ADC issue will bankrupt Maldives Airports Company: Finance Minister Jihad

Finance Minister Abdulla Jihad has declared that the Maldives Airport Company Limited (MACL) is unable to pay the disputed airport development tax (ADC) without risking bankruptcy.

The ADC was intended to be a US$25 fee charged to outgoing passengers from January this year, as stipulated in the contract signed with Indian infrastructure giant GMR in 2010. The anticipated US$25 million the charge would raise was to go towards the cost of renovating INIA’s infrastructure.

The ADC was to be charged after midnight on January 1, 2012, however the Civil Court blocked the fee on the grounds that it was essentially the same as a pre-existing Airport Services Charge (ASC). Following the court ruling the Nasheed government agreed that the ADC be deducted from its concession fee paid to the government-owned company in charge of the airport, Maldives Airport Company Limited (MACL).

On Monday however, new Finance Minister Abdulla Jihad told local newspaper Haveeru that MACL should not and could not cover the development costs.

“The Civil Court ruled against that charge. Hence that amount must not be deducted from the payment to the government which would reduce its income,” Jihad argued. “The Airports Company might face losses if that happens,” he said.

“I don’t believe that GMR can deduct that amount from the payment owed to the government. The estimated US$30 million for this year must be paid. If the payment is not received it would be difficult to run the Airports Company,” he continued.

Speaking to Minivan News, Jihad said the next step was to ask GMR to resolve the issue after the board of MACL was reappointed.

“The new board will write to GMR… It is not for the Finance Ministry to interfere with the running of the [airport] company,” said Jihad.

He also claimed that he did not feel there were any specific provisions in the original deal detailing the collection of the ADC.

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

CEO of INIA Andrew Harrison said that the company was unwilling to comment on the “sensitive” issue at this point.

Meanwhile, Foreign Minister Dr Abdul Samad Abdulla in assured his Indian counterpart that all existing investment agreements would be honoured.

According to the Indian newspaper, the Hindu, Samad assured Indian External Affairs Minister S.M. Krishna that the government’s policy was unchanged, after his counterpart expressed the desire that the Maldives remained friendly to outside investors.

Longstanding opposition

The contentious Civil Court case was filed by the then-opposition Dhivehi Qaumee Party (DQP), now part of the ruling coalition, in a longstanding campaign against Nasheed’s government awarding the airport redevelopment to GMR. DQP leader Dr Hassan Saeed is now President Mohamed Waheed Hassan’s special advisor, while DQP Vice-President Dr Mohamed Jameel is the new Home Minister.

The decision to finalise a deal to develop Ibrahim Nasir International Airport (INIA) was agreed under the administration of former President Mohamed Nasheed in 2010. GMR emerged victorious in the bidding process, amid political opposition on largely nationalistic grounds.

Umar Naseer, now the deputy leader of the ruling coalition party the Progressive Party of Maldives (PPM), previously announced his intention to re-nationalise the airport should his party come to power. Naseer also contended that the airport deal would allow “Israeli flights to come and stop over [in the Maldives] after bombing Arab countries”.

The DQP campaigned vigorously against the deal, producing a pamphlet last December titled “Handing the airport to GMR: The beginning of slavery”, in which it criticised the arrangement with GMR.

In the document, the party argued that deal would allow the Indian company to “colonise” the local economy to the detriment of Maldivians. The DQP also questioned the legality of the deal, taking the issue of the ADC to the civil courts.

The document further alleged that the deal did not make adequate provision for replacing the runway, the condition of which has come under increasing criticism.

Head of the DQP Dr Hassan Saeed today said he was unable to comment on recent developments regarding GMR and the ADC.

The ADC was ruled by the court to be a new tax and was subsequently required to go through the People’s Majlis.

In light of this decision, GMR agreed with the Nasheed government in January that it would deduct the $25 per passenger fee from the concessionary charge paid each quarter to MACL. At the time the government acknowledged the compromise to be a temporary whilt maintaining its commitment to ADC in some form.

Confidence in GMR’s $511 million dollar INIA project appeared to take a hit after the the resignation of President Nasheed in February was accompanied by a five percent drop in GMR’s share prices before bouncing back shortly after.

Dr Waheed has reassured foreign investors that no businesses would be targetted for political reasons, although he did not rule out re-examining “certain deals”.

Attorney General Azima Shukoor announced that she had forwarded some of the previous government’s deals to the Auditor General but said no decision had yet been made on GMR. The government announced the suspension of any new Public Private Partnership schemes last month.

Spokesman for the Maldivian Democratic Party (MDP) Hamid Abdul Ghafoor argued that the new figures in the government were not doing enough to protect foreign investment.

“If they were going to protect the economy, they would be more proactive, rather than simply saying we can’t do it,” said Hamed. “This will seriously impact the the development of the airport. In the meantime, investors lose confidence.”


12 thoughts on “ADC issue will bankrupt Maldives Airports Company: Finance Minister Jihad”

  1. GMR should invest their own money rather take money from passengers to develop the airport. What's the point in giving it to a large company if it is unwilling to finance the investment? Anyone could develop the airport the way it is being done by GMR! They aren't even fulfiling their commitments! Don't b so greedy guys! If the tax is to be deducted from the concession fees, GMR might not have to pay anything to the govt, instead we would have to pay them. What kinda deal is it?

  2. This government has no idea what they have to do. When they wherein opposition they had their day calling everything what Nasheed did was wrong. Now they have to carry the baby and they have no idea to resolve a single issue.

  3. The problem is that this agreement was so biased in favour of GMR, no self respecting person would accept it. Sure there is a clause that says that they can take 25 dollars but there is no term period. they can take this for the whole period of the contract.

    Furthermore, the agreement says that this 25 dollars can only be charged after the approval of the relevant maldivian authority. Only the Majlis can decide or give approval for this charge but the then Finance Minister has also given a letter stating that GMR can charge this.
    The former Finance Ministers Ali Hashim and Mahood Razee should be hauled in front of the Majlis or the ACC.

  4. why don't give the airport to gasim ibrahim than sun travel shiyamu might not need red passport .I THINK HEAR in maldives we have three milliners who thinks all the Maldivian are fools.but we will do every thing we can do to make u guys beg on the street one day

  5. This deal as well as the NexBizz border control software deal are rotton and completely against the interests of the citizens. Each of these deals are on either side of the politics and all it says is that both sides of the Maldivian politics are equally evil...

  6. @ Saleem
    Its "Here" NOT "Hear". and whats the meaning of "Milliners"??

    You are so dumb my friend..Learn to spell right before you comment..LOL

  7. @Simba: Thats ur comment?? dude get smart, we all understood what Saleem said but didnt understand ur point.

    The old opposition parties really tried to fail Nasheeds government. But now they have to take a U turn of all what they have been feeding the public and its gonna be really embarassing for today's government. They were against GST and all kinds of Taxes saying its "milking the public", and they were against health insurance and adviced their supporters to "make it fail by consulting doctors even if you dont have to", and they were against foreign investments saying "selling Maldives". Thats how narrow they were till they got power through the recent coup. And now they are speechless and dont know what to do. They cant go against their words but they cant look like the bad guys either. Such fools. good luck on your stupidity PPM, DRP, DQP, Adhaalath, and whole coalition. LOL

  8. That is what happens when you adopt the principle of opposing for the sake of opposing. The opposition opposed the collection of ADC tooth and nail, even though GMR was legally entitled to collect it, whether from taxpayers or from passengers.

    Guess which is the biggest group of travelers passing through the International Airport? If it is a burden for Maldivians' (it is for those who travel to India and Sri Lanka). Then another way to finance that section of the lost revenue should have been found.

    Now this was all according to plan if Anni was in the presidency, the bankruptcy of the MACL would be on him (although oppositions doing).

    Now they are in charge, reaping what they'd sown.

    I sincerely hope MDP learns from the debacles of these losers and play differently (not likely though). One opportunity exists in the approval of cabinet positions. Since the Executive is directly elected by the people, the ministerial positions should not be at the mercy of the legislature. This needs to be inshrined with MDPs co-operation. This will be beneficial considering the Baaghees time in power is limited anyway. Get some good things done.

  9. this government voluntarily jumped into the hole Anni dug for himself. don't complain realizing how deep the hole is, just get on with the show, coz now Anni is up there pointing the finger down at u!! Ha ha ha!

  10. I guess this is the final nail in the coffin. India will next week declare that this government is not legitimate and ask for elections in 3 months or this game is over. Thank you Jihad. You are making things very easy

  11. Peasant, actually you are wrong. GMR is only entitled to collect the 25 dollars if approved by the relevant authority. The relevant authority to collect any tax is the Majlis. Only the Majlis can approve the collection of this 25 dollars. This is the main issue.
    If the agreement says that GMR can collect the 25 dollars no matter what, then it would not be an issue.

  12. A few questions here.
    >>>Do you people know how many millions the GMR invested to renovate the airport? I don't think so, but let me tell you: a lot. And that did not came from your own pockets.
    >>>Charging 25 dollars to outgoings. If you would have a business of your own, would you not make a deal to make it profitable for you? Any shopkeeper knows this. Yes you would. The investment was an investment. Not a charity. No matter what government is making the deal, this end of the bargain, you need to respect.
    >>>How much % of the outgoing passengers are local? As tourism is the main source of income of the islands, I guess, it's fairly little. You guys charge 300-2000 dollar per night in your resorts. Isn't that robbery? And you protest against 25? With all this political fights and protests you are showing a very unstable image of the islands, and soon investors and tourists will stay away from your blue waters - and this I'm telling you as a tourist (from Norway by the way). Some of you should look over the 25 dollar and see what you loose with the big picture before this gets out of hand. My family planned a vacation there this summer but now we are having serious doubts.
    >>>As a tourist, I know the airport is the first image of the country. You can build palaces inside as much as you want, but if the first and the last impression is bad (checking ins, delays in luggage service), that's what the tourists will take with them. After flying over the globe, that's the last thing they need. Question: when did you guys renewed the airport last time from local investments and from those who are commenting here so enthousiastically, how much you guys pulled out from your own pockets? Does any of you have any experience to compare your current airport with others around the world to see the new standards? GMR has build many world class airports. You should be happy that you will gain one.
    >>>Who works at the airport? Indians? Chinese? French? No. Maldivians.
    >>>A bit of a hint for those who know little about world economy. Why China is developing so rapidly compare to let's say India? One of the key factors: roads. Infrastructure. How can an island develop better? Better than it is now... (I guess you are not changing the blue water to purple or you don't intend to rebuild the resorts you have now I assume). I tell you: with better airport. World class service. Easy access.
    Generally, yes, all investors invest to gain profit. That's the way of the world. You can choose to join the game, or stay out of it completely. From where I see it: you are voting against an airport which is built for the comfort of the tourist, people who are bringing money into your country. From this side it's just looks sad.


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