GMR offers to exempt Maldivian nationals from airport development charge

GMR has offered to exempt Maldivian nationals from paying the contentious Airport Development Charge (ADC), in a bid to end a legal and contractual stalemate that threatens to bankrupt the Maldives Airport Company Limited (MACL) and deprive the government of the majority of all airport revenue.

The Indian infrastructure giant 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 charge was to be levied on all outgoing passengers to part-fund the US$400 million upgrade.

However while in opposition the Dhivehi Qaumee Party (DQP), led by Dr Hassan Saeed, now President Dr Mohamed Waheed’s special advisor, 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 quarter, compared to the US$8.7 million it was expecting.

In a statement today, GMR said the government had “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 stated.

“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 presented the government with two options:

  • Option 1: No Maldivian passport holder will have to pay ADC. Every departing foreign passenger will pay an ADC of US$28.00; or
  • Option 2: Maldivians travelling to SAARC countries will not have to pay any ADC. Every Maldivian Passport holder departing to countries other than SAARC and every foreign passenger will pay an ADC of US$27.00.

No fee would be charged to either Maldivians or foreigners using the domestic terminal, the company noted.

In the statement, GMR noted that the government received US$33 million in 2011 from airport concession fees, “three times the money the government ever made in a year [from the airport] before privatisation.”

Following construction of the new terminal in 2015 – including “a state-of-the-art 600,000 square foot integrated Passenger Terminal and a 20,000 square foot VIP terminal, and various other airside and landside developments,” expected revenue from the airport to the government was expected to reach US$50 million per year, GMR observed, and almost US$100 million from 2021 as passenger numbers increased.

“In effect, GMIAL’s contribution to the government would be over US$2 billion over the concession period of 25 years, which will make a very significant contribution to the economy of the Maldives.”

President’s Office Spokesperson Abbas Adil Riza said the government had not yet officially received details of the offer, but said that such an offer would be evaluated by the Attorney General’s office “to see whether it is in line with the Financial Regulation Act.”

Attorney General Azima Shakoor was yesterday reported as expressing concern that settling the issue would be “quite difficult”, but vowed that “the government would settle the issue for the benefit of the country.”

On May 2 President Dr Mohamed Waheed told media at the inauguration of the Civil Air Navigation Services Organisation (CANSO): “I do not believe [the ADC] can be charged in the current situation because of the court’s decision.”


16 thoughts on “GMR offers to exempt Maldivian nationals from airport development charge”

  1. I am confused. If the Civil Court says that a tax can be levied only by law, can foreigners be taxed without such a law or Maldivians taxed if they are travelling to countries other than SAARC countries? Did the Civil Court say that?

    If the ADC is indeed a tax then it has to be written into law, don't you think?

  2. GMR deal was unlawful. The parties to the contract did not have the right to enter into a contract on such terms as it was unlawful under the laws and regulations prevailing in the country at the time of the contract. The Financial Regulations Act: did not permit the government to enter into a contract with a party.

  3. So the super rich get totally let off, the tourists and poor get smashed in the teeth.

  4. How can a foreign company be able to meddle with the taxation system of a supposedly sovereign nation and impose taxes? This brings to mind instances in the past when stronger nations wanted to control weaker nations. For example when the Ottomons were defeated in World War I, the victorious allied powers ensured that Turkey's finances were under the control of the allies. The allies, according to the Treaty of Sevres, were to determine Turkey's budget, take control their banks and regulate its fiscal policy. Of course the nationalist Turks rebelled and eventually were able to negotiate and get rid of these humiliating terms and have a new treaty, the Treaty of Lausanne. Similarly,in the early 20th century in Iraq, Iran and Egypt the British ensured that they had unfair priviledges when it came to the control of the most crucial economic assests of these countries; in Iraq and Iran the British obtianed unjust concessions regarding their oil revenues. In Egypt, the British obtained the control of the Suez the loss of which in the early fifties led to the 1956 Suez war.

    Imagine a Maldivian company based in India trying to levy a tax on Indian nationals or others entering or leaving the country! Of course, there is no blame on GMR if what they do does not contravene the agreement they had with the Maldivian government. The blame should squarely be on the government who signed such an agreement.

    The deal appears to be a very bad one for the Maldives. GMR runs the airport apparently with the money they earn from the airport and, if they were to develop the ariport, they do so with the tax they collect. They seem not to invest any money at all! Why cannot the government do the same? Do not the Maldivians have the competencey to run the airport, collect taxes and invest these in the development of the airport?

    It is imperative for Maldives to regain control of one of its most crucial economic assests - and it does not have many - if it were to have a semblance of economic independence and maintain its sovereignty.

  5. @Ahmed on Wed, 9th May 2012 12:20 AM

    "GMR deal was unlawful."

    Who decides the fate of the contract? Don't tell me, the Courts right? Hmm, let's see, their record on these matters isn't stellar...

    In fact, I'd be surprised if the buggers could even comprehend a word of a commercial contract.

  6. This is evidence that GMR was willing to forgo the charges. If not for the poor negotiation, this mess would not have occurred.

    Mr. Razee, then head of privatization committee should make a public apology.

  7. WP holders too should have been exempted. WP holders were never treated differently in the past.

  8. Ahmed there is nothing illegal about the contract as it was approved by then AG and signed by the representatives of the government.
    What was wrong is the terms of the contract in relations to Maldives.
    Also there is a clause about the 25 dollars and in the contract it says that this 25 dollars can be only be collected with the approval of the relevant authority of Maldives.
    The then government knew that this was a sticking point and they knew that only the Majlis can approve this and that is the reason why the previous Finance Minister gave such a letter to GMR.
    MDP thought about getting this approval in the Majlis but they found out that even their own members were dead against it and could not get it passed.

    This was a bad deal for Maldives. In fact the 25 dollars is not the real sticking point.
    The real issue is the proposed site of the new Terminal Building.
    This government wants the new terminal building on the western side while GMR wants it on the eastern side.
    The reason is that GMR can then have al their commercial activity on the western side.When this happens there is no space to construct a new runway because the new terminal building would be occupying that space.

    Even now the current runway is so bad that it is being repaired almost every night after the flights depart.
    When GMR goes away after 25 years Maldives would be left with a white elephant as we would still need a new runway and that means dismantling the new terminal building.
    This whole thing has been a huge disaster for Maldives.
    GMR is not to be blamed as they are business people and would milk everything but it is the responsibility of people like Mahood Razee and others in the government who let such a thing happen.
    In fact it should be a crime against the country.

  9. One post states:
    "In fact, I’d be surprised if the buggers could even comprehend a word of a commercial contract."

    Well, did those who signed the agreement on behalf of the Maldivian government, and those government authorities who approved it, comprehend the terms of this commercial contract and their implications for Maldives in the first place?

  10. Why is GMR being able to dictate on how and to whom they want to tax! Are they now in charge of taxation in Maldives?

  11. Over tax the tourist on top of the already unrealistically high charges made by resorts coupled with the inferior service and you won’t have to worry about the tourists anymore – we won’t be going to the Maldives! Who wants to pay 5 and 6 star prices for 3 star resorts and service? There are plenty of holiday destinations in the world that give true 5 star facilities and service.

  12. I see a lot of people commenting and blaming each other. We all have proved that to err is human and that is what we are reassuring our fellow mates.

    Each of you have expressed your views without knowing both the sides. The government has initiated the bid document and for you kind information i am sure that the government would have checked and reviewed it thoroughly. Its easy to blame and very tough to complement. Ask yourselves how many times have you complemented others i.e the people in your family or even your friends. Our culture has proved that we are only good in blaming each other and fighting against each other. Dont forget that at the end it is we who end up loosing.

    Instead of blaming each other let us bring out corrective solutions and suggestions which may come handy for the government to take better decisions.
    This is how we would need to act and thereby bring out the positive vibration in all of us. Let us all make our country proud.

  13. The so called "coalition government" tried everything to stop and destroy this airport initiated by President Nasheed. Now, they want i to go ahead and hey want the money and to increase the charges? This is appalling unethical behaviour. Dreadful.

  14. Compensation is quite easy:
    Just increase the TGST from now 6% not to 10 or 12, but to 15% …

    32.000.000 US$ / 700.000 tourists equal not even 50 US$ !!!

    Get them, charge them, those kafir of any kind!!!

  15. The last visit to the airport we made (March 2012) we found significant changes, and not for the better, from our previous visit (March 2011)
    If these price increases carry on at the rate proposed, then it won't matter to the average tourist whether they are lawful or not, as the tourist won't be visiting.
    This would be a shame as the Maldives are such a lovely place, but there are other places in the world.


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