WT/TPR/S/221 Trade Policy Review 
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II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 
(1) INTRODUCTION  
1. The Maldives has undertaken considerable po litical, constitutional, and judicial changes 
during the period under review.  However, there seems  to be no change in the legal framework for 
trade and investment, which until recently was formul ated and coordinated in an ad hoc manner with 
very little coordination between ministries or with the private sector.  With the setting up of the Trade Policy Coordinating Committee in 2009, it appears that trade policy formulation will be more inclusive in the future.  As a Member of the WTO, the Maldives accords MFN treatment to all 
Members;  furthermore, as a least developed c ountry, the Maldives benefits from quota-free and 
duty-free access to the EC and Japan.  However, it is  expected to graduate from least developed to 
developing country status in 2011 when these preferences will stop;  the Maldives is also a party to the South Asian Free Trade Agreement and is ne gotiating FTAs with Sri Lanka and Qatar.  The 
foreign investment regime is seemingly liberal;  100% foreign ownership is permitted in all sectors 
(although there is a positive list in operation). 
(2) G
ENERAL CONSTITUTIONAL AND LEGAL FRAMEWORK  
2. During the period under review, significant chang es were made in the constitutional and legal 
framework.  In 2005, political parties were legalized  and in 2008, the Majlis (the main legislation 
body) finalized a new Constitution, which was ratifie d by the President.  The main change under the 
new constitution is that the President is now elected through a direct vote.  The first ever multi-party, 
multi-candidate presidential elections  were held in October 2008.  
3. The new Constitution separates the powers of the St ate between the legislative, judicial, and 
executive branches, thereby diluti ng the considerable executive pow ers previously held by the 
President.  There is to be an independent judici ary, supreme court, and prosecutor general;  the 
supreme court will be the highest legal authority in  the country.  The President may no longer appoint 
any individual member of the Majlis and the appointment of a Cabinet needs to be endorsed by the Majlis.  Furthermore, the President can be elected only for two terms.   
4. Legislative power is vested in the Parlia ment, the Peoples Majlis, whose members serve 
five-year terms.  Under the new Constitution, all members of the Majlis are to be elected through 
universal suffrage:  elections for the 61 seats to ok place in May 2009.  Executive power (albeit 
diluted) continues to be vested in the President , who is both the Head of State and the Head of 
Government.  The Cabinet, which is appointed  by the President and endorsed by the Majlis, 
formulates government policy, annual budgets, and government bills, wh ich must be submitted to the 
Majlis for approval.  Furthermore, all bilateral and multilateral agreemen ts need to be authorized and 
ratified by the President upon advice of the Cabinet.   
5. The judicial system is based on Islamic law, with some English common law, mainly in 
commercial matters.  The Supreme Court is the highest  judicial authority;  its members are appointed 
by the President upon approval of the Majlis.  The Judicial Service Commission appoints all high 
court, trial court, and local court judges. Maldives WT/TPR/S/221 
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(3) TRADE POLICY FORMULATION , IMPLEMENTATION AND EVALUATION  
6. All legislative proposals must be presented to the Majlis as bills;  they are debated by the 
relevant committee1, which may introduce amendments or send it back unchanged to the Majlis to 
vote on.  A simple majority, and assent by the President, is required to pass the bill.2    Additionally, 
the President may decree and execute provisional laws by special order if the Majlis is not in session;  
however, in its next sitting, the Majlis must approve the order.  
7. Trade-related legislation and policies enter into  force through the same procedure.  However, 
it appears that there is little coordination or consu ltation between different ministries and departments, 
and ambiguity about the role of different ministri es.  With a view to formulating and implementing 
cohesive trade policies, the authorities set up a national Trade Policy Coordinating Committee in 
2009.  
8. The main ministry responsible for formulati ng trade policy is the Ministry of Economic 
Development (MED).  The MED is responsible for negotiating and implementing multilateral, 
bilateral, and regional trade agreem ents.  In addition, the new Government has mandated the Ministry 
of Foreign Affairs to assist the MED in its forei gn dealings, which are mainly carried out through the 
country's missions abroad.  Other ministries activel y involved in trade and related policy formulation 
and implementation include:  Fi nance and Treasury, Tourism and Civil Aviation, and Fisheries, 
Agriculture and Marine Resources.  The Maldives Custom s Service, which is a part of the Ministry of 
Finance and Treasury, is responsible for administ ering the tariff regime, customs procedures, and 
rules of origin. 
9. Advice on economic policy is provided by the Maldives Monetary Authority (MMA), 
Ministry of Finance and Treasury, and Ministry of Economic Development.   No independent body 
evaluates or advises the Government on trade and economic matters.3  Moreover, it appears that there 
is no formal interaction or coordination between th e public and private sectors on trade issues.  Under 
the Seventh National Development Plan, the Gove rnment was to set up an Economic Development 
Board, which would provide a forum for private an d public sectors to intera ct and coordinate on 
issues such as export development, business faci litation, services trade, and competitiveness.  
However, the Seventh National De velopment Plan has been suspended by the new Government and 
there has been no progress on creating the Board. 
Main trade laws 
10. The President ratified the WTO Agreement in March 2004, whereby it became law.  
However, there have been delays in implementing the Agreement.  The main law governing trade is 
the Export and Import Law 1979 (31/79), which sti pulates the conditions and procedures for the 
export and import of goods (Table II.1).  During the period under review (2003-09), the Maldives has 
not made any notifications to the WTO. 
                                                      
1 Committees are responsible for proposing amendments to bills as well as carrying out further study 
and research on proposed bills.  Committees are selected for 30-month periods and include all ministers, departments, and agencies that  fall within their competence. 
2 The President may return the bill to the Majlis with suggested amendments;  the Majlis has the 
prerogative to pass the bill into law with the suggested amendments or unchanged. 
3 An independent auditor-general's office (AGO) wa s created with the enactment of the Audit Act 
(4/2007), and the first independent auditor general was appointed in January 2008.  The AGO is an independent 
state organization responsible for auditing government organizations, government companies, and other bodies entrusted with government revenues and assets. WT/TPR/S/221 Trade Policy Review 
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Table II.1 
Main trade-related legislation, 2009 
Title of legislation 
Export and Import Law, 1979 (No. 31/79) 
Tourism Act, 1999 (No. 2/99) 
Law on Public Utilities:  electricity distribution, telecommuni cation provision, water distributi on, sewerage systems, 1996 (No . 4/96)  
Import and Sale of Pharmaceutical Drugs, 1975 (No. 75/78) 
Contract Law, 1991 (No. 4/91) 
Mortgage Law, 1993 (No. 9/93) 
Law on Leasing Uninhabited Islands for De veloping Tourist Resorts, 1994 (No. 3/94) 
Law on Bills of Exchange, Cheques a nd Promissory Notes, 1995 (No. 16/95) 
Foreign Investment Law, 1979 (No. 25/79) 
Law on Doing Business in Maldives by Foreign Nationals, 1979 (No. 4/79) 
Law on Outlets Selling Imports and F ood Serving Outlets, 1978 (No. 60/78) 
Consumer Protection Law, 1996 (No. 1/96) 
Law on Prohibited Imports, 1975 (No. 4/75) 
Partnership Law, 1996 (No. 9/96) 
Company Law, 1996 (No. 10/96) 
Environmental Protection and Preservation Act, 1993 (No. 4/93) 
Source:  The Maldives' authorities. 
11. Continued reform is required to create a level and competitive playing field between the state 
and private sectors, so as to foster private-sector development.  The trade regime needs to be made 
more predictable and investor confidence needs to be enhanced.    
(4) TRADE POLICY OBJECTIVES  
12. The Government sees further trade and econom ic liberalization as important means of 
promoting private-sector investment and developmen t, and thus reducing pove rty and ensuring better 
living conditions.  To achieve this, the Government wants to develop and expand the tourism, fishing, 
and agriculture sectors, and to promote small and medium-size enterprises (SMEs), which would 
increase employment.  To facilitate SME developmen t the Government has pledged to facilitate loans 
from banks and the financial markets. 
13. In its manifesto, the new Government has pledge d to establish an integrated transport network 
and develop a transshipment port.  These are expect ed to contribute to economic development and 
thus reduce income inequality and living costs thr ough lower transport costs.  The Government has 
pledged to abolish import taxes on all food products, medicines, and fuel to ensure affordable living 
costs. 
14. The new Government wants "economic and commerc ial diplomacy" to be the main focus of 
its foreign policy.  Against this backdrop, the Government strongly supports globalization, trade 
liberalization, and regional coope ration.  However, the Maldives would like to see a mechanism in 
place that would compensate small economies for ta riff-revenue losses due to trade liberalization.  
Additionally, the Maldives would work through the WTO to gain special concessions such as 
financial and technical assistance for sm all and vulnerable developing states. Maldives WT/TPR/S/221 
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(5) TRADE AGREEMENTS AND ARRANGEMENTS  
(i) Multilateral agreements 
15. The Maldives is an original Member of the WTO and was a GATT contracting party.  It has 
not been a party to any disputes under the WTO Dis pute Settlement Mechanism.  As a Member of the 
WTO, the Maldives accords MFN treatment to all WT O Members.  Furthermore, it is eligible for 
"special and differential treatment" under WTO rules.   
16. The Maldives has stated that it wants a quick  and positive outcome of the DDA, especially 
with regard to technical assistance and the "aid fo r trade initiative", both of which would contribute to 
its development and improve its compliance wi th WTO Agreements.  In 2008, the Maldives 
appointed an ambassador to the WTO and accredite d its United Nations miss ion in Geneva to the 
WTO.  These steps will ensure increased par ticipation in WTO meetings, and thus greater 
understanding of WTO rules and proceedings.  
(ii) Regional agreements 
17. The Maldives is a member state of the South Asian Free Trade Area (SAFTA)4, which 
entered into force in January 2006, and was no tified to the WTO in March 2008.  Under SAFTA, 
India, Pakistan, and Sri Lanka were required to reduce their customs tariff to 20% by January 2008, 
while the LDC members (Bangladesh, Bhutan, Maldiv es, and Nepal) were required to reduce their 
tariffs to 30%.  Furthermore, India, Pakistan, a nd Sri Lanka were required to reduce their tariffs on 
imports from the LDC members to 0-5% by January 2009, while LDC members are required to do the 
same by January 2016.  SAFTA provides a comp ensation mechanism for LDC members' revenue 
losses resulting from the lowering of tariffs as we ll as technical assistance for LDC members. 
(iii) Bilateral agreements 
18. The Maldives' only operational bilateral trade ag reement is with India.  The agreement does 
not provide any tariff preferences in either direc tion.  However, it does allow the Maldives to import 
certain products from India, the export of which is  otherwise not permitted;  these products include, 
river sand, eggs, potatoes, and onions.  In Sept ember 2005, the Maldives and China signed letters 
agreeing to enter into a non-reciprocal zero-tariff agreement, which would allow Maldives' exports to 
enter China duty free.  Additionally, the Maldives is negotiating free-trade agreements with Sri Lanka 
and Qatar.  
(iv) Generalized System of Preferences (GSP) 
19. The Maldives receives GSP tr eatment from most industrialized countries except the 
United States.  Of significant importance to the Ma ldives is the duty-free, quota-free access accorded 
by the EC under its "everything but arms initiative" , as this affects approximately 30% of Maldives 
exports (canned tuna mainly).  Exports to Japan, which also benefit from quota- and duty-free access 
under Japan's GSP, are also of considerable importance.5  Both of these GSP schemes will cease to 
apply once the Maldives graduates from its LDC stat us in 2011.  Graduation would also affect the 
Maldives' obligations under the WTO, i.e. the impl ementation of the TRIPS Agreement (Chapter V).  
The level of official development assistance fro m all sources (which accounts for approximately 30% 
of the budget) would also decline once the country graduates. 
                                                      
4 SAFTA covers trade in goods only;  its member states are Bangladesh, Bhutan, India, Maldives, 
Nepal, Pakistan, and Sri Lanka. 
5 Approximately 34% of Maldives mercha ndise exports benefit from preferences. WT/TPR/S/221 Trade Policy Review 
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(6) FOREIGN INVESTMENT REGIME  
20. The Maldives operates a liberal foreign investment regime and this is reflected in its rank as 
the highest in the region in the World Bank's Doing Business Index .6  The Government acknowledges 
the importance and contribution of foreign investme nt to economic development and job creation in 
the Maldives, and permits foreign investment in a ll sectors of the economy.  Foreign investment is 
governed by the Law on Foreign Investments in th e Republic of Maldives (25/79).  The law provides 
for an agreement between the Government of the Ma ldives and the foreign investor and stipulates the 
terms and conditions and implem entation of the agreement.  The law also provides for, inter alia :  an 
investment guarantee, dispute settlement and arb itration procedures, 100% foreign ownership, and 
unrestricted repatriation of profits.7   
21. Under the law, all foreign investment must be  registered.  Tourism-related investment is 
registered and licensed by the Ministry of Tourism, while all other investment has to be registered and 
licensed by the Foreign Investment Services Bu reau (FISB) of the Ministry of Economic 
Development.  Proposals for joint-venture (J V) investments in activities on the positive list8 must be 
decided upon and the decision communicated to the i nvestors within ten working days of submission 
of all required documents.9  Proposals for JV investments in activities not on the positive list and 
investments by wholly foreign-owned entities must also be submitted to the FISB for approval and registration.  In these cases, the FISB is required to  give its decision within 30 working days.  Foreign 
investment in trade (imports and exports) and related services is governed by the Law on Doing 
Business in the Maldives by Foreign Nationals, 1979 (N o. 4/79);  this legislation also covers the 
operation of a foreign party or joint ve nture in wholesale and retail activities. 
22. In the absence of other direct taxes, all fore ign investments registered in the Maldives are 
required to pay an annual royalty to the Government.  JVs that have a majority Maldivian share (51%) 
are subject to an annual royalty of 1.5% of gross tu rnover or 7.5% of net prof its, whichever is greater.  
The annual royalty for an entity with less than a 51% Maldivian stake is 3% of gross turnover or 7.5% 
of net profit, whichever is greater.  
23. All incentives apply equally to foreign and dom estic investments and depend on the scale of 
the investment.  For example, i nvestments in excess of US$200,000 are allowed duty-free imports of 
machinery, capital goods, and construction materials fo r two years, while investments of less than 
US$200,000 receive the concessions for a year.  Ther e are no exchange controls, and profits may be 
repatriated freely.  Investors are also perm itted to employ foreigners where suitably skilled 
Maldivians are not available.  Furthermore, ther e is no personal or corporate income tax in the 
                                                     
 
6 World Bank (2009). 
7 For details on the Law on Foreign Investments in the Republic of Maldives (25/79) see WTO (2003). 
8 Activities on the positive list are:  financial consultancy;  auditing services; insurance services;  water 
sports activities;  commercial diving (salvage);  domestic  air transport services;  catering services for airlines; 
big game fishing;  technical support services, i.e. photoc opies, elevators, ATM machin es etc.;  manufacturing of 
garments;  water production, bottling, and distribution;  consultancy in public relations;  editorial, advertising 
and translation services;  packing and distribution of cem ent;  general sales agency, passenger sales agency and 
cargo sales agency for airlines and shipping lines;  sp a operations and management;  water treatment plant;  boat 
building;  software development and related support services;  domestic maritime ferry services;  financial leasing services;  fish processing activities;  tr aditional medical services;  production of underwater 
photography, videography and post cards;  block ice making;  specialty restaurants;  and professional business 
valuation services (Invest Maldives online information.  Viewed at:  http://www.investmaldives.org/ investment_guide/annex.php). 
9 Required documents include:  bank reference;  project feasibility report;  draft of the articles of 
association and the memorandum of association of the company proposing to invest;  and a copy of the signed JV agreement between the JV partners proposing investment in the Maldives. Maldives WT/TPR/S/221 
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Maldives (except for business tax on banks).  Conseque ntly the Maldives' tax authorities have not felt 
the need to negotiate any bilateral tax treaties with  other countries in order to relieve international 
double taxation of income.  The Maldives has no bilateral investment treaties.