| Written by Ajay Makan, Minivan News, on 26-09-2007 21:34 |
The Maldives has been rated the easiest country in South Asia to do business by the World Bank for the second successive year. It has the sixtieth best business environment in the world, the Bank's Doing Busines report found.
But while India shot up the world ranking table twelve places, the Maldives has dropped seven in a year. And reforms to credit institutions advocated by the World Bank have not been implemented.
The Doing Business report is published annually by the World Bank’s private arm, the International Finance Corporation (IFC). The IFC ranked one hundred and seveny eight states according to ten economic indicators, including the ease of starting and closing a business, and protection offered to investors.
The Maldives' high regional ranking, explained here , is based on a business friendly tax environment, and a lax regulatory system for workers.
The Maldives is once again ranked the most tax-friendly country in the world for business. There is no corporation tax on profits, and employees pay no income tax.
Workers can be fired without notice or compensation even after many years of service. There is no limit to the number of hours businesses can demand their employees work, including at night and on weekends.
Richard Scurfield, World Bank representative in the Maldives, told Minivan News the World Bank, IMF and Asian Development Bank were discussing options to expand the tax base with the government.
The Maldives is rated the worst country in the world to register property. Land laws only allow individuals to buy and sell property, not companies.
An IFC official said discussions were ongoing to amend the Land Law Act 2002 to cover transactions between companies. “But as of this year's report, there had been no change in the law.”
The Maldives is the thirty fourth easiest country in the world to start a business. But this is not the case if you are poor.
The equivalent of 6% of the average gross national income (GNI), is required as capital to start a business. In contrast the average capital required in South Asia as a whole is less than 1% of (a much lower) average GNI.
And the Maldives is one of the worst countries in the world (ranked 135) for securing credit. An IFC report earlier this year said “improving credit institutions is a priority reform for the Maldives.”
But no action has been taken. IFC official Melissa Johns today said this is hurting would-be entrepreneurs who lack capital backing.
“There is no credit bureau in the country, requiring banks to rely on informal networks when judging the creditworthiness of potential borrowers. This hurts entrepreneurs with few social connections – typically women and youth – the most,” she said.
Richard Scurfield said the World Bank is "working with government to improve access to finance for small and medium sized enterprises," and is, "also keen to provide assistance to government with respect to the removal of any obstacles to the expansion of ownership and operation of businesses."
In a separate report by NGO Transparency International , also released today, the Maldives ranked joint eighty fourth out of one hundred and eighty countries for perceptions of public corruption. It was tied with Sri Lanka but way below both Bhutan and India.
Finance State Minister Rilwan Shareef said the government would respond to the Doing Business report tomorrow. But the Maldives' high ranking will give respite to the ministry after a rash of negative headlines about the country's finances. Courtesy: Minivan News
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