President Abdulla Yameen has warned foreign companies of the importance of political risk assessment before investing in countries such as the Maldives.
“At a time when you had a very heightened political environment in Maldives, at a time when the parliament was polarised, it was a pity that political risk assessment was not undertaken by GMR,” said the president.
Yameen’s comments came during the scholarship awards ceremony of Trans Maldivian Airways’ (TMA) youth pilot training programme – a company he cited as an example of successful foreign investment after its takeover by the Blackstone Group last year.
“Whenever we hear about GMR, the issue that comes right to the limelight is their inability to assess political risk at the time.”
GMR’s landmark airport development deal – signed during the prematurely ended term of President Mohamed Nasheed – was itself abruptly ended by the succeeding administration in December 2012.
The concession agreement to develop Ibrahim Nasir International Airport was signed in June 2010, the same month in which Nasheed’s entire cabinet resigned in protest against what it considered to be the obstructionist policies of then-opposition parties.
Legal action initiated by the deal’s opponents eventually invalidated the deal’s funding arrangements, leading the government of Dr Mohamed Waheed to justify the annulment using the legal principle of ‘frustration’ – in which unforeseen events render contractual obligations impossible.
In June this year, a Singapore court of arbitration ruled the deal had been “valid and binding”, finding the Government of Maldives liable for damages still to be determined by the court.
The Maldivian Democratic Party had subsequently called for the reinstatement of the GMR deal, threatening to dissolve any future deals to redevelop the country’s major international airport.
During yesterday’s ceremony, President Yameen continued to appeal to foreign investors, expressing the country’s desire to diversify from the dominant tourism industry.
“We are not just about the sun, the sand, the sea – Maldives is more subtle. That is the message we are trying to give to the world now,” he told those in attendance at Traders Hotel.
The government’s drive for new investment has focused upon five ‘mega-projects’ as well as an improved climate for new investors, facilitated by controversial plans to establish special economic zones via legislation recently introduced to the People’s Majlis.
Tracing the journey of foreign investment in the Maldives alongside his own public career, Yameen noted that foreign investments were seen as “punitive” in the mid 1980s, with local laws designed to prevent them.
“My task was to encourage political leaders and the president that foreign investment was not such a bad thing. It is only through foreign investment that small countries such as Maldives could forge ahead.”
Yameen – who spent two decades with the Ministry of Trade and Industries – went on to describe frequently “lonely” and “solitary” overseas discussions on potential investment in the Maldives.
Indeed, the president described the difficulty he had in persuading Blackstone’s risk management personnel to invest in the country. The deal saw the US private equity firm gain a monopoly in the vital seaplane sector as rival firm Maldivian Air Taxi was bought simultaneously.
Congratulating those awarded the TMA training scholarships yesterday, Yameen pointed to the country’s “motivated”, “highly intelligent” and “easily trainable” youth as a key resource, urging the seaplane operator to increase the number of Maldivian staff members.
He also expressed his gratitude to the company for providing assistance in his “endeavour which is to bring prosperity throught the avenue of finding ways for the youth”.
The government recently revealed that a number of companies had expressed interest in the government’s Hulhumalé youth city project – which will reportedly include youth-specific housing, international class sports facilities, a theme park, and a yacht marina, catering to a population of 50,000.