No plans to privatise airport, “might sublease”: Tourism Minister Ahmed Adheeb

Minister of Tourism Ahmed Adheeb has said the government is not planning to hand over full control of operations at Ibrahim Nasir International Airport (INIA), but might sublease specific development projects to international parties through a “transparent” bidding process.

Minister Adheeb told Minivan News that privatising the only international airport allowed it to become a monopoly which was not in the best interests of the country.

“What we saw was that handing over operation of the only international airport in the country meant it was monopolised. What we are saying is that if the airport is given like that without any competition, it is not in the best interest of the country,” he said.

Adheeb admitted that INIA needed further development and refurbishment, including the addition of an extra runway, and said such projects would be subleased to developers through a transparent bidding process. He also maintained that “operation and control” of the airport would not be given away as he alleged the former government had done with GMR’s concession agreement.

President Mohamed Waheed Hassan also highlighted in an interview to India’s Business Standard that MACL would “open tenders for major development projects”.

“I think it’s too early to talk about the rebidding but, yes, MACL will open tenders for major development projects in connection with the airport modernisation program. GMR is eligible to participate. I don’t see any reason why Chinese companies should be barred from participating in the bidding process,” he told the Business Standard.

However, when contacted by Minivan News, MACL Managing Director Mohamed Ibrahim denied any knowledge of such bidding processes and said he did not wish to further comment on the matter.

Minister Adheeb said 75 percent of the tourists coming into the country were from Europe and following the “European [economic] crisis, the Maldives government should have provided an incentive to those tourists arriving to the country, but because of INIA being operated by GMR, several airport fees were raised.”

“Flight operators operate as a business. They will not consider us if we give no incentives in such a time of crisis and when the airport handling charges are too high. We have to understand that INIA is a tourist airport, it is not a shopping airport or a transit airport,” he explained.

Therefore, the Minister said that the country needed an efficient airport where tourists can go through quickly, with an efficient check-in system.

Earlier on February 2, Qatar Airways CEO Akbar Al Baker warned the airline will re-consider flying to the Maldives if the airport operator maintained its plan to raise airport handling fees at INIA by 51 percent.

Reuters at the time reported that the airline was “‘dismayed’” over what it understood to be GMR’s plan to increase the handling fee at a future date, and suggested such a move would “threaten Qatar Airways’ continued presence in the Maldives.”

However, the GMR Group at the time denied the allegations stating that it had had received no official communication from the airline about its concerns.

GMR spokesman Amir Ali responded at the time saying that the fee hike had already been made by MACL shortly before GMR assumed control of the airport, adding that while there were no plans for a further increase at present, prices were dependent on factors such as fuel costs.

Adheeb also alleged that the former government intended to rush the development process of the airport rather than a “well contemplated phase by phase development plan”.

“Why do we really need to develop the airport to cater to four million people? We could have done that through proper planning in a phase by phase development process,” he said.

The INIA concession agreement

In 2010, the government of Maldives through its Finance Ministry, Maldives Airports Company Limited (MACL) and GMR-MAHB entered into a concession agreement withINIA whereby the Malaysian-Indian consortium were to develop and operate the airport for a period of 25 years.

According to the concession agreement a “project company” under the name GMR International Airport Limited (GMIAL) was to carry out the development project.

However, a lengthy dispute between the new government of President Mohamed Waheed Hassan and the GMR Group led to the eviction of the agreement.

On November 27, President Mohamed Waheed’s cabinet declared the agreement void, and gave the company a seven day ultimatum to leave the country.

Attorney General (AG) Azima Shukoor stated the government reached the decision after considering “technical, financial and economic” issues surrounding the agreement.

She also claimed the government had obtained legal advice from “lawyers in both the UK and Singapore as well as prominent local lawyers – all who are in favor of the government’s legal grounds to terminate the contract.”

The INIA was handed over to the government on December 8, in an invitation-only press conference; Finance Minister Abdulla Jihad presented the official handover documents to MACL Managing Director Mohamed Ibrahim, and said that the Maldives would pay whatever compensation was required “however difficult”.

With arbitration proceedings underway in Singapore over the contested airport development charge (ADC), GMR received a stay order on its eviction and appeared confident of its legal position even as the government declared that it would disregard the ruling and proceed with the eviction as planned.

On December 6, a day prior to its eviction, the government successfully appealed the injunction in the Supreme Court of Singapore. Chief Justice Sundaresh Menon declared that “the Maldives government has the power to do what it wants, including expropriating the airport.”

That verdict, effectively legalising the sovereign eviction of foreign investors regardless of contractual termination clauses or pending arbitration proceedings, was “completely unexpected”, according to one GMR insider – “the lawyers are still in shock”, he said at the time.

A last ditch request for a review of the decision was rejected, as was a second attempt at an injunction filed by Axis Bank, GMR’s lender to the value of US$350 million.

Scott Wilson Plan

Minister Adheeb said the Scott Wilson master plan produced during former President Maumoon Abdul Gayoom’s administration would have been “a better master plan to develop the airport.”

“Sir Scott Wilson’s master plan to development of INIA was a good master plan. We actually did not require a plan to be implemented immediately. The plan was to develop the airport in a phase by phase development process. Some of the development projects had already been completed at the time the airport was given to GMR for development,” he explained.

Following the signing of the concession agreement of INIA with India’s GMR group, the Scott Wilson master plan was abandoned for a new master plan produced by the International Finance Corporation (IFC) through another foreign consultancy firm – Halcrow – which the current government claimed was more costly.

“Scott Wilson’s phase one cost us US$390 million, and all the three phases summed up came to a figure around US$590 million. The IFC did not provide this information to the government. We are talking about a development of 30 years,” former Civil Aviation and Communications Minister Dr Ahmed Shamheed said previously.

The current government criticised the IFC for abandoning the Scott Wilson plan for a more “costly master-plan”  and alleged that the World Bank affiliated group had been “irresponsible” and “negligent” in advising the former government of President Mohamed Nasheed in the concession of INIA by Indian infrastructure giant GMR.

However the IFC denied the allegations, stating that its advice was geared towards achieving the “objective of upgrading the airport and ensuring compliance with applicable international regulations” and providing the Maldives government “with the maximum possible revenue”.

“A competitive tender was organised with the objective of selecting a world-class, experienced airport operator, who would rehabilitate, develop, operate and maintain the airport,” said an IFC spokesperson at the time.

Airport Development Charge

Highlighting the Airport Development Charge (ADC) that the former government intended to charge – prompting criticism from the opposition parties who are now currently in government of President Waheed – Adheeb said that the former administration proceeded to taking ADC without legislation.

“The way they intended to charge ADC was not a mechanism established in anywhere in the world. ADC is taken through a proper legislation and should be flexible and adjustable in parallel with the inflation rate,” he contended.

On November last year, former President Mohamed Nasheed’s government’s Transport Minister Adil Saleem announced that GMR will begin charging international passengers a US$25 (MVR 385.5) ADC at the departure check-in counters of INIA for all flights scheduled after 12:00am on January 1, 2012.

Saleem stated at the time that the fee had been previously approved by the government as part of its contract with GMR.

The matter was soon taken to Civil Court by then opposition Dhivehi Qaumee Party (DQP) – led by current Special Advisor of President Waheed, Dr Hassan Saeed. The DQP claimed that a pre-existing Airport Service Charge (ASC) of US$18 (MVR 277.56) invalidated the ADC.

The Civil Court in December 2011 invalidated the ADC charge, ruling that the clause in the concession agreement with GMR violated the Airport Service Charges Act of 1978, which was amended in 2009 to raise the charge to US$18 for foreign passengers and US$12 for Maldivians above two years of age.

The current government, after ascension to power, claimed in a “cabinet-committee report” that it was “not in the best interest of the country” to appeal the Civil Court decision to High Court, and thereby ignored the decision.

The former government had honoured the concession agreement following the civil court ruling, and,  under instruction from a letter sent by MACL, had been deducting ADC revenue from concession fees due the government.

Following the ousting of the Maldivian Democratic Party (MDP)-led government on February 7, the new government – which included the DQP – inherited the crippled concession revenues, under which it was effectively obliged to pay GMR to develop the airport.

The new government received a succession of bills from the airport developer throughout 2012. In the first quarter of 2012 the government received US$525,355 of an expected US$8.7 million, after the deduction of the ADC. That was followed by a US$1.5 million bill for the second quarter, after the ADC payable eclipsed the revenue due the government.

Combined with the third quarter payment due, the government owed the airport developer US$3.7 million (MVR 57.05 million).

On May 8, GMR offered to exempt Maldivian nationals from paying the contentious ADC in a bid to end a legal and contractual stalemate that had given rise to MACL going bankrupt and the deprivation of the majority of all airport revenue that the government was to generate through the agreement.

However, despite attempts to renegotiate the issue, the government decided to terminate the agreement at risk of compensation. The ADC case is still pending in the Singapore Arbitration Court.

Adheeb stressed that such major projects that is pivotal to the country’s economy should not be taken without thorough research and proper consultation and analysis. The current government, he said, would address these issues “with patience and with a proper plan.”

He also added that the current government of President Waheed would seek towards a “balanced economic and foreign policy” that would be in the best interest of the country.