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GMR shares dip on back of Civil Court ruling against airport development charge

GMR shares on the Mumbai stock exchange fell 7.57 percent on Thursday on the back of a Civil Court ruling in the Maldives against its proposed US$25 Airport Development Charge (ADC), India’s Economic Times reported.

The paper earlier reported that the share slip had taken the company to a 52-week low, and that that the decision could leave the airport development project facing an annual funding shortage of US$25 million.

GMR said yesterday that it had yet to receive a copy of the Civil Court’s judgement and was only aware of the ruling through media reports.

“We are yet to receive the copy of the judgment and as such we are not in a position to evaluate the implications of the ruling,” the company said in a statement.

“GMR has been permitted to collect ADC and Insurance charge under the Concession Agreement signed between GMR-MAHB, Maldives Airport Company Limited (MACL) and The Republic of Maldives (acting by and through its Ministry of Finance and Treasury), and as such has set up processes for ADC collection from 1st January 2012 supported by an information campaign to ensure adequate awareness,” the company said.

“The bid for the Concession to manage, develop and operate Ibrahim Nasir International Airport for 25 years was conducted by the [World Bank’s] International Finance Corporation (IFC) and the component of ADC was part of the bid. GMR is confident that Government of Maldives will take such measures as would be necessary to honour its contractual obligation in this regard, given that the success of the development of the airport project is of national economic importance.”

The company noted that the payment of a development fee was “a common concept in many airports globally”, particularly as a part of concession agreements where airports are privatised.

“The reason for the inclusion of ADC in many global concession agreements is to address the funding needs to meet the investment model required to upgrade and develop new airport facilities at significant costs,” GMR stated.

The Civil Court ruled 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.

Judge Ali Rasheed Hussein ruled that the Airport Development Charge and insurance charge were service charges “under other names.”

He noted that the Airport Service Charges Act had been amended seven times to raise the charges since 1978 by the legislature, “based on the economic circumstances of the Maldives and the means of the public,” which showed that the purpose of the law was to ensure that enforcement agencies did not have the authority to raise the charges.

The suit was filed by the opposition-aligned Dhivehi Quamee Party (DQP), led by former Attorney General, Dr Hassan Saeed.

President Mohamed Nasheed’s Press Secretary Mohamed Zuhair said he believed the government was obliged to appeal the lower court ruling to in order to comply with the terms of the concession agreement.

GMR’s 25 year concession agreement to construct and manage a new US$400 million terminal (to be competed in 2014) is the single largest foreign investment in the history of the Maldives.

The strength of the IFC-monitored bid by the GMR-Malaysian Airports Holdings Berhad (MAHB), split 77:23 percent respectively, came from its US$78 million upfront payment (compared with US$27 million from the second-highest bidder) and in particular, its 27 percent sharing of fuel revenue (from 2014).

At the time, the government anticipated that 60 percent of government revenue from the airport deal would derive from fuel – US$74.25 million annually between 2015-2020, increasing to US$128.7 a year from 2025-2035. This in turn was the most significant element of the final ‘net-present-value’ calculations to determine the winning bid.

A briefing document obtained by Minivan News following GMR’s successful bid in June 2010 contained forecasts of the government’s expected earnings from the airport over the lifespan of the contract. It revealed that a majority of the predicted revenue, a major factor in calculating the NPV (net present value) used to determine the successful bid, derived from the 27 percent fuel revenue share once the airport is completed in 2014:

  • 2015-2020: 12.8m gross + 74.25m fuel = US$87.05m per year
  • 2020-2025- 17.02m gross + 90.99m fuel = US$108.01m per year
  • 2025-2035 – 20.43 gross + 108.27m fuel = US$128.7 m per year

The document contrasted this with the dividends paid to the government by MACL over the last three years, noting that the majority of the dividends paid in 2008-2009 were achieved “by taking a loan.” Dividends in 2007 were 2.3 million, 13.3 million in 2008, and 5.05 million in 2009.

On the suggestion that MACL should be allowed to raise finance and invest in the upgrade itself, a predicted US$300-400 million, the document noted that MACL “already has debts of Rf 600 million (US$46.69 million)” and would be unable to obtain further leverage “without a sovereign guarantee – simply not allowed due to the IMF measures.”

At the same time, GMR’s bid offered a significantly lower 10 percent share of gross airport revenue, as compared to the other two bids.

The only historic figures available to the government in estimating this revenue (a staid US$20.43 million by 2025-2035) were derived from the existing commercial revenue from the airport – usage fees, ground handling charges, duty free shop rents, and so forth.

Compared to the glittering Gucci-lined corridors of airports in tourist hubs such as Dubai, the airport’s 4-5 departure lounge shops and dilapidated eateries – some serving pot noodle – were a missed opportunity, given the bulging wallet of the average visitor to the Maldives.

Speaking at the opening of GMR’s cavernous Delhi Terminal 3, GMR Manager P Sripathi told Minivan News that the consortium was very interested in the well-heeled concourse traffic in the Maldives – sufficiently interested to invest a sum equal to almost half the country’s stated GDP at the time.

“It’s a lovely project. The type of tourists coming are from the very high-end tourism market, therefore the business opportunities are plenty,” Sripathi said at the time.

Minivan News reported in June 2010 that some of the investment was to be recovered through a US$25 airport development charge, set by the government for all bidders to be levied only on international travellers at time of departure and added to ticket prices.

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ACC fowards Nexbis case to Prosecutor General

The Anti-Corruption Commission (ACC) has forwarded corruption cases against Former Controller Ilyas Hussain Ibrahim and Director General of Finance Ministry, Saamee Ageel to the Prosecutor General’s Office (PG) .

The ACC alleged the pair had abused their authority for undue financial gain in giving the US$39 million Border Control System project to Malaysia’s Nexbis Limited.

The border control agreement was signed on November 17, 2010. However the upgrade stalled earlier this year when the Anti-Corruption Commission (ACC) expressed concerns about the deal, claiming that there were “opportunities for corruption” during the bidding process.

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Lawyers question reappointment of judges convicted of sexual misconduct

A group of lawyers have questioned the Judicial Service Commission (JSC)’s decision to reappoint two judges, previously removed from the bench for sexual misconduct, as magistrate court judges.

The lawyers, including Former Attorney General Husnu Suood, said on Thursday that  Gaafu Dhaalu Thinadhoo, Meeraaz Ahmed Shareef and Dhaalu Meedhoo Biloori Villa, Ali Shafeeg who were appointed as magistrate court judges had previously been convicted for sexual misconduct.

Speaking to Minivan News, Suood said the two judges were removed from bench in 2010 because they did not possess the “high moral character” required to be a judge according to the article 149 (a) of the amended constitution.

According to the records, Shareef – appointed to Gaafu Alifu Dhevadhoo Court – was sentenced to two months under house arrest on July 30 2001, for having an affair. He was former Chief Magistrate of Thinadhoo in Gaafu Dhaalu Atoll.

Ali Shafeeg, appointed to Kaafu Gaafaru Magistrate Court, was sentenced to four months banishment and subjected to seven lashes in 1989, for having an affair with a married woman.

Suood noted that, article 149 (a) of the amended constitution states “a person appointed as a Judge in accordance with law, must possess the educational qualifications, experience and recognized competence necessary to discharge the duties and responsibilities of a  Judge, and must be of high moral character”.

Referring to the previous convictions of the Judges, Suood said that the “two judges were not up to the moral standards required and that’s why they were disqualified in 2010”.

“We are preparing the documents to submit to JSC requesting them to investigate the case. It’s up to the JSC to hold the integrity of the judiciary,” he said.

JSC spokesperson Hassan Zaheen noted that Shareef and Shafeeg were also removed in 2010, under the article 285, which allowed  JSC to dismiss judge failing to meet the requirements in article 149.

However, he added, that Shareef and Shafeeg were reappointed “because the Judges Act now allows it.”

According to the article 15 of the Judges Act – which came into effect five days after the reappointment of judges with life time tenure – a judge will be considered as failing to meet the required ethical and moral standards if they had served a sentence for a criminal offence in the seven years prior to the appointment.

“Shareef and Shafeeg were sentenced before the seven year period,” Zaheen added.

In 2010 when Shareef was dismissed from the bench, he also protested against the JSC in court, claiming his conviction was 11 years old when he was removed from the bench on August 5, 2010, and his sentence had been suspended. The Judges Act was being debated in the parliament at the time of Shareef’s removal.

Therefore, JSC pointed out at the time, the Judges Act post-dated its decision to remove Shareef from the bench, and argued that it could not be expected to rely on legislation that did not exist.

The JSC reiterated that he was removed from bench under the article 285, that allowed JSC to dismiss the judges failing to meet the moral and ethical requirements of article 149.

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MP witnesses summoned to PG Office for questioning in vote-buying corruption case

The Prosecutor General’s Office has reportedly summoned MPs involved in bribery allegations concerning Jumhoree Party (JP) MP Gasim Ibrahim to present for questioning.

Police detained Gasim and People’s Alliance (PA) MP Abdulla Yameen in early July 2010 on accusations of bribery and, according to the police charge sheet, “attempting to topple the government illegally.”

President Nasheed’s cabinet had resigned en masse the week prior, in protest against what they claimed were the “scorched earth politics” of the opposition-majority parliament, leaving only President Mohamed Nasheed and Vice President Mohamed Waheed Hassan in charge of the country. The move circumvented regulations blocking the arrest of MPs while no-confidence motions were pending against sitting ministers.

Several days later, audio recordings of conversations between several MPs, including Yameen and Gasim, were leaked to the media. The recordings carried implications of vote-buying within parliament, suggestions of collaboration with the officials in the Anti-Corruption Commission (ACC), and details of a plan to derail the progress of a taxation bill.

Later in July 2010, the President’s Press Secretary Mohamed Zuhair told Minivan News that the government had felt obliged to take action after six MDP MPs came forward with statements alleging Yameen and Gasim had attempted to bribe them to vote against the government.

At the time the opposition PA-DRP coalition had a small voting majority, with the addition of supportive independent MPs. However, certain votes require a two-thirds majority of the 77 member chamber – such as a no-confidence motion to impeach the president.

“These MPs are two individuals of high net worth – tycoons with vested interests,” Zuhair said at the time. “In pursuing their business interests they became enormously rich during the previous regime, and now they are trying to use their ill-gotten gains to bribe members in the Majlis [parliament] and judiciary to keep themselves in power and above the fray. They were up to all sorts of dark and evil schemes. There were plans afoot to topple the government illegally before the interim period was over.”

Local media reported this week that police had reopened the case against Yameen and Gasim, following a response by Police Inspector Mohamed Riyaz to a question from parliament’s Privileges Committee on the status of the investigation.

Riyaz clarified that while both MPs had been arrested over the matter, “we could find no evidence against Yameen. The bribery case only concerns Gasim.”

While bribery was the stipulated offence Riyaz observed that this was “not necessarily only money.”

Police sent the case to the Prosecutor General’s Office on August 2 last year.

Inspector Riyaz told Minivan News that the Prosecutor General had tried to summon the MPs who gave evidence in the case for questioning over the matter.

While it was “not common for witnesses to be taken to the PG’s office”, Riyaz said he hoped the MPs would cooperate with the PG’s office and clarify their statements. In the statements taken by police, the MPs were “quite clear” about what they had been offered, he added.

Zuhair today said that police had submitted “irrefutable evidence” that six members of parliament had been offered bribes, and that the Prosecutor General “should take the matter forward.”

“This is a very serious issue that last year led to the abrupt resignation of cabinet, and transpired to nearly stop the functioning of government,” Zuhair said.

The Prosecutor General was not responding to Minivan News at time of press.

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UN, UNDP catch up on country, economy with President

Assistant Secretary General at the United Nations and the Assistant Administrator at UNDP Ajay Chibber today paid a courtesy call to President Mohamed Nasheed to discuss the current state of affairs in the Maldives.

At the meeting held at the President’s Office, President Nasheed noted that maintaining relations between the organisations and the Maldives was an important factor in continued national development.

The President also updated Chibber on the current political environment in the Maldives. The country’s Islamic Ministry reacted strongly to UN Human Rights Chief Navi Pillay, who called for a moratorium against flogging last month. A Protest to Defend Islam is scheduled for December 23.

The President later called the controversy, which included protests and letters of complaint to Parliament and the UN, a missed opportunity to demonstrate “the nobility of Islamic Shariah.”

The UN Assistant Secretary General said the development of national institutions was critical towards the Maldives’ ongoing transition into the middle income country category.

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Ali Sulaiman made State Dignitary

Ali Sulaiman of Maafannu Lucky Star was yesterday conferred the title of ‘State Dignitary’ by President Mohamed Nasheed, “in recognition of his invaluable service to the state”, the President’s Office reports.

In a ceremony at the Upper North Regional Office in Haa Dhaal atoll Kulhudhuffushi, Sulaiman was credited for his “immense services” to the country and nation, and particularly noted for his role in bringing a multi-party political system to the Maldives.

In his 33-year long service to the state, Sulaiman served as Haa Dhaal atoll MP, Manager of Haa Dhaal atoll shop, Island Chief of Haa Dhaal atoll Vaikaradhoo and Haa Dhaal Atoll Chief. During this time he has helped develop education and other social services locally.

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Civil Court rules airport development charge invalid as GMR opens airline office complex

GMR today opened a new Airline Office Complex beneath the International Terminal in a step towards consolidating check-in and security procedures for passengers.

The Civil Court has meanwhile ruled against GMR in a case filed by the Dhivehi Qaumee Party (DQP), challenging its right to collect a US$25 (Rf385.5) Airport Development Charge (ADC) and US$2 (Rf30.8) Insurance Charge commencing January 2012. The DQP had claimed that a pre-existing Airport Service Charge (ASC) of US$18 (Rf277.56) invalidates the ADC. The legal dispute with DQP could cost GMR Infrastructure US$25 million annually, India’s The Economic Times estimated.

The Civil Court today ruled 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.

Judge Ali Rasheed Hussein ruled that the Airport Development Charge and insurance charge were service charges “under other names.”

He noted that the Airport Service Charges Act had been amended seven times to raise the charges since 1978 by the legislature, “based on the economic circumstances of the Maldives and the means of the public,” which showed that the purpose of the law was to ensure that enforcement agencies did not have the authority to raise the charges.

President Mohamed Nasheed’s Press Secretary Mohamed Zuhair said the government would likely appeal the lower court’s ruling given its contractual obligation to GMR.

“The government will do everything it can to adhere to the concession agreement,” he said.

GMR has not yet issued a formal response following the Civil Court ruling. However speaking today prior to the ruling, INIA CEO Andrew Harrison told Minivan News that GMR was “delighted to be subject to scrutiny, and will stand up to it.” He said the company was confident in its concession agreement with the government.

Harrison called the allegations and public criticism of GMR “unfair.”

“A lot has been done here,” he said, pointing to the number of renovations completed in the past six months. “I think you can see that locals and tourists are now getting the upgraded facilities befitting an airport like INIA.”

Harrison added that the next six months will see five new food and beverage facilities in international, domestic and land-side areas; a plaza for tourist arrivals; six new air service buses; and the beginning of a new terminal. “Many of these improvements go well beyond the concessionary agreement we have with the government,” said Harrison.

“It’s important to align the airport with passenger expectations, whether their destination is a resort or the warm welcome of a Maldivian home.”

At an event earlier today the company unveiled 30 new airline offices on the first floor next to Immigration.

“The old offices were small and since they were on the first floor rather than the ground floor, they were harder to access for passengers,” noted Harrison.

Airline personnel now have direct access to check-in counters from “some of the best offices in Male'”, situated along a bright white corridor.

The complex hosts four carriers with approximately five airlines per carrier; a few spaces have been left available for additional airline partners, such as Air France and AlItalia, which are expected to begin service to the Maldives in the next few months.

Harrison pointed out that the real reason for building a new complex was to centralise security check-points. Currently, security check points are located at gates one through three, and four through six. Passengers often face a queue, and are consequently more stressed about making their flights, Harrison explained.

“Now, that space is freed for all security check-point equipment to be located right next to Immigration, making passenger traffic smoother and allowing for more time in the airport terminal rather than in queues,” he said.

Harrison added that situating Immigration and Security offices in close proximity was a standard feature of international airports.

GMR is currently overseeing the renovation of INIA, as per a contract with the Maldivian government. In the past six months it has upgraded two lounges and expanded baggage beltways; it is currently adding eight check-in counters and two security lanes. Tourism Minister Maryam Zulfa previously expressed satisfaction with GMR as “an example for the Maldives as it moves forward.”

A groundbreaking ceremony for the new terminal will be held later this month – the structure is due for completion in 2014.

Maldives Airports Company Limited (MACL) today announced that the lease agreement between GMR and the government allows for a 10-year extension from the initial 25 year time frame, pending the agreement of both parties.

GMR began circulating the Airport Source Quality program survey in October to evaluate INIA’s ranking among 34 airports in the two to five million passenger category. The airport initially ranked 33rd, but Harrison said improvements are visible.

“In December alone it has already moved up three airports. By the time the new airport opens, we are convinced that INIA will be number one in the two to five million [passenger] category,” he said.

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Finance Ministry refutes reports of 40 percent police and armed forces salary increase

Finance Minister Ahmed Inaz has disputed claims by People’s Alliance (PA) MP Abdulla Yameen that police and armed forces MPs will receive a 40 percent salary increase in 2012.

Instead the 2012 budget for police and armed forces will increase 9.51 percent “to cover the salary increment for officers who receive promotion and salaries of those who are to be employed next year,” Inaz told newspaper Haveeru.

The 2012 budget includes the provision for 50 additional police officers, while the Maldives National Defence Force (MNDF) will only recruit to vacant posts, Inaz stated.

Yameen allegedly learned of the proposal from the budget review committee rather than the budget itself, Haveeru reported earlier this week.

The Civil Service Commission (CSC) has meanwhile requested parliament include any unpaid civil servants’ salaries and allowances in the 2012 budget without conditions.

Several independent institutions, including the Maldives National University (MNU), meanwhile raised concerns this week over cuts made by the Finance Ministry to their proposed budgets for 2012.

The program-based budget submitted by some of the institutions was revised by the Finance Ministry to maintain recurrent expenditure in line with projected income.

The Rf 14.6 billion (US$946.8 million) state budget for 2012 was submitted to parliament on November 28 by Finance Minister Ahmed Inaz. It is now being reviewed by parliament’s budget review committee headed by local business tycoon, MP Gasim Ibrahim.

The committee met with senior officials of the Local Government Authority (LGA) and the MNU this week, as well as several other institutions, during which they complained about cuts made by the Finance Ministry during the revision process prior to the submission to parliament.

Finance Minister Inaz was not responding to calls at time of press.

The Constitution requires parliament to finalise the budget before December 28. Previous budget committees have significantly increased the budget submitted by the Finance Ministry.

President Mohamed Nasheed’s Press Secretary Mohamed Zuhair observed that additional subsidies and salary increases allocated by parliament for political reasons made it “very difficult” for the government to adhere to the budget.

” “The budget submitted to parliament is a product of exhaustive consultation. Last year no reference was made as to which sector the Finance Ministry should deduct the extra expenditure, and the Minister is required to use his discretion,” Zuhair said.

The Finance Minister has claimed that the government will cover recurrent expenditure in next year’s budget and reduce the deficit to 9.7 percent. However Yameen has claimed that Rf2.3 billion (US$150 million) has been allocated to repaying loans, and that the country’s debt now amounts to Rf 16,000 (US$1037) per head.

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Maldives Hotel and Trade Exhibition draws innovative exhibits

For those in the market for golf buggies, solar heaters, paintings, outdoor furniture, spas, lighting, fish products or energy drinks, the Maldives Hotel and Trade Exhibition was the place to be this week.

The two day event was organised by the Maldives Chamber of Commerce and Industry (MNCCI), filling two halls at Dharubaaruge with exhibitors from all over the world.

One particularly striking exhibit amid the lighting and food and beverage suppliers was a design for a ‘Star-Trekish’ underwater hotel with 21 rooms and positive buoyancy, able to be moored in a lagoon with minimal impact on the reef.

The two main discs sit on a central pillar – one of them eight metres underwater – and cleverly offset each others’ weight using natural water buoyancy so that only minimal foundations are needed.

“The lower disc is filled with air and is buoyant, and is anchored to the ground with steel lines,” explained architect Pawel Podwojewski. The seawater swimming pools on the top disc are four metres deep and weight the structure, and can be used for diver training. In an emergency the cables can be released allowing the lower disc to automatically surface.

Various modules can be attached ranging from spas to a restaurant, helipad and dive school. A decompression chamber is built into the lower part of the structure.

The Polish company behind the design, Deep Ocean Technology, has a background in shipbuilding rather than hotels. Podwojewski acknowledged that he had received “a lot of hard questions” during the two day MNCCI event, but had lined up “three or four” positive meetings. As presented the cost of the structure is expected to run up to US$25 million, although it is modular enough to be relocated where ever economic conditions dictate.

In the Maldives version, guests would access the structure via a jetty, spend a few nights in the underwater hotel and the rest of their holiday on the surface enjoying the sun and sandy beaches, Podwojewski suggested.

The two-day MNCCI event concludes on Wednesday evening. The annual event has run for 10 years now, both attracting tourism services to the Maldives doorstep and allowing local providers to make direct sales to visiting companies.

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