Business & Tourism – Page 17 – Minivan News

Finance minister fears spiralling deficit will leave civil servants without pay

Finance Minister Abdulla Jihad has expressed fear that the ballooning budget deficit will affect the government’s ability to pay civil servants.

“We can’t hold on like this for long, we must acknowledge that this is a very serious problem,” Jihad told atoll council leaders in Malé today.

Jihad explained that shortfalls in revenue of MVR1.5 billion would see the deficit increase to MVR4 billion – equal to 10.6 percent of GDP.

“Expenses keep on increasing, even as we don’t receive any revenue. We did not get the expected revenue this year either. Because of this, we are facing great difficulty in managing the budget deficit,” said Jihad.

Upon being elected last year, President Abdulla Yameen promised to prioritise reducing state expenditure, acknowledging that the Maldives was in a “deep economic pit”.

The government currently employs just under 25,000 civil servants, representing over 7 percent of the population. This high figure has long been identified as one of the causes of country’s fiscal imbalances.

Haveeru reported Jihad as saying today that his ministry was facing pressure every month when salaries are due.

“We try to make regular salary payments even if we have to take loans in order to do so. We haven’t, as of yet, received any salary issues this year. We are trying to make the salary payments through any means possible,” he was reported as saying.

Revenue gaps

Last month’s figures from the Maldives Monetary Authority (MMA) show the salary and allowances expenditure to account for 33 percent of spending, while the finance ministry has not published monthly expenditure reports since March.

The MMA’s latest figures also show the original estimated deficit of MVR1.3 billion – agreed upon last December as part of a record MVR17.96 billion budget.

The budget was inclusive of proposed revenue raising measures – many of which had failed to materialise during the previous administration – amounting to MVR3.4 billion, or 19 percent of the budget.

Despite some measures – including a rise in tourism taxes – passing the Majlis in February, Jihad predicted at the time that compromises would mean the full MVR3.4 billion would not be realised.

Both the outgoing and incoming governors of the MMA have this year called on the state to reduce expenditure alongside increased revenue.

The MMA’s 2013 Macroeconomic Development report said that shortfalls in revenue and overruns in expenditure could jeopardise the country’s debt sustainability – currently 81 percent of GDP.

The report – released in May – noted “there is a considerable amount of uncertainty surrounding the 2014 budget”.

The World Bank’s Maldives Development Update October 2013 described the country as “spending beyond its means,” risking serious damage to the economy,

Expenditure

Despite the government’s persistent promises to focus on the economy, subsequent policies have focused more on infrastructure development than fiscal consolidation.

Initial moves to reduce the salaries of political appointees were soon followed by promises to raise pension payments by 54 percent and the removal of the cap on the Aasandha health insurance scheme.

More recently, the government is facing the prospect of a potentially crippling payout to infrastructure giant GMR after a Singapore court of arbitration ruled in favour of the Indian company in a dispute over the premature termination of its airport concession deal.

Economic development plans have focused largely of large infrastructure projects and special economic zones to attract foreign investment – though no major deals have as yet been signed.

An IMF delegation visiting the country in February, however, expressed surprise at the economy’s continuing resilience.

“For a long time we’ve been saying that reserves at the MMA are very low and that the fiscal deficit is quite difficult and we expect the economy to run into some problems,” said resident representative Dr Koshy Mathai.

“But somehow the economy has shown resilience, a lot of resilience, and we’ve been surprised – happily surprised but surprised nonetheless.”

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Maldives to begin oil exploration with assistance of research vessel

A research vessel with 25 scientists on board has arrived in the Maldives to conduct oil and gas exploration research.

The German research vessel ‘Sonne‘ which came to the Maldives for different research purposes has agreed to do the oil exploration research for free, the government has said.

The scientists are expected to begin research within two days.

Speaking to media after his visit to the vessel today, Minister of Fisheries and Agriculture Dr Mohamed Shainee said the information obtained will be shared with the Maldives in the first quarter of 2015, adding that it would not be shared with any third party.

A local expert and a member of the Maldives National Defence Force will be present with the team during the survey, he said.

According to Dr Shainee it will be carried out in one of the three main areas in the country with properties indicating the presence of oil and gas – located 100 miles east of the region between Laamu and Thaa atoll.

The three dimensional seismic survey, carried out by sending sonic waves into the sea, will identify the presence of oil and gas in the region without any drilling, the minister said. It will be followed by further exploration involving drilling to confirm any positive findings, he explained.

The survey team’s own research will be about the changes in Maldives’ seas due to global warming, Haveeru has reported.

Speaking to the newspaper, the lead researcher from the University of Hamburg said a similar survey was done by the same vessel in 2007, but this new, more detailed one will complement it.

Oil exploration was an election pledge of President Abdulla Yameen and the government earlier this year said a foreign investor had already expressed interest in oil exploration.

The Maldives National Oil Company Ltd (MNOC), a subsidiary of the State Trading Organization (STO), said in February that they will soon begin advertising the country as a destination for oil exploration.

“We have contacted a Norwegian company and a German company to help us better understand the findings of the study. Based on this report, we’re hopeful of advertising the Maldives as a new destination of oil exploration,” said MNOC Managing Director Ahmed Muneez at the time.

French oil company Elf Aquitaine explored for oil and gas between 1968 and 1978, drilling three different sites. According to the MNOC, it was found at the time that the quantity available from the drilled site was insignificant and therefore uneconomical for production.

In 1991, Royal Dutch Shell initiated a second attempt at drilling an exploration well in the inner sea of the Ari Atoll.

Local environmental NGO Blue Peace has said oil drilling in the Maldives could cause environmental issues depending on the location of drilling , arguing that it “cannot coexist” with the country’s dominant tourism industry.

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GMR failed to conduct political risk assessment prior to investing, says President Yameen

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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Three dismissed in ongoing strike at Palm Beach Resort

Three senior staff at Palm Beach Resort in Lhaviyani Atoll have been dismissed after 50 staff staged a strike over alleged discriminatory polices at the resort.

According to a staff member on strike at Palm Beach, 50 housekeeping and food and beverage personnel at the resort stopped work at 10:00pm on Tuesday night following a public dispute between General Manager Fabrizio Dani and Restaurant Manager Ali Ashraf.

“We are calling for the removal of general manager from the resort also calling for an end to discriminatory policies between the European and Maldivian staff here,” Ahmed Abdulla told Minivan News.

He claimed the Maldivian staff were fed poor quality food compared to their European colleagues and said the management had failed to provide adequate arrangements for breakfast during Ramadan.

“We were not even given dates to break our fasts,” he said. “We will continue with our strike until demands are met.”

There have been no negotiations between the workers on strike and the management yet, Abdulla said.

In addition to Ashraf, Assistant Manager Ilyas Ibrahim and Supervisor Abdulla Mohamed were dismissed last night. The three have now left the resort.

Speaking to Minivan News, Ashraf said his dismissal had been “unfair.” He alleged the management of Palm Beach resort employed Russians, Italians, and Bangladeshi workers without work visas.

He also claimed the resort’s management had failed to sign employment contracts with the staff and were not paid for overtime work.

Minivan News was unable to contact either Fabrizio Dani or Palm Beach Resort despite repeated attempts.

In March, 18 members of staff at Vilu Reef Resort were fired after a petition detailing grievances. Workers at Maldives Airports Company Limited (MACL) also staged a strike in the same month over low quality of food and cuts to annual bonus pay outs.

Maldivian staff at One and Only Reethi Rah also held a strike in January over alleged ill-treatment by the management.

In a similar case in September 2013, staff at Irufushi Beach and Spa resort reported a “firing spree” affecting staff members professing to support the Maldivian Democratic Party.

According to the Freedom of Peaceful Assembly Act 2013, tourist resorts, ports, and airports fall into a category of places in which protests are prohibited.

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Court overrules government on lagoon development joint venture

The Civil Court has ruled in favour of Prime Capital Maldives Pvt Ltd in a contract dispute with the government over a joint venture agreement to develop a special tourism zone in Kaafu Atoll Fushidhiggaru lagoon.

In September, Prime Capital sued the government after the Ministry of Economic Development refused to register the joint venture company (JVC) citing lack of authorisation from the president as required by law.

In a verdict (Dhivehi) delivered on July 15, Civil Court Judge Ali Naseer ordered the government to register the JVC within a seven-day period, sign a master lease agreement within five days of registration, “and [to] make all arrangements undertaken by the government in accordance with the agreement”.

An agreement was signed between Prime Capital and the Maldivian government on January 18, 2013 – under the administration of former President Dr Mohamed Waheed – to lease the Fushidhiggaru lagoon for a 50-year period to a JVC with a 25 percent stake for the government.

According to local media, the government was to receive 30 percent of the profits from the tourism venture in the lagoon south of the capital Malé.

Prime Capital is reported to be a Singaporean company.

Denials

Following media reports last year suggesting that the JVC agreement was signed secretively, both Finance Minister Abdulla Jihad and Tourism Minister Ahmed Adeeb initially denied the existence of an agreement to lease the lagoon.

Less than two weeks before the first round of last year’s presidential election on September 7, Jumhooree Coalition campaigner Umar Naseer – now Home Minister – leaked documents to the media purported to be an agreement to sell the lagoon.

Naseer was campaigning for candidate Gasim Ibrahim, while Adeeb was deputy leader of the Progressive Party of Maldives whose candidate – now President Abdulla Yameen – was facing severe criticism from the Jumhooree campaign.

Yameen eventually won the race with Gasim’s endorsement in a run-off with former President Mohamed Nasheed.

The documents leaked by Naseer showed that Finance Minister Jihad had signed the agreement on behalf of the government while Adeeb – also Tourism Minister under President Waheed – had signed as a witness on behalf of Prime Capital.

Naseer alleged at the time that the economic development ministry stopped the project as the cabinet had not officially approved it.

Moreover, the agreement was signed without seeking legal advice from the attorney general, he claimed.

Adeeb denied the existence of an “official” lease agreement and dismissed the allegations as a “political assassination” attempt in the days preceding the presidential election.

He did say, however, that the Waheed administration was in talks with a foreign company as the previous administration had decided to lease the lagoon.

The Anti-Corruption Commission was meanwhile asked to investigate the deal.

Adeeb also suggested that Naseer was upset after the government refused to lease a lagoon called “Gaafalhu” for his whale submarine business.

In its lawsuit, Prime Capital had reportedly submitted a letter signed by Tourism Ministry Deputy Director Hassan Zameel sent to the economic development ministry requesting approval of the JVC registration.

The Civil Court ruled that registering a joint venture with a government stake was the legal responsibility of the government and ordered the relevant ministries to fulfil all contractual obligations.

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Maldives to boycott Israeli products, annul bilateral agreements

The Government of Maldives has today announced the boycott of Israeli products and the annulment of bilateral agreements with the country.

“President Yameen and the Maldivian citizens are with the Palestinian people”, said Foreign Minister Dunya Maumoon at a press conference this afternoon.

Dunya also announced that the Maldives would join other Arab nations in co-sponsoring a resolution at this week’s special session of the UN Human Rights Council (HRC) calling for the protection of an independent Palestinian state and the extension of humanitarian aid.

As well as an admittedly “symbolic” boycott of Israeli products, three agreements – signed in 2009 under the administration of President Mohamed Nasheed – would now be annulled, explained the foreign minister.

The agreements involved cooperation in areas of health, culture and education, and tourism.

“I do not think Maldivians want any help from Israel or want to keep up relations with Israel. So from now on, the agreements have been annulled,” she said.

While she noted that neither that former President Maumoon Abdul Gayoom nor the current government believed in maintaining such relations, she stopped short of announcing the severing of diplomatic ties.

Criticising Nasheed for having established diplomatic relations with Israel, Dunya said that his current statements in support of the Palestinians could not now be accepted.

Addressing the UN General Assembly in 2009, Nasheed argued that renewed diplomatic relations with Israel would be used to reiterate the Maldives’ support for a two state solution.

Boycott

Acknowledging the impact of the Maldives’ boycott would be small, Dunya today noted that other small nations had done likewise with symbolic acts that had been appreciated by the Palestinian government.

“Even though what we give is small or symbolic, the way it is received is important. The message we want to give is we are with the Palestinian people,” said Dunya.

Explaining the boycott, Mohamed Hussain ‘Mundhu’ Shareef, minister at the President’s Office, said the government would soon announce a moratorium on the import of Israeli goods into the country after discussions with the Ministry of Economic Development and Maldives Customs Services.

While the government is calling on businessmen to join the boycott, it will still be possible for some Israeli products to enter the Maldives as the country does not check for the country of origin or manufacturers of imported products. Even so, the government will remove such products from shops in accordance with the Customs Act.

Shareef said that the Maldives may consider lifting the moratorium if the Israeli government’s violation of international resolutions stop.

Regarding other economic links, he noted that there were few tourists arriving in the Maldives from Israel and that there were no Israeli investments in the country.

“Israeli investment is not important for us. We want investments from countries with human rights practices that are acceptable to us,” said Shareef.

Israeli tourists – numbering 2,569 in 2013 – constituted 0.3 percent of total tourist arrivals. In June 2014, 254 Israeli tourists visited Maldives, a 72 percent increase from 12 months earlier.

Domestic pressure

At home, the government remains under pressure from both the opposition and civil society who have called for bolder action concerning the recent escalation of violence in Gaza.

After the opposition leader Nasheed called on human rights defenders to raise their voices against “indiscriminate killings in Gaza”, his Maldivian Democratic Party (MDP) held a rally on July 12 in Malé criticising the government’s initial silence.

On the same day, President Abdulla Yameen phoned Palestinian President Dr Mahmoud Abbas to condemn “Israel’s inhuman actions”, and pledged to do everything necessary in the international arena to aid Palestinians.

Days later, thousands of Maldivians from all sides of the political spectrum gathered across the country to rally in protest against the Israeli offensive.

Nasheed has since called on MDP members to take the initiative and go to Gaza in order to act as a “human shields” protecting Palestinians.

Those who organised the nationwide rally are currently circulating a petition to be submitted to the People’s Majlis calling for a resolution to be passed by MPs.

Speaking to Minivan News, a member of the group said that over 8000 signatures had been collected in just two evenings. Working alongside civil society organisations in the atolls and local councils, many more were expected.

A second online petition has also been launched calling on the government to use Maldives’ seat in the UN HRC to request an investigation into human rights violations in Israel and Palestine and to hold discussions to find a peaceful resolution to the conflict.

The religious conservative Adhaalath Party, along with 11 civil society organisations, had established a donation fund to assist Palestinians affected by the ongoing conflict.

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Housing Ministry to resume stalled Tata housing project

The government expects to sign a revised agreement with Tata Housing Developing Corporation next week to resume stalled housing projects in the capital Malé, Housing Minister Dr Mohamed Muiz revealed at a press conference yesterday.

The terms of the agreement were revised on the advice of the cabinet’s economic council after agreeing to some of Tata’s conditions, Muiz explained, and have now been forwarded to the Indian real estate developer for final approval.

“We have agreed that work must begin in two sites in Malé within 45 days of signing the amendments [to the contract],” Muiz said, referring to the Gaakoshi plot and former Arabiyya School premises.

Muiz further revealed that the government has also agreed to give back the vacant ‘Naadhee’ plot in Malé and approve construction on the site.

The site was taken over by the administration of former President Dr Mohamed Waheed with the intention of building a new Supreme Court complex on the premises.

While the previous administration had offered a plot in Hulhumale’ as an alternative, the developers felt the change would affect financing of the project.

The multi-million dollar housing project – a combination of commercial and social housing through a Public-Private Partnership model – was signed in May 2010 by the administration of former President Mohamed Nasheed with Apex Realty Pvt Ltd, a special purpose vehicle (SPV) or joint venture formed between Tata (65 percent) and SG18 Developers (35 percent).

Providing affordable housing to resolve the acute housing shortage in the capital was a core pledge of the Nasheed administration as well as the current Progressive Party of Maldives-led (PPM) government.

Contractual dispute

The Naadhee plot on Sosun Magu was among four plots of land in the capital awarded to the Tata subsidiary for construction of flats.

The Waheed administration’s decision to take over the plot was the source of the dispute with Tata, Muiz conceded yesterday, which has now been resolved after the economic council decided to give back the plot in accordance with the terms of the original agreement.

The government has agreed to purchase 20 percent of the flats constructed on the plot, he noted.

Discussions were meanwhile ongoing between the Supreme Court and the President’s Office on a new site for the apex court’s building, he said.

The flats in Gaakoshi and the old Arabiyya School site would have to be completed in 10 months and a year respectively, Muiz continued, while Tata has also agreed to construct 150 flats in Hulhumale’.

In May, Apex Realty announced that the company was prepared to resume work on the project as soon as the agreed upon amendments were incorporated into the contract.

“Apex Realty officials have undertaken multiple rounds of meetings with the economic council of the cabinet and the Ministry of Housing to find a mutually acceptable solution to contractual issues,” the company said in a press release.

“We are committed to the Maldives project and can start the project within 45 days after the final nod is received from the Housing Ministry and contract amendment is signed,” said Mr Sandeep Ahuja, Director at Apex.

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Court rules in favour of Medianet in World Cup rebroadcasting dispute

The Civil Court has ruled yesterday that the Maldives Broadcasting Commission’s (MBC) order for cable TV service provider Medianet to cease airing FIFA World Cup matches on any channels except state broadcaster Television Maldives (TVM) and Villa TV (VTV) was unlawful.

Medianet had sued the commission after MBC ordered the company to halt rebroadcasting matches on channels Sony Six, Sony Six HD and Sony Pix pending an inquiry, insisting that only TVM and VTV were authorised to broadcast matches.

In its verdict, the Civil Court reportedly ruled that the commission had not followed due process and was not authorised to issue such an order under broadcasting laws and regulations.

The court’s decision came ahead of the World Cup final match last night. MBC members have since told local media that the commission was seeking legal advice before deciding whether to appeal the verdict at the High Court.

Following Medianet’s refusal to comply with the commission’s first order, MBC had issued a second order instructing the company to comply “without any conditions”. Both orders were annulled by the Civil Court ruling yesterday.

Medianet had also refused to comply with instructions from the commission to broadcast matches shown on TVM and VTV in high definition.

Medianet is currently the only cable television service provider in the Maldives.

Lobbying group

At a press conference following the verdict yesterday, Medianet Director Ahmed Nashid – opposition Maldivian Democratic Party (MDP) MP for Komandoo – contended that the commission could no longer be considered an independent institution.

A recently formed lobbying group comprised of private broadcasters was exerting undue influence over the MBC, he alleged, adding that the group had “hijacked” the commission.

The commission ordered Medianet to cease airing World Cup matches on channels except TVM and VTV a day after a meeting between the lobby group and MBC members, he noted.

Nashid further accused the MBC of participating in the lobby group’s alleged efforts to defame Medianet.

Claiming financial losses caused by the dispute, Nashid also said the company was considering suing MBC members for damages.

The lobby group meanwhile released a press statement yesterday accusing the MBC’s legal counsel of not adequately defending the commission’s stance.

The commission’s lawyer had conceded in court that the matter was under investigation and that due process was not followed, the lobby group said.

Moreover, the lawyer had not attempted to prove that Medianet deliberately misled the commission, the statement added.

Medianet had not sought authorisation in accordance with FIFA rules for rebroadcasting matches, the lobby group insisted.

MBC had maintained that Medianet’s agreement with Indian broadcaster Sony MSM was not made in accordance with Maldivian broadcasting law and that the company’s decision to charge an MVR100 fee for viewing matches on channels 100 and 100 plus was also illegal.

The FIFA World Cup was a “listed event” and Medianet had not sought authorisation to broadcast matches, MBC had said.

Moreover, the commission noted that only TVM and VTV had obtained rights to broadcast the event.

However, Nashid explained yesterday that the company had signed an agreement with Sony Six to broadcast the channel’s content for two years.

He stressed that the agreement was not limited to airing World Cup matches.

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Auditor General questions valuation of assets of state-owned enterprises

The Auditor General’s Office has questioned the valuation of assets of the Thilafushi Corporation Ltd (TCL) and State Electricity Company (STELCO) in audit reports of the state-owned enterprises for 2013.

The TCL audit report released last week explained that the Finance Ministry transferred land and buildings on Thilafushi Industrial Island to the corporation at a value of MVR12 billion (US$778 million).

“The consideration for such transfer had been made by the issue of 150,000,000 equity shares of MVR10 each issued at a premium of MVR74.13 to Ministry of Finance and Treasury,” the report stated.

Following valuation of the island and property therein by a professionally qualified party “on the basis of capitalised lease rentals to perpetuity,” the leased land was valued at MVR5,725 (US$371) per square foot.

Additionally, “land pending reclamation and lease at the time” was valued at MVR1,200 per square foot, “the reasonableness of which cannot be readily established.”

The report noted that the transaction took place between TCL and the Finance Ministry, “its sole shareholder.”

Moreover, in the “absence of a valuation adopting alternative approaches in the context that this is the first purchase of land transaction at Thilafushi,” the Auditor General’s Office was “unable to conclude whether the rates per square foot derived above are reasonable.”

The report stated that auditors were “unable to satisfy ourselves whether the land and buildings thereon and share premium shown in the balance at MVR12,618, 789,042 and MVR11,118,789,042 [US$713 million] respectively are fairly stated.”

Work in progress

The report also noted that MVR33 million (US$2 million) was paid to Heavy Load Maldives for land reclamation, which was stated in the balance sheet as capital work in progress.

However, in 2011, the company incurred a further MVR23 million (US$1.4 million) for the project, increasing the total capital work-in-progress amount to MVR61 million (US$3.9 million).

Auditors found that the MVR23 million had been “capitalised by transferring the amount from capital work-in-progress to land towards the industrial zone reclamation,” while the remaining amount had not been capitalised.

“In the absence of evidences supporting the work done for the remaining amount of MVR38,889,767, we are unable to conclude whether the company has received value for the amount paid and therefore whether the capital work-in-progress has been fairly stated,” the report concluded.

In January 2013, local media reported that TCL incurred MVR650 million (US$42 million) worth of losses as a result of Heavy Load not reclaiming the agreed 152 hectares of land within the granted six month period.

As a result of the issues flagged in the report, the audit office was “unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion,” and subsequently did not express an opinion on TCL’s financial statement.

STELCO and MPL

In the audit report of STELCO for 2013, the audit office noted that while the company’s financial statements gave “a true and fair view” of its financial position, performance and cash flow as of December 31, 2013, Auditor General Niyaz Ibrahim qualified his opinion due to questions over the valuation of assets.

The report explained that the government-owned company’s property, plant and equipment were revalued by an external valuer during 2011.

“Accordingly, the assets having net book value of MVR434,455,893 [US$28 million] as at 31 December 2011 were revalued for MVR847,932,997 [US$54 million] and a revaluation surplus of MVR413,477,104 was recognised in the books of account,” the report revealed.

However, it added, assets worth MVR26 million (US$1.6 million) were excluded from the revaluation report and “the company accounted these assets at their respective net book values based on historical cost,” which was in violation of international accounting standards.

Consequently, “in the absence of valuation of these assets,” auditors were unable to conclude that MVR15 million (US$972,762) included in the property, plant and equipment of MVR1.5 billion (US97 million) as well as a revaluation reserve of MVR314 million (US$20 million) in the balance sheet was “fairly stated.”

Meanwhile, the audit report of the Maldives Ports Ltd (MPL) for 2013 noted that the company was owed MVR13 million (US$8 million) from the dissolved Maldives National Shipping Ltd, which was a receivable that has been “outstanding for more than four years and therefore, doubtful of recovery.”

As a result, the report noted, auditors were unable to conclude “whether the amount shown under related party receivables in the statement of financial position is recoverable and [whether] the results for the year and receivables were are fairly stated.”

Auditors also found that MVR24 million (US$1.5 million) was “incurred on the construction of a tug boat for harbour operations.”

However, the construction had been discontinued since 2010 “due to a dispute with the constructor,” auditors found.

“Further, we were not allowed to access the premises of the tug boat. Hence, we are unable to satisfy ourselves regarding the physical existence and recoverability of the asset,” the report stated.

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