ACC files ADC case with Prosecutor General’s Office

The Anti-Corruption Commission (ACC) has filed a case with the Prosecutor General’s (PG) Office today over the decision to allow infrastructure group GMR to deduct a court-blocked Airport Development Charge (ADC) from concession fees owed to the state.

The deducted concession fees were to have been paid to the state-owned Maldives Airports Company Limited (MACL).

As part of the filed case (Dhivehi), the ACC is seeking reimbursement of MVR 353.8 million (US$22.9 million) from former MACL Chair Ibrahim ‘Bandhu’ Saleem and former Finance Minister Mohamed Shihab over the alleged misuse of authority it claimed had led to significant financial loses for the state.

The ADC issue had been a key point of contention between GMR and the administration of President Dr Mohamed Waheed Hassan Manik before his government opted last month to void a sovereign agreement with the India-based infrastructure group to develop and manage Ibrahim Nasir International Airport (INIA).

When contacted by Minivan News today, a PG’s Office spokesperson confirmed that the ACC case had been received, but could not provide any further details on the matter while its investigations were taking place.

The spokesperson claimed that under normal procedure, whether a case was submitted from an institution like the ACC or the Maldives Police Service, the PG’s Office would review all details before deciding whether to move ahead with a prosecution.

ACC case

According to the case filed by the ACC, former Finance Minister Shihab stands accused of misusing his ministerial authority to benefit a third party by allowing GMR to deduct the ADC and insurance charges from concession fees it owed MACL between October 2011 and September 2012.

Shihab was not responding to calls from Minivan News at time of press.

The ACC has also accused former MACL Head Saleem of allowing GMR to deduct the ADC through a consent letter signed in violation of the company’s rules. According to the ACC’s case, normal procedure for MACL would be to have the company’s Board of Directors pass a resolution allowing for consent to be given to deduct the ADC.

Airport Development Charge

In late 2011, the then-opposition Dhivehi Qaumee Party (DQP) filed a successful Civil Court case blocking GMR from charging an ADC – a US$25 charge for outgoing passengers stipulated in its concession agreement with the government – on the grounds that it was a tax not authorised by parliament.

Former President Mohamed Nasheed’s administration chose to honour the original contract, and instructed GMR to deduct the ADC revenues from the concession fees due to the government through state-owned MACL, while it sought to appeal the Civil Court ruling.

However, the Nasheed government fell a month later and the opposition inherited the result of its court victory, receiving a succession of bills from the airport developer throughout 2012, despite the government’s insistence that the January 5 letter from MACL outlining the arrangement was no longer valid.

In the first quarter of 2012, the government received US$525,355 of an expected US$8.7 million, after the deduction of the ADC. That was followed by a US$1.5 million bill for the second quarter, after the ADC payable eclipsed the revenue due to the government.

Combined with the third quarter payment, the government at the time of the GMR contract termination owed the airport developer US$3.7 million.

GMR attempted to compromise by offering to exempt Maldivian nationals from the ADC.

The offer was claimed to have had been personally mailed by GMR Chairman G M Rao to President Waheed. However, GMR later claimed to have received no response from the government on the matter.


GMR dispute not putting off foreign investors, claims Chamber of Commerce

The Maldives National Chamber of Commerce and Industries (MNCCI) has claimed legal wrangling between the government and India-based developer GMR over a multi-million dollar airport development will not harm confidence in the country’s “challenging” investment climate.

Under the terms of the Ibrahim Nasir International Airport (INIA) agreement – the largest ever foreign investment in the Maldives’ history – GMR signed a 25 year concession agreement to develop and manage the site, as well as redevelop the existing terminal by the end of this year.

However, the coalition government of President Dr Mohamed Waheed Hassan since coming to power has continued to press to “re-nationalise” the airport, with the country’s Deputy Tourism Minister this week confirming in Indian media that the administration wouldn’t “rule out the possibility of cancelling the award [to GMR]”.

Both parties are presently involved in an arbitration case in Singapore over the airport development as several government coalition parties including the country’s religious Adhaalath Party (AP) held a gathering in Male’ on Thursday showing a “united stand” on opposing the GMR deal until the airport was “liberated”.

MNCCI Vice President Ishmael Asif contended that ongoing legal disputes linked to both the GMR agreement and another high-profile contract to manage a border control system with Malaysia-based Nexbis were not among concerns foreign investors had raised with the chamber.

“GMR has nothing to do with the investment climate here, at the end of the day it is a personal concern for the company and more a matter of local politics,” he claimed.

When questioned on the perceived financial factors behind the “quite challenging” investment climate, Asif pointed to political unrest in the country in the build up ad aftermath of February’s controversial transfer of power.

“A second factor is that in major investment markets like Europe, the economy is not doing very well, which does have an impact,” he said. “Locally of course, the problem is politics.”

Asif added that among the key concerns raised by foreign investors to the MNCCI about doing business in the Maldives were concerns about locals laws and regulations, particularly regarding depositioning and withdrawing funds.

The MNCCI also questioned the current importance of Sri Lanka and India for investment and trade opportunities in the country, compared to markets like Australia and the Middle East. Asif claimed that India and Sri Lanka mainly traded certain local foodstuffs with the Maldives, rather than providing large-scale investment projects.

“In terms of the affects to the investment climate, I don’t think there will be much of an impact on other investors from the GMR issue,” he said.

Conversely, Asif said that the MNNCI had been concerned about the impact of the GMR deal on local businesses, alleging that a planning council related to the infrastructure group’s bid had not been open to the public or its members.

“The public was kept in the dark over this matter,” he said, adding that local workers were concerned about the pact of GMR’s airport development. “All local businesses had to move out of the airport and were shut down.”

Asif pointed to the case of local enterprises such as MVK Maldives Private Limited, which in December last year was ordered by the Civil Court to vacate the Alpha MVKB Duty Free shop based at INIA after its agreement had expired.

GMR officials began to physically remove the Alpha MVKB Duty Free Shop at INIA after “several notices” to vacate the area were “ignored”.

On December 14, company CEO Ibrahim Shafeeq held a protest “to demonstrate our opinions and dislike of what GMR has done to us, and to get public responses.”

Speaking to private broadcaster Raaje TV this week, former Economic Development Minister Mahmoud Razee, who had worked with the previous government and international partners on the GMR agreement denied that the deal had resulted in local enterprises being kicked out.

“The privatisation policy does not itself kick others out. It is about honouring the contract. No one has actually been kicked out, but private parties have opportunities to participate. The issue that has always existed is getting cheap capital for small scale businesses,” he claimed.

Razee claimed that the GMR deal reflected a commitment by the former government to pursue privatisation as outlined in the Maldivian Democratic Party’s (MDP’s) manifesto.

“Firstly, if or when anything is run like a business, private people are more skilled and efficient. They are far more competent and they work for profit unlike the government,” he claimed.  “This means it requires less cost for the government, but needs more outside investment or capital. Private people are more skilled and efficient in terms of managing. The end product thus is more beneficial.”

Addressing criticisms from some local politicians that privatisation provided no benefits to the nation, Razee conceded there was an element of truth to the assumption, but stressed it did not reflect longer-term economic benefits.

“Because the investment is huge, the project is big; the first beneficiaries are always the investors. True. The benefits go to the foreigners,” he said. “In foreign countries, they make a consortium, which means the profits are being shared within multiple parties. For example, if a Turkish company is investing here, it doesn’t mean they do everything themselves. If they are developing a property, the construction, or other necessary work is done through local companies.”

Despite the claims, local media reported that a gathering at Male’ artificial beach area went ahead on Thursday (September 27) as part of a protest under the name “The Maldivians’ airport to Maldivians”.

According to local media, of the government-aligned parties represented, only the leaders of the Adhaalath Party such as were witnessed in attendance during the gathering.

“The protest… was not participated [in] by large numbers of people,” according to the Haveeru newspaper.

During the demonstration, a number of speakers reportedly called for action to “regain” the airport from GMR and annul the current development agreement, while claiming the estimated US$700 million required by the company in compensation would be lower.
The gathering is expected to be the first in an ongoing series of events to push for the airport to be “renationalised”.

Both AP President Sheikh Imran Abdulla and Minister of State for Islamic Affairs Mohamed Didi were not responding to calls from Minivan News at the time of press.

Despite these commitments, the Dhivehi Rayyithunge Party (DRP) has said it would not join its fellow government coalition partners in protests to oppose the airport privatisation contract, claiming any resolution to the dispute must be made through the courts.

DRP Spokesperson Ibrahim Shareef has told Minivan News this week that while the party itself questioned if the GMR deal was in the best interest of the public, “due process” had to be followed through proper legal channels in order to establish if any wrong doing had occurred with the airport contract.