GMR commences two year terminal launch countdown, while coalition calls for nationalisation

Infrastructure giant GMR has said the new terminal at Ibrahim Nasir International Airport (INIA) will open two years as of yesterday (July 1) “irrespective” of outside issues.

The government has meanwhile pledged to back parliament should it decide on re-nationalising the project.

The development of the airport – expected by the company to total US$511m in costs – is the largest foreign investment project undertaken in the Maldives’ history and includes commitments to renovate INIA’s existing terminal by September both in terms of operational efficiency and customer services, according to GMR.

At the same time, work is also under way on an entirely new terminal structure on the Eastern-side of Hulhule’ island that GMR has claimed will completely transform the country’s foremost transfer hub for local people and international visitors alike.

Local media outlets were on Saturday updated on the redevelopment of the island and shown around the new terminal site which, when completed, will aim to cater for increases in international traffic predicted in the country up to 2035.  The site is also required to bring INIA’s operations in line with international aviation standards.

With contractors already having begun work on the new structure as of last month, the government has stressed that it will not seek to interfere or “disturb” the project that officially commenced back in November 2010 under the administration of former President Mohamed Nasheed.  This government commitment was made despite raising concerns over what it claimed are minor issues relating to business regulations on the site.

However, President’s Office Spokesperson Abbas Adil Riza said the long-term prospects of the construction ultimately depended on GMR validating the legality of their contract – a document that was overseen by the International Finance Corporation (IFC). The IFC is a member of the World Bank group and the largest global institution focused on private sector in developing countries.

Abbas added that should parliament also decide on nationalising the airport in line with the wishes of certain pro-government parties to take back the project from GMR, then the present administration would have to comply with such a decision.

The government of President Dr Mohamed Waheed Hassan comprises a coalition of former opposition parties that represent the majority of elected representatives. The now-opposition Maldivian Democratic Party (MDP) presently has 29 MPs in the Majlis, the largest number of MPs belonging to a single party.

Nationalisation calls

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

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). The president has previously pledged during a visit to India that he would protect investment from the country in the Maldives.

A delegation from the IFC, 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.

Coalition concerns

When asked whether he believed GMR’s pledge to present the Maldives with a entirely new airport structure by July 1 2014 – in line with a 25 year concession agreement to develop and manage the site – would be met, Abbas claimed that concerns raised by several former opposition parties would need to be addressed.

“The point to note is that during the agreement’s signing, several unlawful points were raised by [former opposition] parties over why the government could not enter the agreement with GMR,” he claimed. “Under the law of the contract [GMR] did not perform sufficient due diligence and they must validate the legality of the contract. If any court of law rules the contract is illegal, the law must be upheld.”

The claims were made after local media reported that GMR had begun construction last month without a Civil Aviation Authority permit needed for work to begin. GMR responding in newspaper Haveeru said that the terminal construction had been approved in an existing master-plan agreed with the government.

Clarifying the report, Abbas claimed that the permit was “not a huge issue” and was believed to have resulted from an error by contractors presently working on the airport’s construction.

Under the law, he stressed that companies were required to undertake an Environmental Impact assessment (EIA) – which had been completed by GMR – as well as meet all other local business regulations.

Abbas claimed that the permit was an issue likely to have resulted due to a contractor error and could be addressed within the space of a week without major delays.

“Normal procedure would be for the cessation of work on the airport while the permit was awaiting approval. This takes about a week. I don’t see any reason for delays,” he said.

Aside from the permit issue, the government also alleged that it wished to resolve an issue over a duty-free law that outlawed duty-free shops at arrival terminals. With alcohol outlawed for consumption or purchase outside of licensed resort properties under Maldivian law, duty free stores within the airport’s arrival area was raised as a legal issue.

“These issues can easily be resolved, we are not looking to disturb the GMR deal,” he claimed. “Larger corporations need good governance, if one company does not meet its obligations everyone else may start looking for loopholes.”

Disturbance

Abbas said the most pressing issue concerning the INIA construction agreement remained the US$25 Airport Development Charge (ADC) outlined by GMR within its original agreement – a practice the infrastructure group contends is commonly used by airport developers around the world to aid the costs of large-scale renovation projects.

“The law does not allow for deduction of the ADC without parliamentary approval,” Abbas said.

The country’s Civil Court had blocked GMR charging the ADC last year on the grounds that it was a tax not approved by parliament. As the ADC was stipulated in the contract, former President Mohamed Nasheed’s administration had signed with the airport operator, the government at the time agreed that GMR would deduct the charges from the concession fees due the government, pending appeal.

With the present government having contested these deductions, GMR released a statement back in May proposing a compromise agreement whereby Maldivian nationals would be excluded paying the ADC when departing the airport.

While seeking to maintain an open dialogue with the government, GMR said Saturday that there had been no reply so far in regards to the options it had offered the government in order to find a resolution to the ADC matter.

Business politics

Despite the ongoing issues with the ADC, the infrastructure group said it did not pay too much attention to politics in the country, claiming it instead remained focused on the development of INIA.

“We don’t do politics well at all,” said INIA CEO Andrew Harrison, when questioned by local media about the impact politics was potentially having on the construction.

Speaking during a tour of the new airport structure yesterday, Harrison added that the airport construction was on track at present, and already providing improved returns to the state when compared to earnings before the agreement came into place.

He added that although there was no set deadline in order to reach consensus with the government over the resolution of the ADC charge, long-term delays could have “time and cost implications for the project”.

“Additional improvements”

Aside from contractual obligations to improve tourist processing capacity in the existing terminal, Harrison said that GMR was committed to a number of additional improvements not specified in the original concession agreement.

These improvements include an entirely new outdoor food court for the present terminal including Thai Express, Burger King and Coffee Corner restaurants that would be open to the general public as well as visitors.

He also pointed to other high-profile developments such as the refurbishment of the airport’s domestic terminal and toilets, a new executive lounge and behind the scenes modifications to boost capacity at the site as a reflection of the company’s claims it is going beyond its contractual obligations.

The new terminal meanwhile has been devised to include new shopping complexes, increased seaplane capacity via two new water runways and a considerably larger structure built above an large artificial lagoon.

The construction, comprising of a 70 percent glass structure, has been designed architecturally to play up the appeal of the Maldives’ oceans, whilst being four times the size of the terminal presently used to accommodate airline passengers.

Emergency runway

Addressing concerns raised in local media about the development of the existing runway, Harrison said that GMR had sent proposals to the government for possible construction of an emergency runway.

He stressed the the construction, which would require additional funding support either directly through the government or through the concession agreement, could be used only in case of emergencies should the main airport runway be out of action owing to an accident or emergency.

Harrison claimed that if approved by government, the emergency runway, which would not be ready by the opening of the terminal on July 1, 2014, would not be in full compliance to  International Civil Aviation Organisation (ICAO) regulations, due to its distance to grounded aircraft.

With the new terminal in place, aircraft would be grounded 212 metres away from the proposed emergency runway, meaning it would not meet recommended international regulations. However, GMR claimed this distance would still be preferable in terms of regulatory requirements to the current space available between INIA’s runway and aircraft parking area.

Beyond the new terminal aiming to meet full ICAO compliance by the time it is open to tourists, the passenger terminal is also expected to meet LEED Silver Certification environmental standards.

The contruction will also include a new VIP terminal to deal with diplomats, heads of state and other high-profile guests, along with a brand new cargo terminal and a Airport Fire and Rescue Building to deal with any potential on-site emergencies.

GMR said that the terminal had been designed by Singapore-based architect Winston Choo, who had devised a structure making the most of natural ocean surroundings while also playing up garden areas and a lagoon equivalent to two football pitches in size.

As part of the terminals proposed aesthetic, distressed wood, granite and coral like materials designed to emulate the feel of high-end resort properties around the country are expected to be used, the company added.

A virtual walk through of the proposed terminal design can be viewed here.

Discussing the ongoing political backlash against the awarding of the contract to GMR back in 2010 on nationalistic grounds, Harrison contended that INIA would remain a Maldivian owned enterprise that would be continuously developed by the company for the duraction of the tender.

“We are just the caretakers here,” he said.  “The airport remains and has always been owned by Maldivians.”

Harrison contended that to ensure profitability for its investment in the airport, GMR was itself committed to strengthening the wider Maldivian economy by working with local businesses, industry and contractors.

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