Tourism business worth US$2.5-3 billion, not US$700 million as thought, says President

The tourism industry in the Maldives is worth three to four times more than previous estimates, President Mohamed Nasheed acknowledged during a press conference this morning with journalists, ministers and industry leaders.

“Previously we had thought tourism receipts for the country were around US$700 million. But since collection of the 3.5 percent Tourism GST it has come to light that the figure is around US$2.5-3 billion,” President Nasheed said.

”I was told that the government’s expenditure was too high, but I told them it was not that the expenditure was high, but that the revenue was too low. There are not many ways we can decrease the expenditure of the government,” Nasheed said.

Nasheed was speaking ahead of parliament’s resuming sessions next week, where the ruling Maldivian Democratic Party (MDP) hope their new voting majority will push through major economic reforms. Most ministers were in attendance, as well as senior industry figures including Jumhoree Party (JP) leader Gasim Ibrahim.

Secretary General of the Maldives Association of Tourism Industry (MATI), Sim Mohamed Ibrahim, suggested the US$2.5 billion figure was optimistic, “as a lot of it is guesstimate.”

“The TGST income is variable depending on season, occupancy and volume of business,” he explained. “If they are projecting the figures from Jan-March for the rest of the year, that is the biggest time of the year and the figure will be very rosy. It may be a few years before we can calculate this accurately.”

Nonetheless, “the government will have a lot more money at its disposal for national development,” Sim predicted.

“I don’t think traders will have any problem paying taxes so long as other charges and levies are lowered. What business needs is predictability – this has been lacking in the past, particularly the calculation of rent and lease periods. They need confidence in the system, and things to be spelt out clearly. I think this is now happening.”

Historically the government had derived most its revenue from import duties, followed by bed taxes on the resorts, President Nasheed explained, both of which ultimately be abolished in favour of a modern tax economy.

One impending change – which was not given a date – was the sale of land for commercial purposes, Nasheed said, with all land, including resort islands, becoming a tradeable commodity.

“Ultimately that is where we have to go. I understand that this not the law right now,” he said.

The Maldives currently does not recognise freehold land, and furthermore lacks a central register of land ownership. Currently land is owned by the government and leased to commercial operators, although these agreements can extend up to 99 years. Resort leases are shorter, but under the current government are extendable to 35-50 years when a certain percentage is paid upfront.

Sim observed that only 20 percent of resorts had invested in the longer leases, “either due to their income [required for the upfront payment] or because the banks aren’t lending.”

“[Land purchase] might be an advantage to the industry, as resort land has always been treated differently,” he said.

“It was briefly introduced in the past but was later revoked. Given the shortage of land in the Maldives, land ownership can be a touchy subject. But now it is possible for the government to reclaim land.”

Nasheed has previously observed that the government’s new financial changes, which include an income tax and a general GST it hopes to approve in parliament, were “perhaps far more radical that introduction of political pluralism in the semi-liberal society that we had.”


12 thoughts on “Tourism business worth US$2.5-3 billion, not US$700 million as thought, says President”

  1. Mr.president...may i suggest you cut the cost by cutting the spiraling corruption within your administration for a start you can start by firing all the foreign staff within you office with all their high salaries.

  2. US$2.5-3 billion? Why why why why did they allow him to say that?

    If Muleeaage floods during this monsoon, our President is so optimistic that he would look for his fishing rod.

  3. Honestly, I don't really care if Zaeem's drp or MDP's anni is in control or not, as long as they have a plan and try to implement it as fairly as possible. (May Allah bless us with prosperity and gratefulness.)

  4. So the real GDP is now 4 times the previous estimates, which is probably a better estimate. The question is where are all the funds?

    In this case in Maldives, some of those tycoons would have enough money to buy MPs and control the parliment for a long time to come. All the more reason to tax them before they destabilise the politics. The control of the economy by few individuals may be the biggest threat Maldives face.

  5. Ahem, why stop at $3 billion? These figures are just like all other figments of President Nasheed's imagination. I have to say, he does have a rich imagination. One wonders whether he lives in the land of the fairies, most of the time. Perhaps, the years of torture Zedey inflicted on him may be to blame. I have read somewhere that the brains of torture victims can invent parallel worlds, as a self protection mechanism.

    For a small example, let's take the whole fiasco of Addu City. The President unashamedly, have made so many empty promises to the good people of Suvadheeb. He has not carried out any of them; nor will he. We are actually in a worse situation than even under Zedey! The two resorts that are operating are due to Zedey, in fact. Gan was upgraded by Zedey; never mind that it took him 30 years to do it.

    The truth is, neither the President nor does anyone else know how much money the country earns and more importantly, how to keep that money here. In the meantime, he's telling more tall tales of worlds beyond 2014 and so on. Yep, "aneh dhivehi raajje" is just one big fairy tale he has in his head!

  6. he is not optimistic. information about hotel industry is just coming to light. all these years its a closely guarded secret only the cartel knows about. they did not want govt. to know about it. even now we notice they (ppl like buruma) talk about going bankrupt by any measure govt takes; they just are scaring govt to get more concessions. only they know how much money they make and they don't want to share even coins in social responsibility things also. so anni is not optimistic. he is just waking up to reality and the high money hoteliers making

  7. "There are not many ways we can decrease the expenditure of the government,”

    Dear President Nasheed,

    You are wrong, sir.

    Here's how you can reduce expenditures by simply recalling the unnecessary high commissioners ambassdors etc. A High Commissioner in a country like UK or Malaysia is costing approximately RF300k a month simply on salaries and perks. Marc Limon (a Maldivian diplomat based in Geneva whose job description is totally unknown) costs USD15k a month to our tax payer. I agree we cant close down these missions. But if you look at the examples of a lot of micro states they dont have High Commissioners or Ambassadors at their missions. Instead they have a junior rank diplomats serving as charge de affairs. This way they do the job at a fraction of the cost. When you appoint all these High Commissioners and Ambassadors all the money is being wasted largely on frivolous ceremonial things. After all what do these missions do? The consular activities and trade promotion could very well be done by having a max of 2 home based staff at the mission.

    If we simply remove the astronomically costly ceremonical High Commissioners, Deputy High Commissioners and unwanted diplomats, a quick look at our missions show that the we will make enormous savings from our missions. Below is a quick summary.

    1. UK mission = Rf55million
    2.Geneva = Rf5million
    3.Malaysia = Rf4million
    4. China = Rf2million
    5. Japan = Rf2million
    6.India = Rf3 million
    7. Srilanka =4million
    8. Permanent mission to UN = 3million
    9. Saudi Arabia = 2milliion.

    Total savings RF30 million annually. This can be achieved by making some hierarchical and structural changes without closing down the missions.

    Just imagine how much you can save if you closely scrutinize costs of each ministry and offices under them.

  8. Well good thing T-GST is atleast helping us figure out how much the tourism business is worth here. Its been such a closely guarded secret, ofcourse for the benefit of a few rich men.

  9. Aicha - it has been a "closely guarded secret" as much as:

    - the true population of this country remains a closely guarded secret to our government.
    - the number of private properties leased out for residential purposes is a closely guarded secret.
    - the amount of income lost through under-declaration and understatement of the value of products and trade for which duties are levied in this country.

    Wake up people, the government has not been lied to. It just never has felt the need to collect and keep figures and statistics. However, the President is pulling his new "figure" for tourism revenue practically out of a magic hat.

    State expenditure can and MUST be reduced. If not, then nothing really changes. This was pretty much expected. The government does not have the political will nor the popular support to implement the slightest austerity measure. 2013 looms and the MDP administration must feed its new pets and aging beasts as well.

  10. tsk tsk - "feed its new pets and aging beasts as well" very well said indeed!

  11. Hmmmmm... so the tourism industry IS the biggest? are we sure? i mean no doubt?

    If so, then why cant the government, nor its agencies protect the employees who physically run it? no rights, no flaws in business, this is all a sick joke..

    sit there and tok about money. it will self print like the law u print


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