Business & Tourism – Page 5 – Minivan News

Maldives blames GMR, Axis Bank for sanctions by India after airport takeover

An Indian infrastructure company and a bank successfully lobbied India for sanctions on the Maldives over the 2012 cancellation of a deal to develop the international airport, the government has claimed.

The government made the allegation last month at a Singaporean arbitration tribunal, where India’s Axis Bank is seeking the repayment of a US$160 million loan from the Maldives. The loan was given to GMR group in 2011 to upgrade and manage the Maldives’ main airport.

India had tightened visa regulations for Maldivians and ceased exporting some construction materials to the Maldives, after the government took over the airport in 2012, but neither India nor the Maldives had explained the reasons for the sanctions.

India only lifted the restrictions after President Abdulla Yameen was elected in November 2013.

In its submission to the Axis Bank tribunal – obtained by Minivan News – the government claimed the bank had been involved in an “attempt to secure political pressure from the Indian government” to prevent cancellation of the deal.

The Axis Bank in 2012 also told the government it would “approach the regulatory-diplomatic authorities in India” after GMR was ordered to handover the airport, the government said.

GMR also wrote to the prime minister in August 2012 “requesting intervention by the Indian government, when it was clear that future of the concession agreement was in jeopardy,” the government said.

GMR is meanwhile claiming US$803 million from the Maldives in a separate arbitration after the tribunal ruled last year that the government had “wrongfully” terminated a “valid and binding” concession agreement.

The campaign by GMR and Axis Bank led to Indian officials including then-Prime Minister Manmohan Singh telling ex-president Dr Mohamed Waheed that the “Indian government stood ready to assist GMR in making sure [the cancellation] did not happen.”

According to minister Mohamed Hussain Shareef, “the message [Waheed] got from them was confident and unbending: they expected [the Maldivian government] not to take any action to terminate the concession agreement”.

The Indian government subsequently “insisted on the repayment of outstanding debts of US$100m” in mid-November 2012 and warned of “repercussions” shortly before the agreement was terminated, lawyers representing the Maldives said.

The lawyers also alleged that then-Indian high commissioner to the Maldives “sought to intervene through several meetings with [then-defence minister Mohamed Nazim] in which he asked the Maldives to cooperate in allowing GMR/GMIAL back into the airport.”

Nazim in his testimony said that the message from India was “either back off or suffer the consequences.”

Documents disclosed during arbitration proceedings also showed that the Axis bank’s officials had met the Indian High Commissioner in January 2013, a month after the government took over the airport, lawyers added.

The submission noted that former president Mohamed Nasheed stated after a visit to India in February 2013 that “India believes the deteriorating ties between Maldives and India will recover” if the 25-year contract is restored.

“On 11 March 2013 several Indian Navy attack craft were reported as having conducted exercises just outside Maldivian territorial waters,” it added.

With the tightening of visa regulations for Maldivian citizens, dozens of people to queued outside the Indian High Commission to obtain visas to travel for medical treatment.

In February 2013, the Indian government revoked a special quota afforded to the Maldives for the import of aggregate and river sand. The move led to a shortage of the supply of construction material and rising costs for construction companies.

The current Indian Prime Minister Narendra Modi meanwhile invited the GMR chairman to a state banquet in honour of President Abdulla Yameen in January 2014, lawyers representing the Maldives noted.

Minivan News is awaiting a response to the allegations from the Axis Bank and GMR, while the government has declined to comment on the ongoing arbitration.

The Axis Bank is seeking repayment of the US$160 million loan as well as an additional US$10 million as interest and fines from the Maldivian government. The bank contends that state is liable for the loan in the event of an early termination or an expropriation of the airport.

However, the government has argued that declaring the concession agreement invalid from the outset does not amount to an early termination. The government also accused the Axis Bank and GMR of colluding to extract large sums of money, claiming the developer paid for the bank’s litigation fees for the separate arbitration process.

The Axis Bank meanwhile dismissed the argument as “highly semantic” and stated: “what words were used by the government to characterise its own acts are irrelevant to establishing whether the acts of the government amounted to an expropriation.”

Verdicts are expected in both the GMR and Axis Bank arbitrations in June.

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Villa accounts freeze will ‘send shockwaves’ through Maldives economy

Jumhooree Party leader Gasim Ibrahim’s Villa Group has warned of negative repercussions for the Maldivian economy if the tax authority freezes the company’s bank accounts next week.

A 20-day final notice seeking US$90.4 million allegedly owed as unpaid rent, fines and interest expires on Saturday (April 18), while the civil court last week refused to grant stay orders halting enforcement of the notice.

The enforcement policy for defaulting taxpayers involves freezing bank accounts to recover the unpaid amounts and ceasing to provide services from any state institution.

Villa – which won the tax authority’s “Ran Laari” award last year as one of five companies that paid the highest amount to the state – insists it does not owe any money to the state.

“It is not only Villa’s shareholders’ and the company’s rights that are lost [if bank accounts are frozen]. The rights of a lot of employees who work at the company, small and medium-sized businesses dependent on this company, guests who have made bookings at our resorts, tour operators, and many other people, would also be lost,” said Villa Group executive director Shimad Ibrahim at a press conference last night.

Banks that have issued loans to Villa will also be affected, he added.

“In sum, we are having to face something on Sunday that will send shockwaves through the whole economy,” he said.

The holding company Villa Shipping and Trading Pvt Ltd conglomerate operates businesses in shipping, import and export, retail, tourism, fishing, media, communications, transport, and education.

Villa business secretary Ibrahim Rasheed added: “We are all holding our breath.”

Rasheed said the company will continue to seek “a peaceful resolution” and “hope for justice”.

He noted that Villa companies employ about 5,000 people.

In an interview on his Villa Television on Saturday, Gasim repeatedly appealed for talks with president Abdulla Yameen and tourism minister Ahmed Adeeb to resolve the dispute.

However, the Villa officials said the government has not responded to “pleas” for discussions.

Adeeb meanwhile accused Gasim at a ruling coalition rally last week of hoarding islands and lagoons and refusing to pay money owed to the state.

“Fabricated”

The Maldives Inland Revenue Authority (MIRA) issued the US$90 million notice after the tourism ministry terminated agreements for several properties leased to Villa and subsidiary companies for resort development.

The move followed Gasim’s JP forming an alliance with the main opposition Maldivian Democratic Party. However, the government denies the opposition’s accusations of unfairly targeting Gasim’s business interests.

Some 27 cases challenging the termination of the agreements and MIRA’s notice as well as appeals of the civil court’s refusal to grant stay orders are ongoing at court.

While the tourism ministry cited lack of “good faith” as the reason, the Villa officials insisted the terminations were unlawful and that the fines were “fabricated”.

If rent is not paid, the government is required to give a 30-day notice before issuing fines or seizing the properties, they noted.

The lease agreements also specify procedures for termination on the grounds of financial or non-financial breaches, but the tourism ministry’s termination notices did not refer to any violation.

“This is something that investors should seriously consider. This is a frightening and dangerous thing,” said Villa lawyer Ahmed Shafeeq.

In response to a letter from Villa contending there was no basis for the fines, Shimad said MIRA told the company it was “following instructions” from the tourism ministry.

Settlement agreement

The properties at stake were leased under a settlement agreement signed with the tourism ministry on December 12, 2013, less than a month after president Yameen took office.

The settlement agreement was reached after the Supreme Court on November 19 ordered the state to pay US$9.7 million to Villa in one month as compensation for damages incurred in a project to develop a city hotel in Laamu Kahdhoo.

As part of the settlement, Villa withdrew cases involving a dispute over a city hotel in Haa Dhaal Hanimadhoo and resort development on Gaaf Dhaal Gazeera.

In return, the government signed five ‘amended and restated lease agreements’ with Villa for three islands and several Kaafu atoll lagoons.

The government also agreed to forgo rents for the islands and lagoons for a construction period of five years and seven years, respectively.

However, after the settlement agreement was terminated in February, MIRA’s notice stated that Villa owed US$75.5 million as fines, US$600,000 as interest, and US$14.8 million as unpaid rent dating back to original lease agreements signed in 2006 and 2007.

The Villa officials noted that the company has paid over US$15 million as advance payments for the properties.

In the case of Kahdhoo, MIRA claimed an unpaid rent of US$293,000 and a fine of US$10 million – 34 times the allegedly unpaid rent – despite the 2013 Supreme Court judgment declaring Villa does not owe rent for the property, the officials said.

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Gasim’s Villa group bankruptcy imminent

Jumhooree Party (JP) leader Gasim Ibrahim’s Villa Group is facing bankruptcy with the courts refusing to issue stay orders on a US$90 million payment to the state ahead of an April 18 deadline.

The civil court yesterday denied Villa’s requests for stay orders, stating the company does not face “irrevocable losses” if a notice by the tax authority to collect US$90 million in allegedly unpaid rent and fines is enforced.

The rulings pave the way for the state to freeze Villa’s bank accounts after April 18.

Gasim has said unfairly freezing Villa’s accounts would “impoverish thousands of citizens” and that the public does not want one of the largest companies in the country to “head towards bankruptcy.”

However, the court said the state could reimburse and compensate the company if the ongoing cases are decided in Villa’s favour.

The JP launched daily anti-government demonstrations in alliance with the main opposition Maldivian Democratic Party (MDP) in early February.

However, since the notice was issued, Gasim has not been seen in opposition protests or made any comments on a deepening political crisis.

Gasim made an appearance on Villa TV on Saturday for the first time in weeks and appealed for discussions with the government to resolve the dispute, insisting that Villa does not owe the “imaginary” amount.

He noted the JP had not condemned the sentencing of former president Mohamed Nasheed to 13-years in jail on terrorism charges last month

“When the judiciary made a judgement I don’t want to comment on it,” he said.

The JP is remaining “silent” and presently does not have a “stand” of supporting any party, Gasim said.

The party is not officially a part of the ‘Maldivians against brutality’ campaign launched by the MDP and religious conservative Adhaalath Party, he added.

Two European banks have cancelled loans worth US$80 million due to media reports of the notice, Gasim said.

Gasim’s interview followed strong criticism from tourism minister Ahmed Adeeb at a ruling coalition rally last week. He accused the tycoon of hoarding islands and lagoons and refusing to pay money owed to the state.

Adeeb also said the JP leader was “in hiding” after unsuccessfully seeking the presidency through his opposition alliance.

In response, Gasim said he is following his best judgment and suggested Adeeb’s anger might stem from insecurity or “lack of self-confidence”.

However, Gasim said he does not bear “animosity towards anyone” and repeatedly said he is ready to meet president Abdulla Yameen or Adeeb at any time.

Senior members of the JP are active in street protests in their individual capacity, Gasim said.

Bankruptcy

The government denies the opposition’s accusations of unfairly targeting Gasim’s business following the JP’s split from the ruling coalition.

The tourism ministry terminated agreements for several properties leased to Villa and subsidiary companies on February 5, shortly after the JP formed the alliance with the MDP.

On February 26, a day before an MDP-JP anti-government mass rally, the Maldives Inland Revenue Authority (MIRA) gave a 30-notice for Villa to pay US$90 million allegedly owed as unpaid rent and fines for the seized properties.

Gasim did not attend the February 27 protest march after failing to return from a trip to Sri Lanka

After the 30-day notice expired, MIRA issued a 20-day notice warning Villa that its accounts will be frozen under the authority’s enforcement policy against defaulting taxpayers.

After the tourism ministry terminated the agreements, Villa filed five cases against the ministry in February, contending that the move was unlawful.

Five additional cases were filed against MIRA over the US$90 million notice.

In rulings during the past two weeks, the civil court refused to grant stay orders in any of the cases. Villa is currently in the process of appealing the rulings at the High Court.

While the court initially granted a stay order in one case in early February, the High Court overturned the ruling.

A Villa official told Minivan New today that the judge who granted the stay order was transferred to the drug court.

The official explained that the properties at stake were leased as part of a settlement agreement signed with the government on December 12, 2013, less than a month after president Yameen took office.

The settlement agreement was reached after the Supreme Court ordered the state to pay over US$9 million to Villa. As part of the settlement, the government signed ‘reinstated and amended lease agreements’ with Villa for several islands and lagoons.

Gasim noted that Villa paid the state about US$15.8 million eight years ago as advance payment for the leased properties.

However, MIRA issued the 30-day notice claiming Villa owed US$75 million as fines and more than US$14 million as unpaid rent dating back to the original lease agreements signed in 2006 and 2007.

Under the settlement agreement, the government had agreed to forgo rents for the leased islands and lagoons for five years and seven years, respectively.

Correction: A previous version of this article stated that the tax authority is seeking US$100 million from the Villa Group, based on statements by Gasim Ibrahim. The company has since explained that the accurate figure is US$90 million.

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Government proposes $5m resort lease extensions

The government is seeking legal changes to allow the extension of resort leases to 99 years for a lump sum of US $5m, and to expand the powers of the tourism ministry.

The lease extension scheme, which would represent the first time they have been lengthened beyond 50 years, aims to raise money for the government.

The bill submitted by government-aligned MP Mohamed Ismail would also transfer to the tourism ministry the power to authorise developments at resorts and conduct environmental assessments.

The changes aim to incentivise investors, make it easier to obtain financing from international institutions, and increase revenue for the government, the proposed law states.

To be eligible for a lease extension, a resort property must be operational with an existing lease period of 50 years and must not owe money to the government.

If the amendments pass, resorts will have to seek authorisation from the tourism ministry for any development on a resort that could “permanently alter” the island, plot of land, or lagoon’s environment. The ministry must compile an environmental impact assessment before issuing permission.

“Making the services available under one roof would ease the burden on investors, speed up services, and improve investor confidence,” the introduction to the legislation says.

Under existing laws, the Environment Protection Agency conducts assessments and authorises projects such as land reclamation. The agency functions under the environment ministry.

However, the new amendments state that “only the tourism ministry will have the authority” to conduct assessments and authorise developments.

The tourism ministry will also have the power to impose fines not exceeding US$5 million for violations.

The introduction says that the involvement of other ministries and institutions in resorts hinders the tourism ministry and “lowers investor confidence”.

“Flip-flopping”

Under the current Tourism Act, the maximum lease period for resorts or hotels is 50 years. However, the constitution allows leases up to 99 years.

Former Economic Development Minister Mahmoud Razee told Minivan News today that from “a commercial investment point of view it’s a good move,” but questioned the government’s “sincerity”.

“Because when they were in opposition they made a big hoohaa about it,” he said, with reference to current ruling party MPs protesting against the then-Maldivian Democratic Party (MDP) government’s plans to extend resort leases from 25 to 50 years.

The move shows the government is trying to make up revenue shortfalls, said Razee, who was part of the MDP government. He said the current administration was “not curtailing expenses” but increasing the number of political appointees.

This year’s record MVR24.3 billion (US$1.5 billion) state budget includes MVR3.4 billion (US$220 million) anticipated from new revenue raising measures.

The measures include revisions of import duty rates, the introduction of a “green tax”, acquisition fees from investments in special economic zones, and leasing 10 islands for resort development.

Razee also suggested that the administration might allow resorts to pay the extension fee in instalments if the tourism industry lobbies the government.

When the MDP government offered extension of leases for 50 years in exchange for an upfront fee, Razee said resort owners were “not so eager” and “relatively few” paid the fees.

In January 2014, Maldives Association of Tourism Industry secretary general Ahmed Nazeer questioned the practicality of collecting resort lease extensions in a lump sum.

Nazeer told a parliamentary committee reviewing revenue raising measures that only 17 out of the more than 100 resorts had paid lease extension fees upfront.

Razee meanwhile criticised the government’s “flip-flopping” on economic policy, referring to its reversal of a decision to impose higher import duties on garments and motorcycles.

He noted that customs authorities are promising to reimburse importers who are paying the higher tariffs that came into force on April 1, even before amendments reversing the hikes have been passed.

In December, the government also reversed a decision to impose a 10 percent import duty on staple foodstuff such as rice, flour, wheat and sugar.

“There’s no clear-cut, defined, long-term policy,” Razee said.

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Thousands sign petition over resort workers’ pay, conditions

A petition calling for sweeping changes to resort employees’ working conditions and a minimum wage has collected two thousand signatures during its first five days.

The Tourism Employees’ Association of Maldives, which launched the petition, said it had amassed signatures from workers on 17 resorts since last Wednesday.

“Signing for new hopes and rights,” the group said on its Facebook page. “Keep going [with] the great work of humankind.”

The petition demands a minimum monthly wage of US $600 across the sector through an amendment to the Employment Act.

There is currently no minimum wage and the petition says that wage rates have not increased in the sector for 10 years.

The workers are also asking for quotas to require 80 per cent of tourism employees in the country to be Maldivian, which would require big changes in the hiring practices of resorts.

Current laws require 50 per cent of resort employees to be Maldivians, but the rule is not widely enforced. The sector employs some 11,426 Maldivians and 16,342 expatriate workers, meaning that overseas employees constitute 59 per cent, according to preliminary figures for the 2014 census.

TEAM also wants the president to honour a pledge to make shares in resorts available to their rank-and-file employees, a rarity in a country where resorts are generally owned by private companies controlled by a few individuals.

In February 2014 President Abdulla Yameen said that by the end of the year, a number of resorts would be floating a portion of their shares to the public, and urged Maldivian employees to become stakeholders.

The president said that share ownership would be a “lucrative addition to their current income from salary and other perks through employment at these resorts”, according to a press release issued at the time.

Speaking at the opening of the Sun Siyam Iru Fushi resort, Yameen also said the Sun Travel resort group would float up to 40 percent of its shares to employees in the coming years.

However, the pledge of shares for resort employees has not so far become a reality.

The petition also asks for a 12 per cent service charge to be applied and for 99 per cent of that to be distributed “fairly” among tourism employees, as set out in the Employment Act.

TEAM’s supporters are seeking the right to form a union, as set out in the constitution, and the right to protest in resorts, which was banned in 2012 under the Freedom of Assembly Act.

The law says that protests can only be held in resorts and in air and sea ports after a special permit from the police based on the advice of the military, but TEAM cites the constitution’s guarantee of the right to peaceful protest.

Over the past few years, resort workers have occasionally tried to launch protests.

Workers who had been fired from Sheraton’s Maldives luxury resort for demanding union recognition protested near the Sheraton Maldives Full Moon Resort and Spa in February, according to the website of the International Union Federation.

Carrying banners with slogans such as “Sheraton fully booked — no room for human rights”, the dismissed workers carried out a boat picket around the resort, while employees came to the beach and waved in support.

In February 2013, an employee strike in Vaavu Atoll Alimathaa resort resulted in 27 employees being fired by management.

According to Haveeru, Ahmed Adeeb, the tourism minister, said at the time that protests in resorts would affect tourists both directly and indirectly.

“Such things must not be encouraged by anyone. Especially when it is something banned by law, it must not happen. No one should encourage or give room for such things,” Adeeb said.

Officials from the Tourism Ministry were unavailable for comment at the time of press.

On Thursday, about 50 employees from the international airport in Seenu atoll Gan protested over a new salary structure which they said would result in lower pay than before. They stopped protesting when management agreed to return to the previous wage structure.

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Power company says hands are tied over $45m subsidy cut

The state-owned electricity provider to the atolls says its hands are tied after subsidy cuts last month left more than 5,700 businesses facing millions extra between them in electricity charges.

Companies on three more islands joined growing protests over the subsidy cuts today. Much of the anger is targeted at the state-owned Fenaka Corporation, which provides electricity to the Maldives’ remote islands.

The government previously provided Fenaka with about MVR11 million (US$713,359) a month to subsidise electricity for atoll businesses, it said yesterday, but this cost must now be borne by the companies themselves.

Fenaka Corporation managing director Mohamed Nimal told reporters on Monday that the company was only implementing government policies.

“If the government changes the rules today or categorises special customers and decides to provides subsidies to small businesses, we will bill them at those rates,” he said.

Fenaka has 46,590 meters in 151 islands, of which 5,765 meters were registered as business consumers, Nimal said.

Most shops, cafés and restaurants in the northern hub of Haa Dhaal Kulhuduhfushi were closed in protest over higher electricity bills yesterday, while more than 100 people demonstrated outside the local Fenaka office.

Businessmen protested in Addu City while those in Gaaf Dhaal Thinadhoo and Haa Alif Dhidhoo are planning to boycott paying their bills.

Electricity bills for businesses doubled, and in some case tripled, when the subsidy was discontinued last month.

Nimal said Fenaka could not address the concerns of businessmen across the country as it was “not a regulatory body” or policy maker. The National Social Protection Agency was in charge of issuing subsidies, he added.

Domestic households have also been told to reapply for subsidies before April 9 as part of a shift to targeted subsidies aiming to save the government money.

The government provided about MVR700 million (US$45 million) in subsidies to Fenaka last year, which Nimal said benefited rich and poor alike. This annual expenditure on subsidies is not sustainable, he said.

While shops have reopened in Kulhudhufushi, local media reported today that all shops and cafés have closed in Haa Dhaal Makunudhoo in protest.

Businesses in Fuvahmulah are meanwhile preparing to submit a petition to President Abdulla Yameen, warning of layoffs and price hikes due to a 50 percent rise in electricity bills.

Subsidy

Fenaka officials said bills in Kulhudhufushi are higher than other islands because businesses were charged a much lower rate than the tariff structure approved by the energy authority in 2009, leading to a threefold increase when the subsidy was removed.

While the actual rate was 7.50 laari per unit for usage above 400 units, the now-defunct upper north utility corporation charged 2.75 laari per unit for Kulhudhufushi businesses.

Then-President Dr Mohamed Waheed established Fenaka in 2012 with a mandate to provide electricity, water, and sewerage to island communities after dissolving the provincial utility companies set up by his predecessor.

Meanwhile, despite the price of crude oil falling in the world market, Nimal said Fenaka could not reduce the price of electricity as it was making investments in infrastructure developments and improving service provision.

When the subsidy was introduced, the price of diesel was MVR8 per litre compared with MVR11 per litre at present, he said.

Renewable energy

Dr Ibrahim Nashid, managing director of Renewable Energy Maldives, told Minivan News today that removing subsidies for small businesses could be counterproductive.

As the main consumption of electricity in a small island comes from businesses rather than households, Nashid argued that the island’s economy and Fenaka’s income will be adversely affected if businesses were forced to shut down.

Nashid suggested that “demand side management” policies and “streamlining” high overhead costs of the Fenaka corporation would result in more savings.

At present, small islands have both a powerhouse and a Fenaka office, he noted, calling for the two to be consolidated.

He stressed that a number of other solutions were available in lieu of price hikes, such as investing in solar energy.

“But the solution for a person with a big hammer will be hitting the nail harder when he doesn’t have other tools,” he said.

Producing energy through solar panels is currently cheaper at 25 US cents per hour, he continued, whilst the cost with diesel would be 35 US cents per hour.

Although renewable energy requires a high initial investment, Nashid said there are interested and capable parties in the Maldives.

“In my view, we can provide electricity for everyone at a flat rate of MVR2.50 [per unit],” he said, adding that the technology was available, “viable and economically proven.”

Nashid welcomed the ongoing solar energy projects but criticised their limited scope as well as the government’s “lack of political will” and long-term planning.

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Government to charge US$25,000 for SEZ applications

The government will charge a US$25,000 application fee from potential investors in its flagship Special Economic Zones.

Accepted applicants are also required to pay a US $1 million guarantee to a bank account of the board’s choice within 15 days of receiving the initial permit, under the new SEZ investment board regulations.

The regulations, published on April 2, set out the terms for a programme that the government hopes will bring in $100m by August. It has so far signed one memorandum of understanding for an SEZ.

The regulations give the President the authority to appoint the board’s chair, vice-chair and to dismiss board members at any time.

They also give the board the power to freeze potential investors’ local assets if the permit is terminated and the investor has any outstanding debt. The board will have the discretion to cancel all visas to migrant workers if a permit is terminated.

Speaking to Minivan News, Economic Council co-Chair and Tourism Minister Ahmed Adeeb said the government is “looking for serious investors”, pointing out that the minimum investment for a SEZ stands at US$ 150 million.

Adeeb said the application fee was set after consulting with investors, and that processing these proposals is hard work.

President Abdulla Yameen has previously declared that the SEZ act would become “a landmark law” that would strengthen the country’s foreign investment regime.

The only SEZ activity since the act was ratified by President Yameen in August 2014 has been a memorandum of understanding for a Dubai Ports World free trade port.

Adeeb said, however, that there is a lot of support for the SEZs, pointing out that Indian investors have shown interest in building a gold refinery after Maldives granted duty free status to gold.

The government estimates that it will be able to acquire over US $100 million in acquisition fees from the SEZs by August 2015.

The US$100 million figure has been included as one of three revenue-raising measures in the 2015 annual state budget, alongside increasing import duties and taxes.

“I think we will meet budget targets. Some investors are prepared to pay a US $100 million acquisition fee on a single project,” said the tourism minister.

The first SEZ project is likely to be the Dubai Ports World free trade port in Thilafushi in Male’ atoll, followed by the mega I-haven port project in the north, Adeeb added.

The government signed an MoU with the Dubai company on the port on March 19, while it is still seeking investors for the I-haven project on the northernmost Ihavandhihpolhu (Haa Alif) atoll.

During parliamentary proceedings, the opposition Maldivian Democratic Party (MDP) submitted more than 300 amendments to the SEZ bill.

The MDP claimed that the law would pave the way for money laundering and other criminal enterprises, while authorizing the president to “openly sell off the country” without parliamentary oversight.

The government, however, maintained that SEZs with relaxed regulations and tax concessions were necessary to attract foreign investors.

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Tourists stranded in Maldives in liveaboard scams

Dozens of tourists are stranded each year in the Maldives by scams involving liveaboards, harming the country’s reputation among visitors, boat owners say.

Scammers use fraudulent websites to collect payments on liveaboards without the owner’s knowledge, leaving tourists stranded at the airport.

Others sell holidays on luxury cruisers, but when tourists arrive in the Maldives, transfer them to low-grade boats.

Boat owners are speaking out about the problem for the first time, saying they decided to do so out of frustration over a lack of action against the fraudsters.

Some 81 liveaboards — boats on which tourists stay for several nights, also known as safari boats — operate in the Maldives, offering surfing and diving trips, some with luxury accommodation.

A safari boat owner, who asked not to be named, said an Indian dive tour operator alerted him on March 19 to a Maldivian company selling a holiday on his boat without his knowledge.

He told Minivan News the government has failed to take action on scammers.

“This is very destructive and tarnishes the Maldives’ image,” he said, calling on the ministry to suspend licenses and blacklist fraudulent tour operators.

Amir Mansoor, the owner of the luxury liveaboard Carpe Diem, also said that liveaboard scams are frequent.

“This is very concerning, even if it’s two or fifty tourists a year, and affects the Maldives’ image,” he said.

Deputy tourism minister Hussain Lirar, however, denied any knowledge of fraud, but said the government would take action through law enforcement agencies against scammers.

The anonymous liveaboard owner said that at least 88 Russian and German tourists were stranded in November 2013 after a scam, and said he had rescued some tourists from the group.

The Liveaboard Association of Maldives (LAM) this week said it had received complaints from foreign tour operators, mostly in India and Hong Kong, involving fake bookings and operators collecting payments without offering a service.

“The scams involve fraudulent websites claiming to be authorized travel agents offering cheap liveaboards,” the organization said, following the March 19 alert from the Indian tour operator.

In the email obtained by Minivan News, the Indian company said it had been saved from fraud by its contacts in the Maldives and urged LAM to take action to ensure “those advertising as Maldivian agents do not defraud gullible tourists.”

LAM subsequently advised holidaymakers and tour operators to be wary of rock bottom prices in the Maldives and to book through agents listed on its website or reputable travel companies listed by the Maldives Association of Travel Agents and Tour Operators.

There are currently 1,367 beds available on safari boats in the Maldives, often costing hundreds of dollars a night.

A Hong Kong-based tour operator, which says it sends 2000 guests to the Maldives every year, said a tour operator called Poseidon Tours in 2012 stranded several guests “desperately in Malé without any excuse,” according to leaked emails.

Although the tourism ministry denied knowledge of scams, the emails show the operator wrote to the ministry and LAM throughout 2012 and 2013 asking them to penalise the scammer. The company threatened to go public with the scandal and asked for a response “before I do something that might hurt all of us.”

“It was the not the first case to our company and on and off we heard that other agents/guests were having similar experiences. I don’t think that this is a good reputation to your country,” the operator said.

The operator reimbursed its clients, but Minivan News was unable to confirm whether the government had taken action against Poseidon Tours.

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Hundreds queue for cigarettes as import duty hiked

Hundreds of people queued up to buy cigarettes before import duties were hiked on a range of goods today.

Block-long queues formed outside tobacco shops The Root and OCC last night, with smokers in what OCC managing director Mohamed Mumthaz described as a “state of panic”.

From today, import duty on tobacco is 200 percent (up from 150 percent) . Some shops have already raised prices from MVR38 (US $2.47) to MVR47 ($3.05) a pack.

Mumthaz believes the public is afraid that big businesses will take advantage of the hike in import duties and hoard cigarettes in order to reduce the supply in the market, so that they can sell at an inflated price.

OCC has resorted to rationing cigarette sales, Mumthaz said. The Root is also rationing, selling only one carton each to individuals and two to retailers.

Some 42 per cent of Maldivians smoke, according to World Bank data.

Meanwhile, a 10 percent duty has also been introduced on petroleum products. About 30 percent of the Maldives’ GDP is spent on importing fossil fuels.

In 2012, US$486 million was spent on oil imports, and the figure is estimated to rise to US$ 700 million by 2020.

Among other items, custom duties for luxury cosmetics and perfume have increased from zero to 20 percent.

Duties on liquor and pork were raised to 50 percent, while duty will be doubled to 200 percent on land vehicles such as cars, jeeps, and vans.

The government previously had plans to raise import duties on staple foods like rice, flour and sugar, but it reversed the decision after criticism from the public.

Retail shop owner Ali Jaleel said that his shop has not increased any prices, but estimates that prices will go up with the next shipment of goods.

“Rising prices is inevitable but necessary for the government to keep on going like this. I do not think it is a problem,” he said.

Parliament approved the import duty hikes in December 2014 as part of revenue-raising measures proposed with the 2015 state budget. The government anticipated MVR533 million (US$34.5 million) in additional income from import duties.

Along with raising import duties, the government has decided to implement a new “green tax”, and estimates that it will receive US$ 100 million as acquisition fees for the newly developed Special Economic Zones by August this year.

However, on Monday (March 30), just two days before the implementing date of the hikes, Economic Development Minister Mohamed Saeed announced that the government has decided not to increase duty on garments or motorcycles.

“We are doing this to make it easier on the people because they are necessities,” Saeed told Haveeru.

During the parliamentary budget debate, opposition Maldivian Democratic Party (MDP) MPs strongly criticised the proposed tax hikes, contending that the burden of higher prices would be borne by the public.

The current administration’s economic policies – such as waiving import duties for construction material imported for resort development and luxury yachts – benefit the rich at the expense of the poor, MDP MPs argued.

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