The government has agreed to deduct expected revenue from the US$25 (Rf385.5) Airport Development Charge that was to be charged from passengers departing on international flights from Ibrahim Nasir International Airport (INIA) from GMR’s concession fee to the Maldives government.
The agreement is subject to change according to a verdict from the High Court in a related case, and the passage of a bill currently before Parliament.
GMR’s request that the amount be deducted from its concession fee to the government was made to Maldives Airports Company Limited (MACL) last week, and approved following discussions between the Finance Ministry and the Maldives Airports Company Limited (MACL).
MACL officials did not respond to phone calls at time of press.
The ADC was to be charged after midnight on January 1, 2012, however the Maldives’ Civil Court blocked the fee on the grounds that it is essentially the same as a pre-existing Airport Services Charge (ASC) of US$18 for foreigners and US$12 for locals above two years of age.
Citing a contractual obligation with GMR, the government subsequently appealed the case to the High Court, where it is currently awaiting a verdict.
Having received nearly 1 million tourist arrivals in 2011, the government and GMR expected the ADC would generate US$25 million in revenue towards the current renovation of INIA.
Although the expected revenue is said to include fees charged from foreigners and Maldivians traveling abroad, it appears that at US$25 apiece the nearly 1 million tourists alone would meet the revenue needs stipulated in GMR’s original agreement.
President’s Office Press Secretary Mohamed Zuhair informed Minivan News that the notion of exempting Maldivians from the ADC had been raised in meetings, but rejected on the grounds that such an exemption would not generate the necessary revenue.
“The government and GMR have calculated to assure that shareholders and banks are properly recompensed,” he explained. “It should be a matter of pride and joy for any Maldivian to help with the development of their airport.”
Economic Development Minister Mahmoud Razee did not believe the deduction of ADC revenue from the concession fee would impact airport development.
“The government agreed to GMR’s request because the numbers were calculated accordingly” to ensure that the project was not compromised, he said.
Razee added that the agreement is only temporary.
“The government is working through the courts and the Majlis [Parliament] to find a resolution,” he said, affirming that the government continues to favor an ADC.
“When the IFC (International Finance Corporation) did the sums it took as part of the income the ADC revenue,” he explained. “Maldives receives a couple million passengers coming and going every year, but if you compare it to a place like Singapore which transits 30 to 40 million passengers a year, and you need to ensure that you are getting an internal rate of return satisfactory to the investor, you need to adjust that rate.
“So we are trying to maintain a good rate of return for the government and the airport,” he explained.
The matter is being addressed at the parliamentary level in an Amendment of Collection of Airport Tax (international travelers) Act 7/78 Bill. However, Parliament is in recess until March.
GMR previously noted that the payment of a development fee was “a common concept in many airports globally”, particularly as a part of concession agreements where airports are privatised.
“The reason for the inclusion of ADC in many global concession agreements is to address the funding needs to meet the investment model required to upgrade and develop new airport facilities at significant costs,” GMR stated.
The company further claimed that the charge was included in the concession fee proposed between GMR and the government in 2010.
Speaking at the groundbreaking ceremony for INIA’s new terminal on December 19, President Nasheed said he wished to assure GMR that the government was “200 percent behind your contract, and every single other contract the government has signed with any other foreign party in this country. Not just contracts signed by our government, but also contracts that any ruler of the Maldives has signed with any party. We will honour it.”
GMR’s 25 year concession agreement to construct and manage a new US$400 million terminal (to be competed in 2014) is the single largest foreign investment in the history of the Maldives.
Meanwhile, in April India’s Supreme Court ruled against the charging of airport development fees which are not approved by India’s Airport Economic Regulatory Authority (AERA). However Delhi airport, developed by GMR, continued to charge the fee as GMR had obtained permission to collect the sum in 2010.
20 thoughts on “Government agrees to amend GMR fee while rooting for ADC”
This fee has to be borne by President Nasheed, Razee and first lady's brother-in-law Kuda Bandhey. They were the ones who negotiated and signed the illegal clause in the agreement with GMR. Public should not be made to pay for their mistakes.
A regrettable thing that the government intentionally approached GMR with a weaker bargaining position. The government should never have conceded to such exorbitant demands and strengthened its position vis-a-vis GMR.
But legally and economically speaking in order to protect the investor and the future of Foreign Direct Investments in the Maldives, the only viable step left to us is to concede to GMRs demands. It was an elected government that represents the people who agreed to an illegal clause without proper due diligence to validate it. Therefore it is the public who elected this government that should bear the burden of compensating GMR.
If the public is enraged at the government's performance the best solution is not to re-elect them.
We have to drag Anni to the courts for this - Someone should take responsibility for this.
I lost my business at the airport, a company that cost blood, swet and tears, and sleep less nights to build up, with no reason just because His Excellency The President decided to hand over the airport facilities to a foreigner company without taking into consideration the already existing business people running companies at the airport facilities. Yes I am a foreigner just like GMR and also have my rights. Yes I am european and so what? Where is the respect we all deserve? Why wheren't we given oportunities like others. We paid our taxes, we contributed to help the airport to exist - was this already forgoten? Why so Honorable Mr. President , why? Don't Maldivians and their business partners deserve a fair treatment? With the previous government any thing could happen, but not with you, not with you!!! If you forget your people your people has the right to forget you also.
There is no reason why tourists be charged $25 ADC and locals a much smaller amount even nil. Any short falls from the expected local passengers can still be deducted from revenue owed by GMR. This will not cause any loss to the country's bottom line as revenue from overseas passengers will not be wasted. We can call this subsidised ADC scheme...
But will the government change their mind for this sort of thing...? Think not because that will now be seen as a win by the opposition FOR the people of the Maldives... We can't have that now can we...
dear mr. antonio, it was our stupidity that we elected a man who never had a full time job ever in his life as the president of this country. We were blinded by our hatred of Gayoom, his 30 year old dictatorship and all that it stood for.
GMR is here to stay. I believe whether it is Gayoom, Anni or Yaameen, they are going to honor this contract.
Mr. Antonio, what is the name of your business. I say you are pretending to be who you say you are.
SO what now, not even in India GMR was allowed to take that unfair tax from the citizens, not the government is subsidising the GMR with the tax, but of course you cant go against the contract now can you. Why weren't the public informed that the contract had such a clause during the days when the contract was awarded to GMR.
Squeeze , squeeze till the last penny is out .. Hip hip hurray to this government .
Mr. Antonio is (Ibrahim Shafeeq)
at which point Anni will admit he failed on this particular one. i have my full support to Anni for most of his doings but this.
Dear all thank you once more to react to my comments. I am not Mr. Shafeeg ( please be respecfull) neverthelss Ii would not be ashamed of being related to him. I am antonio, I live in spain and I was (not anymore as our business has been destroyd without any compensation share holder and director of one of the shops at the airport) and everything I said is the true and nothing but the true. It is not in my values to lie or to exagerate things but it is very hard to wake up one night knowing that the investment done over years went down the river because of bad political negotiation. Still I think Maldives made a big stepp towards the future getting out of 30 years of forced silence and my wish is that it continues is path to democracy and development. Maldives needs more than tourism and fish to survive in our complex world, but no serious business people will establish in you country if their business can disaperar from the night to the morning.
Thank you all and may Maldives become a ver respected country in the region.
This was no ordinary agreement. The head of Airports company was chucked out and replaced with First Lady's brother in law the night before the agreement was signed. The public should not have to pay for illegal activities carried out by government officials. The ADC clause was illegal.
I am afraid both myself and a large number of Europeans have decided not to holiday in the Maldives anymore. There are much better holiday destinations in the world where the tourist is not fleeced by greedy locals
Looks like this contract was all one sided. This may be the most corrupt deal in the history of the Maldives. Anni should be prosecuted for treason!!
Most of you have no clue at all about this deal. The IFC that dealt with Maldives was based in India and so were the Consultants, HALCO.
So it was a done deal even before the bid. When the bid evaluation committee started to ask questions they were told by IFC and HAELCO, that the criteria has already been set-by IFC and the committee could not ask their own questions
The GMR proposal was not even the best bid but they got it because they said they would pay the most up-front. The offer from Paris Airport was much better but their upfront money was not so high as GMR.
The Chairman of MACL refused to sign this because he knew that this deal was not half as good as Paris Airport. Paris Airport operates two of the biggest Airports in Charles De Galle Airport and Orly in Paris, France, yet they were seem not good enough.
No one with any knowledge of Aviation would have turned down the Paris Airport Bid. They were also willing to invest all their money but also have a Joint Venture with The Maldives yet it was not accepted because of "obvious" reasons.
The only solution is for The Majlis to nationalise The Airport before it is too late using the UN regulations. This would make Maldives pay GMR what they have spent on the airport upto now.
This money can easily be raised without much trouble.
manik, we need to start the action against gmr now before its too late. please help!
Is there really hope of doing what Manik proposes?
If there is, then I am all for it. However if we lease a strategic asset a fair degree of control should be maintained over it regardless of whichever party is chosen through whatever form of open tender.
The subject of the airport is fading away ... why? It seems like other news of less importance are jumping into the firs page of the press although the airpport is today one of the most relevant aspects of the country independence from outsie. It is a question of national importance.
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