Additional reporting by JJ Robinson
Despite recent government assurances that Indian investments in the Maldives would be protected, parties in the now ruling coalition have renewed calls for the airport to be nationalised.
Indian infrastructure company GMR has meanwhile informed staff that it will pay 50 percent of employee salaries in US dollars from July onwards, as part of the new employee benefits scheme. Further benefits announced include the payment of Ramadan bonuses in US dollars, and a profit-sharing scheme awarding employees a one percent share of the company’s profits from 2011.
The decision follows a week in which former opposition parties – now in a coalition government following the controversial transfer of power of February 7 – sent replies to President Mohamed Waheed Hassan’s request for opinions on the airport, the development and management of which was taken over by GMR in 2010 in a 25 year concession agreement signed with the now-opposition government.
The pro-government parties – including the Dhivehi Rayithunge Party (DRP), Dhivehi Qaumee Party (DQP), People’s Alliance (PA) and Jumhoree Party (JP) – advised 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 ‘Joint Statement by political parties opposing government’s efforts to hand over the Male’ International Airport to a foreign party’.
The agreement endorsed six main points which included taking legal action to prevent the government’s decision to award the contract to GMR.
GMR’s contract is currently under scrutiny by a committee appointed by President Waheed, which includes the Attorney General, the Finance Minister and the CEO of Maldives Airports Company Ltd (MACL).
A delegation from the International Finance Corporation (IFC) – a member of the World Bank group and the largest global institution focused on private sector in developing countries, which brokered the deal between GMR and the government of Maldives – recently addressed the government’s concerns over the concession agreement in a meeting with senior government officials.
The DQP – a small but extremely vocal party which has consistently opposed the airport deal and filed court cases against it – today accused the IFC of mishandling the bid evaluation report of the airport privatisation agreement. A 24-page book released by the DQP while it was in opposition presents the government’s lease of Ibrahim Nasir International Airport (INIA) to developer GMR as a threat to local industry that will “enslave the nation and its economy”.
“IFC is a company associated with GMR in many other projects. It is clear that IFC had issued loans to GMR on other projects. We believe that the government selected IFC to facilitate GMR for the airport project,” an anonymous party source told newspaper Haveeru.
President’s Office Spokesman Abbas Adil Riza said the airport contract is “an important national issue” which “must be dealt with after discussions with coalition partners.”
However, speaking at the ceremony to mark the 100th day of his administration, President Waheed said he did not wish to involve “political disputes” in reviewing the GMR contract and that foreign investments must be handled as business dealings.
“I do not believe bringing in our political quarrels into the GMR issue will be good for our future and our economy,” said the President.
During President Waheed’s recent trip to India, he also assured Indian Prime Minister Manmohan Singh that the Maldives government would adhere to all agreements between Indian and Maldivian businesses and expressed the Maldives’ desire for further Indian investment in the country.
“My government is a continuation of the previous government under then President Nasheed, and hence there should be no doubt on this score,” he was quoted as telling Manmohan Singh in the Daily News.
In addition, during the India trip, Maldives Foreign Minister Dr Abdul Samad Abdulla assured his Indian counterpart that all existing investment agreements would be honoured despite the change of government on February 7.
According to 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.
Hostile politics
Despite these assurances, the revelation that major political parties now in government continue their endorsement of airport nationalisation, and challenging of the IFC’s competency, could increase tensions between the government and GMR and weaken investor confidence in the Maldives – at nearly US$500 million, the airport concession agreement is the country’s single largest foreign investment.
Declining to comment on the official standing of Dhivehi Rayyithunge Party (DRP) on the GMR deal, the party’s Deputy Leader Dr Abdulla Mausoom said the DRP was against privatising “assets of national importance”.
Jumhoree Party (JP) Spokeman Moosa Rameez said the party had written to the President stating their wish to adhere to the agreement signed between the then opposition parties.
Although the parties in the government had expressed several concerns including “threats to national security” in “giving away the airport to foreigners”, the government’s current concerns are focused on the disputed concession fees in the agreement.
Under the concession agreement in the GMR contract, a US$25 charge was to be levied as an airport development charge (ADC) on all outgoing passengers to part-fund the infrastructure project.
However, while in opposition, the DQP – which today forms part of Waheed’s national unity government – filed a successful case in the Civil Court in December 2011 to block the payment of the charge, on the grounds that it was effectively a tax not approved by parliament.
Nasheed’s government had 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.
In April, Finance Minister Abdulla Jihad declared that the Maldives Airport Company Limited (MACL) would be unable to continuing paying the ADC without risking bankruptcy.
The Transport Ministry has since ordered GMR to pay the shortfall in concession fees. In response, GMR in early May “expressed a desire to exempt Maldivian citizens from the ADC”, as “the majority of Maldivians travel abroad for the purposes for healthcare and education.”
“The ADC was conceptualised and incorporated into the concession agreement by the government to yield a maximum return to the Maldives while ensuring development of the airport and a reasonable return to the successful bidder,” GMR said, in a statement at the time.
“We are sensitive to the apprehensions expressed regarding ADC; and would like to assure all concerned that the management of GMR Male International Airport is doing everything possible by offering viable options to reduce the impact on the Maldivians, thereby helping the government for the ADC implementation.”
GMR has expressed confidence in the strength of its contract, which has a facility for dispute arbitration in Singapore, as well as an option for the government to buy out the agreement – a cost likely to reach several hundred million dollars.
However the country is already facing a crippling budget deficit of 27 percent, a plunge in expected revenue of 23 percent and an increase in spending of almost 24 percent, a time when investor confidence has been impacted by repeated challenges to the government’s legitimacy by the MDP.
Earlier this week the government refused to comment on claims made in local media by JP Gasim Ibrahim that the Maldives was now bankrupt and already unable to pay some civil servants.
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The President of this country has spoken wise words, but the fact remains, he does not have any public support nor a party to represent himself. He is now the product of a coalition led by opposition party groups, only after fulfilling their own self interests.
Anyone with any insight into the workings of this new government, will realize that its true when i say that Hassan Saeed has firmly set his roots inside the presidents office and that its him making moves from within the top office.
Mohamed Waheed is just desperately trying to find his place and make a name for himself in order to come out of the shadow of the patrons who gave him the job in the first place.
Themcoup govt. have destroyed the economy and ruined this deal too.
GMR failed in the technical evaluation and only the interference of the consultants ensured they were not thrown out.
It is not for GMR or the government to decide if the 25 dollars is a tax or not but for the Courts or the Majlis.
Furthermore, the IFC did not address all the government's concern in the process.
The IFC failed to make much headway since they cannot say that they gave the best advice to the government all the time.
The question is not GMR but the whole plan itself that was designed by IFC's technical consultants.
It is a disaster for Maldives and no amount of window dressing by the people who gave away the airport like this is not going to change that fact.
So, the rest of the world do business and function normally and everyone benefits and we say that the whole world is wrong????
Back to the dark ages, where a corrupt dictatorship own evrything so they can puff up their own bank accounts.
Election now to save our country!
This is an unfair and corrupt deal... Way to go! Take away the airport or make them pay a fair share of the profit!
MMA regulations do not permit payments in USD Is GMR an exception. Where is that Foamulak Najeebe.
Most forigiens in the MAldives get paid in USD. Actually all I know have refused rf for clear reasons. It is a useless paper out side of the maldives.
massood Imad and Ali hashim wil get a heart attack after this news.lol
If you look at the GMR published reports . They have spend over 35 millions dollars in securing the airport and further USd 1 0 million dollars as incentive for for acquiring the airport.
Since GMR is public company and they had to published the figures. Since these figures are so huge they have bundle them in the books and Maldivian government should question GMR and IMF where these money were spend to secure the airport.
It is quite obvious that MDP thugs and Anni must have taken these bribes and that is why Anni could not even wait to clear the air and got the contract signed by appointing puppet board less than 24hrs from the appointment of the board.
No matter what MDP and dictator anni thinks, they need to be brought to before the court and need to answer for the money that they must have robbed under this deal.
Without an overall economic policy this is silly talk about individual projects.
And how many economists are there in the Government?
*NONE*
This is a smart move by the DQP (like all their other moves).
The IFC are owned by the World Bank - a sister organisation of the IMF. They are keeping the Maldives afloat with their loans. You better have some really strong evidence before you call them corrupt. Talk about not just biting the hand that feeds you but asking them to wipe your b.... clean afterwards
Second, the IFC don't just lend to GMR - but they also lend to ALL of the other bidders who put forward a bid to the Maldives.
Finally, if the govt want to go back on this deal - they better have the $70million GMR paid up front as well as the tremendously more that they would have to pay at arbitration when they go back on their deal. "this was a mess created by the previous govt" is not a legally acceptable argument in international law.
@Jameel "GMR failed in the technical evaluation and only the interference of the consultants ensured they were not thrown out". from where did you get this information?
i find this bit funny! if this was what really happened back there, why would these "heel-high" lawyers didn't mentioned it at least once.
It is ridiculous, even to think or feel that we need to protect the business of GMR. They are a money hungry scavengers who tried to introduce a similar airport tax in India and the population rose against it and made sure that it was not levied. why is it in the Maldives we have to give in to Mr. Zaki and Naseem, who are corrupt in the prior Maumoon regime are still selling our assets without any patriotic devotion as a country. To make things worse, even the present runway is in like a highway in India with puddle holes every where.
Get GMR out before they take over Maldives as a business venture. Yes GMR is not allowing any budget airline to land in our airstrip. Who are they to deny Maldivians from cheap travel
adam,
Go and check the what the previous government had announced and check the records in airports company and you will see that GMR failed in the first round and then Anni asked them to tie up with Malaysian company to become qualified .
Still airports company MD is there and asked from him and you should be able to get this information.
You people will never accept the fact this was a corrupt deal and large amount of money was pocketed by few elite during the process.
IMF will not be corrupted and it will be the people who are working at the organization who will take the bribes not the organization. IMF who got involved in this deal is the branch of IMF and it is not from thier head quarters .
Those people who working IMF are not angles and they might take bribes since India is one of the highest among the corrupted country in the world including Maldives.
Even though GMR paid only 5 lakh dollars to the Maldivian government instead of the 8.7 million dollars it was supposed to pay to the Maldivian treasury, we Maldivians don't care about this because all we want is for Govt to honour its pledges and not do anything against GMR.
GMR has the right to deduct the Airport development charge from the revenue the company pays to Maldives treasury, because if it wasnt for GMR no other international company was willing to takeover the burden of running the Maldives airport. Maldivians should be grateful that such a reputed Multinational company has even considered investing in the Maldives.
As for the Airport Development Charge that GMR has decided to enforce, it is the right of GMR to take this money and i feel that no Maldivian court should try to block GMR from collecting what the company feels it should charge.
If Maldivian Courts try to block this, then the Maldivian govt should first pay back to GMR the advance payment (around 80 million dollars i think) that GMR paid to Maldivian government back in 2010 when GMR officially took the Airport. After that government (in 2010) used this Money that GMR gave, now this government in 2012 is trying to restrict revenue to GMR. This should not happen.
I think GMR should go on ahead with this plan of deducting Airport development charge from the Money payable to Maldives Govt.
Once the Maldivian govt starts losing revenue, then they will start to see GMR's point of view.
Besides I believe that 8 million dollars quarterly payment to Maldives govt is a bit too much to pay to this Govt, in fact i think that Maldivian Govt should be the one paying GMR for running the Airport not the other way around ! These Maldivians think too highly about themselves!
Mode, you are right in one instant about GMR failing the first time and then tying up with Malaysian Company. You are not right in that they passed the second time.
They actually failed in the technical evaluation, the second time around too. Then IFC's technical partners got involved and convinced one member of the committee to change his vote.
It is actually on record and as Mode says, if you ask the MD of MACL, he would tell you the same.
As for the IFC, there are not the same as the World Bank. The IFC is a private organisation and operated that way too. The IFC, that got involved in Maldives is from the Delhi branch and not from the HQ in Washington.
This is a terrible deal to Maldives and I do not know why the media keep saying that the IFC answered the GOM's concerns? As far as I know there are huge concerns that have not been answered.
Since GMR is now a private company, GMR should be charged for the services by the MNDF and the Maldives Police for securing the airport. Its time that capitalism should be exercised in its pure form in the Maldives just as the IMF and IFC preaches us.
Thus the Maldivian tax payer should not spend for securing the airport.
GMR is running a business and they are not bound by the same standard of ethics as a government officials.
GMR is expected to do everything within their power to maximize their profits and secure any concessions and advantages available to them.
We do not need to attack GMR to discuss this issue. The problem lies with our politicians and their complete disregard for the Maldives.
I feel our leadership must understand that any damage caused to the Maldivian economy in turn damages their political prospects and funding for their own designs.
Allowing GMR to exclude Maldivian businesses from the development of the airport is not right any way that you look at it. Of course, major multinationals and foreign companies with the financial power to cross borders would be stronger and more efficient than most of our own businesses. However we must try and reserve a fair degree of opportunities for local companies to ensure that the profits from the airport are shared by our economy as well.
Partnerships between resorts and local ventures have helped build communities. These partnerships are vital for our future. I do not wish to engage in Nasheed-bashing too much anymore yet the way they got this thing done was wrong however you look at it. Action must be taken to strengthen the Maldives position vis-a-vis GMR in order to ensure the future prospects for the country.
Nationalization would be too extreme a measure though. Just my thoughts on the subject.
Jameel. These MDP thugs will never accept anything against their dictator and they are blindfolded about him.
Even if any one show the sun above our head and tell them its the moon , they will believe that it will be Moon if it has come out from the dictator mouth. This is how far these thugs had gone and they do not think and imaging things on their own and they are following blindly the cult.
I thought they got enough points in the second round after disqualifying Singapore airport company and French Party.
i also agree with TSK to some extent. Since the damage is already done and we should rather need to try to find a best solution for the country. Government should also give in and GMR also need to give in something and the way forward is to find a mutually beneficial partnership between GMR and the government.
It will be impossible to kick the GMR out now but we can reduce their power .