Parliament accepts Political Parties Act and amendments to Tourism Act

Parliament has accepted Political Parties Act and Bill on amending Tourism Act in yesterday’s session, reports Miadhu.

The amendments on the Tourism Act will be deliberated in a committee, while the Political Parties Act has been accepted.

MPs called on the government to increase public funding for political parties, and asked for an increase to the 3000 signatures needed to create a political party.

However, the bill banning the import of alcohol and pork into the country has been rejected, reports Haveeru.

It was rejected by 53 votes, and several MPs argued that both alcohol and pork were essential for the sustainability of the tourism industry.


MDP MP Musthafa assures “I will never leave my party”

Maldivian Democratic Party (MDP) MP for Thimarafushi in Thaa Atoll, Mohamed Mustafa, has spoken against one of the amendments to the Tourism Act in Parliament this week, amendments proposed by his party.

Today he offered assurances that he “would still vote with MDP on the issue.”

Mustafa said he is mainly opposed to the extension of leases for resorts, which will lease islands to resort operators for a minimum of 50 years. This was proposed  to make the Maldives a “more investor-friendly environment,” according to former Minister of Tourism Abdulla Mausoom, who spoke to Minivan News yesterday.

Mustafa believes reducing costs for the investor means “one man is getting rich, while the poor are getting poorer.”

“We don’t need to extend a lease to 50 years,” he said, “rather, the government can implement the Taxation Bill.”

He said he does not see how the amendment is beneficial to the people of the Maldives: “Why are we giving the benefits to rich people and not the general public?”

Although he expressed his concerns over the proposed amendments, he said he wanted to “confirm to Minivan News that I will not vote against my party. It’s one of the best parties.”

“I have my own opinion,” he said, but he still believes “the MDP are [working] for the benefit of Maldivians.”

Mustafa also spoke about his “intimidation” by certain MDP members, but said it was not a recent issue and had nothing to do with the Tourism Act.

He said his comments concerning intimidation by his party were “regarding a previous case that went to criminal court” a year and a half ago over a payment issue.

Mustafa said he was acting as a mediator for a payment that needed to be made to someone, whom he claims is “a known money launderer and strong supporter of the DRP”, and this person tried to cash in the same cheque twice.

“He had no right to take the payment the second time,” he said.

Mustafa claimed the case was then taken to court and he was not informed about it. He said “some senior MDP members were behind the case, but they are not MPs.”

He said his comments were taken out of context by the media, “which is putting their own style into things they don’t know. They are poisoning the minds of the public.”

Concerning the recent rumours that he was planning on leaving the MDP and moving to the People’s Alliance (PA), he said “I will never move to the PA, that is totally false.”

“I have nothing against my party, we are on very good terms,” Mustafa noted, adding that “MDP is a democratic party. It’s the most democratic party in the Maldives, and we are working to perform our pledges.”

“We work very well, cooperate, do our best for our party,” he said, “we are very strong, we walk as one. I will never leave my party, I would rather resign [politics],” he added.


Government’s bill reduces tourism revenue “but improves investor confidence”

The government has proposed an amendment to the Tourism Act that reduces the rent resorts pay as well as extending the lease period to fifty years, a move which would significantly reduce the government’s income from the tourism industry in the short term.

The bill was proposed by MDP MP Ibrahim Mohamed Solih, who said the main aim of the bill “is to improve investor confidence and performance of the tourism sector.”

Solih said rent would be charged depending on the resort’s area and not number of beds. Resorts are now to pay US$7 for each square metre.

Resorts would also be categorised according to their size; the smallest group being from 100,000-200,000 m²; the second from 200.000-400,000 m², and the largest is above 400,000 m².

Solih said this will ease the burden on resort owners and will help resorts currently under construction around the country.

He noted that this would reduce the government’s income from the tourism sector from Rf 1900 million (US$148 million) to about Rf 1300 million (US$101 million).

Creating an investor-friendly environment

Minister of Tourism, Arts and Culture, Dr Ali Sawad, said the amendments to the Tourism Act will create more macro-economic opportunities in the Maldives.

“It is geared towards achieving three objectives: the first is transforming leases to land rent. The second is phasing out the bed tax, and the third is increasing the lease from a minimum of 35 years to a minimum of 50 years.”

Resorts currently pay a flat rate of US$8 per occupied room, per night, known as the ‘bed tax’, however the resort industry has criticised this as a disincentive to increase capacity and promote expansion, and limited potential revenues in the future.

Dr Sawad said since all the revenue streams are linked, any amendments to the bill will have a “ripple effect on the economy” and would create an environment for greater investments as investment costs are decreased.

He assured that the amendments would bring in more revenue starting from next year, but admitted the government would see “a slight drop [of revenue] during the transition. It’s all part of a larger fiscal policy.”

The amendments to the bill would ultimately “not lower revenue” from the tourism industry, as they were intended to make investment in the Maldives “more attractive.”

Former Minister of Tourism Abdulla Mausoom said “we definitely have to create a positive investment environment in the country,” because in the last year and a half, “investor confidence has been down.”

He said the outcome of both the tourism bill and the taxation bill “are not certain.”

“The Maldives is very small and our natural resources are limited,” Mausoon said. “The government has a responsibility to look after our resources.”

He said he believed “it is not in the best interest of the country” when an investor is willing to pay a better price and the government had set a lower fixed price.

“We should facilitate and investor-friendly environment without eliminating the competitiveness of the market,” he said.

Mausoon suggested the government set a minimum fixed rate and have bidders propose higher bids from there. He said most of islands desired by resorts were what he termed, “micro-islands” or those less than 10 hectares in size (less than 0.1 km²).

“The government has a responsibility to safeguard our assets,” Mausoon said, noting that if investors are willing to pay more, “they should be allowed to pay more.”

‘Sim’ Mohamed Ibrahim from the Maldives Association of Tourism Industry (MATI) said “we think this a very forward-thinking bill. Obviously there are little tweaks needed, but overall it’s a good bill that has come at the right time.”

Sim said “the government has worked closely with the tourism industry to develop this bill” and had consulted with the industry “at every stage.”

Bed tax and island lease vs. GST and land rent

Currently, the cost a resort pays the government is based on the number of beds it has. Dr Sawad said on average, the government was making anywhere from US$3,500-20,000 per bed every year, generating a total of US$47 million in revenue from the bed tax per year.

He said a “conservative estimate” of how much revenue the government’s proposed Goods and Services Tax (GST) is expected to bring in was over US$60 million a year. He noted that the tax revenue would continue to increase as the tax net widens.

Dr Sawad said the bed tax would be phased out in the next three years when the GST is in place.

He also said the leases for resorts currently brought in around US$78 million, while the land rent should collect about US$60 million a year.

“By addressing the lease rent head on, we will be able to reduce investment costs, which makes for a more attractive investment,” he said.

However Mausoom said the land rent increases the uncertainty for the tourism industry, because there is no guarantee as to how many beds will be developed on then land: “A resort owner can build as many rooms as possible.”

“This US$7 per square metre is very misleading,” he added, noting that “the government will only be getting three set rents: US$1 million [per month] for the islands in the smallest bracket. For the middle bracket it will be US$1.5 million, and US$2 million for the larger islands. It doesn’t make sense.”

He pointed out the smallest bracket—those islands smaller than 200,000 m²—“should catch at least US$1.4 million, if you multiply it by US$7 per square metre. It’s totally misleading.”

Another thing he believes is unfair is the government’s decision to wait until the GST is in place before ratifying the Tourism Act. “They can’t put a condition like that,” he said, “it’s putting an extra burden on resort owners.”

Mausoom also said he believed there were “many discrepancies” in how the MDP is trying to consolidate the different bills and acts concerning fiscal policy, and said “the government has to start singing the same song. A song that is nice to the Maldivian people, nice to the investors, and nice to the tourists.

Sim explained that the amount the government will lose in land rent (compared to the current lease and bed tax scheme) would be offset by the GST levy, “which would go hand-in-hand with this bill.”

He said adding the business profit tax, GST and land rent, the resorts will “probably pay more than they do currently alongside existing government revenues from customs duties.”

He added that the three year waiting period to phase out the bed tax “is a bit long and [we] will try to lobby for one year.”

Sim also noted that the major issue with the Maldives’ tourism industry is capacity: “The industry can only grow through an increase in capacity. The current situation is good for people who have established, successful properties, [but not for new investors].”

The new system, he said, would offer businesses “certainties” and reduce the current level of “maneuvering” occurring within the industry.


President submits decentralisation bill

President Mohamed Nasheed has submitted the revised Decentralisation Bill to the People’s Majlis.

The bill states that each of the administrative divisions stated in Schedule 2 of the Constitution—except Malé—will be administered by an atoll council elected in accordance with the Constitution.

It also provides representation to both men and women in the elected island and city councils.

The bill gives the president the authority to establish province offices to provide the services of ministries and coordinate government projects in different regions.

The president also proposed the 2nd amendment bill to Act 2/99 (Tourism Act), to make the industry more sustainable and increase the government’s revenue from tourism.