Maldives Introduces New Foreign Investment Act

OVERVIEW

The Maldives has enacted a new Foreign Investment Act (Act No.: 11/2024), replacing the longstanding Foreign Investment Act of 1979 (Act No.: 25/79). Ratified on 3 September 2024 and effective from 3 December 2024, the new legislation introduces a more structured and contemporary framework governing foreign investment in the jurisdiction.

While the Act retains the core licensing-based approach historically applied in the Maldives, it introduces notable refinements in sector classification, regulatory oversight, and investor protection. These changes are expected to influence both market entry strategies and ongoing compliance considerations for foreign investors.

A MORE STRUCTURED APPROACH TO MARKET ACCESS

A central feature of the new Act is the transition from an exhaustive sector listing model to a broader classification framework. Under this approach, business sectors fall into three categories

Sectors not expressly identified as restricted or conditionally open are deemed open to foreign investment. The Ministry of Economic Development and Trade, in consultation with the Cabinet, is responsible for determining and periodically reviewing these classifications.

This shift introduces a more flexible and principle-based regime, while simultaneously centralising regulatory discretion with the authorities.

DEFINITION OF FOREIGN INVESTMENT AND STRUCTURAL CONSIDERATIONS

The Act defines foreign investment as the transfer of capital, employees, or technology into the Maldives under a foreign investment licence.

This formulation reflects the practical realities of foreign investment structures. However, it also introduces a degree of uncertainty. The Act does not clearly address time-bound or project-specific engagements, which may fall outside the definition of foreign investment.

As a result, the treatment of foreign contractors and short-term project arrangements remains an area where further regulatory guidance is anticipated.

LICENSING FRAMEWORK GAINS PROMINENCE

The approval process remains broadly consistent with existing practice, involving:

The introduction of the Foreign Investment Licence as a central statutory instrument is a key development. The licence now formally defines the scope of permitted business activities and must be amended where investors seek to expand or modify their operations.

This elevates the importance of accurate scope definition at the outset, as well as ongoing regulatory alignment.

TRANSITIONAL TREATMENT OF EXISTING INVESTMENTS

The Act provides a structured transition mechanism for existing investors. Investments previously approved under the earlier regime are automatically recognised under the new framework.

However, investments established through sector-specific approvals (including those issued by the Ministry of Tourism), as well as those operating without formal foreign investment approval, must submit a new application within 12 months of the Act’s commencement. Failure to do so may result in revocation of business permits.

This requirement underscores the need for businesses to reassess their regulatory standing under the new regime.

EXPANDED ELIGIBILITY FOR FOREIGN INVESTORS

The Act adopts a broad and inclusive approach to investor eligibility. Applicants may include:

This flexibility provides a wider range of structuring options, although practical implementation will depend on regulatory interpretation and sector-specific restrictions.

ENHANCED COMPLIANCE AND ENFORCEMENT FRAMEWORK

The Act introduces clearer grounds for the suspension or revocation of a foreign investment licence. These include:

Certain breaches, including misrepresentation and non-fulfilment of conditions, require mandatory revocation.

This reinforces the importance of ongoing compliance and operational alignment, beyond initial approval.

INVESTOR PROTECTIONS FORMALISED IN STATUTE

A notable feature of the new Act is the codification of key investor protections. These include:

However, the right to repatriation is subject to important limitations. The Government retains authority to impose restrictions in circumstances involving foreign exchange constraints or broader economic challenges.

This reflects a balanced approach between investor protection and sovereign regulatory flexibility.

RECOGNITION OF INTERNATIONAL FRAMEWORKS

The Act confirms that international treaties and free trade agreements applicable to the Maldives will prevail where they contain provisions governing foreign investment.

This provision may be particularly relevant for investors operating under treaty-based protections or preferential arrangements.

KEY CONSIDERATIONS FOR INVESTORS

The new framework introduces several important considerations:

The new Foreign Investment Act represents a modernisation rather than a transformation of the Maldives’ foreign investment regime. It introduces a more structured statutory framework while preserving a degree of regulatory discretion.

For investors, the Act offers improved clarity and formalisation, but also requires a more disciplined approach to compliance, structuring, and long-term operational planning.

As implementation progresses, particularly with the publication of sector classifications, the practical impact of the new regime will become clearer. In the interim, both new and existing investors should proactively assess their position to ensure alignment with the evolving regulatory landscape.