The Dhivehi Rayyithunge Party (DRP) has called on the government to consider the potential financial repercussions and impact on investor confidence should it renege on a contract with Indian infrastructure group GMR to develop Ibrahim Nasir international Airport (INIA).
DRP Leader Ahmed Thasmeen Ali today said the party had asked the current government to assess the possible implications of cancelling the GMR agreement in three key areas before his party decided on whether to agree to proceed with renationalising INIA.
An agreement now thought to amount to US$511M was signed between GMR and the previous government of Mohamed Nasheed in June 2010 to manage and build a new airport terminal by 2014, as well as renovate the existing airport facilities in the meantime
The deal, the largest single financial investment in the Maldives’ history, has since faced several protracted legal disputes resulting this month in the infrastructure giant referring a disputed US$25 Airport Development Charge (ADC) included in its contract to a court of arbitration in Singapore.
Several pro-government parties – including the DRP, the Dhivehi Qaumee Party (DQP), People’s Alliance (PA) and Jumhoree Party (JP) – advised President Waheed in June this year 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.
Thasmeen’s comments today about assessing the potential impacts of terminating the contract were made as Progressive Party of Maldives (PPM) Deputy Leader Umar Naseer alleged in local media that the DRP was now the “main obstacle” to the state resuming management of the airport.
The PPM is a coalition partner of the DRP in the government of President Dr Mohamed Waheed Hassan.
According to newspaper Haveeru, Naseer contended that an invitation from Indian Prime Minister Manmohan Singh to meet with Thasmeen this week was directly related to the GMR airport dispute.
With the Maldivian Democratic Party (MDP) and the PPM respectively holding the majority and minority leadership roles in parliament, he questioned the reason for Thasmeen’s invite other than discussing the airport case.
“I do not think this trip is related to anything else. The DRP not the main opposition anymore as everyone knows. Even if it is taken in an official manner, the parliament minority leader is from PPM,” Naseer was quoted as saying.
Naseer also claimed that President Mohamed Waheed Hassan’s government wanted to reclaim the management of the airport from GMR – a pledge he hoped would be carried out even without the support of the DRP.
An Anti-Corruption Commission (ACC) investigation into allegations that DRP Leader Thasmeen and Parliamentary Speaker Abdulla Shahid accepted US$1 million in bribes from GMR was last year reported to have “investigated thoroughly”, both men were cleared of wrongdoing over the case.
Thasmeen, Shahid and GMR have all vehemently dismissed the allegations of bribery.
Responding to Naseer’s claims today, Thasmeen told Minivan News that his recent visit to India was the result of a long-standing invitation by the Indian government to discuss a number of issues including the current political situation in the Maldives. He added the visit had not been related to GMR’s dispute with the government.
Thasmeen was not drawn into whether the issue of the GMR contract formed part of discussions, adding only that the prime minister had shown a desire for long-term stability in the Maldives during the talks.
“He was clear in his desire to see a resolution to the current political problems in the Maldives,” he said.
In addressing the issue of GMR, Thasmeen claimed that the DRP has already responded to a request by President Waheed for the views of his coalition government on how to proceed over the matter of the GMR case – but had yet to decide on possible renationalisation.
“In making a decision on this case and the GMR contract, there are three things to consider. These are the impacts on investor confidence from pulling out of such a deal, the impact this will have on bilateral relations with friendly nations and the extent of the financial repercussions from terminating such a contract,” Thasmeen claimed. “What sort of compensation might there be for example? The government is best placed to make such an assessment and we will wait for it to do so before making a decision on the case.”
While GMR has pledged to have the new terminal open by July 1, 2014 “irrespective” of outside issues, the Maldives government has pledged to back the will of parliament should it decide on re-nationalising the project.
The relationship between the airport developer and the government soured further late last month after the government temporarily called for a halt to work on the new airport terminal, alleging it had “violated rules and regulations” by not acquiring certain permissions from the Civil Aviation Authority.
In a statement, the infrastructure giant said the GMR Malé International Airport Private Limited (GMIAL) joint venture company had obtained “requisite approvals” under the regulations at the time construction commenced, but had since been asked to seek further approval from authorities.
“We have received a letter from Maldives Civil Aviation Authority asking us to seek its approval pursuant to a recent regulation, for the construction works related to the proposed new Passenger terminal building. Pending the approval, MCAA has directed stoppage of the said works,” GMR stated. “This has no impact on the operations of the airport at the existing terminal.”
Amidst claims by Attorney General Aishath Azima Shakoor that the “doors for dialogue” were still open over resolving the matter of the ADC case, a GMR spokesperson told Minivan News today that the company was not able to comment if fresh discussions with the government were taking place. Shakoor was not responding to calls by Minivan News at the time of press.
The attorney general told Sun Online that the company could be waiting for up to two years for a resolution to the ADC court case in Singapore. She claimed that discussions between the company and the government remained the “best way” to resolve the issue therefore.
Earlier this year, GMR said it had sought to compromise with the government by offering to exempt Maldivian citizens from paying the ADC. However, the Transport Ministry continued to demand that the infrastructure giant repay US$8.2 million deducted from the concession agreement.
Under the concession agreement, a US$25 Airport Development Charge (ADC) was to be levied on all outgoing passengers to part-fund the airport development.
However, while in opposition, the Dhivehi Qaumee Party (DQP), led by Dr Hassan Saeed, now President Dr Mohamed Waheed’s special advisor, and Dr Mohamed Jameel, now Home Minister, filed a successful case in the Civil Court in December 2011 blocking payment of the ADC on the grounds that it was effectively a tax not approved by parliament.
Nasheed’s government as a stopgap measure 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, at time the country is facing a crippling budget deficit, a foreign currency shortage, plummeting investor confidence, spiraling expenditure, and a drop off in foreign aid.
According to financial statements sent to MACL and released to local media, in the second quarter of 2012, GMR deducted the ADC revenue of US$7.1 million from total revenues of US$5.6 million, leaving the government with a bill for US$1.5 million.
Managing Director of MACL Mohamed Ibrahim told local newspaper Haveeru at the time that the government would not pay the amount, alleging that GMR’s deduction of the ADC from the revenue was illegal.
In its defence, MACL has said that its board of directors had been reformed with the arrival of the new government, and a decision made to annul the old board’s agreement to deduct the ADC revenue.
The government meanwhile sought to invalidate the GMR contract – and the clause invoking arbitration – by challenging the handling of the bidding process by the International Finance Corporation (IFC), a member of the World Bank group and the largest global institution focused on private development sector in developing countries.
“The advisory work was supported by AusAid (Australia), the Ministry of Foreign Affairs of the Netherlands, and DevCo. DevCo is a multi-donor program affiliated with the Private Infrastructure Development Group and funded by the UK’s Department for International Development, the Ministry of Foreign Affairs of the Netherlands, the Swedish International Development Agency, and the Austrian Development Agency,” the IFC explained, following a visit by the delegation in June to address the government’s concerns.
Following the first quarter deduction, GMR announced an employee benefits scheme converting 50 percent of employee salaries to US dollars from July onwards, and a one-percent profit-share.