Independent MP proposes amendment to “defend” local businesses from airport developer

Kulhudhuffushi-South Independent MP Mohamed Nasheed has proposed an amendment to the Business Registration Bill in a bid to reserve airport shops and services for local ownership.

India infrastructure giant GMR currently claims exclusive rights to certain duty free items to be sold at Ibrahim Nasir International Airport (INIA), he said.

“My view is that GMR’s role has shifted from management to ownership,” Nasheed told Minivan News. “This is all about excessive and detrimental penetration into the local economy.”

A parliamentary committee is reviewing the bill and its proposed amendment.

In response to inquiries from Minivan News, GMR issued the following statement: “As part of the concessionaire we follow the terms and conditions of the agreement between the government of the Maldives and us and expect the government too to abide by it.

“The concessionaire agreement grants and specifies entitlement to directly or concession out retail activities at INIA.”

GMR is currently leasing Ibrahim Nasir International Airport (INIA) for a 25-year development project. Upon assuming management of the airport earlier this year, all airport shop contracts were set to expire on December 31, 2011 as per an earlier agreement with Maldives Airline Company Limited (MACL), with the exception of Spice Island.

The Economic Ministry today announced that GMR Male’ Retail has been registered in the Maldives. It is one of two locally-registered businesses under the corporation’s name.

Nasheed said his proposal refers to “duty free, customs clearance, cargo clearance, and the management of bonded warehouses,” industries which he believes can safely be trusted to Maldivian ownership.

“I have always objected to divesting ownership of Maldivian businesses with foreign investors when the business is within the local capacity and competency,” he explained.

“I respect that there are some areas of business and industry in which the Maldives has neither capacity nor competency. But the enterprises covered in my proposal have traditionally been local affairs. There is no reason to exclude them now simply as perks for foreign investors.”

Nasheed pointed out that many Maldivian businesses grew up around and depend on airport operations. Maldivian Island Aviation has allegedly lost business since the transfer of management, while the group running the Commercially Important Persons (CIP) lounge is now defunct.

In November of this year, GMR announced its intention to take control of cargo handling services starting in 2012. The move has allegedly forced Maldivian businesses Freight Forwarding Services and Bonito Group to lay off several employees.

In recent news, the Alpha MVKB duty-free shop at the airport was forcibly vacated by GMR and Customs officials eight months after GMR’s original notice. Rulings from the Civil and High courts upheld GMR’s right to terminate the shop’s contract, however company CEO Ibrahim ‘MVK’ Shafeeq has launched a protest under the slogan ‘Go GMR Go!’

“I understand the contractual obligation on the government’s part, and I respect the bidding process and the business competition that comes with it,” Nasheed reflected. “The airport is a gateway for tourism, but GMR’s excessively favorable terms are excessively disadvantageous to Maldivians.”

The Maldivian government signed a 25-year contract with GMR on 28 June 2010.

Under the contract the Maldivian government receives:

  • A sum of US$78 million as advance payment which is to be deducted from the profit due to government.
  • 1% of the Gross Revenue in the first four years (2010-2014) and 10% of the Gross Revenue from the general business in the remaining years.
  • 15% of the Gross Fuel Sales in the first four years and 27% of the Gross Fuel Sales in the remaining years.
  • GMR is also to invest US$375 million over a period of 25 years in construction of the new terminal.

Nasheed claimed that the government saw the GMR deal as an income generating source to solve income problems at the time. “But the deal wasn’t revised over the years,” and GMR has meanwhile made significant profits from jet fuel sale.

“GMR gets its fuel from State Trading Organisation (STO). STO rates have remained the same over the past year, however GMR’s rates have been raised twice.” He added that landing and airline fees have increased, and voiced concern that the price hike would deter business.

Meanwhile, GMR has recently opened a 30-office Airline Offices Complex, and several airlines including Ethihad and Hainan have lately begun services to Male’.

The Business Registration bill reserves certain areas of business for local owners. Nasheed said his proposal aims to enlarge that domain by two to three commodities.

“I intend to use my role as a parliamentarian to propose this amendment,” he said. “It’s just an initial step for the proposal, and I’m not sure whether it will survive the whole process. But I’m hopeful and I feel good about having done it.”


16 thoughts on “Independent MP proposes amendment to “defend” local businesses from airport developer”

  1. I fully support and endorse the notion of keeping businesses within local capacity and competency as local investments.

    But i do not quite agree with the bill to disallow total foreign involvement. MVK is also in partnership with Alpha Group for their alcohol and cigarette business at airport. The jewelry store - Sifani - is also a foreign party. both parties have operated the duty free shops at the airport for over a decade.

    What the government should have done is to allow competitive bidding for the duty free shops with equal opportunity for local parties to tender their proposals for duty free shops under the GMR management.

  2. Populist nonsense, typical politician talk. Maldivians needs to learn that the country will not survive without foreign money, and that proposals like these will do nothing but harm in the long run. Foreign investor sentiment already is hitting rock bottom because of corruption, religious extremism and the global warming scare, why make it worse and lose even more badly needed FDIs?


    Why should the government administer a tender on behalf of a private business entity? Would you like it if they told you how to run your company, and whom to do with business with and how? I don't think so.

  3. "GMR is also to invest US$375 million over a period of 25 years in construction of the new terminal" WHERE IS THE MENTION OF $25 CONTRIBUTION FROM EACH PASSENGER TOWARDS DEVELOPING THIS AIRPORT?

  4. It is likely Maldives will end up becoming one of those African states where they gets lots of foreign investments but the locals do not get any!.

    Our economic policy on getting rid of cash cows in in local economy is hopeless.

    By the way I am a supporter of MDP but not their policy of getting rid properties to foreign investors. There are some you have to give out but not things like the airport? As youself and check how Singapore developed itself? Did they gave all out to foreigners?

  5. Affirmative action has always been a disaster. The best managed companies are foreign. Guess which ones hire most locals, pays more, provides more benefits, allows for career development?- foreign companies.

    in the 90's Villa and Universal were the top dogs in tourism industry. The reason they have fallen behind is not because foreign companies with their resources and deep pockets out competed them. The reason is their own mismanagement.

    Let's not champion mediocrity.

  6. @Deecay
    My opinion is not on what government should do now, but what government should have done then.

    And also not how private sector businesses operate but how a state asset was privatized.

  7. @peasant
    Don't quite agree with your sentiments. don't you think a level playing field is where true champions shine.

    but i do agree with your last comment mediocrity - only when applied to those in govt who negotiated this contract with GMR.

  8. agree with peasant.. what is the point of giving preferrence to locals when they treat their fellow countrymen poorly? even these so called local bussiness tycoons,they do not even consider themselves locals themselves!

  9. Who said GMR is there to develop the airport? GMR bid not for the airport or its development. It did for all the local businesses, first at the ariport and subsequently all the businesses of the local people. If GMR were to bid to develop the airport it would have to bring in the money for the development of the airport. To the contrary, they are to make money as Airport Development Charge (ADC) before the airport is actually developed and the passengers who pay the ADC are not able to enjoy any additional service at the airport.

    If GMR were to create a develpment fund for the development of the airport why did the Maldives government lease the public assets of millions of dollars to GMR? Why didn't the MACL do so instead and carry out the proposed development?

    The GMR reminds us of the Vora era of the Maldives. They came to sell their produts to the Maldives and began to trade in those goods on an equal footing with the locals in the Maldives. This in effect put the local traders out of business. No Maldivian would wish the Voras to return to the country. The sooner they are sent back the better.

    The principle of protecting local businesses against strong foreign influence is not a new thing. It's not new even to the Maldives. There are some Indian businesses reminiscent of the Vora presence here. However, they cannot by law, at least, engage in retail businesses but in wholesale business only. But this is not relevent any more now since many local businesses are of the same scale as or even larger than their business.

    Just the same way that foreign busineses are not allowed retail business, the businesses that GMR hopes to replace local in must be prevented from being carried out by foreigners. A measure that will effectively put off the GMR. This is in the best interest of the local public at large. All necessary measures must threfore be taken immediately to stop the GMR from going any further jeopardising the local interests.

  10. I wholeheartedly agree with almost all sentiments expressed here.

    Local companies often suffer from mismanagement and poor quality control.

    Foreign investment is necessary for the development of our economic sector.

    While in the same breath;

    I believe that:

    Local businesses should be given some sort of preferential treatment if we are to retain foreign currency earnings in the country.

    The CMDA should play a more active role in educating the public about what to expect from corporate entities.

    The education system should provide targeted opportunities for locals to receive training in fields that would benefit the private sector.

  11. There's a lot of non-sense about the fact that we have to bow to foreign investors. You have to remember that any investor, foreign or not are not here to do us a favour. They are here to make money and that's it! They are not here for altruistic reasons.

    We still don't know the full details of the GMR deal. Day by day we learn more of their plans, like the $25 tax and the duty free shopping. The $25 tax alone is $50 million in GMR's pockets and they don't have to do anything to get that! Add the retail sales to that and GMR are laughing their way to their fat bank accounts.

    And what are we getting for all of this? Some $300 million invested over 25 years plus "management"? That makes me cry. Just do the sums, you fools.

    There are examples of very good foreign investment in the Maldives. Dhiraagu and Cable & Wireless is a very good example. GMR cannot even be mentioned in the same sentence as them. The sooner we unravel this whole mess of a deal with GMR, the better it'd be for the whole country. If allowed to carry on, Maldivians will pay the price of this for generations.

  12. This is a very bad deal and the deal was done even before the bidding process has finished. GMR would not have won a fair bidding process.

    The people involved in the bidding were HALCO( based in India) IFC( based in India) and the GOM.

    In fact the other bid of Turkish and Paris Airport was much better but these 3 parties decided to give the airport to GMR.

    If the Majlis was so interested in this they should look at the bidding and how HALCO and IFC manipulated so that GMR go the contract.

  13. how come we do not get to see the detail of the contract made between GMR and the GOM?? Every now and then when they decide they do what ever they want. Why is that parliament is not asking this question?

  14. The Parliament is also incompetent and is not interested in genuine issues. All they want is to score political points.

  15. @Peasant.....What utter nonsense, shows that you haven't been following the news..The giant corporations in American like Ford, Chrysler, General motors, Bank of America, AIG, many oil companies, almost all major banks, received trillions of US dollars in bailouts, to get them out of the mess these high paid crazy executives got themselves into, Is this not affirmative action? according to you like the tea party and these nasty republicans its all right when affirmative action by any other name is for big foreign companies but cries foul when its actually for the people who really deserves it, in our case the local businesses..You are for less regulations and to protect the rich, the "foreign" rich.We need more regulation and restrictions on foreign business not less.


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