Amendments were proposed to the Tourism Act today to extend leases by two years to offer a “construction period” for tourist resorts, hotels and guest houses with stalled development.
Presenting the amendment bill to parliament, MP Mohamed Mujthaz of the opposition Dhivehi Rayyithunge Party (DRP) explained that the legislation would write-off unpaid fines from the new resorts as heavy fines were an impediment to financing the development or attracting foreign investors.
“Of the 84 islands leased for resort development, only 10 have been completed while 74 have not,” he said. “With the current prices in the construction industry, millions of dollars are needed to develop the most ordinary resort. Considering the 74 islands with stalled development, this is a large amount.”
He added that local banks did not have the capacity to finance the projects while international financial institutions were not “too supportive.”
If passed into law, the proposed amendments would also replace existing guidelines for calculating fines for non-payment of rent. Under the new rates, fines for non-payment of rent for one quarter would be set at five percent of the total rent; 12 percent for two quarters; 18 percent for three quarters; 25 percent for three quarters; and 50 percent for one year of unpaid rent.
Moreover, article 8(c) of the bill states that the government must not charge rent for the two-year construction period.
In the preliminary debate on the amendments, MP Riyaz Rasheed of minority opposition Dhivehi Qaumee Party (DQP) criticised the current government for “not paving the way to obtain loans” and leasing additional islands for development.
DRP MP Yousuf Naeem however noted that the amendments had “serious problems.”
Naeem – affiliated with the Z-faction of the DRP – claimed that similar amendments previously passed to extend resort leases to 50 years “is now in the process of being abolished by the Supreme Court.”
“The reason is because some honourable MPs voted for it in violation of clause 158(a) of parliamentary rules of procedure,” he explained, referring to a conflict of interest on the part of resort owners in parliament.
The MP for Felidhoo noted that as some resort development projects had been stalled for six or seven years, he did not support a further extension of two years with suspended rent.
“These islands were leased after competitive bidding processes with many parties,” he said, adding that it would be disrespectful towards the rights of losing bidders if the government were to write-off debts or unpaid fines.
“The government is owed US$154 million in fines alone, not to speak of rents,” he continued.
MP Mohamed Riyaz of the ruling Maldivian Democratic Party (MDP) concurred with Naeem and questioned whether a two-year extension would allow the resorts to become operational.
MDP Hamid Abdul Gafoor noted that the state was owed US$320 million as unpaid rent and fines, which was “not a small amount” to be written off.
DRP MP Dr Abdulla Mausoom however argued that parliament was forced to “enter micro-governance” as a result of the current administration’s “insincerity” and “disregard of the law and doing things in the margins.”
The proposed law would ensure that the government could not impose double standards on tourist businesses, Mausoom said.
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This sends the completely wrong message in all government bids in the future.
So in the next round of tourist resorts that get bid out - people will once again put down ridiculous promises about what they will provide to the government - end up winning the bid on those promises - then sell it for multi-million dollar deals - and the resorts will not start operation and the resultant increase in employment and foreign revenue will fail to happen.
Also - if they have not been able to build it in the last five years - what will change to get them to build it in the next two? The global economy is still in recession - and the situation is even worse than it was in 2005/6/7 when these resorts were given out.
Fact of the matter is that these resorts are not being built because of the greed of their existing owners.Everyone wants to make a million dollar profit on the back of just owning the leasehold.There are investors willing to put money into resorts - but not when they have to pay the leaseholder a million dollars for the right to invest. Providing another two years will provide no benefit to the country - only to the few greedy resort owners.
What is wrong with this so called honorable member, MP Mohamed Mujthaz?
It seems this man do not understand of what is happening. The government is trying to dismantle an old system and he is opposing by submitting bill that is not fair and workable to present Maldivian situation.
If you wish to change the governments do some constructive work and give a definite economic plan. Also understand that you cannot talk crap about Islam and come into power any more.
Said resorts were awarded based on stupidity. Propose the highest rent, with no explanation regarding how that amount would be even remotely viable. And once that stupidity was done with, the government went on to sign contracts on the islands. It's time this was done with. Said islands were given to be developed within a certain period of time. If the developer could not do so, then it is time that the government wrote off the monies owed and annulled the agreements and declare that these 74 islands are no longer to be resort developments. Instead, the government now needs to go back to a system that requires a prospective developer to show how a resort is feasible, and base the income for the government from the resort industry on taxes. Banks have been paying taxes to the government for a long time now. It's time now to charge the resort industry with a tax of 15 to 25 percent on their net incomes and improve regulations. And for anyone who would say that foreign investors would be put off with this sort of tax, I beg to differ. Having worked with foreign investors in the tourism development field, I can assure you that most foreign investors are smart and sophisticated in terms of financing and running a resort. They already pay taxes in the rest of the world, and they wouldn't be surprised to be taxed here. We need systems in place, instead of giving the resort barons more kickbacks. They have become wealthy beyond the average Maldivian's wildest dreams on the back of the Maldivian people's sovereign wealth. It's time for that to change.
@ sinic is right.
This is a bad move for future of tourism. This is like changing the rules half way through the game. Its send a bad message to future investors. The result would be loss of legal confidence in government policies.
A better approach would have been to give to give a tax holiday of 2 years.
Does the new ammendment include a clause to take back the resort if not opened within a certain time period?
Can someone please explain this.
I know that when tourism began, resort owners were allowed to open a resort after partial completion. Then they complete the rest of the infrastructure as they get money.
Is this allowed now? Do you think this will help resort owners financially?
Even thought I don't like it, I can understand Reeko Moosa, Musthafa, Thaa Riyaz Rasheed and Ali Arif talking nonsense.
But this Abdulla Mausoom guy, (who's been a minister too) talking nonsense is just beyond me.
Insanity is repeatedly doing the same thing and expecting a different result. I find it funny that the government only response is more taxes. The government creates no jobs it only causes the loss of jobs through regulation and additional requirements. When the government doubles the tax rate they lose twice the amount the following year this just sound like stupid people leading who cannot do math.
Resort owners invest tens of millions dollars take all of the risk create jobs maybe not the best jobs but it is a job when you do not have one. Provide tax revenue so the government and politicians can steal it and misuse it and just waste it in general and give themselves raises.
I love how they use the word owed. Should be changed to have not stolen yet $320 million it does make sense to allow these companies a chance to invest without having to pay taxes on something they have not created. Would it not make more sense to require a wage increase or have the resorts pay high wages to their employees?
Think about what your government provides next time you pay a tax.