Report

T OURISM AND TRAVEL RELATED SERVICES 129
the share of foreign ownership was about 13%.
Tourism has substantial links to other sectors of
the economy, such as construction, transportation,
distribution, and telecommunications (Maldives’ TPR
2002). New tourism legislation was introduced in 1999
(Maldives Tourism Act No. 2/99). The government
leases islands to investors for resort development; land
cannot be sold for tourist activities. The new legislation
increased the maximum lease period from 21 to 25
years on investments below $10 million and retained
the period of 35 years for larger amounts, but introduced
a 50-year lease period under certain conditions.
The company must be Maldivian registered and owned;
have at least 50% of its shares publicly held, with no
more than 1% held by a single shareholder (or 5% for
an investment company); and have listed as its main
purpose development and operation of tourist resorts
in its Memorandum of Association.
All non-Maldivian citizens (unless holding a resident
permit) staying in registered tourist resorts, hotels,
guesthouses, and tourist-accommodating vessels pay
the bed tax (Maldives’ TPR 2002:50). Since it is a flat
rate, the ad valorem incidence of the levy, which
depends upon the room rate, falls more heavily on the
cheapest resorts.
Restrictions and challenges: The World Bank (2006)
suggests that issues are emerging on the horizon and it
is time for the growth strategy to be reviewed. It is a
long haul destination, more than ten hours from
originating markets with only one major airport, which
is likely to be a severe constraint to market expansion.
• Maldives has long relied on a public sector role
limited to creating the environment for sound
investment in tourism and managing the leasing
process, with private sector companies bidding on
individual islands. The decision to increase the
speed of issuing new resort leases represents a
fundamental change in Maldives’ policy of expanding
the sector gradually. A number of current
operators are known to be very concerned at this
change in policy. As part of the proposed expansion,
the government has decided to create a public
enterprise that would hold leases at low, preferential
rates in a number of islands, and sell these to new
operators. It would also sell some shares to the
Maldivians on the stock market. The concept is still
evolving, but advantages it would have for the
country are not clear.
• According to an enterprise survey conducted in
three major sectors – tourism, transport-logistics,
and manufacturing – covering 148 enterprises
seeking answer to the question – what are the most
severe obstacles in the Maldives’ investment
climate? – revealed that the first four major
obstacles to all three sectors are (i) access to finance,
(ii) the cost of finance; (iii) access to land; and
(iv) skilled labour (World Bank 2006: ix).
Interestingly, entrepreneurs in the tourism sector
identified the relative significance of the lack of
skilled labour as the third highest constraint on
investment decisions. This clearly shows that the
lack of skilled labour is one of the major obstacles
to the tourism sector. Only 9% of employees in
tourism in the Maldives have acquired a degree or
higher-level qualifications.
• Access to land has also been identified as a major
obstacle. Given the traditional allocation of land
by government at request, there is no proper land
market in the Maldives. However, with the
commencement of a development project at a place
adjacent to the Male Capital Island, there is an
emerging land market. The World Bank suggests
that there is also a need for a paradigm shift for
the government from being a provider to a
facilitator and a regulator. The absence of a vibrant
private land market aggravates the access-tofinance
issue, especially since banks are still focused
on collateral based lending rather than cash flows.
In this regard, the World Bank suggests that the
government should promote the establishment of
a modern movable assets registry to encourage
using such assets as collateral.
Being a small island country, Maldives is overwhelmingly
dependent on other countries for the supply
of goods and services and as a result it has a relatively
liberal trade regime. Foreign investors own hotels,
resorts, restaurants, etc. There are quite a few hotels in
the Maldives owned by Indian companies (The Indian
Hotel Company 2007). The Taj Group of hotels is the
most familiar Indian brand. The Maldives is also
dependent on the foreign labour force particularly from
India, Sri Lanka and Bangladesh.
Efforts are being made to increase the availability
of domestic credit for tourism, for example, by establishing
a state leasing company and allowing leased
resort islands to be mortgaged to finance tourism
development (Maldives’ TPR 2002). The authorities
are aiming to increase employment of Maldivians by
strengthening training. The faculty of hospitality and