Agreements of 75 islands leased for resort development have been revised to impose a three-year deadline for completion, Tourism Minister Dr Abdulla Mausoom told parliament on Monday (14 February).
If the leaseholder fails to develop and open the resort within three years, the contract will be “automatically” terminated, Dr Mausoom explained, characterising years-long delays in completing new resorts as a major challenge.
“Ultimately the government has to bear responsibility for the failure to develop the resort. We are changing that,” he said.
The government will not necessarily wait three years to reclaim leased islands. If a project is not “fully mobilised” within a year and a half – generally the shortest period for developing a resort – the tourism ministry has the right to cancel the agreement.
The tourism ministry has been monitoring work on islands leased for resort development, he assured.
But difficulties in securing financing is also a major obstacle, Dr Mausoom conceded in response to a query from a lawmaker. At least US$900 million is needed for stalled resort projects, he observed. Effective planning and legal changes are needed to overcome the credit crunch, he added.
The tourism minister also revealed that the government is in the process of selling its 32 percent stake in the 282-bed Shangri-La resort in Addu City.
“Under the agreement with [resort operator] Addu Investment Pvt Ltd, in a situation where the resort faces a loss, the government has to participate in the loan issued for financing the loss. As such, the government now owes US$68 million to the company as loan financing,” he said.
As the presently available legal “formula” for divesting the stake would cost US$80 million, the tourism ministry has drafted amendments to the tourism law to facilitate the share transfer at a lower cost, Dr Mausoom revealed, adding that the legislation would be submitted to parliament in two weeks.
After renovations, the resort is expected to be reopened by the end of the year, he said.
Before Canareef resort – which also shut down with Shangri-La after the pandemic struck in 2020 – reopened in January, the South Palm resort was the only property in operation in Addu Atoll.
The government’s target remains developing 8,000 beds in the southernmost atoll as a “critical volume” is necessary for tourism to take off in Addu City, Dr Mausoom said. Together with the introduction of homestay guesthouses and integrated tourism projects in Hankede and Sawahili, the minister expressed confidence that the southern atolls could become a “separate independent hub” for tourism.