Business & Tourism – Page 62 – Minivan News

INIA remains cheapest airport in region “by half”: Transport Minister

GMR will lower fuel charges by US$0.05 a litre on all domestic flights and raise it the same amount for international flights at Male’s Ibrahim Nasir International Airport (INIA).

Several airlines, including Qatar Airways and Sri Lankan Airlines, have meanwhile voiced concerns over the recent hike in set airport fees including landing and ground handling charges.

In response, the Transport Ministry has said that even with price changes INIA remains the cheapest airport in the region “by 60 to 80 percent” – and claims that some airlines have not been paying their dues.

“Doha, Dubai, Tivandrum – while they all charge US$3,000 turn-around fees, Maldives’ INIA was only charging US$1,080,” Transport Minister Adhil Saleem told Minivan News. “Even with a fifty percent increase in fees the total charge of US$1,500 is still half of what is being charged everywhere else in the region.”

Saleem noted that INIA’s rates had not changed since 1994, however in that time salaries had increased four times and development projects had been contracted. He added that the price changes – initiated by Maldives Airlines Companies Limited (MACL) and not GMR – should not have come as a surprise.

“In February 2011 MACL informed all airlines that the rates would increase in November, effectively giving them nine months’ notice. There has been no price change by GMR,” he said.

Yet several carriers including Qatar Airways and Sri Lankan Airlines have expressed concerns over the price changes and suggested they would make changes to their routes, reducing services to the Maldives.

Qatar CEO Akbar Al Bakr last week told Reuters News Agency that the airline was “dismayed” over what it understood to be GMR’s plan to increase the handling fee by 51 percent at some future date, and suggested such a move would “threaten Qatar Airways’ continued presence in the Maldives.”

GMR officials are reportedly meeting with CEOs of airlines serving the Maldives. Two airlines contacted by Minivan News did not wish to comment, including Qatar.

“The issue,” Saleem told Minivan News, “is that some airlines have not paid their dues to GMR in nine months. No airport can go on without payment.”

INIA CEO Andrew Harrison later clarified through GMR’s spokesperson that Qatar has an outstanding debt due to its refusal to pay the higher rates. Minivan News understands that GMR has requested Qatar pay cash for today’s flights, while other airlines are in the process of settling their payments with the airport.

Some have suggested that concerns raised by groups such as Qatar also stem from a drop in demand as the low season approaches. Saleem said that Sri Lankan’s strategy had always been to boost tourism numbers in its own turf.

“We believe the London flights were operated for Sri Lanka to achieve its tourism target. They’ve changed their summer schedule to this effect,” he said, explaining that the airline may cut down on direct flights to Maldives as a result, but that this was rather a matter of scheduling.

Responding to concern that reductions in carrier services would damage the tourism industry, Saleem pointed out that airline changes are a reflection of the already-changing tourism demographic.

Last year Chinese arrivals trumped all other tourist groups to the Maldives, while the Maldives’ traditional European market continued to slump under the West’s ongoing economic pressures.

“It’s a changing world,” Saleem said, noting that local airline Mega Maldives has expressed interest in expanding east to Japan. “The numbers from the East are rising, so it’s possible that the major Western carriers don’t have the demand to continue the same flight frequency that they did before. Singapore will be doubling its flights by 50 percent to 14 flights a week in March,” he said.

GMR spokesman Amir Ali reinforced that concerns over the price hike are misinformed. “There are concerns, but some people are using it in a political game,” he said.

Late in 2011 GMR’s intention to implement a US$25 (Rf385.5) Airport Development Charge (ADC) was blocked by the Civil Court, while minority opposition Dhivehi Quamee Party (DQP) campaigned against the industrial giant with a booklet titled “Handing the Airport to GMR: The Beginning of Slavery.” The government has since appealed the court’s decision, stating that it is obliged to honor its contractual relationship with GMR.

Maldives Association of Tourism Industry (MATI) Secretary General ‘Sim’ Mohamed Ibrahim agrees that INIA’s rates have been remarkably cheap for the region, but believes that the price hike – and ensuing negotiations with airlines – are a delicate business.

Although GMR “inherited” the current change in prices from MACL, “GMR’s strategy is to make as much money as possible any way they can – that’s business. But if it’s not done right then it’s not going to work. This has been too much, too fast,” Sim claimed.

According to Sim, the two overarching issues are the pace and method of the price hike. Rather than raising set fees dramatically during the high season, Sim suggests introducing the change in phases. He also recommends requesting payment post-service.

“In Singapore people are charged after they’ve seen the development and its benefits. People want to see what they are paying for, and it seems to be working alright,” he observed.

Pointing to the Maldives’ limited economy, Sim said airport development and fees “have to be weighed with the reality that the Maldives is totally dependent on tourism.”

Minister Saleem offered assurances that the Maldives’ appeal would continue to draw customers. “I’m sure there will be other airlines wanting to come in, especially as the demographic shifts,” he said.

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Qatar Airways CEO “dismayed” over airport fee hike, GMR denies plans

Qatar Airways CEO Akbar Al Baker has warned that the airline will re-consider flying to the Maldives if airport operator GMR maintains its apparent plan to raise airport handling fees at Ibrahim Nasir International Airport (INIA) by 51 percent.

Reuters reported that the airline was “‘dismayed’” over what it understood to be GMR’s plan to increase the handling fee at some future date, and suggested such a move would “threaten Quatar Airways’ continued presence in the Maldives.”

Noting that the Maldives’ economy is based on tourism, Akbar Al Baker called the planned increase “totally unreasonable.”

“If we or any other major player withdraws services because of these unwarranted and draconian measures, it will be the people of the Maldives who will lose out, affecting their livelihoods as they rely heavily on the tourism industry,” he said in a statement released on Wednesday.

“My message to the Maldives authorities is to think rationally about the future prosperity of your tourism industry. These steps may have not been thought through seriously by the airport operator and I urge them to think again.”

GMR spokesman Amir Ali said that the fee hike had already been made by the Maldives Airport Company Ltd (MACL) shortly before GMR assumed control of the airport, adding that while there were no plans for a further increase at present, prices were dependent on factors such as fuel prices.

“I believe the fee was increased because of the rise in fuel prices, but I’m not sure since the decision was made by MACL some time ago,” Ali said.

GMR had received no official communication from Qatar Airways, he added.

Since taking over INIA in 2010 GMR has made several adjustments to airport operations in an effort to match the airport’s facilities to those expected by visitors to the country’s upmarket resorts. While progress has been rapid, the local population has also voiced discontent with changes to baggage handling services and departure fees.

GMR was recently challenged in court over its recent attempt to collect an Airport Development Charge (ADC) beginning in 2012, a stipulation which was included in its concession agreement with the government. While the Maldives Civil Court ruled against the ADC in December, the government appealed the case to the High Court, declaring that it was obliged to honor its agreement with the airport developer.

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Push for mid-market tourism starts in Laamu Gan

The Maldives first resort-style tourist guest house to operate on a local inhabited island opened yesterday on Laamu Atoll Gan Island, the Maldives largest island (six kilometres squared) and three times the size of capitol Male’.

President Mohamed Nasheed attended the opening of Reveries Diving Village along with over 600 island residents, several government officials and a few representatives from neighboring resort Six Senses Laamu.

Speaking at the opening ceremony, President Nasheed said the guest house would benefit the island by providing jobs and boosting local industrial activity and income.

At the moment, a majority of the guest house is staff is Maldivian. “They are a very friendly group, not terribly experienced but very willing,” said Reveries Manager Boris A. Salam.

President Nasheed elaborated that industrial expansion on islands is directly proportional to government priority. To support development on all islands, the government is obliged to provide clean water, efficient sewerage systems and durable roads for its people, he said.

Reveries Diving Village was designed by a Maldivian architect and developed by BISON Maldives Pvt Ltd; it is owned by BISON Chairman Abdul Majeed. The President pointed out that Reveries is part of a larger push to expand tourism to inhabited islands and incorporate local businesses in the nation’s leading industry.

Re-inventing the Maldives’ traditional “one island one resort” theme, Reveries encourages guests to explore the local side of Gan through sight-seeing excursions, picnics, fishing trips and meals at local cafes, while maintaining a variety of standard resort services including a spa, conference facilities, PADI certified dive school and water sports facilities.

The location will also likely attract an ambitious surf community–famous surf points Yin Yang, Isdhoo Bank and Refugees Lefts are easy to access.

Offering 25 guest rooms and one villa for under US$200 per night (Rf 3000) and compliant with Shariah-based regulations, Reveries aims to serve the needs of vacationers, business folk and backpackers alike–foreign and Maldivian.

“The island life and serenity of Laamu Gan, added with the unique features such as a mythical freshwater lake that is estimated to be 60 meters deep and old Buddhist Temple ruins add distinctive value to any traveler,” reads a press release.

Manager Salam said he had received positive feedback about the guest house’s humble intent. “People said that from the outside the building doesn’t look like much, it could be anything. But when they come in they’re very nicely surprised, the design immediately makes you feel cozy,” he said, observing that the public beach area in front of the house adds a neighborhood feel.

Reveries is part of a string of recent developments on Laamu Gan, which is connected by causeways and bridges to three other islands in the atoll forming a total land area of approximately nine kilometres. The domestic airport on nearby Kadhoo island affords easy transportation to and from capital Male’, located 250 km to the North.

Harbours and a hospital developed by the French Red Cross have improved the economy and lifestyle of Laamu residents, and an international school is also expected to open this year.

The addition of Reveries appears to please Laamu residents. Reveries Manager Boris A. Salam said “people are curious, they’ve been popping in during the development stage to see what’s happening.”

According to a press release one lifetime resident, Hussein, said, “this is the happiest I have been after the opening of the airport. It will create a lot of jobs and opportunities for small business to grow. The success of Reveries will surely bring more investments to the region.”

Reveries plans to develop a second property in Laamu Gan later this year with Amin Construction Pvt. Ltd. The property will offer 20 rooms in 6 villas, along with a swimming pool and other food and beverage facilities.

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Audit report finds discrepancies in Economic Development Ministry finances

An audit report of the Ministry of Economic Development for 2010 released this week found large discrepancies between the ministry’s internal records and the general ledger kept by the Ministry of Finance and Treasury.

The report noted that the Economic Development Ministry did not “identify and reconcile” discrepancies of over Rf6 million (US$389,105) in income and Rf8 million (US$518,806) in expenditure between its accounts and the finance ministry ledger.

In a recurring finding of audits of state institutions for 2010 recently completed by the Auditor General’s Office, the report noted that the ministry did not compile its financial statement in accordance with ‘International Public Sector Accounting Standards’ (IPSAS) as stipulated by regulations under the Public Finance Act, and as a result lacked important information such as detailed “disclosure notes”.

The annual financial statement did not specify how Rf1 million (US$63,850) allocated for the trade representative in Geneva was spent, the report stated.

With the exception of five main issues identified for reform, the audit report found that the ministry’s expenditures were “for the most part in accordance with state financial regulations and for projects specified in the budget.”

Among the recommendations were: comply with IPSAS for future financial statements; issue receipts for all cash collections; obtain quotations from at least three parties for procurement ranging between Rf1000 and Rf25,000, invite bids for purchases above the limit and ensure that an employee signs for goods and services; improve inventory and stock maintenance and account for a lost laptop; ensure expenditures are made under the appropriate budget code.

In other findings, the report noted that renovation work on the ministry’s new offices went over budget by Rf179,629 as a result of poor planning and insufficient instruction to the carpenter chosen for the work. Moreover, the same carpenter was employed for the additional work without a public announcement to seek quotations from other parties.

The report also recommended depositing fees and other income collected by the ministry to the state’s consolidated revenue fund in lieu of sending the cash to the Maldives Inland Revenue Authority (MIRA), which incurs a high cost, takes up employees’ time and risks loss of the money during transfer, the report stated.

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Independent MP contests government agreement with GMR over ADC

Independent MP Mohamed Nasheed has said the government is circumventing the Civil Court’s ruling against a US$25 Airport Development Charge (ADC) by agreeing to deduct the anticipated revenue of US$25 million from GMR’s concession fee.

Nasheed also contends that the government has not breached its contract with GMR, but rather that the contract was breached by outside forces.

The minority Opposition Dhivehi Quamee Party (DQP) has also announced that it will investigate the recent amendment to the government’s contract.

GMR was set to collect US$25 from all passengers departing on international flights starting January 1, 2012. The expected revenue was to cover certain costs for the development of Male’s Ibrahim Nasir International Airport (INIA).

According to Nasheed, any agreement between the government and GMR will not undo the Civil Court’s ruling against the ADC. He argued that the court ruling rendered the clause allowing for an ADC null and void.

“That’s the only decision that interprets or explains the local law at the moment, and it has not been overturned, it has not been struck down by a superior court, therefore that is the position. You can’t circumvent it by deducting receivables from GMR,” said Nasheed.

“Now, the only viable option for the government would be to amend the legislation, allow for the GMR or any other party to collect ADCs or these kind of taxes in future, and then bring the GMR issue within the legislation as an amendment,” he said, adding that an amendment to the law would protect the government from incurring losses to ensure a base line of revenue for GMR.

A related bill is currently awaiting Parliamentary review in March. Nasheed understood that the ADC would be collected by the government only three times per year, yet “it is only January 10 and already the government is trying to make this agreement and circumvent the court decision.”

Meanwhile, the government is also awaiting the High Court’s verdict on the Civil Court case, which was appealed in December. Nasheed said a contract cannot be revised while it is before a court.

Previously, members of the government including President Mohamed Nasheed have expressed firm support for the contract with GMR. Speaking at the groundbreaking ceremony of a new terminal construction project at INIA, the President said the Maldives was “200 percent” behind the contract, while Press Secretary Mohamed Zuhair yesterday stated, “it should be a matter of pride and joy for any Maldivian to help with the development of their airport.”

DQP previously voiced strong opposition to the deal with GMR, filing a case at the Civil Court and releasing a booklet entitled “Handing the Airport to GMR: The beginning of slavery.”

In MP Nasheed’s opinion, however, the government has allowed itself to be bullied into a compromise of terms.

The agreement implies that the government has taken responsibility for the ADC as stipulated in the original contract with GMR. If the ADC is charged for the duration of the 25-year contract, the government could potentially be facing a total payment of US$625 million for GMR’s investment of US$400 million in the airport project.

“The government gets peanuts at the end of the day,” Nasheed said.

“My argument to the government would be, Maldives government too must have gotten into this relationship based on certain calculations. Why should the Maldivian government suffer their calculations to keep GMR’s calculation unaffected by the court decision, over which the government has no control?”

Addressing the matter in a press statement yesterday, the Ministry of Finance claimed that the contract between GMR and the government would be violated in the event that GMR could not collect a stated fee. Therefore, the government had breached its contract.

The ministry did express support for the government’s recent agreement, however, stating that any damages should be deducted from GMR’s concession fee due the government.

Expressing shock at the Ministry of Finance’s statement, Nasheed clarified his intent to defend the government from the ministry’s first point.

“I would like to defend my government and say that the government did nothing on its own or within its control to breach an agreement. They have allowed certain charges to be made based on an opinin of the Attorney General that that charge was permissible under Maldivian law. Now, the Civil Court has said otherwise, and the government has not done anything to breach the contract. It’s a frustrating event that’s happened outside the contract and the government won’t take any responsibility for that.”

Nasheed today said he understood that a only small fraction (12 to 15 percent) of internationally-bound travelers leaving INIA are Maldivians.

“If the ADC was allowed, the burden of payment would have been born by international passengers, and only 12 percent Maldivians. And the government won’t have to bear any burden because the fee would be collected directly from passengers by GMR,” he said, reiterating that under the current arrangement the government would be paying revenue to GMR.

Minivan News asked whether exempting Maldivians from the ADC could put the matter to rest.

Nasheed believed exemption could improve the situation, and added that parliamentarians have discussed exemptions for Maldivians traveling to SAARC countries.

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European decline could stall tourism in 2013: MATI

As the economies of America and the European Union (EU) become more vulnerable in the coming years, the Maldives tourism industry will see a decline in business, the Maldives Association of Tourism Industry (MATI) has predicted.

Maldives Association of Tourism Industry (MATI) yesterday claimed that decline in European traffic to the Maldives was due to economic stability in that region.

MATI Secretary General ‘Sim’ Ibrahim Mohamed pointed out that total tourist arrivals has not declined; in 2011, the Maldives set a new record of nearly one million.

“Occupancy rates in resorts have gone up following the arrival of Chinese tourists,” Sim told local media. “But the number of tourists arriving from Europe and other western countries has declined and we are threatened by the economic instability that Europe is experiencing.”

Maldives Inland Revenue Authority (MIRA) has lately released data indicating that tourism comprised a majority of state revenue in 2011. The State Budget for 2012 was created on this assumption, and leans heavily on expected revenue from tourism in the coming year.

Although the tourism industry has recovered impressively from devastating Boxing Day tsunami of 2004, Sim predicted progress would stall mid-2013 due to “global economic changes as economies of countries like America and the European Union become more unstable and vulnerable.”

However, the Maldives promises to remain atop its niche market of small island tourism. While Mauritius and the Seychelles are leading competitors, Sim affirmed that within the small island niche “we are unbeatable, and I believe it will stay that way.”

According to Simon Hawkins of the Maldives Marketing and PR Corporation (MMPRC), close correlation between a tourism industry’s marketing and arrivals is a strong indicator of success.

In 2011, Hawkins said, the Maldives destination board spent US$2 million on marketing and received close to one million tourists.

Comparatively, Mauritius spent US$13 million and received one million tourists.

“We’re six-and-a-half times more cost effective than Mauritius, and 30 times more cost effective than Indonesia,” said Hawkins. “We are batting very much above our weight, but that’s because the product is brilliant.”

Sim added that the Maldives product did not need to be reinvented during the European recession to suit the growing Asian market.

“Chinese tourists are like any Western tourist,” he explained. “When the Russians began coming to the Maldives they had some different expectations, but now they are used to what we offer. The Chinese will be the same.”

In 2011, Chinese tourists comprised a majority of total arrivals. However Minivan understands from conversations with resorts managers that while they come in high numbers they are not generally high spenders – while resorts make a bulk of their revenue from the bars, restaurants and spas, officials have noted that Chinese tourists’ primary expenditures are on board and transportation.

Minivan News inquired whether the 2013 presidential election would impact tourism.

“Political parties have matured, and the people have matured. They are accepting democracy,” Sim said. “2013 will be much better than when we started our multi-party system in 2008.

“Democracy is not a beauty pageant, it has ups and downs and hustle and bustle, and I think people understand that,” he observed.

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Government agrees to amend GMR fee while rooting for ADC

The government has agreed to deduct expected revenue from the US$25 (Rf385.5) Airport Development Charge that was to be charged from passengers departing on international flights from Ibrahim Nasir International Airport (INIA) from GMR’s concession fee to the Maldives government.

The agreement is subject to change according to a verdict from the High Court in a related case, and the passage of a bill currently before Parliament.

GMR’s request that the amount be deducted from its concession fee to the government was made to Maldives Airports Company Limited (MACL) last week, and approved following discussions between the Finance Ministry and the Maldives Airports Company Limited (MACL).

MACL officials did not respond to phone calls at time of press.

The ADC was to be charged after midnight on January 1, 2012, however the Maldives’ Civil Court blocked the fee on the grounds that it is essentially the same as a pre-existing Airport Services Charge (ASC) of US$18 for foreigners and US$12 for locals above two years of age.

Citing a contractual obligation with GMR, the government subsequently appealed the case to the High Court, where it is currently awaiting a verdict.

Having received nearly 1 million tourist arrivals in 2011, the government and GMR expected the ADC would generate US$25 million in revenue towards the current renovation of INIA.

Although the expected revenue is said to include fees charged from foreigners and Maldivians traveling abroad, it appears that at US$25 apiece the nearly 1 million tourists alone would meet the revenue needs stipulated in GMR’s original agreement.

President’s Office Press Secretary Mohamed Zuhair informed Minivan News that the notion of exempting Maldivians from the ADC had been raised in meetings, but rejected on the grounds that such an exemption would not generate the necessary revenue.

“The government and GMR have calculated to assure that shareholders and banks are properly recompensed,” he explained. “It should be a matter of pride and joy for any Maldivian to help with the development of their airport.”

Economic Development Minister Mahmoud Razee did not believe the deduction of ADC revenue from the concession fee would impact airport development.

“The government agreed to GMR’s request because the numbers were calculated accordingly” to ensure that the project was not compromised, he said.

Razee added that the agreement is only temporary.

“The government is working through the courts and the Majlis [Parliament] to find a resolution,” he said, affirming that the government continues to favor an ADC.

“When the IFC (International Finance Corporation) did the sums it took as part of the income the ADC revenue,” he explained. “Maldives receives a couple million passengers coming and going every year, but if you compare it to a place like Singapore which transits 30 to 40 million passengers a year, and you need to ensure that you are getting an internal rate of return satisfactory to the investor, you need to adjust that rate.

“So we are trying to maintain a good rate of return for the government and the airport,” he explained.

The matter is being addressed at the parliamentary level in an Amendment of Collection of Airport Tax (international travelers) Act 7/78 Bill. However, Parliament is in recess until March.

GMR previously noted that the payment of a development fee was “a common concept in many airports globally”, particularly as a part of concession agreements where airports are privatised.

“The reason for the inclusion of ADC in many global concession agreements is to address the funding needs to meet the investment model required to upgrade and develop new airport facilities at significant costs,” GMR stated.

The company further claimed that the charge was included in the concession fee proposed between GMR and the government in 2010.

Speaking at the groundbreaking ceremony for INIA’s new terminal on December 19, President Nasheed said he wished to assure GMR that the government was “200 percent behind your contract, and every single other contract the government has signed with any other foreign party in this country. Not just contracts signed by our government, but also contracts that any ruler of the Maldives has signed with any party. We will honour it.”

GMR’s 25 year concession agreement to construct and manage a new US$400 million terminal (to be competed in 2014) is the single largest foreign investment in the history of the Maldives.

Meanwhile, in April India’s Supreme Court ruled against the charging of airport development fees which are not approved by India’s Airport Economic Regulatory Authority (AERA). However Delhi airport, developed by GMR, continued to charge the fee as GMR had obtained permission to collect the sum in 2010.

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Released Thai Reefer reveals reef ruin as owners seek to reduce fine

The Thai fishing vessel Emerald Reefer has been removed from its beached location along the Muli Kolhu Faru reef near the Shangri-La Villingili Island Resort, where it ran aground in late November 2011.

After supporting the vessel for nearly two months, the reef area “looks destroyed” and is unlikely to recover in the near future, the Environmental Protection Agency (EPA) has said.

The Emerald Reefer came to the Maldives in November to purchase locally-caught fish in Addu Atoll, which has only a few narrow channels permitting entry. The reefer is one of only a few large vessels to run aground in the Maldives.

As per Maldivian law, the boat’s owner was allotted 25 days to remove the boat before incurring a fine of RF700,000 (US$45,000) per day that the boat remained grounded.

Transport Minister Adil Saleem previously told Minivan News that the owner had unsuccessfully attempted to remove the vessel, and had left the matter in the hands of an agent in the Maldives.

The Transport Ministry began issuing the fine on December 14, 2011. At that time the Ministry was considering options for removal aimed at protecting the reef, which it believed had been damaged on impact and was incurring further damage as tides rocked the ship along the reef.

Saleem today informed Minivan that the vessel, which is damaged but salvageable and currently floating at a fixed location in Addu, is still under the its owner’s remit. Saleem expected the owner would settle his debts with the Maldivian government before selling or removing his ship from Maldivian waters.

The issue is now being addressed by B&C Transport Services, which assumed responsibility for the vessel after the previous agent told Minivan News he had “given up”.

Company owner Kuwa Mohavay said the ship would return to Thailand with a full load of fish once a propeller had been repaired and its debt to the Maldivian government was settled.

“There are cases with the EPA and the Transport Ministry. We don’t know how much money is owed, but we believe the insurance company will cover most of the costs. We are also holding close negotiations with the government to reduce the fine,” Mohavay said.

He added that the government was keen to help the Thai vessel, “because [the Thai company] are the only people transporting our fish.”

Mohavay said B&C Transport had had positive interactions with the Transport Ministry and the Transport Authority, but felt the EPA had reacted unfairly to the matter.

The EPA assessed the site of the incident with the Coast Guard on Friday, January 6. Director Mohamed Naeem said the damage was substantial.

“The corals have been crushed, with large coral heads dislocated. The reef framework has also been crushed,” he said, noting that the destruction covered an area of approximately 70 meters. He added that parts of the equipment used to salvage the boat remained stuck in the reef.

“I do not believe the damage can be recovered in any short period of time,” he concluded.

Mohavay argued that the only piece of equipment used to salvage the boat was a cable, which had been removed from the reef, and that the boat had “not left any pollution”.

Naeem said the EPA’s assessment with the Coast Guard would be used to determine whether further action could be taken to improve the situation.

Coral reefs are home to a variety of marine life, and are essential for maintaining a healthy degree of biodiversity in Maldivian waters. However, scientists argue that they are being damaged by global warming.

Islanders in the Maldives have pointed out that the once-colorful reefs of their islands are now pale and weak, home only to the lowliest of fish. Residents of Guraidhoo in Male’ Atoll point out that their reef was destroyed when land was reclaimed to build resort Kandooma next door.

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“Tariff rationalisation a positive to economy”: Care Ratings Maldives

The new tariff structure that came into force on January 1, 2012 will have a positive impact on the domestic economy, predicts an economic review report for December released by Care Ratings Maldives this week.

Care Ratings Maldives became the first credit ratings agency recognised by the Capital Markets Development Authority (CMDA) in May 2011 to carry out ratings of debt instruments and facilities.

“The new export-import tariff structure may be viewed as a pragmatic policy, designed to diminish structural fragilities of the Maldivian economy,” the report found.

Amendments to the Export-Import Act proposed by the government as part of its economic reform package was passed by Parliament on November 21 and ratified by the President shortly thereafter. Import duties were subsequently reduced and scrapped entirely for a range of items.

Under the new tariff structure, the report observes, “products such as metals, minerals, chemical products and manufactured goods, which together constitute about 57 percent of total [imports], have by and large been awarded with a reduction in tariffs.”

However it noted that tariffs or import duties for certain items have been significantly hiked, such as tariffs for tobacco from 50 to 150 percent and non-biodegradable plastic bags from 200 to 400 percent.

The report also noted that the contribution of import duties to government revenue has been declining, from 73 percent in 2008 to 46 percent in the first ten months of 2011.

Meanwhile the implementation of new taxes, such as the Goods and Service Tax (GST) and Business Profit Tax (BPT), is expected to account for a higher portion of government income.

“It may be noted that the Maldivian government is making a conscious attempt at augmenting revenues from direct tax sources, rather than indirect taxes,” the report stated.

The report predicts that “the largest beneficiary of this new tariff structure” could be the secondary sector as tariffs have been lowered significantly (between 10 percent and 100 percent reduction) for inputs of the manufacturing and construction industries.

As a result, the report forecast that the contribution of both sectors to the GDP could reach pre-recession levels of five and 11 percent, respectively.

“The reduction in import tariff would impact the construction sector by freeing resources for projects under implementation and reducing their costs during gestation periods,” the report explains, adding that the construct boom “could boost the tertiary sector of the economy as well.”

Retailers meanwhile expect prices of foodstuff to fall in the wake of the import duty waiver. Items with GST rate set at zero percent for which import duties have now been scrapped include rice, flour, sugar, salt, milk, cooking oil, eggs, tea, fish products, onions, potatoes, fruits and vegetables, baby food, diapers, gas, diesel and petrol.

While the State Trading Organisation (STO) announced a reduction in diesel and petrol prices, Maldivian airline reduced airfares for domestic flights by Rf50 in line with the reduction in import duty for jet fuel.

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