Transcript Investment climate and opportunities for investment in the

Maldives Partnership Forum
25th - 26th June 2006,
Bandos Island Resort, Maldives
Investment climate &
opportunities for investment in the
Maldives
Presented by
Foreign Investment Services Bureau,
Ministry of Economic Development and Trade
Structure of the presentation
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Introduction
Key economic challenges
Possible options
Investment policy & environment
Proposed changes to the foreign investment policy
Major infrastructure investments-an update
Conclusion
Presentation Theme
“The economy has grown at very impressive rates over the
last 20 years, but we face considerable challenges to
sustain such growth into the future”
Key challenges facing the Maldives
• Tsunami reconstruction & its fiscal implications
– Record budget deficit in 2005
– Funding Gap
• Graduation to MIC status
– Reduced ability to attract ODA & concessional loans
– Loss of preferential trade arrangements i.e. E.U’s
Everything But Arms (EBA) Initiative
• Lack of investment finance
– Unavailability of capital on reasonable terms for nontourism investments
Key challenges facing the Maldives
(contd.)
• Limitation of current infrastructure vs. proposed growth
path
– Proposed tourism expansion and its implications
on the demand for international and domestic
airport services
• International airport highly congested at peak times
even at present
• Tourist arrivals expected to grow at least by 8% per
annum reaching 1 million by 2015
• International airport & the regional airports needs
major upgrades and expansion to cater to
expected increase in demand from increased bed
capacity and to service resorts in outer atolls
Key challenges facing the Maldives
(contd.)
• Limitations in current infrastructure vs. proposed growth
path
– Projected economic growth & its implication on
port demand
• Port throughput growing faster than GDP
• Current port already operating above its intended
capacity
• Unacceptable turnaround times for ships at
present
• Limited container handling space leading to
storage of containers in Hulhumale
Current foreign investment (FI)
policy & environment
• Governance
– FI are governed by Law on Foreign Investments (Law No: 25/79)
• Openness
– Most open in S. Asia (Investment Climate Assessment, World Bank)
– All sectors except the following are open for FI
– retail and wholesale trade
– construction
– fishery investments
• Entry Procedure
– Tourism FI to be registered at the MOTCA under 25/79
– All non-tourism FI to be registered at FISB under 25/79
– All FI proposals appraised by the FI Board
Current foreign investment (FI)
policy & environment
(contd.)
• Taxes
– No corporate tax
– Nominal royalty charged from FI
• Incentives
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100% foreign ownership welcomed
Free repatriation of profits or earnings
No foreign exchange restrictions
Freedom to employ expatriate labour
Proposed changes to
the foreign investment policy
• Further liberalization of the investment regime is under
consideration and the following are being considered
through public-private consultation
– All sectors to be opened up, provided 51% owned by locals
– 100% FI to be allowed for large capital investments
– Automatic approval for FI
– Streamlining the royalty regime to remove current
inconsistencies
– Tax holiday for investments based outside greater Male
region to foster regional development
– Tax holidays and import duty exemptions for investments
targeting export markets to strengthen competitiveness of
exports
Updates on major foreign investment in
infrastructure…
• Port Projects:
– Government signed an MOU with a prospective foreign
investor to establish a port city with extensive transshipment facilities. Detailed feasibility study expected 6
months from now. Total investment in phase 1 estimated at
US$ 430 million and at full scope the estimated investment
is US$1.2 billion
– Relocation and expansion of Male Commercial Port
• Other large investments
– Establishment of a National Airline
– Bridge connecting Male with Hulhule Island (airport
island)
Conclusion
• Need to move fast with major infrastructure investments
to foster economic growth under the proposed growth
path including the expansion of tourism, further
liberalization of fishery and the opening up of foreign
investments in general
• Liberalization of FI expected to boost capital inflows and
off-set the expected decline in ODA due to the
graduation of Maldives to MIC status in 2011