Category: Business & Tourism

Maldives business news

Foreigners barred from cashier jobs as President promises work for Maldivians

Economic development minister Mohamed Saeed has told local media that it will be illegal to hire expatriate workers as cashiers from April 2015.

“A large percentage of the Maldivian youth is unemployed and looking for employment,” Saeed told Haveeru. “All they need is support and guidance”.

Saeed’s announcement closely follows comments made by President Abdulla Yameen yesterday noting that new economic opportunities were being created for Maldivians, not foreign workers.

“This is not to say anything of disrespect to any neighboring or foreign countries,” said the president. “But these jobs are created by the Maldives. Be it in the tourism industry, from hotel industry work to refrigerator work, these jobs are not created for foreigners, but for the Maldivian Youth.”

Yameen’s comments came during the graduation ceremony of the ‘Dhasvaaru 2014’ vocational training programme yesterday evening (December 30).

“The government’s current policy for strengthening the economy is working towards the theme ‘Maldivian work for Maldivians’. The economy is creating jobs, the economy is filling those jobs with Maldivians. This will result in a sound economy,” said the president.

Youth employment has been a major focus of the Yameen administration, which has pledged to create 94,000 new jobs during its five year term.

Economic development minister Saeed is reported to have told Haveeru today that authorities will stop issuing quotas to foreign workers for work as cashiers, after having received a number of complaints.

During yesterday evening’s ceremony, President Yameen reminded the graduates that their job security entirely depended on their work ethic, enthusiasm, and competence – noting that these qualities must be self taught.

“Even if you know how to do the work very well, even if you are very skilled, you will still have to develop proper work ethics on your own.”

Local youth-led NGO Democracy House states unemployment among the youth (aged 15-24) may be as high as 43 percent.

Youth employment

A recent Democracy House publication, however, highlighted a “disconnect” between the current school curriculum and life skills, noting that many were “not able to handle adult responsibilities after we leave school.”

While the government has established a youth unemployment register with 13,000 individuals, youth minister Mohamed Maleeh Jamal has reported receiving complaints from businesses about individuals failing to attend interviews and quitting jobs within a few weeks.

Earlier this month, Maldives Airports Company Ltd head Bandhu Ibrahim Saleem told a Majlis committee that difficulties with local staff had resulted in a dependence on foreign employees, and even military assistance, to keep the international airport running.

After being summoned to the government oversight committee regarding the company’s failure to replace foreign staff with local employees, Saleem informed MPs that 500 employees were currently on leave.

“We loaded and unloaded cargo three times with assistance of army personnel. I don’t think any of you know this. Our employee attendance is low. The process of letting go an employee, so complicated. The foreigners are there to bridge all this,” explained Saleem.

Shortly after his appointment as home minister late last year, Umar Naseer mooted the idea of national service for the country’s youth in order to instill discipline, as well as suggesting that many jobs carried out by foreign workers could be done by locals.

“There is no task too menial or lowly for a Maldivian,” said Naseer at the launch of a ‘Blues for Youth’ camp – organised by the police with the aim of preparing adolescents for the job market.

“None of the work currently being conducted by foreigners in this country is either lowly or dirty work. It is not something that we Maldivians cannot do,” said the home minister.

The 2014 census showed the expatriate population to be 58,683, although Minister of Defence Colonel (retired) Mohamed Nazim – who also heads the immigration department – has said the real figure is more likely to be double this amount.

As part of the government’s drive to reduce undocumented workers in the Maldives, Nazim’s department has deported or repatriated 7,962 undocumented foreign workers so far this year under a voluntary departure programme.


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President Yameen warns of adverse impacts on tourism from threats against guests

President Abdulla Yameen has warned of adverse impacts on tourism from threats against tourists and urged Maldivians to leave aside political differences to assure a safe and secure environment for investors and tourists alike.

Yameen’s statement comes in the aftermath of a death threat issued against Jamaican dancehall artist Sean Paul who is scheduled to perform in Malé on New Year’s Eve.

“Even if such incidences do not actually disrupt the peace, if [guests] believe there is any danger, if they believe there is a threat, we are in effect pouring water into a bottomless container,” Yameen said in a speech in Addu City last night.

The President’s Office yesterday said that the online death threat against Sean Paul was a “local hoax” aimed at damaging the country’s reputation.

An investigation has revealed the threat is “designed to dissuade visitors, create an atmosphere of fear” and aimed “at tarnishing the longstanding reputation of the Maldives as a destination of peace, security, and tranquility,” the President’s Office said.

The video, which has since been removed, promised Sean Paul that “the world will see your burnt and blood drenched dead body,” should he perform in the Maldives.

Representatives of the singer are reported to be undecided about whether the performance is to go ahead.

The tourism ministry’s statistics have meanwhile revealed a 5.1 percent decline in tourist arrivals in November compared to the same month last year.

However, the Maldives welcomed 1.1 million arrivals by November’s end due to a strong growth in arrivals in the first half of the year. The figure amounts to a 7.9 percent increase in arrivals compared to 2013.

President Yameen said the government aims to bring the world’s wealthy to the Maldives and said Maldivians must find common ground with the government despite differences in political ideologies.

“With utmost sincerity, I note it will not be the same leaders ruling the country. Today it is me. Tomorrow it will be someone else. But Maldivians will continue to live on this land. This land must be peaceful,” he said.

Maldivians must not allow foreigners the opportunity to influence the country’s internal affairs, he continued.

“We must not call on foreign militants to come to the Maldives claiming the situation is bad in the Maldives,” he said.

The opposition Maldivian Democratic Party (MDP) has expressed concern over declining tourist arrivals at the onset of the peak tourist season in the Maldives, blaming the government for lack of a clear policy on tourism and ad-hoc decisions to levy additional tourism taxes.

Noting a seven percent decline in arrivals from European Union, a 22 percent decline from Eastern Europe, four percent from the United Kingdom, 24 percent from France, three percent from Italy, and a 13 percent decline from India in November, opposition leader and former President Mohamed Nasheed in a tweet said “the government’s policy will damage the industry”.

Tourists from the European Union made up 43.3 percent of arrivals while Chinese tourists made up 31.4 percent of arrivals. Russian arrivals declined by 31 percent this year due to the economic downturn in the country.

Nasheed said the threat against Sean Paul is the latest threat to artists by extremists in the country, arguing that “Government support for and refusal to prosecute them [extremists] will affect tourism.”


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Expansion of economic activity in third quarter driven by tourism sector: MMA

Tourist arrivals register 10 percent growth in first three quarters of 2014

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Expansion of economic activity in third quarter driven by tourism sector: MMA

Expansion of domestic economic activity in the third quarter of 2014 was “driven by the sustained growth of the tourism sector,” according to the Maldives Monetary Authority’s (MMA) quarterly economic bulletin.

“Total tourist arrivals to the country increased to 299,491 in Q3-2014, growing by 7 percent when compared to the corresponding quarter of last year while bednights grew by 5 percent,” the bulletin stated.

The central bank explained that the “difference in the growth rate of arrivals and bednights is explained by the fall in the average duration of a tourist visit from 6.0 days to 5.8 days during the period.”

Tourism receipts are meanwhile projected to reach US$594.9 million in the third quarter, an annual growth of 20 percent.

“In Q3-2014 the average operational bed capacity of the industry also increased by 4 percent when compared to Q3-2013 and rose to 26,921 beds, contributed by the opening of three resorts and thirty-three guesthouses during the period,” the bulletin revealed.

“Despite the increase in the operational bed capacity of the industry, the occupancy rate of tourism accommodation facilities remained relatively unchanged at 70 percent when compared to Q3-2013, owing to the higher increase in bednights.”

However, tourist arrivals in November declined by 5.1 percent compared to the same period last year, according to statistics from the tourism ministry.

While tourist arrivals reached 89,778 guests last month, 94,584 arrivals were recorded in November 2013, with arrivals from Europe and the Asia Pacific region down 6.8 percent and 4.6 percent, respectively.

Industry insiders had previously noted that a recent increase in T-GST alongside the continuation of Bed Tax in November had contributed to fewer bookings.

The Russian market meanwhile continued to decline due to the weakening of the Russian economy, with Russian arrivals declining by 31.3 percent to 5,273 arrivals in November from 7,675 arrivals in November 2013.

“Arrivals from the country declined at an annual rate of 7 percent in Q3-2014, compared to a decline of 5 percent in arrivals in Q2-2014,” the bulletin stated.

The number of Chinese tourists – representing the single largest market share with 27 percent – declined by 4.9 percent.

However, total tourist arrivals from January to November increased 7.9 percent from 1,020,190 guests in the corresponding period last year to 1,101,113 in 2014.

The MMA’s quarterly bulletin observed that the Chinese market was the “single major contributor to arrivals growth” in the third quarter of 2014, increasing by 8 percent compared to the previous quarter.

“Meanwhile, arrivals from Europe (which constitutes over half of total tourist arrivals) registered a marginal increase of 2 percent in Q3-2014 compared to a 6 percent growth in Q2-2014, contributed mainly by the increase in arrivals from Germany and Spain,” the bulletin noted.

“While the UK market (the largest market from Europe) posted a sluggish performance owing to weak economic conditions, the German market, being the second major source market from Europe, registered a 7 percent growth (12% growth in Q2-2014). Both Germany and UK each accounted for about one-fifth of European arrivals during Q3-2014.”

Other sectors

The central bank noted that the fisheries sector “continued to be adversely affected by falling tuna prices that deteriorated further in the international market during the review quarter.”

The volume of fish purchased from local fishermen by fish processing and exporting companies in the third quarter registered an annual decline of 24 percent, the MMA revealed.

“Additionally, the poor performance of the fisheries sector was also reflected by the fall in both the volume and earnings of fish exports in Q3-2014, by 31 percent and 21 percent, respectively,” the bulletin explained.

The construction industry “continued to strengthen, as indicated by the strong annual growth in construction-related imports and commercial bank credit to the sector.”

Reflecting a 17 percent annual increase in commercial bank credit to the wholesale and retail sector as well as a 13 percent annual growth in private sector imports, the bulletin noted that trade activity also improved in the third quarter.

The rate of inflation in the capital meanwhile decelerated from 3.1 percent in the second quarter to 2.5 percent in the third quarter, “contributed primarily by the slower growth in food prices.”

“Meanwhile, inflation excluding the volatile fish prices also decelerated during the quarter at the same rate as total inflation, explaining the relatively stable fish prices during the year as a whole,” the bulletin observed.

Overall inflation remained “steady and low” at 5.0 percent, the central bank noted.

“However, food inflation registered a much lower rate of 0.2 percent in the review quarter, compared to 3.2 percent in Q2-2014 and 7.4 percent in Q3-2013.

“A large decline in prices was noted for vegetables, particularly onions, and can be attributed to the significant decline in onion prices in India, where 89 percent of onions are imported from. The slowdown in domestic food prices also reflect the easing of global food prices, which have been declining for the most part of 2014.”


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President Yameen urges Saudis to invest in Maldives and “get warmed up for” heaven

President Abdulla Yameen has urged a visiting Saudi Arabian trade delegation to invest in the Maldives “to get warmed up” for paradise in the afterlife.

“As Muslim brothers, we all strive to go to Jannathul Firdous [paradise]. While we have a paradise in the heavenly Maldives, I urge all Saudi business people, if you are seeking to go to Jannathul-paradise in your afterlife, why don’t you get warmed up for that? Paradise is here in the Maldives,” Yameen said at a briefing this morning at Traders Hotel.

The 16 member contingent is the first Saudi business delegation to visit the Maldives. It consists of seven Saudi government officials and representatives from the private sector .

Noting existing Middle-Eastern investments in the telecoms, transport and tourism sector, Yameen invited Saudi Arabia to further invest in the energy sector, including renewable energy, real estate sectors and in developing an Islamic Financial Center in the Maldives.

The government’s landmark Special Economic Zones (SEZ) Act provides a modern legal framework to engage with investors on strategic projects, the president said.

The SEZ Act ensures investment guarantees and protection in line with international best practices, he claimed.

Since the SEZ Act’s enactment, the government has attracted substantive investor interest in several mega projects including the development of the Ibrahim Nasir International Airport, the development and relocation of Malé port and the youth city in Hulhumalé, he continued.

“With a positive outlook for economic growth, coupled with assured political stability and a liberal investment regime, there is no better time to invest here in the Maldives than now.”

Islamic Minister Dr Mohamed Shaheem Ali Saeed noted Saudi Arabia’s aid to the Maldives in the construction of an Islamic college and mosques, but said closer trade ties are essential to further strengthen relations.

“Maldives does not just want Islamic projects, but wants investment from Saudi Arabia and other Arab countries,” he said.

The trade delegation arrived in the Maldives on Wednesday after a request made to the Saudi King by President Yameen.

Saudi Arabia’s Deputy Minister for Foreign Trade at the Ministry of Commerce and Industry, Dr Abdullah A. Al-Obaid, yesterday said the visit signifies his country’s intention to enhance the bilateral relationship through trade, investment, and Islamic affairs.

“We are so proud to hear that Maldives is keeping with its Aqeeda [faith], its religion and trying to stick with it even though we have globalism effecting all countries,” he said.

In October, Saudi Arabia’s crown prince Salman bin Abdulaziz Al Saud donated US$1.2 million to a mosque project, with further plans to build 10 new mosques in the islands.

He had visited the Maldives in February to discuss potential investments and partnerships in energy, tourism, transport, and Islamic affairs, as well the provision of a soft loan facility of US$300 million for the Indian Ocean nation.

During the recent Malé water crisis – caused by a fire at the capital’s only desalination plant, unnamed Saudi donor pledged to assist the Maldives by providing US$1 million to the government’s water crisis fund.


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Saudi delegation visit Maldives to assess investment opportunities

Minister of Islamic Affairs, Dr Mohamed Shaheem has said Saudi Arabia will be informing other Arab nations about the many investments opportunities in the Maldives.

Addressing the press after a meeting with a special Saudi delegation, Shaheem stated the country was assessing means through which it can assist in developing the Maldivian economy.

“The delegates will have a meeting with officials from the Ministry of Economic Development tomorrow where they will discuss potential investment opportunities in the Maldives and how to increase outreach regarding investment,” he added.

The 16 strong delegation arrived from Saudi Arabia this morning consisting of seven Saudi government officials alongside representatives from private sector Saudi enterprises who have shown an interest in pursuing business in the Maldives.

Speaking at the meeting, Saudi Arabia’s Deputy Minister for Foreign Trade at the Ministry of Commerce and Industry Dr Abdullah A. Al-Obaid said the visit signifies his country’s intention to enhance the bilateral relationship through trade, investment, and Islamic affairs.

“We are so proud to hear that Maldives is keeping with its Aqeeda [faith], its religion and trying to stick with it even though we have globalism effecting all countries,” said Dr Abdullah.

Shaheem said that the delegation arrived after a request made to the Saudi King by President Abdulla Yameen. He also said that the delegation was due to meet with President Yameen during this visit.

In October, Saudi Arabia’s crown prince Salman bin Abdulaziz Al Saud donated US$1.2 million to a mosque project, with further plans to build 10 new mosques in the islands.

The Saudi Prince reportedly told Shaheem that he was willing to help the Maldivian government in preserving the Islamic identity of the nation and that Saudi Arabia sees the Maldives as a country of ‘special importance’.

During the recent Malé water crisis – caused by a fire at the capital’s only desalination plant, unnamed Saudi donor pledged to assist the Maldives by providing US$1 million to the government’s water crisis fund.

Vice President Dr Mohamed Jameel Ahmed visited Saudi Arabia earlier this year, meeting with the Imaam of the Grand Mosque of Makkah.

The vice president stressed the importance the government placed on enhancing ties with the Arab world and in strengthening religious unity in the Maldives.

Shortly after Jameel’s return, the government initiated its pledge to introduce Arabic lessons in schools as part of a drive to increase Islamic learning in the country.

After signing an MoU to permit flights between the Maldives and Saudi Arabia earlier this year, Mega Maldives has this week begun flights between Malé and Jeddah.


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Maldives backs new Chinese investment bank, pursues free trade deal

The Maldives is to back a Chinese-initiated international finance institution to be called the Asian Infrastructure Investment Bank (AIIB) while ministers have confirmed a free trade agreement is being pursued.

At a press conference today, the economic council revealed that the Maldives had asked to be included as a founding member of the proposed bank alongside the existing 21 countries, which includes both China and India.

Minister of Fisheries and Agriculture Dr Mohamed Shainee also revealed that China was to become the Maldives first free trade partner, demonstrating the pair’s excellent bilateral relations.

The requests were put forward during a recent visit to China by the Economic Council where discussions were held on proceeding with Chinese-assisted projects, while the Maldives officially signed up to the Maritime Silk Road project.

The AIIB, which is to start up with a proposed US$100 billion capital, is purposed with financing infrastructure projects in the Asia Pacific region.

The bank has been described by some media outlets as having been set up with the intentions of increasing Chinese influence in Asia at the expense of the IMF, ADB, and the World Bank.

The economic council today confirmed that the Maldives has officially agreed to participate in China’s silk road trade route – the third country to do so, although Chinese state media has reported more than 50 states as expressing interest.

The two countries have also agreed to engage upon free trade in the future, explained the council.

“The biggest advantage of the free trade will go towards fishermen. With free trade and the 12 percent export duty will be gone, thus the 12 percent becomes profit for fishermen,” said Shainee.

When questioned about the potential economic disadvantages which might occur because of a free trade agreement, Minister at the President’s office Mohamed Shareef said that both governments will make sure that the agreement leads to a ‘win-win’ for the countries.

“I want to mention that the free trade talks were initiated by the Maldives,” said Shareef. “China is willing to give us a lot of leeway into how we structure the agreement.”

Shareef also said – citing Chinese sources – that the Maldives is the number one South Asian destination for Chinese tourists at the moment. Chinese tourists currently make up around one third of all tourist arrivals to the Maldives.

The economic council also stated that work on the proposed new terminal at Ibrahim Nasir International Airport (INIA) is to begin in the next six to seven months and that the request for the loan to finance the project has been submitted to the Chinese Exim bank.

The council members also reiterated the importance of the proposed Malé-Hulhulé Bridge, saying that there is good progress and that the government is aiming to open it by the year 2017.


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Parliament approves import duty hikes

The People’s Majlis yesterday passed government-sponsored amendments to the Export-Import Act to raise import duties on 17 items from April 2015 onward.

The amendments (Dhivehi) submitted on behalf of the government by Maldives Development Alliance (MDA) MP Mohamed Ismail were approved with 49 votes in favour and 16 against.

Following ratification by the president, import duties for tobacco would be raised from 150 to 200 percent and from 90 laari to MVR1.25 for a single cigarette.

Finance Minister Abdulla Jihad told parliament’s budget review committee last month that the government anticipated MVR533 million (US$34.5 million) in additional income from import duties.

Among other items, custom duties for luxury cosmetics and perfume would increase from the current zero rate to 20 percent.

Additionally, duties for liquor and pork would be raised to 50 percent and a 200 percent custom duty would be levied for land vehicles such as cars, jeeps, and vans.

While the day prior to the budget’s approval the cabinet’s economic council reversed a decision to impose a 10 percent tariff on staple foodstuffs such as rice, flour, and sugar, the import duty for oil or petroleum products was raised from the current zero rate to 10 percent.

About 30 percent of the Maldives’ GDP is spent on importing fossil fuels. In 2012, US$486 million was spent on oil imports, and the figure is estimated to rise to US$700 million by 2020.

According to the Maldives Customs Service, of the MVR7.2 billion (US$466.9 million) worth of goods imported in the first quarter of 2014, one-third was spent on petroleum products.

The latest monthly economic review from the Maldives Monetary Authority noted that “the price of crude oil fell by 4 percent in monthly terms and by 12 percent in annual terms and stood at US$95.9 per barrel at the end of September 2014,”

Revising import duties was among several revenue raising measures in the record MVR24.3 billion (US$1.5 billion) state budget for 2015 currently before parliament.

The forecast for additional revenue for the 2015 budget was MVR3.4 billion (US$220 million), including US$100 million expected as acquisition fees for investments in special economic zones and MVR400 million (US$25.9 million) from the sale and lease of state-owned land.

The other measures included introducing a green tax of US$6 per night in November 2015 and leasing 10 islands for new resort development.

Tariffs were last revised in April this year after parliament approved import duty hikes for a range of goods proposed by the government as a revenue raising measure.

During last month’s parliamentary budget debate, opposition Maldivian Democratic Party (MDP) MPs strongly criticised the proposed tax hikes, contending that the burden of higher prices of goods and cost of living would be borne by the public.

The current administration’s economic policies – such as waiving import duties for construction material imported for resort development as well as luxury yachts – benefit the rich at the expense of the poor, MDP MPs argued.


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Parliament approves state budget for 2015 with 60 votes in favour

The People’s Majlis today approved the record MVR24.3 billion (US$1.5 billion) state budget for 2015 submitted by the government without significant changes to either spending plans or revenue forecasts.

None of the 19 amendments submitted by opposition Maldivian Democratic Party (MDP) MPs and Jumhooree Party (JP) MPs to revise the budget passed as pro-government MPs voted against all the proposals.

The ruling Progressive Party of Maldives (PPM) along with coalition partner Maldives Development Alliance (MDA) controls a combined 48 seats in the 85-member house.

The budget passed with 60 votes in favour and 19 against.

The MDP parliamentary group had issued a three-line whip for its MPs to vote against the budget if none of the proposed revisions are passed. All JP MPs, however, voted to approve the budget.

While the budget review committee completed its review process without significant revisions, pro-government MPs recommended several constitutional amendments to reduce recurrent expenditure.

During the budget debate last month, opposition MPs criticised higher taxes, deficit spending and alleged discrimination in the allocation of funds, whilst pro-government MPs praised planned capital investments and contended that the budget was balanced.

In his budget speech, Finance Minister Abdulla Jihad noted that recurrent expenditure in 2015 is expected to be MVR15.8 billion (US$1 billion) or 65 percent of the budget while the forecast for government income or revenue is MVR21.5 billion (US$1.3 billion).

Capital expenditure meanwhile accounts for 30 percent of the budget, Jihad said, which includes MVR6.3 billion (US$408 million) for the Public Sector Investment Programme (PSIP).

Jihad noted that MVR3.4 billion (US$220 million) was anticipated from new revenue raising measures, which includes revisions of import duty rates from July onward, the introduction of a ‘green tax’, acquisition fees from investments to special economic zones, income from the home ownership programme, and leasing 10 islands for resort development.

The government has since decided to reduce the green tax from the initially proposed US$10 per day to US$6 per day and exempt guest houses from the tax.

Additionally, the cabinet’s economic council yesterday decided not to impose a planned 10 percent import duty on staple foodstuff.

However, in its professional opinion on the budget, the Maldives Monetary Authority (MMA) advised against making ad hoc changes to policies that could affect projected revenue and expenditure.

“If policies are changed the budget deficit would increase and become difficult to finance,” the central bank cautioned.

The MMA also advised against launching infrastructure projects without securing financing.

Following its annual Article IV consultation, the International Monetary Fund (IMF) advised that “large capital investments should only be embarked upon when full financing is secured at affordable costs and the growth benefits clearly outweigh the costs.”

The IMF also recommended addressing the fiscal deficit by reducing public expenditure and reigning in public debt.

During the final debate at today’s sitting of parliament on the report compiled by the budget committee following its review, MPs suggested allocating funds in the 2015 state budget to ensure a permanent solution to the ongoing water crisis in the capital.

While opposition MDP MP Ibrahim Mohamed Solih recommended returning the budget to the committee for revisions, several MPs stressed the importance of establishing a backup mechanism to supply water.

MDP MP Ibrahim Mohamed Didi contended that the crisis could have been averted if the fire and rescue service of the Maldives National Defence Force (MNDF) properly carried out its responsibilities.

The MNDF could have conducted a ‘fire audit’ of the Malé Water and Sewerage Company (MWSC) at least once a month in the interest of national security, the retired brigadier general said.

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Government scraps plan to impose import duty on staple foodstuff

The government has reversed its decision to impose a 10 percent import duty on staple foodstuff such as rice, flour, wheat and sugar, Minister of Tourism Ahmed Adeeb has revealed.

“Emergency economic council meeting ongoing where President [Abdulla] Yameen has just decided not to impose any duty on sugar, rice, flour (staple foods),” the council’s co-chair tweeted this morning.

Speaking at a press conference at the President’s Office later today, Adeeb said parliament and the Progressive Party of Maldives’ parliamentary group have since been informed of the decision.

“The president’s decision was made in light of requests from a lot of people as well as the current situation [with the capital’s water crisis] we are faced with,” he said.

Finance Minister Abdulla Jihad told parliament’s budget review committee last month that the government anticipated MVR533 million (US$34.5 million) in additional income from import duties.

The new duties were to represent 15 percent of the new revenue anticipated in the 2015 budget.

Revising import duties

Revising import duties was among several revenue raising measures in the record MVR24.3 billion (US$1.5 billion) state budget for 2015 currently before parliament.

Government-sponsored amendments (Dhivehi) to the Export-Import Act – which proposed raising custom duties from the current zero rate to 10 percent for staple foodstuffs – were subsequently submitted to parliament last month.

Scrapping plans to levy import duties on staple foodstuff from October 2015 was meanwhile among several amendments submitted to the budget by opposition Maldivian Democratic Party (MDP) MPs last week.

The minority party has issued a three-line whip for its MPs to vote against the budget if none of the proposed revisions are passed.

During last month’s parliamentary budget debate, opposition MPs strongly criticised the proposed tax hikes, contending that the burden of higher prices of goods and cost of living would be borne by the public.

The current administration’s economic policies – such as waiving import duties for construction material imported for resort development as well as luxury yachts – benefit the rich at the expense of the poor, MDP MPs argued.

In addition to a 10 percent tariff for oil, the government’s amendment bill also proposed raising custom duties for tobacco from 150 to 200 percent and raising the duty for a single cigarette to MVR1.25.

Additionally, a 20 percent custom duty would be imposed for luxury cosmetics and perfume and a 200 percent custom duty for land vehicles such as cars, jeeps, and vans.

The forecast for additional revenue for the 2015 budget was MVR3.4 billion (US$220 million), including US$100 million expected as acquisition fees for investments in special economic zones and MVR400 million (US$25.9 million) from the sale and lease of state-owned land.

The other measures included introducing a green tax of US$6 per night in November 2015 and leasing 10 islands for new resort development.

Tariffs were last revised in April this year after parliament approved import duty hikes for a range of goods proposed by the government as a revenue raising measure.

Targeting subsidies

Adeeb meanwhile told the press today that the government still planned to shift to a model of targeting government subsidies to the needy as part of efforts to consolidate public finances.

In his budget speech to parliament last month, Jihad also revealed plans to revise the electricity subsidy, which he said currently benefits the affluent more than the needy.

Targeting the electricity subsidy to low-income families or households would save 40 percent of the government’s expenditure on the subsidy, Jihad explained, and allow the government to provide a higher amount to the poor.

While Maldivians were not legally required to declare income and assets in the absence of an income tax, Adeeb said today that the National Social Protection Agency (NSPA) currently used criteria for means-testing for subsidies.

Minister of Economic Development Mohamed Saeed meanwhile noted that the International Monetary Fund (IMF) has recommended targeting subsidies and reducing recurrent expenditure to reign in the fiscal deficit.

“The electricity subsidy is one that goes to even the richest strata of society. Basic food subsidies are being enjoyed now by the resorts, and never mind the resorts, are being enjoyed by wealthy foreign visitors who stay at the resorts,” Dr Koshy Mathai, resident representative to Sri Lanka and Maldives, told MPs on the public accounts committee in February.

“That to us seems like a totally unnecessary policy.”

He added that “substantial savings” could be made from the budget by targeting subsidies to those most in need of assistance.

Meanwhile, in May, MMA Governor Dr Azeema Adam called for “bold decisions” to ensure macroeconomic stability by reducing expenditure – “especially the un-targeted subsidies.”

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