Only 20% of tourism dollar revenue circulate in Maldives: MP Esa
The direct benefit of the guesthouse business to the economy is now greater than that of running resorts, he said.
Maldives is estimated to earn $4-5 billion a year from tourism, but even 20% of it does not circulate in the Maldivian economy, Kendhikulhudhoo MP Ahmed Esa said Wednesday.
The ruling MDP MP expressed concern over the lack of retention of foreign exchange earnings from tourism, during the debate on a government-sponsored amendment to the Tourism Act at Wednesday's parliament sitting. Esa submitted the bill to introduce a real estate tax on long-term villa rentals from resorts.
Esa said a large portion of the revenue from the sale of rooms in Maldives resorts goes into a foreign bank account of the resort owner or operator. The only foreign exchange earnings from resorts are the money paid directly to the resort by the tourists who spend their holidays at the resort, he said.
"My estimate is that even 20% of the foreign exchange earned from running a resort is not shared within the local banking system. When a travel operator in Germany sells a room, the money goes to the account of the resort owner in Singapore," he said.
"Only the money that is generated from running the resort and its outlets is the foreign exchange that Maldives gets. Little goes into the local banking system. That only includes salaries of the employees, and their food and accommodation expenses."
Esa said Maldives is an importer of almost everything it needs and commodity prices are rising due to foreign exchange shortage. The black market dollar rate MVR 18 per USD, he added.
"Maldives is in a precarious situation where imports are changing on a daily basis. The reason for that is not because of lack of revenue. My estimate is that we are talking about an industry that brings in $4 or $5 billion a year," he said.
'Laws should be tightened'
Along with his concerns, Esa also proposed solutions to keep foreign exchange inflows in the country's economy. He said. They include:
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Laws should prohibit foreign currency income from businesses in Maldives from being remitted abroad without being deposited in a Maldivian bank first
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Many countries in the world have laws and regulations that require businesses to keep foreign currency in banks for a certain period of time
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The real benefits from tourism have not been achieved due to the loopholes opened up by the existing laws
“These are serious things that we have to think about now,” Esa said.
Given the current state of affairs in Maldives, the direct benefit of the guesthouse business to the economy is now greater than that of running resorts, he said. As such, he said:
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Job opportunities are created in the local islands
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More small and medium enterprises are opening up in islands
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Foreign exchange earned by guesthouses is circulated in the economy day by day
Although the guesthouse benefits directly to the economy, the laws and regulations have little relief for the guesthouse businesses, he said. Citing some examples, Esa said:
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Tax exemption on imports to build a resort; the materials brought to build a guesthouse do not get that relief
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They charge the same amount of land rent as a resort
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Councils give land for a maximum of 30 years to build a guesthouse; tourism leases are set at 50 years as minimum lease period
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Subleasing or mortgaging land for guesthouses is also prohibited
