When employers are remarkably stubborn, everything has to be done by the force of law! Atleast that seems to be how it works in the country. Although we have a booming tourism and an accompanying, construction industry, workers of both industries generally live in medieval conditions. The plight is especially worse for construction industry as the workers are mostly expatriate workers. Worse means ‘small’ things like having to work 7 days a week, no pay for 6 months, a makeshift toilet for one in 50 people and things like that. However its to their credit that Minivan observes that the most frequent complaint of expatriate workers is about unpaid wages, while that for locals is about living conditions. However the ever persistent demand by resort workers about service charge is also about money which is also legally theirs.
Minivan has an excellent article on these lines here… Pls follow to read.
Although our construction workers build world class resorts, their work accommodation is definitely other-worldly..
The problem of illegal workers has soared to new heights as the country is listed on US State Department’s human trafficking watch list for a second year. To tackle the problem the military has been manning the immigration counters and human resources ministry to investigate the root causes of the problem. Prior to this takeover the two offices (immigration and human resources ministry) were not able to solve the problem of which office keeps which monies associated with the immigration and visa fees process. The problem was resolved that neither office gets to keep any monies related to expatriates visas, deposit fees, work permit, return ticket etc. Instead Maldives Inland Revenue Authority takes over the money matters from the two offices.
Briefly the various numbers associated with the illegal immigrants are as follows
130milion Rf as lost visa fees per year for the country.
Greater than 40000 estimated illegal immigrants in the country. The two separate databases kept by the Immigration Department and Human Resources Ministry has a variance of greater than 20000 which is making it difficult to estimate the size of the problem.
All legal expatriate worker pays 250rf per month as work visa fees.
1 office serves visas. 1 entry point for immigration.
Expatriates are estimated to remit 10m$ per month. The dollar shortage problem is frequently associated with this problem. However the single most drainer of dollars is high government spending.
Its also estimated that workers remit 100-800$ per month per worker which is contrary to popular belief that illegal workers work almost for pennies!
Recruitments agencies are charged 1500rf per worker as deposit.
To counter the unwieldy problem, the government resorted to a new boarder control system which also fell foul to corruption: The monies involved in the new boarder control system are $220m for 20 years for a company called Nexbis: A comparable system that is employed in in Sri Lanka costs 2.2$m to install and to develop!
Money earned by workers a part of which subsequently is sent back home is an important factor of economies in most countries. Remittance works as both in and outflows to the country. Here in Maldives, the government is simply content in having the economy generate just two inputs to cover for all the expenses of the government, namely through fisheries and tourism. With the recent tax laws, the government will be creating a third input to generate income for the government through the restructuring process of the economy.
Remittances as a share of GDP, 2007 (%)
The major outflow of cash from Maldives by the locals are to medical tourism in India and Sri Lanka together with the educational expenses for students staying abroad. The major outflow remittance from expatriate workers are of course to their parent countries.
Remittances as a share of GDP, 2007 (%)
Because of the importance of workers remittance to the economy, most economies of the world seek to maximize the benefit from workers and their input to the economy. A typical worker who works in a resort is no less beneficial to the economy of his island than an established business at his home island or atoll. The only difference is the form of the business, ie; the worker is not a building but a human being…
Migration improves business profitability and reduces the costs of production, but an unregulated unchecked labour force (such as the one which is existing in the country at the present) is already causing harm to the local economy.
Workers’ remittances, compensation of employees, and migrant transfers, credit (US$ million)
Maldives Association for Tourism Industry has an interesting Operating Guideline: It reads “The member is right, even when s/he is wrong!”. This is an interesting operating guideline which pretty well sums up MATI. The association also has a 5 point agenda the first one of which is resort lease period extension.. To all extents MATI seems to have achieved the first point in the agenda with the government agreeing to extend the existing lease period of the resorts to 50 years if the resort agrees to pay a sum of money. Currently all resorts has individual land lease agreements with government which were drawn up as was when needed, hence the conditions were favourable for the first batch of resorts and gradually got tougher for the latest batch of resorts.
The goods and services tax bill (3.5%) was heavily fought over in the parliament, by the opposition and the government and all sides made concessions to others. That much was apparent from the media. But what was not apparent was the involvement of MATI the resort owners club which cut a deal with the government to extend the existing resort leases. The government has agreed to the cartel’s demand upon the resorts paying a further 100000$ dollar per resort per year for the extension. Now the important question that comes to mind is what sort of leverage the cartel has over the political process? Other than pledges or promises of campaign funding what more leverage does the resort owner’s cartel have? What was the big need for the government to cut a deal with the resort owners over the tax bill in the first place? These are tough questions needing straight answers nobody seems to have.
The Goods and Services Tax is currently only a framework of laws which requires further regulations and by-laws for the process to work, which are still in the process of formation. GST law requires implementation by January 1st next year by which time the by-laws in and in-laws should in theory be in place.. MATI is sounding out the lack of these very regulations as an excuse to delay the process and asking to delay the GST implementation. The government expects the regulations to come through parliament by November.
The reasons MATI gives for delaying the GST implementations are many and they include the following:
that the resorts need time to upgrade theirs accounting softwares
that the existing bed tax is still to continue for further 3 years
that the resorts are obliged under the new pension laws to deposit 7% of staff salary for pensions, which will be required to be implemented on May the next year. MATI sees an issue with this saying that expatriate workers are short term employed and this requirement is unworkable. However labour law does not differentiate between local and expatriate staff on the issue of worker contract, so MATI’s concern over this issue is unfounded. I.e. both the local and expatriates are short term (1 or 2 year) employed in legal speak.
MATI reminds another bill income tax is also in the offing
The unavailability of English translations of the GST bill is also an issue with MATI which is in the process of being translated.
None of the points MATI raises seems to warrant delaying the implantation of GST (3.5%) for a whole one year which is one fifth of a presidential term in office. With MDP pressed to show success on election pledges, its unlikely that the government will want to add any further delays to the GST which in the first place was heavily delayed by the opposition dominated Majlis.
Given the fact that various forms of taxation is coming to the country with popular backing, to stay for good, MATI is clearly out of the line and its understandable. Its understandable since the cartel consists of roughly a handful of ‘resort-barons’ who owns the most expensive real estate properties in the country and who are in their own words “ right, even when they are wrong!” which brings to mind and important fact that democracy cannot be savoured while the economy is shackled.
Here are some points generally in the direction of why MATI is wrong..and why MATI should not be overly worried about their very own ‘concerns’.
Taxes are nor borne out by resorts. Taxes are and they are meant to be passed on to customers. How resorts wants to deal with tax as a burden is another matter.
Resorts were required by law to payout 99% of service charge to staff but few if any resort has implemented this requirement.
The pitiful amounts of salaries most resorts pays to staff is not something to be gloated over. Much less is to be lamented over is the meagre 7% of staff salaries for the pension fund which compared to an average resort’s income scale is peanuts. And that is dried ones of course! A sample quick accurate approximation is like this: (100staff X 250$) X7%=1750$. Which is what?nothing right?
Resort owners has been threatening with the demise of tourism in the country from day one. With these new tax issues the clamour for impending doom of tourism will grow louder. But what is certain is that no resort owner will ever let go of any of their islands because of these new latest requirement to spend, which just tell us that all this noise is just noise and not much else.
The resorts having to re-negotiate on existing contracts between tour-operators maybe a problem in the short term. However most such contracts are short term based, specifying the rates the resort sells their rooms to the operator for one year or for one season. This maybe one issue the forth coming by-laws of the GST bill will iron out come November.
Another place where ironing out will be needed is about the resort’s lease and rent law which seems to suggest that rates will only be applied in relation to land area, without taking to consideration the proximity of resort to airport or Male’. Also where there is great demand and limited supply, as in the case of our resort islands, the government shall not make it unduly easy for resort-barons to lengthen the lease life of the islands for no reason than their greed.
Asking for extensions and exemptions for one year citing book keeping difficulties is excessive as the modest GST is not that complicated at all.
The rate of GST or such finer details of technical issues shall ideally be not passed at parliament as law. It would have been better for the taxation authority to deal with the finer print and have the Majlis play a supervisory role in the matter.
GST tax in various countries are different and arrived at differently. Its complicated in most cases for reasons related to many factors of the country’s economy, politics as well the law.
Its 7% in Singapore as of 1 July 2007
its 10% in Australia on most goods and services
its > 5% in Canada
its 5% in Hong Kong
It will be 4% in Malaysia come 3rd quarter of 2011
its 15% in New Zealand on October 1, 2010.
Except for the very rare ‘exceptions’, dedicating a whole life working in resorts is very rare in Maldives. The reasons are obvious. The resorts being tiny and cut from the rest of the world by the seas and lagoons that surround, the average resort workers works on borrowed time in resorts. And whatever length of time he or she would have spent on the resort would be a great sacrifice against family and friends back at home. However the sacrifice is worth the while for some while not for others. For those who will be able to make substantial savings while working in resorts, the life in resorts would have been worthwhile. But for the vast majority of resort workers this simply is not the case. Resort life is just a necessity to get by to support families and loved one’s back home.
case in point:
Most of the Bangladeshi workers who work in resorts face a special dilemma in addition to being separated from family for extended periods of times. Most of them would have made to Maldives through ‘agencies’ or middlemen who charge exorbitant fees and commissions which are several times over the average of what could be earned in a year’s income in Maldives. With false promises and after having surrendered a mortgage on a title deed or a house or with live stocks the worker arrives in Maldives to find the situation very far from what was being promised. Promised monthly wages would seldom be given and yet the workers toil in resorts sometime for as long as 5 years without being of any benefit for the families back home or themselves. This is in fact labor exploitations big time. Officially most resort owners or managements are not aware of this exploitation and is seen as a peculiar circumstance relating to expatriate labor.
According to local media reports there is indeed a protest going full swing in Chaya Island with the protesting staff calling for the employer to abide by the labour law among the many concerns. The protestors are seeking written assuarances from the management that they would indeed do so which would be a difficult demand since issuing such a writ would be admitting to breaking the law which no employer would willingly do.
Among the various concerns the dissatisfied staff raise are:
that the resort pursues a policy of racial discrimination whereby the Sri Lankan staff are said to recieve favourable conditions in work and pay while the rest Indians, Bangladeshis and Maldivians are said to recieve the less than adequate or favourable treatment in comparision.
That the management has deliberately filled up all managerial positions in a discriminatory manner and gives no scope for development.
That the resort has failed to observe the ratio of expatriate quotas which is a direct violation of labour law.
And the protesting expatriate staff have been threatened with dismissals should they continue with the protest.
Chaya Island which used to be Dhonveli Beach Resort is a popular destination for surfers from Australia and has a full year long tourist season which is unlike many resorts in Maldives. Although popular among surfers the resort has had a bad reputation for illtreating staff under various managements. The current management under John Keels group of hotels has done nothing to address this issue and has infact made matters worse by their unflinching stance on improving relations with staff.