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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Government proposes import duty hike for oil, staple foodstuffs

The government has proposed raising import duties for staple foodstuffs and oil to 10 percent to raise additional revenue anticipated in the record MVR24.3 billion (US$1.5 billion) state budget for 2015.

Amendments (Dhivehi) submitted to the Export-Import Act on behalf of the government by Maldives Development Alliance MP Mohamed Ismail proposes raising import duties from the current zero rate to 10 percent for rice, flour, wheat, and sugar as well as oil or petroleum products.

Additionally, the bill proposes raising custom duties for tobacco from 150 to 200 percent and raising the duty for a single cigarette to MVR1.25.

The government has also proposed imposing a 20 percent custom duty for luxury cosmetics and perfume and a 200 percent custom duty for land vehicles such as cars, jeeps, and vans.

However, the bill proposes scrapping import duty for luxury yachts imported for tourism businesses.

The stated purpose of the amendment is revising import duty rates in light of “price changes in the global market”.

The latest monthly economic review from the Maldives Monetary Authority noted that “the International Monetary Fund (IMF) commodity price index fell in both monthly and annual terms in September 2014, by 4 percent and 9 percent, respectively.”

“The monthly and annual decline in commodity prices was attributed to the decline in petroleum, metal and food prices. 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,” the review stated.

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.

Finance Minister Abdulla Jihad meanwhile told parliament’s budget review committee last week that the government was considering increasing custom duties “mostly for luxury items, or items that are harmful to the environment or health.”

Jihad had said the items under consideration were tobacco, perfume, and vehicles.

Other revenue raising measures

In his budget speech to parliament, 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.

Jihad told the budget review committee that the government anticipates MVR533 million (US$34.5 million) in additional revenue from revising import duties, which was among five revenue raising measures proposed with next year’s budget.

The forecast for additional revenue from the new measures is 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 were introducing a green tax of US$6 per night in November 2015 and leasing 10 islands for new resort development.

An amendment (Dhivehi) to the Tourism Act has been submitted by Progressive Party of Maldives MP Abdulla Khaleel on behalf of the government for introducing the green tax.

The government has also decided to waive import duties for construction material and capital goods imported for resort development and provide sovereign guarantees for loans.

Meanwhile, at the ongoing budget debate, opposition Maldivian Democratic Party MPs have criticised plans to hike import duties while providing concessions to wealthy resort owners.

The burden of higher prices due to higher tariffs would be borne by the public, the MPs argued, contending that the government’s economic policies would benefit the rich at the expense of the poor.

“Our question is why shouldn’t an income tax be introduced? When MDP submitted an income tax bill to parliament it wasn’t passed. But we are telling this government to introduce an income tax and [tax] the affluent as well,” said MDP MP Eva Abdulla last week.



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Maldives to begin oil exploration with assistance of research vessel

A research vessel with 25 scientists on board has arrived in the Maldives to conduct oil and gas exploration research.

The German research vessel ‘Sonne‘ which came to the Maldives for different research purposes has agreed to do the oil exploration research for free, the government has said.

The scientists are expected to begin research within two days.

Speaking to media after his visit to the vessel today, Minister of Fisheries and Agriculture Dr Mohamed Shainee said the information obtained will be shared with the Maldives in the first quarter of 2015, adding that it would not be shared with any third party.

A local expert and a member of the Maldives National Defence Force will be present with the team during the survey, he said.

According to Dr Shainee it will be carried out in one of the three main areas in the country with properties indicating the presence of oil and gas – located 100 miles east of the region between Laamu and Thaa atoll.

The three dimensional seismic survey, carried out by sending sonic waves into the sea, will identify the presence of oil and gas in the region without any drilling, the minister said. It will be followed by further exploration involving drilling to confirm any positive findings, he explained.

The survey team’s own research will be about the changes in Maldives’ seas due to global warming, Haveeru has reported.

Speaking to the newspaper, the lead researcher from the University of Hamburg said a similar survey was done by the same vessel in 2007, but this new, more detailed one will complement it.

Oil exploration was an election pledge of President Abdulla Yameen and the government earlier this year said a foreign investor had already expressed interest in oil exploration.

The Maldives National Oil Company Ltd (MNOC), a subsidiary of the State Trading Organization (STO), said in February that they will soon begin advertising the country as a destination for oil exploration.

“We have contacted a Norwegian company and a German company to help us better understand the findings of the study. Based on this report, we’re hopeful of advertising the Maldives as a new destination of oil exploration,” said MNOC Managing Director Ahmed Muneez at the time.

French oil company Elf Aquitaine explored for oil and gas between 1968 and 1978, drilling three different sites. According to the MNOC, it was found at the time that the quantity available from the drilled site was insignificant and therefore uneconomical for production.

In 1991, Royal Dutch Shell initiated a second attempt at drilling an exploration well in the inner sea of the Ari Atoll.

Local environmental NGO Blue Peace has said oil drilling in the Maldives could cause environmental issues depending on the location of drilling , arguing that it “cannot coexist” with the country’s dominant tourism industry.

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Environment Minister pledges to minimize Maldives dependence on fossil fuels

Minister of Environment and Energy Thoriq Ibrahim has called for increased investment in clean energy in the Maldives and pledged to minimize the country’s dependence on fossil fuels.

The government is working on a low carbon development strategy to improve energy security and strengthen the economy, Thoriq told participants of a one-day workshop at the Nasandhura Palace Hotel this morning.

The Environment Minister’s announcement comes at a time when President Abdulla Yameen has called for investment in oil exploration in the country.

Minister of Fisheries and Agriculture Dr Mohamed Shainee told Minivan News in late April that at least one investor is scheduled to visit the Maldives for discussions on exploration. Shainee had assured potential investors of presence of oil in the Maldives at a recent investment forum in Singapore.

However, Thoriq today expressed concern over “the vulnerability of the Maldivian economy due to high dependence on fossil fuels.”

The country spends 30 percent of its GDP on importing fossil fuels, he said. In 2012, the Maldives had spent US$ 486 million on oil imports, and the figure is estimated to increase to US$ 700 million by 2020.

Lying just a meter above sea level, the Maldives is among the world’s most vulnerable countries to climate change impacts such as sea level rise, ocean acidification and extreme weather events.

Thoriq has previously said the government will convert 30 percent of daily peak electrical load to renewable energy.

“Maldives is committed to introduce cost-effective renewable energy as part of a diverse, low carbon and secure energy mix in our low carbon development. We are determined and actively working towards making 30 percent of daily peak electrical load of all populated islands to renewable energy within next five years,” he said in a statement on April 14.

The workshop at Nasandhura was held to present an assessment – carried out by the UN Environment Programme (UNEP) – on the potential of low carbon development in the Maldives. Minivan News was unable to obtain the document from the Environment Ministry at the time of press.

According to a press release, the assessment will help the government “make an informed contribution to climate negotiations ongoing or the new climate agreement set to be agreed in Paris in 2015.”

An official from the Environment Ministry told Minivan News that the Maldives policy on climate change has not yet been set, but said that a draft is currently under review. He said the climate change draft policy framework consists of five goals; sustainable financing, low carbon development, adaptation and opportunities, advocacy and awareness, and sustainable development.

Thoriq has previously said the Maldives will call for global temperature rise to be limited to 1.5 degrees Celcius.

In 2009, Global leaders recognized “the scientific view that the increase in global temperature should be below two degrees Celsius” to combat climate change.

Earlier this week, United Nations Secretary General Ban Ki-moon warned that too many stakeholders are still “sitting on the fence”, as he challenged participants at a climate conference in Abu Dhabi to make bold political decisions to combat climate change.

“Change is in the air. I challenge you to be part of that change – to be at the head of the race,” he encouraged.

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Oil exploration attracts investors at Singapore investment forum

The Maldives has garnered interest in oil exploration during an investment forum in Singapore.

Minister of Fisheries and Agriculture, Dr. Mohamed Shainee, told Minivan News at least one investor will be visiting the Maldives in the coming weeks to present their company profile and discuss the project further.

Over 160 companies and nearly 200 representatives from 16 countries were present at the first overseas investor forum organised by the Maldives.

Speaking at the event on Friday, Shainee assured potential investors that there was no room to refute the presence of oil in the Maldives based on seismic testing by Royal Dutch Shell.

“Those studies were carried out 25 to 27 years ago, with limited technology capable of investigating under sea. However, now we have better technology that is more capable of more exploration,” he said.

Oil has been found in both Sri Lanka and India and therefore there is a high possibility that it will be found in Maldives too, he added.

Lying just a meter above sea level, the Maldives is among the world’s most vulnerable countries to climate change impacts such as sea level rise, ocean acidification and extreme weather events.

Crude oil will diversify and stabilise the economy, President Abdulla Yameen Abdul Gayoom has said. At present, the Maldives heavily relies on tourism, which supports an estimated 70 – 80 percent of its GDP.

However, some have argued that economic benefits will not outweigh the possible environmental repercussions.

“When you take up the issues of drilling, we are concerned about the oil container tanks with unrefined fuel passing through,” concluded Executive Director of local NGO Bluepeace Ali Rilwan. “We can’t afford to go into that dirty energy.”

With this in mind, Rilwan asked, “can we avoid a disaster in the Maldives? The Maldives is a tiny island and this can have a very negative impact, the tanks are a worrying thing.”

In addition to oil exploration, the government is seeking investment in establishing a port in northern Ihavandhippolhu Atoll, land reclamation and maritime seaport in Hulhumalé, expansion of the Ibrahim Nasir International Airport (INIA) and the relocation and expansion of the central port to Thilafushi Island.

The projects for which the government was seeking investors were “designed to position Maldives to take advantage of its strategic location as a hub and gateway for commerce, innovation and creativity, linking rest of the globe with South Asia,” President Yameen said in his keynote address.

“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 added.

Meanwhile, a Singaporean court is currently overseeing the arbitration process between the Maldives government and Indian infrastructure giant GMR in which the company has claimed US$ 1.4 billion for the abrupt termination of a concession agreement to develop the Ibrahim Nasir International Airport (INIA).

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State Trading Organisation aims to produce 1000 jobs in 3 years

The Managing Director of the State Trading Organization (STO) Adam Azim has said that the company will produce 1000 jobs within the next 3 years.

Adam Azim said that the company is looking to establish a capable work force across the Maldives, reported local media Sun Online.

“A thousand jobs will be produced with the health sector pharmacies and hypermarkets that we plan to establish,” he added.

The company has plans to invest in the development of its staff with training and education opportunities for the next four years, Azim told Sun.

“We will invest in education, regardless of the cost,” Azim said.

The state-owned STO is the country’s primary wholesaler, responsible for bringing in the vast majority of basic foodstuffs, as well as investing in oil and the tourism industry.

The company was announced bankrupt by President Yameen in November 2013, following which the companylaunched a campaign to cut operational costs by MVR50 million in 2014 (US$ 3,242,542).

More recently, in March 2014, the STO told local media that a five-star hotel it is building in Hulhumalé will be fully completed by January 2015.

STO has also announced on April 6 2014 that they will be placing three additional oil storage tanks in Kafu Fuadhoo, in a bid to increase the oil capacity.

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Three additional oil tanks to be placed in Funadhoo

The State Trading Organisation (STO) has announced plans to place three additional oil storage tanks in Kaafu Funadhoo, just off the northern side of the capital Malé.

Managing Director of STO Adam Azim said that the Maldives’ oil storage capacity needs to be increased, according to local media Sun Online.

“We are planning to place three more tanks in Funadhoo. If the oil reserve continues to decline at the present rate, we might face difficulties later. We’re planning to prepare for that,” the news outlet reported.

He added that efforts will begin soon to facilitate bigger vessels to enter the harbour.

“Right now the harbour can take up to about 8,000 ton vessels. We want to increase it to about 15,000 or 16,000 ton vessels.”

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Fishermen invited to register for MVR10,000 allowance on April 1

Application forms will be available on April 1 for fishermen to register in the government’s scheme to provide MVR10,000 (US$648) during lean months, President Abdulla Yameen said last night.

Addressing supporters in Gaaf Dhaalu Thinadhoo at a rally held to celebrate the Progressive Coalition’s victory in the parliamentary polls, President Yameen said the allowance will be released to fishermen before the end of May “when all the calculations and documentation are done.”

Marinas for fishermen would meanwhile be complete by the end of the year, Yameen said.

A MVR10,000 allowance to fishermen “regardless of catch” during lean months was a campaign pledge of candidate Yameen and the now-ruling Progressive Party of Maldives (PPM).

In an interview with Minivan News in January, Fisheries Minister Dr Mohamed Shainy explained that the allowance will be provided through an insurance scheme.

If you look at the skipjack fishing statistics for last year, you will see three or four months which are very difficult for the fishermen. The real goal of this is sustainability,” he said.

“So the aim of the government is to ensure that even during these difficult months fishermen stay in the industry. For that reason, during those few months we want to give a payment so that they can do their basic necessities, so they can fulfil their daily obligations towards their family. The MVR10,000 scheme is a top-up system.”

He stressed that the MVR10,000 was not a subsidy as the productivity of the fisheries industry has been increasing since the downturn in 2004.

So now we need to make the industry stand alone and be more vibrant and shock-proof to absorb these shocks. We need to devise a way to get people’s minds set on the idea that they can work in the industry. The real reason is the sustainability of the fishermen in the industry to keep them in the field during this low season,” he said.

Cheaper diesel

According to the President’s Office, President Yameen also said that discussions were ongoing between the State Trading Organisation (STO) and the Indian government to arrange the supply of petroleum products.

When the talks are concluded, Yameen said the price of oil would fall during the next two months.

Duing Indian Foreign Minister Salman Khurshid’s visit to the Maldives last month, an agreement was reached to supply diesel, petrol, and aviation fuels “on favourable terms” from the Mangalore Refinery & Petrochemicals Ltd, a subsidiary of India’s state-owned Oil and Natural Gas Corporation.

Following President Yameen’s state visit to India in January – his first official overseas trip since assuming office in November – senior government figures described Indo-Maldives ties as being “as strong as they were during [former President Maumoon Abdul] Gayoom’s time in power”.

Meanwhile, in his speech last night, President Yameen reportedly said that the government has undertaken efforts to attract foreign investors to the country, which would create jobs for unemployed youth.

Among the projects in the pipeline for Thinadhoo that President Yameen announced last night included road construction, land reclamation, construction of a sports arena, and broadening tourism.

With the prevailing political stability and the mandate given to the current administration by the public in the presidential and parliamentary polls, Yameen said he believed that the government could commence mega-projects and transform the Maldives to “this region’s Singapore.”

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Ministry of Environment aims to “transform the Maldives’ energy sector”

The International Renewable Energy Investor’s conference, focusing on the development of solar energy in the Maldives, took place yesterday (March 26) at Bandos resort.

The one-day conference – organised by the Ministry of Environment and Energy with the World Bank – aimed to transform the Maldives’ energy sector by reducing the dependency on costly fossil fuels for power generation.

The ministry reported that a total of 78 participants from government organisations, the World Bank, foreign consultants and investors discussed photovoltaic (PV) systems which could be established in Malé and Hulhumalé, as well as a framework for subsidies.

The conference came after the government last week outlined it’s strategic aims for renewable energy in a proposal named Accelerating Sustainable Private Investments in Renewable Energy programme (ASPIRE).

Published March 21 2014, this report details some of the difficulties faced by the Maldives, as well as future plans to increase the proportion of sustainable energy consumed in the country.

Submitted by the government and the International Bank of Reconstruction and Development, the proposal asks for a US$10,683 million grant in funding from the ‘Scaling Up Renewable Energy Programme’.

“The Government has no current stabilization program with the International Monetary Fund. The prior program lapsed in 2009 and most of the measures were reversed. The World Bank started a Development Policy Credit in 2010 for economic stabilization and recovery that was also cancelled due to lack of progress,” states the ASPIRE proposal.

“A major concern of foreign investors in Maldives has been their inability to reliably and consistently convert local currency to hard currency for reasonable transaction costs at the official exchange rate for repatriation of shareholder returns and foreign currency debt service.”

“The country has no conventional resources of energy. Providing electricity to the dispersed islands is overwhelmingly dependent on imported diesel fuel oil, and therefore vulnerable to fuel price volatility.”

Diesel fuel accounts for the bulk of the energy supply in the country, about 82.5% in 2009, according to ASPIRE. Therefore, the report suggests a move toward renewable energy as a means of improving “economic difficulties”.

“The development of solar PV projects is expected to improve the country’s fiscal situation by reducing both the volume of fossil fuel imports, as well as the fiscal uncertainty arising from fuel price volatility. This would also replace the expensive diesel based generation and result in significant reduction of the government subsidy,” the report confirms.

Similar reforms to the energy sector chimes were set to be rolled out two years ago, before the unstable political situation led to its  premature demise.

On the afternoon of February 7, 2012, the Maldives was set to sign in a revolutionary plan to attract an estimated US$200 million of risk-mitigated renewable energy investment.

The Scaling-Up Renewable Energy Programme (SREP) proposal was produced by the Renewable Energy Investment Office under President Mohamed Nasheed’s administration.

The World Bank team working on the project had given verbal approval for the plan, reportedly describing it as one of the most “exciting and transformative” projects of its kind in any country.

Previous awards for Clean Energy in the Maldives

Abu Dhabi media reported that in January 2014 The Abu Dhabi Fund for Development (ADFD) pledged Dh22million (US$6 million) in concessionary loans for clean energy projects in the Maldives.

The announcement came as Abu Dhabi hosted the Fourth Assembly of the International Renewable Energy Agency (IRENA) – attended by a delegation from the Maldives.

“Maldives does not have the luxury of time to sit and wait for the rest of the world to act and that Maldives has started the transition from fossil fuels to renewable energy,” Maldivian Minister for Environment and Energy Thoriq Ibrahim told the assembly.

The project will benefit 120,000 people, with a reduced need for landfills, the generation of 2MW of clean energy, and the production of 62 million litres of desalinated water per year.

Shortly after this award, the Maldives carried out a pioneering desalination project on the island of Gulhi, in Kaafu atoll, which became the first place in the world to produce desalinated drinking water using waste heat from electricity generation.

While these projects indicate advances toward renewable energy, the government has also pledged to seek crude oil as an alternative means of diversifying the economy and supplementing fuel supply.

According to local news outlet CNM, during a speech made by President Abdulla Yameen on March 16 he pledged to begin the search for crude oil. He went on to say that if the government is indeed successful in finding oil in the Maldives, the outlook for the entire country would change for the better.

However, Local NGO Bluepeace raised concerns regarding this pledge. Ali Rilwan Executive Director noted that with the large income from tourism and the spread of guest houses in local isands, the oil drilling “won’t have benefits for the people as a whole.”

“We can’t afford to go into that dirty energy,” he concluded. “When you take up the issues of drilling, we are concerned about the oil container tanks with unrefined fuel passing through.”

Minivan News was unable to contact State Ministers from the Ministry of Environment and Energy for further comment at the time of publishing.

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