Khaleel says govt ignored advice on resort dollar conversion policy

Manta Air CEO and Pulse Hotels & Resorts Managing Director Mohamed Khaleel has said he resigned as President Mohamed Muizzu’s tourism adviser because his advice on the government’s foreign currency policy was not accepted, while warning that the new rules could affect tourism businesses and investor confidence.

Khaleel resigned from the advisory position on 26 August, the same day Parliament passed amendments requiring Category A tourism establishments, including resorts, to convert 40 per cent of their monthly gross foreign currency revenue through local banks. The amendment was ratified on 31 August and took effect on 1 September.

Speaking to Mira Business FM on the sidelines of the Arabian Travel Market in Dubai, Khaleel said he had accepted the advisory position because he believed his 25 years of experience in tourism could contribute to government policymaking. He said there was little purpose in remaining an adviser if his advice was not considered.

“I accepted the position of Tourism Adviser to the President because I believed I could contribute at the policy level,” Khaleel said. “I resigned from the position because my vote basically doesn’t matter to the government. And I believe that this 40 per cent mandatory exchange is practically impossible.”

Khaleel said the government should consider the foreign currency requirements of individual tourism businesses, including resorts and guesthouses, before determining how much of their revenue must be converted.

He noted that tourism businesses already make several payments in US dollars, including Tourism Goods and Services Tax (TGST), land rent, Business Profit Tax (BPT), withholding tax and Green Tax. He also said tourism employees have historically received salaries and service charges in dollars.

Khaleel said he expected the higher conversion requirement to affect the industry’s ability to continue some of those payments in foreign currency.

“With this change, as I foresee it, we will no longer be able to pay their remuneration and service charge in dollars,” he said.

Khaleel said he discussed the issue with President Muizzu before resigning and explained why he believed tourism businesses could not meet the 40 per cent requirement.

“I basically had quite a good interaction with the President. I explained to him why it is practically impossible to meet by any property in the Maldives this mandatory 40 per cent requirement,” he said.

Khaleel said he had advised the President to retain the conversion requirement at 20 per cent rather than increase it to 40 per cent.

However, he said even a 20 per cent requirement could be difficult for some resorts. According to Khaleel, resorts with an average daily rate above USD 1,000 may be better positioned to meet such a requirement, but they account for about a quarter of resorts.

He argued that resorts operating below that average daily rate could face difficulties converting 20 per cent of their revenue, and said a rate of around 10 per cent would be more manageable across the industry.

The government initially proposed replacing the previous USD 500-per-tourist option with a requirement to convert 20 per cent of foreign currency revenue. The requirement was subsequently increased to 40 per cent before Parliament passed the amendment.

Khaleel also raised concerns about the effect of changes to laws and regulations on investor confidence, saying companies with which he is involved have made significant investments in the Maldives.

He said a decision had now been taken at board level not to make further investments in the country.

“We have now made a decision at board level. We will not invest in the Maldives again,” Khaleel said.

He criticised the speed at which the foreign currency changes were introduced, arguing that major regulatory changes require more time and consultation.

Khaleel described the 40 per cent conversion requirement as a form of “capital control” and said investors would be reluctant to invest in a country if they were concerned about their ability to repatriate returns from investments.

He also questioned the value of accumulating Maldivian rufiyaa if businesses were unable to use the currency for their foreign currency obligations.

Khaleel said the Maldives’ financial system faced challenges and noted that external borrowing also created future foreign currency repayment obligations.

Despite his concerns about government policy, Khaleel said he remained confident in the Maldives as a tourism destination, particularly because of the privacy and service offered by its resort model.

However, he said the strength of the Maldives tourism brand depended on the sustainability of the industry itself.

Khaleel called on the government to review the policies and hold further consultations with tourism businesses.

“There are other places where people can invest. There are Seychelles, Mauritius and Zanzibar. There is Sri Lanka as well,” he said.

“Investors do not come just for a name. Investors invest to generate a return. So I call on the government to consult with the industry and reach common ground — to find a way for the government to achieve what it needs without damaging the entire industry.”

The 40 per cent conversion requirement has also faced objections from tourism industry representatives, who have argued that resorts have substantial foreign currency operating costs and liabilities. The government, meanwhile, has said the measure is intended to increase foreign currency flows through the formal banking system and improve dollar availability.