The First Amendment to the Tourism Cross-Subsidisation Regulation
The First Amendment to the Regulation on Leasing Islands, Lands and Lagoons under Cross-Subsidisation for Tourism Purposes1 (the “First Amendment”), gazetted on 21 December 2022, has laxed the condition for investors to settle the full project amount prior to signing the lease agreement under the Regulation on Leasing Islands, Lands or Lagoons under Cross-Subsidisation for Tourism Purposes2 (the “Cross-Subsidisation Regulation”).
The First Amendment further aims to protect the financial interests of the state in the event of termination of the lease agreement if the lessor fails to pay the full project amount within the period provided by the Cross-Subsidisation Regulation.
Leasing of islands under cross-subsidisation
The Cross-Subsidisation Regulation provides procedures for leasing islands, lands and lagoons for tourism purposes as consideration for:
- Undertaking specific projects determined by the government; or
- Providing financing for such projects.
The acquisition cost and land rent of the leased islands, lands and lagoons can be set-off against the project amount incurred by the investor.
The lease agreements of contractors undertaking the specific projects must stipulate that operating licenses will only be issued once the project has been completed or the funds required to complete the project have been transferred to the government.
Law prior to the First Amendment in relation to financing projects
Investors who are financing projects under the Cross-Subsidisation Regulation are required to settle the full project amount upfront prior to signing the lease agreement. A period of not more than 60 days or 180 days (if an extension is granted) can be given to settle the amounts.
Changes following the First Amendment
The First Amendment relaxed the requirement to settle the full project amount upfront for investors financing the projects. The Amendment provides that the lease agreement can be signed upon the settlement of USD 1 Million from the total project amount.
The following additional conditions are also to be stipulated in the lease agreement which are intended to safeguard the financial interests of the state which includes:
- Lease agreement to be terminated if the investor fails to pay the amounts within the timeframe provided.
- Upon termination of the lease agreement for failure to settle the project amount, the state will not be obligated to pay any compensation to the investor.
- The state will not have to reimburse any amounts settled by the investor as the project amount prior to the date of termination of the lease agreement.
Effective date
The First Amendment took effect from 21 December 2022.
