Business & Tourism – Page 12 – Minivan News

Government ordered to pay MVR349 million in damages for terminated transport contract

The Civil Court has ordered the Maldives government to pay MVR348,995,154.60 (US$22.5million) to Dheebaja Investment Pvt Ltd for the abrupt and unlawful termination of a contract to establish ferry services in four northern atolls.

The verdict, dated October 23, said President Dr Mohamed Waheed Hassan’s administration had terminated a contract with Dheebaja on 30 May 2013 claiming the company had failed to fulfill terms by suspending ferry services to Baa Atoll Fulhadhoo and Fehendhoo Islands.

The transport services contract had been signed under former President Mohamed Nasheed in February 2010. Dheebaja was to provide ferry services in Noonu, Raa, Baa and Lhaviyani Atolls in exchange for 47 plots of land to build ferry terminals and tourism development.

The Civil Court found that the Waheed administration’s termination of the contract was unlawful, stating the government had violated the contract first by failing to hand over promised plots of land to Dheebaja.

The court ordered the Maldives government to pay nearly MVR349 million in damages to Dheebaja for it’s unilateral decision to terminate contract with only five days of notice. The amount is to be paid back within six months.

The Maldives is also currently facing a potentially crippling payout to India’s GMR infrastructure for the abrupt and unlawful termination of a contract to develop Ibrahim Nasir International Airport.

President Waheed had declared the US$511 million contract “void ab initio” (invalid from the outset) in November 2012 and gave GMR a seven-day ultimatum to leave the country.

However, a Singaporean arbitration court in June declared the agreement to be “valid and binding” and said the government and Maldives Airports Company Pvt Ltd (MACL) are liable to GMR for damages.

The arbitration tribunal is in the process of determining a compensation figure. Although GMR had initially sought US$1.4 billion – a figure that exceeds the Maldives’ annual budget – government sources say the figure will be between US$300million and US$600million.

The World Bank in 2013 said the payout would place severe pressure on the country’s already critically low foreign reserves.

Since President Nasheed’s controversial ouster in 2012, President Waheed and incumbent President Abdulla Yameen’s administration have terminated or renegotiated several contracts signed under Nasheed.

The government, on October 22, terminated an agreement made with India based Tatva Global Renewable Energy to provide waste management services in Malé and renegotiated a housing contract with India’s TATA group.

The US$190 million housing project had been delayed for more than two years.

Indian companies blamed the government of creating “undue challenges” for political gain to derail their substantial investments in the Maldives in a 2012 report in India’s Business Standard.

Nasheed’s government had been ousted after months of a vitriolic nationalist and anti–India campaign.

Several of Yameen’s ministers also served in Waheed’s cabinet. They include Tourism Minister Ahmed Adeeb, Defense Minister Mohamed Nazim, Finance Minister Abdulla Jihad, Minister of Housing and Infrastructure Dr Mohamed Muizzu, and Minister of Islamic Affairs Dr Mohamed Shaheem Ali Saeed.

Incumbent Foreign Minister Dunya Maumoon served as Waheed’s State Minister for Foreign Affairs while Vice President Dr Mohamed Jameel Ahmed held the position of Home Minister.

Since assuming power, Yameen has strengthened trade and political ties with China and the Maldives is now a partner in China’s flagship Silk Route.

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President Yameen announces development of five resorts in Haa Dhaalu Atoll

President Abdulla Yameen has announced plans to develop five resorts in the northern Haa Dhaalu Atoll next year.

Yameen said that the first islands to be developed as resorts by the current government will be located in Dhipparufushi, Vaikarumuraadhoo, Kanamana, Kudafaru, and Keylakunu islands in the country’s second-northernmost atoll.

During his visit to the northen atolls, President Yameen also talked about the government’s plans to develop an airport on Kulhudhuhfushi to further encourage the arrival of tourists.

Officials from the government promised the even distribution of resorts earlier this year following an online petition calling for the area to participate in the benefits of the country’s billion dollar tourism industry. Haa Dhaalu is currently the only atoll in the country without any operating resorts.

President’s Office Spokesperson Ibrahim Muaz told Minivan News of the strategic importance of Kulhudhuhfushi Island, which has a population of around ten thousand people.

“Projects like the proposed airport, resort development, and the I-Havan mega project will bring with it prosperous employment opportunities for the people residing the northern atolls, eliminating need of migrating to the capital Malé for employment,” said Muaz.

Muaz also noted that such projects, while providing numerous employment opportunities, would also develop the infrastructure in the region and improve the general living conditions in the North.

The UNDP’s most recent Human Development Report noted that disparities between the central and outer atolls were causing losses to human development, with the northern atolls reporting to suffer the most from limited job opportunities and social services.

Regional development

This year’s Avaaz petition – signed by just over 500 people – noted that the economic and societal problems of the 20,000 inhabitants of the atoll could be alleviated by the development of resorts.

The petition argued that the development of the region’s “pristine uninhabited islands” would halt the “mass migration” to Malé which was “tearing up the social fabric of our society”.

President Yameen’s election campaign pledged to develop 50 operational resorts during the five year presidential term. Yesterday’s proposed 2015 budget also planned for tourism growth, with 10 new resorts proposed in a MVR24.3 billion budget plan.

Despite the total number of resorts in the country exceeding one hundred, the majority are clustered around Malé and the country’s main international airport.

After initial plans for the 40-year-old industry’s development envisioned regional hubs, the introduction of sea planes has encouraged the concentration of resorts in the now-crowded central atolls.

The government’s plans for regional development have centered around the controversial SEZ bill, which it argues will decentralise development in order to promote regional growth – though the bill’s detractors fear that the policy will come at the expense of political decentralisation.

Relaxed regulations in the SEZs are intended to attract investors for a number of ‘mega projects’, including the iHavan – or ‘Ihavandhippolhu Integrated Development Project’ – in Haa Alif Atoll.

The project aims to take advantage of the strategic location of the Maldives’ northernmost atoll on a major shipping route – through which more than 700,000 ships carry goods worth US$18 trillion a year – and develop 5,700 hectares of land along with deep natural harbours.

Meanwhile, environmental NGO Ecocare has protested against the proposed Kulhudhuhfushi airport, pointing out that the airport’s development would destroy a mangrove area which would be reclaimed in order to build the airport.

Ecocare suggested a speedy ferry transportation system to Hanimaadhoo Airport which is just 16.6 km away after labelling the Kulhudhuhfushi airport as “economically less viable”.

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Public debt to reach MVR31 billion by end of 2014, reveals finance minister

Public debt is expected to reach MVR31 billion (US$2 billion) or 67 percent of GDP at the end of 2014, Finance Minister Abdulla Jihad has revealed.

“Despite achieving economic progress, the Maldivian economy is fragile and the Maldives’ financial situation is not in the most appropriate state at present,” Jihad cautioned in his budget speech at parliament today.

“The main reason for this is the year on year increase of the budget deficit and the state’s debt because of expenditure being higher than state revenue in recent years,” he explained.

The country’s balance of payments worsened and foreign currency reserves dwindled as a result of both the persisting fiscal deficit as well as outflow of foreign currency, Jihad added.

He noted that the dramatic increase of expenditure on public sector wages, subsidies, and social security programmes was also responsible for the fiscal imbalances.

Expenditure on state employees in 2014 would reach MVR15.8 billion (US$1 billion), Jihad observed, while MVR3.2 billion (US$207 million) would have been spent on subsidies and social security benefits.

Out of every MVR100 collected as revenue or income, Jihad explained that MVR40 was spent on employees and MVR22 on social protection and subsidies.

Consequently, the government was facing serious difficulties in “managing the state’s cash flow and financing the budget” as well as securing loans for budget support, Jihad said.

The budget was mainly financed by selling and rolling over treasury bills (T-bills), he said, which involves repayment at high interest rates.

According to the central bank, the total outstanding stock of government securities was MVR13.6 billion (US$881 million) at the end of September.

“The growth in government securities was contributed by the increase in the amount of T-bills issued by the government to manage its cash flow requirements,” reads the Maldives Monetary Authority’s (MMA) latest monthly economic review.

Targeting subsidies

In May, Jihad continued, the government ceased obtaining funds from the central bank to finance the budget and the inflation rate has remained low as a result.

The government has also decided to freeze hiring new employees in 2015 in favour of conducting training programmes and optimising productivity. The defence minister last week criticised civil servants, saying they were providing “poor service” to the public.

Parliament needed to pass legislation on the state’s wage policy for a lasting solution to discrepancies in pay among state institutions, Jihad suggested.

He also revealed plans to revise the electricity subsidy, which he said currently benefits the affluent more than the needy.

Targeting the electricity subsidy to low-income families or households would save 40 percent of the government’s expenditure on the subsidy, Jihad explained.

The government was also working on revising the Aasandha health insurance programme – expanded by the current government – to ensure sustainability, he added, in addition to plans to target food subsidies in 2015.

In May, MMA Governor Dr Azeema Adam called for “bold decisions” to ensure macroeconomic stability by reducing expenditure – “especially the un-targeted subsidies” – and increasing revenue.

The MMA had previously warned that shortfalls in revenue and overruns in expenditure could jeopardise the country’s debt sustainability.

The International Monetary Fund (IMF) has also recommended targeting subsidies to the poor.

“The electricity subsidy is one that goes to even the richest strata of society. Basic food subsidies are being enjoyed now by the resorts, and never mind the resorts, are being enjoyed by wealthy foreign visitors who stay at the resorts,” Dr Koshy Mathai, resident representative to Sri Lanka and Maldives, told MPs on the public accounts committee in February.

“That to us seems like a totally unnecessary policy.”

He added that “substantial savings” could be made from the budget by targeting subsidies to those most in need of assistance.

Despite the cost-cutting measures, Jihad cautioned today that the government’s recurrent expenditure could not be reduced while people reside in 188 geographically dispersed islands.

Providing services to small populations was difficult and costly, he observed, stressing the importance of formulating and implementing a population consolidation policy.

On plans to tackle the high rate of unemployment, Jihad noted that MVR332 million (US$20 million) was allocated in the 2015 budget for higher education programmes, with special emphasis on training doctors and health sector professionals.

The implementation of the government’s economic policy – with the introduction of special economic zones – would spur job creation and attract foreign investment, he added.

Jihad appealed for support from MPs for the government’s proposed revenue raising measures, warning that public services could be disrupted if anticipated revenue is not realised.

“The estimated budget for 2015 is a budget that lays the foundation to build the future of the current generation and future generations,” he said.

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Government decides to implement a ‘green tax’ on tourists

Tourism minister Ahmed Adeeb has told local media that a bill detailing proposed ‘green tax’ for tourists will be sent to parliament this month.

“Levying this tax is necessary given Maldives’ fragile environment. Revenue generated from the tax will go into managing the waste from local resorts and other islands,” said Adeeb who also serves as the co- chair in the cabinet’s Economic Council.

The exact percentage to be levied will be decided after consultations with relevant stakeholders, he added.

Earlier this month, Adeeb said he would aim to resolve waste management issues within the next two years using state-owned companies, after announcing the termination of the deal with India based Tatva Global Renewable Energy.

Minister of Finance and Treasury Abdulla Jihad also spoke of the proposed green tax while submitting a record MVR24.3 billion (US$1.5 billion) state budget for parliamentary approval today.

Jihad noted that the tax will form part of revenue raising measures, which also include the addition of ten resorts to the current 112. The proposed changes are anticipated to raise MVR3.4 billion (US$220 million) in new revenue.

Levies on the tourism industry – which accounts indirectly for up to 90 percent of the country’s GDP – formed a major part of proposed revenue raising measures in 2014.

An IMF-recommended hike on Tourism Goods and Service Tax (T-GST) from eight to 12 percent was approved by parliament in February and came into force last Saturday (November 1), prompting concerns from industry insiders.

Speaking to Minivan News today, former Managing Director of Maldives Tourism Development Corporation (MTDC) Mohamed Matheen said that the budget issues could not be resolved without addressing the structural issues within the budget.

“The budget deficit cannot be resolved regardless of how the tax regime is set without addressing issues like the high recurrent expenditures of the government, which is a lot higher than the majority of the countries,” said Matheen.

One general manager from a prominent resort told Minivan News last weekend that bookings appeared to be down for November, with both guests and operators aware of the “double tax” as the T-GST increase combines with the bed tax – a measure also continued this year as a way to boost government coffers.

“November will be tough,” he explained. “Top end resorts will really feel this. There’s no way further increases could be stood.”

He also expressed concern that the resorts were being asked to carry the fiscal burden of the government’s failure to curb expenditure.

Former President Mohamed Nasheed has also criticised the hike in the T-GST saying that it would cause immense difficulties to the general public.

“Now a [ticket] to a flight to Addu has gotten more expensive than a flight to Colombo. This is not, in any situation, how it should be priced,” Nasheed told local media.

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Government unveils integrated resort project at World Travel Market

The Maldives Marketing and PR Corporation (MMPRC) has unveiled its integrated resort development project at the World Travel Market in London this week.

Representatives from the Maldivian government’s tourism promotion department – as well as local tour operators – are taking part alongside 146 representatives from 54 countries.

“A press conference was held on the first day of the fair, where the highlight of the conference was the recently launched Integrated Resort Project which was disseminated to the audience,” read an MMPRC press release.

The new scheme, described as ”communal tourism development” or “vertical tourism” by President Abdulla Yameen is being overseen by the MMPRC.

Sixteen bids were reported to have been received earlier this year for the first 20 plots made available as part of the Thumburi guest house island project – designed to attract small and medium business to an industry dominated by high-end island resorts.

Also present in London this week are representatives of the Maldives Association of Travel Agents and Tour Operators (MATATO), which is acting as an associate partner for the second year.

“This partnership opens new doors for MATATO members,” explained the association – the only Maldivian group to be given associate partner status.

”We believe that the growth and sustainability of our members, local travel agents and tour operators and other industry stake holders, require continued exploration and networking efforts in the emerging markets along with strengthening the presence in the lucrative markets for Maldives.”

The World Travel Market was launched in 1980, and has grown from 350 exhibitors to around 5,000 and 50,000 participants – agreeing deals worth $3.7 billion last year alone.

The Maldives tourism industry welcomed over one million tourists for first time in 2013, with the government expecting the 1.5 million arrivals in 2015.

The MMPRC visited China last month in an effort to further boost the now-dominant Chinese market, which makes up over 30 percent of the market share.

Recent statistics show that visitors from the UK – traditionally one of the largest sources of tourists to the Maldives – rose to 8 percent of the total in the first three quarters of 2014.

“The Maldives delegation will be meeting with the Top Travel Agents and Travel trade media to identify opportunities to build strong ties between two countries and to identify strategies to increase the number of tourist arrivals from UK,” said the MMPRC today.

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Finance minister presents record MVR24.3 billion state budget to parliament

Finance Minister Abdulla Jihad submitted an estimated 2015 state budget of MVR24.3 billion (US$1.5 billion) for parliamentary approval today – 35 percent higher than this year’s record MVR17.96 billion (US$1.16 billion) budget.

“The estimated budget deficit for 2015 is MVR1.3 billion [US$84 million],” Jihad said in his budget speech at today’s sitting of parliament.

“This is 2.5 percent of GDP. The deficit is to be financed by MVR1.1 billion [US$71 million] estimated from foreign parties and MVR223 million [US$14 million] estimated from domestic finance.”

After expressing fears in August that the deficit for this year would spiral to MVR4 billion – or 10 percent of GDP, Jihad told MPs today that the 2014 deficit was expected to be just MVR1.6 billion (US$103 million) as a result of compromises by parliament to the government’s revenue raising measures.

Recurrent expenditure in 2015 is expected to be MVR15.8 billion (US$1 billion) or 65 percent of the budget, he explained.

Salaries and allowances for state employees accounts for 26 percent of the total budget, Jihad noted, followed by social security and welfare (13 percent) and administrative costs (8 percent).

Capital expenditure meanwhile accounts for 30 percent of the budget, Jihad continued, which includes MVR6.3 billion (US$408 million) for the Public Sector Investment Programme (PSIP) and loan repayment.

The forecast for government income or revenue is MVR21.5 billion (US$1.3 billion), Jihad said, including MVR13 billion (US$843 million) in tax revenue, MVR6.8 billion (US$440 million) in non-tax revenue, and MVR1.7 billion (US$110 million) in free aid.

Jihad noted that MVR3.4 billion (US$220 million) is anticipated from new revenue raising measures, which includes revisions of import duty rates from July onward, the introduction of a ‘green tax’, fees from investments to special economic zones, income from the home ownership programme, and leasing 10 islands for resort development.

Fund allocations

The MVR2.9 billion (US$188 million) allocated for the education sector is 32 percent higher than 2014, Jihad continued, which includes higher expenditure on scholarships, student loans, training programmes, financial assistance for pre-schools, and the cost of implementing the new national education curriculum.

The MVR2.1 billion (US$136 million) allocated for the health sector is 21 percent higher than 2014, Jihad noted, while MVR3.2 billion (US$207 million) was allocated for social security and subsidies provided by the National Social Protection Agency, including MVR1 billion (US$65 million) earmarked for the MVR5,000 (US$324) a month pension for the elderly and MVR750 million (US$48 million) for the unlimited Aasandha health insurance programme.

Some 52 programmes would be conducted to upgrade three hospitals to tertiary level and develop infrastructure in regional hospitals and island health centres, he noted.

While MVR90 million (US$5.8 million) was allocated for fisheries and agriculture, Jihad said MVR50 million (US$3.2 million) was allocated for providing financial assistance for small and medium-sized enterprises.

“As development of Maldivian youth is one of the most important pledges of this government, MVR300 million [US$19.4 million] has been budgeted to conduct different programmes aimed at youth,” Jihad said, which was 55 percent higher than 2014.

Funds have also been earmarked for the celebration of the 50th anniversary of independence, Jihad noted.

Notable PSIP projects include the development of the Ibrahim Nasir International Airport (INIA), the Malé-Hulhulé bridge project, the Indira Gandhi Memorial Hospital (IGMH) renovation project, water and sewerage projects for 66 islands, coastal protection for 22 islands, 23 new harbour construction projects and 38 ongoing harbour projects, and waste management projects in 105 islands.

Funds have also been allocated in the budget for a renewable energy project expected to commence next year, he added.

A total of MVR695 million (US$45 million) was earmarked for housing programmes, Jihad continued, which includes the construction 1,985 housing units in Hulhumalé.

In addition to a project to resolve flooding in the capital, Jihad said 15 road construction projects in other islands were included in the budget.

2014

While the projected deficit for 2014 was MVR1.3 billion, Jihad said the deficit at the end of the year would be MVR1.6 billion (US$103 million) as a result of compromises by parliament to the government’s revenue raising measures.

A proposed Tourism Goods and Services Tax hike was delayed from July to November while the reintroduction of the US$8 bed tax was delayed by a month.

While the finance ministry anticipated payments for resort lease extension fees in full, parliament revised the budget for the fees to be paid in instalments over 18 months.

Jihad meanwhile noted that the International Monetary Fund’s (IMF) global economic outlook released in October predicted economic growth in 2014 and 2015 after the recovering from the global financial crisis and recession of 2007 to 2012.

Accordingly, domestic economic growth in 2014 was expected to be 8.5 percent, Jihad said, while the forecast for 2015 is 10.5 percent – driven by tourism, telecommunications, and transport.

The tourism industry is expected to grow by 8 percent with 1.5 million tourist arrivals, he added, while the inflation rate has meanwhile remained steady at 1.4 percent as of September.

On the balance of payments, Jihad revealed that the current account deficit would reach US$290 million or 10 percent of GDP, although it is projected to decrease to US$215 in 2015.

The official reserve at the end of 2014 is expected to be US$445 million – projected to rise to US$460 million next year.

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Future of Gulhifalhu in doubt as government halts project

Additional reporting by Ismail Humaam Hamed

The future of the Gulhifalhu development project appears uncertain as the government called a halt to proceedings, being said to have deemed the island unfit for habitation.

A buyer’s association – comprising seven families who made down payments on flats four years ago – now fear their investment may be lost.

“We are not big businessmen. We are simple people who gave up all our life savings because we wanted accommodation near the capital Malé,” said the association’s representative Adam Nadeem.

After paying the 30 percent – or MVR500,000 – of the cost of each flat in 2010, with a promise of a new home in 6 months, buyers were informed last week that the government had suspended further development, he explained.

Global Project Developments (GPD) have today said that the plan to build housing units was formulated upon the request of the state-owned Gulhifalhu Investments Ltd (GIL) and that all necessary permits were obtained in 2011.

“GPD believes that if there are any issues which would affect the livelihood of habitants of the island it is the responsibility of the government and GIL to address those issues,” read a press release from GPD.

GPD – a subsidiary of the UK company Capital Investment and Finance Ltd (CIFL) – went on to accuse GIL of failing to uphold its part of the agreement in registering the houses with the relevant authorities.

The project to develop the submerged reef situated between the islands of Villingili and Thilafushi – just minutes from the capital Malé – was signed in 2007 under the government of Maumoon Abdul Gayoom.

Investment plans

Initially envisioned as an industrial project, the development was amended after the arrival of the Maldivian Democratic Party (MDP) administration, taking on the title of the Global Green City, and focusing on housing units to ease congestion in the capital city.

CIFL, having signed a 35-year lease agreement with the state-owned GIL, then established GPD in order to continue the reclamation and development of the island.

After the completion of the first housing units last month, however, the cabinet’s Economic Council informed GIL that the island was not fit for habitation due to health and geological factors, reported local media.

The island is located just 200 yards from Thilafushi – often referred to as a ‘toxic bomb’ owing to the fumes produced as much of the nation’s waste is burned on site.

Despite this, the Environmental Protection Agency had issued approval for the construction of 240 two-bedroom flats in November 2011.

Neither GPD nor the buyers association have been provided a copy of the GIL statement. Officials from the President’s Office were unavailable for comment at the time of publication.

Nadeem explained that meetings with the President’s Office and the Economic Council last December had been positive, with no sign that the future of the development was in danger.

Indeed, the Maldives’ first amusement park opened on the island the same month, with locals now visiting from the neighbouring islands every weekend. Additionally, two beach villas are available for visitors wishing to stay overnight.

Investor confidence

The disruption to the Gulhifalhu project is the latest in a series of foreign investor agreements that have faced difficulties after a change of government.

The Tatva waste management project became the latest deal signed under the MDP government to founder last month, with the government announcing that it wished to use a state-owned company to provide such services in the capital.

Deals for both border control and – most notably – airport development were also terminated by the government of Dr Mohamed Waheed, while the Tata housing project in Malé was delayed for two years as the incoming administration sought revised terms.

Assuming power in November 2013, the government of President Abdulla Yameen has sought to rebuild investor confidence, making the introduction of special economic zones (SEZ) the cornerstone of its economic policy.

The fostering of an investor friendly environment is intended to facilitate the development of a number of ‘mega projects’ which the administration hopes will move the economy away from its current dependence on tourism.

The SEZ bill was passed in September, and China has signed a preliminary contract agreement on the development of Ibrahim Nasir International Airport as well as promising to “favorably consider” financing the bridge project.

Proposed projects in the Malé region include the continued development of Hulhumalé to house the capital’s overflowing population, the construction of the Malé-Hulhulé bridge, and the relocation of the country’s main port from Malé to Thilafushi.

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T-GST rises to 12 percent

A Tourism Goods and Service Tax (T-GST) hike from eight to 12 percent approved by parliament in February has come into force today.

The tax hike was approved as part of revenue raising measures proposed by the government to raise additional revenue anticipated in this year’s budget.

One general manager has from a prominent resort told Minivan News that bookings appeared to be down for the month of November, with both guests and operators aware of the “double tax” as the T-GST increase combines with the bed tax.

“November will be tough,” he explained. “Top end resorts will really feel this. There’s no way further increases could be stood.”

Representatives from the Maldives Association of Tourism Industry (MATI) have also opposed the continuation of the bed tax alongside the T-GST increase, though the IMF has suggested that a 12 percent tax rate on the Maldivian industry remains “quite low” due to its high rates of return.

Other measures included reintroducing the US$8 tourism bed tax, reversing import duty reductions, raising airport departure charge for foreign passengers from US$18 to US$25, leasing 12 islands for resort development, and introducing GST for telecommunication services.

Introduced in 2011, T-GST generated around MVR2 billion (US$129 million) between January and September this year – equal to just under 24 percent of all government revenue.

In its latest quarterly economic bulletin, the Maldives Monetary Authority (MMA) warned that total revenue collected in 2014 could be lower than budgeted due to compromises by parliament in passing the revenue raising measures.

“For example, initially the 2014 budget anticipated the implementation of Tourism Goods and Services Tax (T-GST) hike— from 8% to 12%—in July 2014 but it was delayed to November 2014,” the central bank explained.

“Similarly, the continuation of the Bed Tax was delayed by a month and it is to be discontinued after November 2014, as opposed to the anticipated collection of Bed Tax throughout the year.”

In addition, the MMA explained that payments for resort lease extension fees, which had been anticipated to be received in full under the proposed budget, were later revised to be paid in instalments over 18 months.

Finance Minister Abdulla Jihad told parliament’s public accounts committee last month that the revenue shortfall would amount to MVR1.5 billion. Consequently, the initially projected MVR1.3 billion deficit in this year’s record budget is now expected to rise to over MVR4 billion.

Last month, the finance ministry imposed cost cutting measures in a bid to rein in the ballooning budget deficit.

The parliamentary subcommittee that reviewed the revenue raising measures had recommended revising the government’s proposals following consultations with the MATI.

Appearing before the subcommittee, MATI Secretary General Ahmed Nazeer also questioned the practicality of collecting resort lease extension fees upfront.

Only 17 out of more than 100 resorts offered the opportunity by the administration of former President Mohamed Nasheed to extend leases with a lump sum payment were able to do so, Nazeer said.

Resort owners had amended their lease agreements to pay extension fees in installments during Dr Mohamed Waheed Hassan’s administration, Nazeer noted, and revising agreements for a third time could present legal challenges.

Speaking with Minivan News today, the anonymous GM suggested the government focus on its own austerity measures, or risk losing guests to more “cost-effective” destinations, though the IMF earlier this year had

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Former Thilafushi Corporation head given 3 years for corruption

Former Thilafushi Corporation Managing Director (MD) Ibrahim Riyaz was sentenced to jail for 3 years by the Criminal Court today after being found guilty of using his influence to gain unlawful advantages in the Thilafushi land reclamation project.

The Criminal Court sentence read that Riyaz had denied corruption charges, claiming that the decision to award the project to Heavy Load Maldives was made by the company board of directors.

Heavy Load is owned by the family of Maldives Democratic Party MP and Deputy Speaker of the Majlis ‘Reeko’ Moosa Manik.

The troubled reclamation deal – awarded in 2010 as part of the Thilafalhu Industrial Zone project – faced repeated delays due to both technical and financial reasons.

The Criminal Court today countered Riyaz’s defense saying that he was not able to prove that the decision was made by the board of directors, and accused the former MD of making the decision himself in order to gain personally.

The decision to award the contract to Heavy Load Maldives was made against the rules and regulations of the company as well, read the sentence.

The mega-construction company was paid a mobilisation fee of MVR 38.6 million (US$ 2.52 million) by the Thilafushi Corporation in the project with the whole project reported to be worth US$ 21 million.

Anti-Corruption Committee (ACC) officials ordered the project halted in February 2011, citing the potential for corruption with the deal – though Moosa himself at the time alleged the decision to have been politically motivated.

The Thilafushi Corporation later sued the ACC for the decision to stop the work.

The state-owned corporation reportedly told a Majlis subcommittee last year that it had lost MVR650 million (US$42 million) as a result of the failure of Heavy Load to reclaim the required 152 hectares within the 6 month period agreed.

Criminal Court also charged two other executives of Thilafushi Corporation for participating in the corruption but were unable to prove their involvement.

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