Doing Business 2020 Maldives Economy Profile Maldives Page 1 Doing Business 2020 Maldives Economy Profile of Maldives Doing Business 2020 Indicators (in order of appearance in the document) Starting a business Procedures, time, cost and paid-in minimum capital to start a limited liability company Dealing with construction permits Procedures, time and cost to complete all formalities to build a warehouse and the quality control and safety mechanisms in the construction permitting system Getting electricity Procedures, time and cost to get connected to the electrical grid, and the reliability of the electricity supply and the transparency of tariffs Registering property Procedures, time and cost to transfer a property and the quality of the land administration system Getting credit Movable collateral laws and credit information systems Protecting minority investors Minority shareholders’ rights in related-party transactions and in corporate governance Paying taxes Payments, time, total tax and contribution rate for a firm to comply with all tax regulations as well as postfiling processes Trading across borders Time and cost to export the product of comparative advantage and import auto parts Enforcing contracts Time and cost to resolve a commercial dispute and the quality of judicial processes Resolving insolvency Time, cost, outcome and recovery rate for a commercial insolvency and the strength of the legal framework for insolvency Employing workers Flexibility in employment regulation and redundancy cost Page 2 Doing Business 2020 Maldives About Doing Business The Doing Business project provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level. The Doing Business project, launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle. Doing Business captures several important dimensions of the regulatory environment as it applies to local firms. It provides quantitative indicators on regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of employing workers. Although Doing Business does not present rankings of economies on the employing workers indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business, it does present the data for these indicators. By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages economies to compete towards more efficient regulation; offers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each economy. In addition, Doing Business offers detailed subnational studies, which exhaustively cover business regulation and reform in different cities and regions within a nation. These studies provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the indicator areas. Selected cities can compare their business regulations with other cities in the economy or region and with the 190 economies that Doing Business has ranked. The first Doing Business study, published in 2003, covered 5 indicator sets and 133 economies. This year’s study covers 11 indicator sets and 190 economies. Most indicator sets refer to a case scenario in the largest business city of each economy, except for 11 economies that have a population of more than 100 million as of 2013 (Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) where Doing Business also collected data for the second largest business city. The data for these 11 economies are a population-weighted average for the 2 largest business cities. The project has benefited from feedback from governments, academics, practitioners and reviewers. The initial goal remains: to provide an objective basis for understanding and improving the regulatory environment for business around the world. To learn more about Doing Business please visit doingbusiness.org Page 3 Doing Business 2020 Maldives Ease of Doing Business in Region South Asia DB RANK DB SCORE Maldives Income Category Upper middle income Population 515,696 147 53.3 City Covered Malé Rankings on Doing Business topics - Maldives 63 74 119 124 144 141 149 147 157 176 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Topic Scores 89.2 73.0 55.6 40.0 35.0 32.0 66.4 55.9 52.5 33.3 Starting a Business (rank) 74 Getting Credit (rank) 144 Trading across Borders (rank) 157 Score of starting a business (0-100) 89.2 Score of getting credit (0-100) 35.0 Score of trading across borders (0-100) 55.9 Procedures (number) 6 Strength of legal rights index (0-12) 2 Time to export Time (days) 12 Depth of credit information index (0-8) 5 Documentary compliance (hours) 48 Cost (number) 4.1 Credit registry coverage (% of adults) 22.4 Border compliance (hours) 42 Paid-in min. capital (% of income per capita) 1.4 Credit bureau coverage (% of adults) 0.0 Cost to export Documentary compliance (USD) 300 Dealing with Construction Permits (rank) 63 Protecting Minority Investors (rank) 147 Border compliance (USD) 596 Score of dealing with construction permits (0-100) 73.0 Score of protecting minority investors (0-100) 32.0 Time to export Procedures (number) 10 Extent of disclosure index (0-10) 0.0 Documentary compliance (hours) 61 Time (days) 140 Extent of director liability index (0-10) 8.0 Border compliance (hours) 100 Cost (% of warehouse value) 0.4 Ease of shareholder suits index (0-10) 8.0 Cost to export Building quality control index (0-15) 7.0 Extent of shareholder rights index (0-6) 0.0 Documentary compliance (USD) 180 Extent of ownership and control index (0-7) 0.0 Border compliance (USD) 981 Getting Electricity (rank) 149 Extent of corporate transparency index (0-7) 0.0 Score of getting electricity (0-100) 55.6 Enforcing Contracts (rank) 124 Procedures (number) 6 Paying Taxes (rank) 119 Score of enforcing contracts (0-100) 52.5 Time (days) 75 Score of paying taxes (0-100) 66.4 Time (days) 760 Cost (% of income per capita) 234.6 Payments (number per year) 17 Cost (% of claim value) 18.5 Reliability of supply and transparency of tariff index (0-8) 0 Time (hours per year) 391 Quality of judicial processes index (0-18) 5.5 Total tax and contribution rate (% of profit) 30.2 Registering Property (rank) 176 Postfiling index (0-100) 47.5 Resolving Insolvency (rank) 141 Score of registering property (0-100) 40.0 Score of resolving insolvency (0-100) 33.3 Procedures (number) 6 Recovery rate (cents on the dollar) 50.2 Time (days) 57 Time (years) 1.5 Cost (% of property value) 15.7 Cost (% of estate) 4.0 Quality of the land administration index (0-30) 8.5 Outcome (0 as piecemeal sale and 1 as going 0 concern) Strength of insolvency framework index (0-16) 2.0 Page 4 Doing Business 2020 Maldives Starting a Business This topic measures the number of procedures, time, cost and paid-in minimum capital requirement for a small- to medium-sized limited liability company to start up and formally operate in each economy’s largest business city. To make the data comparable across 190 economies, Doing Business uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times the income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals. Starting a Business considers two types of local limited liability companies that are identical in all aspects, except that one company is owned by 5 married women and the other by 5 married men. The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally start and formally operate a company To make the data comparable across economies, several assumptions about the business and the (number) procedures are used. It is assumed that any required information is readily available and that the entrepreneur will pay no bribes. • Preregistration (for example, name verification or reservation, notarization) The business: • Registration in the economy’s largest business city -Is a limited liability company (or its legal equivalent). If there is more than one type of limited • Postregistration (for example, social security registration, liability company in the economy, the limited liability form most common among domestic firms is company seal) chosen. Information on the most common form is obtained from incorporation lawyers or the statistical office. • Obtaining approval from spouse to start a business or to leave -Operates in the economy’s largest business city. For 11 economies the data are also collected for the home to register the company the second largest business city. • Obtaining any gender specific document for company -Performs general industrial or commercial activities such as the production or sale to the public of registration and operation or national identification card goods or services. The business does not perform foreign trade activities and does not handle products subject to a special tax regime, for example, liquor or tobacco. It is not using heavily Time required to complete each procedure (calendar days) polluting production processes. • Does not include time spent gathering information -Does not qualify for investment incentives or any special benefits. -Is 100% domestically owned. • Each procedure starts on a separate day (2 procedures cannot -Has five business owners, none of whom is a legal entity. One business owner holds 30% of the start on the same day) company shares, two owners have 20% of shares each, and two owners have 15% of shares • Procedures fully completed online are recorded as ½ day each. -Is managed by one local director. • Procedure is considered completed once final document is received -Has between 10 and 50 employees one month after the commencement of operations, all of them domestic nationals. • No prior contact with officials -Has start-up capital of 10 times income per capita. -Has an estimated turnover of at least 100 times income per capita. Cost required to complete each procedure (% of income per -Leases the commercial plant or offices and is not a proprietor of real estate. capita) -Has an annual lease for the office space equivalent to one income per capita. • Official costs only, no bribes -Is in an office space of approximately 929 square meters (10,000 square feet). -Has a company deed that is 10 pages long. • No professional fees unless services required by law or commonly used in practice The owners: Paid-in minimum capital (% of income per capita) -Have reached the legal age of majority and are capable of making decisions as an adult. If there • Funds deposited in a bank or with third party before registration is no legal age of majority, they are assumed to be 30 years old. or up to 3 months after incorporation -Are in good health and have no criminal record. -Are married, the marriage is monogamous and registered with the authorities. -Where the answer differs according to the legal system applicable to the woman or man in question (as may be the case in economies where there is legal plurality), the answer used will be the one that applies to the majority of the population. Page 5 Doing Business 2020 Maldives Starting a Business - Maldives Standardized Company Legal form Limited Liability Company Paid-in minimum capital requirement MVR 2,000 City Covered Malé Indicator Maldives South Asia OECD high Best Regulatory income Performance Procedure – Men (number) 6 7.1 4.9 1 (2 Economies) Time – Men (days) 12 14.5 9.2 0.5 (New Zealand) Cost – Men (% of income per capita) 4.1 8.3 3.0 0.0 (2 Economies) Procedure – Women (number) 6 7.3 4.9 1 (2 Economies) Time – Women (days) 12 14.6 9.2 0.5 (New Zealand) Cost – Women (% of income per capita) 4.1 8.3 3.0 0.0 (2 Economies) Paid-in min. capital (% of income per capita) 1.4 0.2 7.6 0.0 (120 Economies) Figure – Starting a Business in Maldives – Score 70.6 88.4 98.0 99.7 Procedures Time Cost Paid-in min. capital Figure – Starting a Business in Maldives and comparator economies – Ranking and Score DB 2020 Starting a Business Score 0 100 94.5: Mauritius (Rank: 20) 89.2: Maldives (Rank: 74) 86.3: Regional Average (South Asia) 81.6: India (Rank: 136) 81.2: Indonesia (Rank: 140) 78.8: Seychelles (Rank: 147) Note: The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. Page 6 Doing Business 2020 Maldives Figure – Starting a Business in Maldives – Procedure, Time and Cost Time (days) Cost (% of income per capita) 12 4.5 4 Cost (% of income per capita) 10 3.5 8 3 Time (days) 2.5 6 2 4 1.5 1 2 0.5 0 0 1 2 3 4 5 6 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 7 Doing Business 2020 Maldives Details – Starting a Business in Maldives – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Reserve a unique company name and obtain the standard forms for incorporation 1 day no charge Agency : Registrar of Companies The Companies Act 1996 governs the rules on acceptable company names. To make the incorporation process easier, the Registrar of Companies provides standard memorandum and articles of association. The standard forms are downloadable on the web. Name reservation can be done both in person and online. In person reservation is usually done on the same day, while online applications take approximately 24 hours. No fees apply for the name confirmation. 2 Pay registration fees 1 day fees included in procedure Agency : Ministry of Economic Development 3 Since January 2010, registration fees are paid at the Ministry of Economic Development. 3 Register at the Registrar of Companies and Apply for a Tax Identification Number (TIN) 5 days MVR 2,000 annual Agency : Registrar of Companies company fee + registration The company must apply for registration with the Companies Registrar, by submitting the following fee (see the comment) + documents: MVR 500 stamp duty • Company registration application form; • Name search approval form • Memorandum of Association – 2 copies • Articles of Association – 2 copies • Acceptance letter from Managing Director • Acceptance letter from Company Secretary • National Identification card copies of all relevant individuals (shareholders, company secretary, board of directors); The forms may be printed at: http://trade.gov.mv/beta/?page=company-registration The schedule of the Companies Act 1996 sets the company registration fees based on a sliding scale of authorized share capital. If the authorized capital is MVR 10,000 or less, the fee is MVR 1,000. If authorized capital is more than MVR 10,000, an additional fee is payable on every MVR 4,000 or part thereof of the authorized capital, as follows: • Between MVR 10,000 and MVR 500,000: MVR 10. • Between MVR 500,000 and MVR 4,000,000: MVR 4. • Between MVR 4,000,000 and MVR 8,000,000: MVR 2. • Above MVR 8,000,000: MVR 1. In addition to this sliding-scale fee, public companies must pay an annual fee of MVR 10,000 before the end of March every year; private companies must pay MVR 2,000. The stamp duty is MVR 500, payable at registration. Upon approval of registration, the company will receive the origination certificate, registration letter, endorsed Memorandum and Articles of Association. When the company information is submitted to the Companies Registrar, the Registrar automatically submits Taxpayer registration (Maldives Inland Revenue Authority Form No. 101S) to MIRA for tax registration. 4 Make a company seal 1 day MVR 250 Agency : Seal maker The Companies Act 1996 requires all companies to make a company seal and register it with the Registrar of Companies. 5 Register the company seal with the Registrar of Companies 1 day no charge Agency : Registrar of Companies Business founders must register the company seal with the Registrar of Companies. There is an option to register the seal online through the Business Portal, which takes approximately 24 hours. In person registration is done on the same day. 6 Register with the Maldives Pension Administration Office (MPAO) 3 days no charge Agency : Maldives Pension Administration Office According to the Maldives Pension Act of 2009. All employers must register at the Maldives Pension Administration Office (MPAO). They must do so by visiting the offices of the MPAO in Male. All required forms are available online at http://pension.gov.mv/ Takes place simultaneously with previous procedure. Page 8 Doing Business 2020 Maldives Dealing with Construction Permits This topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required notifications, requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certification requirements. The most recent round of data collection was completed in May 2019. See the methodology for more information What the indicators measure Case study assumptions Procedures to legally build a warehouse (number) To make the data comparable across economies, several assumptions about the construction company, the warehouse project and the utility connections are used. • Submitting all relevant documents and obtaining all necessary clearances, licenses, permits and certificates The construction company (BuildCo): • Submitting all required notifications and receiving all necessary - Is a limited liability company (or its legal equivalent) and operates in the economy’s largest inspections business city. For 11 economies the data are also collected for the second largest business city. • Obtaining utility connections for water and sewerage - Is 100% domestically and privately owned; has five owners, none of whom is a legal entity. Has a licensed architect and a licensed engineer, both registered with the local association of architects • Registering and selling the warehouse after its completion or engineers. BuildCo is not assumed to have any other employees who are technical or licensed Time required to complete each procedure (calendar days) experts, such as geological or topographical experts. - Owns the land on which the warehouse will be built and will sell the warehouse upon its • Does not include time spent gathering information completion. • Each procedure starts on a separate day—though procedures that can be fully completed online are an exception to this rule The warehouse: • Procedure is considered completed once final document is - Will be used for general storage activities, such as storage of books or stationery. received - Will have two stories, both above ground, with a total constructed area of approximately 1,300.6 square meters (14,000 square feet). Each floor will be 3 meters (9 feet, 10 inches) high and will be • No prior contact with officials located on a land plot of approximately 929 square meters (10,000 square feet) that is 100% owned by BuildCo, and the warehouse is valued at 50 times income per capita. Cost required to complete each procedure (% of income per - Will have complete architectural and technical plans prepared by a licensed architect. If capita) preparation of the plans requires such steps as obtaining further documentation or getting prior • Official costs only, no bribes approvals from external agencies, these are counted as procedures. - Will take 30 weeks to construct (excluding all delays due to administrative and regulatory Building quality control index (0-15) requirements). • Quality of building regulations (0-2) The water and sewerage connections: • Quality control before construction (0-1) - Will be 150 meters (492 feet) from the existing water source and sewer tap. If there is no water • Quality control during construction (0-3) delivery infrastructure in the economy, a borehole will be dug. If there is no sewerage • Quality control after construction (0-3) infrastructure, a septic tank in the smallest size available will be installed or built. - Will have an average water use of 662 liters (175 gallons) a day and an average wastewater flow • Liability and insurance regimes (0-2) of 568 liters (150 gallons) a day. Will have a peak water use of 1,325 liters (350 gallons) a day and • Professional certifications (0-4) a peak wastewater flow of 1,136 liters (300 gallons) a day. - Will have a constant level of water demand and wastewater flow throughout the year; will be 1 inch in diameter for the water connection and 4 inches in diameter for the sewerage connection. Page 9 Doing Business 2020 Maldives Dealing with Construction Permits - Maldives Standardized Warehouse Estimated value of warehouse MVR 7,250,827.40 City Covered Malé Indicator Maldives South Asia OECD high Best Regulatory income Performance Procedures (number) 10 14.6 12.7 None in 2018/19 Time (days) 140 149.7 152.3 None in 2018/19 Cost (% of warehouse value) 0.4 12.5 1.5 None in 2018/19 Building quality control index (0-15) 7.0 9.4 11.6 15.0 (6 Economies) Figure – Dealing with Construction Permits in Maldives – Score 80.0 67.1 98.1 46.7 Procedures Time Cost Building quality control index Figure – Dealing with Construction Permits in Maldives and comparator economies – Ranking and Score DB 2020 Dealing with Construction Permits Score 0 100 85.8: Mauritius (Rank: 8) 78.7: India (Rank: 27) 73.0: Maldives (Rank: 63) 67.3: Seychelles (Rank: 106) 66.8: Indonesia (Rank: 110) 65.3: Regional Average (South Asia) Note: The ranking of economies on the ease of dealing with construction permits is determined by sorting their scores for dealing with construction permits. These scores are the simple average of the scores for each of the component indicators. Page 10 Doing Business 2020 Maldives Figure – Dealing with Construction Permits in Maldives – Procedure, Time and Cost Time (days) Cost (% of warehouse value) 140 0.3 120 0.25 Cost (% of warehouse value) 100 0.2 Time (days) 80 0.15 60 0.1 40 0.05 20 0 0 1 2 *3 4 5 6 7 8 9 10 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 11 Doing Business 2020 Maldives Figure – Dealing with Construction Permits in Maldives and comparator economies – Measure of Quality 16 14.5 13.8 14.0 14 12 Index score 10 9.4 8 7.0 6.0 6 4 2 0 Maldives India Indonesia Mauritius Seychelles South Asia Details – Dealing with Construction Permits in Maldives – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Request and obtain permit to block the road/carry out site works 7 days no charge Agency : Ministry of Housing and Infrastructure A permit to block the road is required from the Ministry of Housing and Infrastructure. If a complete road block is not required, but if the site works would interrupt or affect the pedestrian or road traffic, a permit to carry out site works is required. For both permits, relevant sign boards are provided by the Ministry of Housing and Infrastructure and are required to be displayed at the work site. 2 Request approval from the Ministry of Housing and Infrastructure, depending on the road 3 days no charge width Agency : Ministry of Housing and Infrastructure The officials will check whether the excavation works are done within the defined boundaries. 3 Obtain approval of drawings from architectural and structural checkers 1 day USD 1,301 Agency : Private expert According to the Male’ Planning Regulation of June 11, 2014, both architectural and structural drawings and plans must be approved and stamped by licensed architectural and structural checkers. 4 Obtain building permit 62 days MVR 3,902 Agency : Ministry of Housing and Infrastructure BuildCo must submit an application to the Ministry of Housing and Infrastructure (Building Approval Section), which approves the architectural and structural drawings. In the case of a building with two or more floors, Ministry of Housing and Infrastructure also sends the drawings to the Ministry of Construction and Public Infrastructure for its approval. The cost is MVR 2.00 per sq. m. Significant under staffing of engineers can be a hurdle for companies in need of timely completion of their applications. Only two engineers service the entire city. 5 Receive set out inspection from the Ministry of Housing and Infrastructure 1 day no charge Agency : Ministry of Housing and Infrastructure The Ministry of Housing and Infrastructure (Building Approval Section) checks the plot of land for any work done, height of adjacent houses, and width of the road for consistency with the measurements given in the drawings. 6 Receive foundation inspection from the Ministry of Housing and Infrastructure 1 day no charge Agency : Ministry of Housing and Infrastructure The Ministry of Housing and Infrastructure will inspect the foundation to ensure that it does not encroach on the other property. It will not conduct any other inspections during construction since the company manages that process internally through a licensed professional. 7 Apply for water and sewerage connection 1 day no charge Agency : Malé Water and Sewage Company BuildCo must submit an application for connecting the warehouse to the main drinking water and sewage systems, based on the utility plans for the warehouse. The following documents must be provided: - National Identity Cards - The application forms - one for water and one for sewage - The plumbing drawings of the building. 8 Receive inspection by Malé Water and Sewage Company 1 day no charge Agency : Malé Water and Sewage Company 9 Obtain water and sewage connection 34 days MVR 3,000 Agency : Malé Water and Sewage Company 10 Obtain occupancy permit from Maldives Housing Urban Development Board 30 days no charge Agency : Maldives Housing Urban Development Board After completion of the construction work, BuildCo must request an occupancy permit. Takes place simultaneously with previous procedure. Page 12 Doing Business 2020 Maldives Details – Dealing with Construction Permits in Maldives – Measure of Quality Answer Score Building quality control index (0-15) 7.0 Quality of building regulations index (0-2) 2.0 How accessible are building laws and regulations in your economy? (0-1) Available online; Free 1.0 of charge. Which requirements for obtaining a building permit are clearly specified in the building regulations or on any List of required 1.0 accessible website, brochure or pamphlet? (0-1) documents; Fees to be paid; Required preapprovals. Quality control before construction index (0-1) 1.0 Which third-party entities are required by law to verify that the building plans are in compliance with existing Licensed architect; 1.0 building regulations? (0-1) Licensed engineer; Private firm. Quality control during construction index (0-3) 2.0 What types of inspections (if any) are required by law to be carried out during construction? (0-2) Inspections at various 1.0 phases. Do legally mandated inspections occur in practice during construction? (0-1) Mandatory 1.0 inspections are always done in practice. Quality control after construction index (0-3) 0.0 Is there a final inspection required by law to verify that the building was built in accordance with the approved Final inspection is not 0.0 plans and regulations? (0-2) required by law. Do legally mandated final inspections occur in practice? (0-1) Final inspection does 0.0 not always occur in practice. Liability and insurance regimes index (0-2) 0.0 Which parties (if any) are held liable by law for structural flaws or problems in the building once it is in use No party is held liable 0.0 (Latent Defect Liability or Decennial Liability)? (0-1) under the law. Which parties (if any) are required by law to obtain an insurance policy to cover possible structural flaws or No party is required 0.0 problems in the building once it is in use (Latent Defect Liability Insurance or Decennial Insurance)? (0-1) by law to obtain insurance . Professional certifications index (0-4) 2.0 What are the qualification requirements for the professional responsible for verifying that the architectural plans Minimum number of 2.0 or drawings are in compliance with existing building regulations? (0-2) years of experience; University degree in architecture or engineering; Passing a certification exam. What are the qualification requirements for the professional who supervises the construction on the ground? (0- There are no specific 0.0 2) requirements. Page 13 Doing Business 2020 Maldives Getting Electricity This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tariffs index measures reliability of supply, transparency of tariffs and the price of electricity. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to obtain an electricity connection (number) To make the data comparable across economies, several assumptions about the warehouse, the electricity connection and the monthly consumption are used. • Submitting all relevant documents and obtaining all necessary clearances and permits The warehouse: • Completing all required notifications and receiving all necessary - Is owned by a local entrepreneur and is used for storage of goods. inspections - Is located in the economy’s largest business city. For 11 economies the data are also collected for • Obtaining external installation works and possibly purchasing the second largest business city. material for these works - Is located in an area where similar warehouses are typically located and is in an area with no physical constraints. For example, the property is not near a railway. • Concluding any necessary supply contract and obtaining final - Is a new construction and is being connected to electricity for the first time. supply - Has two stories with a total surface area of approximately 1,300.6 square meters (14,000 square Time required to complete each procedure (calendar days) feet). The plot of land on which it is built is 929 square meters (10,000 square feet). • Is at least 1 calendar day The electricity connection: • Each procedure starts on a separate day - Is a permanent one with a three-phase, four-wire Y connection with a subscribed capacity of 140- • Does not include time spent gathering information kilo-volt-ampere (kVA) with a power factor of 1, when 1 kVA = 1 kilowatt (kW). - Has a length of 150 meters. The connection is to either the low- or medium-voltage distribution • Reflects the time spent in practice, with little follow-up and no network and is either overhead or underground, whichever is more common in the area where the prior contact with officials warehouse is located and requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other Cost required to complete each procedure (% of income per owners’ private property because the warehouse has access to a road. capita) - Does not require work to install the internal wiring of the warehouse. This has already been • Official costs only, no bribes completed up to and including the customer’s service panel or switchboard and the meter base. • Value added tax excluded The monthly consumption: The reliability of supply and transparency of tariffs index (0-8) - It is assumed that the warehouse operates 30 days a month from 9:00 a.m. to 5:00 p.m. (8 hours • Duration and frequency of power outages (0–3) a day), with equipment utilized at 80% of capacity on average and that there are no electricity cuts • Tools to monitor power outages (0–1) (assumed for simplicity reasons) and the monthly energy consumption is 26,880 kilowatt-hours (kWh); hourly consumption is 112 kWh. • Tools to restore power supply (0–1) - If multiple electricity suppliers exist, the warehouse is served by the cheapest supplier. • Regulatory monitoring of utilities’ performance (0–1) - Tariffs effective in January of the current year are used for calculation of the price of electricity for the warehouse. Although January has 31 days, for calculation purposes only 30 days are used. • Financial deterrents limiting outages (0–1) • Transparency and accessibility of tariffs (0–1) Price of electricity (cents per kilowatt-hour)* • Price based on monthly bill for commercial warehouse in case study *Note: Doing Business measures the price of electricity, but it is not included in the ease of doing business score nor in the ranking on the ease of getting electricity. Page 14 Doing Business 2020 Maldives Getting Electricity - Maldives Standardized Connection Name of utility State Electric Co. Ltd Price of electricity (US cents per kWh) 39.4 City Covered Malé Indicator Maldives South Asia OECD high Best Regulatory income Performance Procedures (number) 6 5.5 4.4 3 (28 Economies) Time (days) 75 86.1 74.8 18 (3 Economies) Cost (% of income per capita) 234.6 952.6 61.0 0.0 (3 Economies) Reliability of supply and transparency of tariff index (0-8) 0 2.7 7.4 8 (26 Economies) Figure – Getting Electricity in Maldives – Score 50.0 75.2 97.1 0.0 Procedures Time Cost Reliability of supply and transparency of tariff index Figure – Getting Electricity in Maldives and comparator economies – Ranking and Score DB 2020 Getting Electricity Score 0 100 89.4: India (Rank: 22) 88.0: Mauritius (Rank: 28) 87.3: Indonesia (Rank: 33) 71.3: Seychelles (Rank: 104) 62.6: Regional Average (South Asia) 55.6: Maldives (Rank: 149) Note: The ranking of economies on the ease of getting electricity is determined by sorting their scores for getting electricity. These scores are the simple average of the scores for all the component indicators except the price of electricity. Figure – Getting Electricity in Maldives – Procedure, Time and Cost Time (days) Cost (% of income per capita) 180 70 160 Cost (% of income per capita) 60 140 50 120 Time (days) 100 40 80 30 60 20 40 10 20 0 0 1 2 3 4 5 6 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures Page 15 Doing Business 2020 Maldives reflected here, see the summary below. Figure – Getting Electricity in Maldives and comparator economies – Measure of Quality 7 6 6 6 6 5 Index score 4 3 3 2.7 2 1 0 0 Maldives India Indonesia Mauritius Seychelles South Asia Page 16 Doing Business 2020 Maldives Details – Getting Electricity in Maldives – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Get load calculation and low-voltage panel drawings approved 3 calendar days MVR 0 Agency : Maldives Energy Authority The process of getting the drawings approved by MEA is that the customer has to submit the detail LV panel drawings and the load calculation to MEA with a letter asking to approve the drawings. The approval process normally takes 2-4 working days and is free of charge. This is a requirement to be provided along with the application form for electricity. 2 Apply for and receive electrical installation testing by utility engineer 9 calendar days MVR 100 Agency : STELCO The form for electrical installation testing application is available on the STELCO website. The electrical installation testing certification is done solely by STELCO engineers. 3 Submit connection application to STELCO and await estimate 14 calendar days MVR 0 Agency : STELCO The following documents need to be attached to application form: Installation testing application signed by a licensed electrical contractor. Electricity Connection Application signed by the owner, together with his national ID card (if not owner then please provide a valid power of attorney and original national ID card), Registration documents of the plot issued by Male' Municipality, Load Calculation of the premise with LV panel drawings which are both approved by Maldives Energy Authority. 4 Purchase materials, including low-voltage panel 28 calendar days MVR 90,000 Agency : Customer Customer has to purchase the LV panel (meter is included in the panel). Customer may also buy the cables, but utility also sells that, and customer can either pay utility for it or someone else. 5 Request and receive meter testing by STELCO 7 calendar days MVR 50 Agency : STELCO The LV panel and meter has to be tested by STELCO, before they conduct external connection works. 6 Obtain external works, meter installation and turn-on of electricity 14 calendar days MVR 250,000 Agency : STELCO The meter is installed and tested at the end of external works with no separate procedure as the customer is not involved. Electricity is turned on by the utility automatically after all external connection works are complete. Takes place simultaneously with previous procedure. Page 17 Doing Business 2020 Maldives Details – Getting Electricity in Maldives – Measure of Quality Answer Reliability of supply and transparency of tariff index (0-8) 0 Total duration and frequency of outages per customer a year (0-3) 0 System average interruption duration index (SAIDI) 168.0 System average interruption frequency index (SAIFI) 2.5 What is the minimum outage time (in minutes) that the utility considers for the calculation of SAIDI/SAIFI 5.0 Mechanisms for monitoring outages (0-1) 0 Does the distribution utility use automated tools to monitor outages? No Mechanisms for restoring service (0-1) 0 Does the distribution utility use automated tools to restore service? No Regulatory monitoring (0-1) 0 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability of supply? No Financial deterrents aimed at limiting outages (0-1) 0 Does the utility either pay compensation to customers or face fines by the regulator (or both) if outages exceed a certain cap? No Communication of tariffs and tariff changes (0-1) 1 Are effective tariffs available online? Yes Link to the website, if available online http://www.stelco.com.mv/ tariff-rates#tariff-rates- male-region-commercial Are customers notified of a change in tariff ahead of the billing cycle? Yes Note: If the duration and frequency of outages is 100 or less, the economy is eligible to score on the Reliability of supply and transparency of tariff index. If the duration and frequency of outages is not available, or is over 100, the economy is not eligible to score on the index. If the minimum outage time considered for SAIDI/SAIFI is over 5 minutes, the economy is not eligible to score on the index. Page 18 Doing Business 2020 Maldives Registering Property This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has five dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally transfer title on immovable property To make the data comparable across economies, several assumptions about the parties to the (number) transaction, the property and the procedures are used. • Preregistration procedures (for example, checking for liens, The parties (buyer and seller): notarizing sales agreement, paying property transfer taxes) - Are limited liability companies (or the legal equivalent). • Registration procedures in the economy's largest business city. - Are located in the periurban (that is, on the outskirts of the city but still within its official limits) • Postregistration procedures (for example, filling title with area of the economy’s largest business city. For 11 economies the data are also collected for the municipality) second largest business city. - Are 100% domestically and privately owned. Time required to complete each procedure (calendar days) - Perform general commercial activities. • Does not include time spent gathering information The property (fully owned by the seller): • Each procedure starts on a separate day - though procedures - Has a value of 50 times income per capita, which equals the sale price. that can be fully completed online are an exception to this rule - Is fully owned by the seller. • Procedure is considered completed once final document is - Has no mortgages attached and has been under the same ownership for the past 10 years. received - Is registered in the land registry or cadastre, or both, and is free of title disputes. • No prior contact with officials - Is located in a periurban commercial zone (that is, on the outskirts of the city but still within its official limits), and no rezoning is required. Cost required to complete each procedure (% of property - Consists of land and a building. The land area is 557.4 square meters (6,000 square feet). A two- value) story warehouse of 929 square meters (10,000 square feet) is located on the land. The warehouse is 10 years old, is in good condition, has no heating system and complies with all safety standards, • Official costs only (such as administrative fees, duties and building codes and legal requirements. The property, consisting of land and building, will be taxes). transferred in its entirety. • Value Added Tax, Capital Gains Tax and illicit payments are - Will not be subject to renovations or additional construction following the purchase. excluded - Has no trees, natural water sources, natural reserves or historical monuments of any kind. - Will not be used for special purposes, and no special permits, such as for residential use, Quality of land administration index (0-30) industrial plants, waste storage or certain types of agricultural activities, are required. • Reliability of infrastructure index (0-8) - Has no occupants, and no other party holds a legal interest in it. • Transparency of information index (0–6) • Geographic coverage index (0–8) • Land dispute resolution index (0–8) • Equal access to property rights index (-2–0) Page 19 Doing Business 2020 Maldives Registering Property - Maldives Indicator Maldives South Asia OECD high Best Regulatory income Performance Procedures (number) 6 6.9 4.7 1 (5 Economies) Time (days) 57 107.8 23.6 1 (2 Economies) Cost (% of property value) 15.7 7.0 4.2 0.0 (Saudi Arabia) Quality of the land administration index (0-30) 8.5 9.1 23.2 None in 2018/19 Figure – Registering Property in Maldives – Score 58.3 73.2 0.0 28.3 Procedures Time Cost Quality of the land administration index Figure – Registering Property in Maldives and comparator economies – Ranking and Score DB 2020 Registering Property Score 0 100 82.5: Mauritius (Rank: 23) 70.8: Seychelles (Rank: 65) 60.0: Indonesia (Rank: 106) 47.6: India (Rank: 154) 47.6: Regional Average (South Asia) 40.0: Maldives (Rank: 176) Note: The ranking of economies on the ease of registering property is determined by sorting their scores for registering property. These scores are the simple average of the scores for each of the component indicators. Page 20 Doing Business 2020 Maldives Figure – Registering Property in Maldives – Procedure, Time and Cost Time (days) Cost (% of property value) 16 50 14 Cost (% of property value) 12 40 Time (days) 10 30 8 6 20 4 10 2 0 0 1 2 *3 *4 5 6 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 21 Doing Business 2020 Maldives Figure – Registering Property in Maldives and comparator economies – Measure of Quality 25 22.5 21.0 20 Index score 15.5 15 10.8 10 8.5 9.1 5 0 Maldives India Indonesia Mauritius Seychelles South Asia Details – Registering Property in Maldives – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Check for encumbrances 7 days no charge Agency : Ministry of Housing and Infrastructure Due diligence searches may be lodged by anyone (including individuals) at the Ministry of Housing and Infrastructure in order to check whether any mortgages have been registered against a property. The request must include a consent letter allowing the Ministry of Housing and Infrastructure to share the information with the person requesting the search. 2 Apply to the Civil Court for the sale of the Land 30 days MVR 50,025; (MRF Agency : Civil Court 45,000- 55,000 + MRF 25 Lawyer fees may be applicable and may vary from lawyer to lawyer. Legal fees are estimated to for court administrative be in the range of MRF 45,000- 55,000 for all court transactions in relation to the property sale. fees) The documents submitted to the Civil Court for this procedure include: 1. Duly completed Land Sale Application Form of the Civil Court 2. Legal representation documents (Board Resolutions of companies appointing counsel and court formalities) 3. Registration Certificate of the Buyer and the Seller 4. Copy of the Title Deed/Land Registration Certificate 3 Payment of the property transfer tax at the Inland Revenue Authority and obtaining a tax 14 days MVR 1,087,624.11; (15% payment proof of the value of the Agency : Inland Revenue Authority property) For taxation purposes, the value of the land is either the actual sale price of the land or the total price of the land calculated on the basis of MRF 1,400 per square feet, whichever total value is higher. This tax is paid at the Inland Revenue Authority. Time required is between 7 - 14 working days. 4 Submit detailed outline chart to Civil Court 3 days no charge Agency : Ministry of Housing and Infrastructure The detailed chart includes outlines of neighboring houses as well. The outline charts are done by the Ministry of Housing and Infrastructure. 5 Obtain the Civil Court Report or Judgment in relation to the sale of property 15 days Lawyer fees and court Agency : Civil Court fees of MVR 20 + MVR 1 Lawyer fees may be applicable. Legal fees are estimated to be in the range of MRF 45,000- per page of the judgment 55,000 for all court transactions in relation to the property sale. The Court confirms that the report (included in transaction of property is completed and transferred to a new owner. procedure 2) 6 Apply for registration at the Male' City Counsel 5 days MVR 100; (MRF 50- for Agency : Male' City Counsel issuing a Registry The documents that need to be submitted for the above purpose include: certificate MRF 50- for 1. Originals of the registry/title documents of the current owner. revenue stamp) 2. Proof of payment of tax to the Government. 3. The Civil Court Report or Judgment in relation to the sale of property. Takes place simultaneously with previous procedure. Page 22 Doing Business 2020 Maldives Details – Registering Property in Maldives – Measure of Quality Answer Score Quality of the land administration index (0-30) 8.5 Reliability of infrastructure index (0-8) 0.0 Type of land registration system in the economy: Title Registration System What is the institution in charge of immovable property registration? Male' City Counsel In what format are past and newly issued land records kept at the immovable property registry of the largest Paper 0.0 business city of the economy —in a paper format or in a computerized format (scanned or fully digital)? Is there a comprehensive and functional electronic database for checking for encumbrances (liens, mortgages, No 0.0 restrictions and the like)? Institution in charge of the plans showing legal boundaries in the largest business city: Ministry of Housing and Infrastructure In what format are past and newly issued cadastral plans kept at the mapping agency of the largest business Paper 0.0 city of the economy—in a paper format or in a computerized format (scanned or fully digital)? Is there an electronic database for recording boundaries, checking plans and providing cadastral information No 0.0 (geographic information system)? Is the information recorded by the immovable property registration agency and the cadastral or mapping agency Separate databases 0.0 kept in a single database, in different but linked databases or in separate databases? Do the immovable property registration agency and cadastral or mapping agency use the same identification No 0.0 number for properties? Transparency of information index (0–6) 0.0 Who is able to obtain information on land ownership at the agency in charge of immovable property registration Only intermediaries 0.0 in the largest business city? and interested parties Is the list of documents that are required to complete any type of property transaction made publicly available– Yes, in person 0.0 and if so, how? Link for online access: Is the applicable fee schedule for any type of property transaction at the agency in charge of immovable property Yes, in person 0.0 registration in the largest business city made publicly available–and if so, how? Link for online access: Does the agency in charge of immovable property registration agency formally commit to deliver a legally No 0.0 binding document that proves property ownership within a specific timeframe –and if so, how does it communicate the service standard? Link for online access: Is there a specific and independent mechanism for filing complaints about a problem that occurred at the agency No 0.0 in charge of immovable property registration? Contact information: Are there publicly available official statistics tracking the number of transactions at the immovable property No 0.0 registration agency? Number of property transfers in the largest business city in 2018: Who is able to consult maps of land plots in the largest business city? Only intermediaries 0.0 and interested parties Is the applicable fee schedule for accessing maps of land plots made publicly available—and if so, how? Yes, in person 0.0 Link for online access: Does the cadastral/mapping agency formally specifies the timeframe to deliver an updated cadastral plan—and No 0.0 if so, how does it communicate the service standard? Link for online access: Page 23 Doing Business 2020 Maldives Is there a specific and independent mechanism for filing complaints about a problem that occurred at the No 0.0 cadastral or mapping agency? Contact information: Geographic coverage index (0–8) 4.0 Are all privately held land plots in the largest business city formally registered at the immovable property Yes 2.0 registry? Are all privately held land plots in the economy formally registered at the immovable property registry? No 0.0 Are all privately held land plots in the largest business city mapped? Yes 2.0 Are all privately held land plots in the economy mapped? No 0.0 Land dispute resolution index (0–8) 4.5 Does the law require that all property sale transactions be registered at the immovable property registry to make Yes 1.5 them opposable to third parties? Legal basis: Maldivian Land Act and its amendments as well as the Regulations made under it and its amendments Is the system of immovable property registration subject to a state or private guarantee? No 0.0 Type of guarantee: Legal basis: Is there a is a specific, out-of-court compensation mechanism to cover for losses incurred by parties who No 0.0 engaged in good faith in a property transaction based on erroneous information certified by the immovable property registry? Legal basis: Does the legal system require a control of legality of the documents necessary for a property transaction (e.g., Yes 0.5 checking the compliance of contracts with requirements of the law)? If yes, who is responsible for checking the legality of the documents? Registrar; Does the legal system require verification of the identity of the parties to a property transaction? Yes 0.5 If yes, who is responsible for verifying the identity of the parties? Registrar; Is there a national database to verify the accuracy of government issued identity documents? No 0.0 What is the Court of first instance in charge of a case involving a standard land dispute between two local Civil Court businesses over tenure rights for a property worth 50 times gross national income (GNI) per capita and located in the largest business city? How long does it take on average to obtain a decision from the first-instance court for such a case (without Between 1 and 2 2.0 appeal)? years Are there publicly available statistics on the number of land disputes at the economy level in the first instance No 0.0 court? Number of land disputes in the economy in 2018: Equal access to property rights index (-2–0) 0.0 Do unmarried men and unmarried women have equal ownership rights to property? Yes Do married men and married women have equal ownership rights to property? Yes 0.0 Page 24 Doing Business 2020 Maldives Getting Credit This topic explores two sets of issues—the strength of credit reporting systems and the effectiveness of collateral and bankruptcy laws in facilitating lending. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Strength of legal rights index (0–12) Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions through 2 sets of indicators. The depth of credit • Rights of borrowers and lenders through collateral laws (0-10) information index measures rules and practices affecting the coverage, scope and accessibility of • Protection of secured creditors’ rights through bankruptcy laws credit information available through a credit registry or a credit bureau. The strength of legal rights (0-2) index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. For each economy it is first determined whether a unitary Depth of credit information index (0–8) secured transactions system exists. Then two case scenarios, case A and case B, are used to • Scope and accessibility of credit information distributed by determine how a nonpossessory security interest is created, publicized and enforced according to credit bureaus and credit registries (0-8) the law. Special emphasis is given to how the collateral registry operates (if registration of security interests is possible). The case scenarios involve a secured borrower, company ABC, and a Credit bureau coverage (% of adults) secured lender, BizBank. • Number of individuals and firms listed in largest credit bureau In some economies the legal framework for secured transactions will allow only case A or case B as a percentage of adult population (not both) to apply. Both cases examine the same set of legal provisions relating to the use of movable collateral. Credit registry coverage (% of adults) • Number of individuals and firms listed in credit registry as a Several assumptions about the secured borrower (ABC) and lender (BizBank) are used: percentage of adult population - ABC is a domestic limited liability company (or its legal equivalent). - ABC has up to 50 employees. - ABC has its headquarters and only base of operations in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. - Both ABC and BizBank are 100% domestically owned. The case scenarios also involve assumptions. In case A, as collateral for the loan, ABC grants BizBank a nonpossessory security interest in one category of movable assets, for example, its machinery or its inventory. ABC wants to keep both possession and ownership of the collateral. In economies where the law does not allow nonpossessory security interests in movable property, ABC and BizBank use a fiduciary transfer-of-title arrangement (or a similar substitute for nonpossessory security interests). In case B, ABC grants BizBank a business charge, enterprise charge, floating charge or any charge that gives BizBank a security interest over ABC’s combined movable assets (or as much of ABC’s movable assets as possible). ABC keeps ownership and possession of the assets. Page 25 Doing Business 2020 Maldives Getting Credit - Maldives Indicator Maldives South Asia OECD high Best Regulatory income Performance Strength of legal rights index (0-12) 2 5.5 6.1 12 (5 Economies) Depth of credit information index (0-8) 5 5.1 6.8 8 (53 Economies) Credit registry coverage (% of adults) 22.4 5.1 24.4 100.0 (2 Economies) Credit bureau coverage (% of adults) 0.0 21.0 66.7 100.0 (14 Economies) Figure – Getting Credit in Maldives – Score 35.0 Score - Getting Credit Figure – Getting Credit in Maldives and comparator economies – Ranking and Score DB 2020 Getting Credit Score 0 100 80.0: India (Rank: 25) 70.0: Indonesia (Rank: 48) 65.0: Mauritius (Rank: 67) 53.1: Regional Average (South Asia) 35.0: Maldives (Rank: 144) 35.0: Seychelles (Rank: 144) Note: The ranking of economies on the ease of getting credit is determined by sorting their scores for getting credit. These scores are the sum of the scores for the strength of legal rights index and the depth of credit information index. Page 26 Doing Business 2020 Maldives Figure – Legal Rights in Maldives and comparator economies 10 9 9 8 Index Score 7 6 6 6 5.5 5 4 3 2 2 2 1 0 Maldives India Indonesia Mauritius Seychelles South Asia Page 27 Doing Business 2020 Maldives Details – Legal Rights in Maldives Strength of legal rights index (0-12) 2 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional equivalents No to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without requiring a specific description No of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a specific description of Yes collateral? May a security right extend to future or after-acquired assets, and does it extend automatically to the products, proceeds and replacements of the No original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; Yes and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by asset type, with an No electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional equivalents can be registered? No Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed online by any interested third No party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor defaults outside an insolvency procedure? No Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is liquidated? No Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law No protect secured creditors’ rights by providing clear grounds for relief from the stay and sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor to sell No the collateral through public auction or private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Figure – Credit Information in Maldives and comparator economies 9 8 8 7 7 7 Index Score 6 5 5 5.1 5 4 3 2 1 0 Maldives India Indonesia Mauritius Seychelles South Asia Page 28 Doing Business 2020 Maldives Details – Credit Information in Maldives Depth of credit information index (0-8) Credit bureau Credit registry Score Are data on both firms and individuals distributed? No Yes 1 Are both positive and negative credit data distributed? No Yes 1 Are data from retailers or utility companies - in addition to data from banks and No No 0 financial institutions - distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries No Yes 1 that distribute more than 10 years of negative data or erase data on defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per capita distributed? No Yes 1 By law, do borrowers have the right to access their data in the credit bureau or No No 0 credit registry? Can banks and financial institutions access borrowers’ credit information online No Yes 1 (for example, through an online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value-added service to help No No 0 banks and financial institutions assess the creditworthiness of borrowers? Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Coverage Credit bureau Credit registry Number of individuals 0 81,488 Number of firms 0 2,274 Total 0 83,762 Percentage of adult population 0.0 22.4 Page 29 Doing Business 2020 Maldives Protecting Minority Investors This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions • Extent of disclosure index (0–10): Disclosure, review, and To make the data comparable across economies, a case study uses several assumptions about approval requirements for related-party transactions the business and the transaction. • Extent of director liability index (0–10): Ability of minority shareholders to sue and hold interested directors liable for The business (Buyer): prejudicial related-party transactions; Available legal - Is a publicly traded corporation listed on the economy’s most important stock exchange. remedies (damages, disgorgement of profits, disqualification - Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of from managerial position(s) for one year or more, rescission of Buyer where permitted, even if this is not specifically required by law. the transaction) - Has a supervisory board in economies with a two-tier board system on which Mr. James • Ease of shareholder suits index (0–10): Access to internal appointed 60% of the shareholder-elected members. corporate documents; Evidence obtainable during trial and - Has not adopted bylaws or articles of association that go beyond the minimum requirements. allocation of legal expenses Does not follow codes, principles, recommendations or guidelines that are not mandatory. - Is a manufacturing company with its own distribution network. • Extent of conflict of interest regulation index (0-30): Sum of the extent of disclosure, extent of director liability and ease of The transaction involves the following details: shareholder suits indices - Mr. James owns 60% of Buyer, sits on Buyer’s board of directors and elected two directors to • Extent of shareholder rights index (0-6): Shareholders’ rights Buyer’s five-member board. and role in major corporate decisions - Mr. James also owns 90% of Seller, a company that operates a chain of retail hardware stores. Seller recently closed a large number of its stores. • Extent of ownership and control index (0-7): Governance - Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Buyer’s safeguards protecting shareholders from undue board control distribution of its food products, a proposal to which Buyer agrees. The price is equal to 10% of and entrenchment Buyer’s assets and is higher than the market value. • Extent of corporate transparency index (0-7): Corporate - The proposed transaction is part of the company’s principal activity and is not outside the transparency on ownership stakes, compensation, audits and authority of the company. financial prospects - Buyer enters into the transaction. All required approvals are obtained, and all required disclosures • Extent of shareholder governance index (0–20): Sum of the made—that is, the transaction was not entered into fraudulently. extent of shareholders rights, extent of ownership and control - The transaction causes damages to Buyer. Shareholders sue Mr. James and the executives and and extent of corporate transparency indices directors that approved the transaction. • Strength of minority investor protection index (0–50): Sum of the extent of conflict of interest regulation and extent of shareholder governance indices Page 30 Doing Business 2020 Maldives Protecting Minority Investors - Maldives Stock exchange information Stock exchange Maldives Stock Exchange Stock exchange URL http://www.maldivesstockexchange.com.mv Listed firms with equity securities 5 City Covered Malé Indicator Maldives South Asia OECD high Best Regulatory income Performance Extent of disclosure index (0-10) 0.0 5.8 6.5 10 (13 Economies) Extent of director liability index (0-10) 8.0 5.0 5.3 10 (3 Economies) Ease of shareholder suits index (0-10) 8.0 7.4 7.3 10 (Djibouti) Extent of shareholder rights index (0-6) 0.0 3.5 4.7 6 (19 Economies) Extent of ownership and control index (0-7) 0.0 3.6 4.5 7 (9 Economies) Extent of corporate transparency index (0-7) 0.0 3.3 5.7 7 (13 Economies) Figure – Protecting Minority in Maldives – Score 32.0 Score - Protecting Minority Investors Figure – Protecting Minority Investors in Maldives and comparator economies – Ranking and Score DB 2020 Protecting Minority Investors Score 0 100 80.0: India (Rank: 13) 78.0: Mauritius (Rank: 18) 70.0: Indonesia (Rank: 37) 57.0: Regional Average (South Asia) 34.0: Seychelles (Rank: 143) 32.0: Maldives (Rank: 147) Note: The ranking of economies on the strength of minority investor protections is determined by sorting their scores for protecting minority investors. These scores are the simple average of the scores for the extent of conflict of interest regulation index and the extent of shareholder governance index. Page 31 Doing Business 2020 Maldives Figure – Protecting Minority Investors in Maldives and comparator economies – Measure of Quality Maldives 0 8 0 8 India 6 7 8 6 6 7 Indonesia 7 5 10 6 5 2 Mauritius 5 8 7 5 5 9 Seychelles 0 8 4 0 5 OECD high income 5.6 5.6 6.6 4.3 4.5 7.4 South Asia 3.9 5.9 6.1 4.4 4.1 7.1 0 5 10 15 20 25 30 35 40 45 Sub-Indicator Score Extent of corporate transparency index (0-7) Extent of director liability index (0-10) Extent of disclosure index (0-10) Extent of ownership and control index (0-7) Extent of shareholder rights index (0-6) Ease of shareholder suits index (0-10) Page 32 Doing Business 2020 Maldives Details – Protecting Minority Investors in Maldives – Measure of Quality Answer Score Extent of conflict of interest regulation index (0-30) Extent of disclosure index (0-10) 0.0 Whose decision is sufficient to approve the Buyer-Seller transaction? (0-3) CEO alone 0.0 Must an external body review the terms of the transaction before it takes place? (0-1) No 0.0 Must Mr. James disclose his conflict of interest to the board of directors? (0-2) No disclosure 0.0 obligation Must Buyer disclose the transaction in periodic filings (e.g. annual reports)? (0-2) No disclosure 0.0 obligation Must Buyer immediately disclose the transaction to the public? (0-2) No disclosure 0.0 obligation Extent of director liability index (0-10) 8.0 Can shareholders representing 10% of Buyer's share capital sue for the damage the transaction caused to Yes 1.0 Buyer? (0-1) Can shareholders hold Mr. James liable for the damage the transaction caused to Buyer? (0-2) Liable if unfair or 2.0 prejudicial Can shareholders hold the other directors liable for the damage the transaction caused to Buyer? (0-2) Liable if unfair or 2.0 prejudicial Must Mr. James pay damages for the harm caused to Buyer upon a successful claim by shareholders? (0-1) Yes 1.0 Must Mr. James repay profits made from the transaction upon a successful claim by shareholders? (0-1) Yes 1.0 Is Mr. James disqualified upon a successful claim by shareholders? (0-1) No 0.0 Can a court void the transaction upon a successful claim by shareholders? (0-2) Voidable if negligently 1.0 concluded Ease of shareholder suits index (0-10) 8.0 Before suing, can shareholders representing 10% of Buyer's share capital inspect the transaction documents? Yes 1.0 (0-1) Can the plaintiff obtain any documents from the defendant and witnesses at trial? (0-3) Any relevant 3.0 document Can the plaintiff request categories of documents from the defendant without identifying specific ones? (0-1) Yes 1.0 Can the plaintiff directly question the defendant and witnesses at trial? (0-2) Yes 2.0 Is the level of proof required for civil suits lower than that of criminal cases? (0-1) No 0.0 Can shareholder plaintiffs recover their legal expenses from the company? (0-2) Yes if successful 1.0 Extent of shareholder governance index (0-20) Extent of shareholder rights index (0-6) 0.0 Does the sale of 51% of Buyer's assets require shareholder approval? No 0.0 Can shareholders representing 10% of Buyer's share capital call for a meeting of shareholders? Yes 1.0 Must Buyer obtain its shareholders’ approval every time it issues new shares? Yes 1.0 Do shareholders automatically receive preemption rights every time Buyer issues new shares? No 0.0 Do shareholders elect and dismiss the external auditor? Yes 1.0 Are changes to the rights of a class of shares only possible if the holders of the affected shares approve? No 0.0 Extent of ownership and control index (0-7) 0.0 Is it forbidden to appoint the same individual as CEO and chairperson of the board of directors? No 0.0 Must the board of directors include independent and nonexecutive board members? No 0.0 Page 33 Doing Business 2020 Maldives Can shareholders remove members of the board of directors without cause before the end of their term? Yes 1.0 Must the board of directors include a separate audit committee exclusively comprising board members? No 0.0 Must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of Buyer? No 0.0 Must Buyer pay declared dividends within a maximum period set by law? No 0.0 Is a subsidiary prohibited from acquiring shares issued by its parent company? No 0.0 Extent of corporate transparency index (0-7) 0.0 Must Buyer disclose direct and indirect beneficial ownership stakes representing 5%? No 0.0 Must Buyer disclose information about board members’ primary employment and directorships in other No 0.0 companies? Must Buyer disclose the compensation of individual managers? No 0.0 Must a detailed notice of general meeting be sent 21 days before the meeting? No 0.0 Can shareholders representing 5% of Buyer’s share capital put items on the general meeting agenda? No 0.0 Must Buyer's annual financial statements be audited by an external auditor? Yes 1.0 Must Buyer disclose its audit reports to the public? No 0.0 Page 34 Doing Business 2020 Maldives Paying Taxes This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as the administrative burden of paying taxes and contributions and complying with postfiling procedures (VAT refund and tax audit). The most recent round of data collection for the project was completed in May 2019 covering for the Paying Taxes indicator calendar year 2018 (January 1, 2018 – December 31, 2018). See the methodology for more information. What the indicators measure Case study assumptions Tax payments for a manufacturing company in 2018 (number Using a case scenario, Doing Business records taxes and mandatory contributions a medium size per year adjusted for electronic and joint filing and payment) company must pay in a year, and measures the administrative burden of paying taxes, contributions and dealing with postfiling processes. Information is also compiled on frequency of • Total number of taxes and contributions paid or withheld, filing and payments, time taken to comply with tax laws, time taken to comply with the including consumption taxes (value added tax, sales tax or requirements of postfiling processes and time waiting. goods and service tax) • Method and frequency of filing and payment To make data comparable across economies, several assumptions are used: - TaxpayerCo is a medium-size business that started operations on January 1, 2017. It produces Time required to comply with 3 major taxes (hours per year) ceramic flowerpots and sells them at retail. All taxes and contributions recorded are paid in the • Collecting information, computing tax payable second year of operation (calendar year 2018). Taxes and mandatory contributions are measured at all levels of government. • Preparing separate tax accounting books, if required • Completing tax return, filing with agencies The VAT refund process: - In June 2018, TaxpayerCo. makes a large capital purchase: the value of the machine is 65 times • Arranging payment or withholding income per capita of the economy. Sales are equally spread per month (1,050 times income per capita divided by 12) and cost of goods sold are equally expensed per month (875 times income Total tax and contribution rate (% of commercial profits) per capita divided by 12). The machinery seller is registered for VAT and excess input VAT incurred • Profit or corporate income tax in June will be fully recovered after four consecutive months if the VAT rate is the same for inputs, sales and the machine and the tax reporting period is every month. Input VAT will exceed Output • Social contributions, labor taxes paid by employer VAT in June 2018. • Property and property transfer taxes The corporate income tax audit process: • Dividend, capital gains, financial transactions taxes - An error in calculation of income tax liability (for example, use of incorrect tax depreciation rates, • Waste collection, vehicle, road and other taxes or incorrectly treating an expense as tax deductible) leads to an incorrect income tax return and a corporate income tax underpayment. TaxpayerCo. discovered the error and voluntarily notified the Postfiling Index tax authority. The value of the underpaid income tax liability is 5% of the corporate income tax • Time to comply with VAT refund (hours) liability due. TaxpayerCo. submits corrected information after the deadline for submitting the annual tax return, but within the tax assessment period. • Time to obtain VAT refund (weeks) • Time to comply with a corporate income tax correction (hours) • Time to complete a corporate income tax correction (weeks) Page 35 Doing Business 2020 Maldives Paying Taxes - Maldives Indicator Maldives South Asia OECD high Best Regulatory income Performance Payments (number per year) 17 26.7 10.3 3 (2 Economies) Time (hours per year) 391 273.5 158.8 49 (3 Economies) Total tax and contribution rate (% of profit) 30.2 43.9 39.9 26.1 (33 Economies) Postfiling index (0-100) 47.5 41.2 86.7 None in 2018/19 Figure – Paying Taxes in Maldives – Score 76.7 47.2 94.3 47.5 Payments Time Total tax and contribution rate Postfiling index Figure – Paying Taxes in Maldives and comparator economies – Ranking and Score DB 2020 Paying Taxes Score 0 100 94.0: Mauritius (Rank: 5) 84.7: Seychelles (Rank: 36) 75.8: Indonesia (Rank: 81) 67.6: India (Rank: 115) 66.4: Maldives (Rank: 119) 60.2: Regional Average (South Asia) Note: The ranking of economies on the ease of paying taxes is determined by sorting their scores for paying taxes. These scores are the simple average of the scores for each of the component indicators, with a threshold and a nonlinear transformation applied to one of the component indicators, the total tax and contribution rate. The threshold is defined as the total tax and contribution rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax and contribution rate below this threshold receive the same score as the economy at the threshold. Page 36 Doing Business 2020 Maldives Figure – Paying Taxes in Maldives and comparator economies – Measure of Quality 120 98.3 100 93.4 Index score 80 68.8 60 49.3 47.5 41.2 40 20 0 Maldives India Indonesia Mauritius Seychelles South Asia Page 37 Doing Business 2020 Maldives Details – Paying Taxes in Maldives Tax or Payments Notes on Time (hours) Statutory tax Tax base Total tax and Notes on TTCR mandatory (number) Payments rate contribution contribution rate (% of profit) Business Profit 1.0 online 94.5 15% On taxable profit 13.11 Tax in excess of MVR 500,000 Property transfer 1.0 15% sale price 9.09 tax Pension fund 12.0 88.0 7% gross salaries 7.90 contributions Company annual 1.0 A fixed amount of fixed fee 0.05 fees Rufiyaa 10,000/- is to be paid by all public companies and Rufiyaa 2,000/- is to be paid by all private companies. Vehicle 1.0 MVR 1,800 fixed fee 0.04 registration fees annual fee, MVR 40 stamp for vehicles weight less than 2 tonns Value Added Tax 1.0 online 208.0 6% Gross sales 0.00 not included (GST) Employee 0.0 jointly 7% gross salaries 0.00 withheld pension fund contributions Totals 17 391 30.2 Page 38 Doing Business 2020 Maldives Details – Paying Taxes in Maldives – Tax by Type Taxes by type Answer Profit tax (% of profit) 13.1 Labor tax and contributions (% of profit) 7.9 Other taxes (% of profit) 9.2 Page 39 Doing Business 2020 Maldives Details – Paying Taxes in Maldives – Measure of Quality Answer Score Postfiling index (0-100) 47.5 VAT refunds Does VAT exist? Yes Does a VAT refund process exist per the case study? No Restrictions on VAT refund process NA Percentage of cases exposed to a VAT audit (%) Not applicable Is there a mandatory carry forward period? No Time to comply with VAT refund (hours) No VAT refund per 0.0 case study scenario Time to obtain VAT refund (weeks) No VAT refund per 0.0 case study scenario Corporate income tax audits Does corporate income tax exist? Yes Percentage of cases exposed to a corporate income tax audit (%) 0% - 24% Time to comply with a corporate income tax correction (hours) 7.0 89.9 Time to complete a corporate income tax correction (weeks) No tax audit per case 100 study scenario Notes: Names of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. The hours for VAT include all the VAT and sales taxes applicable. The hours for Social Security include all the hours for labor taxes and mandatory contributions in general. The postfiling index is the average of the scores on time to comply with VAT refund, time to obtain a VAT refund, time to comply with a corporate income tax correction and time to complete a corporate income tax correction. N/A = Not applicable. Page 40 Doing Business 2020 Maldives Trading across Borders Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tariffs) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Documentary compliance To make the data comparable across economies, a few assumptions are made about the traded goods and the transactions: • Obtaining, preparing and submitting documents during transport, clearance, inspections and port or border handling in Time: Time is measured in hours, and 1 day is 24 hours (for example, 22 days are recorded as origin economy 22×24=528 hours). If customs clearance takes 7.5 hours, the data are recorded as is. Alternatively, • Obtaining, preparing and submitting documents required by suppose documents are submitted to a customs agency at 8:00a.m., are processed overnight and destination economy and any transit economies can be picked up at 8:00a.m. the next day. The time for customs clearance would be recorded as 24 hours because the actual procedure took 24 hours. • Covers all documents required by law and in practice, including electronic submissions of information Cost: Insurance cost and informal payments for which no receipt is issued are excluded from the Border compliance costs recorded. Costs are reported in U.S. dollars. Contributors are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. • Customs clearance and inspections Contributors are private sector experts in international trade logistics and are informed about • Inspections by other agencies (if applied to more than 20% of exchange rates. shipments) Assumptions of the case study: • Handling and inspections that take place at the economy’s port - For all 190 economies covered by Doing Business, it is assumed a shipment is in a warehouse in or border the largest business city of the exporting economy and travels to a warehouse in the largest business city of the importing economy. Domestic transport - It is assumed each economy imports 15 metric tons of containerized auto parts (HS 8708) from • Loading or unloading of the shipment at the warehouse or its natural import partner—the economy from which it imports the largest value (price times port/border quantity) of auto parts. It is assumed each economy exports the product of its comparative advantage (defined by the largest export value) to its natural export partner—the economy that is • Transport between warehouse and port/border the largest purchaser of this product. Shipment value is assumed to be $50,000. • Traffic delays and road police checks while shipment is en - The mode of transport is the one most widely used for the chosen export or import product and route the trading partner, as is the seaport or land border crossing. - All electronic information submissions requested by any government agency in connection with the shipment are considered to be documents obtained, prepared and submitted during the export or import process. - A port or border is a place (seaport or land border crossing) where merchandise can enter or leave an economy. - Relevant government agencies include customs, port authorities, road police, border guards, standardization agencies, ministries or departments of agriculture or industry, national security agencies and any other government authorities. Page 41 Doing Business 2020 Maldives Trading across Borders - Maldives Indicator Maldives South Asia OECD high Best Regulatory income Performance Time to export: Border compliance (hours) 42 53.4 12.7 1 (19 Economies) Cost to export: Border compliance (USD) 596 310.6 136.8 0 (19 Economies) Time to export: Documentary compliance (hours) 48 73.7 2.3 1 (26 Economies) Cost to export: Documentary compliance (USD) 300 157.9 33.4 0 (20 Economies) Time to import: Border compliance (hours) 100 85.7 8.5 1 (25 Economies) Cost to import: Border compliance (USD) 981 472.9 98.1 0 (28 Economies) Time to import: Documentary compliance (hours) 61 93.7 3.4 1 (30 Economies) Cost to import: Documentary compliance (USD) 180 261.7 23.5 0 (30 Economies) Figure – Trading across Borders in Maldives – Score 74.2 43.8 72.2 25.0 64.5 18.3 74.8 74.2 Time Cost Time Cost Time Cost Time Cost to to to to to to to to export: export: export: export: import: import: import: import: Border Border Documentary Documentary Border Border Documentary Documentary compliance compliance compliance compliance compliance compliance compliance compliance Figure – Trading across Borders in Maldives and comparator economies – Ranking and Score DB 2020 Trading Across Borders Score 0 100 82.5: India (Rank: 68) 81.0: Mauritius (Rank: 72) 71.8: Seychelles (Rank: 98) 67.5: Indonesia (Rank: 116) 65.3: Regional Average (South Asia) 55.9: Maldives (Rank: 157) Note: The ranking of economies on the ease of trading across borders is determined by sorting their scores for trading across borders. These scores are the simple average of the scores for the time and cost for documentary compliance and border compliance to export and import. Page 42 Doing Business 2020 Maldives Figure – Trading across Borders in Maldives – Time and Cost Time (hours) Cost (USD) 120 1200 100 981 100 1000 Time (hours) Cost (USD) 80 800 596 61 60 48 600 42 40 300 400 180 20 200 0 0 Export Export Import Import - - - - Border Documentary Border Documentary Compliance Compliance Compliance Compliance Page 43 Doing Business 2020 Maldives Details – Trading across Borders in Maldives Characteristics Export Import Product HS 03 : Fish & crustacean, mollusc & other aquatic HS 8708: Parts and accessories of motor vehicles invertebrate Trade partner Thailand Singapore Border Male port Male port Distance (km) 1 1 Domestic transport time (hours) 2 3 Domestic transport cost (USD) 165 161 Details – Trading across Borders in Maldives – Components of Border Compliance Time to Complete (hours) Associated Costs (USD) Export: Clearance and inspections required by 13.0 50.0 customs authorities Export: Clearance and inspections required by 24.0 153.5 agencies other than customs Export: Port or border handling 18.0 392.3 Import: Clearance and inspections required by 48.0 75.0 customs authorities Import: Clearance and inspections required by 24.0 425.0 agencies other than customs Import: Port or border handling 100.0 480.5 Page 44 Doing Business 2020 Maldives Details – Trading across Borders in Maldives – Trade Documents Export Import Commercial invoice Commercial invoice Packing list Packing list Health certificate Bill of lading Export license Delivery order Export declaration Security check form Cargo release order Import declaration SOLAS certificate Import license Bill of lading SOLAS certificate Page 45 Doing Business 2020 Maldives Enforcing Contracts The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Time required to enforce a contract through the courts The dispute in the case study involves the breach of a sales contract between two domestic (calendar days) businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. • Time to file and serve the case • Time for trial and to obtain the judgment To make the data on the time and comparable across economies, several assumptions about the case are used: • Time to enforce the judgment - The dispute concerns a lawful transaction between two businesses (Seller and Buyer), both Cost required to enforce a contract through the courts (% of located in the economy’s largest business city. For 11 economies the data are also collected for the claim value) second largest business city. - The Buyer orders custom-made furniture, then fails to pay alleging that the goods are not of • Average attorney fees adequate quality. • Court costs - The value of the dispute is 200% of the income per capita or the equivalent in local currency of USD 5,000, whichever is greater. • Enforcement costs - The Seller sues the Buyer before the court with jurisdiction over commercial cases worth 200% of income per capita or $5,000 whichever is greater. Quality of judicial processes index (0-18) - The Seller requests the pretrial attachment of the defendant’s movable assets to secure the • Court structure and proceedings (-1-5) claim. - The claim is disputed on the merits because of Buyer’s allegation that the quality of the goods • Case management (0-6) was not adequate. • Court automation (0-4) - The judge decides in favor of the seller; there is no appeal. • Alternative dispute resolution (0-3) - The Seller enforces the judgment through a public sale of the Buyer’s movable assets. Page 46 Doing Business 2020 Maldives Enforcing Contracts - Maldives Standardized Case Claim value MVR 298,243 Court name Male' Civil Court, Commercial Branch City Covered Malé Indicator Maldives South Asia OECD high Best Regulatory income Performance Time (days) 760 1,101.6 589.6 120 (Singapore) Cost (% of claim value) 18.5 29.9 21.5 0.1 (Bhutan) Quality of judicial processes index (0-18) 5.5 7.1 11.7 None in 2018/19 Figure – Enforcing Contracts in Maldives – Score 47.5 79.3 30.6 Time Cost Quality of judicial processes index Figure – Enforcing Contracts in Maldives and comparator economies – Ranking and Score DB 2020 Enforcing Contracts Score 0 100 72.2: Mauritius (Rank: 20) 52.5: Maldives (Rank: 124) 51.2: Seychelles (Rank: 128) 49.1: Indonesia (Rank: 139) 43.5: Regional Average (South Asia) 41.2: India (Rank: 163) Note: The ranking of economies on the ease of enforcing contracts is determined by sorting their scores for enforcing contracts. These scores are the simple average of the scores for each of the component indicators. Page 47 Doing Business 2020 Maldives Figure – Enforcing Contracts in Maldives – Time and Cost Time (days) Cost (% of claim value) 1600 80 1445 70.3 Cost (% of claim value) 1400 70 1200 60 Time (days) 1000 915 50 800 760 40 31.0 589.6 29.9 600 490 25.0 30 403 21.5 18.5 400 15.4 20 200 10 0 0 1,101.6 India Indonesia Maldives Mauritius OECD Seychelles South high Asia income Page 48 Doing Business 2020 Maldives Figure – Enforcing Contracts in Maldives and comparator economies – Measure of Quality Maldives 2 0 1 2.5 India 2.5 1.5 2 4.5 Indonesia 2.5 2.8 0.6 3 Mauritius 2.5 3 3 5 Seychelles 2 1 0.5 3 OECD high income 2.5 3.2 2.4 3.6 South Asia 2.4 1.2 0.8 3.1 0 2 4 6 8 10 12 14 16 Sub-Indicator Score Alternative dispute resolution (0-3) Case management (0-6) Court automation (0-4) Court structure and proceedings (-1-5) Details – Enforcing Contracts in Maldives Indicator Time (days) 760 Filing and service 30 Trial and judgment 260 Enforcement of judgment 470 Cost (% of claim value) 18.5 Attorney fees 16.4 Court fees 2.1 Enforcement fees 0 Quality of judicial processes index (0-18) 5.5 Court structure and proceedings (-1-5) 2.5 Case management (0-6) 0.0 Court automation (0-4) 1.0 Alternative dispute resolution (0-3) 2.0 Page 49 Doing Business 2020 Maldives Details – Enforcing Contracts in Maldives – Measure of Quality Answer Score Quality of judicial processes index (0-18) 5.5 Court structure and proceedings (-1-5) 2.5 1. Is there a court or division of a court dedicated solely to hearing commercial cases? Yes 1.5 2. Small claims court 0.0 2.a. Is there a small claims court or a fast-track procedure for small claims? No 2.b. If yes, is self-representation allowed? n.a. 3. Is pretrial attachment available? Yes 1.0 4. Are new cases assigned randomly to judges? No 0.0 5. Does a woman's testimony carry the same evidentiary weight in court as a man's? Yes 0.0 Case management (0-6) 0.0 1. Time standards 0.0 1.a. Are there laws setting overall time standards for key court events in a civil case? Yes 1.b. If yes, are the time standards set for at least three court events? No 1.c. Are these time standards respected in more than 50% of cases? Yes 2. Adjournments 0.0 2.a. Does the law regulate the maximum number of adjournments that can be granted? No 2.b. Are adjournments limited to unforeseen and exceptional circumstances? No 2.c. If rules on adjournments exist, are they respected in more than 50% of cases? n.a. 3. Can two of the following four reports be generated about the competent court: (i) time to disposition report; (ii) No 0.0 clearance rate report; (iii) age of pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case management techniques used before the competent court? No 0.0 5. Are there any electronic case management tools in place within the competent court for use by judges? No 0.0 6. Are there any electronic case management tools in place within the competent court for use by lawyers? No 0.0 Court automation (0-4) 1.0 1. Can the initial complaint be filed electronically through a dedicated platform within the competent court? No 0.0 2. Is it possible to carry out service of process electronically for claims filed before the competent court? No 0.0 3. Can court fees be paid electronically within the competent court? No 0.0 4. Publication of judgments 1.0 4.a Are judgments rendered in commercial cases at all levels made available to the general public Yes through publication in official gazettes, in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme court level made Yes available to the general public through publication in official gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 2.0 1. Arbitration 1.5 1.a. Is domestic commercial arbitration governed by a consolidated law or consolidated chapter or Yes section of the applicable code of civil procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public order or public policy— No that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements usually enforced by the courts? Yes Page 50 Doing Business 2020 Maldives 2. Mediation/Conciliation 0.5 2.a. Is voluntary mediation or conciliation available? Yes 2.b. Are mediation, conciliation or both governed by a consolidated law or consolidated chapter or No section of the applicable code of civil procedure encompassing substantially all their aspects (for example, definition, aim and scope of application, desig 2.c. Are there financial incentives for parties to attempt mediation or conciliation (i.e., if mediation or No conciliation is successful, a refund of court filing fees, income tax credits or the like)? Page 51 Doing Business 2020 Maldives Resolving Insolvency Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Time required to recover debt (years) To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are used: • Measured in calendar years • Appeals and requests for extension are included - A hotel located in the largest city (or cities) has 201 employees and 50 suppliers. The hotel experiences financial difficulties. Cost required to recover debt (% of debtor’s estate) - The value of the hotel is 100% of the income per capita or the equivalent in local currency of USD 200,000, whichever is greater. • Measured as percentage of estate value - The hotel has a loan from a domestic bank, secured by a mortgage over the hotel’s real estate. • Court fees The hotel cannot pay back the loan, but makes enough money to operate otherwise. • Fees of insolvency administrators In addition, Doing Business evaluates the quality of legal framework applicable to judicial • Lawyers’ fees liquidation and reorganization proceedings and the extent to which best insolvency practices have • Assessors’ and auctioneers’ fees been implemented in each economy covered. • Other related fees Outcome • Whether business continues operating as a going concern or business assets are sold piecemeal Recovery rate for creditors • Measures the cents on the dollar recovered by secured creditors • Outcome for the business (survival or not) determines the maximum value that can be recovered • Official costs of the insolvency proceedings are deducted • Depreciation of furniture is taken into account • Present value of debt recovered Strength of insolvency framework index (0- 16) • Sum of the scores of four component indices: • Commencement of proceedings index (0-3) • Management of debtor’s assets index (0-6) • Reorganization proceedings index (0-3) • Creditor participation index (0-4) Page 52 Doing Business 2020 Maldives Resolving Insolvency - Maldives Indicator Maldives South Asia OECD high Best Regulatory income Performance Recovery rate (cents on the dollar) 50.2 38.1 70.2 92.9 (Norway) Time (years) 1.5 2.2 1.7 0.4 (Ireland) Cost (% of estate) 4.0 9.9 9.3 1.0 (Norway) Outcome (0 as piecemeal sale and 1 as going concern) 0 .. .. .. Strength of insolvency framework index (0-16) 2.0 6.5 11.9 None in 2018/19 Figure – Resolving Insolvency in Maldives – Score 54.1 12.5 Recovery rate Strength of insolvency framework index Figure – Resolving Insolvency in Maldives and comparator economies – Ranking and Score DB 2020 Resolving Insolvency Score 0 100 73.8: Mauritius (Rank: 28) 68.1: Indonesia (Rank: 38) 62.0: India (Rank: 52) 52.2: Seychelles (Rank: 75) 40.8: Regional Average (South Asia) 33.3: Maldives (Rank: 141) Note: The ranking of economies on the ease of resolving insolvency is determined by sorting their scores for resolving insolvency. These scores are the simple average of the scores for the recovery rate and the strength of insolvency framework index. Page 53 Doing Business 2020 Maldives Figure – Resolving Insolvency in Maldives – Time and Cost Time (years) Cost (% of estate) 2.5 25 21.6 2.2 2.0 Cost (% of estate) 2 20 1.7 1.7 Time (years) 1.6 1.5 14.5 1.5 15 1.1 11.0 9.3 9.9 1 9.0 10 0.5 4.0 5 0 0 India Indonesia Maldives Mauritius OECD Seychelles South high Asia income Page 54 Doing Business 2020 Maldives Figure – Resolving Insolvency in Maldives and comparator economies – Measure of Quality Maldives 0 2 0 India 4.5 2 1 0 Indonesia 5 3 2 0.5 Mauritius 5.5 3 3 0.5 Seychelles 5 2.5 2 0.5 OECD high income 5.3 2.8 2.1 1.9 South Asia 3.6 2.1 0.9 0.6 0 2 4 6 8 10 12 14 Sub-Indicator Score Management of debtor's assets index (0-6) Commencement of proceedings index (0-3) Creditor participation index (0-4) Reorganization proceedings index (0-3) Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Figure – Resolving Insolvency in Maldives and comparator economies – Recovery Rate Recovery rate(cents on the dollar) 80 71.6 70 65.5 67.4 60 50.2 50 38.8 38.1 40 30 20 10 0 Maldives India Indonesia Mauritius Seychelles South Asia Page 55 Doing Business 2020 Maldives Details – Resolving Insolvency in Maldives Indicator Answer Score Proceeding foreclosure After Mirage's default on payment, BizBank would initiate foreclosure by filing the petition at the Civil Court and Registrar of Companies. This is the most effective way for BizBank to recover its investment with the security interest over Mirage's assets. Outcome piecemeal sale After Court's decision on Mirage's case, BizBank would gain possession of Mirage's assets and sell them piecemeal in a public auction. The hotel will stop operating. Time (in years) 1.5 The foreclosure procedure until BizBank is repaid some or all of the money owed to it takes approximate 1.5 years. Cost (% of estate) 4.0 The costs associated with the case would amount to approximately 4% of the value of the debtor's estate. Main component of the cost is the attorney fee. Recovery rate 50.2 (cents on the dollar) Page 56 Doing Business 2020 Maldives Details – Resolving Insolvency in Maldives – Measure of Quality Answer Score Strength of insolvency framework index (0-16) 2.0 Commencement of proceedings index (0-3) 2.0 What procedures are available to a DEBTOR when commencing insolvency proceedings? (b) Debtor may file for 0.5 liquidation only Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor? (b) Yes, but a creditor 0.5 may file for liquidation only What basis for commencement of the insolvency proceedings is allowed under the insolvency framework? (a) (a) Debtor is 1.0 Debtor is generally unable to pay its debts as they mature (b) The value of debtor's liabilities exceeds the value generally unable to of its assets pay its debts as they mature Management of debtor's assets index (0-6) 0.0 Does the insolvency framework allow the continuation of contracts supplying essential goods and services to the No 0.0 debtor? Does the insolvency framework allow the rejection by the debtor of overly burdensome contracts? No 0.0 Does the insolvency framework allow avoidance of preferential transactions? No 0.0 Does the insolvency framework allow avoidance of undervalued transactions? No 0.0 Does the insolvency framework provide for the possibility of the debtor obtaining credit after commencement of No 0.0 insolvency proceedings? Does the insolvency framework assign priority to post-commencement credit? (c) No priority is 0.0 assigned to post- commencement creditors Reorganization proceedings index (0-3) 0.0 Which creditors vote on the proposed reorganization plan? N/A 0.0 Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as No 0.0 what they would obtain in a liquidation? Are the creditors divided into classes for the purposes of voting on the reorganization plan, does each class vote No 0.0 separately and are creditors in the same class treated equally? Creditor participation index (0-4) 0.0 Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency No 0.0 representative? Does the insolvency framework require approval by the creditors for sale of substantial assets of the debtor? No 0.0 Does the insolvency framework provide that a creditor has the right to request information from the insolvency No 0.0 representative? Does the insolvency framework provide that a creditor has the right to object to decisions accepting or rejecting No 0.0 creditors' claims? Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Page 57 Doing Business 2020 Maldives Employing Workers Doing Business presents detailed data for the employing workers indicators on the Doing Business website (http://www.doingbusiness.org). The study does not present rankings of economies on these indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Hiring To make the data comparable across economies, several assumptions about the worker and the (i) whether fixed-term contracts are prohibited for permanent business are used. tasks; (ii) maximum cumulative duration of fixed-term contracts; (iii) length of the maximum probationary period; (iv) minimum The worker: wage;(v) ratio of minimum wage to the average value added per - Is a cashier in a supermarket or grocery store, age 19, with one year of work experience. worker. - Is a full-time employee. - Is not a member of the labor union, unless membership is mandatory. Working hours (i) maximum number of working days allowed per week; (ii) The business: premiums for work: at night, on a weekly rest day and overtime; - Is a limited liability company (or the equivalent in the economy). (iii) whether there are restrictions on work at night, work on a - Operates a supermarket or grocery store in the economy’s largest business city. For 11 weekly rest day and for overtime work; (iv) length of paid annual economies the data are also collected for the second largest business city. leave. - Has 60 employees. - Is subject to collective bargaining agreements if such agreements cover more than 50% of the Redundancy rules food retail sector and they apply even to firms that are not party to them. (i) whether redundancy can be basis for terminating workers; (ii) - Abides by every law and regulation but does not grant workers more benefits than those whether employer needs to notify and/or get approval from third mandated by law, regulation or (if applicable) collective bargaining agreements. party to terminate 1 redundant worker and a group of 9 redundant workers; (iii) whether the law requires employer to reassign or retrain a worker before making worker redundant; (iv) whether priority rules apply for redundancies and reemployment. Redundancy cost (i) notice period for redundancy dismissal; (ii) severance payments, and (iii) penalties due when terminating a redundant worker. Data on the availability of unemployment protection for a worker with one year of employment is also collected. Page 58 Doing Business 2020 Maldives Employing Workers - Maldives Details – Employing Workers in Maldives Answer Hiring Fixed-term contracts prohibited for permanent tasks? No Maximum length of a single fixed-term contract (months) 24.0 Maximum length of fixed-term contracts, including renewals (months) 24.0 Minimum wage applicable to the worker assumed in the case study (US$/month) 0.0 Ratio of minimum wage to value added per worker 0.0 Maximum length of probationary period (months) 3.0 Working hours Standard workday 8.0 Maximum number of working days per week 6.0 Premium for night work (% of hourly pay) 0.0 Premium for work on weekly rest day (% of hourly pay) 50.0 Premium for overtime work (% of hourly pay) 25.0 Restrictions on night work? No Restrictions on weekly holiday? No Restrictions on overtime work? No Paid annual leave for a worker with 1 year of tenure (working days) 30.0 Paid annual leave for a worker with 5 years of tenure (working days) 30.0 Paid annual leave for a worker with 10 years of tenure (working days) 30.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in working days) 30.0 Redundancy rules Dismissal due to redundancy allowed by law? Yes Third-party notification if one worker is dismissed? No Third-party approval if one worker is dismissed? No Third-party notification if nine workers are dismissed? No Third-party approval if nine workers are dismissed? No Retraining or reassignment obligation before redundancy? No Priority rules for redundancies? No Priority rules for reemployment? No Redundancy cost Notice period for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 4.3 Notice period for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 8.7 Notice period for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 8.7 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 7.2 Severance pay for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 0.0 Severance pay for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 0.0 Page 59 Doing Business 2020 Maldives Severance pay for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 0.0 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 0.0 Unemployment protection after one year of employment? No Page 60 Doing Business 2020 Maldives Business Reforms in Maldives From May 2, 2018 to May 1, 2019, 115 economies implemented 294 business regulatory reforms across the 10 areas measured by Doing Business. Reforms inspired by Doing Business have been implemented by economies in all regions. The following are reforms implemented since Doing Business 2008. =Doing Business reform making it easier to do business. = Change making it more difficult to do business. DB2018 Getting Electricity: Maldives made getting electricity faster by upgrading existing electricity grid and increasing the network capacity to accommodate new connections. Paying Taxes: Maldives made paying taxes easier by introducing an online system for filing and paying taxes. DB2016 Dealing with Construction Permits: The Maldives made dealing with construction permits more difficult by requiring that building plans be stamped and approved by private structural and architectural checkers prior to requesting a building permit. Paying Taxes: Maldives made paying taxes easier for companies by introducing more payment counters at the tax authority and express counters at peak periods. At the same time, Maldives introduced additional disclosure requirements for filing corporate income tax returns. DB2014 Paying Taxes: Maldives made paying taxes easier for companies by introducing electronic filing systems for corporate income tax, sales tax and pension contributions. DB2013 Paying Taxes: Maldives introduced a goods and service tax, a business profit tax and additional social contributions. DB2011 Registering Property: Maldives now allows registered companies to own land as long as all company shares are owned by Maldivians. DB2010 Employing Workers: Maldives reduced the maximum duration of fixed-term contracts and increased mandatory paid annual leave. Page 61 Doing Business 2020 Maldives Page 62