AG slams former government over foreign investment “damage” from alleged lack of financial research

Attorney General Azima Shukoor has accused the previous government of failing to conduct sufficient research before signing several major foreign investment projects, that had now been terminated by the present administration.

Azima was quoted by private broadcaster Villa Televison (VTV) (Dhivehi) as claiming that unspecified “economic damage” currently faced by the state had resulted from a lack of economic and legal research by the administration of former President Mohamed Nasheed.

She was quoted in local media arguing that “damages” to the state had resulted from a number of foreign investment projects signed by Nasheed’s administration, including the US$511 million concession agreement signed with GMR to build and manage a new terminal at Ibrahim Nasir International Airport. Azima also raised over another deal with Malaysia-based Nexbis to manage and operate a border control system in the country.

Both agreements have since been terminated by the administration of President Dr Mohamed Waheed, with the Maldives facing a US$1.4 billion compensation claim from GMR after its contract was suddenly declared void in November. The company was then given a seven day notice period to leave before being evicted by authorities.

Nexbis was last week given 14 days to vacate by the government, which likewise terminated its concession agreement with the company.

However immigration officials last week questioned whether  replacement technology was ready to be implemented, in place of the Nexbis system.

Former government response

Responding today to the attorney general’s criticisms, Mahmood Razee, former economic development minister during the Nasheed administration, stressed that the former government had engaged with the World Bank’s International Finance Corporation (IFC) before moving ahead with the airport privatisation program.

As such, he rejected accusations that no research had been conducted before undertaking such a high profile project.

“Clearly this was not a stab in the dark,” Razee said of the deal. “[The World Bank engagement] determined how best to proceed with the airport development for the benefit of the government and the people. After looking at the revenue streams, it was concluded that it was best to move forward with the public private partnership.”

He claimed that aside from potential financial benefits of agreeing the deal, the consortium consisting of GMR and Malaysia Airports Holdings Berhard (MAHB) had been picked based on the companies’ experience in managing other airport projects.

With the deal now terminated, Razee added that it remained critical to secure development at the airport as soon as possible, claiming the current facilities at INIA did not meet the required standards.

Waheed’s government last year accused the IFC itself of negligence during the bidding process for the development of INIA, charges the World Bank rejected at the time.

By June this year, the Maldives’ Anti-Corruption Commission (ACC) ruled out corruptionin the awarding of a concession agreement in June 2010 to the GMR/MAHB consortium. The government meanwhile continues to insist the sudden termination of the contract was in the national interest.

“Cause and effect”

Former Economic Development Minister Razee said the Maldives would remain reliant on development funding for future development projects, which would cost hundreds of millions of dollars out of reach of the government.

With the country now lacking sufficient rating to obtain credit commercially, Razee argued that development funds remained the only means for a country like the Maldives to secure sizeable finance.

The present government’s decision to cancel two major foreign investments would have a “cause and effect”, he suggested.

Should the MDP be elected to power in the presidential election scheduled for next month, the party would have to consider returning to negotiations with GMR in a bid to avoid huge financial fallout from arbitration proceedings now being conducted in Singapore.

He claimed that the cooperation of international bodies such as the World Bank in securing the GMR deal would likely to be sought in other high-profile investment projects sought under an MDP government.

Economic problems

The Maldives National Chamber of Commerce and Industries (MNCCI) meanwhile last month accused senior politicians under successive governments of trivialising the severity of the country’s economic problems.

MNCCI Vice President Ishmael Asif claimed parties were addressing financial concerns and issues impacting foreign investment with negative slogans rather than actual policies in the run up to September’s election.

While accepting the present “bad shape” of the Maldives economy, the chamber of commerce was particularly critical of what it called negative economic campaigning by senior figures in the last two governments – arguing they had done little to address an ongoing shortage of US dollars and a lack of investment banking opportunities and arbitration legislation in the country.

Asif’s comments were made in response to claims by the government-aligned Progressive Party of Maldives (PPM) that foreign investors were now turning away from the Maldives due to concerns about political stability and safety in the country.