GMR presents government with US$1.5 million bill for Q2, as ADC dispute sent for arbitration

An ongoing dispute between Ibrahim Nasir International Airport (INIA) developer GMR and the incumbent Maldivian government concerning a US$25 Airport Development Charge (ADC) has been referred to a court of arbitration in Singapore.

The government-owned Maldives Airports Company Limited (MACL) faces a US$1.5 million shortfall in concession fees owed to the airport developer for the second quarter of 2012; the legacy of an opposition-sponsored Civil Court case in late 2011 that scuttled the airport’s ability to charge the ADC as stipulated in its concession agreement.

GMR signed a 25 year concession agreement with former President Mohamed Nasheed’s government to upgrade and manage Ibrahim Nasir International Airport (INIA). Under the concession agreement, a US$25 Airport Development Charge (ADC) was to be levied on all outgoing passengers to part-fund the US$400 million development – the country’s single largest private investment.

However, while in opposition, the Dhivehi Qaumee Party (DQP), led by Dr Hassan Saeed, now President Dr Mohamed Waheed’s special advisor, and Dr Mohamed Jameel, now Home Minister, filed a successful case in the Civil Court in December 2011 blocking payment of the ADC on the grounds that it was effectively a tax not approved by parliament.

Nasheed’s government as a stopgap measure agreed to deduct the ADC from the concession fees payable by GMR, while it sought to appeal to verdict.

As a result, Dr Waheed’s government received only US$525,355 from the airport for the first quarter of 2012, compared to the US$8.7 million it was expecting, at time the country is facing a crippling budget deficit, a foreign currency shortage, plummeting investor confidence, spiraling expenditure, and a drop off in foreign aid.

According to financial statements sent to MACL and released to local media, in the second quarter of 2012, GMR deducted the ADC revenue of US$7.1 million from total revenues of US$5.6 million, leaving the government with a bill for US$1.5 million.

Managing Director of MACL Mohamed Ibrahim told local newspaper Haveeru that the government would not pay the amount, alleging that GMR’s deduction of the ADC from the revenue was illegal.

In its defence, MACL has said that its board of directors had been reformed with the arrival of the new government, and a decision made to annul the old board’s agreement to deduct the ADC revenue.

The government meanwhile sought to invalidate the GMR contract – and the clause invoking arbitration – by challenging the handling of the bidding process by the International Finance Corporation (IFC), a member of the World Bank group and the largest global institution focused on private development sector in developing countries.

“The advisory work was supported by AusAid (Australia), the Ministry of Foreign Affairs of the Netherlands, and DevCo. DevCo is a multi-donor program affiliated with the Private Infrastructure Development Group and funded by the UK’s Department for International Development, the Ministry of Foreign Affairs of the Netherlands, the Swedish International Development Agency, and the Austrian Development Agency,” the IFC explained, following a visit by the delegation in June to address the government’s concerns.

Following the first quarter deduction, GMR announced an employee benefits scheme converting 50 percent of employee salaries to US dollars from July onwards, and a one-percent profit-share.

Around the same time, the company sought to compromise with government by offering to exempt Maldivian citizens from paying the ADC. However, the Transport Ministry continued to demand that the infrastructure giant repay the US$8.2 million deducted.

Several pro-government parties – including the Dhivehi Rayithunge Party (DRP), Dhivehi Qaumee Party (DQP), People’s Alliance (PA) and Jumhoree Party (JP) – meanwhile advised President Waheed that they continued to endorse an agreement signed in June 2010 calling for the airport to be taken back from GMR and nationalised.

The relationship between the airport developer and the government soured further last week after the government temporarily called for a halt to work on the new airport terminal, alleging it had “violated rules and regulations” by not acquiring certain permissions from the Civil Aviation Authority.

“When the government decides that a project be stopped, we will make sure this happens,” President’s Office Spokesperson Abbas Adil Riza previously told Minivan News. “GMR have not discussed the construction with relevant authorities.”

Following the second quarter deduction, the airport developer declined to comment, as the matter “has been referred for arbitration by the parties.”

“GMR Male’ International Airport Pvt Ltd has made the said adjustment as per the concession agreement,” a spokesperson said.

The concession agreement includes an option for the government to buy out the contract from the developer, however the cost is likely to reach upwards of several hundred million dollars.

President’s Office Spokespersons Abbas Adil Riza and Masood Imad had not responded at time of press.

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23 thoughts on “GMR presents government with US$1.5 million bill for Q2, as ADC dispute sent for arbitration”

  1. Fight till GMR win the case, rebels may be defeated soon. Let big baagee fall down and develop the terminal as wished to bring the airport to world standard.

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  2. this government is like a mafia gang. lets see how long they can hold on.a baghee state with baghee police ruling the country

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  3. JJ is right. Maldivians are just stupid, they should be paying GMR to run the airport. This development is excellent. Maldivians think they are too smart. THis way Maldivians are reduced to their right size. Go GMR !

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  4. Holy cow. Now, legally, the country owes the Indians.

    Well done. Anni and co. you have secured an endless stream for the team.

    Bad luck BMW. You are left to take the blame,

    Good bye... Maldives. You are doomed.

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  5. this is the fruit of Anni failed economic policy . Anni and his clan had take huge amount of money from GMR deal.

    We can develop the airport without GMR also and have down in the past also. It is not GMR who had done the airport in the first place and it was Maldivian who had built it and we only need to solid Government and genuine people to build and enhance the airport and not the GMR.

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  6. Another stupid mess by the baaghees. Instead of a wonderful airport, paid for by tourists, you have no airport and a huge bill. Well done Hassan Saeed, well done Waheed! Well done Andrew Cox and Naaz!!!

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  7. @ Hassan Saeed... Careful what you wish for!! You go what you wanted and your distructive approach has back fired on you and the whole economy. Thanks for nothing!!

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  8. We had it for the last 60 years and we did not make it competitive or up to date. Let the professionals finish the job and help save our economy.

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  9. Hassan Saeed must be cursing himself for what he did to our nation. Do you really think India becomes bankrupt if this project of half a billion collapses ? Remember today they are creating jobs and investments worth more than 50 billion dollars to help USA. And we would have already collapsed, if they didn't help us in time after the events in February with more than 100 million dollars. Do our politicians like Dr Saeed and Jameel at all care for ordinary people like us? For them the love of power and revenge on Political opponent is all that matters. They should think carefully before making our economy ruin by creating this bad atmosphere and discourage foreign investors.

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  10. Oh God, why is both sides of the argument so damn shallow, one is Oh baghees lost the airport ! the other side of the argument Anni gave up the airport to the indians!

    Really people(fellow citizens),
    this is our country we are talking about despite what differences we have in terms of who is running it, this may be a problem long term, both Mohammed Nasheed and all his opponents are human, and they make mistakes as well, why dont we look to problems through our own thinking heads rather than through political perspectives?

    Why do we have so much damn faith in politicians?

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  11. Another way to drive bog investment away. Better book those cruise ship cabins fellow Maldivians for the grand sinking.

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  12. Thes bhagees will end up bankrupting the country. Does not know how to manage an economy doesn't have enough money to build an airport on our own ,yet goes around attacking investors and destroying the chance of having a modern functional airport.the airport was in such bad shape that it would have been a catastroph had n emergency occurred. Fuel storage is too close to the runway and so on,the airport is like a time bomb waiting to happen, n yet this illegal government,just throws away the chance to make the place better.

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  13. All investments aren't really productive ones. This one doesn't even have any gains nor does the government has means to recover from this (regardless of whoever is running the country).

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  14. Baaghees investment advisor is no other but the nut job Umaru Naseeru, PPM naibu Zaeem.

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  15. GMR will never win the case. Anni who had done this blunder need to be answerable and he need to be bought to justice.

    Anni and Bandhe need to explain why they had taken a bribe from GMR and where those money they taken had gone.

    Part of this is sitting MDP account and balance must be at an off shore bank.

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  16. Mohamed Naseed popularly known as Seyku Nasheed or Anni is in fact a retard who does whatever his cronies like Mariya and Eva tells him. He has destroyed Maldives. And all the people who say that GMR is doing a wonderful job: go check out the condition of the airport now...look at the horrendous tiles they have put up and the ridiculously ugly chairs they have placed all over the airport. The toilets are not in working condition already. Their workmanship is inferior. Anni and his ass licking cronies have pocketed a large amount of money from GMR. That is a fact. Snap out of your deluded thinking and think about what is best for Maldives and your families.

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  17. I think this is only political propaganda to fool the innocent Govt of our beautiful country. In all respect the GMR deal a win-win baby for all of us, after the new Governments policy only the country was opened to foreign investors. and it is a fair deal that our Government is be paid US$ 70 plus million on lumpsum by the developer,(GMR) it is the fate of our country or the wrong policy of the government made us, walk in darkness. not GMR or INDIA as some of my friends commented. it is unfortunate that we are blind and arrogant as well as Jealous of our better neighbor who was with us since the beginning of our relationship, but the previous government hided the truth for the people of the county. India definitely would had made a Billion or more loss already by giving Aid to us when there was a need at times. which we always forget to regard and remember. it is the interest of China and their close ally Mr. Ghasim Ibraim, which creates the entire ruin. if we all take a move to push out India who served and helped us sincerely. we may have to pay heavenly as the next ally China will eat us all in big time. see what happened in Sri lanka and all other countries where china invested.

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  18. It was not Hassan Saeed or Jameel that blocked GMR's airport development charge, but the Maldivian legal system, a Court of law. Hassan Saeed merely submitted the issue to court, and it was the Maldivian courts and the judicial system which decreed that GMR could not collect ADC from Airport by referring to existing Maldivian laws and our constitution. The courts ruled back then that Airport development charge was a form of tax on every Maldivian and every foreigner who arrived and departed from the airport; AND that every Tax had to seek the approval and endorsement of our People's majilis. That was why the courts ruled it illegal for GMR to collect ADC (airport development charge) without obtaining permission and endorsement from Peoples majilis. (If people's majilies oked this charge then it was legal).

    Courts cannot take POLITICAL rulings, they have to refer to laws and the Maldivian courts ruled it illegal for GMR to collect Airport development charge by referring to EXISTING Maldivan laws and our constition. Anyone affiliated or supporting MDP will never accept this but this is a fact, it was the MALDIVIAN LEGAL SYTEM, a Court of Law that ruled that Airport development charge was illegal.

    However after the Maldivian Courts ruled that Airport development charge was illegal and that GMR could not collect the ADC money, it was Anni and the MDP government who really messed things up, they gave GMR the go-ahead to deduct the Airport development charge from the payments to government. They (Anni) could have sought the right way and proceeded to submit the airport development charge issue to People's majilis so as to make it legal for GMR to take the money, but they were too stubborn to admit that they were wrong in any way,and it was too much of a hassle for the MDP government back then, and they sought the easy way out. The result is this, instead of GMR paying maldivians to run the airport, Maldivians are today having to pay GMR. GMR continues to make fantastic profits from the Male airport (it is the most profitable subsidiary for them in all their business operations), yet they are unwilling to give any money or any return to the Maldivian people for using the Maldivian people's airport, the Maldivian peoples land, and are instead extorting more and more money from the Maldivian people.

    Who knows. Tomorrow GMR may decide to levy RUNWAY DEVELOPMENT CHARGE also, and bill the Maldivian people, and because of a stupidly drafted agreement which GMR, and a stupid go-ahead letter from MDP govt, any elected Maldivian government will then have no choice but to pay GMR whatever they ask.

    MDP, and the previous MDP government has to take full responsibility for this whole mess. MDP were the ones supporting GMR when GMR clearly were acting on their business interests to extort money from the maldivian people.

    Maldivians should be careful in future not to elect fruitcakes and nutheads without proper qualifications to important positions as president. A president of maldives must not take stupid decisions so as to further his party's popularity, he must take the right decision and the just decision.

    Anni decided to make the stupid decision back then, and the result, now its gonna be the Maldivian citizens who are going to have to pay the Indians to run the maldives airport.

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  19. I being a Maldivian citizen cannot accept the above said claim that the Maldivian is paying to Indians to run the Airport. i can feel some grudge in the author toward India who had all the way helped us for all our development even though they don't claim it due to its very good and reasonable policy. i do agree with the statement that it is ridiculous to pay tax as a Maldivian citizen, and i do believe this is the biggest mistake made by the previous regime due to their inexperience. if we can sincerely look at the status of the employees at our Airport, it is a real cause of pride for all of us, which we never had seen in the last 40 plus years. the claims that our we could had made a beautiful airport is also like a line drawn in the water, otherwise Ex-president Maumoon would had done it, which is a clear evidence that this story is just fabricated to play with the innocent brains of our country. it is also wise to think than An airport making a revenue of US$ 8 - 10 million in each quarter will not give back a return on investment comfortable in 25 years of contract,

    in my opinion it is important and useful for the country to get on to a table to discusses what best could be done to resolve the problem with out sacrificing the interest of our Country as well as with out making losses to the developers, rather than threatening the investors who are ready to come to Maldives. in other way this investment is also as simple as it is of the operation of a tourist resort operated by a foreign investor. they bid the island and pledge the same for obtaining Loan to develop which will pay back their investment.

    it is important for all of us to be wise at this time when our economy is been crushed of what so ever the reason may be. India is in all mean a better ally than any body who has an eye on our land. so i hope our politicians will act to secure the sovereignty of our mother land

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