It is more beneficial to the government to run projects based on cross subsidization, states Finance Minister Ibrahim Ameer.
Cross subsidization is the practice of funding one product with the profits generated by a different product.
The minimum lease rate for an island, land or lagoon provided for resort development as cross subsidy to contractor or financer of key government projects is USD 1 million.
Ameer told Sun that the previous practice by the government offered no guarantees on timely completion of projects, resulting in projects remaining incomplete, increasing the burden on the government.
“They are contracted to build an airport in exchange for, for example the provision of transport services or the development of a resort. But they don’t do the work they are required to in exchange. They don’t build the airport. It takes some six years,” he said.
Ameer said the government now run projects with the guarantee the projects will be completed.
“What we do now is, when they give the funding we want, we give them cross subsidy. When the government gets the funding, we build the infrastructure. There’s certainty the work will be done,” he said.
The government is running a number of key projects based on cross subsidization, including airport development projects. The government recently posted an announcement seeking investors to reclaim and develop a city in K. Giraavaru lagoon.