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UNCLAS SECTION 01 OF 11 COLOMBO 000067 
 
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TAGS: KTDB OPIC ECON USTR EINV EFIN ETRD ELAB PGOV MV
SUBJECT: INVESTMENT CLIMATE STATEMENT, 2010 - THE MALDIVES 
 
REF: 09 STATE 124006 
 
¶1.  Per reftel, below is the investment climate statement for the 
Maldives for 2010.  (NOTE: Certain Website addresses were split to 
allow for sending via cable.  The report sent in Word format has the 
correct links.) 
 
INVESTMENT CLIMATE STATEMENT - THE MALDIVES 
 
JANUARY 2010 
 
INTRODUCTION 
 
The Maldives has seen significant political and economic changes in 
the last two years.  On October 8, 2008, the Maldives held its first 
multi-party Presidential election.  Parliamentary elections were 
held in May 2009.  The new President, Mohamed Nasheed, has vowed to 
put the country's economic and fiscal matters in order.  The country 
launched a new constitution and a series of new laws, including the 
first comprehensive employment act.  The President has also pledged 
to establish a transportation network linking the islands of the 
country, reduce the cost of living, provide affordable housing and 
healthcare, and eliminate illegal narcotics.  Notably, the 
government has also set itself the ambitious goal of going carbon 
neutral in ten years, and the President has taken an international 
leadership role on climate change issues. 
 
The Maldives is comprised of over 1,190 islands, of which 198 are 
inhabited and 95 are exclusive resort islands.  The land is low 
lying, with 80% of the land mass only 2 meters or less above sea 
level, making the Maldives extremely vulnerable to climate change. 
The native Maldivian population is approximately 310,000, of whom 
103,000 live on the capital island of Male'.  There are an 
additional 80,000 expatriate workers.  More than 680,000 tourists 
visit annually.  In 2009 GDP totaled around $1.3 billion, or about 
$4,300 per capita (far exceeding the average of about $700 in the 
rest of South Asia).  From 2000-2008, real GDP growth averaged 
around 6% per year except for 2005, when GDP declined following the 
Indian Ocean tsunami.  Economic growth has been powered mainly by 
tourism and its spin-offs in the transportation, communication, and 
construction sector.  Fishing remains an important part of the 
economy as well.  However, due partially to the global financial 
crisis, the country is currently facing acute economic problems.  In 
2009, the Maldivian economy shrank by 4 percent. 
 
While income disparity remains high, particularly between the 
capital and distant islands, the Maldives' growth has yielded 
considerable social progress.  The net enrollment in primary 
education is close to 100 percent.  Literacy rates are about 98 
percent.  Infant and maternal mortality are declining rapidly. 
 
The Indian Ocean tsunami in December 2004 devastated many islands. 
The Maldivian economy made a remarkable recovery, with a rebound in 
tourism, and post-tsunami reconstruction. 
 
In 2009, the Maldives' economy was in recession.  The global 
economic crisis severely hurt the Maldivian economy through a fall 
in tourism receipts, external financing, and exports.  As a result, 
the Maldives is facing an acute currency shortage, curtailing normal 
business activities.  The fiscal situation also deteriorated 
sharply. 
 
In December 2009, the International Monetary Fund approved a $93 
million loan for the country.  The loan shores up reserves and will 
help smooth adjustment.  In a bid to promote exports, the U.S. 
government restored the GSP trade preference program to the Maldives 
in December 2009.  The United States is seeking to provide various 
other assistance efforts to defend against climate change, prevent 
drug use, and enhance U.S. investment.  The Maldives became a member 
of the International Labor Organization in 2009. 
 
The government has plans to substantially downsize the government 
workforce (currently over 30,000 employees), change the tax system 
to direct taxes, and privatize many industries.  The government aims 
to move from being a service provider to a regulator, and to enhance 
the role of private sector.  The government has launched a program 
to establish public-private partnerships in service provision and 
 
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privatization of selected State Owned Enterprises.  The programs 
target key sectors such as transport (ferry services), real estate 
(housing development), utilities (electricity, gas, water and 
sanitation), healthcare, education, regional airports, regional 
ports, and broadcasting and entertainment.  The program is supported 
by initiatives to promote foreign and local investments which 
require major reform in the legal and regulatory framework of the 
various sectors. 
 
The Maldives Monetary Authority (Central Bank) expects GDP growth 
around 3.5% in 2010. 
 
The Maldives is ranked 87th out of 183 countries in the World Bank's 
(www.worldbank.org) Ease of Doing Business 2010 Index, ahead of its 
South Asian neighbors except Pakistan (85).  The index investigates 
regulations that enhance or constrain business activity.  Within the 
index, the Maldives ranked first in terms of paying taxes (the 
Maldives has no income or sales tax) and ninth in dealing with 
construction licenses.  The Maldives is planning to develop a 
business profits tax to reduce import duties and provide more 
sustainable revenues.  But in terms of registering property, getting 
credit, and closing a business, the country ranked lower, at 183, 
150, and 126, respectively.  The low property ranking stems from the 
fact that foreigners are not allowed to own property outright. 
Other rankings were as follows:  starting a business 49, employing 
workers 41, protecting investors 73, trading across borders 126, and 
enforcing contracts 92. 
 
The Maldives is preparing for its "graduation" from Least Developed 
Country (LDC) status, currently scheduled for 2011.  The graduation 
would reduce the country's ability to access concessionary trade and 
finance programs, and threatens the demise of the fish export 
industry and the curtailment of foreign aid.  The Maldives is 
seeking to delay the curtailment of certain benefits. 
 
Tourism will likely remain the engine of the economy.  As many as 
forty new resorts could open in the next few years, with at least 
two planned openings in 2009. 
 
The United Nations Development Program (UNDP) (www.mv.undp.org), the 
World Bank (www.worldbank.org), and other multilateral and bilateral 
donors are active in the Maldives.  They support government efforts 
to improve education, health and nutrition, housing and social 
protection, basic infrastructure, environmental protection, and 
improved governance, and to create employment opportunities.  The 
United States has friendly relations with the Maldives. 
 
OPENNESS TO FOREIGN INVESTMENT 
 
The Maldives began opening up to foreign investment in the late 
1980s.  Foreign investments in the Maldives have primarily involved 
resort management, but also include telecommunications, accounting, 
banking, insurance, air transport, courier services, and some 
manufacturing.  Invest Maldives Division (www.investmaldives.org) 
and the Licensing and Regulations Division within the Ministry of 
Economic Development are tasked with promoting and regulating 
foreign investments, respectively, with the notable exception of the 
tourism sector.  The Ministry of Economic Development reviews all 
proposed investments prior to granting licenses. 
 
Foreign investment in the Maldives is governed by Law 25/79, which 
provides for an agreement between the government and an investor. 
The Law of Contract governs contractual relationships and a separate 
law (No. 4/79) governs business and trading activities by foreign 
nationals.  Investment agreements are for an initial period of 5 to 
10 years for investments less than $1 million, and can be renewed 
thereafter.  For larger projects, terms are negotiable. 
 
The Ministry of Economic Development offers "one-stop shop" services 
to investors and incentives including import duty concessions, 100% 
foreign ownership, no restrictions on repatriation of earnings or 
profits, and no foreign exchange restrictions.  Foreign investments 
are required to pay annual royalty fees to the government.  The 
royalty fee is 3% of gross income or 15 percent of profits, 
whichever is greater, for majority foreign-owned companies.  For 
others, the royalty is 1.5 percent of income or 7.5 percent of 
profits, whichever is greater.  At present, personal income taxes 
 
COLOMBO 00000067  003.2 OF 011 
 
 
are not imposed.  Banks' profits are taxed.  For the first time, the 
Government plans to introduce a corporate income tax (business 
profits tax) and a goods and services tax in the tourism sector. 
International arbitration is available for dispute settlement. 
Foreign investments within the tourism sector - such as resorts - 
are registered with the Ministry of Tourism, Arts and Culture. 
 
The Ministry of Economic Development approves joint ventures in the 
following sectors within ten working days of submitting required 
documentation:  financial consultancy, auditing, insurance, water 
sports, commercial diving, domestic air transport, airline catering, 
game fishing, technical support services, apparel manufacturing, 
water bottling, cement, agencies, spa operators, water purification, 
boat building, software development, ferry services, finance 
leasing, fish processing, traditional medicine, underwater 
photography, ice making, restaurants, valuation, flying schools and 
IT services.  Proposals for joint ventures in other sectors and 
investments fully owned by foreigners are approved within 30 days. 
 
The government hopes to privatize airports and harbors and develop 
basic services such as water, sewage systems, harbors, roads and 
power utilities through public/private partnerships.  The Government 
has started a public/private partnership program in health, 
education, transport, and housing projects.  However, some 
state-owned enterprises, such as the electricity and water 
companies, are currently losing money and they need to be made more 
efficient and competitive to improve their prospects of becoming 
more profitable prior to privatization. 
 
The Ministry of Economic Development is looking for local and 
foreign investors in media and broadcasting, entertainment industry, 
utilities, infrastructure, health care facilities, hospital 
management, regional airport management, and the development of 
residential infrastructure (vacation homes). 
 
The Ministry of Economic Development encourages investment projects 
which: (1) are capital intensive; (2) enhance technology transfer; 
(3) introduce new skills and offer training to local employees; and, 
(4) are environmentally friendly. 
 
The following industries offer good potential for foreign investors: 
 
 
Tourism: Opportunities exist in the entire range of services, 
including development and management of resorts, tourist activities, 
and land and sea transportation.  New resorts require a range of 
equipment and products. 
 
Value-Added Fisheries:  Fish processing is open to foreign 
investment, particularly for new technology and capital investment. 
The government owned Maldives Industrial Fisheries Company (MIFCO) 
is identified for substantial restructuring with private investment. 
 Areas such as fish canning, cold storage, tuna farming and 
aquaculture also open for foreign investment 
 
Financial, banking, accounting, and management consulting:  the 
Maldives' financial sector consists mainly of banks, one of which is 
partially state-owned and four branches of foreign-owned banks.  The 
FISB is interested in bringing in more global banks.  (Only HSBC is 
currently present).  The lack of adequate banking laws has deterred 
entry, however.  Financial services consulting and management 
services are also areas that offer potential 
 
Transportation and Shipping:  The transport sector is dominated by 
maritime and air transportation.  However, transportation is 
inadequate.  There is potential to develop air and sea transport 
including inter-atoll transport services, bunkering, transshipment, 
and passenger cruises. 
 
Telecommunications and information technology also offer potential 
opportunities.  There are currently 3 licensed operators in the 
telecommunication sector.  The telecommunications sector offers good 
potential for equipment and technology input suppliers. 
 
Power:  Virtually all electricity is provided by diesel generators. 
Tourist resorts consume about 60 percent of electricity used in the 
Maldives.  There is scope to provide renewable sources such as 
 
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solar, wind and biomass for energy needs.  Studies have revealed 
good potential for wind energy-based power generation with some 
pilot projects underway.  The Maldives has announced its objective 
of being the first carbon neutral nation by 2020 which would provide 
extensive opportunities for renewable power suppliers. 
 
Retail trading is closed to foreign investment.  The production of 
any items that are illegal to import into the Maldives is 
prohibited. 
 
CONVERSION AND TRANSFER POLICIES 
 
A foreign exchange shortage affecting businesses was reported in 
¶2009.  The Maldives has maintained a fixed peg of its currency with 
the dollar since 2001.  Due to the shortage, the Maldives Monetary 
Authority (MMA) started rationing foreign exchange supplied to the 
banking system in 2009.  This has led to a foreign exchange 
restriction and some current international transactions to be 
conducted in the parallel market.  MMA hopes to gradually ease the 
rationing once foreign exchange market stabilizes. 
 
Repatriation of funds and profits is allowed after local debts are 
settled. 
 
Major international currencies can be bought and sold at banks and 
authorized moneychangers.  Hotels and banks accept major credit 
cards and travelers' checks.  Foreign currency accounts are 
available through banks.  The U.S. dollar is the most widely used 
foreign currency and is accepted by small shops and taxi drivers in 
Male'. 
 
The official exchange rate is set at 12.8 Rufiyaa to the dollar. 
This rate has remained unchanged since 2001.    The Maldivian 
currency is non-convertible and its true value cannot be determined. 
 The real effective exchange rate has appreciated recently.  A new 
IMF program in the Maldives aims to rebuild international reserves 
while preserving the exchange rate peg to the U.S. Dollar.  The 
heavy dependence on imports is a constraint for exchange rate 
management, although historically tourism receipts helped maintain 
hard currency liquidity. 
 
Foreign reserves at the end of December 2009 were approximately $270 
million compared with $241 million in 2008 and $309 million in 2007, 
and were sufficient to finance 3.2 months of imports. 
 
The government has taken initial action to introduce a new public 
accounting system.  A new Public Finance Law, an Audit Law and a 
Civil Service Law came into force in 2006-2007.  Legislation on 
Anti-Money Laundering and Combating Terrorist Financing has been 
drafted.  The Maldives has established a financial intelligence unit 
to combat money laundering and terrorist financing. 
 
EXPROPRIATION AND COMPENSATION 
 
According to the Law on Foreign Investment (25/79) the government 
may, with or without notice, suspend an investment, either where the 
investor indulges in an act detrimental to the security of the 
country or where temporary closure is necessary for national 
security.  If, after due investigation, it cannot be concluded 
within 60 days of the temporary closure that the foreign investor 
had indulged in an activity detrimental to the security of the 
Maldives, then the government will pay compensation.  Capital 
belonging to an investment that is closed for the above reasons may 
be taken out of the country in a mutually agreed manner.  There 
appears to be little risk of expropriation in the near future. 
 
DISPUTE SETTLEMENT 
 
The sources of law in the Maldives are its constitution, Islamic 
Sharia law, regulations, Presidential decrees, international law, 
and English common law, with the latter being more influential in 
commercial matters.  The Judicial Services Commission (JSC) is 
responsible for nominating, dismissing, and examining the conduct of 
all judges. 
 
A Supreme Court was established for the first time in 2008 under the 
new Maldives Constitution.  The Supreme Court is the highest 
 
COLOMBO 00000067  005 OF 011 
 
 
judicial authority in Maldives.  In addition to the Supreme Court, 
there are four courts in Male':  a high court, civil court, criminal 
court, and a family and juvenile court.  There are approximately 200 
magistrate courts, one in each inhabited island.  The Supreme Court 
serves as court of appeal.  There are no jury trials.  Though legal 
procedures are adequate, the judicial process is slow. 
 
Pursuant to the new constitution, a prosecutor general was appointed 
in September 2008.  The prosecutor general is tasked with the 
prosecution of criminal offences.  The Attorney General acts as the 
legal advisor to the government and represents the government in all 
courts except on criminal proceedings represented by the prosecutor 
general. 
 
The law on foreign investments guarantees the security of 
investments.  The Maldives has no laws pertaining to arbitration. 
Disputes involving investments below $1 million can be referred to 
the courts in Maldives.  Disputes over $1 million can be referred 
for international arbitration. 
 
Recognizing that the existing legal and commercial framework is 
underdeveloped and not always fully transparent or predictable, the 
government is promoting administrative reforms and formulating 
regulations dealing with labor, the environment and industry.  In 
recent years, the People's Majlis (parliament) has enacted a number 
of commercial laws, including the Law of Contract, the Negotiable 
Instruments of Law, and the Companies Act.  The Maldives is not a 
member of the International Center for the Settlement of Investment 
Disputes (ICSID). 
 
RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT 
 
There is little private ownership of land.  Land reform currently 
under consideration may result in more trade and private ownership 
of property.  Foreign investors are not allowed to own land, but are 
granted lease rights ranging up to 25 years, which can be later 
extended to 35 years for investments over $10 million, or 50 years 
if 50% of the company's shares are floated on the Maldives stock 
market.  Leases can be renewed at the end of their terms, but the 
formula for assessing compensation value of a resort at the end of a 
lease has not yet been developed.  The government is looking at the 
possibility of extending the initial lease period from 25 years to 
99 years. 
 
Currently there is no property and real estate law or mechanism to 
allow foreign persons to hold title to land.  As a result, the 
Maldives ranks last among 183 countries in the World Bank doing 
business 2010 report's registering property indicator.  Locals, 
however, can hold title to land. 
 
PROTECTION OF PROPERTY RIGHTS 
 
Currently, the Maldives lacks specific legislation to protect 
intellectual property rights (IPR) and has not signed any related 
international agreements or conventions.  An IPR law is awaiting 
parliamentary approval.  The Maldives recently established an IPR 
unit within the Ministry of Economic Development.  The Maldives 
benefits from the World Trade Organization (WTO) decision to extend 
the transition period for least-developed countries (LDC) to provide 
protection for intellectual property under the Trade-Related Aspects 
of Intellectual Property Rights (TRIPS) agreement until July 1, 
¶2013. 
 
EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT 
 
The financial sector in the Maldives is narrow and dominated by the 
banking sector.  The banking sector consists of one publicly owned 
commercial bank -- the Bank of Maldives -- and branches of four 
foreign-owned commercial banks.  HSBC, the only global bank present, 
set up operations in 2002.  The Bank of Maldives faced difficulties 
in 2009 and the government is seeking to restructure the bank's 
portfolio, recover defaulted debt, and look at a capital infusion. 
Non-bank financial institutions in the country consist of two 
insurance companies, a pension fund, and a finance leasing company. 
All financial institutions currently operate under the supervision 
of the Maldives Monetary Authority, which acts as the central bank. 
The Maldives Monetary Authority Act was amended in 2007 to ensure 
 
COLOMBO 00000067  006 OF 011 
 
 
independence of the Authority.  Banking supervision has recently 
been upgraded, moving toward international best practices.  The 
government is seeking to put in place a stronger legal framework for 
the banking sector. 
 
Most lending usually comes through the parent banks of international 
commercial banks.  Most foreign currency loans are made to foreign 
currency-earning tourist enterprises.  Local sources of finance are 
limited in scope because of the small size of the capital market and 
the lack of instruments that are available in more developed 
nations.  The government commenced treasury bill auctions in 2006. 
Other types of financial instruments are not offered to the public. 
The commercial banks provide short- and long-term credit to the 
private sector.  No specialized financial institution exists to meet 
the investment needs of tourism, agriculture and fisheries. 
 
The banking system has been hit by the shortage of external 
financing and the economic slowdown.  According to the IMF, 
non-performing loans have increased significantly as banks have a 
high exposure to the tourism sector.  No problems were reported 
regarding domestic liquidity of foreign banks.  Nonetheless, due to 
deteriorating economic conditions, private sector credit shrank in 
2009 after several years of growth. 
 
Due to the foreign exchange shortage, the Maldives Monetary 
Authority started rationing foreign exchange supplied to the banking 
system in 2009.  As a result, a parallel market has emerged with a 
small premium over the official peg.  In one known case, a U.S. 
company was unable to immediately receive its dollar-denominated 
payment due to lack of foreign currency at banks in the Maldives. 
 
The Maldives Stock Exchange (MSE), first opened in 2002 as a small 
securities trading floor, was licensed as a private stock exchange 
in 2008.  The legislature passed a Securities Act in January 2006 
and the government created a Capital Market Development Authority 
(CMDA) to regulate the capital market.  The MSE functions under the 
CMDA.  At present, the only investment opportunity available to the 
public is a limited number of shares in the Bank of Maldives and 
three other state-owned public companies. 
 
A leasing company, Maldives Finance Leasing Company (Pvt) Ltd 
(MFLC), was established in May 2002 as a collaborative venture 
between five domestic public and private sector entities and two 
international parties including the World Bank's International 
Finance Corporation (IFC).  The MFLC aims to address the demand for 
long-term equipment financing from all sectors of the economy. 
 
The Housing Development Finance Corporation is a government company 
designed to provide housing loans with long repayment terms at 
favorable interest rates.  The company is also entrusted with 
drawing up the land use policy in the Maldives. 
 
The prevalence of state-owned enterprises in many sectors of the 
economy has traditionally crowded out the private sector in the 
Maldives, however the current government is working to privatize 
many of them through private/public partnerships.  Energy, water, 
and airport sectors are going through this process now, as are 
fisheries and tourism. 
 
SOEs operate under the Companies Act with overall little government 
influence.  The government does approve the Boards of Directors but 
the SOEs do not report to line ministers.  It is generally rare that 
Board seats go to senior government officials, although some 
political affiliation does exist.  All companies of over $1 million, 
whether public or private, must submit to an independent audit.  SOE 
audits are sent to the Ministry of Finance and can be viewed upon 
request. 
 
Currently the Maldives does not have a sovereign wealth fund 
although it is considering creating one to be used to provide 
low-interest loans to support the move to carbon neutrality, 
especially on resort islands. 
 
CORPORATE SOCIAL RESPONSIBILITY (CSR) 
 
There is limited but growing awareness of corporate social 
responsibility among the business elite. 
 
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POLITICAL VIOLENCE 
 
The Maldives has a homogeneous society of one culture, one religion, 
and one language.  In 2008, the Maldives held its first multi-party 
Presidential elections, following a multi-year effort for 
constitutional reforms.  President Nasheed took office in November 
2008, replacing a thirty-year incumbent.  The transition to a new 
government led by the former head of the opposition was peaceful. 
Political rallies in the Maldives generally do not turn violent, as 
sometimes occurred under the previous regime. 
 
Religious extremism, involving espousal of fundamentalist views 
incompatible with the Maldives' generally moderate Islamic 
practices, is a small but growing trend.  In September 2007, the 
Maldives experienced its first-ever terrorist attack when a bomb 
exploded in the capital of Male', injuring twelve tourists who 
appeared to be the target of the attack. 
 
CORRUPTION 
 
Corruption, including bribery, raises the costs and risks of doing 
business.  Corruption has a corrosive impact on both market 
opportunities overseas for U.S. companies and the broader business 
climate.  It also deters international investment, stifles economic 
growth and development, distorts prices, and undermines the rule of 
law. 
 
It is important for U.S. companies, irrespective of their size, to 
assess the business climate in the relevant market in which they 
will be operating or investing, and to have an effective compliance 
program or measures to prevent and detect corruption, including 
foreign bribery.  U.S. individuals and firms operating or investing 
in foreign markets should take the time to become familiar with the 
relevant anti-corruption laws of both the foreign country and the 
United States in order to properly comply with them, and where 
appropriate, they should seek the advice of legal counsel. 
 
The U.S. Government seeks to level the global playing field for U.S. 
businesses by encouraging other countries to take steps to 
criminalize their own companies' acts of corruption, including 
bribery of foreign public officials, by requiring them to uphold 
their obligations under relevant international conventions.  A U. S. 
firm that believes a competitor is seeking to use bribery of a 
foreign public official to secure a contract should bring this to 
the attention of appropriate U.S. agencies, as noted below. 
 
U.S. FOREIGN CORRUPT PRACTICES ACT 
 
In 1977, the United States enacted the Foreign Corrupt Practices Act 
(FCPA), which makes it unlawful for a U.S. person, and certain 
foreign issuers of securities, to make a corrupt payment to foreign 
public officials for the purpose of obtaining or retaining business 
for or with, or directing business to, any person. The FCPA also 
applies to foreign firms and persons who take any act in furtherance 
of such a corrupt payment while in the United States. For more 
detailed information on the FCPA, see the FCPA Lay-Person's Guide 
at: http://www.justice.gov/ criminal/fraud/docs/dojdocb.html. 
 
OTHER INSTRUMENTS 
 
It is U.S. Government policy to promote good governance, including 
host country implementation and enforcement of anti-corruption laws 
and policies pursuant to their obligations under international 
agreements.  Since enactment of the FCPA, the United States has been 
instrumental to the expansion of the international framework to 
fight corruption.  Several significant components of this framework 
are the OECD Convention on Combating Bribery of Foreign Public 
Officials in International Business Transactions (OECD Antibribery 
Convention), the United Nations Convention against Corruption (UN 
Convention), the Inter-American Convention against Corruption (OAS 
Convention), the Council of Europe Criminal and Civil Law 
Conventions, and a growing list of U.S. free trade agreements.  The 
Maldives is country is party to the UN Convention, but generally all 
countries prohibit the bribery and solicitation of their public 
officials. 
 
 
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OECD ANTIBRIBERY CONVENTION 
 
The OECD Antibribery Convention entered into force in February 1999. 
 As of December 2009, there are 38 parties to the Convention 
including the United States (see http://www.oecd.org/ 
dataoecd/59/13/40272933.pdf).  Major exporters China, India, and 
Russia are not parties, although the U.S. Government strongly 
endorses their eventual accession to the Convention.  The Convention 
obligates the Parties to criminalize bribery of foreign public 
officials in the conduct of international business. The United 
States meets its international obligations under the OECD 
Antibribery Convention through the U.S. FCPA.  The Maldives is not a 
party to the OECD Convention. 
 
UN CONVENTION 
 
The UN Anticorruption Convention entered into force on December 14, 
2005, and there are 143 parties to it as of December 2009 (see 
http://www.unodc.org/unodc/en/ treaties/CAC/signatories.html).  The 
UN Convention is the first global comprehensive international 
anticorruption agreement.  The UN Convention requires countries to 
establish criminal and other offences to cover a wide range of acts 
of corruption.  The UN Convention goes beyond previous 
anti-corruption instruments, covering a broad range of issues 
ranging from basic forms of corruption such as bribery and 
solicitation, embezzlement, trading in influence to the concealment 
and laundering of the proceeds of corruption.  The Convention 
contains transnational business bribery provisions that are 
functionally similar to those in the OECD Antibribery Convention and 
contains provisions on private sector auditing and books and records 
requirements.  Other provisions address matters such as prevention, 
international cooperation, and asset recovery.  The Maldives is a 
party to the UN Convention. 
 
LOCAL LAWS 
 
U.S. firms should familiarize themselves with local anti-corruption 
laws, and, where appropriate, seek legal counsel.  While the U.S. 
Department of Commerce cannot provide legal advice on local laws, 
the Department's U.S. and Foreign Commercial Service can provide 
assistance with navigating the host country's legal system and 
obtaining a list of local legal counsel. 
 
ASSISTANCE FOR U.S. BUSINESSES 
 
The U.S. Department of Commerce offers several services to aid U.S. 
businesses seeking to address business-related corruption issues. 
For example, the U.S. and Foreign Commercial Service can provide 
services that may assist U.S. companies in conducting their due 
diligence as part of the company's overarching compliance program 
when choosing business partners or agents overseas.  The U.S. 
Foreign and Commercial Service can be reached directly through its 
offices in every major U.S. and foreign city, or through its Website 
at www.trade.gov/cs. 
 
The Departments of Commerce and State provide worldwide support for 
qualified U.S. companies bidding on foreign government contracts 
through the Commerce Department's Advocacy Center and State's Office 
of Commercial and Business Affairs.  Problems, including alleged 
corruption by foreign governments or competitors, encountered by 
U.S. companies in seeking such foreign business opportunities can be 
brought to the attention of appropriate U.S. government officials, 
including local embassy personnel and through the Department of 
Commerce Trade Compliance Center "Report a Trade Barrier" Website at 
tcc.export.gov/Report_a_Barrier/index.asp. 
 
GUIDANCE ON THE U.S. FCPA 
 
The Department of Justice's (DOJ) FCPA Opinion Procedure enables 
U.S. firms and individuals to request a statement of the Justice 
Department's present enforcement intentions under the antibribery 
provisions of the FCPA regarding any proposed business conduct.  The 
details of the opinion procedure are available on DOJ's Fraud 
Section Website at www.justice.gov/criminal/fraud/fcpa.  Although 
the Department of Commerce has no enforcement role with respect to 
the FCPA, it supplies general guidance to U.S. exporters who have 
questions about the FCPA and about international developments 
 
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concerning the FCPA.  For further information, see the Office of the 
Chief Counsel for International Counsel, U.S. Department of 
Commerce, Website, at http://www.ogc.doc.gov/ 
trans_anti_bribery.html.  More general information on the FCPA is 
available at the Websites listed below. 
 
ANTI-CORRUPTION RESOURCES 
 
Some useful resources for individuals and companies regarding 
combating corruption in global markets include the following: 
 
Information about the U.S. Foreign Corrupt Practices Act (FCPA), 
including a "Lay-Person's Guide to the FCPA" is available at the 
U.S. Department of Justice's Website at: http://www.justice.gov/ 
criminal/fraud/fcpa. 
 
Information about the OECD Antibribery Convention including links to 
national implementing legislation and country monitoring reports is 
available at: http://www.oecd.org/department 
/0,3355,en_2649_34859_1_1_1_1_1,00.html.  See also new Antibribery 
Recommendation and Good Practice Guidance Annex for companies: 
http://www.oecd.org/dataoecd/ 11/40/44176910.pdf 
 
General information about anticorruption initiatives, such as the 
OECD Convention and the FCPA, including translations of the statute 
into several languages, is available at the Department of Commerce 
Office of the Chief Counsel for International Commerce Website: 
http://www.ogc.doc.gov /trans_anti_bribery.html. 
 
Transparency International (TI) publishes an annual Corruption 
Perceptions Index (CPI).  The CPI measures the perceived level of 
public-sector corruption in 180 countries and territories around the 
world.  The CPI is available at:  http://www.transparency.org/ 
policy_research /surveys_indices/cpi/2009.  TI also publishes an 
annual Global Corruption Report which provides a systematic 
evaluation of the state of corruption around the world.  It includes 
an in-depth analysis of a focal theme, a series of country reports 
that document major corruption related events and developments from 
all continents and an overview of the latest research findings on 
anti-corruption diagnostics and tools.  See 
http://www.transparency.org/ publications/gcr. 
 
The World Bank Institute publishes Worldwide Governance Indicators 
(WGI).  These indicators assess six dimensions of governance in 212 
countries, including Voice and Accountability, Political Stability 
and Absence of Violence, Government Effectiveness, Regulatory 
Quality, Rule of Law and Control of Corruption.  See 
http://info.worldbank.org/ governance/wgi/sc_country.asp.   The 
World Bank Business Environment and Enterprise Performance Surveys 
may also be of interest and are available at: 
http://go.worldbank.org/RQQXYJ6210. 
 
The World Economic Forum publishes the Global Enabling Trade Report, 
which presents the rankings of the Enabling Trade Index, and 
includes an assessment of the transparency of border administration 
(focused on bribe payments and corruption) and a separate segment on 
corruption and the regulatory environment.  See 
http://www.weforum.org/en/initiatives/ 
gcp/GlobalEnablingTradeReport/index.htm. 
 
Additional country information related to corruption can be found in 
the U.S. State Department's annual Human Rights Report available at 
http://www.state.gov/g/drl/rls/hrrpt/. 
 
Global Integrity, a nonprofit organization, publishes its annual 
Global Integrity Report, which provides indicators for 92 countries 
with respect to governance and anti-corruption. The report 
highlights the strengths and weaknesses of national level 
anti-corruption systems. The report is available at: 
http://report.globalintegrity.org/. 
 
CORRUPTION IN THE MALDIVES 
 
Public sector corruption, including bribery of public officials, 
remains a challenge for U.S. firms operating in the Maldives. 
Reports indicate an improvement although the perception of 
corruption remains high. 
 
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Corruption was a serious problem in the Maldives, and the new 
government has vowed to fight it.  The World Bank's Control of 
Corruption Index for the Maldives which showed a steady decline in 
recent years from +0.09 in 2003 to -0.83 in 2007 showed a marginal 
improvement at -0.60 in 2008.  Transparency International's 
Corruption Perception Index surveyed the Maldives for the first time 
in its 2007 index, ranking the country 84th with a score of 3.3 out 
of a possible 10.  In 2008, the Maldives slipped 31 places and 
ranked 115th out of 180 countries with a score of 2.8.  In 2009, the 
Maldives slipped further to 130th out of 180 countries with a score 
of 2.5.  This may be due in part to the fact that corruption is now 
openly talked about in the media as well as a "hang-over" caused by 
the abuses of the previous government. 
 
The law on prevention and punishment of corruption (2002) defines 
bribery and improper pecuniary advantage and prescribes punishments. 
 The law also outlines procedures for the confiscation of property 
and funds obtained through commission of the included offenses.  An 
Anti-Corruption Commission was created in December 2008 following 
the passage of the Anti Corruption Commission Act.  The 
responsibilities of the Commission include inquiring into and 
investigating all allegations of corruption; recommending further 
inquiries and investigations by other investigatory bodies; and 
recommending prosecution of alleged offences to the Prosecutor 
General, where warranted.  The Anti-Corruption Commission is 
empowered to handle cases of corruption of members of parliament. 
It cannot investigate corruption in the private sector. 
 
In March 2007, the Maldives acceded to the United Nations Convention 
against Corruption. 
 
OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS 
 
The Overseas Private Investment Corporation (OPIC) has just begun 
operations in the Maldives.  The Maldives is not a member of the 
Multilateral Investment Guarantee Agency of the World Bank Group. 
 
LABOR 
 
Skilled and unskilled labor is scarce, and expatriate labor is 
allowed in order to meet shortages.  There are an estimated 80,000 
expatriate workers, mostly in tourism, construction, and social and 
personal services.  Expatriate labor is of equal cost or more 
expensive than local labor.  Even when salaries are set lower, 
travel and other benefits typically make it more expensive overall 
to hire expatriates.  Since higher education options in the Maldives 
are limited, young Maldivians from higher income families often 
travel abroad for education. 
 
The laws covering labor were overhauled in 2008 with the enactment 
of the 2008 Maldives Constitution, the new Employment Act, and a 
subsequent amendment to the Employment Act.  The new constitution 
recognizes workers' right to strike and establish trade unions, for 
the first time.  The Maldives is hoping to enact a separate trade 
union law providing rules for formation of trade unions and 
collective bargaining.  The Maldives also needs to enact regulations 
further defining the right to association. 
 
The Employment Act provides for the establishment of minimum wages, 
maximum hours of work, overtime, annual and sick leave, maternity 
leave and work place safety.  The Employment Act created a 
48-hour/week with a compulsory 24-hour break after six days of 
continuous work.  Resort workers may accumulate the weekly rest day. 
 Overtime is available.  Workers in tourist resorts may work 
additional two hours a day and be paid at overtime rate.  Employees 
are usually authorized 30 days of annual leave, 30 days of medical 
leave, 65 days of maternity leave, and 10 days of special annual 
leave to "attend important obligations."  Either parent of a newborn 
child is entitled to one year's unpaid annual leave after the expiry 
of the maternity leave period.  Employers are also required to 
provide a safe workplace.  The law provides for entering into of 
agreements between the employer and the employee which guarantees 
the rights specified in the law. 
 
Until recently, the government did not recognize the right to form 
unions or the right to strike.  Hence, labor actions and disputes 
 
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were rare.  There are two employees associations, and collective 
bargaining involving employees' associations in the tourism sector 
began within days of the new constitution taking effect.  Labor 
disputes arose in some resorts when employees' associations 
presented demands for wage increases and improvements in the 
conditions of work and stopped work. 
 
Traditionally, wages in the private sector have been set by a 
contract between employers and employees and were based on rates for 
similar work in the public sector.  The new employment law 
established a Pay Advisory Board to advise the Minister of Human 
Resources, Youth and Employment on setting minimum wages in the 
private sector. 
 
The Employment Act granted workers the right to compensation if 
fired without cause.  The government has established a Labor 
Relations Authority to implement the new employment law.  The law 
requires the Ministry of Human Resources to issue specific rules for 
employment of foreign workers. 
 
The Employment Act does not cover emergency workers, air and sea 
crews, executive staff of any company and persons on on-call duty. 
 
In December 2008, following the enactment of the new Employment Act, 
the Maldives became a member of the International Labor 
Organization.  In December 2009, the United States restored tariff 
preferences under the U.S. Generalized System of Preferences (GSP). 
The GSP facility to the Maldives was suspended in 1995 because the 
Maldives did not have a mechanism to afford internationally 
recognized worker rights.  The Maldives is also eligible for 
Overseas Private Investment Credits (OPIC). 
 
FOREIGN INVESTMENT STATISTICS 
 
Foreign direct investment statistics are not readily available. 
Most of the FDI is in tourism, telecommunications and banking. 
 
U.S. firms represented in the Maldives include Western Union, FedEx, 
UPS, Hewlett Packard (HP), Dell, Compaq, Coca-Cola, American 
Express, Hilton Resorts, Sheraton, SeaTec, Ernst and Young, 
PricewaterhouseCoopers, Marriott, and KPMG. 
 
WEB RESOURCES 
 
Foreign Investment Services Bureau: www.investmaldives.org 
International Monetary Fund:      www.imf.org 
World Bank:         www.worldbank.org 
Ministry of Planning and National Development: www.planning.gov.mv 
Maldives Monetary Authority:      www.mma.gov.mv 
Maldives Stock Market:         www.maldivesstockexchange.com.mv 
United Nations Development Program:   www.mv.undp.org 
Butenis