The government has said President Abdulla Yameen’s flagship Special Economic Zone (SEZ) legislation would bring an end to the Maldives’ dependence on tourism. The bill aims to create jobs, and stimulate investment in the Maldives’ underdeveloped atolls and bring in long term development.
However, the special incentives and tax breaks to corporations and limited oversight in the bill paint a different picture – SEZs will only institute a system of economic slavery in the Maldives.
The bill proposes handing over control of the Maldives’ atolls to corporations, and suggested lax regulations will allow money laundering, and increase corruption and inequality. It may also become a tool for resort owners to legally evade taxes.
What are SEZs? They are specific geographical areas within a country’s borders with relaxed regulations, financial incentives, and facilities to attract investment and create jobs.
The Maldives has plans to set up nine zones, including free trade zones, offshore finance zones, high-tech zones, and ports. The SEZs are to be administered by a 17-member board consisting largely of government officials.
Incentives for SEZ developers include exemptions from import duty, Business Profit Tax (BPT), Goods and Services Tax (GST), and withholding taxes, and concessions in bringing in expatriate workers. There are no regulations on money remittance, and the bill also provides for land lease periods up to 99 years. Further, any company with a majority of local owners (51 percent) can buy and own land without paying land taxes.
Centralization
Local communities may not receive any benefits from investments in SEZs. According to Article 33, once an area is designated an SEZ, local councils will no longer have authority over the area. All the revenue will bypass local councils and go into the state budget. This may mean the end of decentralization in the Maldives.
It suggests and propels a move towards a centralised autocratic government. Moreover, atolls of the Maldives will be controlled by business tycoons rather than elected representatives.
Corruption
The freedoms in money remittance without government oversight and single window clearance for various government approvals could result in a reduction in finance and trade controls, opening up opportunities for money laundering and financing of terrorism. For the same characteristics that make SEZs attractive to legitimate businesses, also attract abuse by illicit actors.
The SEZ bill allows the SEZ board to override all controls in proposed in the bill. The board can add a number of additional incentives such as extended tax relief, extended land lease periods for foreign companies up to 99 years and increase foreign labor quotas. Such excessive power in the board’s hands will lead to corruption, inequality and may result in the rich controlling SEZs with very little scope for future entrepreneurs.
Tax Evasion
The proclaimed purpose of the SEZ bill is to attract investment in other industries, but the bill, in fact, grants excessive benefits and tax relief to the tourism sector.
Article 74 states up to 40 percent of investment in any special economic zone could be in tourism or tourism related industries. Hoteliers will not have to pay import duty on capital goods, and will be exempted from paying Goods and Services Taxes (GST), Business Profit Taxes (BPT) and withholding taxes for two years. Shareholders will not have pay BPT on their dividends, and companies will be granted concessions in employing expatriate workers.
All of these concessions can be extended further and land taxes can be waived on the recommendation of the SEZ board.
Maldives already attracts multi-million dollar investments and international brands in the tourism sector under existing laws, and the sector already makes vast profits. There are already many top international hotel brands in the Maldives, we do not need SEZs to ensure investor protection or attract investors in the tourism sector. If these businesses had not been sure of their investments, they would not have invested in the Maldives in the first place.
The incentives granted for the tourism sector in the SEZ bill means most of the investments in the SEZs will end up as tourism investments, and will allow resort owners to legally evade taxes.
According to MIRA’s records, the government’s main source of income at present is Tourism Goods and Services Taxes (TGST) and BPT, and the main sources of dollar income are TGST and other tourism sector taxes. The tax reliefs and exemptions will reduce TGST, BPT, and other tourism taxes, which will in turn reduce state income and dollar income.
Ultimately, the reduction in the state’s income means an increase in debt and deficit, whilst reduction in the state’s dollar income would hand over control of the dollar market to tourism tycoons.
As the Maldives currently lacks a set minimum wage, and as developers in the SEZ have the right to bring in any amount of expatriate workers, most of the SEZ jobs will also go to expatriates preventing locals from benefiting at all.
President Yameen has previously pledged to create 94,000 job opportunities. The SEZ bill will create jobs, but only for foreigners?
Wealth concentration
A majority of Maldivians live without clean water, proper sewerage systems or medical and educational facilities. We are a rich country with a small population, but 90 percent of our wealth is concentrated in the hands of a mere 10 percent.
In the context of high inequality, high corruption and incompetent courts, the SEZ bill may very well hand over ownership of this country’s resources to a handful of corporations. Corporations end to be driven by power and financial gain, and in the absence of oversight, will not work for the public good.
History had shown a correlation between huge investments and corruption and civil unrest. These investments ultimately help authoritarian governments to stay in power by buying off their citizens. Investors will fund the governments who provided them with profit-making opportunities to buy off their citizens.
Laws that are made in the interest of corporations and business tycoons result in economic slavery. Corporations want profits and the best way for them to get the profits is to use political party campaign financing system i.e. a system of legalized bribery. This way they can control government officials, politicians, and the public.
They use those government officials and politicians to dismantle the marketplace, to obtain monopoly control, and ultimately privatise the commons. The SEZ bill allows corporations to turn our wealth, our air, our water, our public lands, our wildlife, and our fisheries into profit.
The Maldivian Economist is a Facebook Group which aims to create a platform for debate on the Maldivian economy, finance and policies.
Photo courtesy of Rajjetherey Meehunge Party.
All comment pieces are the sole view of the author and do not reflect the editorial policy of Minivan News. If you would like to write an opinion piece, please send proposals to [email protected]
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The SEZ bill in works since 2007 is clearly a brain child of a mad Maldivian economist.
And there are not many of those
This is a very serious issue, its time for the public to voice against this monster SEZ bill
Any thought on where the Labour and skills come from?
Just because Singapore or Dubai done well over the years it does not mean Maldives will succeed in obtaining investment.
Money is cheap right now in the West, however, it's unlikely anyone sensible will try their luck in Maldives whilst emerging markets like Indonesia and Brazil give a better yield.
To do anything that can bring investment and ultimate benefit to people should be welcomed. The question is, is making a piece of legislation enough to kick start to feel UAE boom. Where is money, and who will come to invest in Maldives , the looming threat of environment, Islamic extremism, inferior and barbaric justice system and nationalist mentality are enough ingredients to scare away anyone who may be interested to invest.
That Minivan News is now publishing articles by Facebook Groups, without a single author, without proper credit and reference is a complete travesty and indicative of how far this online paper has fallen. Opinion pieces are only acceptable when there is an author to stand behind those words. Anonymous opinion pieces targeting people, parties, or even policies is tantamount to propaganda at the best, and slander at the worst. It is reprehensible.
@MaldivesYouth
Thanks for your comment - you make a very good point here.
Ideally, people would feel comfortable to use their real names on comment pieces but, when the expression of online opinion has been proven in recent times to result in threats and even physical attack, it is unsurprising that people prefer to stick to anonymity.
In this case, I would argue that to reject such an interesting and well-argued piece would have been a sad loss. Would a pseudonym have made any difference? As it is, the author is far more accessible than most people who submit comment pieces and can be contacted through the Facebook page where I'm sure they would be happy to respond to any criticisms of the piece.
Additionally, the 'The Maldivian Economist' is clearly inspired by the British newspaper 'The Economist' which is famous for its editorially anonymity. This newspaper justifies its policy by professing "a belief that what is written is more important than who writes it" - a notion than any regular reader of the Minivan News comments section can I'm sure appreciate. This is a policy that has not gone without criticism over the years, however, and I'm sure the Maldivian Economist is available to hear your concerns.
In a country where people are attacked and abused in the street for expressing their opinions, I would question the use of words like "travesty" and "reprehensible" to describe Minivan News' attempts to disperse constructive opinion on a topic that is of concern to many.
But thanks once again for you comment - I urge you to write a rebuttal to this article and we will happily publish.
Feel free to write under the title 'Maldives Youth', or whichever you wish.
Little Indians don't know wot they want. Rich and powerful or democracy and human rights? Decentralization is good. But not for a developing country.
A layer of economic centralization on top of Decentralized local authorities.
The clause should be changed to retain control of revenue within local governing authorities.
Otherwise the bill sounds like a good incentive to attract investments.
voicing a 'Maldivain Economist' face book group? #$%^&. Its mostly about Raajetherey Party, another meaningless group. And they call it Economist..
What next then. Some fake twitter account as an authority and think tank of policy. Surely Maldivains are not so idiotic. Come on Minivann.
SEZ bill is a serious issue.
Who cares?
Rushed GMR agreement was signed between a dumbfounded numbskull from Mordis' side, while Indians had skills that could shave off razors edge.
Who cared?
The government has been pushing divide and conquer rule for centuries. Saved them the nuisance of a focused public, asking uneasy questions about the future.
Who cared?
The camels-wanna-be, is worried about whether you recite Qunooth or not. That has been a major reason for the atrocities between the groups.
Who cared?
SEX bill FTW, thank you for the laura
Dear Minivan.. Maldives has and will always be controlled by business tycoons. State something new and original instead of recycling trash for shock value.
Singapore and Dubai didn't succeed just with a piece of legislation. In the case of Dubai, tons of oil money created their success story coupled with innovative ideas.
As for Singapore, the hard graft of the Chinese work ethic and mentality is largely behind their success more than anything else.
If the Maldivians think that a piece of legislation will bring investors flocking over here, they are in for a nasty surprise. There is no foundation to build on here. The whole thing is sitting on a quick sand of corruption and embezzlement. With a country heading towards a one party state yet again, investors cannot be fooled by covering shi*t with glitter.
"History had shown a correlation between huge investments and corruption and civil unrest. These investments ultimately help authoritarian governments to stay in power by buying off their citizens. Investors will fund the governments who provided them with profit-making opportunities to buy off their citizens" THis is exactly what had happened with GMR and Nasheed got all his money for his campaign through them.
Holy Ganja smoke!
cant you think of a single argument to discredit what he is saying? so attack the messenger instead of the argument. Neat. if you so strongly think this lack substance why not write another opinion piece and smash it to bits. we are waiting
Note: Golha ganja jumping on to comment without even looking at article!! for you infor its in the comment section.
Thanks for your comments - just a reminder that our policy is to publish comment pieces based on the quality of the article rather than the status of the author.
All are welcome to submit coherent and well-written comment pieces.
MaldivesYouth
now tell that to afraasheem. in a country where gangs and fanatics are send to say hello to people courageous enough to speak- caution is a must to keep on speaking up in every manner we can- in gangsters capital
Dear Minivan,
Do you know how much money gov. waste simply for reclimation of lagoons? Don't they see huge lands in other area? when you talk about business tycoons controlling Maldives, do you know the amount of Job villa group, Crown and Champa Brothers, so called Ong, Soneva, and Universal? 80% of jobs in the country is created these people. Don't you think that they can invest money in other parts of the world and can earn money? Think about it
we voted for this. These zones are going to be a country within a country. However the Maldivian Economist should have talked about positives too.
Maldives Economist -what a joke!!
Clearly Minivan is deluded into thinking there is some substance behind it. Besides, if its not all politics, why hide identity of the website
All these detractors are just pissed off because someone's making fun of their 'Dear Leader'. Not one of them has explained why this article has 'no substance' behind it.
...not that they could.
PS: Here's a picture of 'MaldivianYouth'
http://i.imgur.com/FdFxgfe.jpg
A bunch of heroin peddlers who'll profit from the SEZ.