Foreign direct investment to the Maldives almost exclusively flows to tourism and related sectors with the vast majority of investors based in the Asia Pacific region.
A UNDP analysis of 58 FDI transactions worth nearly US$2 billion between 1995 and 2021 found that 72% of all deals originated within the Asia Pacific region. More than half (54%) of investors were from four countries: Singapore, Japan, Thailand, and Sri Lanka.
“This represents a rather limited success for Maldives in attracting investments from other regions. Catalysing global investors outside Asia Pacific should be an important strategy in future policies and plans for investment expansion,” UNDP Maldives’ quarterly economic bulletin advised in an examination of the challenges faced in attracting private capital.
Unsurprisingly for an economy that is largely dependent on high-end tourism, the data showed that 65% of all deals (worth US$1.3 billion) represented acquisitions and mergers of hotels, resorts, and similar assets as “investor preferences heavily skewed towards a handful of sectors with close linkages to the tourism sector”. Investment worth US$500 million in the transport services sector represented ownership sales of airlines, airports, and marine transport.
“Investors appear to target sectors with potential for economies of scale with the opportunity to serve the increasing number of mostly well-to-do foreign tourists (in addition to resident population) while earning in foreign exchange to mitigate their risks,” the UNDP observed.
“Many of these investments also have limited linkages to the local economy. The data in fact shows that investments in more domestic-facing sectors represent less than 4% of the deals. Industries such as agriculture, fisheries, health, and essential utilities, which face typical supply-side issues and challenges in achieving economies of scale, have extremely limited traction in attracting FDI towards a range of areas related to blue and ocean economy. Such factors, however, are critical to sustaining both the tourist-facing and the domestic economy.”
According to the real estate and investment management firm JLL, the Maldives tourism sector received US$205.5 million as capital investment during the first half of 2022.
With its robust recovery since the reopening of borders in July 2020, the Maldives tourism industry “demonstrated its resilience in 2021 as a global gateway resort destination with hotels generally performing better than in 2019, despite the notable absence of Asian demand for much of the year,” JLL explained.
“That momentum has carried over into 2022 and in turn the market has continued to attract the interest of investors from Asia, Middle East and Europe. Overall, we are forecasting higher investment volumes this year on the back of marquee sales such as the W Maldives and Sheraton Full Moon Resort, with more sales currently underway for the second half of the year.”
JLL advised on the sale of W Maldives and Sheraton to the American private equity firm KSL Capital Partners earlier this year.