Lease rent payable by resorts in Maldives will be deferred for the rest of the year, the island nation’s president announced Wednesday.

In a televised address, Ibrahim Mohamed Solih said resorts and agricultural islands will be granted a lease rent deferral for the last six months of the year.

“As we prepare to restart economic activity, all sectors of the economy, including resorts, need concessions and support,” he said.

According to the president, the deferral will also cover land and property leased for other purposes through the finance ministry.

What is the lease rent?

Maldives allows tourism leases up to 99 years, with rent calculated based on the land area of the island leased.

Lease rent, also called Tourism Land Rent, has to be paid in advance for each quarter. By that requirement, tourist resorts can now get the rent payable for the third and fourth quarter of the year deferred.

Failure to pay lease rent attracts a penalty of 0.5 per cent of the amount that is due. The penalty is levied for each day of delay, and continues to be applied until such time the lease rent amount and accrued penalties are all paid.

In recent weeks, the issue of lease rent has become a major contentious issue between the government and leading figures in the tourism industry.

The government earlier offered to defer lease rent for the third and fourth quarter, but it was tied to a key condition that all local employees be retained for three months.

This sparked a rare criticism by the Maldives Association of Tourism Industry (MATI). The influential industry representative body said the offer came too late.

Borders, resorts will reopen in July

In his address Wednesday evening, president Solih also announced plans to reopen the country’s borders and restart its worst-hit tourism industry in July.

“Guidelines on reopening the country are being formulated with input from industry stakeholders,” he said.

The president’s announcement comes a day after his tourism officials invited comments from industry stakeholders on draft guidelines, which — if finalised — will see the introduction of a $100 visa fee and mandatory on-arrival testing for coronavirus for all tourists when the island nation reopens its borders to visitors.

According to the draft guidelines, which have attracted public criticism for being too harsh and unpractical, only resorts and liveaboard vessels that have a so-called “safe tourism licence” will be permitted to open at first.

Guests can come to these tourist establishments either by private jet or superyacht from June 1, followed by charter and commercial flights a month later.

Charter flights and private jets will be charged a landing fee of $50,000. Superyachts will also have pay an entry fee fo $10,000.

Meanwhile, guesthouses and hotels will only be allowed to open from August.

There are no plans yet to allow cruise ships.

The tourism ministry expects the restrictions to be in effect until September “unless extended by the government”.

The ministry says the guidelines will only be finalised based on industry feedback.

The coronavirus outbreak has hit the Maldivian economy hard, as travel restrictions and other preventive measures affect the country’s lucrative tourism industry, which contributes the bulk of the island nation’s state revenue and foreign reserves.

Before the pandemic, the government had been bullish about tourism prospects, targeting two million, high-spending holidaymakers this year after last year’s record 1.7 million.

However, tourist arrivals saw a year-over-year decline of 22.8 per cent in the first 10 days of March. Officials say the number of tourist arrivals to the Maldives could drop by half in 2020.

All international airlines have suspended scheduled operations to the Maldives, as the island nation enforced a blanket suspension of on-arrival visa in late March in a bid to combat the spread of the novel coronavirus.

Even before the visa suspension, the Maldives had closed its borders to arrivals from some of the worst-hit countries, including mainland China, Italy, Bangladesh, Iran, Spain, the United Kingdom, Malaysia and Sri Lanka. Visitors from three regions of Germany (Bavaria, North Rhine-Westphalia and Baden-Württemberg), two regions of France (Île-de-France and Grand Est) and two regions of South Korea were also banned from entering the country.

All direct flights to and from China, Italy, South Korea and Iran were also cancelled.

Cruise ships and foreign yachts were also banned from docking at any of the country’s ports.

With arrival numbers falling and the visa suspension in effect, several resorts across the Maldives had been closed.

Tourism has been the bedrock of the Maldives’ economic success. The $5 billion-dollar economy grew by 6.7 per cent in 2018 with tourism generating 60 per cent of foreign income.

However, the government is at present projecting a possible 13 per cent economic contraction this year — an estimated $778 million hit.

On March 8, Maldives reported its first cases of the novel coronavirus, as two hotel employees tested positive for Covid-19 at a luxury resort in the archipelago.

Eighteen more cases — all foreigners working or staying resorts and liveaboard vessels except five Maldivians who had returned from abroad — were later identified.

A six-case cluster of locals, detected in capital Male on April 15, confirmed community transmission of the coronavirus. Several more clusters have since been identified, bringing the total number of confirmed case in the Maldives to 1,186.

Four deaths have been reported and 91 have made full recoveries.

The Maldives announced a state of public health emergency on March 12, the first such declaration under a recent public health protection law.

The public health emergency declaration has allowed the government to introduce a series of unprecedented restrictive and social distancing measures, including stay-at-home orders in capital Male and its suburbs, a ban on inter-island transport and public gatherings across the country, and a nationwide closing of government offices, schools, colleges and universities.

Non-essential services and public places in the capital such as gyms, cinemas and parks have also been shut.

Restaurants and cafes in the capital have been asked to stop dine-in service and switch to takeaway and delivery.

A nationwide shutdown of all guesthouses, city hotels and spa facilities located on inhabited islands is also in effect.