Category:

GMR wins arbitration case, tribunal deems airport deal was “valid and binding”

Additional reporting by Zaheena Rasheed

Indian infrastructure giant GMR has won its arbitration case against the Government of Maldives (GoM) for the premature termination of its airport development agreement in 2012.

In a letter sent to the Bombay Stock Exchange, the company explained that the tribunal has said the 18 month tribunal found the agreement to have been “valid and binding”.

“GoM and MACL [Maldives Airports Company Ltd] are joint and severally liable in damages to GMIAL for loss caused by wrongful repudiation of the agreement as per the concession agreement,” read today’s letter.

“It has always been our firm belief that the cancellation of our  concession agreement amounted to wrongful repudiation by the Government of Maldives and the Tribunal has upheld this standard,” wrote GMR Company Secretary C.P. Sounderarajan.

The determining of liability – the first of two phases of arbitration – will now be followed by the determining of compensation owed, with the Indian company seeking US$1.4billion – a figure which exceeds the Maldives annual budget.

Current Attorney General Mohamed Anil has recently expressed his belief that the government was liable only for GMR’s initial outlay of US$78million, plus any costs for construction work completed after the 2010 deal was agreed.

The President’s Office has said that the attorney general will provide a briefing on the case later today.

With the compensation fee yet to be decided, the impact of the tribunal’s decision is still unclear, although the World Bank has previously noted that it would place severe pressure on the country’s already “critically low” foreign reserves.

Hamid Abdul Ghafoor, spokesman for the opposition Maldivian Democratic Party  – under whose tenure the deal was brokered has described the decision as a “major breakthrough”.

Void ab initio?

As well as ordering the Maldives to pay GMR’s Malé International Airport Limited (GMIAL), US$4 million within 42 days for cost of proceedings, GMR have revealed further details of the award.

According to GMR the private arbitration proceedings – disclosed in line with its regulatory requirements – deemed the deal “not void for any mistake of law or discharged by frustration”.

The decision to cancel the deal was made in November 2012 by the administration of President Dr Mohamed Waheed, with then Attorney General Azima Shukoor declaring the deal void ab initio – meaning that the contract was invalid from the outset.

Shukoor further cited English contract law of ‘frustration’, which acts as a device to set aside contracts where an unforeseen event either renders contractual obligations impossible, or radically changes the party’s principal purpose for entering into the contract.

GMR have today revealed the tribunal’s finding that the collection of Airport Development Charge and Insurance Surcharge – contentious points preceding the contracts termination – to have been lawful under Maldivian law.

The US$511 million agreement to develop Ibrahim Nasir International Airport (INIA) – signed during the tenure of former President Mohamed Nasheed – represented the largest foreign direct investment in the Maldives history.

Legal and political wrangling regarding the deal began before GMR had even assumed management of the airport, however, with the then opposition attacking the deal as part of an increasingly fervent anti-government movement which would eventually lead to the controversial resignation of Nasheed in February 2012.

Concession and compensation

The previous December a case filed in the Civil Court  by opposition parties ruled that the Airport Development Charge – key to the agreement’s financial viability – was deemed illegal.

Following the ruling, the Nasheed government reached an agreement with GMR to deduct the lost revenue – anticipated to have been US$25 million per year –  from concession payments owed to the government.

This decision resulted in further tensions after the fall of the Nasheed government, with GMR contract’s detractors – now in office –receiving a series of bills as the lost ADC revenue eclipsed any concession payments owed.

The ADC matter was subsequently referred to the Singapore arbitration court – as agreed in the initial concession agreement – while senior figures in the government pleaded with Indian PM Manmohan Singh to cancel the agreement, citing growing anti-Indian sentiment in the country.

In today’s letter, GMR revealed that the tribunal had ruled both the charge, and the subsequent adjustment was also “lawful and binding on MACL and GoM”.

The termination of the contract was accompanied by a cooling of relations with neighbour India as well as questions regarding foreign investor confidence in the Maldives – both issues that incumbent President Abdulla Yameen has sought to address since his election in November.

Future investment

Yameen – whose Progressive Party of Maldives has distanced itself from termination of the GMR deal, despite being the largest party in the coalition government at the time –  has pledged to create an environment conducive to further foreign investment.

As well as introducing plans for special economic zones within the country, Yameen’s government has embarked on a drive for foreign investors – suggesting that even GMR would be welcomed back to work on new projects.

“We are going to open up the Maldives in a huge way to foreign investors. Our thirst cannot be quenched. The opportunity to foreign investors is going to be enormous,” said the president in April.

Projects outlined at a landmark Singapore Investment Forum included the further development of Malé International Airport, though Yameen has said that overall management would remain in Maldivian hands due to its national commercial and security importance.

New plans for redevelopment of the airport will include foreign investors – an issue that continues to cause controversy – under the management of the state-owned MACL.

MDP Spokesman Hamid today suggested that the tribunal’s decision would deter further investment and foreign financing in the Maldives and – depending on the compensation amount – could result in the state’s bankruptcy.

Hamid reiterated his party’s recent calls for GMR’s reinstatement, stating the the MDP would be considering further legal action following the tribunal’s decision.

Likes(1)Dislikes(0)

Dredging International NV awarded US$50 million Hulhumalé reclamation project

A US$50 million contract for dredging and reclamation work in Hulhumalé has been awarded to Belgian company Dredging International NV, the Housing Development Corporation (HDC) has announced.

HDC revealed in a press release today that the letter of award to carry out the project was issued to the company yesterday (June 18) following discussions with the government.

“The project work will commence within a period of two months and the reclamation works is estimated to be completed within a period of seven months,” read the press release.

“It is estimated that the Hulhumalé Phase II reclamation and coastal protection work will be completed by the end of December 2015.”

Phase two of the Hulhumalé development project involves reclamation of 240 hectares of land “with a target population of 100,000 people,” HDC explained.

According to the corporation, development plans for the fully reclaimed artificial island includes residential developments, a business district and “commercial spine,” a light industrial park, a yacht maria and cruise terminal, a knowledge and technology park, a heritage island a tourism district.

“Both Hulhumalé Phase I & Phase II developments are planned in line with the government’s overall vision to bring sustainable youth related developments,” the press release noted.

HDC Managing Director Suhail Ahmed told local media this week that the government was seeking a loan from the Bank of Ceylon (BOC) to finance the second phase of the Hulhumalé development project.

Suhail said HDC was “going through the terms of the loan deal” and “assessing all conditions,” adding that the project would likely be state-financed.

“Youth village”

Phase two of the Hulhumalé development project was among five mega-projects pitched to international companies at an investor forum held last April in Singapore.

While the dredging project was “conditionally awarded” to Dredging International NV in July 2013, the company withdrew due to financial constraints.

According to the company’s website, Dredging International NV was established in 1974 and specialises in “the construction and development of harbours, artificial islands, estuarial dams, canals and inland waterways, dyke construction and reinforcement, beach replenishment and coastal protection, supply of dredged aggregates and salvage activities.”

Developing a ‘youth village’ in Hulhumalé with a population of 50,000 was a key campaign pledge of President Abdulla Yameen.

Speaking at an inauguration ceremony for a land reclamation project in Thulusdhoo last month, President Yameen said the government’s objective was to relocate people from small islands in the atolls to Hulhumalé.

Economic opportunities in small islands were limited due to their size and isolation, he added.

The government hoped youth from smaller islands would migrate to Hulhumalé as well as other islands selected for land reclamation, Yameen said.

In April, Yameen said the HDC’s development plans were being revised to achieve the new administration’s goals.

The vision for the youth city includes a “technopolis park” as well as entertainment and sports facilities, he said, in addition to facilities for the tourism and fisheries industries.

“The youth village will not involve only housing [projects]. It will also include other projects related to the youth village such as the creation of light industries to provide job opportunities, as well as arrangements for food and beverages required by modern youth and restaurant facilities for [fast food],” he said.

Yameen also revealed last month that the government planned to tender the the Malé–Hulhulé bridge project in early June.

“God willing, before the end of the first two weeks of June, we will tender the bridge project. With that, additional studies needed for the project – that is the direction and extent of ocean currents – will be undertaken by the party awarded the tender,” he explained.

In February, Economic Minister Mohamed Saeed pledged that the Malé–Hulhulé bridge project – which he described as “iconic for the whole region” – would be completed in two years.

Likes(0)Dislikes(0)

Foreign minister calls for Muslim self-assesment over negative image of Islam

Minister of Foreign Affairs Dunya Maumoon has called for a thorough self-assessment to identify the reason Islam is being associated with intolerance, terrorism, violence, and backwardness.

Speaking at the 41st session of the Council of Foreign Ministers of the Organisation of Islamic Cooperation (OIC), Dunya suggested that although Muslims could blame the West and Western media, Muslim societies must make a self-assessment as to why Islam is being tarnished by images linked to terrorism.

“Muslims were once the pioneers of science and technology. Today, we have to accept the reality that Muslim societies are on the brink of falling into an abyss for creativity,” said the foreign minister in Jeddah.

“It is beyond imagination, or within the realm of belief, to think that we can overcome these dark times? Let us recommit ourselves to work together to overcome our challenges. United and strong we can once again become the standard bearers of tolerance and innovation,” she said.

Condemning Islamophobia, Dunya also argued that the chaos seen in the Muslim world today is a result of not exercising true Islamic ideals.

“Islamic principles and values of justice and equality of all humans, and the right of citizens in having a say and a stake in their governments is well in line with modern democratic values,” she said.

Urging the OIC to unite in support for democratic change around the world and in Islamic societies, Dunya said Maldives was an emerging democracy that is striving to advance its democratic institutions and to cherish the values of Islam.

Stating that Islam emphasises the equal rights and responsibilities of men and women, she called on the OIC to work to protect, safeguard, and guarantee the rights of Muslim women around the world.

Concern over the ‘tarnished image of Islam’ was also highlighted in OIC Secretary General Iyad Ameen Madani’s statement.

He called on ‘European leaders’ to reflect internally “before accusing Islam of racism, Nazism and committing massacres against others” and called for the rights of Muslim minorities around the world.

“The Organization of Islamic Cooperation condemns terrorism wherever it is and confirms, as in all international agreements and resolutions in this regard, that terrorism has no religion, nationality, doctrine, color, or race,” said Madani

“It is rather a phenomenon that should be combatted and addressed wherever it is and whatever its source may be. Accordingly, the Organisation of Islamic Cooperation rejects and condemns any attempt to render terrorism equivalent to Islam, a religion espoused by more than two billion people throughout the world.”

Madani noted that terrorism, religious, and sectarian extremism, and the rights of Muslim minorities outside the Muslim World were primary concerns of the OIC.

Concepts of human rights, the rights of women and children, and religious practice were also listed a key interests of the group.

A statement from the UN Secretary General Ban Ki-moon was also delivered yesterday at the conference, in which he commented on issues faced by Muslim communities around the world, particularly in Myanmar, Mali, Central African Republic, Syria, Palestine and Iraq.

Stating that a humanitarian crisis is quickly unfolding in Iraq, Ban Ki-moon called for a national security plan against terrorist threats, saying that OIC members can play a key role in creating a positive and enabling environment for a national dialogue in Iraq.

Likes(0)Dislikes(0)

Women’s rights NGO criticises altered Ramadan work hours

Women’s rights NGO Hope for Women has criticised the altered working hours this Ramadan, stating the decision was made without consideration as to how it would impact women working in public service.

“In the Maldivian society, domestic responsibilities typically fall on women, with added work during the month of Ramadan for the preparation of the meals for the family in time for breaking fast,” said the NGO.

“Therefore, we believe that the decision regarding the Ramadan working hours have been made without giving consideration to how it would impact women working in public service.”

The President’s Office today announced the working hours at government offices for Ramadan and the seven days of Eid al Fitr, which will be from 10am til 2:30pm.

While it is usual for the government to reduce work hours every Ramadan, this year’s timings are one hour later than previous years.

Hope for Women, highlighting recent reports that the number of women working in the civil service is twelve percent more than men, and said that finishing work late would impact women negatively as the domestic responsibility of preparing food for breaking the fast at sunset falls on women in the Maldivian society.

A recent election observation report from an observer mission noted that women continued to face multiple barriers to participation in public life, leading to acute under-representation in the public and political spheres.

The average time for sunset and breaking the fast this Ramadan is at 6:20pm.

Hope for women also suggested the government’s decision was influenced by the late hour football matches of the ongoing World Cup tournament which it claims is causing many government employs to attend work late.

The massive popularity of the tournament has already prompted the government to relax previous opening times for local cafes in order for people to watch the matches, which currently conclude at around 5am.

Speaking to Haveeru, spokesperson to the President Ibrahim Muaz assured the decision has no connection to the World Cup, saying that it had been made to allow people to spend more late hours in worship.

Even if might upset some workers, the government’s decision was made after considering everyone’s convenience.

The Ministry of Education has, meanwhile, reduced school times to three hours during Ramadan.

Single session Schools will hold classes in the morning from 9am until 12pm, while schools with two sessions will hold classes from 8:30am til 11:30am and from 11:45am until 3pm – with an extra 15 minutes for noon prayers.

The ministry has also informed all schools to make arrangements for students to pray at schools and not to conduct any school activity at night in a way which could interfere with religious activities such as obligatory prayers, optional prayers, and religious preaching

Likes(0)Dislikes(0)

INIA passes inspection to remain part of EU supply chain

Ibrahim Nasir International Airport (INIA) has been awarded ‘Regulated Agent from a third country’ status (RA3) by the EU, meaning that it can continue to act as part of the supply chain for imports into the European Union.

RA3 three status means that INIA will be able to continue to receive air cargo en route to the EU after July 1st, when new regulations will require all EU cargo to be transported through an EU validated supply chain.

The new EU procedures follow the October 2010 attempt to sabotage two planes travelling to the EU from Yemen.

“This is a huge milestone achieved as Maldives exports tons of Cargo EU countries every month,” read an MACL press release.

A small ceremony was held at the cargo department today after a three day validation process. The official report was handed over to MACL Managing Director Ibrahim Saleem by the EU aviation validator Sander De Man.

“MACL has brought major infrastructure changes to the cargo facility and had done mandatory trainings to adhere to the EU required standard,” added today’s press release.

Likes(0)Dislikes(0)

‘Fete de la Musique’ in Malé this Saturday

The Alliance Francais will hold its annual music festival – the ‘Fete de la Musique’ – in Malé this Saturday (June 21).

The free event, first held in 1982 both amateur and professional musicians to perform, is celebrate in over 100 countries around the world on the same day.

French indie pop duo Bel Plaine will be appearing alongside local artists Project Sasquatch, Scarlet Rite, and Mixmaster Iguana in Malé City Hall on Majeedhee Magu between 9pm and midnight.

Likes(0)Dislikes(0)

Yameen receives credentials of Thai and South Korean ambassadors

President Yameen has today received the credentials of both the Thai and South Korean ambassadors.

New Thai Ambassador ‎H.E. Nopporn Adchariyavanich discussed the furtherance of fisheries, agriculture, and trade ties between the two nations.

During his meeting with President Yameen, new South Korean Ambassador H. ‎E. Chang Won-sam was told of the importance of South Korean investment in the Maldives.

The South Korean ambassador discussed enhancing, tourism, trade, and training ties with the Maldives, sending the good wishes of President Park Geun-hye.

Likes(0)Dislikes(0)

Civil Court reinstates Villimalé Safe Beach Project

The Civil Court has ordered Malé City Council to reinstate a beach-cleaning contract made with Save the Beach.

The council terminated the contract on September 23, 2013 on the Anti Corruption Commission’s (ACC) recommendations. The ACC claims undue advantages were conferred in awarding the contract to Save the Beach.

The commission has also asked the Prosecutor General to press corruption charges against two former Malé City Councilors and three council staff who were involved in vetting applications for the project.

However, the Civil Court today ruled the ACC does not have the power to order a contract be terminated as per a previous Supreme Court ruling.

Under the Vilimalé Safe Beach Project, Save the Beach won a contract to keep the Vilimalé beach area, jetty, and lagoon clean in exchange for two beachfront plots of land to establish businesses to sustain the project.

Likes(0)Dislikes(0)

Human Development Report highlights Maldives’ regional divide

The UNDP’s second Human Development Index (HDI) report for the Maldives urges stakeholders to address regional inequalities which remain a “major challenge” towards human development.

The first sub-regional HDI report of its kind, titled ‘Bridging the Divide: Addressing vulnerabilities, Reducing inequalities’ was officially launched today, analysing the disparities between the Malé region and the outer atolls.

“Where one is born within the Maldives determines many of the opportunities and choices available to a person,” reads the report.

“Remote islands with small populations have limited accessibility to services including schooling, healthcare, social services, job opportunities and face overall isolation.”

Since its first HDI report in 2001, the Maldives has graduated to middle income country status. Today’s report, however, noted that while the nation’s HDI score is 0.688 – placing it in UNDP’s medium development bracket – the regional analysis reveals stark inequalities.

While the atolls’ development was revealed to be 0.627 in 2012 – placing it in the mid-level HDI group, alongside countries such as South Africa and Indonesia – Malé’s HDI was 0.734, putting it in the high development bracket next to Azerbaijan and Mauritius.

Used as a measure to gauge people’s choices in life – accounting for access to education, nutrition, healthcare, security, political and cultural freedoms – Norway currently tops the Human Development Index (0.955), while Niger ranks last (0.304).

The global average HDI average is 0.694.

The Divide

‘Bridging the Divide’ notes that income and educational choices are the most notable of the inequalities faced by those born outside of the capital.

“A person living in Malé is likely to complete three years more of schooling than a person living in the atolls,” explained the report.

It was also noted that the average income for a person living in Malé – equivalent to US$4251.90 – is one and a half times that of a person living in the atolls.

The report noted that rapid internal migration to the capital Malé has itself become a cause of inequalities

“In-migration to  Malé has led to a sharp increase in living costs, poor housing conditions, overcrowding, pollution and a general sense of frustration and impatience in the public.”

After categorising the Maldives into seven regions, the report showed regions 2 and 6 – containing Noonu, Raa, Baa, and Lhaviyani atolls in the north, and Gaafu atoll in the south – to be under performing.

The best performing region contained the central Meemu, Faafu, and Dhaalu atolls – reflecting the concentration of the tourism industry in the Malé area.

The HDI report recommends enhancing the benefits of of tourism – which has taken the Maldives from one of the world’s poorest nations in the 1970s to having South Asia’a highest GDP per capita today – to the wider population.

It was noted that the rich-poor divide was being exacerbated as the tourism industry “operates as a powerful oligarchy and has given rise to an elite class that owns much of the country’s wealth”.

While acknowledging the recent growth of the guest house industry, the report argues that the bulk of the luxury resort industry provides little opportunity for local small and medium enterprises.

Vulnerabilities

Core physical vulnerabilities identified in the report included the Maldives’ small land mass, lack of natural resources, while economic weaknesses focused on the heavy reliance on tourism and a high external dependence on imports.

Such vulnerabilities reduce the ability of institutions to address inequalities, with the report suggesting that solution lies in “building resilience through improved spatial planning, increasing targeting and effectiveness of social protection measures, restoring fiscal and macro-economic stability and diversifying the growth base.”

It was acknowledged that considerable improvements in poverty levels, life expectancy, and access to education had been assisted by “fiscal prudence” between the mid 90s to the mid 2000s which must return in order to continue the country’s HDI progress.

The effective targetting of vulnerable groups – those facing more than one impediment – is needed in order to design policies and programmes to address their development needs. The removal of blanket subsidies was one example of such a policy change.

The development of a hub and periphery model in the atolls – improving local services and relieving the pressure on the capital – was mooted alongside the completion of governmental decentralisation.

Finally, it was suggested that long-term thinking among political leaders – beyond a five-year election cycle – is key if human development is to be enhanced in the island nation.

“Political parties and political leaders need to start thinking beyond the ballot,” read the report. “With democratic transition, the country’s long-term development planning process has been side-lined.”

While noting that human developed requires a strong democracy, the report concluded by suggesting a reappraisal of the state’s “extraordinarily high costs”.

“For a small country like the Maldives, with mounting pressures, fiscal crisis and high debt distress, it is time that political parties, institutions, civil society and the public engage in debate; and agree to right-size the governance system, to make it more sustainable and to maximize the democratic dividend and enhance the freedoms and choices for the people.”

Likes(0)Dislikes(0)