasian Lawyer’s 2014 Hot 40 list as “the type of projects lawyer that top tier clients with an interest in the Asia-Pacific region trust on deals that are a ‘first’ of their kind”. For more on Stephen, www.dlapiper.com/en/australia/people/w/webb-stephen/
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MUTUAL GROWTH: INVESTMENTS FOR
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THE FUTURE
Maldives Pension Administration Office (MPAO) is the administrator of Maldives Retirement Pension Scheme (MRPS)- the mandatory national pension scheme, covering employees of the public and private sectors. Since its inception in 2009, MPAO has expanded pension coverage to more than 90% of the formal employment sector of the Maldives and has established strong systems for pension collection and distribution from remote centers of Maldives.
Currently, assets under management of MRPS represent 17% of the nation’s GDP. This is expected to accumulate further in the future with positive inflows from more than 110,000 employees and a robust 85% of the fund’s members aged below 45 years. MRPS investments are diversified with placements in listed securities in both public and private companies in diverse economic sectors.
Future outlook: During the year 2014, Maldives experienced a growth rate of 8.5% and is projected to have a growth rate of more than 10% in 2015 with strategic investment projects announced by the government in key sectors such as the tourism, construction, transport, communication and real estate. MPAO as the nation’s largest institutional investor is actively seeking avenues to expand and diversify its investments in the nation’s top performing sectors. Over the course of its history, MPAO has also developed strong partnerships with other multilateral and national development financial institutions, quadrupling its co-financing in key sectors since 2010.
Total assets under management as of 30th September 2015 is USD 300 million MPAO has recently invested in Dhiraagu Plc, a 52% foreign owned company based in the Maldives providing telecommunication services. A similar investment has also been made in the real estate sector through the Housing Development Finance Corporation, Maldives, a public private partnership with 51% shares held by the International Finance Corporation (IFC) of the World Bank Group, Asian Development Bank (ADB) and HDFC Investments Ltd of India. Both these investments were made by subscribing to listed corporate bonds, Sukuk and equities on Maldives Stock Exchange. Through these investments, MPAO is also actively involved in providing liquidity to the Maldivian corporate sector to boost lending activities in key sectors.
MPAO is keen to extend its co-financing into long term infrastructure projects in transportation, energy, water, sanitation, healthcare and further development projects in real estate, tourism and communication.
Attractive opportunities for overseas investors: Maldives offers a liberal operating environment for foreign institutional funds to set up shop in the country. Maldives has a simple legal framework, which recognizes foreign incorporated funds. It is evident that institutional investors such as pension funds, insurance companies and sovereign wealth funds play a potentially major role in providing long-term financing for development projects on a global scale. Given this backdrop and considering new opportunities emerging in the Maldives in tourism, infrastructure, real estate as well as logistics, the timing is just right for international funds to capitalize on the growing opportunities in the Maldives. OCTOBER 2015. INVEST MALDIVES 50
BANK OF MALDIVES
Maldives' Bank for Foreign Direct Investment About Bank of Maldives Bank of Maldives (BML) is the leading bank in Maldives. Known locally as “the national bank”, BML is a public limited company with majority ownership held by the Government of Maldives. We are a full-service bank engaging across the complete spectrum of personal, business and corporate banking. We are privileged to touch the lives of almost every citizen and business in Maldives through our extensive network of branches, ATMs and online banking facilities. Our business is built on a clear and compelling strategy focused on 3 strategic pillars of Support for Business, Customer Service and Financial Inclusion. Our strategic foundations are People Excellence and Robust Risk Management.
Dedicated Foreign Direct Investment Team With over 30 years of experience, BML is the bank of choice for the majority of international businesses operating in Maldives. We are the only bank with a geographical reach across the entire nation. Access to a dedicated, welcoming and capable Relationship Manager to guide and support your business is a must when operating in a foreign country. BML has a Foreign Direct Investment unit in place with dedicated and experienced managers who understand your unique requirements and who will ensure a smooth process from account opening to payment processing to providing the right products and services.
Our services Operating Accounts (Conventional and Islamic)
Payroll Processing
Advisory Services
Corporate Credit Cards
International Banking Services
Merchant Services
Bank Guarantees
Insurance Services
Project Finance & Syndications
Internet and Mobile Banking Services
Loan & Overdraft Finance
Term Deposits
Why choose Bank of Maldives ? At Bank of Maldives, we have experience, scale and a welcoming attitude. We go the extra mile to provide you with the right banking and financial solutions to meet your needs. !
Experienced Foreign Direct Investment team
!
Professional and dedicated relationship managers
!
Single point of contact for all banking needs
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Tailor-made financial solutions
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Strong correspondent banking relationships
Bank of Maldives PLC 11, Boduthakurufaanu Magu, Male’ 20094, Republic of Maldives T: +960 333 0183, F: +960 301 5331, E: corporatebanking@ bml.com.mv www.bankofmaldives.com.mv
bankofmaldives
bankofmaldives
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INVESTMENT TAX INCENTIVES IN THE MALDIVES Dr Kevin Holmes ADB International Tax Adviser to Maldives
INTRODUCTION In 2011, the Maldives introduced business profit tax (BPT) and goods and services tax (GST). As the name suggests, BPT is a direct tax on profits derived by businesses in the Maldives. GST is an indirect consumption tax on the value of goods and services supplied in the Maldives. It is imposed on business customers, but collected by businesses, which pay the GST across to the tax administration, the Maldives Inland Revenue Authority (MIRA). This article briefly describes the main provisions of the Maldives tax laws, which apply to foreign business interests in the Maldives. In particular, it addresses a number of tax concessions which are offered to foreign investors which invest in the Maldives.
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BUSINESS TAXES The taxation of business profits is governed by the BPT Act and its subordinate regulation, the BPT Regulation. In general, non-resident companies and partnerships are subject to BPT at the rate of 15% on:
In a provision intended to encourage the establishment of offshore financial services centres, BPT is applied at a concessionary 5% rate to taxable profits derived by Maldivesresident companies from sources outside the Maldives if they:
•
• are registered under the Maldives Companies Act; and • are not resident of another country; and • derive income from: (i) a business carried on wholly outside the Maldives; or (ii)bonds, shares, debentures, loans or other financial instruments issued by a person that is: (1) not a resident of the Maldives; or (2) a resident of the Maldives, but for the purpose of a capital project carried on outside the Maldives; or (iii) loans of any nature; or (iv) royalties payable by a person that is not a resident of the Maldives; or (v) immovable property that is situated outside the Maldives; and do not carry on any business or have any other source of income.
• •
Net rent received from the lease of land and buildings in the Maldives; Taxable profits which are attributable to any business carried on through a permanent establishment (PE) in the Maldives; and Royalties and management fees payable by a person who is a resident of the Maldives or by a non-resident person with a PE in the Maldives, which are not taken into account under (b) above.
In addition, the following payments made to a non-resident are subject to a final withholding tax (WHT) at source at the rate of 10% of the gross amount of the payment: • • • • • •
Rent, royalties and any other such consideration for the use of plant, machinery, equipment or other property for the purposes of a business; Payments made for carrying out research and development; Payments made for the use of computer software; Payment of fees for management, personal or technical services and any other commission or fee not constituting income from employment; Payments made in respect of performances by public entertainers; and Rent in respect of the viewing in the Maldives of cinematographic films.
It should be noted especially that interest and dividend payments to foreign lenders and shareholders are not subject to WHT. Furthermore, they are subject to BPT only if they constitute taxable profits of a business carried on by a non-resident company or partnership through a PE in the Maldives, or Maldives business profits derived by any other non-resident.
A non-resident owner or charterer of a ship or aircraft is eligible for a full exemption from BPT if it does not carry on any other business in the Maldives and the country in which its central management and control is located gives a similar exemption to Maldivian ship and aircraft owners and operators. All commercial banks are exempt from BPT, and are instead subject to a 25% bank profit tax under the Bank Profit Tax Act. In broad terms, the GST Act imposes GST at the rate of 6% (general sector) or 12% (tourism sector) on non-exempt goods and services supplied in the Maldives.
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FOREIGN INVESTOR TAX CONCESSIONS However, foreign investors in the Maldives may obtain relief from some or all of the above taxes under 3 main categories.
1. Foreign investment agreements Business profits of a person that is a party to an agreement approved under the Law on Foreign Investments in the Republic of Maldives made after 18 July 2011 are exempt from BPT to the extent that the agreement confers the exemption. That law is intended to facilitate foreign investments of significant value in both the tourism and non-tourism sectors of the Maldives economy, whether or not in collaboration with the Maldives Government, Maldives companies or Maldives nationals.
2. Government international agreements A foreign government (or one of its agencies) or an international organization may enter into an agreement with the Government of Maldives (or one of its agencies) to facilitate investment in the Maldives with the aim of enhancing economic and social development. If the agreement contains tax exemption provisions, those provisions prevail over Maldives domestic tax law, provided that the agreement does not impose obligations on citizens of the Maldives. If it does impose such obligations, the agreement does not have legal force in the Maldives until it is approved by the Maldives Parliament.
3. Special Economic Zones regime The Special Economic Zones (SEZ) Act, offers foreign investors a wide range of tax concessions, which over-ride the taxing acts. The tax incentives depend on the status of the applicant and the nature of the investment:
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Tax incentives available to a developer who establishes a SEZ’s infrastructure and provides basic services in a SEZ (1) Guaranteed tax incentives (i) Exemption from: - BPT - GST for the first 10 years of the SEZ (i) Tax relief under specific guidelines (ii) Tax credits under specific guidelines (iii) Exemption from payment of WHT for the first 10 years (2) Other tax incentives by negotiation with the SEZ Investment Board (i) Exemption from GST for a period exceeding the first 10 years; (ii) Exemption from WHT for a period exceeding the first 10 years; (iii) Exemption from any tax in connection with the purchase or ownership of land.
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Industry based guaranteed tax incentives available to investors, investments and businesses in a SEZ Industry
Tax incentives
• • •
Hotel Tourism Commercial Real Estate
• • • •
• • • • •
Manufacturing Logistics Transportation Building ports Communication
• • • •
Exemption from BPT for the first 20 years Exemption from GST for the first 10 years Exemption from WHT for the first 10 years Exemption from BPT on shareholder dividends for the first 15 years
• • • • •
Education Health Housing Building and operating airports Research and development
• • •
Exemption from BPT for the first 10 years Exemption from GST for the first 10 years Exemption from WHT for the first 10 years
•
Financial services
• • • • •
Exemption from bank profit tax for the first 10 years Exemption from BPT for the first 10 years Exemption from BPT on shareholder dividends for the first 5 years Exemption from GST for the first 10 years Exemption from WHT for the first 5 years
• • •
Exemption from BPT for the first 5 years Exemption from GST for the first 5 years Exemption from WHT for the first 5 years
• •
Sports Other businesses
Exemption from BPT for the first 2 years Exemption from GST for the first 2 years Exemption from WHT for the first 2 years If the Investment Board decides that a SEZ assists in regional development, the President may grant hotel and tourism projects in the SEZ the following additional tax concessions: - Exemptions from BPT, GST and WHT for an extended period • Exemption from any tax related to the purchase of land • Tax credits under specific guidelines • Tax relief under specific guidelines
Developers and investors in a SEZ are protected from any new taxes or any increase in exiting taxes, which adversely affects any of the above SEZ incentives. Developers and investors in a SEZ must provide economic activity and tax expenditure data to MIRA as well as other information which may be obtained under Maldives law (in this context, particularly the Tax Administration Act) or under international treaties to which the Maldives is a party. To date, the Maldives has not entered into any double tax agreements or tax information exchange agreements with other countries.
Conclusion The Maldives imposes a tax on business profits and a GST, which conform to international standards. Like many other countries, it offers tax concessions both within its tax laws and via its SEZ legislation, to encourage foreign investors to contribute to the development of the Maldives economy. Further tax concessions to non-residents can be expected as the Maldives enters into double tax agreements with other countries in the future.
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C
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Achieving excellence
in pension services and financial stability for a secure future
CMY
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www.pension.gov.mv info@pension.gov.mv /pensionoffice
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CHINA RISING
As Chinese investment in the global hospitality sector soars, the Maldives is now seeing a rapid increase in interest in its own rich tourism resources.
Adele Verdier-Ali According to a report published on Forbes.com, there has been a surge in Chinese investment in the global hospitality industry over the past two years. The data was released at the beginning of June, just days after the Maldives government announced that it would hold its second Maldives Investment Forum in Beijing and just weeks after the government signed an agreement to lease an island for resort development to Chinese-government-run China Machinery Engineering Company (CMEC), the country’s largest engineering and trade company. Three days after the Forbes report was published, the development of a five-star resort on the island of Kunaavashi in Vaavu Atoll by a private Chinese company – CJL Investments Pvt. Ltd, was also announced. Both announcements are clear indications that as China continues to look for investment opportunities in the hospitality sector, the Maldives tourism industry will see an increase of Chinese interest. Although gathering momentum, the trend for Chinese investment in the hospitality industry is a new one and only began in 2013 when Dalian Wanda Group announced its intention to invest US $1.09 billion to build and operate a luxury hotel in London. At the time, it was the first luxury hotel venture to be taken on by a Chinese firm outside of China. Since then, Dalian Wanda has added a luxury hotel project in Madrid and announced a $900 million skyscraper in Chicago for 2018. In addition, Anbang, China’s 8th largest insurance conglomerate shocked the hospitality community with its $1.95 billion acquisition of New York’s Waldorf-Astoria last year—the highest price ever paid for an existing hotel in the US. In October the same year, China’s Sunshine Insurance Group Corp. invested AUS$463 million (about $399 million) in Sydney’s high-profile Sheraton on the Park, paying roughly $716,000 per room; and in November, Shanghai-based Jin Jiang International Holdings Co. purchased European-based Louvre Hotel Group for around $1.2 billion.
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The announcement that the Maldivian government had leased the island of Kalhufahalufushi located in Thaa Atoll to China Machinery Engineering Company (CMEC) was the first true indicator that the trend had reached the Maldives. CMEC is the first Chinese company to invest in the Maldives tourism industry. Only weeks later, a second development, this time from a private firm, was announced. However, Chinese investment in infrastructure has been growing for some time. Last year, Chinese company Beijing Urban Construction Group (BUCG) was awarded the expansion project of Ibrahim Nasir International Airport during a state visit by Chinese President Xi. The project, to be financed by a concessionary loan, also involves building a fuel farm and expanding the cargo terminal as well as the runway. The Chinese government has also pledged 100 million Yuan (approximately US$ 16.1 million) in free financial aid to cover a huge part of the cost of a bridge between the island capital of Male’ and the neighbouring island Hulhumale’. The Chinese government is also continuing to express interest in investing in several other major development projects. With these investments in infrastructure already well under way, and considering that Chinese tourists made up almost 30% of tourist arrivals in the Maldives last year, the Maldivian government is now keen to invite more Chinese investors to consider possibilities in the country’s tourism industry. President Yameen continues to form close ties with the Chinese government and made his second state visit to China in mid-June to attend the China-South Asia Exposition and Kunming Import and Export Fair, where he was the keynote speaker. What this trend signals for the Maldives, as for the world, is clear. Chinese brands and investors are growing significantly and as a result strategists are predicting a sharp increase in Chinese investment in the hospitality sector.
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Timeline
MAY 2015
JUNE 2013 Dalian Wanda Group announces its intention to invest US $1.09 billion to build and operate a luxury hotel in London. At the time, it is the first luxury hotel venture to be taken on by a Chinese firm outside of China.
OCTOBER 2014 Anbang, China’s 8th largest insurance conglomerate acquired New York’s Waldorf Astoria for a record-breaking $1.95 billion. China’s Sunshine Insurance Group Corp. invests AUS$463 million (about $399 million) in Sydney’s high-profile Sheraton on the Park.
Dalian Wanda Group acquires Edificio España in Madrid.
JUNE 2014
Kalhufahalufushi Island, located in Thaa Atoll, is leased to government-owned China Machinery Engineering Company (CMEC), the first and largest engineering and trade company in China.
The development project of a five-star resort on the island of Kunaavashi, Vaavu atoll is agreed with CJL Investments Pvt. Ltd; the first such investment by a privately owned Chinese company.
Shanghai-based Jin Jiang International Holdings Co. purchases European-based Louvre Hotel Group for around $1.2 billion.
JUNE 2015
NOVEMBER 2014
KUNAAVASHI CASE STUDY: The leasing of Kunaavashi Island to CJL Investments Pvt. Ltd signals a new path in Maldivian tourism investment trends. It is the first investment of its kind by a privately owned Chinese company. When seen against the background of booming Chinese investment in the hospitality sector, it is clear that it is the first of no doubt many more to come. Kunaavashi Island is located in Vaavu Atoll – a location famous for having some of the most beautiful dive points in the Maldives. The 1.5 hectare island is to be increased to 3 hectares, which will then be able to accommodate 71 villas in total. The project is due to start in September this year, and will be completed within 14 months. Speaking at a ceremony in Male’ to launch the development, Mr. Chujin Liang, Chairman of CJL Investments Pvt. Ltd, said that the project was based on five main principles that
would be mutually beneficial for both parties. According to the press release by CJL Investments, the first principle would be to assure that CJL Pvt. Ltd is committed to investing in the Maldives for the long term. Second, that commitment means CJL Investments will bring sufficient capital, continuous holiday makers and fresh thinking from China. Third, the company will foster local management, talent and know-how to work efficiently within the domestic system in Maldives. Fourth, the company will develop a new green economy to maintain Kunaavashi Island as the best-kept and untouched island. Lastly, CJL Investments will help to integrate Maldives into the dynamic tourism economy in China through the company’s well-connected marketing network and close ties with Chinese tourism authorities.
Adele Verdier-Ali is Senior Editor at Hotelier Maldives. This article was first published in Hotelier Maldives, Issue number 09 (May/ June 2015). www.hotelier.mv
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REAL ESTATE
GOLD
T
he Maldivian real estate market is booming and the time for investments has never been better with new laws specifically enacted for foreign investors, guaranteeing longterm security over foreign investments. There is no shortage of coral islands in the Maldives. With over 1190 coral islands (of which less than 200 are populated) and additional pristine lagoons for reclamation, property development for high-end luxury projects are ample.
From private luxury villas, to large scale condominiums and business complexes, opportunities for investments in the Maldivian real estate market has never been this diverse. The Government of Maldives, has made it a priority to ensure affordable, adequate and safe housing for its 400,000 citizens. Housing ventures are also on the boom with premium, luxury, and middle range housing projects set to be developed over the next few years.
Construction Sector Growth and Share of GDP 2002 - 2011 (in percent of GDP, annual percentage change)
12
60 50
10
40 30
8
20 10
6
0 (10)
4
(20) (30)
2
(40) 0
(50) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Share of GDP (left axis) Construction sector growth (right axis)
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Major housing projects of the government across the country have been undertaken through developer financing mechanisms. Additionally, private sector involvement in housing development is increasing in the greater Male’ area including Malé City and Hulhumale’. The government has opened up investments in the housing sector to private sector involvement through public private partnership models as well through pure private development. Opportunities for investors in the real estate market include:
YOUR OWN PRIVATE ISLAND Government has introduced the opportunity to develop and sell private villas on an uninhabited island of your choice, along with supporting facilities and infrastructure in return for contributing towards the government’s policy on provision of affordable housing to Maldivian citizens.
What is on Offer • • • • •
50 Private Villa land plots (with each plot having a land/ lagoon area of 20,000 sq.ft) on identified islands and on the lagoon around the island Ample free land from the island and surrounding lagoon for development of support services and infrastructure 50 years of lease rights on the land plots and the land for supporting services (this 50 years period excludes three years provided for construction) Buyers of the private villas and immediate family gets resident visa including the opportunity to have timeshare arrangement for villas The prospect of dedicating the adjacent beach of each villa as private beach areas for the villa owner.
How to make use of this opportunity The Government of Maldives provides three options for investors/developers.
Option 1
Option 3
•
•
Developers can develop and hand over 500 housing units, free of charge to the government and obtain 50 land plots for development of Private Villas for a 50 year lease period with no additional charge.
Option 2 •
•
Developers, who are not keen to directly engage in development of the housing units required by the government, have the option to purchase the right to develop private villas after paying the government the cost of developing the required 500 housing units (the accepted minimum rate is USD 55,000 per housing unit)
Developers can develop and sell the 500 housing units to Government-nominated buyers and obtain the land plots for development of Private Villas at a rate of (25 US Dollars per sq.ft ) for the 50 year lease period. This payment can be made to the Government within 15 years, as per an agreed schedule.
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HOUSING DEVELOPMENT AT HULHUMALE’ The government of Maldives is looking to engage real estate/ housing developers, investors, and contractors to develop 7,120 social housing units and 3000 medium-end housing units in Hulhumale’, Phase 2. The development area encompasses 230 Ha of land reclaimed from the lagoon of Hulhule, and is the continuation of Phase1 of the development of Hulhumalé. The reclaimed land will offer suitable land parcels for residential, commercial, institutional, recreational as well as tourism related developments. The land reclaimed will have adequate shore protection features to ensure loss of reclaimed land due to
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erosion. The proposed development will consist mainly of residential expansion, of which 30% would be dedicated to developing social housing. The residential areas will be developed on a neighborhood level scale, with various forms of housing (including social housing, medium to high end housing, and mixed developments), along with supporting public facilities such as schools, play areas and parks, religious and social facilities, and other healthcare facilities.
INVESTMALDIVES.ORG
REAL ESTATE MARKET Housing Type
No. of Housing Units
Premium
575
Luxury
3,605
Mid-range
12,111
Social
7,120
Total
23,411
Real estate is swiftly becoming the most viable investment for local housing developers and construction companies. This has been due to the increasingly high demand for housing across the Maldives and especially in the Male’ urban region coupled with the resulting attractive return on such investments.
The capital Male’ City is one of the most densely populated cities in the world, surpassing Manhattan in population density. With the scarcity for land in Male’, housing in the newly reclaimed Hulhumale’ is expected to grow exponentially. The banking sector of the country has also been increasing its exposure to the housing development sector signaled by its strong growth. Furthermore, with new developments to the regulatory framework governing the real estate sector, prospects for private sector involvement in the sector looks very positive.
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MALDIVES INVESMENT FORUM 2015
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CONSTRUCTION AND REAL ESTATE IN THE MALDIVES Mohamed Ali Janah The Construction Industry is the second largest after tourism, in the Maldives. While the tourism industry flourished at a remarkable speed, the construction industry had to keep pace with the developments taking place in the tourism sector. This is how the construction business in this country became the frontrunner after tourism. The construction industry not only had to cater for the development of hotels and resorts, but also had to match the demands of getting the right infrastructure in place to complement the upward trajectory in the tourism industry. Over the past four decades, the construction industry in the Maldives has reached heights that the Maldivian people would never have imagined a generation ago. We have had double digit growth rates year on year for almost twenty plus years. With the booming tourism industry, and the OCTOBER 2015. INVEST MALDIVES
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developments that have been taking place in the country, we also have had to direct our focus to the real estate sector as well. With theincrease in disposable income of the average Maldivian the demand for housing increased, and together with a large local and expatriate professional work force, the real estate sector became a growing opportunity for business with a huge potential for investment. While investment in the resort development sector is one of the most feasible opportunities with guaranteed returns over a very short period of time, the demand to build and complete resort projects in a timely manner is of utmost importance to the Maldives. There are only a handful of experienced and capable local companies who are able to execute such projects. Such companies have the capability to complete multiple projects at any given time. However, there are many
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constraints especially in the management of logistics of these projects due to the unique geography of the country. The floodgates should be opened up for foreign investment in the construction sector in areas where local companies do not have the knowledge or the skills to carry out specific type of works. The logistical constraints also require partnerships with foreign parties who could come and invest in this particular segment of our industry so that the transportation needs, the supply chain and all other logistical support can become more competitive and affordable for everyone. Construction and real estate sectors in the Maldives will be key drivers of the Maldivian economy in the coming years. The demand for residential and commercial buildings keeps growing. The total housing needs in the capital city alone is estimated to be approximately 2000 housing units a year. Currently we are able to meet only a fraction of this requirement. There is a huge potential for foreign and local investors to explore this segment of our economy. The growth in demand for social and affordable housing facilities has been driven by many factors, including a growing youth population. The reclamation of additional land in Hulhumale’ and the proposed connection of Hulhumale’ and Male’ via an overwater bridge is going to definitely change the dynamics in the real estate sector. With such developments the necessity for construction material is high and will continue to grow. Cement, river sand, aggregate and steel are just some of the major items that are in high demand on a daily basis and so it has led to a huge appetite for these materials and construction related goods. It would be a welcome move for potential investors to invest in the supply chain of major construction material so that such material may be readily available at any given time and the prices may be maintained at affordable rates. The key to a sustainable construction industry in the Maldives is to be cost efficient by using less material, controlling wastage and increasing efficiency and productivity of our workers. It is only through efficient and innovative ideas and designs that we can change what we are doing now. The current turnover of our construction industry is over one billion US Dollars year on year, with an 8 per cent contribution to the GDP of the Maldives. We have the capacity to absorb around at least 40 thousand workers at the current growth rate. This will continue to grow considering the current 7 plus per cent growth rate the country is achieving and estimated to achieve in the coming years. Like the tourism industry, the construction industry in the Maldives must keep up with the rapidly changing advancements in technology. It is sad to say that most of our contractors are still relying on outdated technologies and it is very hard for us to change our mind set when it comes to testing new things. It is my belief that if we are to remain competitive and if we are to maintain the high skills required
by the investors, we have to revolutionize our industry in many ways. Whether it is importing new technologies or partnering with companies with new technologies that would benefit our industry, thus increasing the productivity and performance of the players that keep building this industry. The Maldives Government has a very positive approach to all potential investors, whether they are local or foreign. The approach taken is very transparent and unlike many other countries investors in the Maldives do not have to go through a rigid clearance procedure thereby helping potential investors to get the investment clearance approved within a few days of application. On the legal front, the legal and regulatory regime is on the whole quite clear and understandable and follows international best practices in several areas relevant to construction. Furthermore, the Maldivian currency is very stable and inflation rates are very low compared to many countries in our region. The construction and real estate sector is one of the most important sectors of the economy and is sure to become the driver of rapid economic and social change, transforming the economy of this country in addition to transforming the built environment itself. Maldives can take full advantage of the rapid pace of growth seen in China, India and the Middle East. While Chinese and Middle Eastern tourists flock to the Maldives, the Indian market continues to grow rapidly and with the Indian population and its economy expected to surpass many milestones, Maldives is positioned, both geographically and strategically, to take the maximum economic advantage. With such potential the Maldivian construction industry and the real estate market would continue to grow at double digits for many more years to come. Maldives has been a capital-starved market for a very long time. It is high time that for this situation to change. All possible efforts must be made to promote the Maldives not only as a tourism destination, but also as a destination which has many other potential opportunities especially in segments like the real estate sector. The Government of Maldives is giving all the right signals by enacting the proper legislation to facilitate and attract such investments. Overall, investment in the construction and the real estate sector in the Maldives will be money well spent with reasonable returns even in comparison to many other markets in the region.
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MALÉ SPORTS COMPLEX A
vast number of youth can question the availability of diverse options for recreation and entertainment in Maldives. While a few local athletes have won awards in international events, for many others, the ambition to pursue a career as professionals in their respective fields is but a dream.
The government is taking the bold step towards solidifying the potential of the youth, with the introduction of a stateof-the-art sports facility in the heart of the capital city. A land area of over 100,000 square feet in a prime location in MalĂŠ is dedicated for development of this integrated sports development project. Offering a mix of residential and commercial offerings, retail and sports facilities, Male Sports Complex will become the epitome of recreation and entertainment in the capital.
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The carefully chosen mix of residential, retail, leisure and recreational facilities at Male Sports Complex creates lucrative investment potential for any investor looking to position themselves in the Maldives real estate sector.
SPORTS COMPLEX A dormitory, apartments, both indoor and outdoor courts for various sports, cinemas, offices, clinics, shops, a convention center and a rooftop garden, ample space for parking units
HOTEL State-of-the-art facilities including gymnasiums, business centers, game room, shops, a rooftop restaurant and an infinity pool, among others
MIXED DEVELOPMENT Various properties such as a spa facility, apartments, cafés, shops or kiosks, and parking spaces
“Better infrastructure will market the
Maldives as a destination for sporting events and also help our sportsmen and women hone their skills to the fullest ” - Minister of Youth -
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ON THE SPOTLIGHT
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HULHUMALE’
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lying into the Maldives, one is warmly greeted by a vast array of mesmerizing blues, spreading all the way to the horizon. Slowly, the islands appear, like garlands of emeralds enclosed in shining white beaches. As you descend towards Ibrahim Nasir International Airport, the façade changes. The luxuriant green islands that spread across the horizon are replaced by tall concrete buildings, literally popping out of the sea. But not far, you also see a vast barren land; a mixture of the beauty that Maldives is famous for, but with strategically placed buildings that take the island to the apex of urban living. Adjoining Ibrahim Nasir International Airport at one end, this land is one of the most ambitious undertakings by the Maldivian governments. The completely artificial island reclaimed in the Hulhule’-Farukolhufushi lagoon, is a project to ease the congestion in the capital Male’ City, Hulhumale’. Hulhumale’ is a project commissioned by former President Maumoon Abdul Gayoom in October 1997. Now, 18 years after its inception, Hulhumale’ is a rapidly growing hub for residential, commercial, industrial and leisure developments with over 30,000 people residing in this manmade island. The land was developed in two phases. Phase 1 which saw reclamation of 188 hectares of land was completed in June 2002. Two years later, the first settlers, around 1000 people moved to their new homes, complete with essential infrastructure including schools, shops, hospitals, and modern roads and sewerage systems. Reclamation of an additional 240 hectares of land under Phase 2 is now complete and is all set for development. OCTOBER 2015. INVEST MALDIVES
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The development of this mega-project was assigned to the state-owned Hulhumale’ Development Corporation (HDC). HDC oversaw the development, commissioning and zoning, and has been managing the municipal functions of this new island. After the successful completion of phase one, the corporation was rebranded as Housing Development Corporation, a name which reflects its success in housing projects nationwide. Getting around in Hulhumale’ is quite convenient. Ecofriendly public transport runs to and from the main ferry terminal to almost all corners of the residential zones, and also makes regular trips to the adjoining Ibrahim Nasir International Airport. But, with the gentle breeze in this lush island, taking a stroll or cycling around the beaches is the most favourable option. With strategic zoning plans, residential, commercial, institutional, municipal, and industrial zones are well-placed, making living on Hulhumale’ or visiting the island for a weekend getaway just as easy.
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The eastern coastline boasts a number of guesthouses for leisure travelers, or passengers on a quick transit. Just adjacent to these booming guesthouses is a stunning beach which barely shows signs that it was manmade. This area is popular for locals and guests for evening barbeques or weekend picnics. The development of Hulhumalé envisions a harmonious combination of residential, commercial, and industrial components acting as a catalyst to entice broad investments in commerce, education, health, recreation, tourism, fisheries, and a number of other related areas by both foreign and local parties. With the current population at 30000, half the targeted population for phase I, the project aims to attract an additional 100000 people to reside in Hulhumale’ by the end of phase II. The current government has unveiled massive projects to take Hulhumale’ to even greater heights, with a plan to develop the island as a Youth City, and link the island with the capital Male’ City with the country’s first ever bridge. With this new venture, investment opportunities have been announced for residential developments, a sports area, a water sports area, a technopolis and knowledge park, water theme park and youth park, along with opportunities in hospitality, as well as commercial and social housing projects.
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MALDIVES MARITIME IS STAYING ON COURSE
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Dr. Ahmed Adham Abdulla
INTRODUCTION President Yameen’s vision of transshipment port development is truly one of a kind. The location and scope of the port in the Maldives, besides the seven-degree channel and within close vicinity of the world’s emerging economic powerhouses, will allow the nation to capitalize on the growing traffic on this route. The port will have modernized container terminals supported by a highly efficient domestic logistical distribution hub, bundled with a freezone and
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warehousing facilities. Investment in maritime infrastructure is trending across the globe. Most recently, the $8 billion extension of the Suez Canal in Egypt inaugurated in August 2015 is seen by its President Abdel Fattah al-Sisi as an investment that will power the economic turnaround for the country. This article will address the trends in global maritime investments and the prospects for Maldives.
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THE INTERNATIONAL TRENDS ON MEGA-PORTS: A QUICK REVIEW The sea and the coasts are drivers of the economy. Because of their outward looking geography, ports and coastal communities have traditionally been centers for new ideas and innovation. It is believed that a maritime investment strategy, rigorously planned and efficiently executed, could anchor today’s income-oriented portfolios. According to the International Transport Forum at the OECD, large-scale port projects have big impacts on the local economy and affect the way that the regional and national economy operates, with major implications for investment in regional transport systems. The global trade context characterized by the improvement of logistics chains, the development of containerization and hub concepts and the arrival of the new supra-large ships
is producing a flurry of mega-ports around the world. They are being considered, launched or are in progress, including significant expansions around existing ports. Capacity of such ports range from 2 to 15 million TEUs. Latin America and the Caribbean, inline with the global trend, are investing in mega-port projects in the works in Peru, Callao (San Lorenzo Island), Colombia (Cartagena), Panama (Balboa and Rodman in the Pacific side), Mexico (Punta Colonet, Baja California), Cuba and of course Chile. There are many other mega-port initiatives around the world. In the Gulf countries (Dubai, Kuwait, Qatar and Abu DabhiKhakifa Port), Indonesia (Jakarta), Taiwan, Sri-Lanka, Lagos (Nigeria), Kenya, Tanzania, Australia (Gladstone), Mauritius among others and of course the 26 mega-ports in China and counting.
Port Financial Concession Ports require large capital investments in infrastructure that take many years to recoup and different parts of the infrastructure have different life-spans (measured in decades for quays, centuries for breakwaters). The lumpiness of these sunk investments has led to many jurisdictions to develop systems of concessions where governments fund basic infrastructure. There is, however, no universal model. International mega ports are structured under a variety of operational and financial structures but most with a significant participation of the State. Ports are financed through established supper funds as well. In Cuba, the mega-port is an integrated concession where Odebrecht builds, and Singapore Authority operates while financing is shared by Brazil (85%) and Cuba (15%). In Jakarta, the Indonesia Port Corporation develops (three terminals and two fuel berths), then concessions by business units. In Taiwan, the mega-port
is fully state-funded. In Sri-Lanka, the Chinese build, finance, and own 85% of the project, the SRLA Port Authority finances and owns 15%, and the project does include a significant investment for breakwater components (financed by a loan from the Asian Development Bank, of US$ 300 million). Most have significant government participation, either in terms of ownership or financing, while some are fully privately financed (e.g. ATM in Lagos, Nigeria). The most common intervention by governments is the financing of “nonproductive/ non-direct revenue generating” port infrastructure and those components of the project are often undertaken as public works. The level of investment is considerable in most of those initiatives ranging from $500 million to $7 billion.
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Trends In The Shipping Market Global shipping is showing signs of recovery. Current long-term charter rates allow for profitable employment of shipping assets with strong counterparties. Today, yield-oriented maritime asset investments offer a unique combination of benefits: i.e. attractive total return potential, the inflation protection of real assets, low correlation to financial and other real assets, and a premium yield in an otherwise income-starved environment. Ship owners increasingly invest in their own terminals or acquire interests in terminals to secure handling capacities (dedicated terminals), and a transport and logistics site is well advised to co-operate with them. This was particularly evident during the latest economic crisis when shipping
companies channeled their cargo to dedicated terminals to achieve optimum utilization. Today the 10 largest container shipping companies control more than 58% of the total seaborne cargo volumes – in 2001 this figure stood at 35%. This rapid development clearly shows that there is a trend towards consolidation and reorganization in the added-value chain of the shipping and logistics sector. This is enhanced by a trend in the freight forwarding sector that allows companies which, on the basis of purchased transport services, arrange the shipment of goods for third parties to acquire an ever larger share in global seaborne freight and position themselves along the entire added-value chain.
Ecological Aspects In Maritime Traffic In addition to the development of ship sizes, ecological aspects are gaining ever more importance in maritime traffic. The use of clean technologies will enhance the ecological quality and improve the carbon footprint of ships. The deployment of new large vessels further decreases energy
consumption as well as pollutant and CO2 emissions per cargo unit moved. Major approaches currently being pursued are the reduction of contaminants and greenhouse gases in fossil fuel burning and the use of alternative, less harmful fuels such as LNG (liquefied natural gas).
STRATEGIC LOCATION OF MALDIVES The Republic of Maldives is a small South Asian developing maritime nation, with 99% of its territory comprising sea. It is the sixth smallest sovereign State in the world in terms of land area and shares its Exclusive Economic Zone (EEZ) boundaries with Sri Lanka, India and the British Indian Ocean Territory (BIOT). The Maldives is a low-lying archipelago ecosystem consisting of approximately 1190 islands that are, on average, one meter above mean sea level at high tide. The islands are enclosed, or partially enclosed, by lagoons ranging in size from 0.5 km2 to 5.0 km2 and varying enormously in shape. The Maldives is located at the equator on the Laccadives Chagos submarine ridge, 450 km to the southwest of
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the southern tip of India. The total area of Maldives is approximately 90,000 km2 (of which only 298 square kilometers is land), and the country stretches up to 860 km long and 80-120 km wide. Due to this unique geographical make-up, Maldives is home to thriving tourism and fisheries industries, which are globally competitive and environmentally friendly. Maldives also benefits from its strategic location, lying adjacent to the large markets of the Indian sub-continent, along the main international shipping route, which connects Europe, East Africa, and the middle eastern economies to the growing Indian and Chinese Markets.
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Prospects For Transshipment Port Development The Maldives has high prospects for ports development as it is located at the heart of the world’s main container region and in close proximity to heavily active international shipping trunk routes. Currently, more than US$18 trillion worth of goods are transported across the channel annually, with over 70,000 ships crossing the Indian ocean every year. Maldives’s rapid economic development is reflected in container traffic growth and investments are underway to meet forecast demand through extensions to terminals and new concessions in the existing ports. The Government has
examined the potential development of demand and foresees a capacity gap emerging 8 to 12 years ahead. New terminal capacity is under construction and planned under a tendering system that has been effective in promoting competition in the sector. The country is pushing its best endeavors to develop its Service Ports into Landlord Ports (primarily through Public Private Partnership) to effectively and efficiently, cater to the vast potential of rapid economic growth in and around the Maldives.
Opportunities For Maritime Investment The Maldives is the quintessential island nation. With its seafaring tradition rooted in thousands of years of history, unrivalled knowledge and expertise has been passed down through the generations to provide a highly- competitive environment for the shipping community. Investment opportunities in the Maldives maritime sector include the following: • • • • • •
Maritime Joint Venture for liner services for both imports and exports; Coastal shipping trade for cargoes; Passengers and supply services by registering ships in Maldives; Marine environmental management including pollution control; Establishment of port reception facilities; Shipbuilding and repairs;
• • • • • • • •
Bunkering; Wreck removal; Ship recycling and rehabilitation at dockyards; Supply of marine equipment; Maritime education, training, research and consultancy services; Ship financing, marine insurance, Ship management; and Maritime law services.
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TRANSSHIPMENT PORT OF MALDIVES: AN INVESTMENT INNOVATION The transshipment port of the Maldives seeks to capitalize on the location of the country at the seven and eight degree channels. The port will be situated perfectly, with Mumbai to the north, Mombasa to the west, Colombo to the east, Perth to the south east and Durban to south west. The port will be less than 500 kilometers to the south west of the port city of Kochi, India.Furthermore, the port will have great advantages for global oil trade as over 5 billion barrels of the Arabian Gulf oil en route to Asia are transported via the seven and eight degree channels in ultra large crude carriers annually.
ENDNOTE Maldives Maritime is on course for sound investment. Invest Maldives is a one-stop shop to promote investments and to guide investors at every stage of the investment process, which will pave the way for speedy commercial operations.
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In line with the global trend, the transshipment port of Maldives will have modernized container terminals supported by a highly efficient domestic logistical distribution hub, financed through Public Private Partnerships and a concessional term of 99 years. The port will be able to simultaneously accommodate multiple vessels and move cargo more efficiently through domestic logistic operations. Managed warehousing will be provided to traders allowing them to focus on the core business of trading without having to tie up resources in warehousing assets. The port will utilize state-of-the- art technology and environmentally friendly methods to ensure operations are executed with the highest levels of efficiency and in line with international environmental law.
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INVEST MALDIVES ISSUE 01 Ministry of Economic Development Republic of Maldives