Business & Tourism – Page 50 – Minivan News

Immigration halts work permits to GMR, aviation authority to revoke aerodrome certificate

Additional reporting by Mariyath Mohamed.

The Department of Immigration has declared that it will cease renewing the visas of foreign employees working under GMR Male International Airport Limited (GMIAL), the Indian infrastructure giant’s side of the deal to manage and operate Ibrahim Nasir International Airport (INIA) signed with the former government.

“We have stopped issuing visas to GMR for the time being. This was decided since the cabinet has terminated the contract, and GMR has been given a seven day ultimatum to leave. If we went on processing visa requests, it would just be pointless work,” Deputy Chief Executive Officer of Immigration, Mohamed Khalid told Minivan News.

“We are just going along with the decisions made from the top, the President’s Office,” he said.

The Maldivian cabinet declared the agreement with GMR void on Tuesday evening, and gave the company a seven day ultimatum to leave the country.

“The government has given a seven day notice to GMR to leave the airport. The agreement states that GMR should be given a 30 day notice but the government believes that since the contract is void, it need not be followed,” said Attorney General (AG) Azima Shukoor at the time.

Deputy Controller of Immigration Hamid Fathuhullah told Minivan News that immigration had not yet made any decisions on how to proceed on dealing with the visas and permits obtained by GMR that were still active after the government’s seven day ultimatum.

However, Fathuhulla added that they would be making provisions in accordance with existing regulations to allow ample time for the employees to make arrangements to leave.

“Right now, we are not going to provide visas, quotas or work permits to any company associated with GMR. This is in line with the Immigration Act 1/2007 and International Law,” Fathuhulla stated.

President’s Office Spokesperson Masood Imad declined to comment on the matter.

“It is not part of our mandate to cancel visas, deport or arrest people. The President’s Office will do no such thing. The immigration department will decide this issue,” Imad said.

CEO of GMIAL, Andrew Harrison, said the company had received no communication or memo from the immigration department, as stated in several media reports, and had contacted the immigration to try and clarify the matter.

Of the company’s total 1760 staff, 140 are foreign employees on work permits, Harrison said. He stressed 17 of there work permits were due to be renewed before the end of December.

“Our people are committed. They will stay and work until otherwise notified,” Harrison said.

He said it would be “premature” to discuss the implications of the Immigration Department’s announcement, given that GMR disputes the legality of the government’s termination of its contract, and that there was “still work to be done before statements are made”.

However, he said it was surprising that the notice was issued to the media before any discussion with the company.

“I don’t know why they are doing it this way,” Harrison said. “People are asking us about this, but we have no information apart from the conflicting reports in the media.”

“One report says the visas are being cancelled, another says they have not been cancelled, just the renewals,” said Harrison.

Minister of State for Home Affairs Mohamed Fayaz stated Thursday that the foreign employees of GMR would be “given protection” until they could arrange to leave the country.

Fayaz said that the ministry had extended an invitation to the management of GMR for a meeting following the termination of the contract.

Accepting the invitation, Harrison and Managing Director P Sripathi had met with the ministry representatives, he said.

“At the meeting, we requested that in these seven days, they proceed in a manner which would not disrupt any of the services being provided at the airport. We also assured them that they would remain safe and secure during their time in the country,” Fayaz said.

“We also told them that should they require it, we can provide security services through the police force,” he added.

The government-owned Maldives Airports Company Limited (MACL) has meanwhile issued a circular “opening opportunities for GMIAL staff who are keen to join the MACL team.”

In a statement, the company said it provided “assurance to employees that their present basic salary, allowances and other benefits, and training and development opportunities will be maintained under MACL management. MACL also guarantees that the employees currently sponsored by GMIAL will have the same opportunity to continue and complete their courses.”

CAA withdrawing aerodrome certificate

The Civil Aviation Authority (CAA) has meanwhile sent GMIAL a letter informing the company its aerodrome certificate will be withdrawn at 11:59 pm on December 7.

“That is the regulatory authority that permits us to operate an airport,” explained Harrison, “We cannot operate an airport without the certificate.”

Harrison emphasised that the withdrawal of the certificate did not mean the end of the company’s effort to seek legal redress.

“Reckless”

The government’s decision to declare GMR’s concession agreement void and evict the developer from the Maldives comes after a tough year for tourism, the sector indirectly responsible for up to 70 percent of the country’s economy. According to the 2013 budget presented to parliament on November 27 – the same day as cabinet announced GMR’s eviction – tourism growth in the Maldives has fallen from 15.8 percent in 2010 and 9.1 percent in 2011, to an expected 0.7 percent in 2012.

In a statement today, former President Mohamed Nasheed, under whose administration the GMR contract was signed, said the government’s “reckless decision to terminate GMR’s contract will scare off investors”, with “serious ramifications for the economy, at a time when we can ill-afford to see it falter.”

“Right across the board we are witnessing positive trends being dangerously reversed. Growth in tourism – the bedrock of our economy – has flat-lined; our GDP, which was 7 per cent last year, is projected to be just 3.4 per cent this year; and our deficit, which we had brought under control at the start of the year, is now ballooning at an alarming rate,” Nasheed said.

“If this continues, we risk setting back every aspect of our development. It is not those in government but the Maldivian people who stand to lose most from President Waheed’s economic mismanagement.”

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Tourism growth slowed to less than one percent in 2012: Finance Ministry

The government’s forecast for economic growth in 2013 is 4.3 percent, following a slowdown to a projected 3.4 percent in 2012, according to an economic and fiscal outlook by the Finance Ministry introducing the state budget (Dhivehi) proposed for next year.

Tourism was especially hard hit in 2012, with growth falling from 15.8 percent in 2010 and 9.1 percent in 2011, to an expected 0.7 percent in 2012.

The original forecast for economic growth in 2012 was 5.5 percent.

An International Monetary Fund (IMF) mission said in a statement earlier this month that economic growth slowed to three and a half percent this year on the back of “depressed tourist arrivals earlier in the year and weak global conditions,” which have been “only partially offset by strong performance in construction and fisheries-related manufacturing.”

The IMF mission forecast “a modest recovery” for 2013 and beyond.

The Finance Ministry’s statement on the economic outlook for the next three years meanwhile explained that the Maldivian economy dipped into recession in 2009 following the global financial crisis in the previous year.

However, the economy rebounded with 7.1 percent growth in 2010 and 7 percent in 2011.

“While [real GDP] was projected to increase in 2012, the main cause of the economic slowdown compared to 2011 was the weakening of the tourism sector during the year,” the Finance Ministry stated.

While the tourism industry grew by 15.8 percent in 2010 and 9.1 percent in 2011, the industry’s growth in 2012 was expected to be 0.7 percent.

The two main reasons cited by the Finance Ministry for the anaemic growth were “the political turmoil the country faced in February” and a decline in the average number of nights tourists spend in the country “as a result of a decline in the average number of days a tourist spent in the Maldives.”

On average, tourism accounted for 28 percent of GDP during the past 10 years.

The main drivers of growth in 2012 were a booming construction industry and growth in manufacturing and fisheries.

Fisheries, manufacturing and construction

The volume of fish catch has been steadily declining for the past seven years. While approximately 185,000 tonnes of fish were caught in 2006, the number dropped to about 70,000 tonnes in 2011.

During the past five years, the value of the fisheries industry declined from MVR 489 million (US$31.7 million) to MVR 321 million (US$20.8 million) with a corresponding fall of 3.3 percent of the economy to 1.1 percent in 2012.

As a result of opening up the country’s Exclusive Economic Zone (EEZ), the industry’s productivity was expected to rise by 9.7 percent in 2012.

However, as fishing in the Indian Ocean was not expected to improve in coming years, the Finance Ministry has forecast the real GDP of the fisheries sector to decline by 1.3 percent in 2013.

Estimated real GDP for the manufacturing industry – fisheries products, foodstuff, furniture and cement – was meanwhile MVR 998 million (US$64.7 million) in 2012, up from MVR 850 million (US$55.1 million) the previous year.

Fisheries-related products accounted for the largest share of the manufacturing industry.

Following 19 percent growth in 2011, the construction industry was expected to have grown by 16 percent in 2012.

“The main reason for the large growth of the sector in 2011 and 2012 was the development of new resorts in 2011,” the Finance Ministry observed, adding that resort development accounted for 50 percent of construction in the Maldives.

Meanwhile, in the retail and import business sector, customs statistics for the first eight months of 2012 showed that the value of goods imported (adjusted for inflation) was 22 percent higher than the same period in 2011.

The real GDP of the business sector in 2012 was an estimated MVR 875 million (US$56.7 million).

Deficit and debt

The Finance Ministry also revealed that nominal GDP in 2011 was MVR31,447 million (US$2 billion) while the estimate for 2012 was MVR34,148 million (US$2.2 billion).

Real GDP in 2011 was MVR20,461 million (US$1.3 billion). Nominal GDP per capita in 2012 was estimated to be MVR 80,260 (US$5,206) per annum.

Real GDP measures the value of all goods and services produced in a country expressed in the prices of a base year – 2003 in the Maldives.

According to the Finance Ministry, the medium term target of the government was meanwhile reducing the fiscal deficit “to pave the way to conduct social and economic programmes” and regain the confidence of international financial institutions.

While a budget deficit of 9.7 percent was forecast 2012, the Finance Ministry said the figure was expected to reach 12.6 percent of GDP by the end of the year.

“The projected deficit in the estimated budget proposed for 2013 is 6.1 percent of GDP,” the Finance Ministry stated. “In the medium term, the budget deficit can be lowered to 1.9 percent of GDP in 2015.”

The Finance Ministry proposed MVR 1.1 billion (US$71.3 million) as foreign loans and MVR 1.1 billion (US$71.3 million) as domestic finance to plug the budget deficit in 2013.

While tax revenue from T-GST, GST and import duties collected in 2012 was lower than forecast, the Finance Ministry revealed that income from Business Profit Tax (BPT) was 80 percent higher than expected.

At the end of 2012, the government would have received MVR 1.3 billion (US$84 million) as BPT while the forecast was MVR763.6 million (US$49.5 million).

Presenting the 2013 budget to parliament on Monday, Finance Minister Abdulla Jihad said revenue forecast for 2013 was MVR 12.9 billion (US$836 million), including MVR 1.8 billion (US$116 million) expected as a result of implementing proposed revenue raising measures.

However, most of the proposed measures – such as hiking T-GST and introducing GST for telecom services – would have to be approved by parliament through amendments to the relevant laws.

More than MVR 200 million (US$12.9 million) was estimated as GST receipts from telecom services in 2013.

The Finance Ministry also revealed that the ‘total external public and public guaranteed debt’ was estimated to reach MVR 13.7 billion (US$888 million) in 2012.

Of the MVR 4.1 billion (US$330 million) of the loan assistance spent in 2012, more than 50 percent was from multilateral financial institutions and 28 percent from bilateral donors.

A total of MVR 1.9 billion (US$123 million) from loan assistance has been spent for various projects in 2012 while the rest was spent for budget support.

As of September 2012, MVR 561 million (US$36.4 million) has been received as budget support – US$16 million from the Asian Development Bank and US$20 million from a standby credit facility extended by the Indian government.

Moreover, the government spent more than MVR 1 billion (US$64.8 million) in 2011 and MVR 1.1 billion (US$71.3 million) in 2012 to service foreign debts as interest and repayments.

The figure was expected to remain the same in 2013.

In addition, the government spent MVR 660.5 million (US$42.8 million) in 2011 and MVR 2 billion (US$129.7 million) in 2012 to service domestic debts.

The figure for domestic debt was expected to decline to MVR 1.1 billion (US$71.3 million) in 2013 as payment for US$ 100 million of government bonds sold to the State Bank of India in Male’ – amounting to MVR 771 million (US$50 million) as repayment for a second tranche – has been pushed back to 2014.

Similarly, repayment of three ways and means treasury bonds to the Maldives Monetary Authority (MMA) or central bank amounting to MVR 951 million (US$61.6 million) has also been pushed back.

Government spending on loan repayment and interest payments was expected to reach MVR 3.1 billion (US$201 million) in 2012.

Including an estimated MVR 13 billion (US$843 million) in domestic debt, the total public debt is expected to reach MVR 27 billion (US$1.7 billion) in 2012 and MVR 31 billion (US$2 billion) in 2013 – 82 percent of GDP.

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Cabinet voids US$511 million GMR contract, gives airport developer seven day ultimatum to leave

Additional reporting by Neil Merrett and Mohamed Naahii.

The Maldivian cabinet has declared the agreement with Indian infrastructure giant GMR to develop Ibrahim Nasir International Airport (INIA) void, and has given the company a seven day ultimatum to leave the country.

During a press conference on Tuesday evening, Shukoor stated that the government reached the decision after considering “technical, financial and economic” issues surrounding the agreement.

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

“We also got advice from both local and international lawyers in the Maldives Airports Company Limited (MACL),” she added.

Shukoor said the government had two legal grounds to terminate the contract: one in which the government believed the contract was ‘void ab initio’ – meaning to be treated as invalid from the outset; and the second being ‘frustration’, an English contract law doctrine 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.

“The contract is governed by the English contract law. The government believes that the agreement is void ab initio meaning the contract was void from the beginning or the contract is frustrated,” she said.

She added the termination of the agreement was a “purely legal decision” and did not have any connection with the recent series of anti-GMR protests headed by the religious Adhaalath Party (AP).

The decision was, Shukoor insisted, made “professionally” and after “thorough research”.

Shukoor also claimed the government was going to initiate the arbitration process in Singaporean Courts and had already informed its decision to both GMR and MACL.

Asked how the government planned fund the estimated US$700 million in compensation for terminating the contract, Shukoor declined to speak of the sum of money but expressed “full confidence” in winning a court battle.

“We were advised by very professional lawyers including Queen’s Counsels (QC). We have full confidence in winning the case,” she said.

“We do not intend to share all our legal arguments in this press conference. Please do respect that decision,” she added.

“Completely irrational”: GMR

GMR has slammed cabinet’s decision as “unilateral and completely irrational”.

“This unlawful and premature notice on the pretext that the concession agreement is ‘void’ is completely devoid of any locus standi and is therefore being challenged by the company before the competent forums. The company disputes that the concession agreement is ‘void’,” GMR said in a statement.

“The company would further like to state that it has taken all measures to continue operations at the Ibrahim Nasir International Airport thereby ensuring that this vital gateway to Maldives is kept open.

“We would also like to inform all that this action by the government of the Maldives is in complete disregard of and has been done during the pendency of arbitration proceedings in the designated tribunal in Singapore. We are therefore taking all measures to ensure the safety of our employees and safeguard our assets. We are confident that the stand of the company will be vindicated in every way.”

Speaking to Minivan News, GMR Executive Vice President & Group Head of Corporate Communications, Arun Bhaghat, said the only reason for the decision as stated in the government’s letter was that the airport development charge had been ruled unleviable by the Civil Court, and therefore the entire contract was void.

In late 2011 the then-opposition Dhivehi Qaumee Party (DQP) filed a successful Civil Court case blocking GMR from charging an Airport Development Charge (ADC) – a US$25 charge for outgoing passengers stipulated in the concession agreement – on the grounds that it was a tax not authorised by parliament.

Nasheed’s administration chose to honour the original contract, and instructed GMR to deduct the ADC revenues from the concession fees due the government, while it sought to appeal the Civil Court ruling.

However, the Nasheed government fell a month later and the opposition inherited the result of its court victory, receiving a succession of bills from the airport developer throughout 2012, despite the government’s insistence that the January 5 letter from MACL outlining the arrangement was no longer valid.

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

Combined with the third quarter payment due, the government now owes the airport developer US$3.7 million.

“The net result of this is that the Maldivian government now has to pay GMR for running the airport. On this basis it is likely that the Maldivian government will end up paying about MVR 8 billion (US$519 million) to GMR for the duration of the contract,” wrote Dr Hassan Saeed, DQP Leader and President Mohamed Waheed’s Special Advisor, in a recent appeal to Indian Prime Minister Manmohan Singh calling on him to cancel the Maldives’ agreement with GMR and warning the Indian PM of “rising extremism” as a result of the GMR deal and anti-Indian sentiment.

GMR attempted to compromise by offering to exempt Maldivian nationals from the ADC, with GMR Chairman G M Rao personally mailing Waheed with the offer, but claimed to have received no response from the government.

“This is by far the single largest foreign investment in the Maldives at US$511 million – in today’s figures, 40-50 percent of the Maldives’ GDP,” observed Bhaghat, adding that the company was supremely confident of defending its legal position.

“We have no plans to go. We have 23 more years here,” he said, vowing that the cabinet’s decision would have “no effect” on the operation of the airport.

“The defence force in this wonderful country is well geared to ensure smooth operation of the airport,” Bhaghat told Minivan News.

India backs GMR: “All necessary measures”

The government of India “proposes to monitor the situation in Maldives closely and is prepared to take all necessary measures to ensure the safety and security of its interests and its nationals in the Maldives,” India’s Ministry of External Affairs has meanwhile said in a statement.

“We have noted the decision by the Government of Maldives to terminate the agreement with the GMR Group to manage the Male International Airport. It would be recalled that the consortium consisting of GMR and MAHB (Malaysian Airport Authority) had been awarded the contract to manage the Male’ International Airport concession through a global tender conducted by the International Finance Corporation (IFC), Washington, a member of the World Bank.

“As the Advisor to the Government of Maldives, the IFC has stated that it has complied with Maldivian laws and regulations and followed international best practices at each step of the bidding process to ensure the highest degree of competitiveness, transparency and credibility of the process,” the statement read.

“The investment by GMR represents the single largest foreign direct investment in the history of Maldives. The decision to terminate the contract with GMR without due consultation with the company or efforts at arbitration provided for under the agreement sends a very negative signal to foreign investors and the international community. The Government of India would continue to remain engaged with the Government of Maldives on this issue, and would expect that the Government of Maldives would fulfil all legal processes and requirements in accordance with the relevant contracts and agreement it has concluded with GMR in this regard.”

“Destabilising the country”: MDP

The Maldivian Democratic Party (MDP) has meanwhile accused cabinet of destabilising the country by attacking foreign investment and supporting “extremist” rhetoric.

“This decision is bad for tourism, bad for the economy and bad for the Maldivian people,” said former President Mohamed Nasheed.

“Waheed’s government has cynically used xenophobia, nationalism and religious extremism to attack GMR, the country’s largest foreign investor. This will put off potential investors for decades. Waheed is leading the Maldives down the path to economic ruin,” he stated.

MDP MP and Spokesperson Hamid Abdul Ghafoor told Minivan News that disputed contracts could be unravelled through a legal process, but said the executive’s decision to void the contract and evict the country’s single largest foreign investor was not backed by any law.

“If cabinet has now decided to revoke the contract, who is going to execute the order? The contract is bound under international law. The case is still being heard by a court of arbitration in Singapore,” Ghafoor said.

“Will police be executing this order to reclaim the airport, or will it be Islamist elements? This is an executive decision that is being taken without any legal or political backing.”

Maldives National Defence Force (MNDF) Spokesperson Colonel Abdul Raheem said the military was “not involved” in the airport issue: “We will however, continue to take care of security [at the site] and look after it,” he said.

Police Spokesperson Sub-Inspector Hassan Haneef told Minivan News that any decision to enforce the decision would have to be directed by the President’s Office.

Decision prompted by “extremists”

Ghafoor claimed that threats of direct attacks on foreign investors reflected what he was the growing role of extremist Islamic thinking within the most senior decision making of the present government.

Raising concerns over the legality of voiding the GMR contract, Ghafoor pointed to recent comments in local media by the government-aligned religious Adaalath party, whose president Sheikh Imran Abdulla was yesterday quoted as threatening to “invade the runway” should the government not renege on the airport agreement.

“The deal was done very transparently, and [the government] have never been able to prove any wrongdoing,” Ghafoor claimed. “Yet, what is most worrying is that we have the cabinet of what we believe is an illegitimate government that is being influenced by extremist influences.”

Ghafoor alleged that the government’s decision over the GMR issue was being driven by former President Maumoon Abdul Gayoom’s Progressive Party of Maldives (PPM), Adhalaath Party President Sheikh Imran and fellow party member and Minister of Islamic Affairs, Sheikh Mohamed Shaheem Ali Saeed.

“We are now seeing the government partnering with and backing the rhetoric of a movement led by an Islamist group, it is very apparent what is going on here,” he said.

MP Ghafoor further claimed that parliament had, as of this evening, received no information on the decision to renege on the GMR agreement, adding that several no-confidence motions against senior government figures including President Waheed were scheduled.

“What is going on right now is a shift in parliament,” he said.

Ghafoor also claimed that beyond the potential legal and economic ramifications of reneging on the sovereign agreement with GMR, rumours of a Chinese intermediary stepping in to cover possible financial consequences could significantly affect the Maldives internationally.

“In terms of geopolitics, we are hearing about a Chinese connection to the [airport issue] that does not put the country in a comfortable position,” Ghafoor claimed. “Ideologically and culturally we have much closer ties to India than China.”

Returning from a visit to China back in September, President Dr Mohamed Waheed Hassan told reporters that Chinese aid to the Maldives would not be limited to a US$500million (MVR7.7billion) loan finalised earlier this year.

Waheed revealed at the time that the Chinese government had pledged to make all necessary aid available to the Maldives, including assistance with road and shipping development, local media reported at the time.

Regarding China’s view on Maldivian politics, Waheed noted that the Chinese were amongst the first nations to recognise his unity government.

“The Chinese Prime Minister personally told me that he had full confidence and support for the Maldivian government,” Waheed was reported as saying.

However, the Maldives government this evening dismissed suggestions that China would be taking a role in any future airport development.

“On this matter, China is as far away from the airport development as is physically possible,” said Presidents Office Media Secretary Masood Imad.

Troubled airport agreement

The agreement with the GMR-Malaysia Airports Holdings Berhad consortium was signed on June 28, 2010 with the Nasheed administration, following a bidding process conducted by the World Bank’s International Finance Corporation (IFC).

The GMR-MAHB consortium narrowly beat Turkish-French consortium TAV Holdings-Aéroports de Paris Management (ADPM), scoring a final Net Present Value (NPV) score of 495.18 to the runner up’s 454.04 at conclusion of the bid.

GMR’s win was based on playing to the government’s highest-scoring factors – fuel share revenue and upfront payment – at the expense of non-fuel related airport revenue.

As part of its successful bid, GMR paid the government US$78 million and 1 percent of non-fuel revenue and 15 percent of fuel revenue for 2011-2014, increased to 10 percent and 27 percent respectively for 2015-2025. The developer at the time anticipated that additional services and duty free development for the country’s well-heeled clientele, as well as the Maldives’ tourism growth potential, would offset the risks of the higher fuel share.

Opposition parties at the time the agreement was signed – and are now in government following February 7’s controversial transfer of power – first opposed GMR’s development of the airport on nationalistic grounds, and then levelled numerous allegations against the company ranging from corruption to concerns that the deal would allow Israeli bombers to refuel en route to bombing Arab countries.

Further protests occurred in December 2011 after GMR ceased renewing lease agreements of several existing airport duty free operators, notably duty-free liquor store Alpha-MVKB.

The High Court upheld at the time that since GMR had given notice on March 1, 2011 and, as per the agreement, the contract had been terminated on March 31. The court concluded that MVK had no right to remain at the airport without approval from GMR, and began packing up the store’s contents on December 4. Following the eviction, MVK CEO Ibrahim Shafeeq accused GMR of breaking into his shop and stealing his stock, and then launched a ‘Go Home GMR’ protest.

As tension with the developer increased, President Waheed’s cabinet attacked the IFC as “irresponsible” and “negligent” in conducting the bidding process.

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

The stand-off escalated in early August 2012 following a stop work order on the new terminal development, after the government alleged certain planning permissions had not been obtained from the Civil Aviation Authority.

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State budget of MVR 16.9 billion for 2013 presented to parliament

Finance Minister Abdulla Jihad submitted an annual state budget of MVR 16.9 billion (US$1 billion) for 2013 (Dhivehi) to parliament today, proposing a raft of measures to raise revenue and reduce spending.

Of the proposed MVR 16.9 billion of government spending, more than 70 percent was recurrent expenditure, Jihad noted in his budget speech (Dhivehi).

“As in other years, the highest portion of recurrent expenditure is expenditure on [salaries and allowances for government] employees,” Jihad explained. “That is 48 percent of total recurrent expenditure.”

As total expenditure would outstrip projected revenues of MVR 12.9 billion (US$836 million), Jihad said the resulting deficit would be plugged with MVR 971 million (US$62 million) as budget support and MVR 1.3 billion (US$84 million) from Treasury bill (T-bill) sales.

Of the MVR 971 million in budget support, MVR 671 million (US$43 million) was expected as foreign loan assistance, Jihad explained, with the rest to be made up from “domestic finance.”

New measures proposed to raise revenue is expected to account for MVR 1.8 billion (US$116 million) in income, Jihad said.

Jihad further claimed that the budget deficit at the end of 2013 would be MVR 2.3 billion (US$149 million), half the deficit in the current year.

On revenue forecasts, Jihad revealed that income from taxation would account for MVR 9.1 billion (US$590 million) while MVR 3 billion (US$194 million) was expected from other sources, such as resort lease rents, dividends from government companies and profits from the Maldives Monetary Authority (MMA).

On social and economic programmes, Jihad said MVR 2.5 billion (US$162 million) was allocated to the education sector, MVR 1.7 billion (US$110 million) for strengthening the judiciary, MVR 1.5 billion (US$97 million) for improving health services, MVR 2 billion (US$129 million) for social security and welfare and MVR 5.5 billion (US$356 million) for infrastructure projects in the atolls.

A public sector investment programme (PSIP) was formulated with MVR 3.1 billion (US$201 million), Jihad said, with MVR 1.5 billion (US$97 million) from the state budget, MVR 21 million (US$1.3 million) from domestic loans, MVR 1.2 billion (US$77 million) as foreign loans and MVR347.6 million (US$22.5 million) as free aid.

The PSIP projects include construction and repairs of harbours in 14 islands, establishing sewerage systems in 11 islands, water systems in three islands, 1,500 housing units in eight islands, 21 new mosques and upgrading the regional hospitals in Kulhudhufushi and Addu City to tertiary level.

Meanwhile, according to the latest figures from the Finance Ministry, government spending as of November 22 stands at MVR 10.9 billion (US$706 million), while revenues of MVR 8.5 billion (US$551 million) have been collected so far this year.

Jihad said in parliament today that total spending in 2012 is expected to be MVR 16.5 billion (US$1 billion) while revenues would be MVR9.4 billion (US$609 million).

The revenue forecast in the 2012 budget was however MVR 11 billion (US$713 million).

“At the end of 2012, the state’s budget deficit is estimated to be at MVR 4.3 billion (US$278 million). That is 12.6 percent of GDP,” Jihad revealed.

Revenue raising and cost-cutting measures

A recent mission from the International Monetary Fund (IMF) urged the government to implement a raft of measures to raise revenues, advising that strengthening government finances was “the most pressing macroeconomic priority for the Maldives.”

Echoing the IMF concerns, Jihad told MPs that rising public debt was “a major challenge to the country’s economy,” revealing that the state’s debt would increase to MVR 31 billion (US$2 billion) by the end of 2013 – 82 percent of GDP.

If the deficit spending trend continues, Jihad warned that the Maldives would face severe difficulties in securing development loans and financial assistance.

Taking the IMF recommendations on board in formulating the budget, Jihad proposed a number of revenue raising and cost-cutting measures,

Review government subsidies to target assistance to the needy
Freeze hiring “as much as possible”
Reforming the universal health insurance programme ‘Aasandha’
Reducing the number of councillors and board members of government companies
Reducing expenditure for trips from government offices to the atolls
Reduce government expenditure on rent for government offices
Reduce overseas trips by government employees
Amending the Pension Act to abolish “double pension”
Reversing import duty reductions
Hiking T-GST (Tourism Good and Services Tax) to 15 percent from July 2013
Introducing GST for telecom services (currently exempt from the tax)
Introducing GST for oil
Increasing airport service charge for foreigners from $18 to $30
Amending the law on revenue stamps
Abolishing 22 loss-making government companies

Jihad appealed to MPs to approve the measures and warned of “bitter consequences for the whole nation” should deficit spending continue in the future.

The Finance Minister urged MPs to “put aside political differences and prioritise national interest” in recognising that the country could not “indefinitely” spend beyond its means.

“We have to accept that these measures will affect all of us to some extent,” he said. “However, if we do not begin taking these measures, we might have to face more severe difficulties as a result of steps we would be forced to take.”

Monetary policy

According to projections by the MMA, said Jihad, the current account deficit is expected be higher than 2012 by 15 percent.

The current account deficit is projected to widen to 28 percent of GDP in 2013, Jihad said.

Collaborative efforts from different sector would be needed to “solve the balance of payments problem facing the country,” Jihad added, as the imbalance in the foreign exchange market has been building for many years, resulting in a parallel or “black market” for dollars.

Policies have been proposed to increase exports and expand small businesses, Jihad said.

Following the submission of the budget today, a joint committee of the parliament’s Finance Committee and Economic Committee would convene to review the proposed budget before it is put for a vote.

The budget debate has meanwhile been scheduled for December 4, 5 and 6, Speaker Abdulla Shahid said today.

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Indian US$25 million budget support loan delayed after Maldives fails to complete paperwork

A US$25 million state loan from India required to help balance the Maldives’ budget for the remainder of 2012 has been delayed after the government failed to submit the requested paperwork, a diplomatic source has revealed.

A representative for the Indian High Commission in the Maldives – who asked not to be named – told Minivan News that despite recent diplomatic tensions between the two nations, funding had actually stalled due to the Maldives’ government failing for over a month to submit the papers needed to complete the financing deal.

Although the Finance Ministry has now played down previous budget concerns, the US$25 million in funding agreed by India was last month deemed vital by the Finance Minister to ensure the government’s remaining spending in 2012 was met.

While the loan agreement still stands, the diplomatic source stressed that concerns within the Indian government about perceived anti-India sentiments from senior political figures in the Maldives could yet have a bearing on financial support offered to the country.

“Because of the current situation in the Maldives there is a perception in the Indian government that its interests are being treated unfairly,” he said. “[The government] will have the final say on approving any loan and these comments will be taken into account.”

Tensions have increased between the two countries this month as senior Maldivian government officials step up their efforts to oppose a contract signed under the previous administration with Indian infrastructure group GMR to develop Ibrahim Nasir International Airport (INIA). The contract represents the largest foreign investment ever undertaken in the country’s history.

In an arbitration case held last week, the High Court of Singapore rejected an attempt by the Maldives Airports Company Limited (MACL) to release an injunction blocking the government from taking action in the Civil Court of Maldives blocking GMR’s offset of the airport development charge (ADC).

Yet according to rumours circulating on social media sites, the government will allegedly cancel the GMR contact at a cabinet meeting today on the back of calls from some coalition parties to “renationalise” the airport.

Tweets were being circulated speculating that a Chinese intermediary was prepared to pay for the contract termination and take over the airport development.

Finance Minister Abdulla Jihad said he did not wish to comment on the matter or the loan delay at present ahead of the state budget being unveiled on November 27.

Meanwhile, recently appointed State Finance Minister Abbas Adil Riza – who publicly labelled Indian high Commissioner D M Mulay “a traitor” earlier this month over the airport development – and Economic Development Minister Ahmed Mohamed were not responding to Minivan News at time of press.

India has also this week called for the Maldives government to repay US$100 million in treasury bonds by February 2013.

Amidst increased diplomatic tensions, Finance Minister Abdulla Jihad told Minivan News earlier this week that he was unaware of the reason for the delays in receiving the US$25 million loan, requesting the question be put to the Indian High Commission in Male’.

In response, a High Commission of India representative said it had waited for over a month before Maldivian authorities this week returned a draft amendment needed to process the loan. The high commission has said it could now proceed and forward the finance request to the Indian government for final approval.

“We had sent the government the draft amendment, to which they have now have agreed. However is it unlikely they are going to get the funds soon as the decision must be sent to the cabinet for approval,” the source said, adding that the agreement would need to be first sent to India’s Ministry of External Affairs. “The Maldives government will also need to complete certain steps to obtain the funds. For instance, it will have to open a bank account with the State Bank of India for the loan.”

The US$25 million loan was agreed as part of the $US100 million standby credit facility signed with Prime Minister Manmohan Singh in November 2011.

“Deep trouble”

According to the high commission source, the credit facility had been initially agreed after the previous government of Mohamed Nasheed found itself in “deep trouble” and in need of financial assistance by late October last year.

These financial concerns were said to have been exacerbated following the controversial transfer of power on February 7, leading to fears the country may face a sovereign default.

According to the high commission, these initial loan payments were expedited at the time by Indian authorities on an emergency basis on the grounds that the correct paperwork would be completed at a later date.

However, these emergency conditions were no longer said to be in place.

“This was an extreme situation and we did not want the government to have to default,” the diplomatic source claimed, adding that the Maldives was now required to complete all requested paperwork as had been agreed.

Of the US$100 million credit provided by India, half the amount was agreed to be provided as part of budget support, while the remaining US$50 million would be set aside to aid local business by importing products from India.

However, the diplomatic source said that this agreement had been amended on several occasions to allow for a further US$25 million to go towards supporting the state budget.

Despite previously claiming that the Maldives would be unable to support state spending without securing the additional US$25 million budget support loan from India, Finance Minister Jihad announced this week that the issue of covering the government’s wage bill for the remainder of 2012 was “no longer a major concern”.

Jihad added that his department was working to secure private sector funding to make up any shortfalls in budget support.

However, he did not give further details on the nature of the private sector groups presently being sought.

Jihad claimed that a “significant” part of the private sector focus would be through issuing treasury bills (T-bills) to the private sector as recommended earlier this year by the IMF.

“When we opened up treasury bills to the private sector initially there was no response,” he said. “However, there have now been consultations with private groups.”

T-bills, which are sold by governments all over the world, serve as a short-term debt obligation backed by sovereign states. In the Maldives, T-bills have a maximum maturity of six months, after which time they must be repaid.

Foreign borrowing

Earlier this year, President Waheed reportedly said he would not resort to borrowing from foreign governments in order to finance government activities.

“I will not try to run the government by securing huge loans from foreign parties. We are trying to spend from what we earn,” he was reported to have told the people of Nilandhoo.

Despite Waheed’s reassurances, October saw a number of state owned institutions face disconnection from the capital’s power grid as bills amounting to around MVR 150 million (US$9.7 million) were owed to the State Electricity Company (STELCO).

Since coming to power in February, the government has committed to reimbursing civil servants for wage reductions made during the austerity measures of the previous government, amounting to Rf443.7 million (US$28.8 million), to be disbursed in monthly instalments over 12 months from July.

A MVR 100 million (US$6.4 million) fuel subsidy for the fishing industry was also approved by the Majlis Finance Committee, with the hope of stimulating the ailing sector.

The overall deficit for government expenditure has already reached over MVR 2 billion (US$129 million). Jihad has told the Majlis’ Finance Committee that he expected this figure to rise to MVR 6 billion (US$387 million) by year’s end – 28 percent of GDP – alleging that the previous government left unpaid bills equal to over one third of this anticipated deficit.

Former Minister of Economic Development Mahmood Razee has previously told Minivan News that this increased expenditure in the face of a pre-existing deficit represented the government “ignoring reality.”

“If they don’t get the loan, they will have to cut travel expenses, stop certain programs – take drastic measures or get another loan,” said Razee, claiming that the only alternative would be to sell treasury bills.

Following reports in August that the government was attempting to raise funds through the sale of treasury bills, former Finance Minister Ahmed Inaz claimed such a measure would not address IMF concerns about state spending, prolonging economic uncertainty.

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India calls in debts of US$100 million; “not a major concern” says Finance Minister

Despite India requesting repayment of US$100 million in treasury bonds by February 2013, Finance Minister Abdulla Jihad has said his earlier fears that the Maldives would be unable to cover expenditure for the final months of 2012 were “no longer a concern”.

Jihad told Minivan News that India was also yet to provide a final US$25 million installment of a promised loan, one Jihad said just last month was vital to ensure the Maldives could cover its wage bill.

The Maldives is now required to pay US$50 million in T-bond payments to India by next month, with a second payment due in February, local media has reported.

The Finance Ministry said the debt would be repaid through state reserves, which Sun Online reported could fall to US$140 million (MVR2.2 billion) once the payments to India are settled.

Concerns over state reserves are shared by the International Monetary Fund (IMF), which earlier this month called on the Maldives to introduce a raft of new measures to try and raise revenue and cut spending to alleviate a ballooning fiscal deficit.

“The fiscal deficit is expected to rise in 2012 to 16 percent of GDP [Gross Domestic Product] in cash terms, and likely even higher if one accounts for the government’s unpaid bills, accumulated in an increasingly challenging environment for financing,” the IMF mission stated, following its visit to the Maldives.

Finance Minister Jihad said that as part of trying to balance the country’s expenditure, the Economic Ministry was attempting to secure private sector funding to make up any shortfalls in budget support resulting from a lack of funds anticipated from India. However, he did not give further details on the nature of the private sector groups presently being sought.

Jihad claimed that a “significant” part of the private sector focus would be through issuing treasury bills (T-bills) to the private sector as recommended earlier this year by the IMF.

“When we opened up treasury bills to the private sector initially there was no response,” he said. “However, there have now been consultations with private groups.”

Meanwhile, Jihad said the Finance Ministry had received no notice from Indian authorities regarding when it may receive the final US$25 million installment of a US$100 million loan agreed late last year. The finance minster said his department had been given no ultimatum or conditions to be met by Indian authorities in order to receive the money.

“I don’t know why the delay [in receiving the funds] has happened. You would need to ask the Indian High Commission about that,” he said.

The US$25 million was agreed as part of the $US100 million standby credit facility signed with Prime Minister Manmohan Singh in November 2011.

Diplomatic tension

Tensions between India and the Maldives has risen in recent months as divides within the coalition government of President Mohamed Waheed Hassan began to appear over opposition to a contract signed by the previous government, to develop and manage the country’s main airport with Indian infrastructure group GMR.

The divides have threatened to spill into a major diplomatic incident in recent weeks, after the President’s Office issued a release distancing itself from the comments of its own spokesperson, Abbas Adil Riza, who had accused India’s representative in the Maldives of being “an enemy and a traitor to the Maldivian people”.

The dispute between the government and GMR – currently being heard in an arbitration case at Singapore’s High Court – has become increasingly acrimonious with ongoing demonstrations across Male’ and even the water ways surrounding the airport.

The demonstrations have been backed by certain parties within President Waheed’s coalition government, who have set him an ultimatum of reneging on the contract by the end of the month.

While the GMR contract is not implicitly backed by other coalition parties, several senior party figures have opted against plans to “take to the streets” in calling for the airport to be “renationalised” or acting in a manner that could potentially damage future foreign investment in the country.

The GMR contract, which was overseen by a number of organisations including the International Finance Corporation (IFC) – a member of the World Bank group – represents the largest ever foreign investment in the Maldives. President Waheed himself told Indian media that his government was committed to protecting foreign investments in the Maldives, despite questioning elements of the deal.

Foreign borrowing

Earlier this year, President Waheed reportedly said he would not resort to borrowing from foreign governments in order to finance government activities.

“I will not try to run the government by securing huge loans from foreign parties. We are trying to spend from what we earn,” he was reported to have told the people of Nilandhoo.

“The Maldivian economy is fine. Don’t listen to whatever people say. We don’t have to [worry] about the Maldivian economy being in a slump,” he was quoted as saying at the time during a rally in Meedhoo.

Responding to the institutions’ blaming of his ministry, Jihad at the time told Sun that the finances were simply not there.

“We are not receiving foreign aid as was included in the budget. How can we spend more than we receive? That’s why those bills are unpaid. We can’t spend money we don’t have,” he told the paper.

A MVR 100million (US$6.4 million) fuel subsidy for the fishing industry was also approved by the Majlis Finance Committee, with the hope of stimulating the ailing sector.

The overall deficit for government expenditure has already reached over MVR2billion (US$129million). Jihad has told the Majlis’ Finance Committee that he expected this figure to rise to MVR 6 billion (US$387 million) by year’s end – 28 percent of GDP – alleging that the previous government left unpaid bills equal to over one third of this anticipated deficit.

In August, the current Finance Ministry announced its own austerity measures intended to wipe over MVR2.2billion (US$143 million) from this year’s budget deficit though few of these propositions have as yet been followed through.

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High Court of Singapore upholds injunction against MACL, blocking action over ADC in Maldives’ Civil Court

The High Court of Singapore has rejected an attempt by the Maldives Airports Company Limited (MACL) to release an injunction blocking the government from taking action in the Civil Court of Maldives blocking GMR’s offset of the airport development charge (ADC).

MACL is the government party in the concession agreement with Indian infrastructure giant GMR to manage and develop Ibrahim Nasir International Airport, signed during the Nasheed administration.

The opposition had some success in disrupting the agreement in late 2011, after the Dhivehi Qaumee Party (DQP) won a case in the Civil Court blocking GMR from levying an airport development charge (ADC) as stipulated in its concession agreement.

MACL in a letter sent on January 5, 2012, instructed GMR to deduct the ADC revenues from the concession fees due the government, while it sought to appeal the Civil Court ruling. However the Nasheed government fell a month later and the opposition inherited the problem, receiving a succession of bills from the airport developer throughout 2012.

Combined with the third quarter payment due, the government now owes the airport developer US$3.7 million.

“The net result of this is that the Maldivian government now has to pay GMR for running the airport. On this basis it is likely that the Maldivian government will end up paying about MVR 8 billion (US$519 million) to GMR for the duration of the contract,” wrote Dr Hassan Saeed, President Mohamed Waheed’s Special Advisor, in a recent appeal to Indian Prime Minister Manmohan Singh calling on him to cancel the Maldives’ agreement with GMR.

Saeed is the leader of the DQP, the party that filed the case against the ADC while in opposition, and has strongly opposed GMR’s involvement in the airport development.

As per the concession agreement, the ADC matter was referred to the Singapore Court of Arbitration.

The High Court of Singapore on July 23 granted an injunction in favor of GMR, restraining MACL from taking any step in the Civil Courts of the Maldives preventing the company “from adjustment/set-off of the Airport Development Charge and insurance surcharge, as per MACL’s 5th January 2012 letter, which is now referred to arbitration,” according to the airport operator.

MACL approached the High Court of Singapore in October 2012 seeking to have the injunction lifted. However the court dismissed the application on November 19.

MACL has challenged the validity of the July 5 letter instructing GMR to deduct the ADC from its concession revenues, claiming that it was signed by the former MACL Chairman ‘Bandhu’ Ibrahim Saleem without approval from the company’s board, and noted that he had been subsequently replaced under the new administration.

“The dispute raised by MACL on the validity of the 5th January 2012 letter will be decided in the arbitration proceedings to be held in Singapore,” GMR noted in a statement.

Attorney General (AG) Aishath Azima Shakoor claimed in local newspaper Haveeru on Monday that the Singaporean court had permitted MACL to try the matter in a Maldivian court, and allow the company to sue Saleem for the loss of revenue caused by the July 5 letter.

“But in accordance with the agreement whether MACL had the right to ignore or comply with the letter would be decided by arbitration. Even if a Maldivian Court rules the letter as null and void it would not binding for the arbitration,” Azima was reported as telling the paper.

There was, she said, no impediment to the government terminating the GMR agreement altogether, although this would be subject to compensation payable to GMR to be decided through arbitration.

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Maldives mulls tourism future as China reaches quarter of all arrivals

China has accounted for just under a quarter of all visitors coming to the Maldives for the first nine months of 2012, contributing substantially to a 3.4 percent increase in arrivals compared to last year despite declines in established European markets.

The Ministry of Tourism, Arts and Culture has said the figures indicated that the country remained on track to meet its aim of welcoming a million visitors in 2012.

Tourism authorities also said that despite the growing importance of China to visitor numbers, European markets remained the main overall contributor to the Maldives tourism sector. As the country looks to commemorate 40 years since the introduction of the travel industry, officials have said that even declining custom from markets like the UK has begun showing positive trends in terms of demand for more lucrative high-end holidays.

According to the statistics, between January and September 2012, there were 691,608 tourist arrivals in the Maldives. During September 2012, 76,806 visitors travelled to the Maldives – an increase of 6.9 percent over the same time last year.

In terms of regional demand, the ministry figures showed that European arrivals fell by 2.9 per cent between January and September to 376,674 people over the same period in 2011. A five percent increase in traffic from Central and Eastern Europe was ultimately insufficient to offset double-digit declines in travellers from northern and southern European countries.

Arrivals from the Eastern Mediterranean region were also up between January and September by 10.4 percent to 5,191 people. In the region, tourists from Turkey and Israel coming to the Maldives increased by 7.6 percent and 21.8 percent respectively over the same period.

During September 2012, European arrivals overall fell 3.2 percent to 33,975 over the same time last year.

The statistics showed that the Asia Pacific region has continued to drive growth in visitors to the Maldives, with 275,343 arrivals between recorded January to September 2012 – an increase of 10.2 percent.

According to the figures, arrivals in September alone from the Asia Pacific region reached 38,483, up 17.5 percent on the same time last year.

Key to this regional growth has been demand from China, which for the first nine months of 2012 accounted for 24.5 percent of all tourism arrivals to the Maldives.

In the Americas, total arrivals from the region rose 12.3 percent to 18,375 for the first nine months of the year, with Brazil Canada and the US all posting growth. The US was the region’s largest market over the period with visitor numbers up 10 percent to 10,899 people.

Visitors from the Middle East were also up for the first nine months of the year by 54.6 percent over the same time in 2011, amounting to 16,211 people. However, visitor numbers for the region fell by 3.3 percent during September when compared to the same period of time in 2011.

Arrivals from Africa between January and September this year were up by 9.8 percent to 5,005 compared to the same period this year.

For every month of 2012 since February, resort occupancy has been down on a single figure basis, a trend continued into September with occupancy at the country’s island tourism properties falling 5.5 percent over the same period last year.

Occupancy rates have also fallen for hotels, guest houses and safari boats when compared to the nine month period between January and September 2011, according to the statistics.

Encouraging figures

Deputy Tourism Minister Mohamed Maleeh Jamal told Minivan News that the figures were encouraging for the industry. Maleeh stressed that this encouragement was not representative just of growth in Asia, but also due to the performance of key markets like Germany and Switzerland.

“Some 55 percent of traffic [during 2012] has still come from Europe,” he said.

However, even in markets like the UK, which for the first nine months of the year saw visitors fall by 13.7 percent to 67,987, Maleeh claimed the decline failed to reflect a changing customer demand for high-end holidays in the country.

Having recently returned from visiting London for the World Travel Market 2012 travel fair, Maleeh said that industry insiders and travel operators he had spoken to at the show identified a shift in the UK market towards more lucrative higher-cost packages. He added that with the overall economic situation in Europe still uncertain, it was important to keep an industry presence in the region.

“We will be keeping a presence in these markets and wait for them to bounce back. Countries like Germany and Switzerland have shown good growth,” he said.

Master plan

Along with celebrations to commemorate 40 years since the introduction of tourism, the ministry has said it also expects to unveil its fourth official tourism master plan by year-end. The document is anticipated to outline developments across the industry – dealing with the expansion of biospheres and other “value-adding” focuses – as well as an integrated plan to promote the destination internationally.

“We are working on the fourth tourism master plan in line with groups like the United Nations Development Programme (UNDP) and the World Bank to focus on a destination strategy,” Maleeh said.

Following February’s controversial transfer of power, the incoming government of President Dr Mohamed Waheed Hassan sought to utilise public relations groups and advertising to try and offset the impact of negative news headlines resulting from the change in government.

This focus has included agreeing a US$250,000 (Rf3.8million) advertising deal to promote the country’s tourism industry on the BBC through sponsorship of its weather services, as well as signing a £93,000 per month (US$150,000) contract with public relations group Ruder Finn to try and improve the country’s image internationally.

Having previously claimed that the “hard days” were over for Maldivian tourism, Maleeh said he hoped the government – currently facing increasing pressure to reduce its fiscal deficit by the International Monetary Fund (IMF) – would provide a sufficient promotional budget to support such plans.

“The Maldives should be present in two to three of the largest news sources, these are CNN, the BBC and the National Geographic channel,” he said. “These are frequently watched by major investors. Tourism is vulnerable and we need to have continuous engagement and visibility, if not, it can be a case of out of sight out of mind.”

While unable to outline the exact scope of the new master plan, Maleeh said that as President Waheed this year announced a strategy to make the Maldives the world’s largest marine reserve within the next five years, the commitment could prove particularly beneficial to tourism.

“Since the foundation of tourism 40 years ago, the environment has always been hugely important to the Maldives. After 40 years the country is still pristine making us very popular with tourists and we welcome any actions to encourage maintaining this,” he said.

Maleeh added that the foundation of reserves in the country at destinations like Baa Atoll was helping the area become a “premium destination within a destination”, adding further value to properties located in an area of strong natural interest.

Along with the potential benefits of operating as a marine reserve, Maleed claimed that the country’s status of being a protected marine reserve would not itself impact on the type of tourism developments being sought in the Maldives. These plans have included ambitious proposals such as the construction of five man-made islands to support leisure developments including a 19-hole golf course in the Maldives.

Maleeh claimed that he did not think these type of projects would be threatened by the Maldives protected reserve status, with developers still being required to work within existing environmental laws that impose several restrictions on the amount of development possible on each island.

“All plans are required to undergo an Environmental Impact Assessment (EIA) and resort developers are very good at working within these parameters,” he said.

In Baa Atoll, which has been awarded the United Nations Educational, Scientific and Cultural Organization (UNESCO) Biosphere Reserve status, several resort operators have said they remain uncertain as to the direct impact protected marine areas may have on their operations.

Reethi Beach Resort General Manager Peter Gremes has previously told Dhonisaurus that while obtaining the UNESCO reserve status last year was a “prestigious” accolade for properties in the atoll, it was unlikely to impact visitor numbers on a significant basis.

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Government’s contract with Ruder Finn PR firm expires

The Maldivian government has concluded its contract with international public relations firm Ruder Finn, according to industry publication PR Week.

Head of the agency Nick Leonard told PR Week that the account had concluded upon reaching the end of its time frame.

Ruder Finn was selected in April by the new government to improve the Maldives’ international image, following widespread negative media coverage of February 7’s controversial transfer of power, at a reported cost of £93,000 per month (US$150,000).

Rumours in August that the contract had ended after six months were unconfirmed. Ruder Finn’s Senior Vice President and Ethics Officer Emmanuel Tchividjian at the time referred Minivan News to the government, “as we do not comment publicly on contracts that we have with our clients.”

In July, a small group of protesters gathered outside the PR firm’s London offices to mark Maldives Independence Day, including President Mohamed Waheed’s brother, Naushad Waheed Hassan.

The protest saw placards bearing slogans ‘Islamophobes and dictators’, ‘Ruder Finn: no client too toxic’ and ‘Gold medallists of spin: Ruder Finn’, according to PR Week.

Former International Spokesperson for the President’s Office, Paul Roberts, told Minivan News that a source inside Ruder Finn had revealed that the agency considered President Waheed “a lost cause from a PR point of view”.

“They said that the senior people in Ruder Finn worried that representing the Maldives government had damaged the company’s brand,” Roberts said.

Ruder Finn’s previous work includes the Philip Morris campaign disputing the health hazards of smoking, and publicising the release of the anti-Islamic film ‘Fitna’.

President’s Office Media Secretary Masood Imad confirmed that Ruder Finn had ceased working with the Maldivian government, but did not elaborate on the reason.

Journalist and climate activist Mark Lynas, formerly Nasheed’s climate advisor, has previously argued that the appointment of a such a large PR agency was counterproductive as it made journalists “doubly suspicious”.

The original request for proposals (RFP) document issued by the MMPRC on April 9 stated that the successful agency would be required to target stakeholders in the UK, USA, Commonwealth countries, “all relevant EU institutions”, academic institutions and NGOs, “arrange 1:1 meetings with influential and open minded potential champions”, and “arrange briefings to build links at various levels with the UK, US, Commonwealth and major European governments.”

The agency will “feed in academic arguments to those identified”, and “determine champions who are willing to speak publicly on Maldives”, in a bid to “Rally an alliance of support for the Maldives”.

Locally, the chosen company will be required to “assist with the roll out of policy and other announcements to media, parliamentarians,government, NGOs and others.”

Minivan News also sought clarification from Maldives Marketing and Public Relations Corporation (MMPRC) head Mohamed Maleeh Jamal, but he had not responded at time of press.

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