The Maldives, renowned for its turquoise waters, coral reefs, and luxury tourism, is pursuing an ambitious strategy to attract wealthy foreign investors through artificial island developments and a new residency-by-investment program. Facing mounting national debt and limited land resources, the government hopes these initiatives will generate billions of dollars in investment. However, the plans have raised concerns about money laundering, tax transparency, political accountability, and environmental damage.
At the center of this strategy is Project Ayla, a $790 million luxury development in the Noonu Atoll. The project highlights the government’s effort to transform the Maldives into a destination not only for tourists but also for wealthy individuals seeking long-term residency and international investment opportunities.
Project Ayla: A luxury city built on artificial islands
Project Ayla involves constructing 25 artificial islands and islets using more than six million cubic metres of sand dredged from the seabed. The development is expected to feature more than 70 luxury residences and is intended to attract high-net-worth individuals from around the world.
The project operates within a Special Economic Zone (SEZ), where foreign investors will be able to obtain 99-year property leases despite constitutional restrictions on foreign land ownership. Investors may also benefit from reduced or avoided taxes on certain transactions, including capital gains and import duties.
The government views these incentives as a way to attract international capital and diversify the economy. However, critics argue that the combination of tax advantages, offshore financial services, and limited ownership transparency could create opportunities for financial misconduct.
Under the SEZ framework, qualifying zones can host offshore banks that provide services involving trusts. Although trusts have legitimate uses in wealth management and estate planning, they can also make it difficult to identify the individuals who ultimately control assets.
Former Maldives Information Commissioner Ahmed Ahid Rasheed has warned that restrictions on public access to beneficial-ownership information create a significant accountability gap. Transparency advocates argue that publicly searchable registers of property and company ownership would help prevent corruption and improve public oversight.
Residency-by-investment program raises questions
Alongside Project Ayla, the government is developing the Maldives Pearl Residence program, which will allow eligible foreigners to obtain residency through investment. The minimum investment requirement had not been announced in the report, and the program’s regulatory framework remained under development.
Economic Development and Trade Minister Mohamed Saeed has estimated that the initiative could generate more than $1 billion in direct and indirect financial inflows over an unspecified period.
The government believes the program could stimulate property development, tourism, and other economic activities. Nevertheless, residency-by-investment schemes have attracted international scrutiny because they can be exploited to launder illicit funds, conceal assets, evade law enforcement, or facilitate other criminal activities.
The Financial Action Task Force (FATF) has highlighted the risks associated with such programs, emphasizing the importance of effective screening and strong regulatory oversight.
The Maldivian Ministry of Economic Development has stated that the proposed program will incorporate international screening, financial and reputational assessments, and checks by relevant government agencies. However, critics maintain that the effectiveness of these safeguards will depend on how they are implemented and enforced.
Opposition demands greater transparency
Several opposition politicians have questioned whether the government can adequately supervise the proposed developments and prevent financial abuse.
Former economic minister Fayyaz Ismail has expressed concern about whether sufficient safeguards will prevent unsuitable applicants from obtaining residency. Opposition lawmaker Ahmed Shamheed also called for the Pearl Residence program to be suspended and for related agreements to be disclosed. His parliamentary resolution was rejected in August, according to the report.
Shamheed has warned that special economic zones could become effectively self-contained jurisdictions operating with insufficient public scrutiny.
Transparency International’s Maldives chapter has also raised concerns, particularly given the country’s history of corruption involving tourism development. An earlier scandal involving island leases in 2014 and 2015 saw senior politicians improperly lease islands to developers while receiving tens of millions of dollars in proceeds.
Governance manager Azza Mohamed has argued that avoiding similar abuses requires transparent beneficial-ownership records, independent oversight of procurement and approvals, and effective mechanisms to trace and recover illicit funds.
Questions have also emerged about Project Ayla’s financing. The project is being developed by local company Crystal Holdings Private Limited and Dubai-based BluRock Group. However, their underlying investors, equity partners, and ultimate beneficial owners were not publicly identified in the report. Both companies declined to respond to journalists’ requests for comment.
The absence of public information does not establish wrongdoing, but it makes independent scrutiny of a major development more difficult.
Henley & partners and the global residency industry
The Maldivian government is working with Henley & Partners, a firm specializing in residency and citizenship-by-investment programs, to develop the Pearl Residence initiative. The company is expected to assist with application processing and recommendations, while the government will make the final decisions.
Henley & Partners has faced scrutiny over its work in other jurisdictions. An investigation by the Organized Crime and Corruption Reporting Project reported that the company had facilitated passport applications in St. Kitts and Nevis for individuals including prominent politicians and people described as alleged criminals or fugitives.
The firm rejected suggestions that historical and disputed allegations demonstrated that its due diligence for the Maldives program would be inadequate. It has stated that it takes its responsibilities seriously.
International organizations, including the Organisation for Economic Co-operation and Development, have warned that poorly supervised investment migration programs can facilitate corruption, money laundering, and tax evasion. The challenge for the Maldives will be to ensure that attracting foreign capital does not weaken its financial safeguards.
Environmental threats from land reclamation
Financial transparency is not the only concern surrounding Project Ayla. Environmentalists warn that dredging and large-scale land reclamation could cause lasting damage to the Maldives’ fragile marine ecosystems.
The project requires millions of cubic metres of sand to be extracted from the seabed. Dredging can create sediment plumes that block sunlight, smother coral reefs, and disrupt habitats for marine species, including parrot fish and nurse sharks.
Environmental activist Humaida Abdul Ghafoor has warned that these activities can cause severe harm to marine life and alter ocean currents, water movement, and local hydrology.
President Mohamed Muizzu has defended the government’s development strategy, stating that reclamation projects should minimize environmental damage and be accompanied by initiatives such as coral spawning and planting.
However, environmental advocates question whether restoration measures can adequately compensate for the damage caused by large-scale construction. Protecting coral reefs is particularly important because the Maldives depends heavily on marine biodiversity and natural beauty to sustain its tourism industry.
Economic pressures and climate vulnerability
The Maldives’ investment strategy comes amid serious economic and geographic challenges. The International Monetary Fund projected that the country’s public debt would reach approximately 130 percent of gross domestic product in the year discussed in the report.
Meanwhile, limited land availability and population growth have increased pressure on the capital, Malé, where nearly half the country’s population lives within an area of approximately two square kilometres.
Land reclamation has become a key part of the government’s response. Plans for Ras Malé, another artificial island development, include a proposed undersea tunnel connecting it to the capital.
Climate change adds further complexity. Approximately 80 percent of the Maldives’ nearly 1,200 islands lie less than one metre above sea level, making the country particularly vulnerable to rising seas.
Although artificial islands may create additional space for development, they require careful environmental planning, resilient infrastructure, and long-term financial commitments.
Conclusion
The Maldives’ plans to attract wealthy residents and build luxury artificial islands offer potential economic benefits, including foreign investment, new business opportunities, and additional revenue. Yet these ambitions also carry significant risks involving financial transparency, corruption, environmental degradation, and public accountability.
To make the strategy sustainable, the government will need effective anti-money-laundering safeguards, transparent ownership records, independent oversight, and rigorous environmental monitoring.
Ultimately, the success of Project Ayla and the Pearl Residence program will depend not only on the amount of investment they attract but also on whether the Maldives can protect its natural resources, strengthen public trust, and ensure that economic development benefits the country as a whole.
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