A ban on foreign investment in the Maldives involving capital of under US$5 million will continue under amendments to the country’s Business Registration Bill proposed by parliament.
The health, accounting, taxation and financial services sectors will be exempted from the minimum investment requirement. However involvement in any other sector will require a foreign national to have capital of over US$5 million and a deposit of US$1 million with a group approved by the Maldivian government, local media has reported.
Parliament’s Committee on Economic Affairs omitted a proposed amendment from the latest draft of the Business Registration Bill, that would have potentially opened up smaller businesses such as retail and coffee shops to foreign investors.
The Maldives National Chamber of Commerce and Industries (MNCCI) has called for even tighter restrictions on specific sectors, stating a need to protect smaller-scale local businesses such as restaurants and retail outlets.
Former Minister of Economic Development Minister Mahmoud Razee said the Business Registration Bill was designed to open up new forms of capital from foreign investors in areas such as large-scale agriculture and fisheries projects, rather than allowing foreigners to directly compete with local retail businesses.
President Dr Mohamed Waheed has returned the bill after it was passed by parliament in June 2012, citing unspecified “socio-economic” concerns.
According to the Sun Online, President Waheed opted not to ratify the bill over concerns it would abolish a law restricting foreign involvement in imports, cafes and canteens.
The bill is also reported to include provisions restricting foreigners to involvement in the wholesale trade, with the exception of duty free stores, while also restricting businesses said to be ‘against the interest of the Maldivian public’.
MNCCI Vice President Ishmael Asif told Minivan News that foreign investment should be opened up in the Maldives, but only in terms of large-scale projects like resort development and infrastructure – areas where Maldivians lacked sufficient experience.
Responding to the latest draft of the bill, Asif contended that the Maldives had always been “very friendly” to foreign investors and would continue to welcome large-scale projects such as resort and airport development.
The government last November cancelled the country’s largest single foreign investment project – a US$511 concession agreement with Indian infrastructure giant GMR to manage and develop a new terminal at Ibrahim Nasir International Airport, declaring the sovereign agreement “void” from the start. The company was then given seven days to leave.
Asif said while the MNCCI had not yet had any input on the current iteration of the bill since it was returned to parliament, it was concerned about provisions allowing a foreigner with over US$5 million in capital to invest in any sector.
Asif said that the chamber of commerce favoured sector-specific restrictions that would outlaw any foreigner from investing in areas such as retail or food and beverage. However, he maintained that opportunities should remain for international investors to join with medium-sized local businesses in the form of joint ventures.
With the bill undergoing review at parliamentary level, Asif accused regulators of remaining far behind the industry, pointing to the emergence of online consumers and the lack of an international secure payment service like ‘Paypal’.
“A lot of the time regulators are far too behind the industry. The focus of the bill should be to encourage enterprise here,” he said.
Business Registration Bill
Razee said the business registration bill was devised under the Nasheed administration to open new areas for foreign investment, as well boost the capabilities of national industries in the longer-term.
He added that investment areas such as in the retail sector would have been protected from direct competition from foreign investors, while large-scale investment in areas such as agriculture and the fisheries sector would be promoted.
The bill was first proposed as part of a wider economic reform package championed by Nasheed’s administration, which was further revised following consultations in 2011 with the International Monetary Fund (IMF).
These policies included introducing a general Goods and Services Tax (GST), raising import duties on pork, tobacco, alcohol and plastic products, raising the Tourism Goods and Services Tax (T-GST) to six percent, and reducing import duties on certain products.
Razee said last year that the registration bill was intended to provide a “clearer means” for facilitating foreign investment in the Maldives.
“We were trying to make it easier for foreign shareholders to register here,” he said.
Acting Minister of Finance and Treasury Ahmed Mohamed, State Minister for Finance Abbas Adil Riza, and Presidents Office Spokesperson Masood Imad were not responding to calls at the time of press.