Trade Bodies Not Consulted Over New Resort Leases: Tourism Minister

By Olivia Lang in Malé
June 24, 2008

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The government decided to lease out 31 new resorts without consulting key bodies such as the Maldives Association of Tourism Industry (MATI), according to tourism minister Mahmoud Shaugee.

He has also said the decision to lease the islands was made due to a revenue shortfall in the state budget, saying advance payments on the lease rents would provide government with immediate income.

But he added the new leases, adding to over 30 resorts already under construction, would bring “other benefits” such as “more resorts closer to people” and a boost to other economic activities.

Consultation

The tourism minister told Minivan News the government made “internal” consultations” over the new island leases, but did not consult other key groups, such as MATI, which represents the industry.

“We can’t disclose all details of the consultation process. Did government ask MATI? No. But I don’t think it is necessary,” he said.

Saying such consultation would have taken too much time, he added government had consulted widely in developing the Tourism Masterplan 2007-2011, which sets out plans to increase the number of tourist beds.

A total of 31 islands will be leased for new resort development this year to avoid a $190 million deficit in the national budget, although a specific timeframe for the leases has not been released.

The islands will add to 30 resorts currently still under construction and a further 90 operational resorts – the total of which accounts for a third of the country’s budget through bed tax and island rent.

“No Complaints”

The move was made after a revenue shortfall when government “mega”-projects failed to materialise, matching concerns by members of parliament when the budget was announced in December.

Governor of the Maldives Monetary Association (MMA) Abdullah Jihad said the lease plan was the “only option”.

In a statement from MATI, the association warned of the need to ensure islands are developed once they are leased, saying: “It is important when you lease all these resorts at the same time that all these products come to the market as soon as possible”.

Of 35 resorts leased in 2006, only 2 are operational, despite a theoretical 18-month window for development. Leases on the new islands will offer three years for construction, according to Shaugee.

There have been no formal complaints made against the move by MATI, according to Shaugee, although he said the government “never thought they [MATI] would be happy,” because the move would increase competition in the sector.

Consequences?

MATI has been increasingly critical of government resort leasing policy, arguing the emphasis on high “bed rents” and money upfront means companies may struggle to develop the islands they have leased, and are forced to create high-end resorts to recoup costs.

In January, MATI chairman Mohamed Umar Maniku warned that “major decisions on tourism development cannot be made on an ad-hoc basis to meet immediate and pressing needs of the government without considering long term consequences.”

Shaugee on Tuesday said that industry in the long-term may see a decrease in profit margin but that that was common “as any industry matures”.

There is no timeframe for naming the islands to be leased, but the planning ministry has now named 7 islands of the 11 new reef resorts announced last month.

These include Kaafu atoll Kaashidhoo, Haa Dhaal Nolhivaranfaru, Haa Alif Kelaa, Alif Alif Thoddoo, Faafu Nilandhoo, Faafu Magoodhoo and Laamu atoll Gadhoo.

Construction

At the start of 2008, the Ministry of Finance highlighted “the limited capacity of the construction industry, compared to the large number of both government and private projects on the market”.

But Shaugee says he believes the “construction industry will develop the capacity,” saying that by creating demand, supply would follow.

And MACI president Mohamed Ali Janah said: “We are happy the government is giving the resorts because we are having a boom. We are one of the biggest growing industries in the country”.

Tourism accounts for 70 per cent of the economy through direct and indirect streams. Last year the treasury raised more than Rf 2,500m (US $195 million) directly from the industry, according to MATI.