Business & Tourism – Page 54 – Minivan News

ACC approaches Finance Committee over Nexbis system

The Anti-Corruption Commission (ACC) has told Parliament’s Finance Committee that the deal with Malaysian mobile security provider Nexbis will cost the Maldives MVR 2.5 billion (US$162 million) in potential lost revenue over the lifetime of the contract.

The border control system is now up and running at Ibrahim Nasir International Airport (INIA), after a Supreme Court ruling in early September favouring Nexbis ended almost two years of efforts by the ACC to block the project.

Under the ‘build operate and transfer’ (BOT) agreement with Nexbis, the government is obliged to pay Nexbis US$2 for every foreign passenger processed and US$15 for every work permit for the 20 year lifespan of the contract. Nexbis remains responsible for the upgrading, servicing and administration of the system.

Former Immigration Controller Abdulla Shahid has expressed concern over both the cost and necessity of the project, calculating that with continued growth in tourist numbers Nexbis would be earning US$200 million in revenue over the 20 year lifespan of the agreement.

At five percent, royalties to the government would come to US$10 million, Shahid said, when there was little reason for the government not be earning the revenue itself by operating a system given by a donor country.

“The option was there to establish the system for free,” stated ACC President Hassan Luthfee, revealing that the US government had offered a free system in 2009.

“Even the Indian government had offered to do it for free. On the other hand this could have been done for MVR2.3-2.5 million. So we can’t believe that this should be done at such a high cost,” Luthfee told the committee.

Other contentions raised by the ACC included a “questionable” project evaluation, which the commission alleged violated protocols of the National Planning Council.

“The National Planning Council’s protocols say that anything passed by the council cannot be changed by any other relevant institution unless it is sanctioned by the Council itself or the ministerial cabinet. But without following the said two protocols, Immigration made major changes to the proposal,” ACC’s investigation officer Mohamed Sodig was reported as saying in local media.

Evaluations and bid criteria had been unclear, the ACC alleged, further claiming that the validity of the Nexbis bid had been 90 days which had expired at the time the price bids were opened.

“We tried to determine whether the validity of the proposal or bid of Nexbis had been extended. However, we failed to find a single document that had done so, and marks had been given for Nexbis’ price bid,” Sodig was reported as stating.

The commission also claimed that minutes for one government meeting to discuss the project had taken place during prayer time on Friday October 15, 2010, which the commission claimed was “highly suspicious in a 100 percent Muslim country”.

The ACC also contended that the charging of a fee for passengers and foreign workers constituted a tax and was in violation of Article 97 of the constitution, requiring parliamentary approval for new or altered taxation. In an apparent precedent, a similar ruling from the Civil Court in late 2011 overruled airport developer GMR’s ability to levy an Airport Development Charge (ADC), despite this being stipulated in the developer’s concession agreement with the government.

The Supreme Court has meanwhile cleared the way for the border control project, invalidating an earlier injunction from the High Court.

The move prompted complaints from the ACC, which expressed concern and frustration over the decision stating that it has put the commission in a state of limbo and deprived it of purpose.

“If this institution is simply an investigative body, then there is no purpose for our presence,” he said. “Even the police investigate cases, don’t they? So it is more cost effective for this state to have only the police to investigate cases instead of the ACC,” Luthfee said at the time.

Outside the dispute over its legality, with the project now running the collection of biometric data by immigration allows the government to identify people without paper documents – useful in a country where a third the population are imported workers, and where the confiscation of passports by employers is common practice.

The reaction from tourists to the new system has however been mixed.

“The immigration process now takes a lot of time to complete because they must now take fingerprints and pictures of people entering the country,” observed a German visitor.

Likes

(2)Dislikes

(0)

Maldives over half-way towards one million visitor goal following August arrival growth

Arrival numbers to the Maldives between January and August this year totalled 614,802 people – an increase of 2.9 percent compared to the same period during 2011, official figures provided by the Ministry of Tourism, Arts and Culture have shown.

With Maldives travel authorities aiming to welcome a million visitors to the country by the end of the year, the figures highlight a 3.8 percent increase in arrivals for August 2012 when compared to the same period the previous year. A total of 79,768 international arrivals were recorded coming to the country last month.

Although unavailable for comment today, Deputy Minister for Tourism, Arts and Culture Mohamed Maleeh Jamal told Minivan News earlier this month that the country’s travel industry was on target to meet its goal of attracting one million annual visitors – claiming the “the hard days” were over for Maldives tourism.

Maleeh claimed at the time that the industry remained on track to attract one million visitors, despite facing challenges such as the impact of ongoing financial uncertainty on some core European tourism markets like the UK and Italy.

According to the Tourism Ministry figures, for the first eight months of 2012, Europe continued to dominate visitor numbers to the Maldives, accounting for 55.7 percent of all arrivals – down 2.9 percent when compared to 2011.

During August, total European arrivals on a year-on-year basis fell by 9.6 percent to 35,488 visitors.

In Central and Eastern Europe, which includes markets like Russia, Poland and Bulgaria, visitors during August fell 7.7 percent compared to the same period in 2011.

In Northern Europe, which incorporates markets including the UK, Sweden and Ireland, arrivals dropped 14.3 percent to 8,202 last month, according to the official statistics.

Southern Europe also recorded a drop in arrivals with 7,710 visitors from markets such as Greece, Italy and Spain coming to the Maldives – a fall of 24.1 percent compared to the same period last year.

Arrivals were up by 5.6 percent from the Western Europe region on the back of growth in markets such as Germany, France and Austria, with 12,434 visitors entering the country during August 2012.

Europe’s smallest tourism market for the Maldives, Eastern Mediterranean Europe, saw 617 arrivals visitors coming from countries like Turkey and Israel, a fall of 7.9 percent.

The Asian impact

Asia was responsible for 38.5 percent of arrivals in the Maldives between January and August 2012, an increase of 9.1 percent over the same time last year.

Despite the overall decline in European visitors during August 2012 when compared to the same period last year, arrivals from the Asia Pacific market were up 12.6 percent to 38,898. The increase was reflected in increased visitors from key markets throughout the region.

North East Asia, which represents the bulk of the region’s travel market for the Maldives – with countries like China, Japan and Korea – saw arrivals increase by 9.4 percent to 31,020 people.

In South East Asia, visitors to the Maldives rose 45.1 percent during August 2012 to 2,809 from markets such as Indonesia, Thailand and Singapore.

South Asia meanwhile posted a 19.6 percent rise in visitors, with 3,623 arrivals from markets including India, Sri Lanka and Bangladesh being recorded for the month on a year-on-year basis. Arrivals from Oceania markets like Australia and New Zealand were up 18.1 percent to 1,446 people.

According to the same findings, arrivals from Africa reached 524, an increase of 24.5 percent, while visitors from the Americas rose 19.9 percent to 2,146. Arrivals from the Middle East during August rose 3.4 percent to 2,712 people.

Occupancy rates

Despite the growth in arrivals, the total occupancy rate for resorts, hotels, guest houses and safari boats during the first eight months of the year was down 1.2 percentage points in total to 70.8 percent. On a year-on-year basis, total average occupancy for August 2012 fell one percentage point to 68 percent.

According to Tourism Ministry statistics, the average resort occupancy between January and August this year fell 2.3 percentage points to 77 percent compared to the same period in 2011. During August alone, average occupancy fell 0.8 percentage points to 74.9 percent.

At the country’s hotels, average occupancy for the first eight months of the year was down 8.8 percentage points to 30.3 percent. In August, average hotel occupancy was down 6.1 percentage points to 25.8 percent over the same time frame last year.

Guest house occupancy for the first eight months of 2012, rose 0.8 percentage points to 16.3 percent. The same level of growth was also recorded in terms of average guest house occupancy for August 2012, which rose 0.8 percentage points to 16.3 percent.

Safari vessel occupancy meanwhile increased 4.1 percentage points between January to August 2012, totalling an average of 28.4 percent. However, average occupancy during August had fallen two percentage points to 19.1 percent.

Likes

(0)Dislikes

(0)

“Time for everyone to tighten their belts”: Finance Minister Jihad

Minister of Finance and Treasury Abdulla Jihad has said the state must brace to enact austerity measures in the long-term if authorities are to address the country’s fiscal deficit – with further budget cuts anticipated in all government departments over the next 12 months.

Jihad has told Minivan News that previous commitments by government institutions to cut their budgets by 15 percent would need to be followed by further reductions to state and civil service spending in next year’s budget, regardless of financial assistance secured from China and India.

The minister’s comments were made as Parliament’s Finance Committee – reconvening for the first time since July – agreed this week to provide an additional MVR 12 million (US$780,000) in budget to the Auditor General’s (AG’s) Office, according to local media.

Auditor General Niyaz Ibrahim said that under the existing state budget, an agreement was reached that an additional MVR 58.8 million (US$3.8 million) would be provided to the AG’s Office, though it was decided to request a smaller proportion of these funds, the Sun Online news service reported.

People’s Aliance (PA) party MP and Finance Committee Chair Ahmed Nazim was not responding to calls from Minivan News at the time of press.

However, Jihad claimed that the decision to provide the extended budget was a “concern” considering the state was not getting enough direct revenue at present to justify its spending.

“We need to be fair when it comes to the budget, everyone should have to follow the same rules,” he claimed. “Otherwise this would mean that I could only reduce the budget of the Finance Ministry in future. It is time that everyone should tighten their belts.”

According to Jihad, provisions for the extension of funds to the AG’s Office had been included in the state budget, but he claimed that the country needed to work together in reducing state spending where possible.

Regarding claims that further cuts to the state budget wuld be required during the next 12 months, Chairman of the Civil Service Commission (CSC) Mohamed Fahmy Hassan said that it had “managed” with the 15 percent cuts already made to its expenditure.

Fahmy added that as no request had so far been made by the government to reduce the size and budget of civil society organisations, it did not have concerns about potential job cuts.

“Our mandate is to provide human resources to the government. As long as there is no effect on the salaries or number of civil servants, we will not seek to intervene in the policy of government,” he said.

With state income lower and expenditure higher than predicted, this year’s budget deficit had been forecast to reach MVR9.1billion (US$590 million), equivalent to around 28 percent of nominal GDP.

Financial assistance

In the last few months, authorities in India and China had both pledged to provide financing to the Maldives. Finance Minister Jihad said that of these funds, US$25 million being provided by India would be put into “budget support” to try and address state spending. A large amount of the funding meanwhile from China, which would total US$500 million, was expected to be put towards development projects such as housing construction, the Finance Ministry added.

The Indian government had announced that it would be granting the Maldives an additional as part of the US$100 million standby credit facility agreed last year under the previous government.

China has also pledged funding to the government of President Dr Mohamed Waheed Hassan following an official state visit to the country.

The loans, equal to nearly one quarter of the Maldives’ GDP, are said to include $150 million (MVR2.3billion) for housing and infrastructure, with another $350million (MVR5.4billion) from the Export-Import Bank of China, reported Reuters.

Jihad has maintained that the state still needs to reassess where further spending cuts can be made going forward.

Just last month, the Finance Ministry forwarded proposals it claimed would cut MVR2.2billion (US$143million) form the national budget.

The austerity measures include raising Tourism Goods and Services Tax (TGST) to 15 percent, terminating electricity subsidies in Male’, increasing import duties on alcohol and imposing a 3 percent duty on oil, “reforming” the Aasandha health insurance scheme, and reducing the budget of every Ministry and independent institution by 15 percent – among other measures.

The original budget for 2012 envisioned that revenue would rise to MVR11.4billion (US$740million) with expenditure anticipated to be MVR14.5 billion (US$941million). This would have resulted in a budget deficit of around MVR3billion (US$194million), representing 10 percent of GDP.

However, several resort managers voiced concern at the time that the proposed revenue amendments would serve only to affect the financial viability of the country’s tourism industry, while providing little improvement in service or support in return.

Likes

(0)Dislikes

(0)

GMR leadership to visit Maldives as government parties escalate nationalisation rhetoric

Board members and the head of Indian infrastructure giant GMR, G M Rao, are due to visit the Maldives later this week in a bid to resolve tensions with the government over the company’s development of Ibrahim Nasir International Airport (INIA).

The upcoming visit follows a meeting between Rao and former President Maumoon Abdul Gayoom at a hospital in India where Gayoom’s wife was being treated. Gayoom also recently met with Indian Prime Minister Manmohan Singh.

GMR won a 25 year concession agreement to develop and manage the airport during the Nasheed administration. The opposition at the time challenged the government’s privatisation and threatened to renationalise the airport should it come to power.

Following the controversial transfer of power on February 7, the unity government under President Dr Mohamed Waheed Hassan has swung between issuing reassurances within diplomatic circles that Indian investments in the country would be protected, while locally stepping up nationalisation rhetoric.

Some of the dissent has blurred the line between business and politics.

Leader of the government-aligned Jumhooree Party (JP), resort tycoon Gasim Ibrahim, urged the government in local media to reclaim the airport, even at a cost of US$700 million, as it was worth “a thousand times more”.

Gasim’s comments followed GMR’s decision to suspend the credit facility for his Villa Air airline, due to unpaid bills totaling MVR 17 million (US$1.1 million) for fuel, ground handling and passenger service fees.

Contentious airport development charge

One of the government’s disagreements with GMR concerns the charging of a US$25 Airport Development Charge (ADC) on outgoing passengers, as stipulated in the concession agreement.

During the last months of the Nasheed administration, the opposition Dhivehi Qaumee Party (DQP) filed a successful case in the Civil Court blocking this fee from being charged on the grounds that was effectively a tax which had not been approved by parliament. DQP leader Dr Hassan Saeed, now President Waheed’s special advisor, and DQP Vice-President Dr Mohamed Jameel – the new Home Minister – justified their disapprobation while in opposition by publishing a pamphlet in Dhivehi (English translation).

The pamphlet described the deal as “paving the way for the enslavement of Maldivians in our beloved land”, and warning that “Indian people are especially devious”.

To abide by the court decision, Nasheed’s government agreed to subtract the ADC from its concession revenue while it sought to appeal.

Following February 7 the opposition inherited that compromise and in the first quarter of 2012 received only US$525,355 of an anticipated US$8.7 million.

With no resolution, in the second quarter of 2012 the government was presented with a bill for US$1.5 million, due to a shortfall in airport income. The loss of revenue comes at a time when the country is facing a crippling budget deficit, a foreign currency shortage, plummeting investor confidence, spiraling expenditure, and a drop off in foreign aid.

GMR publicly offered to resolve the ADC dispute by exempting Maldivian nationals from paying the fee, but has otherwise kept its negotiations largely behind closed doors.

In a statement at the time, GMR noted that the government received US$33 million in 2011 from airport concession fees, “three times the money the government ever made in a year [from the airport] before privatisation.”

Following construction of the new terminal in 2015 – including “a state-of-the-art 600,000 square foot integrated Passenger Terminal and a 20,000 square foot VIP terminal, and various other airside and landside developments,” expected revenue from the airport to the government was expected to reach US$50 million per year, GMR observed, and almost US$100 million from 2021 as passenger numbers increased.

“In effect, GMR Male’ International Airport Limited’s contribution to the government would be over US$2 billion over the concession period of 25 years, which will make a very significant contribution to the economy of the Maldives.”

The government’s airport company, Maldives Airports Company Limited (MACL), complained that it was now facing bankruptcy as a result of the ADC deduction, and insisted that it could make MVR 60 billion (US$3.9 billion) over 25 years by developing and operating the airport on its own. It did not clarify where the investment would come from.

If the government considered GMR’s public offer, it made no sign. Instead, the Transport Minister backed MACL in ordering GMR to pay back the money deducted.

MACL Managing Director Mohamed Ibrahim had told local media that MACL’s agreement with GMR under the previous government to deduct the ADC payment was “null and void”. He told reporters that the deal was no longer relevant as it had been agreed by the former MACL chairman, who had been replaced under the new government. Ibrahim contended that charges could therefore no longer be deducted from GMR’s concession payment.

“We had informed [GMR] that the letter from the former Chairman of MACL was now invalid and hence must not be followed. In addition we had also informed that no deductions can be made from the concession fee,” he told local newspaper Haveeru.

The matter has now been sent to the Singapore court of arbitration, as per the concession agreement.

Escalation

The stand-off escalated in early August following a stop work order on the new terminal development, after the government alleged there were missing planning permissions from the Civil Aviation Authority.

“When the government decides that a project be stopped, we will make sure this happens,” said President’s Office Spokesperson Abbas Adil Riza at the time. “GMR have not discussed the construction with relevant authorities,” he claimed.

In the past week the government and assortment of former opposition parties now in power have stepped up their campaign to pressure the airport developer, with cabinet ministers holding a press conference during which they accused the World Bank’s International Finance Corporation (IFC) of “negligence” and “irresponsibility” in conducting the original bidding process.

The IFC dismissed the allegations: “The IFC’s advice 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 organisation stated.

Attorney General Azima Shukoor then announced she had asked the Supreme Court to rule on whether it had jurisdiction over the airport agreement.

“It is against the International laws and the United Nations Charter that any action that undermines any sovereign right of a sovereign state, it is clear that courts of a sovereign nation has the jurisdiction to look into any matter that takes place within the boundaries of that state as according to the constitution and laws of that state,” read a statement from the court.

“Even though a contract has an arbitration clause giving right to arbitrate in a foreign court does not limit a local courts jurisdiction to look into the formed contract, and it is clear that such limitations are in violation of UN Charters principles of sovereign equality, principle of sovereignty non intervention within domestic jurisdiction, principle of self determination rights,” the Supreme Court said, in an apparent affirmative.

Investor confidence

Meanwhile, the government-aligned Dhivehi Rayithunge Party (DRP) this week revealed President Waheed’s response to its letter requesting details of the implications of exiting the concession agreement with GMR – an apparent fee of US$700 million, although Minivan News understands that even if the government were to produce the money, under the concession agreement it would also be required to prove ‘public interest’ in the Singapore court of arbitration.

According to the DRP, President Waheed advised that it would be “extremely difficult” to make the payment given the country’s economic circumstances, and that cancelling the agreement would furthermore have a negative impact both on perception of the Maldives as a favourable destination for foreign investors, and Maldives-India relations. Dr Waheed emphasised that the decision was ultimately one for the political parties in the unity government.

The following day, DRP MP Ali Azim called on President Waheed to resign, claiming that it was up to him to reach a decision.

“If Waheed is finding it too hard to come to a decision on the matter of GMR, he ought to resign immediately,” Azim told local media.

“Each of these parties have someone who is looking forward to running in the 2013 elections. Whether it be Gasim, Yameen or Thasmeen, they are all just waiting for 2013 to come around. Now if Waheed’s going to ask these men for advice, then he’s going to get tricked, isn’t he?” predicted the MP.

Likes

(0)Dislikes

(0)

Bahraini company interested in Cable & Wireless’ Dhiraagu shares

Dhiraagu’s leading shareholder, Cable and Wireless Communications (CWC), has received an offer from a Bahraini company regarding its Monaco & Islands business unit.

This section of the multinational’s portfolio – one of four regional units – consists of Monaco, the Maldives, the Channel Islands, the Isle of Man, the Indian and Atlantic Oceans, and Africa.

The company has released a press statement confirming the approach.

“Cable & Wireless Communications Plc today confirms that it has received an approach from Batelco Group regarding a possible transaction involving its Monaco & Islands business unit,” read the statement.

“At this point, there can be no certainty that the discussions will lead to a transaction,” it added.

CWC took a controlling stake in Dhiraagu, the Maldives’ largest telecommunications company in 2009 when former President Nasheed’s government sold 7 percent of its shares, giving the British-based firm a controlling stake in the company.

Then-opposition parties criticised the sale, arguing that the acquisition of large stakes of domestic companies by foreign investors was bad for the country.

Similar arguments have been levelled against the development of Ibrahim Nasir International Airport (INIA) by Indian company GMR, sparking fears that foreign firms will be deterred from investing in the Maldives.

CWC now controls 52 percent of Dhiraagu’s shares,with the government holding just under 42 percent as of March this year.

Dhiraagu is currently the largest company on the Maldives Stock Exchange (MASEX) by market capitalisation after listing in January this year.

CWC’s 2011/12 financial report showed that it made $586million in pre-tax revenue from it ‘Monaco & Islands’ interests – 83 percent of this pre-tax revenue came from the company’s interests in Monaco, the Maldives and Guernsey.

The report mentioned that, despite strong growth which saw the Maldivian Rufiyya (MVR) revenue increase by 3 percent, the free float of the currency resulted in a 14 percent loss compared with the previous year’s US Dollar (USD) revenue.

The April 2011 decision to allow the MVR to be traded within 20 percent of the pegged rate of MVR12.85 to the USD effectively devalued the currency as the exchange rate rose quickly to MVR15.42 to the USD without moving since.

Praised by the International Monetary Fund (IMF) as “an important move toward restoring external sustainability,” although some local experts described the decision as “high risk” and “unpredictable”.

“CWC has long been seen by analysts as wanting to sell its island assets, as well as its unit in Macau, given its longer term strategy of focusing on its core business in the Caribbean,” said Britain’s Financial Times .

Batelco (Bahrain Telecommunications Company) operates in Jordan, Kuwait, Saudi Arabia, Yemen, Egypt and India, as well as its home market.

The Financial Times reported that the company was seeking to expand its foreign investments after its domestic subscribers and profitability had dipped, citing stiff local competition.

“Bahraini companies have suffered amid political unrest in the Gulf state that led to widespread protests and a security crackdown,” the paper added.

The company’s shares on the Bahrain Bourse have fallen nearly 13 percent so far this quarter.

Likes

(0)Dislikes

(0)

IFC responds to government’s allegations of negligence in airport bid

Additional reporting by Neil Merrett

A spokesperson for the International Finance Corporation (IFC) has defended the organisation against charges of negligence during the bidding process for the development of Ibrahim Nasir International Airport (INIA).

In a press conference last Thursday held by the Attorney General Azima Shukoor, Economic Development Minister Ahmed Mohamed, Toursim Minister Ahmed Adheeb and Civil Aviations Minister Dr Ahmed Shamheed, it was alleged there were discrepancies in the bid awarding and concession process.

The cabinet members claimed that the IFC had been “irresponsible” and “negligent” in advising the former government of President Mohamed Nasheed in the concession of INIA by Indian infrastructure giant GMR.

“The current government believes that the IFC had not given the most appropriate legal, financial and economic advice to the Maldivian State,” Azima Shukoor said.

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”.

“A competitive tender was organised with the objective of selecting a world-class, experienced airport operator, who would rehabilitate, develop, operate and maintain the airport,” said an IFC spoksperson.

The IFC – a member of the World Bank Group – was established in 1956 to stimulate private investment in developing countries through investment, advisory, and asset management services.

The spokesperson stated that the bids were evaluated by a government appointed committee, comprising senior government officials, using two key criteria.

The first criterion required firms to meet all the technical requirements set out in the tender documents which, Seth stated, were designed to meet the objectives of the government, and ensure the airport becomes a world class airport with ‘Leadership in Energy and Environmental Design’ certification (Silver).

The second criterion was financial, favouring the highest offer from firms that passed the technical stage. The financial criterion was a combination of a one-time up-front fee, and fixed and variable fees to be paid throughout, explained the spokesperson.

“The IFC’s advice 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 organisation stated.

“These processes have been followed globally in several Public-Private-Partnership projects in the airport and other infrastructure sectors,” it added.

Asked if the IFC was currently continuing assistance to GMR or the Maldivian government, it replied “We are currently not working in any capacity with the authorities on this project. We however remain available to address any issues or concerns that the government may have relating to the project.”

A GMR Spokesperson said that the company did not wish to comment on the remarks made by government ministers.

The Anti-Corruption Commission (ACC), which is currently investigating the GMR deal, said last week that continued work on the project may be delayed considerably whilst the investigations are completed.

ACC investigations began in June, although building work on the new terminal – due to open in July 2014 – was ordered to halt in early August after the government claimed that the company had not acquired the appropriate permits.

Government’s critique of bidding process

During Thursday’s press conference, Shukoor claimed that the role played by the IFC during the bid awarding process – as well as the technical, financial and legal advice given – was unacceptable and included “major inconsistencies” in the “loss-benefit assessment” carried out before awarding the project to GMR.

“The legal agreement also lacks equity between the state and GMR, and gives significant powers which have narrowed the government’s ability to manoeuvre within the agreement. For this reason, the state is facing a huge loss even in taking steps that have to be taken immediately,” she added.

Speaking about the prospective profit, Shukoor claimed the agreement made between GMR and the government would lose the country more than that it would earn, and a much more cost effective master plan had been made during the tenure of former President Maumoon Abdul Gayoom.

She said that as long as the agreement between GMR and the government is not invalidated, the agreement would be “legally binding” despite a “majority of the people” who wish to “terminate the agreement immediately”.

“The government must also consider how much money has to be paid back as compensation if terminating the agreement, and it is clear to all of you that the Maldives financial and economic situation is at a critical level, and in this situation it is not an easy thing to do,” she told the press.

Shukoor also expressed the government’s concern about the effect on investor confidence that may result if the agreement is terminated in addition to other “diplomatic issues” that may arise from such a decision.

The Economic Minister, Ahmed Mohamed, claimed that the Nasheed government had only considered the lump sum that it received as the upfront payment, rather than long term benefits that the government could have achieved.

“They awarded the bid to a party who proposed to pay US$76million, but if you look at the other bidders, their bids were more profitable in the long run. For example one of the bidders proposed to give a 31 percent share to all the businesses except that from oil trades until 2014, but GMR proposed only one percent,” he claimed.

He added that another bidder had proposed to share 16 percent of the profits gained from the oil trades with the government.

“It is clear that the government did not consider, when awarding the bid, the long term benefits of the people but rather an instant short term profit,” he argued.

Highlighting the already much disputed issue of the Airport Development Charge (ADC), Mohamed claimed the government had given up a lot of power to GMR in the contract, allowing them to dictate all the fees during the concession.

He stated that there were only two options left for the government: “Either find a solution within the concession agreement with GMR or terminate it.”

Civil Aviation Minister Dr Shamheed said the initial INIA master plan, made by British consultancy firm Scott Wilson, was considered too costly by the IFC.

“So we checked the truth of IFC’s report. The master plan by Scott Wilson is a phase based development. There were developments that were to be brought in the first phase, the second and other phases that followed were mentioned very much in detail,” he claimed.

Shamheed claimed that despite the fact that Wilson’s master plan was more cost effective the IFC made a new master plan, hiring another foreign Consultancy firm – Halcrow- which Dr Shamheed claimed was more costly.

“Scott Wilson’s phase one cost us US$390 million, and all the three phases summed up came to a figure around US$590 million. IFC did not provide this information to the government. We are talking about a development of 30 years,” he said.

Shamheed also alleged that the new master plan was made without even testing the status of the current runway at all and said they relied on a test that was made a long time ago.

“Even those tests showed that the runway needed significant repairs and some parts of the runway had to be removed,” he added.

“This is very irresponsible that the former government entered into a contract with a party who did not assess the situation of the existing runway,” he claimed.

Tourism Minister Ahmed Adheeb alleged that because of the new fees implemented by GMR following its take-over, the flight frequency from Europe had declined.

“Coming to Maldives is no longer feasible for most of the chartered flights. Sri Lankan airlines’ Male to London direct flights have been pulled out following the decision. Even though the flight frequency from China has increased, the number of bed nights has declined,” Adheeb said.

Likes

(0)Dislikes

(0)

Hospitality expo head claims record exhibitor numbers defy impact of Maldives “unrest”

The 2012 Hotel Asia Exhibition and International Culinary Challenge is said to be at maximum capacity in terms of exhibitors this year – a trend organisers have claimed defies the negative impact to the industry of unrest in the Maldives during the last six months.

Husnie Rauf, Senior Manager of Maldives Exhibition and Conference Services (MECS), said the company had been “surprised” by the interest shown from exhibitors taking part in the show, which attempts to link the country’s secluded resort industry and local hotel trade with “world class” suppliers. Over the last decade, the exhibition has also held a culinary challenge that sees representatives from the resorts of the Maldives and neighbouring Sri Lanka competing in cuisine challenges, Rauf added.

“With all the political uncertainty this year, we have been surprised that we have a full house, we have even had to reject some applications from exhibitors and contestants for the culinary challenge,” he said.

“We have grown this year to be the country’s biggest ever exhibition with over 150 companies exhibiting at present. These companies represent groups some 40 to 50 different countries. Right, now we are at capacity and cannot handle any more attendees.”

The three day-exhibition, which concludes today at Male’s Dharubaaruge conference centre, aims to provide a diverse range of good and services; from fine foods and drink, to boating supplies and renewable energy technology.

Amongst the attendees was Desmond James, Director of Indonesia-based Hospitality Essentials, a supplier of hotel accessories such as soap dishes, dispensers and waste bins that he says presently works with between 30 to 40 of the country’s resorts.

James, who has attended the exhibition in the Maldives for several years, told Minivan News the expo remained a good opportunity for doing business in the country, as well establishing new contacts in the market.

However, he questioned whether claims from the event organisers about record exhibitor numbers reflected actual growth in the number of individual participants.

“I would say claims about a record number of exhibitors here could be a bit misleading, I think what you have are a number of larger booths, which perhaps take up the space that would be used by several exhibitors,” he said. “It is a good show, one of two that we participate in the Maldives along with the MHTE [Maldives Hotel and Trade Exhibition] event,” he said.

Having built a network of contacts in the country over the last five years, James said the expo, in reflection of the continued growth of the Maldives island resort model, did provide real opportunities to expand business.

“Our operations here are based on a combination of established contacts and meeting new companies. There are always new projects happening here and it is also a good way to catch up with familiar faces,” he added.

James claimed that for this year’ show, heavy rain in the Male’ area during the event’s first day negatively impacted the number of visitors, but added that improved weather conditions yesterday helped a much better turnout.

However, he stressed that the event itself continued to retain a strong focus on food products and services rather than the wider supply chain. James believed that such a focus limited some of the potential value for resort operators and key local industry players in attending the show.

Elsewhere on the convention centre’s first floor, alongside Sri Lankan real estate specialists, beverage groups and major multi-nationals like ingredients manufacturer Barry Callebaut, was a stand specialising in renewable energy technologies.

Over the last few years, successive governments in the Maldives have pledged to try and develop a more sustainable economy for the Maldives – commitments that have also been adopted by some resort groups to play up their eco-credentials.

Guy Sizer, who represents a group called South West Windpower at the show, concurred that the expo was something of an “unusual” event for a specialised energy-focused tech company to be taking part in considering the seemingly large focus on food and beverages.

However, Sizer added that for local partners based in and around the Maldives, the show over the last few years had remained “pretty useful” in order to build contacts with the local resort industry and discuss adoption of renewable technologies.

“There is certainly interest it seems in the local population regarding renewable energy, particularly as fears grow over the cost and reliance on diesel here,” he said.

Sizer said that from a Maldives perspective, there had been a great deal of interest in alternative energy supply from local people, however he added these ambitions had not always been backed up with investment.

“There is a strong correlation with what is going on in the Maldives in terms of renewable energy developments and what is going on in nearby massive economies like India, which has been experiencing energy shortages,” he said. “There is interest here even in the local population for renewable energy schemes, and we have some work ongoing here to that end. But as far as direct results go, we think that there stills needs to be a practical reference site here in the Maldives to show the applications of renewable energy technologies.”

In terms of business at the expo, Sizer said that several resort groups had been in contact over the last few days to discuss the possibilities of adopting renewable energy services such as off-grid wind technology.

As well as a potential hub for renewable energy development, the Maldives has continued to push its reputation as a high-end luxury destination. As a result, the sourcing of goods like European cheeses, meats and other delicatessen specialities were well represented at the event.

One such supplier of these products is Deli United, which has combined a stand providing guests with fresh fruits from across the wider South Asian region, with matured Swiss cheeses and fine slices of meats usually experienced at the country’s resort properties rather than exhibit halls.

Whilst providing guests and exhibitors with combinations of fine cuts of deer with varieties of European cheeses, a company representative explained that the Maldives provided a unique market for high-quality foodstuffs.

“The market we are aiming for here in mainly the resorts, we have interest from local people, but in general they do not have the traditions of enjoying these sort of cheeses,” the representative said. “This is a very strong market, visitors spend a lot of money on food. With the products I have, I like to think of myself as something of a food missionary when it comes to my produce.”

Despite targeting the country’s resort industry, which was not subject to the same restrictions the country’s inhabited islands were in terms of banning the sale of alcohol and pork products, the company representative said he had tried to select a wide number of products like beef ham and duck pates for guests to sample at the event.

Beyond specialist products like cheeses, pate’s and meats, Kapila De Silva, Marketing Manager for Sri Lanka-based Sadaharitha Agri Farms and Exporters, said the Maldives also presented a strong market for more everyday items like fresh fruits and vegetables, considering the country’s limited food production output.

“Obviously you have a very luxury-focused market here, so of course, resorts will be expected to provide very high-quality fruits and vegetables to guests,” he said. “They expect the best-quality goods.”

Having attended the Hotel Asia Exhibition for the last few years, Kapila claimed that his company now worked with a growing number of resorts to provide a range of produce from more standards fruits and vegetables to specially developed products like square melons, which he added could also be embossed for individual properties.

“Our plantations in Sri Lanka allow us to provide a large amount of fresh produce,” he said. “Being so close to the Maldives,the country represents a very important market for us, with our low, medium range and higher altitude plantations, we really can supply a very large number of products.”

While Kapila claimed that recent political uncertainty had not seemed to dampen demand from the Maldives for fresh produce, he claimed that the company still faced challenges in supplying goods to the country.

“There are still some barriers here in the Maldives in terms of logistics. Basically we need to clear customs and have our products get out to the resorts as soon as possible. At times this process can take up to seven or eight hours to have them processed. This threatens the quality of our goods,” he said. “We would like to see more work conducted here in terms of logistical support as a number of resorts are not close by to the airport. Guests expect the highest quality products here in the Maldives, this includes fresh fruit and vegetables.”

Culinary challenge

The exhibition’s organisers added that beyond business relationships, equally important to the development of the Hotel Asia expo during the last ten years had been the culinary challenge, which is held alongside the trade show in the Male’ convention centre.

An estimated 35 chefs are taking place in this year’s event, which is divided into a number of categories to contest three main awards including ‘Best Culinary establishment’, ‘Top Maldivian Chef’ and ‘Most Outstanding Chef’.

Bruce Woolner, Operations Manager for Chef Middle East, a supplier working with a number of the country’s resorts, contended that the strong focus on food at the show -particularly through the culinary competition – was important for the ongoing development of the industry locally.

“It’s a very good way of engaging companies to take part, but also it’s way to positively talk up the industry in this country and that is something that is not done enough,” he said.

Husnie Rauf agreed that the competition was an important part of attracting the local and multinational resort operators to the event, with many locally-based chefs travelling to Male’ specifically for the event.

From the perspective of MECS, Rauf claimed that Hotel Asia continued to be the largest event of its kind for business in the Maldives.

But what prospects are there in the future for other major events?

Rauf added that after launching the Hotel Asia show back in 2000, a number of additional exhibitions targeting the local business community had been started up in the country. These included a boat show that had been run by MECS up until 2008.

“We got to a point where there wasn’t a lot of investment in boats at the time due to a global economic downturn. We also used to run a construction-themed event in the country, but this hasn’t been held since 2009 again because of the economic climate,” he said.

“Right now we continue to manage the Hotel Asia exhibition and our education fairs. There continues to be strong interest for these services in the Maldives, particularly among Maldivians looking to study abroad.”

Likes

(0)Dislikes

(0)

Progress on GMR project awaits ACC investigations

President of the Anti Corruption Commission (ACC) Hassan Luthfee has said there may be an extended delay before work is resumed on GMR’s development of Ibrahim Nasir International Airport (INIA).

“It will take some time. It is not easy for us to finish it,” said Luthfee.

CEO of GMR Maldives Andrew Harrison last week said that no work had been completed on the site since August 2.

Work was initially halted due to issues relating to missing permits – an issue which Harrison said had now been resolved.

Luthfee said today that the government was now waiting for the ACC to finish its three cases concerning the Indian infrastructure company’s deal which was signed under the presidency of Mohamed Nasheed in 2010.

At US$511 million deal represents the largest foreign investment deal in the country’s history.

Luthfee refuted local media reports that two of the three cases will be completed by this Saturday.

“We have started the investigations and analysed the agreements and maybe we will finish our first reports in two weeks,” said Luthfee.

Luthfee was also keen to correct media reports that the ACC had requested a foreign expert to help specifically with the GMR investigations.

He stated that the ACC had been seeking an expert for assistance with all of the commission’s work but had struggled to accommodate one within the current budget.

Luthfee also added that the investigation would be conducted in conjunction with the Auditor General (AG) in order to give the process “greater transparency.”

Following a Supreme Court ruling on a separate case last week, Luthfee argued that the ACC was powerless without greater powers to prevent corruption.

“In other countries, Anti Corruption Commissions have the powers of investigation, prevention and creating awareness. If an institution responsible for fighting corruption does not have these powers then it is useless,” he said.

President’s Spokesman Abbas Adil Riza, who was not responding to calls at time of press, told local media yesterday that the government would not be able to take any decision regarding the GMR project until the ACC’s investigations were completed.

“ACC’s decision on the issue is very important for the government; it would assist the government in resolving this issue. There’s no legal action the government can take otherwise,” Abbas told Sun Online.

In June, pro-government parties re-affirmed a joint 2010 agreement calling for nationalisation of the airport.

The leader of one of these parties, Gasim Ibrahim of the Jumhooree Party (JP), was quoted in local media yesterday as saying he would oppose the GMR deal for as long as he lived.

These comments closely followed media reports that GMR had terminated the credit facility of Gasim’s Villa Air company after it had amassed MVR 17 million ($US1.1million) in unpaid bills.

There was no one from Villa Air available for comment at the time of press.

Fellow national unity government party, the Dhivehi Qaumee Party (DQP), filed a case last November against the introduction of an Airport Development Charge (ADC) which had been key to financing the project.

The DQP also produced a document criticising the deal and drawing parallels between foreign investment and colonialism.

After the Civil Court ruled the ADC an illegal tax, the Nasheed government reached an interim arrangement whereby GMR would deduct the lost revenue from the concessionary payments owed to the government.

This issue has become a major point of friction with the new government which subsequently declared this interim arrangement illegal also.

Transport Minister Dr Ahmed Shamheed, also not responding to calls today, met with India’s Civil Aviation Minister last week, informing him of the issues with the GMR project.

“The Civil Aviation Minister talked about this issue in detail, while we were on the subject of foreign investments. Until now, the Indian government had been aware only that the Maldivian government has an agreement with GMR. So we took the opportunity to explain the problems associated with this agreement. It was a good chance to inform them of this,” Shamheed told Sun Online.

Whilst Shamheed visited India, President Dr Mohamed Waheed Hassan, was in China where as well as meeting with prominent businessmen, he told the China-Eurasia Economy Development and Cooperation Forum that the Maldives was “open for business”.

The government recently sent a statement to the Commonwealth Ministerial Action Group (CMAG), arguing that the stigma of being on the group’s investigative agenda was deterring foreign investment in the country.

Likes

(0)Dislikes

(0)

Battle for the brand: Are the “hard days” over for Maldives tourism?

As the Maldives looks to boost tourism arrivals following negative international coverage of the country’s political unrest this year, one leading branding consultant has said destinations looking to overcome bad headlines rarely find quick fix solutions to improve their image.

Following the controversial transfer of power that brought President Dr Mohamed Waheed Hassan to office on February 7, negative headlines regarding the political situation and violent clashes between civilians and security forces were deemed as having an adverse affect on tourism in the Maldives.

However, tourism authorities this week talked optimistically of the prospects for growth in the industry following several months of uncertainty that it said impacted growth – predicting a resurgence in international visitors towards 2013.

Earlier this week, Deputy Minister for Tourism, Arts and Culture Mohamed Maleeh Jamal claimed “the hard days” were over for the Maldives tourism industry, after a Commonwealth-backed report last week rejected accusations that the present government came to power illegally.

Former President Mohamed Nasheed and the opposition Maldivian Democratic Party (MDP) have continued to allege that they were removed from office in a “coup detat”, claiming the Commission of National Inquiry (CNI) failed to include key witness statements and evidence in its findings.

Amidst the uncertainty since February’s power transfer, tourism authorities in the country have pursued a strategy of collaboration with the country’s private sector to try and strengthen arrival numbers to the country. This focus included signing a US$250,000 (Rf3.8million) advertising deal to promote the country’s tourism industry on the BBC through sponsorship of its weather services.

In April, the Maldives Marketing and Public Relations Corporation (MMPRC) confirmed the appointment of New-York based public relations agency Ruder Finn to “oversee the overall media coordination and achievement of PR related solution for destination Maldives.”

However Peter Mathews, founder and chief Executive Officer of UK-based branding consultancy Nucleus, claimed a quick fix solution to changing perceptions of a destination on the back of negative international headlines was unlikely.

Mathews took the examples of Sri Lanka and Bahrain as countries that had experienced difficulties attracting tourists on the back of unfavourable headlines relating to reports of political uncertainty or human rights abuses.

“Both of these destinations have had issues with branding. Branding alone is not an instant solution for a country’s reputation,” he told Minivan News. “If you are not transparent about issues, they will still be there for tourists to see once you scratch below the surface of a destination.”

With the growing prominence of social media and video sharing services like Twitter, Facebook and YouTube, Mathews claimed it was becoming increasingly difficult to move on from negative headlines without addressing the key social or political issues.

“We now live in a digital world of instant updates and information, there is nowhere to hide,” he said.

“Ultimately, the best way to re-brand in the medium to long-term is for a destination to try and ensure transparency and avoiding contradictions.”

According to Mathews, a single negative headline about a destination required number of positive stories in order for it to overcome any detrimental impacts to a country’s reputation.

“It can take a while these days for unfavourable headlines to slip down the Google rankings. Of course, some have turned to using the ‘dark arts’ but this doesn’t always work. Particularly in the luxury market, where consumers tend to be much better informed when it comes to travel,” he said.

Talking about the potential challenges for the Maldives regarding boosting confidence in the tourism industry, Mathews said that authorities would need to satisfy resort owners and the international brands operating in the country, as well as the wider population that positive changes were being enacted.

“Suddenly, word of mouth can become very important. This makes it difficult to paper over the cracks,” he said.

Mathews said the Maldives’ relatively unique resort industry – a hundred-or-so resort properties exclusively built on individual private islands – had been afforded protection from any political unrest that centered mostly on its inhabited islands.

“The Maldives resort experience is obviously very different to the Maldives experienced in the capital of Male’, and this does help insulate the industry from uncertainty,” he said. “Yet economically, I would have thought there was interest to try and bring tourism income directly to the capital and other [inhabited] local islands.”

However, the negative impacts on Maldives tourism witnessed following February’s political turmoil appears not to have been repeated despite fears of continued unrest.

The UK Foreign and Commonwealth Office (FCO) updated a travel advisory for the Maldives on August 24 to account for potential violent clashes linked to the release of findings by the Commission of National Inquiry (CNI).

“Very positive”

Amidst talks of potential boycotts of the Maldives travel industry, a stance at one point this year backed by former President Mohamed Nasheed, Deputy Tourism Minister Maleeh contended that arrival figures immediately after February had been sluggish. However, even before the release of the CNI’s findings, which were welcomed by the Commonwealth last week, Maleeh contended that arrival figures had shown “very positive” during June and July.

The deputy minister therefore moved this week to play down fears over the country experiencing continued difficulties in attracting visitors.

“The hard days are over following the findings of the [CNI] report. Over the last week, unlike February, we have seen no major disturbances in the country and this sends a positive message out about the destination,” he said. “During the next four months we are expecting a positive outcome for the industry despite the economic crisis.”

Maleeh added that in light of political instability and “turbulence” experienced in the country since the transfer of power, internal stability was a huge part of attracting and maintaining visitor numbers

“What we do is try to provide the industry and media with information that is true and accurate,” he said.

In March, the Maldives Marketing and Public Relations Corporation (MMPRC) announced that, as well as returning to its ‘sunny side of life’ branding, the industry had set a target during 2012 to attract one million visitors to the country by year’s end.

Maleeh claimed that the industry remained on track to meet these goals, despite certain key challenges such as the impact of ongoing financial uncertainty on some core European tourism markets like the UK and Italy.

During the last 120 days of 2012, Maleeh said that a major tourism marketing push was being planned to meet these goals. This focus was said to be focused on over 12 major emerging and established markets through Europe and Asia, including measures such as six travel road shows and an international media push.

“We will be bringing an estimated 40 journalists from around the world for press familiarisation trips to show them the ‘sunny side of life’,” he said.

Maleeh claimed that the MMPRC would also be collaborating with over 300 industry stakeholders including resorts groups, liveaboard boat operators and travel agencies to attend a number of major travel events and fairs around the world including London, Rome, Tokyo and Osaka. Key national markets in China and Eastern Europe would also be included.

Maleeh said authorities considered using special roadshow events in order to ensure a short-term boost in tourist interest.

Back in April, the MMPRC teamed up with local airline group Mega Maldives to carry out a travel road-show to promote the Maldives through what it described as a whistle-stop tour of five Chinese cities in one week.

According to Maleeh, the tours allowed the private sector to “close deals” during a period of “sluggish” growth in February and March.

“The roadshows have shown very positive results and we are looking to have one in Eastern Europe to try and boost the market in countries like Poland and the Czech Republic.

The MMPRC has also announced a commitment to take part in special market focused events like the Dive Resort Travel (DRT) Expo in China and other luxury travel-focused shows.

“Sunny side of life”

As part of the organisation’s marketing push, Maleeh added that under ‘sunny side of life’ brand, authorities would make use of a number of what he called lesser known taglines to target specific areas including ‘the spiritual side of life’ and ‘the colourful side of life’ – a tag used to play up the country as a dive destination.

“These messages are quite useful in areas like the Middle East, which are very popular with honeymooners,” he said. “Right now we are hoping that 2012 is shaping up to be a very promising year for tourism in the Maldives.”

Beyond addressing the Maldives’ image, several industry insiders have also raised concerns of late about the financial realities facing both local and multinational companies working in the country.

Just last month, several resort managers voiced concerns over revenue raising measures proposed by the Finance Ministry, which they claimed would have a detrimental financial impact on the tourism industry and provide little improvement in service or support in return.

The proposed measures were part of an ‘austerity’ package sent to parliament’s Finance Committee during August in a bid to address the country’s crippled financial condition.

However, since the publication of the CNI report, President Waheed told Reuters this month that China would grant the Maldives US$500 million (MVR7.7billion) in loans during his state visit to the country.

The loans, equal to nearly one quarter of the Maldives’ GDP, would include $150 million (MVR2.3billion) for housing and infrastructure, with another $350million (MVR5.4billion) from the Export-Import Bank of China, reported Reuters.

Minister of Finance and Trasury Abdulla Jihad told Minivan News today that despite the possible provision of finance from China, the proposed revenue raising plans such as
raising Tourism Goods and Services Tax (TGST) to 15 percent were still being discussed to help balance finances.

Likes

(0)Dislikes

(0)