STO to import oil, staples and pharmaceuticals only

State wholesaler State Trading Organization (STO) will focus solely on importing fuel, food staples and pharmaceuticals, the Economic Council has announced at a press conference today.

The move is part of the government’s decision to move STO out of the retail business in order to encourage private businesses, Economic Development Minister Mohamed Saeed said.

However, the STO has recently launched a new brand of groceries called Noofahi as well as announcing plans to expand the supermarket at the STO Trading Center in Malé.

Tourism Minister Ahmed Adeeb added that STO will be restructured and will build new fuel storage facilities, establish a shipping fleet to import oil and will take measures to increase fuel security.

Meanwhile, STO MD Adam Azim today announced a MVR1.25 reduction on a liter of petrol and diesel following a request by President Abdulla Yameen.

Adeeb at today’s press conference pledged to further decrease fuel prices and said the government is looking into ways to reduce prices on jet fuel for domestic transport

Minister of Youth Mohamed Maleeh Jamal said the “historic” reduction would address rising inflation.

The Economic Council also said a German research vessel has found hydrocarbon source rocks in the Maldives and said the government is working with a Japan’s Mitsui and Taisei, and China’s Beijing Urban Construction Group (BUCG) to upgrade the Ibrahim Nasir International Airport (INIA).

The Maldives intends to ask for a preferential trade mechanism with China following partnership in China’s maritime Silk Road.

Finance Minister Abdulla Jihad said the Economic Council will hold monthly meetings with state owned enterprises to address challenges, facilitate financing, and strengthen management.

Oil exploration

Fisheries Minister Dr Mohamed Shainee said a preliminary assessment of hydrocarbons by Germany’s Hamburg University had brought “happy signals.”

The research team will handover detailed assessment in the first quarter of 2015, he said.

Although the presence of hydrocarbon source rocks have been confirmed, further research and analysis is required to determine if there are hydrocarbon reservoirs in the Maldives and their exact locations, Shainee explained.

The inner atoll ocean basins and atoll slopes have been examined, and new 3D seismic data will provide a more complete picture of presence of hydrocarbons, he said.

The government is setting up renewable energy alternatives in Malé and Addu, but such sources can only cater to 30 percent of Maldivian energy requirements, Shainee said.

Meanwhile, Sri Lankan, Indian, Norwegian, and British companies have expressed interest in assisting Maldives in oil exploration.

Approximately 30 percent of Maldives GDP is spent on fuel imports.

Airport Development

Adeeb revealed today that the Maldives is working with Japan’s Mitsui and Taisei, and China’s BUCG on a master plan for airport development.

The government intends to secure a US$600 million loan from Japan Bank for International Cooperation (JBIC) and China Exim Bank for the venture.

Once loans are sanctioned, the work will be contracted out, he added. In the meantime, the government will rehabilitate the existing runway.

Economic Development Minister Mohamed Saeed noted an increase in Chinese imports to Maldives, especially in heavy machinery, and said the Economic Council is working on establishing a preferential trade mechanism.

A technical team from China is due to visit the Maldives to undertake a survey for the Malé – Hulhulé bridge in the near future, the council said.

The council also revealed that the Maldives has signed a maritime labor convention, and intends to establish an open ship registry in order to expand maritime businesses such as offshore shipping and to increase luxury cruise ship arrivals in the country.


MMA reports increased business activity in second quarter

All sectors of the domestic economy with the exception of the tourism industry reported increased business activity in the second quarter (Q2) of 2014, according to the Maldives Monetary Authority’s (MMA) Quarterly Business Survey.

With regard to the current level of employment, businesses across all sectors, except for those in the tourism sector, indicated an increase in Q2-2014 compared to Q1-2014,” the report observed.

“Looking ahead, all sectors anticipate an increase in employment in Q3-2014, reflecting the optimism shown by majority of businesses towards improved activity levels in this quarter.”

While businesses in the construction sector reported an increase in prices, the report noted that businesses in the wholesale and retail trade, manufacturing and tourism reported a fall in prices.

“As for business costs, businesses across all sectors experienced an increase in all labour related costs and other input costs in Q2-2014 when compared to Q1-2014, while they expect a further increase in costs in Q3-2014 as well.”

In the construction industry, the survey found that factors which limit growth opportunities included “delays in payment by clients and cost of raw materials.”

“Other significant factors include limited access to bank credit and foreign exchange, high cost of labour and finance; and shortage of materials,” the report noted.

The quarterly survey is conducted by the central bank for a “quick assessment of current business trends and expected future economy activity” by questioning senior managers “on the direction of change in various business variables such as sales, output, prices, exports, capacity utilisation and employment”.

Survey forms were sent out to 135 large enterprises in four main sectors of the economy which are construction; manufacturing; tourism; wholesale and retail trade. A total of 65 enterprises responded to the survey which represents an overall response rate of 48 percent,” the report explained.


Restrictions on foreign investment to remain under amended business registration bill

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’.

Investment friendly

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.


Prices must be public: Economic Development Ministry

Shops are required to publicly identify items exempt from the Goods and Services Tax (GST), the Economic Development Ministry has ordered.

The ministry also requires businesses that charge GST on their goods and services to display their Maldives Inland Revenue Authority (MIRA) registration certificate.

Unregistered businesses may not charge GST and wholesale and retail prices should also be viewable.

Businesses that violate these regulations will be fined between Rf500-10,000. A second offense will incur a fine between Rf5,000-10,000.