The government has submitted a new Foreign Investment Act to the Maldives Parliament, introducing a legislative framework aimed at establishing clear rules and guidelines for foreign investment in the Maldives. This newly proposed legislation focuses on creating a favourable environment for the inflow of foreign capital, technology, knowledge, and skills, thereby enhancing the country’s attractiveness to international investors.
The bill proposes the establishment of an investment promotion mechanism designed to attract and retain foreign investors. It outlines the need to determine specific areas where foreign investors can invest, as well as the rules and conditions for issuing permits and ensuring the protection and security of these investments. The responsibility for promoting foreign investment and implementing these regulations has been assigned to the Ministry of Economic Development and Trade.
Once enacted, the Foreign Investment Act will require the Minister to designate and announce sectors in which foreign investment will not be allowed. In making these determinations, factors such as potential threats to national security, the impact on industry competitiveness, the development of indigenous enterprises, and long-term productivity contributions will be considered. The bill also mandates that these areas be reviewed every three years.
Additionally, the act stipulates that foreign investment permission will be necessary if the shares of a Maldivian company are transferred to a foreign entity. Such transfers will only be permissible for companies specifically designated for foreign investment.
The proposed legislation guarantees full protection and security for foreign investors and their investments, including the right to repatriate capital and profits to the investor’s home country. However, the bill includes provisions allowing the government to restrict foreign investment or related rights in order to maintain sovereignty, defence security, environmental protection, and human rights.
Violations of the Foreign Investment Act, once in force, could result in fines of up to 30 percent of the investment value. Additionally, submitting incorrect information to obtain a licence could incur fines ranging from USD 6,494 to USD 64,940, depending on the severity of the violation.
The enactment of the new Foreign Investment Act will result in the repeal of the existing Foreign Investment in Maldives Act. Investments currently licensed under the old act will be transferred to the new one, and foreign investments permitted under the Ministry of Tourism will be given 12 months to register under the new legislation.
It is important to note that the Foreign Investment Act will govern all matters related to foreign investments except those covered by the Special Economic Zone Act. Accompanying the Foreign Investment Act are proposed amendments to the Financial Securities Act and the Business Registration Act. Notably, the amendment to the Business Registration Act will enable foreign investors to invest in permitted securities.
This legislative move is expected to have a significant impact on the Maldivian economy by creating a more conducive environment for foreign direct investment (FDI). The government’s clear guidelines and protections for investors are likely to enhance confidence, potentially leading to increased FDI inflows. This could result in various economic benefits, such as job creation, technology transfer, and the development of key sectors like tourism and real estate, which are essential for the country’s growth.
The act’s provisions for full repatriation of profits and capital might further attract international investors, making the Maldives a competitive destination for investment. However, by maintaining regulatory oversight and imposing penalties for non-compliance, the government aims to ensure that foreign investments align with national interests, safeguarding critical areas such as national security and environmental protection.
