The special economic zone (SEZ) bill submitted to parliament last week is designed to incentivise foreign investment with special privileges and tax exemptions, Economic Development Minister Mohamed Saeed has said.
Speaking at a press conference this morning, Saeed said the current administration’s objective was introducing new industries in order to overcome the dependence on the tourism industry, which was vulnerable to external shocks and global events.
The Maldives had to “outperform competitors” by offering incentives so that investors would choose the country over business hubs such as Dubai, Oman, Qatar, Singapore or Hong Kong, Saeed said.
According to the draft SEZ legislation (Dhivehi), investors would be exempted from paying either import duties for capital goods brought in for the development, supervision, and operation of the zone or business profit and withholding taxes.
Moreover, investors in the SEZ will be exempted from paying goods and services tax for a 10-year period.
Additionally, a board of investment – chaired by a minister – established by the law would have the authority to lease land to foreign companies for 66 years while local companies would be able to purchase land.
Saeed said he expects the SEZ bill to become the first piece of legislation to be passed by the 18th People’s Majlis, which began its five-year term last month.
The Maldives became the number one destination worldwide for “lifestyle holidays” because resorts were developed in the early 1970s as “a kind of special economic zone,” Saeed contended.
While the tourism industry was the main source of foreign currency at the moment, Saeed said the government did not believe that other industries were “alien” or unsuited to the Maldives.
Saeed suggested that the turnover from new industries set up in the SEZs could be two or three times higher than tourism.
“That is because all the large developing economies of the world are near the Maldives. For example, China and India,” he said.
Referring to the government’s ‘iHavan’ transshipment port mega-project, Saeed noted that the Maldives is strategically located astride major sea lanes in the Indian Ocean, through which cargo ships carry US$79 trillion worth of goods from East to West and vice versa annually.
Nine ships an hour travel through these channels, he added.
“Lagoons with the natural depth needed to service those ships is found in this region only in the Maldives,” he said.
While other countries would have to dredge to build ports, Saeed said the Maldives has “wave-free natural ports” that could provide services such as offshore docking facilities throughout the year.
“If turnover from tourism is US$2.5 or US$3 billion [annually], when a shipping industry with offshore docking, bunkering and bulk-breaking facilities is set up in the Maldives – one of the world’s most spacious ports – then consider the benefits. For example, consider the turnover, the GST [goods and services tax] of the turnover, [and other] taxes,” he explained.
The iHavan or Ihavandhippolhu Integrated Development Project involves a transshipment port facility, airport development, a cruise hub, yacht marina, bunkering services, a dock yard, real estate, and conventional tourism developments.
The SEZ legislation envisions nine economic zones across the country, including an industrial estate zone, export processing zone, free trade zone, enterprise zone, free port zone, single factory export processing zone, offshore banking unit zone, offshore financial services centre zone, and a high technology park zone.
President Yameen had declared in April that the SEZ bill would become “a landmark law” that would strengthen the country’s foreign investment regime.
“What we would like to confirm for the foreign investors who come to the Maldives is that foreign investors should feel that Maldives is your second home here,” Yameen said at a function in Hulhumalé.
The SEZs would be “likened to cities in Dubai or the Emirates” and “the [business] environment we have in Singapore.”
The new law would enable investors to have “freeholds” in the country and allow investors “to engage in really, really long gestative projects,” Yameen said.
“We are embarking on an era of growth,” he said.
Moreover, addressing participants of the Maldives Investor Forum in April, Yameen had said his administration was “cognisant of the needs of our investors and the requirements to strengthen and redefine the legal and regulatory environment governing foreign investments.”
“To address investment climate and to facilitate mega investments with attractive incentive packages, a Special Economic Zone Bill will be tabled in the parliament soon. Additionally, the Foreign Investment Act and Companies Act are being revised to cater the ever increasing needs of the modern foreign investors,” he said.