Nasheed government sought to make Maldives an “economic slave”: Economic development minister

Economic Development Minister Ahmed Mohamed yesterday (September 16) accused former President Mohamed Nasheed of working to make the Maldives “an economic slave” to an unspecified foreign company.

Ahmed, a senior member of the Dhivehi Rayyithunge Party (DRP), which this week announced it would be backing Nasheed’s in a second round of voting for this year’s presidential election, was quoted in local media as being highly critical of the former head of state.

Although Economic Development Minister Ahmed did not reportedly name the foreign company accused of trying to enslave the nation.  However, the present government last year controversially scrapped a US$511 million contract signed under by Nasheed’s administration with India-based infrastructure group GMR to develop and manage an entirely new airport terminal.

The Maldives is presently facing a US$1.4 billion compensation claim from GMR for its decision to terminate the contract over allegations that the International Finance Corporation (IFC)-approved tender was open to corruption. The allegations were ultimately rejected by the country’s Anti-Corruption Commission (ACC).

However, Ahmed was reported in Sun Online as slamming Nasheed for alleged efforts to make the Maldives what he called an “economic slave” to a foreign business by taking loans with high interest rates and short repayment periods. The comments were made during a rally held by the Progressive Party of Maldives (PPM) and its election coalition partner the Maldives Development Alliance (MDA).

Despite the claims, the government earlier this month said it hoped to secure longer-term financing to plug a shortfall in annual revenue that has seen the number of 28-day Treasury Bills (T-bills) sold by the state almost double in July 2013, compared to the same period last year.

Finance Minister Abdulla Jihad told Minivan News at the time that the state’s increased reliance on short-term T-bills between July 2012 and July 2013 reflected the current difficulties faced by the government in trying to raise budgeted revenue during the period. He cited minimal interest from the private sector in providing finance as adding to these difficulties.

Jihad added that the current administration was also reliant on 28 day T-bills, which were being sold as a means to “roll over” debt one month at a time.

“We are trying to have banks get longer-term finance such as T-bills at present,” he said.

Economic Development Minister Ahmed also claimed yesterday the number of doctors had fallen by the time of his controversial resignation last year following a mutiny by sections of the police and military, while also criticising the former president’s record towards education.

“By the time Nasheed resigned, the value of Maldivian Rufiyaa had been decreased by 32 percent, which means that a commodity which earlier cost MVR 100 (US$6.5), cost MVR 132 (US$8.5) by the time he resigned,” he was quoted as saying.

According to Sun Online, the economic development minister also said that the aim of unspecified peoples was to “remove” Nasheed from office.

Ahmed Mohamed was not responding to calls from Minivan News or requests to clarify his comments at time of press.

The comments were made as PPM vice presidential candidate Dr Mohamed Jameel Ahmed last week declared that former President Nasheed “will not be allowed to assume power”, even should he emerge as the clear winner in the run-off.

Clarifying his remarks to Minivan News at the time, Dr Jameel stated that his comments during the rally reflected the “criminal charge filed against Nasheed” concerning his role in the detention of Criminal Court Chief Judge Abdulla Mohamed, who stands accused of corruption and halting investigations into his conduct through the courts.


President seeking US$300 million credit facility from Saudi Arabia for “budget support”

The government has confirmed it is in discussion with Saudi Arabia, seeking a long-term, low interest credit facility of US$300 million to help overcome “fiscal problems”.

President’s Office Spokesperson Masood Imad confirmed President Waheed had held discussions with senior Saudi Arabian dignitaries including Crown Prince Salman bin Abdulaziz Al Saud over the proposed credit facility, during his recent visit to the country.

“The president has initiated the talks so it is just a matter of working out the details now,” Masood said, explaining that the funds would be used for “budget support” and development projects.

The opposition Maldivian Democratic Party (MDP) has meanwhile said the government would still be required to secure parliamentary approval for the funding.

MDP MP and Spokesperson Hamid Abdul Ghafoor said that the heavily partisan parliament now effectively controlled state finances as a result of former opposition politicians – now part of President Waheed’s government – imposing tighter spending restrictions on former President Mohamed Nasheed’s administration.

Ghafoor argued that with the MDP failing to recognise the legitimacy of the present government due to the controversial transfer of power last February, he did not believe there would be support for approving the credit agreement with Saudi Arabia due to the government’s existing extravagant borrowing levels.

The party accused the current government of reckless financial management, pointing to a potential US$1.4 billion compensation bill facing the state for deciding last year to abruptly terminate a US$511 million airport development contract agreed with infrastructure group GMR.

The compensation claim amounts to four times that of the Maldives’ current state reserves should it be awarded by a Singapore court overhearing arbitration hearings between GMR and the government.

“Since we do net see this government as legitimate, we do not see why we should support them,” he said. “They have put us into debt with their handling of the airport development and another bill for a border control system.”

Earlier this month, Malaysian security firm Nexbis invoiced the Department of Immigration and Emigration for US$2.8 million (MVR 43 million) for the installation and operation of its border control system technology in the country, in line with a concession agreement signed in 2010.

Immigration Controller Dr Mohamed Ali confirmed at the time that Nexbis had submitted a bill seeking charges for the period its system has been in use, as work continues on replacing the Malaysian company’s border controls with new technology provided by the US government.

Development delays

In April this year, Finance Minister Abdulla Jihad sought authorisation from parliament to divert MVR 650 million (US$42 million) allocated for infrastructure projects in the budget to cover recurrent expenditure.

Jihad warned that government offices and independent institutions might be unable to pay salaries or electricity and phone bills if funds were not transferred from the MVR 1.8 billion (US$117 million) Public Sector Investment Programme (PSIP).

Earlier the same month, Jihad also announced that the government had decided to delay all new development projects that were to be financed out of the state budget due to shortfalls in revenue.

The decision to suspend new projects was revealed after Housing Minister Dr Mohamed Muiz told local media at the time that he had been instructed not to commence any further infrastructure projects included in the 2013 budget, such as harbour construction or land reclamation.

Both Finance Minister Jihad and Economic Development Minister Ahmed Mohamed were not responding to calls from Minivan News at time of press.


Ahmed Mohamed appointed acting minister of finance and treasury

Economic Development Minister Ahmed Mohamed has been appointed acting minister of finance and treasury in place of Abdulla Jihad, the President’s Office has announced.

No reason was given for the decision to appoint Ahmed Mohamed to the role.

Both Ahmed Mohamed and Abdulla Jihad were not responding to calls from Minivan News at time of press.


IFC responds to government’s allegations of negligence in airport bid

Additional reporting by Neil Merrett

A spokesperson for the International Finance Corporation (IFC) has defended the organisation against charges of negligence during the bidding process for the development of Ibrahim Nasir International Airport (INIA).

In a press conference last Thursday held by the Attorney General  Azima Shukoor, Economic Development Minister Ahmed Mohamed, Toursim Minister Ahmed Adheeb and Civil Aviations Minister Dr Ahmed Shamheed, it was alleged there were discrepancies in the bid awarding and concession process.

The cabinet members claimed that the IFC had been “irresponsible” and “negligent” in advising the former government of President Mohamed Nasheed in the concession of INIA by Indian infrastructure giant GMR.

“The current government believes that the IFC had not given the most appropriate legal, financial and economic advice to the Maldivian State,” Azima Shukoor said.

The IFC denied the accusations, stating that its advice was geared towards achieving the “objective of upgrading the airport and ensuring compliance with applicable international regulations” and providing the Maldives government “with the maximum possible revenue”.

“A competitive tender was organised with the objective of selecting a world-class, experienced airport operator, who would rehabilitate, develop, operate and maintain the airport,” said an IFC spoksperson.

The IFC – a member of the World Bank Group – was established in 1956 to stimulate private investment in developing countries through investment, advisory, and asset management services.

The spokesperson stated that the bids were evaluated by a government appointed committee, comprising senior government officials, using two key criteria.

The first criterion required firms to meet all the technical requirements set out in the tender documents which, Seth stated, were designed to meet the objectives of the government, and ensure the airport becomes a world class airport with ‘Leadership in Energy and Environmental Design’ certification (Silver).

The second criterion was financial, favouring the highest offer from firms that passed the technical stage. The financial criterion was a combination of a one-time up-front fee, and fixed and variable fees to be paid throughout, explained the spokesperson.

“The IFC’s advice complied with Maldivian laws and regulations and followed international best practices at each step of the bidding process to ensure the highest degree of competitiveness, transparency and credibility of the process,” the organisation stated.

“These processes have been followed globally in several Public-Private-Partnership projects in the airport and other infrastructure sectors,” it added.

Asked if the IFC was currently continuing assistance to GMR or the Maldivian government, it replied “We are currently not working in any capacity with the authorities on this project. We however remain available to address any issues or concerns that the government may have relating to the project.”

A GMR Spokesperson said that the company did not wish to comment on the remarks made by government ministers.

The Anti-Corruption Commission (ACC), which is currently investigating the GMR deal, said last week that continued work on the project may be delayed considerably whilst the investigations are completed.

ACC investigations began in June, although building work on the new terminal – due to open in July 2014 – was ordered to halt in early August after the government claimed that the company had not acquired the appropriate permits.

Government’s critique of bidding process

During Thursday’s press conference, Shukoor claimed that the role played by the IFC during the bid awarding process – as well as the technical, financial and legal advice given – was unacceptable and included “major inconsistencies” in the “loss-benefit assessment” carried out before awarding the project to GMR.

“The legal agreement also lacks equity between the state and GMR, and gives significant powers which have narrowed the government’s ability to manoeuvre within the agreement. For this reason, the state is facing a huge loss even in taking steps that have to be taken immediately,” she added.

Speaking about the prospective profit, Shukoor claimed the agreement made between GMR and the government would lose the country more than that it would earn, and a much more cost effective master plan had been made during the tenure of former President Maumoon Abdul Gayoom.

She said that as long as the agreement between GMR and the government is not invalidated, the agreement would be “legally binding” despite a “majority of the people” who wish to “terminate the agreement immediately”.

“The government must also consider how much money has to be paid back as compensation if terminating the agreement, and it is clear to all of you that the Maldives financial and economic situation is at a critical level, and in this situation it is not an easy thing to do,” she told the press.

Shukoor also expressed the government’s concern about the effect on investor confidence that may result if the agreement is terminated in addition to other “diplomatic issues” that may arise from such a decision.

The Economic Minister, Ahmed Mohamed, claimed that the Nasheed government had only considered the lump sum that it received as the upfront payment, rather than long term benefits that the government could have achieved.

“They awarded the bid to a party who proposed to pay US$76million, but if you look at the other bidders, their bids were more profitable in the long run. For example one of the bidders proposed to give a 31 percent share to all the businesses except that from oil trades until 2014, but GMR proposed only one percent,” he claimed.

He added that another bidder had proposed to share 16 percent of the profits gained from the oil trades with the government.

“It is clear that the government did not consider, when awarding the bid, the long term benefits of the people but rather an instant short term profit,” he argued.

Highlighting the already much disputed issue of the Airport Development Charge (ADC), Mohamed claimed the government had given up a lot of power to GMR in the contract, allowing them to dictate all the fees during the concession.

He stated that there were only two options left for the government: “Either find a solution within the concession agreement with GMR or terminate it.”

Civil Aviation Minister Dr Shamheed said the initial INIA master plan, made by British consultancy firm Scott Wilson, was considered too costly by the IFC.

“So we checked the truth of IFC’s report. The master plan by Scott Wilson is a phase based development. There were developments that were to be brought in the first phase, the second and other phases that followed were mentioned very much in detail,” he claimed.

Shamheed claimed that despite the fact that Wilson’s master plan was more cost effective the IFC made a new master plan, hiring another foreign Consultancy firm – Halcrow- which Dr Shamheed claimed was more costly.

“Scott Wilson’s phase one cost us US$390 million, and all the three phases summed up came to a figure around US$590 million. IFC did not provide this information to the government. We are talking about a development of 30 years,” he said.

Shamheed also alleged that the new master plan was made without even testing the status of the current runway at all and said they relied on a test that was made a long time ago.

“Even those tests showed that the runway needed significant repairs and some parts of the runway had to be removed,” he added.

“This is very irresponsible that the former government entered into a contract with a party who did not assess the situation of the existing runway,” he claimed.

Tourism Minister Ahmed Adheeb alleged that because of the new fees implemented by GMR following its take-over, the flight frequency from Europe had declined.

“Coming to Maldives is no longer feasible for most of the chartered flights.  Sri Lankan airlines’ Male to London direct flights have been pulled out following the decision. Even though the flight frequency from China has increased, the number of bed nights has declined,” Adheeb said.