On 2 July 2019 the Ministry of Tourism published its new Regulation on Extension of Construction Periods and Deferment of Lease Rent and Fines and the provisions of which, allows tourism leaseholders to derive the benefit of developing their tourism properties in phases rather than the singular phase development and operation method.
You may think what is phase development. Think of the development of a lagoon, from a mere tiny sandbank to a tourist resort with double the existing land size, lush green vegetation and infrastructure. Now think of the practical implications of developing such a resort on a lagoon as opposed to an already existing island. To begin with, a lagoon requires reclamation of land before it can progress with vegetation plantation and construction of infrastructure. The reclamation process itself takes a significant period of time which must be distinguished from the time period taken to landscape and build on. What phase development allows is for the Construction Periods of such properties as granted under its Island Lease Agreement to recognize the different stages of the aforementioned “vertical” development of resorts and to allow for reasonable timelines to be granted to leaseholders for each specific stage of such vertical development.
Therefore, when extending the Construction Period of a property, such development can be split into phases such as the first phase of development allocated for land reclamation only without the requirement of imposing operation of the said property.
Despite the aforementioned benefit, the Regulation also contains a contradiction to this, by stating that where a leaseholder chooses to develop a tourism property in phases, they must not only complete the development of the phase for which the Construction Period is extended but also that they must operate the resort or a part of it developed under the extended phase. To this effect, the insertion of the word “operation” into the aforementioned scenario negates the benefit of providing leaseholders with a phase development method.
We can therefore, only hope that this apparent contradiction is something which the Government may look into and consider so that tourism leaseholders who are currently undergoing reclamation of lagoons can practically benefit from the true and practical intention of the phase development method.