IFC delegation addresses government concerns over GMR airport deal

A delegation from the International Finance Corporation (IFC) – a member of the World Bank group and the largest global institution focused on private sector in developing countries – met with senior government officials last week to address concerns over the concession agreement with Indian infrastructure giant GMR to develop the Ibrahim Nasir International Airport (INIA).

Local daily Haveeru reported that the IFC delegation comprised of the country manager to the Maldives, the technical team of the airport development project evaluation committee and its legal team. The delegation reportedly provided information requested by the government regarding the evaluation of the agreement with GMR.

“The government’s main concern is the deduction of the fuel concession fee which includes airport development charge and insurance surcharge by GMR, payable to Maldives Airports Company Limited (MACL). In addition, the government also raises its concern over the restricted opportunities for Maldivians in the development plan of the airport,” the newspaper reported.

According to IFC, the key objectives of the institution in its role as lead advisor to the government in the structuring and awarding of the 25-year concession agreement were:

  • increase the airport’s capacity to handle long-term traffic growth while ensuring that the airport met international technical standards;
  • position the airport as a world-class facility catering to highend tourism;
  • improve operations and service quality standards in line with international best practices;
  • maximize the value of the project for the government in terms of proceeds and quality.
  • implement a successful public-private partnership which could serve as model for other infrastructure projects.

“The concession was awarded to a consortium of GMR Infrastructure Limited (GMR, India) and Malaysia Airports Holdings Berhad (MAHB, Malaysia). The consortium will pay $78 million in upfront fees and offered a percentage of shared revenues that represents over $1 billion in fiscal benefits for the government over the length of the concession, calculated on a net present value (NPV) basis. The proposed investment of $400 million represents nearly 40 percent of the country’s gross domestic product (GDP),” reads an IFC document on the airport deal.

“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.”

On the bidding process, which was organised by the IFC and “evaluated based on the payment of an upfront fee as well as annual concession fees as a percentage of gross revenues to the government”, the document explained that, “Each bidder was required to demonstrate that it had the requisite experience in developing, designing, constructing, operating, and financing airports of a similar size.

“The technical solutions proposed by the bidders were also expected to consider the specific conditions on Hulhulé Island,  including its physical and environmental constraints, and the coordination required between conventional aviation activities, seaplanes, and motor boats.

“The cornerstone of the project was the construction of a new passenger terminal expected to meet LEED silver criteria and to be carbonneutral—i.e., to minimize energy consumption and carbon emissions through the use of energy-efficiency and renewable-energy technologies, and minimize water consumption. The bidders were also asked to make specific, predefined improvements to the existing airport infrastructure, and to manage all core airport services, including the provision of fuel—a historically established role at Malé airport.”