Maldives' New Foreign Investment Law in Brief
President Dr. Mohamed Muizzu has ratified the new Foreign Investment Bill, replacing the 45-year-old Foreign Investment Act. This modernized law comprising 39 pages and 45 provisions establishes clear procedures for foreign investment in the Maldives.
Under the new law, the government, specifically the Ministry of Economic Development and Trade, will take a proactive role in identifying, evaluating, and promoting potential business opportunities in the Maldives to attract foreign investment on a global scale.
Investment Areas
From a foreign investment perspective, opportunities in the Maldives are available in respect of all areas except those that are closed under the law. Of all areas permitted, some are freely open for foreign investors and the other is permitted with conditions.
The Minister of Economic Development and Trade is to publish in the government gazette areas closed for foreign investment and areas that are permitted with conditions / restrictions. This notification is to be reviewed every three years.
Restricted Areas
The determination of restricted areas for investments is to be motivated by certain factors provided in the bill. Those factors are:
National security
Impact on industry competitiveness
Extent of local strength in the industry
Extent of need for foreign investment to propel growth
Contribution to long term growth
Extent of human resource development and potential for job creation
No foreign investment is to be allowed in any closed area. However, if there is already an active investment in that area – the investment can proceed till end of the current license.
Who Can Apply?
Foreign nationals; foreign companies (held entirely by foreign nationals or with locals); foreign companies re-registered in the Maldives; joint venture arrangements (between foreign and local); foreign associations; and any legal entity created in any other country.
Licensing Process
The licensing process is to include four broad processes:
Application and grant of an initial no objection certificate
Completion of formalities and requirements by the applicant
Grant of license
Signing of the foreign investment agreement
The bill contains details on the sequence of regulatory processes and required documentation. If an application for an investment permit meets all regulatory requirements, the Ministry of Economic Development and Trade will decide on the application within 30 days of its submission.
A significant chapter of the bill focuses on the foreign investment license, detailing its specific requirements, the process for renewal, and the circumstances under which it may be suspended or revoked.
Foreign Investment Agreement
In addition to the licensing provisions, the bill also speaks on the elements to be included in any foreign investment agreement signed by a licensee of a foreign investment.
According to the bill, a foreign investment agreement is to include details such as – details of investment; activities permitted to be carried out in pursuance of the investment; period of agreement; novation of investment; land related matters; compliance with law; obligations toward environmental protection; obtaining requisite approvals from government agencies; repatriation of capital and proceeds; tax and financial obligations; dispute resolution mechanisms, and anti-corruption clauses;
Investor Protection
Chapter 4 of the bill is important for investor protection. It speaks of fair and equitable treatment being afforded to investors; provides for repatriation of capital and proceeds of investment; deals with the issue of expropriation - how it can be done in limited exceptional circumstances - and what will not amount to expropriation; and finally it speaks on mattes of compensation.
Penalties
The new law imposes fines for non-compliance. Those conducting business activities beyond the scope of their license may face fines of up to 30% of their total business value. Additionally, submitting inaccurate information during the foreign investment license application process can result in fines ranging from MVR 100,000 to MVR 1 million.
