Agreements Detrimental to the Government Must Be Reformed! A Call to Action for Fair Business Practices

The entrusted operation of the ferry system throughout the country was once exchanged for an island to build a resort. Yet, ferry services have not commenced in several locations, with some places where the service started later ceasing altogether. Meanwhile, the resort continues to prosper, resulting in the company’s owners profiting greatly while the government bears all the damage, including the loss of the island and the need to pay hundreds of millions of rufiyaa in compensation to the company.

This is just one instance of how the government always seems to lose out in agreements when awarding companies to undertake various projects. There seems to be no recourse if the contractor fails to complete the project within the designated timeline stated in the agreement, except for the option of cancelling the agreement, which obliges the company to pay substantial compensation.

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The allocation of islands and island lagoons to companies under the pretext of executing projects follows a similar principle. The project may not be executed, but the island or lagoon is developed or sold for profit, with the government often required to pay compensation when attempting to terminate the agreement.

Fifteen years ago, Premier Activity Pvt Ltd was awarded a training project in L. Atoll Bodufinolhu. The company was entrusted with the task of developing a tourism university or college, but no work has been carried out to date. It is common knowledge that the company is unable to do so, as acknowledged by both the Atoll Council and the government.

Although the island was allowed to be developed and operated for 25 years, 15 years have passed without any progress. If the island is separated from the company, the government will be compelled to pay compensation of another island or $2.7 million (MVR 41.6 million), as disclosed by Tourism Minister Abdulla Mausoom during a recent parliamentary session.

This issue is equally apparent in housing projects. Many projects awarded by the government have been delayed or not completed on time. While there is ample evidence available in such scenarios, the existing laws do not cover them. Furthermore, the projects cannot be separated from the companies, as the agreement stipulates compensation in case of termination.

Additionally, the government has no means of obtaining compensation for project delays. As Minister Mausoom stated, the projects are stalled, and the government is at a standstill. “We are stuck in light of the discussions we had. Now it has reached the point where it has to be separated even after paying compensation,” he stated.

Such agreements always seem to be detrimental to the government in every administration. This current government has already paid billions of rufiyaa from the state budget as compensation for many such projects. This must change. The government must contemplate deeply on agreements made in such projects. If a project is not completed within the designated timeframe or does not progress at all, the government must be entitled to compensation. If the government agrees to pay compensation for amounts that do not match the project, it is a fraudulent use of public funds, and penalties should be imposed for such actions.

Featured Cover Image: Fushifaru Maldives

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