Why aren’t investments coming to South Asia’s most business friendly country?

I was very happy when the World Bank’s ‘Doing Business Report 2006 and 2007’ report ranked the Maldives as the most business friendly country in South Asia. This coincided with the time Mohamed Jaleel was quoted by our media almost every other day, about the development of a USD300million transshipment port in Ihavandhippolhu, a USD 200million port city in Gulhifalhu and an integrated infrastructure project in Hulhumalé phase2. My happiness turned out to be somewhat short-lived. The promised investments did not come and the projects appear to have been shelved now. To make matters worse, funds have even dried up for most of the 50 or so resort islands that are currently in various stages of development. I cannot help asking why we are unable to attract FDI the way some small countries like Cyprus, Trinidad and Tobago, Mauritius, Malta are doing. If Nasheed’s government is serious about getting FDI, he needs to get his Minister Rasheed to quickly remove the bottlenecks and address some of the pressing problems in the area.

▫ Interference and corruption – government has previously mixed political objectives and influence with commercial and infrastructure projects (Ihavandhippolhu transshipment port, Gulhifalhu, Hulhumale phase 2, Hulhumale Ceylinco project etc). This gives wrong signals to investors who know that they need ‘influential business partners’ on their side if they want to stand a chance of winning a project or approval for a project. However, most investors with a good international standing would want to be judged on the basis of technical criteria rather than their political connections and knack for influence paddling. As for corruption, with Transparency International giving us a world ranking of 115 – way below countries like India and Srilanka, it’s a little… ahem…a paper bag, anyone?

▫ Inadequacy and ambiguity of legal framework –ambiguous and conflicting messages are given to potential investors, often as a result of vested interests of powerful figures within the government. Important pieces of legislation in areas such as intellectual property and instruments to deal with WTO’s TRIPs etc are non-existent. The lack of rules and regulations that unambiguously protects the interests of investors exacerbates the ambiguity and makes the operating parameters of the investment climate hazy. Can someone tell me the latest policy on EEZ fishing licenses, for instance?

▫ Unclear entry requirements and non-transparent operating conditions – Another major deterrent to attracting FDI is the lack of clarity in rules concerning entry and operation requirements and conditions in major sectors of the economy. For instance, over the recent years MMA has had a policy of licensing banks of international repute based on their ratings. But I’m not too sure how Moody’s would rank the Mauritius Commercial Bank, the most recent bank to set-up shop in the Maldives. Another example of how not to do things is the way someone (Gawd, I cowed again!) tried to get commission from each and every FDI initiative that ever crossed the Trade ministry’s door.

▫ Insufficient coordination – Foreign Investment Board and the FISB, instead of proactively seeking investments, are passive in their approach and only serve to rubber stamp projects approved at the very top. In addition, insufficient coordination among multiple govt agencies and the bitter ‘turf wars’ within government agencies, often owing to rather petty political squabbles and vested interests, continue to derail our efforts to attract FDI.

▫ Lack of expertise –FISB’s mandate and authorities are somewhat nebulous and the resources of the agency are too thinly spread. As a result there are serious shortfalls of institutional capacity and expertise necessary to promote and implement projects at the agency.