Aitken Spence acquires two new resort properties

Aitken Spence Hotels has acquired two new properties in the Maldives for resort development, making the Sri Lankan company the largest foreign resort operator in the country.

According to TTG Asia, Aitken Spence revealed yesterday that it has leased the island of Raafushi in Noonu atoll for US$5 million for the development of a four-star resort.

The company also plans to invest US$50 million to develop a five-star resort with 163 rooms on the island of Aarah in Raa atoll.

The hospitality group also operates resorts in Meedhupparu, Hudhuranfushi, Rannalhi and Vadoo in the Maldives under its Adaaran brand.

Maldives Capital Market Development Authority CEO Ahmed Naseer told Sri Lankan newspaper the Daily Mirror: “We have potential future developments for over 60 islands with about a US$2 billion financing requirement and an airport development with another US $400 million financing requirement.”


Government to lease four islands for resort development

The Ministry of Tourism has made an announcement today inviting expressions of interest (EOI) to develop four uninhabited islands and one lagoon as tourist resorts.

The designated islands were Haa Dhaal Dhipparufushi, Haa Dhaal Kanamana, Haa Dhaal Kudafarufasgandu, Shaviyani Bolissafaru, and a lagoon in Haa Dhaal Atoll with the coordinates 6°42’41”N, 72°54’34”E.

Dh. Kanamana. H. Dh. Kudafarufasgandu and the lagoon in H. Dh Atoll mentioned above will be developed as a single project,” the announcement noted.

The deadline for submission of EOI is December 4 while an information session would be held on November 27 at the ministry.

President Abdulla Yameen announced plans to develop five tourist resorts in Haa Dhaal atoll during a visit to two northern islands earlier this month.

Haa Dhaal is currently the only atoll in the country without a resort in operation.


MPs quiz finance minister about revenue raising measures

MPs on the budget review committee quizzed Finance Minister Abdulla Jihad yesterday about revenue raising measures proposed within the record MVR24.3 billion (US$1.5 billion) state budget for 2015.

Briefing the committee yesterday (November 10), Jihad explained that MVR3.4 billion (US$220 million) in additional revenue is anticipated from raising import duty rates from July onward and introducing a ‘green tax’ for tourists.

Additionally, acquisition fees from investments to special economic zones (SEZs), income from the home ownership programme, and leasing 10 islands for resort development would help raise the forecast revenue.

The minister also told the committee that domestic debt had reached about MVR20 billion (US$1.2 billion)- 39 percent of GDP -making the rolling over of T-bills “a nightmare”.

The government was considering increasing custom duties “mostly for luxury items, or items that are harmful to the environment or health,” he said.

The cabinet’s economic council has not yet finalised the import duty or tariff revisions, Jihad noted, though he did reveal that the items under consideration include tobacco, perfume, and vehicles.

Tariffs for tobacco would be raised from the current 150 percent to 300 percent while duty would be raised from 100 to 150 percent for cars, and zero to 10 percent for perfume, Jihad said.

Asked if higher custom duties would lead to higher prices, Jihad said the impact on the inflation rate would have to be studied, which would take time to complete.

Jihad stressed that the government has ceased deficit monetisation – borrowing money from the central bank to finance the deficit – in May, as a result of which the inflation rate was reduced to 1.4 percent.

In April, parliament approved import duty hikes for a range of goods proposed by the government as a revenue raising measure.

Meanwhile, the forecast for income from SEZ acquisition fees is US$100 million, Jihad revealed, which is expected by August 2015.

A further MVR400 million (US$25.9 million) is forecast from leasing and sale of land from across the country, Jihad said – in particular, plots from unused reclaimed land in various islands.

The state-owned land designated for leasing or sale falls under three categories, he explained, which were residential, commercial, and industrial.

Moreover, 10 new islands would be leased next year for resort development, he continued, which would generate income for the government in the form of acquisition costs.

As an incentive or relief for new resorts with development stalled due to financial constraints, Jihad said the government would waive import duties for construction material or capital goods next year.

Tourism Minister Ahmed Adeeb revealed yesterday that a green tax of US$6 per night would be introduced in November 2015 and guest houses would be exempt from the tax.

Jihad said the income from the green tax would be used for water, sewerage, and coastal protection projects.

Of the proposed revenue raising measures, import duty revisions and introduction of a green tax would be subject to parliamentary approval, which the finance minister hoped would be granted as the budget was passed.

Legislative compromises to new revenue measures led Jihad to express fears in August that the predicted state deficit for 2014 would more than double in 2014.

State debt

The outstanding stock of treasury bills (T-bills) is currently MVR10 billion (US$648.5 million), said the finance minister.

In his budget speech last week, Jihad observed that the state’s debt would reach MVR31 billion (US$2 billion) or 67 percent of GDP by the end of 2014.

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

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

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

Spiralling debt is threatening “the economy’s health”, Jihad said yesterday, with the rolling over T-bills proving to be difficult as the ministry has to plead with banks for extension of repayment periods.

“For example, if MVR600 million matures this week and there is MVR700 million in the public bank account, if the MVR600 million is rolled over there’ll be MVR100 million. How can we run the state with that? It can’t be done,” he explained.

The solution was raising additional revenue by utilising resources such as uninhabited islands, he continued, and appealed for cooperation from parliament. Additionally, the government was trying to extend the periods for repayment of debt.

The interest rate for T-bills is currently 7.5 percent, Jihad said, down from 10 percent before the current administration took office.

“This year we estimate that MVR1.2 billion worth of T-bills have been used by the state for finances. In 2015, it will be MVR440 million,” he noted.


Cabinet leases two uninhabited islands for resort development

The Cabinet has decided to lease two uninhabited islands for resort development to the party currently operating Kolhumadulu Thimarafushi Domestic Airport.

During today’s discussion, the Cabinet noted that leasing uninhabited islands for resort development would help recover the cost of developing the airport last year.

The government last year reclaimed 31 hectares of land for airport construction.

Cabinet members also concluded that opening new resorts is also expected to promote industrial growth and increase job opportunities for locals.


J Hotels and Resorts to sue government

J Hotels and Resorts intends to sue the government “at length” over the Cabinet’s decision to terminate the contract for Laamu Gan Asseyri Project, which was awarded in October.

Company chairman and former ruling party MP Abdulla Jabir said no explanation for the termination was given, and claimed it was not the first time that the Cabinet had retracted a decision.  He said he had “strong suspicions” of corrupt dealings.

“There are ruling party members who decided that they want the project, so they forced the President to terminate my contract through the Cabinet. The Cabinet is unfit to operate, it is just playing games on its high chair in the Maldives,” Jabir said.

The project was won via bidding and awarded on October 12 of this year. It includes a 50-year lease of 25 hectares for the development of hotels and 79 guest houses containing a total of 1,500 beds. Restaurants, spas and sports facilities were also included in the project plan.

Originally, a joint venture company was to be created with the government, which would earn a five percent share, and J Hotels and Resorts. State Minister for Tourism Thoyyib Mohamed was previously reported saying the government preferred a private party to develop and manage the whole project, but the ministry had a ‘Plan B’ to lease out separate components of the project to different parties.

According to the government gazette the Cabinet decided to terminate the contract on November 29, and has lately decided to re-open the bidding process.

Minister of Tourism Mariyam Zulfa was unavailable for comment, however Permanent Secretary Ahmed Solih said the ministry had sent its reply to J Hotels and emphasised that the issue now lies between the Ministry and the company.

Jabir warned that the Cabinet’s decision was one of several factors that was causing a dip in investor confidence.

“These are expensive games, for the investors and for the Maldivian people,” he said. “The government is losing credibility doing this. I am disappointed that the Maldivian government is dishonoring its agreement.”

According to Jabir, the contract between J Hotels and the Ministry of Tourism was valid under Maldivian contract law.

“We have incurred losses of income and opportunity, and our lawyer is assessing those losses now,” Jabir said, reiterating that the company plans to sue the government.

He further claims that a contract cannot be terminated unilaterally, as the Cabinet has done, and that the government cannot accept bids for a project which is the active subject of a lawsuit.

Jabir was unable to provide further details regarding losses incurred.

Last week, the Cabinet instructed the Attorney General’s Office to monitor allegations of corruption made against the government, and file defamation lawsuits where such allegations were proven unfounded.

The Cabinet’s request follows growing concern that some such allegations are being made for political purposes. Meanwhile, the acrobatics of local politics could have a detrimental effect on foreign investment.

At the same time, the government has been tasked with improving its latest ratings in Transparency International’s 2011 Corruption Perception Index (CPI), which were less than favorable.


14 new islands to be leased for resort development

The government has decided to lease 14 new islands for resort development to finance regional airports and housing projects.

According to the government gazette, six islands will be leased on a tender basis to develop regional airports in Dhaalu Atoll Kudahuvadhoo, Thaa Atoll Thimarafushi, Shaviyani Atoll Funadhoo, Gaaf Dhaal Maavedhhoo, Gaa Alif Atoll Raavereha and Fuvahmulah.

A further eight islands will be leased to raise funds for housing development and housing subsidies.