Tourism Indicators: The future outlook for investments in the Maldives

Sahla ZahirTourism-Indicators-(Hotelier-Issue-011)-2Since the opening of the country’s first resort in 1972, the tourism sector has grown exponentially to total 109 registered tourist resorts, with arrivals currently hitting over a million annually. Alongside local hospitality brands, many of the most popular hotel chains have made their presence in the Maldives.

Looking into the current industry performance, the total number of tourist arrivals from January to September 2015 stood at 919,277, with an average annual growth rate of 2% compared the first three quarters of 2014. The bed nights showed a negative growth of 3.9%, while the average occupancy rate for the period was 69.5%. On average, tourists stayed 5.7 days depicting that most tourists prefer to stay for a shorter duration. The operational capacity as of September was 27,660 beds.

The country’s natural beauty is not the only factor that has contributed towards the tremendous development of this sector. The investment climate and the country’s regulatory policies geared towards attracting both private sector and foreign investments have also played key roles. At present, the hospitality and tourism sector accounts for 18.9% of the capital investment undertaken in the Maldives.Although bringing in foreign investments is hardly an easy task for a relatively small country like the Maldives, Maldives ranked 3rd in the Ease of Doing Business Index among South Asian countries. Doing Business is an Index created regularly by the World Bank Group that measures the regulatory policies and protection of property rights of economies and their impact on businesses. Though there is no optimal amount of regulation, a lower rank on this index usually means the country has more lenient regulations and stronger property rights. Starting with five indicators and 133 countries in 2004, the latest Doing Business report covers 189 countries measuring 10 indicators. The recent reports include both quantitative measures (ease of doing business) and qualitative measures (distance to frontier score- measuring the absolute improvement in a particular indicator and the gap between the economy and the frontier).




As per the most recent economy profile of the Maldives published by the World Bank Group in their Doing Business 2016 report, the ease of doing business rank of the country is 128, and the distance to frontier score is 55.04. Among the 10 topics measured under doing business, Maldives got a comparatively high score in starting a business topic, implying that there are simpler procedures, lesser time and lower cost incurred to start a business in the country. It takes just five procedures, about nine days, costing only 4.9% of GNI per capita and requiring a minimum paid-in capital of 1.7% GNI per capita (World Bank Group, 2015). Dealing with construction permits is also easy in the Maldives taking about 140 days, 10 procedures and 0.5% of the project cost, thereby having a relatively higher score of 41 among the 189 countries studied. By contrast, with 6.0 procedures, 91.0 days and incurring a cost of 296.8% of per capita income, getting electricity in the Maldives is costly and time consuming with a score of 141. Regarding property registration, Maldives stands far behind at 171 as it takes 6.0 procedures, 57.0 days with a cost of 15.9% of the property value. In terms of getting credit, Maldives ranked 126 globally, indicating the limited availability of credit information, and weaker collateral and bankruptcy laws. And, Maldives ranked 134 in protecting minority investors, which measures the protection given to minority shareholders against corporate power used by directors, taking into account the transparency, disclosure and governance practices. In the topic of ease of paying taxes, though Maldives stands comparatively behind at 128, there is some improvement in the score with the recent reforms done including the introduction of an electronic filing system for some types of taxes. Analysing the predefined set of procedures and stages of exports and imports, the county ranks 137 on the ease of trading across borders. Among the 189 economies, Maldives ranked 95 in enforcing contracts. This measures the efficiency of the local judicial system in resolving business disputes. Lastly, Maldives ranked 135 in resolving insolvency indicating that there are some challenges in terms of time, cost and outcomes of insolvency proceedings and recovering debt.

Having said this, there are many liberal policies promoting investments in the Maldives such as the right for 100% foreign ownership of businesses, no restriction on profit repatriation, and a very liberal trade policy system. Additionally, the government is in the process of reforming policies to increase investment security, and mega investment projects are incentivized with a Special Economic Zone Act.

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