Time for Sovereign Guarantees for Resort Owners and Other Big Investors in Maldives

Editorial
Time for Sovereign Guarantees for Resort Owners and Other Big Investors

A.S.I.Moosa (Sappe') - January 17, 2005

In Maldives the tourism sector is fully financed by high interest loans, sometime more than 14%. The local banks in Maldives do not give low interest loans to anyone apart from those backed by the regime.

State Bank of India, Bank of Ceylon, Habib Bank (Pakistan), HSBC and the Bank of Maldives are the main beneficiaries of the tourism business in the country because almost all the resorts are mortgaged with them and resort owners borrow at extraordinarily high rates.

Gayyoom's government has today offered more time (3 months) for the resort owners to pay their rent. In Maldives, the resorts are rented out to investors. Each bed, whether occupied or not, is taxed daily by the government and the worry now is even the resorts that were destroyed such as Olhuveli, Vilureef, Medhufushi and Hakuraa Huraa are still liable to pay rent, even though these resorts will not be able to operate till late this year.

The best thing Gayyoom can do to revitalise the local economy, in particular the tourism industry, is to give them sovereign guarantees, so that they can obtain financing from abroad and overhaul their finances - refinance their loans with low interest loans. Commercial loans from Europe and Asia region can be obtained at less than 6%. The problem has always been the strict regulations and the agreement with the government and also the refusal from the side of the government to issue sovereign guarantees. Tourism Ministry official do not have to travel and make arrangements for the resort owners, they can do it themselves; stop interfering with their operations and management.

Renting resorts to private investors in this way is hugely detrimental to the economy. Resort owners don't want more time but a rebate or abolishment of this rent for at least this year. In fact, this whole resort bidding procedure should end and those who can come up with a good business plan should be allowed to setup and invest in any part of the Maldives. Who is this Ismail Firaag to decide which island should be a resort and where water bungalows can go?

We all know that Gayyoom wants a fixed income from tourism sector. That is why he introduced the rent system rather than a progressive taxation model. Regardless of market performance, natural disasters, Gayyoom wants his money. This model is fit for Babylonian times, not the 21st century.

We all know that Gayyoom does not have the capacity and the will to make life easy for anyone. Even the biggest investors in Maldives are scared of being thrown in to jail for upsetting Gayyoom.

It is also extremely important that the restriction of the Purchase Processing and Export of Tuna should be lifted now so small businesses can flourish and enter into the market. Currently, the best fishing areas are still restricted and operated by the government. This must come to an end. Furthermore, these investors also must be given sovereign guarantees to enable them to refinance their expensive loans.

Unless resort owners stand up to face this difficulty, many Maldivians businesses will go bankrupt. The government must deregulate tourism sector and the fisheries sector as well. They must provide a solid legal framework and make Maldives a country of the 21st century.

The main solution to the whole problem in Maldives is to remove Gayyoom from power and install an able government that can work with the people in an atmosphere of professionalism and ethics, not fear and intimidation, corruption and nepotism. Many local investors are now thinking of going abroad. To stop this, the government must act fast and make the country attractive investors, both local and abroad.