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DE RUEHLM #0218/01 0410537
ZNR UUUUU ZZH
R 100537Z FEB 06
FM AMEMBASSY COLOMBO
TO RUEHC/SECSTATE WASHDC 2537
RUCPCIM/CIMS NTDB WASHDC
RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
INFO RUEHCG/AMCONSUL CHENNAI 6341
RUEHKA/AMEMBASSY DHAKA 8909

RUEHIL/AMEMBASSY ISLAMABAD 5792
RUEHKT/AMEMBASSY KATHMANDU 3826
RUEHGV/USMISSION GENEVA 1000

UNCLAS COLOMBO 000218 
 
SIPDIS 
 
 
 
STATE FOR EB/IFD/OIA AND SA/INS 
STATE PASS USTR 
STATE PASS OPIC, TDA, EXIM 
 
TREASURY FOR DO/GCHRISTOPOLUS; USDOC FOR ITA/ATAYLOR 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ETRD ELAB KTDB PGOV OPIC USTR MV
SUBJECT: IMI - INVESTMENT CLIMATE STATEMENT 2006 - 
MALDIVES 
 
REF: (A) 05 STATE 211900 
     (B) 05 STATE 202943 
 
¶1.  THE FOLLOWING IS THE INVESTMENT CLIMATE STATEMENT 
FOR MALDIVES FOR 2006 
 
INVESTMENT CLIMATE STATEMENT 
MALDIVES 
 
FEBRUARY 2006 
 
¶2.  Maldives is comprised of over 1,190 islands, of which 198 are 
inhabited and 87 are exclusive resort islands.  The local 
population is about 285,000, and over 600,000 tourists arrive 
annually.  Over the past decade, real GDP growth averaged over 7.5 
percent per year, powered mainly by growth in tourism and its spin- 
offs in transport, communication, and construction.  Per capita 
income was $2,100 in 2004, compared to an average of about $500 in 
the rest of South Asia.  While income disparity remains high, this 
growth also resulted in considerable social progress.  The net 
enrollment in primary education was close to 100 percent. 
Literacy rates were about 98 percent.  Infant mortality and 
maternal mortality were declining rapidly.  One week before the 
Tsunami disaster, the United Nations decided to graduate Maldives 
 
SIPDIS 
from the group of Least Developed Countries (LDCs) and was granted 
a three year grace period to prepare for the transition, though 
this has been subsequently put on hold due to the impact of the 
tsunami. 
 
SIPDIS 
 
¶3.  The Asian tsunami in December 2004 caused extensive economic 
losses to Maldives.  Total damages were initially estimated by 
donors at around $470 million -- close to 62 percent of GDP.  This 
figure did not include loss of private assets and incomes. 
Fourteen inhabited islands were destroyed and another 39 suffered 
severe damage.  A few resort islands also suffered extensive 
damage.    Most losses were concentrated in housing and tourism, 
with education, fisheries, and transport also heavily affected. 
The latest estimates put the recovery cost at $393 million 
excluding $100 million in damages to resorts, the bulk of which 
was covered by private insurance.  Although reconstruction has 
begun, the recovery process remains under-funded.  Maldives 
requires about $140 million to bridge the funding gap.  The 
Government continues to seek external assistance from donors and 
to explore foreign investment to cover the shortfall.  Shelter, 
power and energy, disaster management and infrastructure are key 
sectors requiring additional funds.  The reconstruction effort 
presents an opportunity to address longstanding issues such as 
providing safe water, sanitation, health and education for island 
populations and empowering them. 
 
¶4.  As a result of the tsunami, the Maldivian economy contracted 
by about 5.5 percent in 2005 compared to an 8.8 percent growth 
rate in 2004.  A dramatic tourism sector decline following the 
tsunami has been a major cause of the economic downturn in 2005. 
 
SIPDIS 
Tourist arrivals declined by about 50 percent in the first half of 
2005, with total arrivals for the year likely being about 35 
percent less than 2004 , reflecting a substantial recovery towards 
the end of 2005.  Tourism is expected to remain the main driver of 
the economy in the post-tsunami era.  The island resorts, for the 
most part, experienced only minor damage.  Maldives is intensively 
marketing its status as a unique tourist destination.  The second 
largest economic sector, fisheries, which contributes about 9 
percent of GDP, has continued to grow following the tsunami, 
despite substantial losses to small boats and fisheries 
infrastructure.  Most of the larger vessels were not damaged and 
are being fully utilized.  The loss of agricultural land and 
livelihoods of island communities has been substantial.  In 
addition to the tsunami, high oil prices have also dealt a blow to 
the economy due to the high dependency on air transport for 
tourism, marine transport for travel between the islands and a 
heavy reliance on oil for electricity generation. 
 
¶5.  The impact of the tsunami on the Government budget was also 
substantial as reconstruction spending increased and revenue 
(especially from tourism) declined.  The government has received 
about $83 million in grant assistance to cover tsunami related 
expenditure in 2005.  Foreign grants of about $130 million are 
 
expected in 2006.  It is estimated that the budget shortfall, 
after accounting for grants, will be about $100 million in 2005 
and $165 million in 2006.  Budget support is expected from the 
World Bank and the ADB following a planned IMF review in March 
¶2006.  Inflation, which had been flat and falling for some years, 
picked up sharply in 2004-2005 to about 6 percent. 
 
¶6.  Maldives is also experiencing adverse impacts on its balance 
of payments due to the tsunami.  The current account deficit is 
expected to widen sharply, reflecting the steep drop in tourism 
and rising reconstruction related imports.  On the export side, 
while fish exports have increased substantially (about 20 
percent), apparel exports disappeared following the expiration of 
the Multi Fiber Agreement (MFA) which sets quotas for developing 
country garment exports in developed countries.  The garment 
industry was comprised entirely of foreign investors, mostly from 
Sri Lanka, seeking quota advantages.  However, the effects on the 
economy are expected to be negligible since the apparel industry 
yielded little value-added and imported all inputs.  Additionally, 
even its labor force was imported:  most workers in garment 
factories were Sri Lankan.  The main effect of the factory 
closings was about a 4 percent loss of government revenues derived 
from land rentals. 
 
¶7.  The tsunami further demonstrated that Maldives, which has a 
narrow economic base relying on tourism and fisheries, needs to 
promote economic diversification to reduce vulnerability to 
external shocks.  This has been known for sometime; but how to 
diversify such a small resource-poor nation is a challenge.  A 
recently released Strategic Economic Plan for Maldives, prepared 
by the International Trade Institute of Singapore at the request 
of the Government of Maldives, recommends several actions to 
reduce the volatility and the vulnerability of the economy and to 
mitigate adverse impacts of possible LDC graduation.  The study 
proposes extensive diversification of fisheries and tourism, and 
expansion of agriculture to meet requirements of the tourism 
sector and island populations.  By capitalizing on the growth of 
these traditional sectors, the study recommends Maldives expansion 
into new areas such as ports and logistics services, information 
and telecommunications, and offshore financial services. 
 
¶8.  The United Nations Development Program (UNDP) and the Asian 
Development Bank (ADB) along with other multilateral and bilateral 
donors are active in Maldives providing assistance to improve 
basic economic infrastructure and services to promote economic 
diversification, employment opportunities and regional 
development.  The government is preparing its Seventh National 
Development Plan which will identify major development projects 
for the next five-year period. 
 
¶9.  There may be commercial opportunities especially in the 
construction sector and in the supply of equipment in the post 
tsunami recovery program. 
 
SIPDIS 
 
OPENNESS TO FOREIGN INVESTMENT 
------------------------------ 
 
¶10.  Maldives began opening up to foreign investment in the late 
1980s.  The government of the Republic of Maldives introduced a 
Foreign Investment Services Bureau (FISB) in 1987, within the 
Ministry of Economic Development and Trade.  The lack of a strong 
legal and procedural regime for investment and an over-reliance on 
negotiations makes the job of the FISB difficult and presents an 
added risk for investors.  The FISB offers "one-stop shop" 
services to investors and incentives such as 100 percent foreign 
ownership, duty exemptions and no exchange controls or 
restrictions on repatriation of profits.  At present, personal 
income taxes are not imposed, though banks' profits are taxed and 
a corporate profit tax is under consideration for the end of the 
decade.  Domestic and international arbitration is available for 
dispute settlement. 
 
¶11.  Foreign investment is governed by Law 25/79 (passed in 1979), 
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.  Foreign investors qualify for import duty 
concessions as specified by the FISB. 
 
¶12.  The Government is committed to improving the investment 
regime and speeding up the approval process.  The FISB is in the 
process of amending the FISB law with the help of the Foreign 
I 
nvestment Advisory Service (FIAS) of the World Bank group. 
Currently, approvals for new investments take about one month, and 
in some cases, when the investment is similar to previous 
investments, immediate approval is given.  The Economic Review 
Committee reviews all proposed investments in "restricted" and 
"approval with restrictions" areas or in areas involving 
environmental or social impacts prior to granting licenses. 
 
¶13.  There are several foreign investments in Maldives, primarily 
in resort management, but also in accounting services, banking, 
telecommunications, air transport, courier services, and 
manufacturing. 
 
¶14.  The FISB 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 FISB has identified several 
industries that offer potential for investors, which are 
summarized below. 
 
¶15.  Value Added Fisheries- fish processing is open to foreign 
investment, particularly for new technology and capital 
investment.  Opportunities also exist for marine product 
development and aquaculture, including tropical fish farming and 
cultivation of seaweed, lobster, shrimp, reef fish and crab. 
 
¶16.  Financial- banking, accounting, and management consulting. 
The FISB is interested in bringing in more global banks (only HSBC 
is currently present).  The present lack of adequate banking laws 
has deterred entry. 
 
¶17.  Transport and other services- development of air and sea 
transport including inter-atoll transport services, bunkering, 
transshipment, and passenger cruises.  The development of a 
transshipment port in the north of the country for cargo bound for 
Pakistan and the west coast of India is one of the highest 
priorities.  The government's goal is to develop a port that 
handles 1.3 million twenty foot equivalent units (TEUs) annually 
and open nearby islands for industries, duty free shopping, and 
export processing zones.  The Government seeks financing and 
intends to begin construction as soon as possible.  Other key 
priorities in the transport sector are the expansion of the Male' 
Airport, a bridge connecting the capital city Male' with 
Hulhumale, and a new commercial port in the Male' region.  The new 
resorts to open in the next few years will also require 
transportation options from tourist arrival locations. 
 
¶18.  Other infrastructure development opportunities include 
harbors and tourist resorts, residential/retirement islands for 
foreigners, health resorts, and time-share plans.  There are two 
major development plans in the government's docket.  The first is 
a consolidation of services and infrastructure of the 20 atolls 
around five regional centers, two of which have already been 
established.  The second is a capital project to alleviate 
overcrowding in Male'.  Reclamation and development of Hulhumale 
Island, near Male', has already commenced.  Hulhumale is projected 
to house 50,000 people when the first stage of the project is 
completed in 30 years and 150,000 when all three stages are 
complete.  However, cost of real estate on that island as well as 
a cultural preference to not commute from another island appears 
to be significantly slowing utilization of Hulhumale.  Currently 
1,000 people are in residence on the 465 acres of reclaimed land. 
Basic amenities, such as electricity, water and 
telecommunications, are being provided by the government at the 
same rates as Male'.  The government plans to offer 125 acres of 
duty-free shopping, hoping to increase Maldives' attraction for 
tourists.  There will be potential opportunities in civil works, 
supply of equipment and investment in the above projects.   The 
government is also currently funding harbor-dredging projects for 
103 islands on a contract basis.  While infrastructure development 
remains a top priority for the government, some of the projects 
 
listed above have been slowed as tsunami reconstruction work takes 
priority. 
 
¶19.  Other sectors with potential opportunities include: 
 
Tourism: Opportunities exist in the entire range of services, 
including development and management of resorts, tourist 
activities, and land and sea transportation.  In 2005, the 
Government awarded tenders for the development of 11 new resort 
islands.  As of February 2006, however, only four were under 
construction as unsuccessful bidders continue to raise challenges 
to the tender process.  The Government has opened 35 additional 
islands for resort development in 2006 and intends to establish 
streamlined tender processes to make bidding less costly and more 
transparent. 
 
Telecommunications: Currently, Dhiraagu, jointly owned by UK's 
Cable and Wireless and the Government of Maldives, is the main 
provider of telecommunications services.  Dhiraagu's monopoly on 
cellular services ended when Wataniya International of Kuwait 
commenced operations in August 2005.  There are two ISP providers: 
Focus Computers and Dhiraagu.  In the past few months, numerous 
wireless communication "hot spots" have sprung up around Male'. 
Telecommunications operators are in the process of establishing 
two optical fiber gateways, currently expected to be ready by 
January 2007. 
 
Information Technology: The FISB would like to establish a 
"technology island" for software development and other IT 
activities.  While the connectivity infrastructure is not yet in 
place to support such an operation, is the Government believes 
that Maldives' climate, surroundings and pace of life would be 
attractive to software developers. 
 
Other sectors include petroleum exploration; marine-based 
agriculture; health services, medical facilities and horticulture. 
 
¶20.  Sectors closed to investment: trading and the production of 
any items illegal to import into Maldives. 
 
CONVERSION AND TRANSFER POLICIES 
-------------------------------- 
 
¶21.  There are no exchange controls or restrictions on currency 
movements.  Repatriation of funds and profits is allowed, after 
local debts are settled. 
 
¶22.  Major international currencies can be bought and sold at 
banks and authorized moneychangers.  Hotels and banks accept major 
credit cards and traveler's checks.  Foreign-currency accounts are 
available through banks.  The US dollar is the most widely used 
foreign currency and is accepted by small shops and taxi drivers 
in Male'. 
 
¶23.  The official exchange rate is set at 12.8 Rufiyaa to the 
dollar.  The currency underwent a nine percent devaluation in July 
2001 after staying at 11.77 Rufiyaa to the dollar for several 
years.  The Maldivian currency is non-convertible and its true 
value cannot be determined.  However, the Maldives Monetary 
Authority (MMA) is currently working on a computer upgrade to help 
track currency movements and provide better information on 
currency flows.  The Government has noted that it will need to 
review the exchange rate policy in the next few years in order to 
promote export diversification.  The heavy dependence on imports 
is a constraint for exchange rate management, though tourist 
receipts help maintain hard currency liquidity.  During 2001-2002, 
businesses reported hard currency shortages and difficulty 
obtaining dollars at banks.  Large fiscal deficits financed by 
Maldives Monetary Authority posed a potential threat to the fixed 
exchange rate system, and so the Government took steps to achieve 
fiscal consolidation during 2003.  The fiscal deficit was 4.6 
percent of GDP and 3.6 percent of GDP in 2003 and 2004 
respectively.  The deficit was financed mainly through foreign 
grants and loans.  Public debt, which was 46.5 percent of GDP in 
2003, decreased to 38.5 percent in 2004.  Debt servicing has been 
manageable, since most external borrowing is contracted on 
concessional terms.  Due to tsunami related expenditure, the 
budget deficit is estimated to increase sharply during 2005-2006. 
 
The deficit will be financed through foreign grants and loans and 
domestic borrowing.  World Bank and the ADB are expected to 
provide budget support following an IMF review in March 2006. 
 
¶24.  To enable more comprehensive and up-to-date control over 
public expenditures, initial actions have been taken to introduce 
a new public accounting system.  The Parliament is expected to 
pass a new Public Accounting bill in early 2006.  Additional draft 
bills have been prepared, including a public finance bill and 
amendments to the Audit Bill.  However, there has been a delay in 
their submission to the People's Majlis legislative body. 
Instead, several Presidential decrees have been issued on these 
subjects.  The Government has also taken steps to expand the tax 
base and is planning to enact a business profit tax and a property 
rental value tax.  Foreign reserves at end of October 2005 were 
$199 million, only slightly lower than end 2004 reserves of $205 
million, and were sufficient to finance 3.3 months of imports. 
 
EXPROPRIATION AND COMPENSATION 
------------------------------ 
 
¶25.  According to the Law on Foreign Investment (25/79) the 
Government may, with or without any given 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 in the interest of 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 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 does not appear 
to be any risk of expropriation in the near future. 
 
DISPUTE SETTLEMENT 
------------------ 
 
¶26.  The sources of law in Maldives are its constitution, Islamic 
Sharia law, international law, and English common law, with the 
latter being more influential in some areas, such as commercial 
law.   In November 2005, the government announced the creation of 
a 10-member judicial services commission, led by the chief 
justice, responsible for appointing, dismissing, and examining the 
conduct of all judges. The commission recommends a group of 
candidates for judgeships to the President.  While the President 
will then choose from the list of candidates, the commission 
maintains the right to accept his choice or veto the President's 
selection.  There is a High Court in Male' as well as lesser 
courts (the number to be determined by the President) in Male' and 
on other islands.  There are no jury trials.  The High Court 
serves as court of appeal and also handles any politically 
sensitive cases.  There are also eight lower courts in Male' 
dealing with theft, debt and property cases. 
 
¶27.  Ultimate appeal lies with the President.  In this process, 
the President is briefed by an advisory board which goes through 
the appeal and recommends that the President affirm or vary the 
decision of the High Court.  Under a November 2005 Presidential 
decree, this advisory board was given substantial independence 
within the confines of the constitution.  This arrangement is an 
interim one until the constitutional changes -- which could 
establish an independent supreme court. 
 
¶28.  Though the legal practices are adequate, the judicial process 
is slow.  The law on foreign investments guarantees the security 
of investments.  Disputes involving investments below $1 million 
can be referred to the courts in Maldives.  Disputes over $1 
million can be referred for international arbitration. 
 
¶29.  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 has enacted a number of 
commercial laws, including the law of contract, the Negotiable 
Instruments of Law, and the Companies Act, and amended the tourism 
law to conditionally extend the 25-year resort lease period to 50 
years.  Maldives is not a member of the International Center for 
 
the Settlement of Investment Disputes (ICSID). 
 
RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT 
-------------------------------------------- 
 
¶30.  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 percent of the company's shares are 
floated on the Maldives trading floor.  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 Cabinet has agreed to extend the initial lease 
period from 25 years to 99 years.  Relevant legislation is 
expected to be presented to Parliament by mid-2006. 
 
PROTECTION OF PROPERTY RIGHTS 
----------------------------- 
 
¶31.  Maldives lacks specific legislation to protect intellectual 
property rights (IPR) and has not signed on to international 
agreements and conventions.  Maldives stands to benefit from the 
recent WTO decision to extend the transition period for least- 
developed countries (LDC) to provide protection for intellectual 
property under Trade-Related Aspects of Intellectual Property 
Rights (TRIPS) agreement until July 1, 2013, unless it graduates 
from being an LDC.  The transition period was due to expire on 
January 1, 2006.  Consumers of computer software reportedly 
appreciate the value of genuine products, as pirated software 
programs often contain bugs and viruses. 
 
EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT 
------------------------------------------ 
 
¶32.  The financial sector in Maldives is very 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.  Non-bank 
financial institutions in the country consist of two insurance 
companies, a provident fund and a finance leasing company.  All 
financial institutions currently operate under the supervision of 
Maldives Monetary Authority, which acts as the Central Bank. 
 
¶33.  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.  No financial instruments 
are 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.  Non-performing loans are 
about 6 percent and the risk-weighted capital adequacy ratio is 
high.  Most foreign currency loans are made to foreign currency- 
earning tourist enterprises.  The Maldives Monetary Authority has 
introduced an emergency liquidity facility for commercial banks. 
Banking supervision has been recently upgraded, moving toward 
international best practices. 
 
¶34.  The development of a stock market has been a policy objective 
of the Government of Maldives since the late 1990s and has been 
integrated in consecutive National Development Plans.  As there is 
currently no organized capital market in Maldives, the Capital 
Market Development Section (CMDS) of the MMA is working towards 
creating the institutional mechanism to facilitate an organized 
market for raising capital required by the economy.  A proposed 
Securities Bill would make provisions for the establishment of a 
regulatory framework for the capital market, the proposed capital 
market institutions and the licensing of financial intermediaries 
for the purpose of developing and regulating a capital market in 
Maldives.  A small trading floor opened in Male' in April 2002 
within the capital development department of the MMA.  At present, 
the only investment opportunity available to the public is a 
limited number of shares in the Bank of Maldives and two other 
state-owned public companies - Maldives Transport and Contracting 
Company (MTCC) and the State Trading Organization (STO).  There 
are plans to expand into the islands, and the MMA is conducting an 
 
investor eduction program.  There are hopes that the stock 
exhange will facilitate the development of a capitalmarket.  A 
leasing company, Maldives Finance Leaing 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 Asian Development Bank will support strengthening the 
financial sector to more effectively mobilize savings and fund 
long-term development. 
 
¶35.  The Housing Development Finance Corporation is a government 
company designed to provide public housing loans with long 
repayment terms at favorable interest rates.  The Company is also 
entrusted with drawing up the policy that plans and facilitates 
the use of land as an asset in Maldives, and to bring the 
necessary changes and the subsequent development of economic and 
financial mechanisms in the country, to incorporate this policy. 
 
POLITICAL VIOLENCE 
------------------ 
 
¶36.  Maldives has a homogeneous society of one culture, one 
religion and one language.  The current President has been in 
office since 1979.  In 2004, the Government initiated a process of 
constitutional reforms to address calls for change and democracy. 
A Special Majilis (a special parliament separate from the People's 
Majlis) was established in May 2004 specifically to consider 
proposed amendments to the constitution.  Parliamentary elections 
in January 2005 saw some reformists entering Parliament.  In 2004 
the President presented detailed proposals for constitutional 
reform to the Parliament.  In June of 2005, Parliament legally 
recognized political parties.  Reformists complained that reform 
programs were slow and insufficient.  Opposition groups held 
demonstrations to demand further reforms and request the release 
of political prisoners in August and November 2005 and January 
¶2006.  The demonstrations remained largely peaceful, although 
after the first such protest in August, several people were 
arrested and parliament was temporarily suspended.  The arrested 
demonstrators were later released without charge.  Several reform 
bills are due to come before Parliament in February 2006. 
 
CORRUPTION 
---------- 
 
¶37.  In 2002, Parliament passed a bill on the prevention and 
punishment of corruption.  The provisions of the law cover 
definitions of bribery and improper pecuniary advantage and 
prescribe punishments.  The law also outlines procedures for the 
confiscation of property and funds obtained through commission of 
the included offenses.  It broadens the mandate of the Anti- 
Corruption Board, which previously extended only to government 
employees, to investigate corruption in the private sector. 
 
 
OPIC AND OTHER INSURANCE PROGRAMS 
--------------------------------- 
 
¶38.  Currently, OPIC does not operate in Maldives.  Maldives is 
also not a member of the Multilateral Investment Guarantee Agency 
of the World Bank Group. 
 
LABOR 
----- 
 
¶39.  Skilled and unskilled labor can be scarce, and expatriate 
labor is allowed in order to meet shortages.  There are an 
estimated 33,800 expatriate workers, mostly in tourism, 
construction, and social and personal services.  Expatriate labor 
is equal to or more expensive than local labor.  While salaries 
are lower, travel and other benefits typically make expatriate 
overall costs higher. 
 
¶40.  Wages in the private sector are usually set by contract 
between employer and employee and are generally based on rates for 
similar work in the public sector.  Employment contracts usually 
specify work hours on a weekly or monthly basis.  Employees are 
 
usually authorized 20 days of annual leave, 30 days of medical 
leave, 45 days of maternity leave, and 10 days of special annual 
leave for "extraordinary circumstances." There are no laws 
governing health and safety conditions; however, there are 
regulatory requirements that employers provide a safe working 
environment and ensure the observance of safety measures. 
 
¶41.  Maldives is not a member of the International Labor 
Organization.  Although unions are not expressly prohibited, the 
Government does not recognize the right to form unions or the 
right to strike.  Hence, labor actions and disputes are rare.  The 
US Government in 1995 suspended Maldives' eligibility for tariff 
preferences under the US Generalized System of Preferences (GSP) 
because the Government failed to take steps to afford 
internationally recognized worker rights to Maldivian workers. 
The Government has drafted new labor laws dealing with rights of 
association, the right to organize, and acceptable conditions of 
work, and has promised to pass them into law.  The US Government 
has offered technical assistance to review the draft legislation. 
 
¶42.  Foreign Investment: US firms represented in Maldives include 
Western Union, FedEx, UPS, Hewlett Packard (HP), Dell, Compaq, 
Coca-Cola, American Express, Hilton Resorts, SeaTec, Ernst and 
Young, Price Waterhouse Coopers and KPMG. 
LUNSTEAD