Tag: foreign investment

Adhaalath Party head gives government six day ultimatium to renege on GMR airport deal

The government has been given less than a week to “reclaim” Ibrahim Nasir International Airport (INIA) from infrastructure group GMR under order of the religious conservative Adhaalath Party, a member of the coalition backing President Dr Mohamed Waheed Hassan.

Adhaalath Party President Sheikh Imran Abdullah gave the deadline yesterday, during a rally calling by November 15 for an annulment of the contract signed between the former government and GMR to manage and develop a new terminal at INIA.

Imran also told those gathered to stand ready for “activities on sea” planned for the November 12. The gathering, held yesterday at the artificial beach area of Male’, is expected to reconvene this evening.

Sheikh Imran was not responding to calls from Minivan News at the time of press, while fellow party member and State Islamic Minister Sheikh Mohamed Shaheem Ali Saeed said he did not wish to comment on the “GMR issue”, asking that he only be contacted over religious matters.

Former President Mohamed Nasheed, whose government approved the deal back in 2010, this month slammed statements over the “reclaiming” the airport from GMR.  Nasheed claimed such comments were “highly irresponsible”, stating that such words from the government could cause irreparable damage to the country.

Several Indian companies operating in the Maldives including GMR and TATA have also this month expressed concerns over political interference that they claimed is derailing their substantial investments in the country.

Following the controversial transfer of power on February 7, members of President Waheed’s unity government of President Dr Mohamed Waheed Hassan has swung between issuing reassurances within diplomatic circles that Indian investments in the country would be protected, while locally stepping up nationalisation rhetoric.

President’s Office Media Secretary Masood Imad and Spokesperson Abbas Adil Riza were also not returning calls on whether the government had been officially notified of the deadline or how it will proceed on the matter at time of press.

The present government has continued to press to “re-nationalise”the airport, with the country’s Deputy Tourism Minister confirming to Indian media in September that the administration would not “rule out the possibility of cancelling the award [to GMR]”.

Despite these pledges, government coalition partners including the Dhivehi Rayyithunge Party (DRP) and Jumhoree Party (JP) have both called for further investigation into alleged wrongdoing over the deal and to follow legal guidelines.

Senior representatives of both parties have told Minivan News that any potential action taken against GMR to be taken through the courts and after negotiations with the infrastructure group.  Any actions should then be conducted in a manner not detrimental to securing future foreign investment opportunities, both parties have concluded.

Under the terms of the agreement – an estimated US$511 million deal that represents the largest ever case of foreign investment in the Maldives – GMR agreed to a 25 year concession agreement to develop and manage the site, as well as to overhaul the existing terminal by the end of this year.

The document was overseen by the International Finance Corporation (IFC), a member of the World Bank group and the largest global institution focused on private sector projects in developing countries.

The Maldives government has accused the IFC of negligence during the bidding process for INIA – allegations there were rejected by the organisation.  Both the government and GMR are presently involved in an arbitration case in Singapore over the airport development that is anticipated to conclude by year end.

However, the Adhaalath Party, as part of a civil society coalition that was formed last year, has stepped up efforts of late to oppose upholding the airport deal.

The efforts have included an ongoing number of gatherings in the capital Male’, promotional material including a “Go Home GMR” balloon, the publication of a book on the deal and a petition sent to the government.

Local media reported this week that some 10,000 people had so far signed the petition.

Sheikh Imran has previously predicted there would be “some unrest and damage” should the GMR deal be annulled, but nontheless urged people to come out and support the calls for nationalisation.  The GMR deal is actually a 25 year lease arrangement and the airport still belongs to the government.

Imran said the Maldivian population would be able to endure economic hardship should the deal be annulled, before threatening “a completely different activity” should the government fail to resolve the issue to the coalition’s satisfaction.

Book launch

Also against the GMR deal is the government-aligned DQP, whose leader Dr Hassan Saeed serves as special advisor to president Waheed, as well as being his party’s presidential candidate.

Late last month, Dr Saeed launched a book authored by himself that concluded the only option for “reclaiming the airport from GMR” is to invalidate or cancel the concession agreement with the Indian infrastructure giant.

The DQP has claimed the book would reveal a number of facts that the Maldivian people were unaware of before the signing of the agreement.

It follows the publication last year of another DQP publication that claimed that the government’s lease of Ibrahim Nasir International Airport (INIA) to developer GMR posed a threat to local industry that will “enslave the nation and its economy”.

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

This week alone, cabinet ministers announced efforts were being taken to try expanding the number of investment opportunities available in the Maldives in order to generate greater interest from foreign enterprises.

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Cabinet opts to expand foreign investment oppurtunities

Cabinet ministers have opted to try expanding the number of investment opportunities available in the Maldives in order to generate interest from foreign enterprises.

Following discussions on a paper presented to the cabinet by the Ministry of Economic Development, a decision was taken yesterday to create a “scheme of action” outlining how to attract and handle foreign investments being made in the Maldives, according to the President’s Office website.

The cabinet was also said to have agreed on the need for a specific investor focus around the provision of basic needs, updating public services and developing the country’s economic landscape.

As a result of the investment plan, the islands of aakan’doodhoo and Firun’baidhoo in Shaviyani Atoll and Maakuredhdhoo in Noonu Atoll are expected to be leased out for long-term agricultural projects.

The cabinet’s decision comes as Indian media earlier this month raised concerns that enterprises including TATA and infrastructure group GMR – both presently operating in the Maldives – were struggling to overcome political interference they claim is derailing their substantial investments in the country.

GMR, contracted to develop and manage a new terminal at Ibrahim Nasir International Airport (INIA) in Male’ in the largest foreign investment project ever seen in the country, is facing opposition from some government-aligned parties over allegations about the validity of its contract.

GMR has denied the allegations, adding that all relevant documentation was overseen at the time by the International Finance Corporation (IFC).

Last month, Jumhoree Party (JP) Deputy Leader Abdulla Jabir criticised attempts to “politicise” the dispute between the government and India-based GMR over an agreement to develop INIA – fearing a negative impact on foreign investment.

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

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India concerned over Maldives’ political instability, investment climate

The Indian government has expressed concern over continuing political instability in the Maldives, following the murder of Progressive Party of the Maldives (PPM) MP Afrasheem Ali this week.

In a statement on Thursday, India’s External Affairs Ministry said it had “consistently emphasised that peace and stability are necessary prerequisites to the firm implantation of democracy, as well as for the economic growth and prosperity of the people of Maldives.”

“We call upon all parties in Maldives to continue to work towards facilitating an early and commonly acceptable internal solution to the political impasse in the country. In this context, India urges the government of Maldives and all political parties to adhere strictly to democratic principles and the rule of law thus paving the way for the holding of free, fair and credible elections. Violence should find no place in democracies,” the Ministry stated.

India also called on the Maldivian government “to ensure a propitious climate for foreign investments, which have a direct bearing on the economic growth and development of Maldives.”

The latter remark comes after parties in the ruling coalition last month stepped up rhetoric calling for nationalisation of Ibrahim Nasir International Airport (INIA), currently being developed and managed by Indian firm GMR in the Maldives’ single largest foreign investment.

Following the controversial transfer of power on February 7, President Dr Mohamed Waheed Hassan’s government has swung between issuing reassurances within diplomatic circles that Indian investments in the country would be protected, while locally stepping up nationalisation rhetoric.

Last week, GMR’s Airports CFO Sidharth Kapur told Indian television channel CNBC that the dispute could affect the country’s investment climate.

“While we have invested both debt and equity into this project, these kind of problems naturally affect the investment climate of any region,” said Kapur.

Discussing the GMR case last week, the Maldives National Chamber of Commerce and Industries (MNCCI) assured Minivan News that investor confidence was not being harmed, though the body did describe the investment climate as “challenging”.

India meanwhile recently granted the Maldives a further US$25 million as part of a US$100 million standby credit facility agreed during last November’s official visit from Prime Minister Manmoham Singh.

The deal represents the third instalment of the credit facility, with the previous two instalments having amounted to US$50 million. The previous tranche of US$30 million was released following President Waheed’s first official visit to India in May.

The assistance comes at a time the Maldives is facing a crippling financial position.

Minister of Finance Abdulla Jihad told parliament’s Finance Committee that this year’s budget deficit is set to be double the original estimate of MVR 3 billion (US$195million).

Jihad told Parliament’s Finance Committee that state spending this year, MVR 9 billion (US$590 million), had outstripped earnings by 28 percent.

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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.

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Government urges CMAG to remove Maldives from agenda

The government has sent a statement to the Commonwealth Ministerial Action Group’s (CMAG) demanding its removal from the group’s agenda, ahead of its teleconference this Tuesday (August 11).

In the statement, dated September 7, the government argues that there remains “simply no justification for keeping the Maldives on the [CMAG] agenda”.

The CMAG had placed the Maldives on its formal agenda in February although President Dr Mohamed Waheed Hassan’s government has maintained that the group “lacked the mandate” to to so.

Waheed’s government also spent £75,000 (MVR 1.81 million) on advice from former UK Attorney General and member of the House of Lords, Baroness Patricia Scotland, in a bid to challenge what they deemed was the Commonwealth’s “biased” stance on the Maldives, and has continued to express disapproval at what it terms “interference” by the Commonwealth.

The government’s statement offers five reasons in support of its removal from the CMAG agenda.

Firstly, the government pointed out that the recently completed Commission of National Inquiry (CNI) had found no legal issues surrounding the transfer of power, adding that its international observers had hailed the report as “exemplary.”

The publication of the CNI was closely followed by an independent legal analysis which has raised serious doubts over the credibility of the CNI’s findings.

The teleconference statement added that former President Mohamed Nasheed had also welcomed the report, “though with some caveats”.

The most notable of the caveats mentioned by Nasheed was that the report left the country in a “comical” situation “where toppling the government by brute force is taken to be a reasonable course of action.”

Secondly, the government reasons that the CNI’s findings of police brutality are already being acted upon by the relevant independent institutions – the Police Integrity Commission (PIC), the Human Rights Commission (HRCM) and the Prosecutor General (PG).

The onus placed on these institutions since the release of the report has again raised doubts as to their ability to handle these politically sensitive investigations.

However, the fourth reason cited for the removal from CMAG’s agenda was the government’s willingness to expand cooperation with the Commonwealth in order to strengthen the institutional infrastructure.

This willingness to enhance relations with the Commonwealth appears at odds with the apparent enmity shown by senior figures towards the organisation since the CNI’s release.

Both Dunya Maumoon, State Minister for Foreign Affairs, and Dr Hassan Saeed, Special Advisor to the President, have publicly argued that the Maldives had been treated unfairly, suggesting that the country should leave the organisation should it not be removed from the CMAG agenda without delay.

“Should the Maldives continue to be kept on the CMAG agenda, I have to say that there are a lot of citizens and very senior members of the government who have many serious concerns regarding whether the Maldives will stay on as a member of the Commonwealth,” Dunya told the press last Thursday.

Dr Hassan launched a scathing attack in a comment piece for local newspaper Haveeru, in which he argued that the Maldives had received “third class justice” from the Commonwealth.

“It is my belief that the Commonwealth and its institutions have treated us very badly,” wrote Dr Hassan.

“I would now argue that if CMAG does not remove the Maldives from its agenda in its next teleconference on 11th of this month, we should end our relationship with the Commonwealth and look to other relationships that reflect modern realities of the world,” he said.

President’s Office Spokesman Abbas Adil Riza was reported in local media today as saying that he does not feel CMAG should intervene in any future challenges the country faces.

When discussing the current visit of Commonwealth Special Envoy Sir Donald McKinnon, Abbas said he felt this would be McKinnon’s last visit to the country.

The third reason listed by the government in its statement to CMAG argues that calm had been maintained “despite some serious efforts by the opposition to create unrest.”

Although there was widespread anticipation of unrest before the release of the CNI with Nasheed at one point calling for his supporters to “topple the government”, the demonstrations surrounding the report’s release were not accompanied by a notable increase in violence.

The presence of international news crews in anticipation of unrest did, however, did lead to greater coverage of the ensuing protests.

The statement also mentions the initiation of the ‘Leader’s Dialogue’ talks which it claims will focus discussion on practical issues such as legislation which will ensure elections next year can be held freely and fairly.

Finally, the government argues that the stigma of remaining on the CMAG agenda is negatively affecting foreign investment and tourism in the country.

“The Maldives, which is one of the smallest countries in the Commonwealth, is experiencing difficulties in finalising foreign investment projects, and in some cases, concessional loan financing, as well as a drop in tourist arrivals into the country as a result of being on the CMAG agenda,” read the statement.

Ministry of Tourism figures show that this year’s tourist arrivals had grown just 2.8 percent compared to the same period in 2011. Figures for 2011, however, showed growth of 17.6 percent compared with 2010’s arrivals.

President Waheed travelled to China last week where he finalised agreements for a US$500 million loan (MVR7.7billion).

“It is therefore time that the Maldives is removed from the formal agenda of the CMAG and allow the government to focus on what it is expected to do; cultivating and nurturing democracy in the Maldivian society,” concludes the statement.

“After all, in democracies, governments are answerable to the people,” it finishes.

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Government demands GMR “temporarily halt” construction of new terminal

The Maldives government has called for a cessation of work on the new airport terminal by Indian infrastructure group GMR, over allegations the company has “violated rules and regulations” regarding the construction.

President’s Office Spokesperson Abbas Adil Riza confirmed to Minivan News that the cabinet, acting on information provided by the Transport Ministry, had requested that building work on the new terminal at Ibrahim Nasir International Airport (INIA) be halted.

“When the government decides that a project be stopped, we will make sure this happens,” he said. “GMR have not discussed the construction with relevant authorities.”

Abbas did not clarify if the alleged violation of rules and regulations by the company was related to previous reports that construction on the project commenced last month without obtaining  construction permits from the country’s Civil Aviation Authority.

Transport and Communications Minister Dr Ahmed Shamheed was not responding to calls at the time of press.

A GMR spokesperson said today that the company itself had received no letter or communications calling for a halt to work.

However, local media has reported that the cabinet opted on Tuesday (July 24) to call for a “temporarily halt” on work on the terminal, over claims GMR had not acquired necessary authorisation and permit approval from the country’s Civil Aviation Authority.

GMR told Haveeru earlier earlier this month that terminal construction had been approved in an existing master-plan agreed with the government. The company has pledged that it will open by July 2014, “irrespective” of outside issues.

Addressing the matter of GMR’s construction work earlier this month, the government at the time claimed that the permit was “not a huge issue” and was believed to have resulted from an error by contractors presently working on the airport’s construction.

Development plans

The development of the airport – expected by the company to total US$511m in costs – is the largest foreign investment project undertaken in the Maldives’ history and includes commitments to renovate INIA’s existing terminal by September both in terms of operational efficiency and customer services, according to GMR.

With contractors already having begun work on the new structure in June, the administration of President Dr Mohamed Waheed has previously stressed that it would not seek to interfere or “disturb” the project that officially commenced back in November 2010 under the administration of former President Mohamed Nasheed.

However, President’s Office Spokesperson Abbas previously claimed that the long-term prospects of the construction ultimately depended on GMR validating the legality of their contract – a document that was overseen by the International Finance Corporation (IFC). The IFC is a member of the World Bank group and the largest global institution focused on private sector in developing countries.

Abbas added that should the (now government party controlled) parliament also decide on nationalising the airport in line with the wishes of certain pro-government parties to take back the project from GMR, then the present administration would have to comply with such a decision.

The government of President Dr Mohamed Waheed Hassan comprises a coalition of former opposition parties that represent the majority of elected representatives. The now-opposition Maldivian Democratic Party (MDP) presently has 29 MPs in the Majlis, the largest number of MPs belonging to a single party.

Nationalisation calls

Several pro-government parties – including the Dhivehi Rayithunge Party (DRP), Dhivehi Qaumee Party (DQP), People’s Alliance (PA) and Jumhoree Party (JP) – advised President Waheed last month 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.

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Foreign investment key to address dollar supply issues: economic development minister

Economic Development Minister Ahmed Mohamed has claimed in local media that the value of the US Dollar against the Maldivian Rufiyaa is not expected to fall in the “near future”, citing the need for a new long-term financial strategy.

Criticising the previous government’s decision to amend local dollar exchange rates – capped at Rf12.85 until April last year –  in an attempt to alleviate black market trading of foreign currency, Ahmed claimed a new approach to foreign investment was needed to alleviate the supply situation.

“After Ramadan, we will announce several new projects. This would be a solution to the dollar problem,” he told local news service Sun Online yesterday.

Ahmed also hit out at the previous government’s decision to discontinue charging import duty to instead impose a General Goods and Services Tax (G-GST). The tax, which was passed by parliament last year rose to six percent from 3.5 percent yesterday while import duties were lowered or eliminated for a range of commodities starting January 1, 2012.

The Tourism Goods and Services Tax (T-GST) was meanwhile raised to six percent for 2012 as stipulated in the GST Act.

Despite Ahmed’s criticisms, two former economic ministers serving within the administration of former President Mohamed Nasheed claimed last month that they were confused by the seemingly contradictory measures of increasing import duties whilst reducing GST.

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Government to monitor corruption allegations, file defamation suits

Cabinet has instructed the Attorney General’s Office to monitor allegations of corruption made against the government, and file defamation lawsuits where such allegations are proven unfounded.

Defamation was decriminalised in the Maldives in 2009, and now carries a maximum penalty of Rf 5000 (US$325). That same year the Maldives jumped 53 places in Reporters Without Borders’ press freedom index and was upgraded by Freedom House from ‘not free’ to ‘partially free’.

Cabinet’s move comes on the back of growing concern that some such allegations are being made for political purposes, and that fear of their share prices being damaged by the Maldives’ byzantine local political agendas may be a factor discouraging potential foreign investors.

Minister for Economic Development Mahmoud Razee told Minivan News that Cabinet’s intention was to review allegations of corruption against the government, and refer them to police for investigation where justified.

He said the intention was not to take on the duties of the Anti-Corruption Commission (ACC), as “in many cases these are allegations that never reach the ACC.”

The primary objective was to show that the government was taking corruption allegations seriously in the wake of Transparency’s 2011 Corruption Perception Index (CPI), Razee said.

The Maldives rose slightly to rank 134 this year, scoring 2.5 on a scale of 0 (highly corrupt) to 10 (very clean), placing it alongside Lebanon, Pakistan and Sierra Leone.
Transparency Maldives’ Project Director Aiman Rasheed observed at the time that there was a “systemic failure to address corruption” in the country.

“Corruption in the Maldives is grand corruption, unlike neighbouring countries where much of it is petty corruption,” Rasheed said. “In the Maldives there is corruption across the judiciary, parliament and members of the executive, all of it interlinked, and a systemic failure of the systems in place to address this. That why we score so low.”

Razee acknowledged the need for the government to address the corruption index, but emphasised that it did not reflect the actual level of corruption but only its perception – “reflected in our transparency, the availability of information, and right to information.”

Monitoring accusations and investigating or filing defamation cases where justified should show that the government was taking the problem seriously, he suggested, “and show we stick to our principles.”

Allegations of corruption and fractious local politics this year impacted several foreign investors, including mobile security solutions vendor Nexbis and airport developer GMR.

Nexbis shares immediately dropped 6.3 percent on the back of an ACC’s announcement in January that the project was to be suspended after it observed “opportunities for corruption”.

Nexbis issued a statement at the time claiming that speculation over corruption was “politically motivated” in nature and had “wrought irreparable damage to Nexbis’ reputation and brand name.”

“Although we understand that the recent media frenzy and speculation of corruption are politically motivated in nature and not directly related to Nexbis, it has had an indirect impact on our reputation and brand name,” the company said.

The ACC has since forwarded corruption cases against former Immigration Controller Ilyas Hussain Ibrahim and Director General of Finance Ministry, Saamee Ageel to the Prosecutor General’s Office (PG), alleging the pair had abused their authority for undue financial gain in granting the project to Nexbis.

On Thursday last week GMR shares on the Mumbai stock exchange fell 7.57 percent on the back of a Civil Court ruling against the company’s proposed US$25 Airport Development Charge (ADC), included in the concession agreement signed with the government. The suit was filed by the opposition-aligned Dhivehi Quamee Party (DQP).

Razee acknowledged that while political parties were obliged to behave in a professional manner, given the tumultuous political environment “Yes there is a possibility that [corruption allegations] will be used for political purposes.”

Razee noted that investors sometimes struggled to raise finance in Maldives as it was not a weighted country, and faced potential difficulties “if a contract turns sour”, due to the lack of arbitration. Both problems were highlighted in World Bank assessments, he said, but added that the government had a bill pending for a proposed Mercantile Court, staffed by foreign judges with a separate seal and special jurisdiction to solve disputes involving business transactions.

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Tourism sails on with luxury in fragile setting

Maldives tourism has made an impressive comeback since the 2009 global recession, and investment from China and India is expected to surpass precedents in coming years, finds a report from Care Ratings Maldives.

Nonetheless, the Maldives occupies a precarious market, and government controls limit foreign investment, the ratings agency found.

In 2005 Asia surpassed America as a tourist destination, coming in second to Europe. According to Care Ratings, Foreign Tourist Arrivals (FTA) surged this year as China’s economy flourished and European economies made a slow comeback. Chinese tourists are projected to account for 15 percent of Maldives FTA by 2020.

Plans are being made to expand capacity accordingly. The Maldives tourism sector will add 77 new resorts and increase bed capacity by 47 percent over the next three years, the report finds. Additional safari vessels are also expected to be added to the industry, which already boasts a fleet 150 strong.

By the end of 2011, the report projects the direct employments in tourism will have grown from 35,000 to 38,000. Fifty percent of these are likely to be expatriate hires.

Revenues are also expected to increase by 10 percent by the end of the year, claims the report.

Tourism is the largest contributor to Maldives national GDP and foreign currency, however the sector is restricted and vulnerable. The reports lists terrorism, global economic crisis, and limited land and human resources as obstacles to growth. It also points out that environment is a major factor of success.

“The tourism industry is capital-intensive in nature due to the high cost involved in leasing the land, developing the land and constructing a self-contained tourist resort,” states the report. Maldivian resorts frequently sell the appeal of the natural environments, but the Maldivian construction industry lacks the capacity to process raw materials.

Importing processed materials drives the average resort room construction cost up to US$30,000 to US$60,000, one of several factors which makes tourism in the Maldives a high-end market.

Human capital is mentioned as a complicating factor. Resort employment could account for one-tenth of the Maldivian population, 32 percent of which is unemployed. However, only half of resort employees are Maldivian.

Coincidentally, a recent study found that social stigma limited female Maldivian employment in the resort sector to 3 percent, a number far below the demographic’s potential.

Another challenge to growth is government oversight. “The industry now is very much regulated by the government of the Maldives,” states the report. “Tourism is now developed and managed according to country-wide policy based on a master plan.”

All Maldivian islands are government-owned, and resorts can only be leased for 25 to 50 years. Construction is limited by the “One Island One Resort” policy, which allows only one resort per island, and structures are limited to 20 percent of the land available.

Over the past three decades, the ministry has introduced three tourism master plans.

Although the report recognizes the complicating effect of government restrictions on developers and investors, it states attributes these plans with significant growth.

“The growth of the industry in the last couple of decades was mainly due to the efforts taken by the government to promote the tourism industry and the progress was largely on a planned path determined by the First Tourism Master Plan (1983-1992), the Second Tourism Master Plan (1996-2005) and the Third Tourism Master Plan (2007-2011).”

The Maldivian government also created the Maldives Marketing and Public Relations Corporation (MMPRC), which promotes the Maldives as a brand in the world tourism arena.

Last week, MMPRC recognized the value of the Asian travel market by co-hosting a travel agents networking event with GMR. In a nod to the region’s booming business culture, MMPRC MD Simon Hawkins pointed out the advantages of hosting meetings at Maldives resorts.

MMPRC aims to draw 1 million tourists to the Maldives by the end of 2012.This year, the Maldives reached 700,000 arrivals by September.

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