HomeReportsBureau of Economic and Business Affairs2019 Investment Climate Statements…Maldives

# 					2019 Investment Climate Statements: Maldives			

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													Executive Summary											

                -  Executive Summary 
                -  1. Openness To, and Restrictions Upon, Foreign Investment   
                -  2. Bilateral Investment Agreements and Taxation Treaties   
                -  3. Legal Regime   
                -  4. Industrial Policies   
                -  5. Protection of Property Rights   
                -  6. Financial Sector   
                -  7. State-Owned Enterprises   
                -  8. Responsible Business Conduct   
                -  9. Corruption   
                -  10. Political and Security Environment   
                -  11. Labor Policies and Practices   
                -  12. OPIC and Other Investment Insurance Programs   
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                -  14. Contact for More Information   

## Executive Summary

The Republic of Maldives comprises 1,190 islands in 20 atolls spread over 348 square miles in the Indian Ocean.  Tourism is the main source of economic activity for Maldives contributing 28 percent of GDP and generating more than 60 percent of foreign currency earnings.  The tourism sector has experienced impressive growth over the past 10 years growing from 655,852 arrivals in 2009 to 1.3 million in 2018 (end-November) and much of this growth has been fueled by the growth of Chinese tourists.  Tourism will likely continue to drive the economy while the Government of Maldives promotes construction of new island resorts.

GDP growth averaged 6 percent during the past decade and has helped lift Maldives to middle-income country status.  Per capita GDP, estimated at USD 10,443, is the highest in South Asia.  Income inequalities and the availability of jobs remain a major concern for Maldivians, especially those in isolated atolls.  Economic growth is expected to remain strong in 2019 supported by investments in infrastructure development, tourism and real estate.

Maldives is a multi-party constitutional democracy, but some report the transition to democracy has been challenging.  Maldives’ Parliament ratified a new constitution in 2008 that provided for the first multi-party presidential elections.  Since 2008, Maldivian President Mohamed Nasheed was forced out of power under allegedly disputed circumstances and his successor Abdulla Yameen’s tenure was marked by corruption, systemic limitations on the independence of parliament and the judiciary, and restrictions on freedom of speech, press, and association.

In 2012, Ibrahim Mohamed Solih of the Maldives Democratic Party won the campaign for President running on a platform focused on economic and political reforms and transparency.  The MDP also won a super majority (65 out of 87) seats in parliamentary elections in April 2019, the first single-party majority since the advent of multi-party democracy.  President Solih has pledged to restore democratic institutions and the freedom of the press, re-establish the justice system, and protect fundamental rights.

Corruption across all sectors, including tourism, was a significant issue under the previous governments.  Rising extremism and the threat of terrorism are also significant concerns.

Large scale construction of island infrastructure and new resorts in the past five years contributed to economic growth, but has resulted in a significant rise in debt.  The Maldives’ debt-to-GDP ratio increased from 54 percent in 2014 to an estimated 69.4 percent in 2017 according to the International Monetary Fund (IMF).  The IMF has recommended Maldives adopt measured tightening of policies to safeguard macroeconomic and external stability.

Maldives welcomes foreign investment, although companies claim that the ambiguity of codified law and competition from politically influential local businesses act as deterrents.  U.S. investment in Maldives is limited and focuses on the tourism sector, particularly hotel franchising and air transportation.

*Table 1: Key Metrics and Rankings*