Tag: GMR

Singapore’s Crescendas Group claim Maldives is still secure for foreign investment

Maldives is still a safe and secure environment for foreign investors, Singapore’s Crescendas Group has claimed today.

The comments were made in local media days after the Maldives government annulled a contract with Indian infrastructure giant GMR to redevelop Ibrahim Nasir International Airport (INIA) near to Male’. GMR was just two years into a 25-year contract to develop and manage the country’s main airport.

Prior to the annulment, an anti-GMR campaign organised by coalition-aligned parties was formed to increase public support to “reclaim” the airport.

Despite this week’s developments, Crescendas Group Chief Executive Officer Lawrence Leo today claimed to have “strong confidence” in the Maldives, expressing the company’s interest in looking to invest in country for “the long term”.

“There is huge investment potential here. We have met many from both the private sector and government; we have received great support from everyone. Most important thing to be noted is everyone we met gave very positive responses. This shows that Maldives is one of the best places to invest,” he told Haveeru.

“We are also thinking to invest here for the long term because we have strong confidence, otherwise we wouldn’t have brought our funds to invest it here,” Leo added.

Crescendas group is currently developing a resort in Addu Atoll Hankede.

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Immigration halts work permits to GMR, aviation authority to revoke aerodrome certificate

Additional reporting by Mariyath Mohamed.

The Department of Immigration has declared that it will cease renewing the visas of foreign employees working under GMR Male International Airport Limited (GMIAL), the Indian infrastructure giant’s side of the deal to manage and operate Ibrahim Nasir International Airport (INIA) signed with the former government.

“We have stopped issuing visas to GMR for the time being. This was decided since the cabinet has terminated the contract, and GMR has been given a seven day ultimatum to leave. If we went on processing visa requests, it would just be pointless work,” Deputy Chief Executive Officer of Immigration, Mohamed Khalid told Minivan News.

“We are just going along with the decisions made from the top, the President’s Office,” he said.

The Maldivian cabinet declared the agreement with GMR void on Tuesday evening, and gave the company a seven day ultimatum to leave the country.

“The government has given a seven day notice to GMR to leave the airport. The agreement states that GMR should be given a 30 day notice but the government believes that since the contract is void, it need not be followed,” said Attorney General (AG) Azima Shukoor at the time.

Deputy Controller of Immigration Hamid Fathuhullah told Minivan News that immigration had not yet made any decisions on how to proceed on dealing with the visas and permits obtained by GMR that were still active after the government’s seven day ultimatum.

However, Fathuhulla added that they would be making provisions in accordance with existing regulations to allow ample time for the employees to make arrangements to leave.

“Right now, we are not going to provide visas, quotas or work permits to any company associated with GMR. This is in line with the Immigration Act 1/2007 and International Law,” Fathuhulla stated.

President’s Office Spokesperson Masood Imad declined to comment on the matter.

“It is not part of our mandate to cancel visas, deport or arrest people. The President’s Office will do no such thing. The immigration department will decide this issue,” Imad said.

CEO of GMIAL, Andrew Harrison, said the company had received no communication or memo from the immigration department, as stated in several media reports, and had contacted the immigration to try and clarify the matter.

Of the company’s total 1760 staff, 140 are foreign employees on work permits, Harrison said.  He stressed 17 of there work permits were due to be renewed before the end of December.

“Our people are committed. They will stay and work until otherwise notified,” Harrison said.

He said it would be “premature” to discuss the implications of the Immigration Department’s announcement, given that GMR disputes the legality of the government’s termination of its contract, and that there was “still work to be done before statements are made”.

However, he said it was surprising that the notice was issued to the media before any discussion with the company.

“I don’t know why they are doing it this way,” Harrison said. “People are asking us about this, but we have no information apart from the conflicting reports in the media.”

“One report says the visas are being cancelled, another says they have not been cancelled, just the renewals,” said Harrison.

Minister of State for Home Affairs Mohamed Fayaz stated Thursday that the foreign employees of GMR would be “given protection” until they could arrange to leave the country.

Fayaz said that the ministry had extended an invitation to the management of GMR for a meeting following the termination of the contract.

Accepting the invitation, Harrison and Managing Director P Sripathi had met with the ministry representatives, he said.

“At the meeting, we requested that in these seven days, they proceed in a manner which would not disrupt any of the services being provided at the airport. We also assured them that they would remain safe and secure during their time in the country,” Fayaz said.

“We also told them that should they require it, we can provide security services through the police force,” he added.

The government-owned Maldives Airports Company Limited (MACL) has meanwhile issued a circular “opening opportunities for GMIAL staff who are keen to join the MACL team.”

In a statement, the company said it provided “assurance to employees that their present basic salary, allowances and other benefits, and training and development opportunities will be maintained under MACL management. MACL also guarantees that the employees currently sponsored by GMIAL will have the same opportunity to continue and complete their courses.”

CAA withdrawing aerodrome certificate

The Civil Aviation Authority (CAA) has meanwhile sent GMIAL a letter informing the company its aerodrome certificate will be withdrawn at 11:59 pm on December 7.

“That is the regulatory authority that permits us to operate an airport,” explained Harrison, “We cannot operate an airport without the certificate.”

Harrison emphasised that the withdrawal of the certificate did not mean the end of the company’s effort to seek legal redress.

“Reckless”

The government’s decision to declare GMR’s concession agreement void and evict the developer from the Maldives comes after a tough year for tourism, the sector indirectly responsible for up to 70 percent of the country’s economy. According to the 2013 budget presented to parliament on November 27 – the same day as cabinet announced GMR’s eviction – tourism growth in the Maldives has fallen from 15.8 percent in 2010 and 9.1 percent in 2011, to an expected 0.7 percent in 2012.

In a statement today, former President Mohamed Nasheed, under whose administration the GMR contract was signed, said the government’s “reckless decision to terminate GMR’s contract will scare off investors”, with “serious ramifications for the economy, at a time when we can ill-afford to see it falter.”

“Right across the board we are witnessing positive trends being dangerously reversed. Growth in tourism – the bedrock of our economy – has flat-lined; our GDP, which was 7 per cent last year, is projected to be just 3.4 per cent this year; and our deficit, which we had brought under control at the start of the year, is now ballooning at an alarming rate,” Nasheed said.

“If this continues, we risk setting back every aspect of our development. It is not those in government but the Maldivian people who stand to lose most from President Waheed’s economic mismanagement.”

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Government “cynically used xenophobia, nationalism and religious extremism” to attack foreign investor: former President

Additional reporting by Neil Merrett and Mohamed Naahii

The Waheed government’s decision to void the GMR contract and issue the developer a seven day ultimatum will “put off potential investors for decades,” former President Mohamed Nasheed has said.

“Waheed’s government has cynically used xenophobia, nationalism and religious extremism to attack GMR, the country’s largest foreign investor. Waheed is leading the Maldives down the path to economic ruin,” Nasheed said, following Attorney General Azima Shukoor’s issuing of the ultimatum on Tuesday (November 27) evening.  The ultimatum was made while arbitration proceedings are pending in the Singapore courts.

The government’s party to the 25 year concession agreement – the 100 percent state-owned Maldives Airports Company Limited (MACL) – issued a statement on Wednesday declaring that the company was “now working with stakeholders to take over the operations of Ibrahim Nasir International Airport (INIA) on or before the expiry of the seven days period provided to [GMR] to handover possession of the INIA pursuant to the notice issued by the government of the Maldives and MACL.”

GMR meanwhile yesterday denounced the move as “unilateral and completely irrational”.

“We have no plans to go. We have 23 more years here,” GMR’s Head of Corporate Communications Arun Bhaghat told Minivan News.

CEO of INIA, Andrew Harrison, told Minivan News that the airport’s 1700 staff were “quite concerned” and “not exactly jumping for joy”.

The company had held several meetings with staff following the announcement and called on them to ensure continued smooth operation of the airport while the legal team was working to resolve the issue.

“People who have seen their businesses improve since GMR took over have been calling me up expressing support,” Harrison noted.

The company had received no communication from the government apart from the notice issued yesterday, he added.

The Indian government was quick to back GMR yesterday following the announcement by its Maldivian counterpart, noting that the company was awarded the deal “through a global tender conducted by the International Finance Corporation (IFC), a member of the World Bank.”

“The IFC has stated that it has 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,” said the Ministry of External Affairs.

The Indian government added that it was prepared to take “all necessary measures to ensure the safety and security of its interests and its nationals in the Maldives.”

Surprisingly, GMR’s stock showed an upward trend following the government’s announcement.

Traders on one broker’s website predicted that stock was reacting positively due to the Indian government’s quick defence of the company and the prospect of significant compensation for the infrastructure developer following arbitration proceedings.

“Stock will definitely react in a positive manner as it has now become a matter of national prestige,” predicted one trader on Indian finance portal, Moneycontrol.

The Maldives’ decision was widely derided in the Indian media. Forbes India suggested that “the decision to send the Indian consortium packing has brought into focus the risk of doing business in emerging markets with rapidly changing political landscapes.”

“India Inc has had its share of relatively minor `law and order’ problems in its journey into Africa and a few brushes with shifting goalposts in places like Indonesia and Russia. But being thrown out after signing a 25-year, supposedly iron-clad international contract, is a first,” Forbes observed.

Locally, the Progressive Party of the Maldives (PPM) of 30 year autocrat Maumoon Abdul Gayoom praised the government’s move as “important for protecting the rights of Maldivian citizens”.

“It is PPM’s hope that the government’s decision to terminate the agreement with GMR will not affect the historic friendship between the governments and people of the Maldives and India,” the PPM said in statement.

The largest party in the ruling coalition, the Dhivehi Rayyithunge Party (DRP), was more reserved.

“The government should act responsibly and according to the legal contract,” said DRP MP Dr Abdulla Mausoom. “The consequences of government decisions should not adversely affect the lives of the Maldivians.”

The 2191-member Dhivehi Qaumee Party (DQP), which during the Nasheed administration filed the Civil Court case outlawing the airport development charge (ADC) stipulated in GMR’s concession agreement which deprived MACL of airport revenues and cost the government several million dollars, praised President Waheed as a national hero.

“[The] decision will be noteworthy in the history of this country,” DQP Leader and President Waheed’s Special Advisor, Dr Hassan Saeed, was reported as saying in local media.

“No one would expect such a decision to be made by a country that heavily relies on India. But Waheed has decided what is best for his country,” said Saeed. “President Waheed will be remembered in the years to come.”

Saeed earlier wrote to Indian Prime Minister Manmohan Singh urging him to terminate the Maldives’ airport development contract with GMR, warning of rising fundamentalism and anti-Indian sentiment should he fail to do so.

“I want to warn you now that there is a real danger that the current situation could create the opportunity for these extremist politicians to be elected to prominent positions, including the Presidency and Parliament on an anti-GMR and anti-India platform,” Saeed informed Singh.

“That would not be in the interests of either the Maldives or India. You are well aware of the growing religious extremism in our country,” Saeed warned the PM.

Seven day stand-off

GMR has shown no interest in complying with cabinet’s direction and has expressed confidence in the professionalism of the Maldives National Defence Force (MNDF) and its assignment to protect the airport, raising speculation as to how far the government would be willing to go to enforce its decision to void the concession agreement and reclaim INIA.

President’s Office Media Secretary Masood Imad told Minivan News on Wednesday that the government’s role had “solely been to advise MACL to take control of the site.”

“We are not engineering any handover [of the airport],” he said. “What we have done is just given our opinion after being advised that [terminating the contract] was the proper thing to do.”

GMR has responded that it did not recognise a legal basis for the government’s decision while the arbitration is still ongoing in the Singaporean courts, stating that it would continue to manage and oversee development at the airport for the remaining 23 years of its tender agreement.

Masood claimed that any decision to retake the airport would be “the responsibility” of MACL.

“Well I suppose if MACL decide to terminate the agreement and the company hasn’t moved, procedures are in place for the MACL to address these issues,” he said, forwarding further inquiries to MACL Managing Director Mohamed Ibrahim.

Ibrahim however told Minivan News he was “not willing to disclose anything at this moment.”

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Cabinet voids US$511 million GMR contract, gives airport developer seven day ultimatum to leave

Additional reporting by Neil Merrett and Mohamed Naahii.

The Maldivian cabinet has declared the agreement with Indian infrastructure giant GMR to develop Ibrahim Nasir International Airport (INIA) void, and has given the company a seven day ultimatum to leave the country.

“The government has given a seven day notice to GMR to leave the airport. The agreement states that GMR should be given a 30 day notice but the government believes that since the contract is void, it need not be followed,” said Attorney General (AG) Azima Shukoor.

During a press conference on Tuesday evening, Shukoor stated that the government reached the decision after considering “technical, financial and economic” issues surrounding the agreement.

The attorney general claimed the government had obtained legal advice from “lawyers in both the UK and Singapore as well as prominent local lawyers – all who are in favour of the government’s legal grounds to terminate the contract.”

“We also got advice from both local and international lawyers in the Maldives Airports Company Limited (MACL),” she added.

Shukoor said the government had two legal grounds to terminate the contract: one in which the government believed the contract was ‘void ab initio’ – meaning to be treated as invalid from the outset; and the second being ‘frustration’, an English contract law doctrine which acts as a device to set aside contracts where an unforeseen event either renders contractual obligations impossible, or radically changes the party’s principal purpose for entering into the contract.

“The contract is governed by the English contract law. The government believes that the agreement is void ab initio meaning the contract was void from the beginning or the contract is frustrated,” she said.

She added the termination of the agreement was a “purely legal decision” and did not have any connection with the recent series of anti-GMR protests headed by the religious Adhaalath Party (AP).

The decision was, Shukoor insisted, made “professionally” and after “thorough research”.

Shukoor also claimed the government was going to initiate the arbitration process in Singaporean Courts and had already informed its decision to both GMR and MACL.

Asked how the government planned fund the estimated US$700 million in compensation for terminating the contract, Shukoor declined to speak of the sum of money but expressed “full confidence” in winning a court battle.

“We were advised by very professional lawyers including Queen’s Counsels (QC). We have full confidence in winning the case,” she said.

“We do not intend to share all our legal arguments in this press conference. Please do respect that decision,” she added.

“Completely irrational”: GMR

GMR has slammed cabinet’s decision as “unilateral and completely irrational”.

“This unlawful and premature notice on the pretext that the concession agreement is ‘void’ is completely devoid of any locus standi and is therefore being challenged by the company before the competent forums. The company disputes that the concession agreement is ‘void’,” GMR said in a statement.

“The company would further like to state that it has taken all measures to continue operations at the Ibrahim Nasir International Airport thereby ensuring that this vital gateway to Maldives is kept open.

“We would also like to inform all that this action by the government of the Maldives is in complete disregard of and has been done during the pendency of arbitration proceedings in the designated tribunal in Singapore. We are therefore taking all measures to ensure the safety of our employees and safeguard our assets. We are confident that the stand of the company will be vindicated in every way.”

Speaking to Minivan News, GMR Executive Vice President & Group Head of Corporate Communications, Arun Bhaghat, said the only reason for the decision as stated in the government’s letter was that the airport development charge had been ruled unleviable by the Civil Court, and therefore the entire contract was void.

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

Nasheed’s administration chose to honour the original contract, and instructed GMR to deduct the ADC revenues from the concession fees due the government, 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 the government.

Combined with the third quarter payment due, the government now owes the airport developer US$3.7 million.

“The net result of this is that the Maldivian government now has to pay GMR for running the airport. On this basis it is likely that the Maldivian government will end up paying about MVR 8 billion (US$519 million) to GMR for the duration of the contract,” wrote Dr Hassan Saeed, DQP Leader and President Mohamed Waheed’s Special Advisor, in a recent appeal to Indian Prime Minister Manmohan Singh calling on him to cancel the Maldives’ agreement with GMR and warning the Indian PM of “rising extremism” as a result of the GMR deal and anti-Indian sentiment.

GMR attempted to compromise by offering to exempt Maldivian nationals from the ADC, with GMR Chairman G M Rao personally mailing Waheed with the offer, but claimed to have received no response from the government.

“This is by far the single largest foreign investment in the Maldives at US$511 million – in today’s figures, 40-50 percent of the Maldives’ GDP,” observed Bhaghat, adding that the company was supremely confident of defending its legal position.

“We have no plans to go. We have 23 more years here,” he said, vowing that the cabinet’s decision would have “no effect” on the operation of the airport.

“The defence force in this wonderful country is well geared to ensure smooth operation of the airport,” Bhaghat told Minivan News.

India backs GMR: “All necessary measures”

The government of India “proposes to monitor the situation in Maldives closely and is prepared to take all necessary measures to ensure the safety and security of its interests and its nationals in the Maldives,” India’s Ministry of External Affairs has meanwhile said in a statement.

“We have noted the decision by the Government of Maldives to terminate the agreement with the GMR Group to manage the Male International Airport. It would be recalled that the consortium consisting of GMR and MAHB (Malaysian Airport Authority) had been awarded the contract to manage the Male’ International Airport concession through a global tender conducted by the International Finance Corporation (IFC), Washington, a member of the World Bank.

“As the Advisor to the Government of Maldives, the IFC has stated that it has 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 statement read.

“The investment by GMR represents the single largest foreign direct investment in the history of Maldives. The decision to terminate the contract with GMR without due consultation with the company or efforts at arbitration provided for under the agreement sends a very negative signal to foreign investors and the international community. The Government of India would continue to remain engaged with the Government of Maldives on this issue, and would expect that the Government of Maldives would fulfil all legal processes and requirements in accordance with the relevant contracts and agreement it has concluded with GMR in this regard.”

“Destabilising the country”: MDP

The Maldivian Democratic Party (MDP) has meanwhile accused cabinet of destabilising the country by attacking foreign investment and supporting “extremist” rhetoric.

“This decision is bad for tourism, bad for the economy and bad for the Maldivian people,” said former President Mohamed Nasheed.

“Waheed’s government has cynically used xenophobia, nationalism and religious extremism to attack GMR, the country’s largest foreign investor. This will put off potential investors for decades. Waheed is leading the Maldives down the path to economic ruin,” he stated.

MDP MP and Spokesperson Hamid Abdul Ghafoor told Minivan News that disputed contracts could be unravelled through a legal process, but said the executive’s decision to void the contract and evict the country’s single largest foreign investor was not backed by any law.

“If cabinet has now decided to revoke the contract, who is going to execute the order? The contract is bound under international law. The case is still being heard by a court of arbitration in Singapore,” Ghafoor said.

“Will police be executing this order to reclaim the airport, or will it be Islamist elements? This is an executive decision that is being taken without any legal or political backing.”

Maldives National Defence Force (MNDF) Spokesperson Colonel Abdul Raheem said the military was “not involved” in the airport issue: “We will however, continue to take care of security [at the site] and look after it,” he said.

Police Spokesperson Sub-Inspector Hassan Haneef told Minivan News that any decision to enforce the decision would have to be directed by the President’s Office.

Decision prompted by “extremists”

Ghafoor claimed that threats of direct attacks on foreign investors reflected what he was the growing role of extremist Islamic thinking within the most senior decision making of the present government.

Raising concerns over the legality of voiding the GMR contract, Ghafoor pointed to recent comments in local media by the government-aligned religious Adaalath party, whose president Sheikh Imran Abdulla was yesterday quoted as threatening to “invade the runway” should the government not renege on the airport agreement.

“The deal was done very transparently, and [the government] have never been able to prove any wrongdoing,” Ghafoor claimed. “Yet, what is most worrying is that we have the cabinet of what we believe is an illegitimate government that is being influenced by extremist influences.”

Ghafoor alleged that the government’s decision over the GMR issue was being driven by former President Maumoon Abdul Gayoom’s Progressive Party of Maldives (PPM), Adhalaath Party President Sheikh Imran and fellow party member and Minister of Islamic Affairs, Sheikh Mohamed Shaheem Ali Saeed.

“We are now seeing the government partnering with and backing the rhetoric of a movement led by an Islamist group, it is very apparent what is going on here,” he said.

MP Ghafoor further claimed that parliament had, as of this evening, received no information on the decision to renege on the GMR agreement, adding that several no-confidence motions against senior government figures including President Waheed were scheduled.

“What is going on right now is a shift in parliament,” he said.

Ghafoor also claimed that beyond the potential legal and economic ramifications of reneging on the sovereign agreement with GMR, rumours of a Chinese intermediary stepping in to cover possible financial consequences could significantly affect the Maldives internationally.

“In terms of geopolitics, we are hearing about a Chinese connection to the [airport issue] that does not put the country in a comfortable position,” Ghafoor claimed. “Ideologically and culturally we have much closer ties to India than China.”

Returning from a visit to China back in September, President Dr Mohamed Waheed Hassan told reporters that Chinese aid to the Maldives would not be limited to a US$500million (MVR7.7billion) loan finalised earlier this year.

Waheed revealed at the time that the Chinese government had pledged to make all necessary aid available to the Maldives, including assistance with road and shipping development, local media reported at the time.

Regarding China’s view on Maldivian politics, Waheed noted that the Chinese were amongst the first nations to recognise his unity government.

“The Chinese Prime Minister personally told me that he had full confidence and support for the Maldivian government,” Waheed was reported as saying.

However, the Maldives government this evening dismissed suggestions that China would be taking a role in any future airport development.

“On this matter, China is as far away from the airport development as is physically possible,” said Presidents Office Media Secretary Masood Imad.

Troubled airport agreement

The agreement with the GMR-Malaysia Airports Holdings Berhad consortium was signed on June 28, 2010 with the Nasheed administration, following a bidding process conducted by the World Bank’s International Finance Corporation (IFC).

The GMR-MAHB consortium narrowly beat Turkish-French consortium TAV Holdings-Aéroports de Paris Management (ADPM), scoring a final Net Present Value (NPV) score of 495.18 to the runner up’s 454.04 at conclusion of the bid.

GMR’s win was based on playing to the government’s highest-scoring factors – fuel share revenue and upfront payment – at the expense of non-fuel related airport revenue.

As part of its successful bid, GMR paid the government US$78 million and 1 percent of non-fuel revenue and 15 percent of fuel revenue for 2011-2014, increased to 10 percent and 27 percent respectively for 2015-2025. The developer at the time anticipated that additional services and duty free development for the country’s well-heeled clientele, as well as the Maldives’ tourism growth potential, would offset the risks of the higher fuel share.

Opposition parties at the time the agreement was signed – and are now in government following February 7’s controversial transfer of power – first opposed GMR’s development of the airport on nationalistic grounds, and then levelled numerous allegations against the company ranging from corruption to concerns that the deal would allow Israeli bombers to refuel en route to bombing Arab countries.

Further protests occurred in December 2011 after GMR ceased renewing lease agreements of several existing airport duty free operators, notably duty-free liquor store Alpha-MVKB.

The High Court upheld at the time that since GMR had given notice on March 1, 2011 and, as per the agreement, the contract had been terminated on March 31. The court concluded that MVK had no right to remain at the airport without approval from GMR, and began packing up the store’s contents on December 4. Following the eviction, MVK CEO Ibrahim Shafeeq accused GMR of breaking into his shop and stealing his stock, and then launched a ‘Go Home GMR’ protest.

As tension with the developer increased, President Waheed’s cabinet attacked the IFC as “irresponsible” and “negligent” in conducting the bidding process.

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”.

The stand-off escalated in early August 2012 following a stop work order on the new terminal development, after the government alleged certain planning permissions had not been obtained from the Civil Aviation Authority.

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Indian US$25 million budget support loan delayed after Maldives fails to complete paperwork

A US$25 million state loan from India required to help balance the Maldives’ budget for the remainder of 2012 has been delayed after the government failed to submit the requested paperwork, a diplomatic source has revealed.

A representative for the Indian High Commission in the Maldives – who asked not to be named – told Minivan News that despite recent diplomatic tensions between the two nations, funding had actually stalled due to the Maldives’ government failing for over a month to submit the papers needed to complete the financing deal.

Although the Finance Ministry has now played down previous budget concerns, the US$25 million in funding agreed by India was last month deemed vital by the Finance Minister to ensure the government’s remaining spending in 2012 was met.

While the loan agreement still stands, the diplomatic source stressed that concerns within the Indian government about perceived anti-India sentiments from senior political figures in the Maldives could yet have a bearing on financial support offered to the country.

“Because of the current situation in the Maldives there is a perception in the Indian government that its interests are being treated unfairly,” he said. “[The government] will have the final say on approving any loan and these comments will be taken into account.”

Tensions have increased between the two countries this month as senior Maldivian government officials step up their efforts to oppose a contract signed under the previous administration with Indian infrastructure group GMR to develop Ibrahim Nasir International Airport (INIA).  The contract represents the largest foreign investment ever undertaken in the country’s history.

In an arbitration case held last week, the High Court of Singapore rejected an attempt by the Maldives Airports Company Limited (MACL) to release an injunction blocking the government from taking action in the Civil Court of Maldives blocking GMR’s offset of the airport development charge (ADC).

Yet according to rumours circulating on social media sites, the government will allegedly cancel the GMR contact at a cabinet meeting today on the back of calls from some coalition parties to “renationalise” the airport.

Tweets were being circulated speculating that a Chinese intermediary was prepared to pay for the contract termination and take over the airport development.

Finance Minister Abdulla Jihad said he did not wish to comment on the matter or the loan delay at present ahead of the state budget being unveiled on November 27.

Meanwhile, recently appointed State Finance Minister Abbas Adil Riza – who publicly labelled Indian high Commissioner  D M Mulay “a traitor” earlier this month over the airport development – and Economic Development Minister Ahmed Mohamed were not responding to  Minivan News at time of press.

India has also this week called for the Maldives government to repay US$100 million in treasury bonds by February 2013.

Amidst increased diplomatic tensions, Finance Minister Abdulla Jihad told Minivan News earlier this week that he was unaware of the reason for the delays in receiving the US$25 million loan, requesting the question be put to the Indian High Commission in Male’.

In response, a High Commission of India representative said it had waited for over a month before Maldivian authorities this week returned a draft amendment needed to process the loan. The high commission has said it could now proceed and forward the finance request to the Indian government for final approval.

“We had sent the government the draft amendment, to which they have now have agreed. However is it unlikely they are going to get the funds soon as the decision must be sent to the cabinet for approval,” the source said, adding that the agreement would need to be first sent to India’s Ministry of External Affairs. “The Maldives government will also need to complete certain steps to obtain the funds. For instance, it will have to open a bank account with the State Bank of India for the loan.”

The US$25 million loan was agreed as part of the $US100 million standby credit facility signed with Prime Minister Manmohan Singh in November 2011.

“Deep trouble”

According to the high commission source, the credit facility had been initially agreed after the previous government of Mohamed Nasheed found itself in “deep trouble” and in need of financial assistance by late October last year.

These financial concerns were said to have been exacerbated following the controversial transfer of power on February 7, leading to fears the country may face a sovereign default.

According to the high commission, these initial loan payments were expedited at the time by Indian authorities on an emergency basis  on the grounds that the correct paperwork would be completed at a later date.

However, these emergency conditions were no longer said to be in place.

“This was an extreme situation and we did not want the government to have to default,” the diplomatic source claimed, adding that the Maldives was now required to complete all requested paperwork as had been agreed.

Of the US$100 million credit provided by India, half the amount was agreed to be provided as part of budget support, while the remaining US$50 million would be set aside to aid local business by importing products from India.

However, the diplomatic source said that this agreement had been amended on several occasions to allow for a further US$25 million to go towards supporting the state budget.

Despite previously claiming that the Maldives would be unable to support state spending without securing the additional US$25 million budget support loan from India, Finance Minister Jihad announced this week that the issue of covering the government’s wage bill for the remainder of 2012 was “no longer a major concern”.

Jihad added that his department was working to secure private sector funding to make up any shortfalls in budget support.

However, he did not give further details on the nature of the private sector groups presently being sought.

Jihad claimed that a “significant” part of the private sector focus would be through issuing treasury bills (T-bills) to the private sector as recommended earlier this year by the IMF.

“When we opened up treasury bills to the private sector initially there was no response,” he said. “However, there have now been consultations with private groups.”

T-bills, which are sold by governments all over the world, serve as a short-term debt obligation backed by sovereign states. In the Maldives, T-bills have a maximum maturity of six months, after which time they must be repaid.

Foreign borrowing

Earlier this year, President Waheed reportedly said he would not resort to borrowing from foreign governments in order to finance government activities.

“I will not try to run the government by securing huge loans from foreign parties. We are trying to spend from what we earn,” he was reported to have told the people of Nilandhoo.

Despite Waheed’s reassurances, October saw a number of state owned institutions face disconnection from the capital’s power grid as bills amounting to around MVR 150 million (US$9.7 million) were owed to the State Electricity Company (STELCO).

Since coming to power in February, the government has committed to reimbursing civil servants for wage reductions made during the austerity measures of the previous government, amounting to Rf443.7 million (US$28.8 million), to be disbursed in monthly instalments over 12 months from July.

A MVR 100 million (US$6.4 million) fuel subsidy for the fishing industry was also approved by the Majlis Finance Committee, with the hope of stimulating the ailing sector.

The overall deficit for government expenditure has already reached over MVR 2 billion (US$129 million). Jihad has told the Majlis’ Finance Committee that he expected this figure to rise to MVR 6 billion (US$387 million) by year’s end – 28 percent of GDP – alleging that the previous government left unpaid bills equal to over one third of this anticipated deficit.

Former Minister of Economic Development Mahmood Razee has previously told Minivan News that this increased expenditure in the face of a pre-existing deficit represented the government “ignoring reality.”

“If they don’t get the loan, they will have to cut travel expenses, stop certain programs – take drastic measures or get another loan,” said Razee, claiming that the only alternative would be to sell treasury bills.

Following reports in August that the government was attempting to raise funds through the sale of treasury bills, former Finance Minister Ahmed Inaz claimed such a measure would not address IMF concerns about state spending, prolonging economic uncertainty.

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Maldives National Movement to protest against Nexbis

The Maldives National Movement is to begin protesting against Nexbis and the Border Control System (BCS) project, should the GMR contract be annulled.

The National Movement was formed by government coalition parties who oppose the Ibrahim Nasir International Airport (INIA) development being run by GMR.

Speaking at a press conference held at Traders Hotel today (November 26), Steering Committee member of National Movement and Minister of State for Tourism Ahmed Shameem said that the group aims to protest against all illegal agreements made.

“The names of our activities are constantly changing. We had to protest in the name of National Movement because these issues required action to be taken at national level.

“Our first target was to settle the airport issue. After that, we will not hesitate to take action against the Border Control System issue either. We will do that, we will protest against all issues that citizens do not accept,” he said.

Shameem stated that the National Movement is prepared to get the country on the right track, along with the help of Maldivian citizens.

“We have yet to find out if the ‘People’s Majlis’ is in fact a people’s Parliament. We will do that too, if you participate. Some members of Parliament believe that they control the whole country, that they can do whatever they want. So that’s also something we will protest against,” he said.

The Parliamentary Public Accounts Committee has decided to ask the government to cancel the agreement on Border Control System project, a move supported by the Attorney General and Finance Ministry.

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MP Muthalib calls for killing of former President’s Special Envoy Ibrahim Hussain Zaki

Adhaalath-aligned MP Ibrahim Muthalib has called in parliament for former President Mohamed Nasheed’s Special Envoy, Ibrahim Hussain Zaki, to be “hanged to death” as a “traitor to the Maldives”.

Speaking in the parliamentary chamber on November 26, Muthalib called for the arrest of Zaki, claiming that “traitors have to be killed” else they will “destroy the country”.

Muthalib’s comments follow those made by Adhaalath Party Leader Sheik Imran at the ‘GMR go home’ rally earlier this month.

Speaking at the rally, Sheik Imran reportedly stated that Zaki would “leave both worlds” on the day GMR is “chased out of the country”.

The latest threat comes after Zaki warned India that rising fundamentalism in the Maldives threatened the country’s economic interests.

Zaki told reporters that the attack on the GMR contract is “an Islamic fundamentalist issue”, adding: “When Islamic fundamentalism takes over the country, if the Lashkar-e-Taiba can take over the country, then I have no choice [but to call in forces from India].”

Zaki previously claimed that many top figures within the Adhaalath Party were educated in Pakistan and draw their philosophy from the hard line Salafist form of Islam.

Indian media reported on Thursday that: “Zaki, 67, a former minister in successive Maldivian governments headed by former presidents Maumoon Gayoom and [Mohamed] Nasheed, said he would have called for Indian forces to protect the multi-million-dollar investment by Indian infrastructure firm GMR Group.”

India’s Daily News & Analysis reported Zaki as saying that fundamentalists in the Maldives “have links with terror group Lashkar-e-Toiba” and warned that if Islamic fundamentalism goes unchecked the country could turn into a terror state that threatens Indian security.

Muthalib alleged that Zaki’s motivation to defend the GMR deal came from fear of having to spend “a long time in jail” or face “a death sentence” as an investigation would prove that he had accepted “large amounts of money” as bribes from the Indian company.

“Honourable Speaker, these are traitors to the nation. They have to be killed. If they are not killed and left to live, the country will be ruined. They will destroy the country,” Muttalib said, as recorded in parliament’s minutes.

“Therefore, I am calling on the Maldivian government one more time to arrest Ibrahim Hussain Zaki as quickly as possible and, after conducting a trial against him, to hang him to death as a traitor the the Maldives.”

MP Muthalib further alleged that Zaki was “the chief architect” of 1988 failed coup attempt and called on the government to launch an investigation into his alleged involvement.

However, the article in which Zaki was quoted, notes that he is “known in India as the man who telephoned then Indian prime minister Rajiv Gandhi to seek help when Gayoom was threatened by a coup in 1988”.

Muhthalib stated that Zaki was “once again attempting to have Malabars invade the country”. He also called on the government to strip Zaki of the title of honour previously given to him by the state.

Following the remarks, Speaker Abdulla Shahid said calling for a person’s death in the Majlis chamber was “unacceptable.”

Zaki’s remarks “threat to national security”: Defence Ministry

In a statement on Friday (November 23), the Defence Ministry condemned Zaki’s remarks made to Indian media “in the harshest terms” and contended that “such actions are very dangerous [threats] to national security and encourage activities that would harm the country’s independence and sovereignty.”

Zaki responded to the criticism faced by his comments through a statement released yesterday (November 25), claiming that his comments were “misrepresented”.

“The comments I made were directly related to long-standing security cooperation between India and the Maldives, and the common interest of both countries in ensuring peace, stability, law and order in the Maldives, and the emerging international law obligation of Responsibility to Protect. They respond directly to the growing political violence in the Maldives with clear international dimensions,” said Zaki.

He further states that it is “ludicrous” to suggest that India would receive a request that violates the sovereignty of the Maldives.

“My comments in India were completely within the framework of the United Nations resolution 44/51 on Protection and Security of Small States, which the Maldives proposed to the UN in 1989 and of which I am the author. They were fully consistent with the principles set out in UN resolution 2625 and with the regional and the bilateral agreements in force between the two countries.

“To suggest that a call for proactive regional security cooperation was tantamount to treason only reflects the international outlook of those currently governing the Maldives; and I strongly disassociate myself from any such imputation,” added Zaki.

Political groups within the Maldives have been calling for the government to annul the Ibrahim Nasir International Airport (INIA) development contract with Indian infrastructure giant GMR.

The Adhaalath party have played a pivotal role in the anti-GMR campaign, staging multiple protests and an issuing an ultimatum for the government to adhere to.

The first six-day ultimatum to “reclaim” the airport was originally announced by the party earlier this month. However, this was extended to November 30 after no action had been taken by the government by the end of the six-day deadline.

Following the latest ultimatum Sheikh Imran warned of “direct action” should there be no conclusion to the dispute by November 30.

Defence of Mohamed Fahmy

Muthalib rcently caused controversy over his comments relating to the dismissal of President of the Civil Service Commission Mohamed Fahmuy on charges of sexual harassment.

Muthalib spoke against removing Fahmy, excusing his actions as being “encouraged” by Satan.

“If we are to make our women nude and exposed, and then send them out to mingle with men, then why speak of protecting them? Honourable Speaker, this cannot be done in this manner. If a man and a woman are in a room alone, Satan will be there as the third person and will encourage sinful activities,” Muthalib said.

“Their place is in their houses, to serve their husbands and look after children. If we give them the opportunity to go out and mingle then we can no longer talk about their dignity and protection. It is people who harass women who are now speaking in their defense here today,” he further added.

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Government informs diplomats of decision to take action on airport issue

The government has informed diplomats regarding its decision to “take action” on issues related to Ibrahim Nasir International Airport (INIA).

Government spokesperson Abbas Adil Riza mentioned that the GMR contract was discussed, but did not give any further details.

A senior official of the President’s Office said that the information was shared with diplomats during a teleconference held by Riza and Minister of State for Foreign Affairs Dunya Maumoon on Tuesday.

“They were informed that the contract results in serious losses to the state, and that the government has decided to take action on this issue,” the official said.

Rumours have been circulating social networking sites over the last week that the government plans to annul its contract with GMR at a cabinet meeting this Tuesday (November 27).

Minivan News obtained a personal letter sent by GMR Chairman G M Rao to President Mohamed Waheed Hassan Manik, proposing an amendment to the Airport Service Charge exempting Maldivian nationals from having to pay the fee.

The letter notes that there has been no correspondence from the President’s Office regarding the proposal prior to sending the letter.

No information has been disclosed by the government regarding the GMR contract. However, anti-GMR parties said after meeting with the President, he had assured the government’s decision on GMR will be “as per people’s wishes”.

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No response from government over ADC amendment proposal, reveals letter from Rao to Waheed

Chairman of Indian infrastructure giant GMR, G M Rao, has reiterated the airport developer’s proposal to exempt Maldivians from paying the contentious airport development charge (ADC), in a personal letter to President Mohamed Waheed Hassan Manik.

Rao’s letter, dated November 21 and obtained by Minivan News, proposes that an increased fee of US$28 be levied from all international departing foreign passengers, in order to compensate for an ADC exemption for Maldivian passport holders.

Rao’s letter, sent on November 21, states the importance of the ADC and that the current non-levying of the ADC was benefiting international foreign passengers rather than the government.

“The ADC significantly contributes to the cash flows of [GMR Male International Airport] and undoubtedly, in turn significantly benefits the GoM and the Maldives Airport Company Limited (MACL) by way of concession fee payments.

“The said non-levy of ADC and Insurance Surcharge (IS) has resulted (at the costs of GMIAL and eventually MACL/GoM) in an entirely unintended benefit to the international foreign passengers who are enjoying and would enjoy in future as well, the enhanced facilities and privileges at the airport without commensurate payment,” the letter reads.

Following a Civil Court case filed in 2011 by the then-opposition Dhivehi Qaumee Party (DQP) blocking GMR from levying ADC from international foreign passengers, GMR – under instruction from a letter sent by MACL – has been deducting ADC revenue from concession fees due the government.

Following the removal of ADC, the government has received a succession of bills from the airport developer throughout 2012.

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 the government.

Combined with the third quarter payment due, the government now owes the airport developer US$3.7 million.

According to Rao, the proposal exempting Maldivian passport holders from ADC and instead charging all international departing foreign passengers from INIA an increased ADC fee, is out of “deference to the Maldivian public sentiments” and to “ensure the unintended financial loss to GMIAL, MACL or GoM is contained”.

So far however, Rao states that has been no correspondence from the President’s Office regarding the proposal prior to the sending of the letter.

Minivan tried to contact the President’s Office, but there was no response at time of press.

MACL’s report “ridden with calculation errors”.

A further report addressed to President Waheed, entitled: ‘Concession Agreement dated 28th June 2010 relating to INIA, Male – purported report submitted by MACL regarding benefits to Maldives’, goes on to provide “accurate” and “factual” information relating to the benefits to the Maldives that the GMR-Malaysia Airports Holdings Berhad (MAHB) Consortium envisages.

Commenting on MACL’s recently prepared report that implies airport concession will have a negative impact on the Maldives, the GMR report claims it is “ridden with calculation errors” of which are “not only highly misleading but are full with errors and oversight”.

“It is estimated that over the concession period, GMR-MAHB will pay more than MRF 32.5 bilion to MACL as concession fee and MRF 12.5 billion as Passenger Service Chards (PSC) to the government.

“MACL report claims that if MACL operate the airport, they will make a profit of MRF 60 billion. However, once the errors in their report are corrected it will show that they will make a profit of MRF 18 billion only.

“The report also claims that when GMR-MAHB is operating the airport, MACL will make only MRF 21 billion. However, once the errors are corrected it will show that MACL will receive a concession fee of MRF 32.5 billion from GMR- MAHB,” GMR’s report claims.

Recently there has been mounting pressure from parties within the Maldives calling for the government to annul the agreement with Indian infrastructure giant GMR.

According to rumours circulating on social media sites, the government will allegedly cancel the GMR contact at a cabinet meeting on Tuesday. Tweets were being circulated speculating that a Chinese intermediary was prepared to pay for the contract termination and take over the airport development.

However asked to confirm or deny these rumours, Economics Minister Ahmed Mohamed said he was “unaware of any such action”.

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