Over MVR 24 million (US$1.5 million) is being lost annually by the Maldives Tourism Development Corporation (MTDC) on a stagnant hotel development in Uligamu in Haa Alif Atoll, it has been revealed.
MTDC Managing Director Mohamed Matheen told Minivan News that the corporation had been making losses on the City Hotel development after construction was halted half way into the project in 2010.
Matheen revealed that along with the City Hotel project – which had cost MVR 120 million (US$ 7.8 million) to develop it to its present state – MTDC’s Herethera Resort had also made a MVR 386 million (US$25 million) loss.
The land for City Hotel was leased to MTDC by the government on February 27, 2007, after which construction on the 100-bed hotel began. According to the 2010 annual report by MTDC, the project was halted after just 40 percent of the development had been completed.
“There have been certain issues to contend with in the project’s development. We have had some difficulties in attracting investors because of the US$1.5 million land rent and problems with the possibility of serving alcohol on the island.
“The previous board of directors had decided to terminate the contract as the land rent is costing too much. However I have made a lot of progress in trying to change that, and City Hotel can be completed by the end of this year,” Matheen claimed.
According to the MTDC website, the Maldives government has leased nine islands to the company “at a rate substantially below the market rate”. MTDC’s 2008 annual report stated that the company has over 21,000 shareholders making it one of the largest public companies in the Maldives.
In November last year, shareholders of MTDC expressed concern after the company failed to pay dividends for three consecutive years while also recording a net loss for the first time in 2011, local media reported.
Minivan News visited the City Hotel development last month with a surveyor who had worked and lived on the site in 2009.
Minivan News witnessed that the entire development, including the inside of staff and residential quarters, had become overgrown with vegetation. Assorted earth-moving machinery was idle and in disrepair.
The MTDC Managing Director stated that MVR 80,000 (US$5,181) per month – MVR 960,000 (US$ 62,176) per year – is currently being spent on the “upkeep” of the development.
“We have 14 people looking after this facility, but it seems they are not able to keep the overgrowth down.
“With another seven to eight million dollars this development would be complete. It won’t cost us much to remove the overgrowth and the rooms were already completed to their rafters. It would involve minor repairs,” Matheen added.
According to the former surveyor – speaking on condition of anonymity – construction was halted due to external pressures from conservative religious groups regarding the sale of alcohol on an inhabited island.
Asked about this issue, Matheen said discussions had taken place with native islands , however they were “divided” on the issue of alcohol sale.
“The bread and butter of the Maldives is definitely tourism. We are maintaining [Maldivians’] livelihood through tourism, and tourists want different products other than just sun and sand.
“Ninety-nine percent of tourists are drinkers, they are not coming here for many activities, and they are coming for relaxation and peace of mind. We have to cater to their needs,” Matheen added.
A committee formed by Uligamu islanders had submitted a court case regarding the halted development, according to Matheen.
“The island committee is not happy. They also think the development is controlled by the government when the majority is controlled by public shareholders. The government is not a major shareholder.
“The case is a pressure tactic. They think we have the money and they think we are purposefully not building here. They don’t accept the reality of the situation,” Matheen added.
In January 2012, local media reported that five people have been arrested in a youth-led demonstration at Uligamu against MTDC.
The protestors had demanded a reason as to why the development of the City Hotel had ceased, according to local media reports.
Matheen said that he was attempting to reduce the land rent costs as stipulated in the Tourism Act and that a new survey report of Uligamu is to be submitted this year.
US$25 million loss in Herethera Resort
Herethera resort – owned and operated by MTDC – was also said to have made a US$25 million loss following a series of “logistical issues”, Matheen said.
“We had pumped US$53 million into Herethera, however we are paying US$2 million in land lease and our operating costs are nearly 17 percent higher than resorts in the Male’ area because of location being so far away.
“When I took over this role in July, we did not have a single booking at the resort. Now we are fully booked until February 17,” Matheen said.
The MTDC Managing Director revealed that while no other resorts owned by MTDC are currently working at a loss, he admitted that because of the locations of the properties in the far south and far north, there were certain infrastructure issues.
Last month the bidding period for the management or purchase of Herethera Resort was been extended for the third time by the MTDC.
The company has not stated why the bidding period prior to this one ceased, but in previous instances the company said it had to cancel bids due to a lack of interest from potential investors.
ONYX, a company from Thailand, managed the resort until February 2012.
4 thoughts on “Stalled hotel development costing MVR 24 million annually: MTDC”
Pure incompetence of the new managing director. Who happens to be a former GM at one of buruma gasims resort. He's a pretty boy with absolutely no experience in making a transaction of this nature n scale. All he has to offer if you sit with him are the resort stories people tell each other inside the staff compound. This govt should be held responsible for this major loss to the public shareholders for appointing MDs who don't fit the bill.
Hussein thaufeeq on Fri, 1st Feb 2013 10:49 PM.
You are either unaware of real facts or is trying a fast one to pass the buck on to the new MD!
Which ever, it does not matter!
The fact is, MTDC was a company Gayyoom put together for giving out more resorts to be either run by the Champas, or be leased out at a profit!
Before 2004 presidential election, the people of Uligan were told that there was a plan for a domestic airport to be put up at Uligan! And surveys were carried out! Island administration informed not to give land from a certain area!
Then just before 2008 came, there was the story of a Hotel be built at Uligan by MTDC!
A comparatively large portion of the island was rented to MTDC for almost a penny per square feet!
People from the island given jobs, and some key people of the island given opportunity to supply food items and to lend their services in catering for the staff!
Before the election, work was started. A Mr. Ingireysi Waheed was set up as project manager, and the current MP for Maafannu Dhekunu Dhaaira who is well known for shifting from one party to another was in charge of the accountability!
It was non other than Champa Afeef who was sponsoring this project using Ibrahim Nooraddeen to give orders! MTDC was a mere place where what ever paper to be filed or dumped was to be dumped with!
Just before election there was a story about a "buffer zone" to be attached to the already taken area for the resort!
This buffer zone area well encroached into the area that was set aside for the airport!
People of Uligan then got wind of what was happening!
When a buffer zone is taken into account and it is fenced, then there was not enough space for and airport!!!!!!
Except a single large extended "family" on the island (who were under the claws of the "Champas"), the rest came to see what was going on and going to happen!
They fell into disagreement with this "family" who were campaigning for allowing a buffer zone!
People wanted the hotel, and the airport too!
What happened next is the ending to what is there today!
Everyone who worked in top ranks of the project at Uligan were generously treated!
The "family" of Uligan, was given authority to dispose of what was left on the island when work was halted!
Construction material that was not used were sold to some fortunate people of the island at a price, and even to this day, there are some of these people retaining jobs and claiming wages!
The MD of MTDC had control over what was going on at Uligan during that time and until this unfortunate thing happened!
To do away with all what was said and done; at the request of this "family" of people of the island, the "half pant" Champa has built a mosque on the island with that buried the real story of Uligan Hotel!!!!
Champas have taken their inputs from MTDC, and it very much seems that MTDC is not their baby anymore or their worry anymore and that MTDC is incurring all these loss because of incompetency!!!!
I do not know this new MD Matheen and his competency which I care less!
But this is the real story of Uligan, it's airport and the so called hotel!!!!
Matheen was hardcore MDP activist during Nasheed regime and Nasheed had also appointed him as board of direct of MIFCO.
So he was more Nasheed boy than anyone else.
@patriot and @kuribee - please i urge you to stop trying to defend the fact that a GM at a former Gasim resort is capable of undertaking a multi million dollar transaction on behalf of the many public shareholders.
Dear sirs, We are in uncertainty of the times - with an unstable local political front and remnants of the financial crisis still looming over our nation - i cant accept compounding that with an equally incompetent MD who appeared out of nowhere on a political ticket.
@patriot when you say i do not know this new MD Matheen, it is clear that you do know him and you are defending him.
Comments are closed.