New tourism regulation prohibits SOEs from sub-leasing resort islands

State-owned enterprises (SOEs) will not be allowed to transfer, rent or sub-lease islands, land plots or lagoons allocated to them for tourism development under new regulations published by the Ministry of Tourism.

The regulations, gazetted on Thursday, set out procedures governing the allocation of islands, land and lagoons to SOEs for the development and operation of tourist resorts and integrated tourist resorts.

The rules were introduced following amendments to the Tourism Act passed in December last year.

Under the regulation, any lease agreement granted to an SOE, as well as any rights associated with the allocated island, land or lagoon, cannot be transferred, rented or sub-leased to another party.

However, the management and operation of a resort developed under the regulation may be contracted to a third party in accordance with existing rules governing the transfer of resort management rights.

The regulation also states that the government's ownership in an SOE receiving such an allocation must remain at or above 45 per cent throughout the duration of the lease agreement.

Only companies in which the state holds a minimum 45 per cent stake are eligible to receive islands, land plots or lagoons under the regulation.

The rules further provide that where land located within the jurisdiction of an inhabited island is allocated for tourism purposes, only guesthouses or hotels may be developed on the site. Such areas must first be designated for tourism development by the President.

According to the regulation, any allocation of an island, land plot or lagoon to a state-owned enterprise must be approved by the Cabinet of Ministers.

The Cabinet must determine both the property to be leased and the state-owned enterprise that will receive it.

The allocated property will then be transferred through a formal agreement signed between the government and the company.

The receiving company is required to pay the applicable acquisition fee to the government.

The regulation also allows the Ministry of Tourism, under specified circumstances, to require the company to contribute funds to the Tourism Trust Fund as part of its corporate social responsibility obligations or to directly finance a development project identified by the minister.

Development periods for leased tourism properties may be extended by up to six months subject to conditions outlined in the regulation.

In addition, the ministry has been granted authority to defer lease payments, rent obligations and fines for tourism properties that are temporarily closed for redevelopment.

The regulation states that parties providing tourism services without obtaining the required licences may face fines of up to MVR 1 million.

The new rules form part of the framework introduced following amendments to the Tourism Act and are intended to govern the allocation and management of tourism properties leased to state-owned enterprises.