President Abdulla Yameen has warned foreign companies of the importance of political risk assessment before investing in countries such as the Maldives.
“At a time when you had a very heightened political environment in Maldives, at a time when the parliament was polarised, it was a pity that political risk assessment was not undertaken by GMR,” said the president.
Yameen’s comments came during the scholarship awards ceremony of Trans Maldivian Airways’ (TMA) youth pilot training programme – a company he cited as an example of successful foreign investment after its takeover by the Blackstone Group last year.
“Whenever we hear about GMR, the issue that comes right to the limelight is their inability to assess political risk at the time.”
GMR’s landmark airport development deal – signed during the prematurely ended term of President Mohamed Nasheed – was itself abruptly ended by the succeeding administration in December 2012.
The concession agreement to develop Ibrahim Nasir International Airport was signed in June 2010, the same month in which Nasheed’s entire cabinet resigned in protest against what it considered to be the obstructionist policies of then-opposition parties.
Legal action initiated by the deal’s opponents eventually invalidated the deal’s funding arrangements, leading the government of Dr Mohamed Waheed to justify the annulment using the legal principle of ‘frustration’ – in which unforeseen events render contractual obligations impossible.
In June this year, a Singapore court of arbitration ruled the deal had been “valid and binding”, finding the Government of Maldives liable for damages still to be determined by the court.
The Maldivian Democratic Party had subsequently called for the reinstatement of the GMR deal, threatening to dissolve any future deals to redevelop the country’s major international airport.
Foreign diversification
During yesterday’s ceremony, President Yameen continued to appeal to foreign investors, expressing the country’s desire to diversify from the dominant tourism industry.
“We are not just about the sun, the sand, the sea – Maldives is more subtle. That is the message we are trying to give to the world now,” he told those in attendance at Traders Hotel.
The government’s drive for new investment has focused upon five ‘mega-projects’ as well as an improved climate for new investors, facilitated by controversial plans to establish special economic zones via legislation recently introduced to the People’s Majlis.
Tracing the journey of foreign investment in the Maldives alongside his own public career, Yameen noted that foreign investments were seen as “punitive” in the mid 1980s, with local laws designed to prevent them.
“My task was to encourage political leaders and the president that foreign investment was not such a bad thing. It is only through foreign investment that small countries such as Maldives could forge ahead.”
Yameen – who spent two decades with the Ministry of Trade and Industries – went on to describe frequently “lonely” and “solitary” overseas discussions on potential investment in the Maldives.
Indeed, the president described the difficulty he had in persuading Blackstone’s risk management personnel to invest in the country. The deal saw the US private equity firm gain a monopoly in the vital seaplane sector as rival firm Maldivian Air Taxi was bought simultaneously.
Congratulating those awarded the TMA training scholarships yesterday, Yameen pointed to the country’s “motivated”, “highly intelligent” and “easily trainable” youth as a key resource, urging the seaplane operator to increase the number of Maldivian staff members.
He also expressed his gratitude to the company for providing assistance in his “endeavour which is to bring prosperity throught the avenue of finding ways for the youth”.
The government recently revealed that a number of companies had expressed interest in the government’s Hulhumalé youth city project – which will reportedly include youth-specific housing, international class sports facilities, a theme park, and a yacht marina, catering to a population of 50,000.
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You guys and your ithihaad started the political polarizing. You're to blame.
Now pay up, "ECONOMIST".
Yup GMR made a mistake to invest in The Maldives. Any foreign investment in The Maldives is a mistake. And the regime is the reason why.
Maldivian of all ranks are simply morons, do you really find single guy there who can use his brain to make any sense. Is it for GMR to risk evaluate, who is the looser here. GMR has lost nothing instead you are losing big time, you have lost investor confidence, you have lost arbitrary, you are paying money for arbitrary and you will be paying for the loss to GMR, a loss something in reality they never lost.GMR has lost nothing instead they have gained. And this cheap Yameen; may be a smart guy for Maldivian standard trying to picture GMR as a losing partner in his moronic government deal. Mr Yameen ,the truth is they never made any deal with you that should have been a mistake on their side that could result a loss for them. In business you have to think about the loss and profit not losing the agreement.
Maldives will gain by terminating the GMR contract instead of incurring any losses.
Yes GMR had not lost anything and they have gained. Corrupt companies like GMR will always go for dodgy deal like airport deals.
Nasheed and his associates had taken a huge bribe under the deal and cut given was recorded in GMR P and L under the heading " Processing Fees"in thier finical statement .
Then again additional millions of dollars were wasted to do campaigning for Nasheed election which had got wasted.
All these money were spent and GMR consider that as investment . Should Nasheed would have been able to win the election in 2013, today GMR will be there to operate the airport and Maldivian would have been paying money to operate the airport to GMR instead of earning any money to Maldives.
'GMR failed to conduct political risk assessment prior to investing?'......what a dumb statement from the President no less!! Does this mean he acknowledges the political instability of the Maldives and that all potential investors need to beware? If this statement doesn't scare away new investors I don't know what will.
When is GMR going to be paid? As you are flat broke and bankrupt, who are you going to borrow the money from? China? Saudi Arabia? Singapore? North Korea? Zimbabwe? Democratic Republic of Congo? Papua New Guinea? Mongolia?
Pure comedy! Every last word of delusion. Where is this highly motivated and easily trainable workforce? It's easier to find unicorns and leprechauns than it is to find a reliable maldivian employee. And yes, it was gmr's fault to invest in third world country that doesnt honor binding contracts.
Can't wait to see who's dumb enough to invest in the STO hotel in Hulhumale! Another foreign investment train wreck just waiting to happen.
@Hero
Yes, Maldives will gain - on its debt. You and your blind hatred for a man who had the guts to stop your exploitation of children.
The only reason you say there's been corruption is because you didn't get your bribe.
Its true that GMR did fail to assess the political situation in the Maldives. Their Board has to be responsible. GMR failed
What a great,inspiring message to potential investors from the President himself. Investors will certain think twice before investing. GMR won't lose and they stand to gain and their case will send out a strong message to the world.