President of the Anti Corruption Commission (ACC) Hassan Luthfee has said there may be an extended delay before work is resumed on GMR’s development of Ibrahim Nasir International Airport (INIA).
“It will take some time. It is not easy for us to finish it,” said Luthfee.
CEO of GMR Maldives Andrew Harrison last week said that no work had been completed on the site since August 2.
Work was initially halted due to issues relating to missing permits – an issue which Harrison said had now been resolved.
Luthfee said today that the government was now waiting for the ACC to finish its three cases concerning the Indian infrastructure company’s deal which was signed under the presidency of Mohamed Nasheed in 2010.
At US$511 million deal represents the largest foreign investment deal in the country’s history.
Luthfee refuted local media reports that two of the three cases will be completed by this Saturday.
“We have started the investigations and analysed the agreements and maybe we will finish our first reports in two weeks,” said Luthfee.
Luthfee was also keen to correct media reports that the ACC had requested a foreign expert to help specifically with the GMR investigations.
He stated that the ACC had been seeking an expert for assistance with all of the commission’s work but had struggled to accommodate one within the current budget.
Luthfee also added that the investigation would be conducted in conjunction with the Auditor General (AG) in order to give the process “greater transparency.”
Following a Supreme Court ruling on a separate case last week, Luthfee argued that the ACC was powerless without greater powers to prevent corruption.
“In other countries, Anti Corruption Commissions have the powers of investigation, prevention and creating awareness. If an institution responsible for fighting corruption does not have these powers then it is useless,” he said.
President’s Spokesman Abbas Adil Riza, who was not responding to calls at time of press, told local media yesterday that the government would not be able to take any decision regarding the GMR project until the ACC’s investigations were completed.
“ACC’s decision on the issue is very important for the government; it would assist the government in resolving this issue. There’s no legal action the government can take otherwise,” Abbas told Sun Online.
In June, pro-government parties re-affirmed a joint 2010 agreement calling for nationalisation of the airport.
The leader of one of these parties, Gasim Ibrahim of the Jumhooree Party (JP), was quoted in local media yesterday as saying he would oppose the GMR deal for as long as he lived.
These comments closely followed media reports that GMR had terminated the credit facility of Gasim’s Villa Air company after it had amassed MVR 17 million ($US1.1million) in unpaid bills.
There was no one from Villa Air available for comment at the time of press.
Fellow national unity government party, the Dhivehi Qaumee Party (DQP), filed a case last November against the introduction of an Airport Development Charge (ADC) which had been key to financing the project.
The DQP also produced a document criticising the deal and drawing parallels between foreign investment and colonialism.
After the Civil Court ruled the ADC an illegal tax, the Nasheed government reached an interim arrangement whereby GMR would deduct the lost revenue from the concessionary payments owed to the government.
This issue has become a major point of friction with the new government which subsequently declared this interim arrangement illegal also.
Transport Minister Dr Ahmed Shamheed, also not responding to calls today, met with India’s Civil Aviation Minister last week, informing him of the issues with the GMR project.
“The Civil Aviation Minister talked about this issue in detail, while we were on the subject of foreign investments. Until now, the Indian government had been aware only that the Maldivian government has an agreement with GMR. So we took the opportunity to explain the problems associated with this agreement. It was a good chance to inform them of this,” Shamheed told Sun Online.
Whilst Shamheed visited India, President Dr Mohamed Waheed Hassan, was in China where as well as meeting with prominent businessmen, he told the China-Eurasia Economy Development and Cooperation Forum that the Maldives was “open for business”.
Local business tycoon, media owner, MP, Jumhoree Party (JP) leader and member of the Judicial Services Commission (JSC), Gasim Ibrahim, has warned that the dollar exchange rate of the Maldivian rufiya may rise to MVR 20 by the end of the year – a 25 percent increase.
Speaking at a press conference on Sunday, Gasim told local media that the main reason for the Maldivian currency to go down was “selling Ibrahim Nasir International Airport to GMR, selling the shares of Dhiraagu, and the Maldives Water and Sewerage Company.’’
Gasim claimed the three companies were now taking US$2 billion dollars out of the country annually.
At the press conference, Gasim – who also operates domestic airline Villa Air, under the FlyMe brand – alleged the former government had not awarded the airport to GMR in a way that would benefit the citizens, and expressed concern over increased fuel prices and landing fees.
Gasim’s comments follow GMR’s suspension of Villa Air’s credit facility due to unpaid bills of MVR 17 million (US$1.1 million) for fuel, ground handling and passenger service fees, according to local media reports on Saturday.
His concern over currency devaluation follows the former government’s managed float of the rufiya within a 20 percent band of the pegged rate of MVR 12.85.
In April last year, then-Finance Minister Ahmed Inaz explained that the government decided to change the fixed exchange rate to a “managed float” to shape government policy towards increasing the value of the rufiya and ultimately bring the exchange rate down to MVR 10 – an oft-repeated pledge of former President Mohamed Nasheed.
The worsening balance of payments deficit could not be plugged without allowing the market to set the exchange rate, Inaz continued, adding that through lowering the fiscal deficit and spurring private sector job growth “a path would open up for us to reach the lower band (MVR 10.28).”
“My estimate is that it will take about three months for the market to stabilise and reach a balanced [exchange] rate,” he said.
Following this decision of the former government the then opposition Dhivehi Rayyithunge Party (DRP), which has since divided into two factions, held protests in the streets of Male’ against the decision.
The International Monetary Fund (IMF) however praised the Maldives’ decision to effectively devalue its currency as a “bold step by the authorities [representing] an important move toward restoring external sustainability.”
Indian media outlets have reported that the country’s Minister for Civil Aviation Ajit Singh has asked the Maldives to consider ways to resolve ongoing disputes with Indian company GMR regarding the development of Ibrahim Nasir International Airport (INIA).
The Economic Timesreported that the issue arose during a meeting with the Aviation Minister and a Maldivian delegation led by the Maldives’ Minister for Transport and Communication Dr Ahmed Shamheed.
The paper said that an official statement from the Civil Aviation Ministry had highlighted the major issues discussed:
“The contentious issues include provision of airport development charges provided for in the agreement with the GMR, but termed as unauthorised by a local court in the Maldives, and a demand for an additional runway not provided in the agreement,” the statement is reported to have said.
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 complete the renovation of INIA’s existing terminal this month.
The issues detailed during the meeting have been compounded in recent months by government aligned parties calling for nationalisation of the airport as well as orders to halt construction work following allegations of missing permits.
CEO of GMR Maldives operations Andrew Harrison today told Minivan News that the government had informed the company it had complied all regulations, but had not yet given it the go-ahead to resume work.
“We have not done any work since August 2,” said Harrison.
During a visit to India last month, leader of the government aligned Dhivehi Rayyithunge Party (DRP) Ahmed Thasmeen Ali warned of serious repercussion for investor confidence should the country renege on the GMR deal.
Sri Lankan media this week has also reported Business Council leader Hussain S Hashim as saying that a lack of trade dispute mechanisms in the Maldives was stifling bilateral trade.
Travel Daily Indiareported that additional measures to strengthen bilateral ties in the aviation sector were discussed during the meeting.
Increasing air links between Indian cities and the Maldives was a topic reportedly discussed. It was reported that Island Aviation, Spice Jet, and Mega Maldives are all planning to connect Mumbai, Delhi and Chennai with Male’.
Changes to the countries’ aviation agreement was also mentioned in Travel Daily, with the current rules only allowing flights with carrying capacities of less than 150 passengers.
“India will relook the agreement which will help in boosting tourism between the two countries,” Singh is reported to have said.
During his official visit to India in May, President Dr Mohamed Waheed Hassan spoke of his desire to bring more Indian visitors – who currently represent only 2.9 percent of the market share – to the Maldives.
“Not enough Indian tourists are coming to the Maldives and that is a matter of concern for us. I am sure it is also a matter of concern for India, particularly when you realise that there are so many Chinese tourists who are coming to the Maldives now,” Dr Waheed told India’s Business Line.
Whilst Dr Shamheed is in India, a number of his fellow cabinet ministers have accompanied President Waheed on his official state visit to China.
Yesterday, the President’s Office website reported that Waheed had met with members of the business community in Shanghai.
Waheed is reported as having said that investors were always welcome in the Maldives.
“Maldives is open for business,” Waheed told those in attendance at the opening of the China-Eurasia Expo & the 2nd China-Eurasia Economy Development and Cooperation Forum.
The highlight of Waheed’s first trip to China as President has been the finalising of a $500million (MVR7.7billion) package of aid, concessional loans, and loans for housing construction.
“First of all, I want give you a bit of good news. The good news is that the Maldives is not about to disappear,” President Dr Mohamed Waheed Hassan has told a group of Sri Lankan businessmen in Colombo yesterday, according to media reports.
Speaking during his official state visit to the Maldives’ closest neighbour, Waheed told an assembled group of business heads at the Hilton Colombo hotel that the country could mitigate the effects of climate change and global warming.
Waheed made the comments in an attempt to assure his audience in Colombo yesterday that steps were being taken to stabilise the political climate in the country, as well to retain investor confidence.
The President said that large sections of the state budget were currently being spent on combating coastal erosion, providing clean water for the islands and developing renewable energy to minimize overall expenditure.
Since assuming the presidency, Waheed has pledged to work towards the previous administration’s carbon neutrality strategy, while also announcing intentions to make the Maldives the world’s largest bio-reserve.
There has also been discussion of a green energy fund to raise US$100 million for renewable energy projects through voluntary tourist contributions.
The country’s energy sector had been headed for a dramatic overhaul this year before the political instability surrounding February’s transfer of presidential was claimed to have deterred potential investors in such a project.
The Scaling-Up Renewable Energy Programme (SREP) promised to attract up to $3billion in risk-mitigated renewable energy investment and reduce the Maldives’ dependency on imported oil.
The environmental obstacles besetting the low-lying archipelago had been championed by former President Mohamed Nasheed, who garnered international media attention with his underwater cabinet meetings and a promise to make the country carbon neutral by the year 2020.
Nasheed’s media campaign was covered in the documentary film, “The Island President”, which highlighted his negotiations at the 2009 Copenhagen Climate Summit.
Before assuming office, Nasheed told internationalmedia that he had discussed the idea of purchasing land in Sri Lanka, amongst other nations, “as an insurance policy for the worst possible outcome.”
Investor Confidence
Waheed assured his audience in Colombo yesterday that the government was also focused on bolstering investor confidence.
Threats to renationalise Ibrahim Nasir International Airport (INIA) – currently being developed by Indian company GMR – have recently brought calls from within the national-unity government for greater consideration of the longer-term impact on foreign investment.
President Waheed is also reported as having told Sri Lankan media that both the economy and the tourism industry, which indirectly contributes around 70percent of GDP, were growing.
A President’s Office statement, however, has reported that Waheed told the group gathered at the Hilton that there had been a decline in the tourism industry recently.
The Tourism Ministry’s most recent figures show that, compared with the same point in 2011, tourist arrivals were up by 2.8 percent, whilst occupancy rates had dropped 1.2 percent.
Figures published by the Maldives Monetary Authority (MMA) show that the economy was expected to grow by 5.5percent this year, a slight slow down on the previous year.
Tourism Minister Ahmed Adheeb, who is accompanying President Waheed to Sri Lanka, was unavailable for comment when contacted today.
At present, a key economic concern to the government is the current budget deficit, anticipated to reach MVR9.1billion (US$590million) – over 28 percent of nominal GDP.
Haveeru reported that Waheed has informed the Sri Lankan press of austerity measures which were delivered to the Majlis by the Finance Ministry earlier this month.
The Sri Lanka Daily News meanwhilereported that he was in the process of finalising agreements which would strengthen bilateral ties in trade and investment as well as the legal and the educational sectors.
Minister for Economic Development Ahmed Mohamed and President’s Office Spokesperson Abbas Adil Riza were not responding to calls at the time of press.
“The MDP is extremely worried about the deteriorating environment for investors and strongly condemns the continued threats posed by Dr Waheed’s administration to foreign investors,” read a press statement released by the party today.
The party’s spokesman, Hamid Abdul Ghafoor, stated that public-private partnerships (PPP) initiated under the MDP government have been suspended “in the interest of preserving the status and wealth of few local wealthy businessmen.”
The current government announced the suspension of any new PPP projects shortly after assuming power. The Minister of Economic Development, Ahmed Mohamed, whose department handles foreign investment in the Maldives, was not responding at the time of press. President’s Office Spokesperson Abbas Adil Riza was also not responding.
The MDP statement specifically mentions three projects which have encountered difficulties, claiming that they have been intentionally hindered by the current government, “causing irreparable damage to the foreign investment climate of Maldives.”
The World Bank’s ‘Ease of Doing Business Report’ shows that the Maldives has dropped one place in its overall list during the last twelve months, falling to 79th out of 183 countries ranked. In terms of protecting investors, the Maldives dropped five places in this year’s list.
Former Energy Advisor to President Nasheed Mike Mason told Minivan News in June that, before Nasheed’s controversial resignation, the World Bank had given verbal approval to a plan which would have brought an immediate US$200million of renewable energy investment to the country.
The resulting political instability caused the plan, which had been intended to wean the country off its dependency on oil imports, suspended indefinitely as potential investors backed away.
Meanwhile, proposed austerity measures sent to Parliament by the Finance Ministry last week include a three percent increase in oil import duty.
One of the most high profile foreign investments in the Maldives is the GMR-MAHB project to develop Ibrahim Nasir International Airport (INIA). This US$400 million deal for the upgrade and management of the airport represents the country’s biggest ever private investment contract.
The deal has foundered on a dispute over the implementation of an Airport Development Charge (ADC) of $25 per passenger which was agreed as part of the initial contract. This charge was opposed by the Dhivehi Qaumee Party (DQP), now a member of the coalition government, whilst in opposition. The party last year successfully sued for the blocking of the ADC, claiming that it represented an unauthorised tax.
The case led to an arrangement with the Mohamed Nasheed administration whereby the ADC money would be deducted from the concession fee payable to the government. The subsequent shortfall in funding for the project has seen the government’s anticipated US$14.3million in fees replaced this quarter with a bill from GMR for US$1.5million.
A number of pro-government parties, including the DQP, have renewed calls for the re-nationalisation of the airport. The dispute has now been referred to a court of arbitration in Singapore.
All three projects mentioned in today’s press release involve partnerships with Indian firms, the other two being a social housing development project with the TATA group, and a solid waste management project in Thilafushi with environmental engineering company UPL.
During President Dr Mohamed Waheed Hassan’s official state visit to India in May, he confirmed that all contracts with Indian investors would be honoured and was keen to discuss further Indian investment projects in the Maldives.
The MDP statement noted that its PPP projects would have generated revenue over MVR23.1billion (US$1.5billion) for the country.
The Finance Ministry’s austerity measures are an attempt to reduce this year’s budget deficit, which is forecast to reach MVR9.1billion (US$590million).
The Dhivehi Rayyithunge Party (DRP) has called on the government to consider the potential financial repercussions and impact on investor confidence should it renege on a contract with Indian infrastructure group GMR to develop Ibrahim Nasir international Airport (INIA).
DRP Leader Ahmed Thasmeen Ali today said the party had asked the current government to assess the possible implications of cancelling the GMR agreement in three key areas before his party decided on whether to agree to proceed with renationalising INIA.
An agreement now thought to amount to US$511M was signed between GMR and the previous government of Mohamed Nasheed in June 2010 to manage and build a new airport terminal by 2014, as well as renovate the existing airport facilities in the meantime
The deal, the largest single financial investment in the Maldives’ history, has since faced several protracted legal disputes resulting this month in the infrastructure giant referring a disputed US$25 Airport Development Charge (ADC) included in its contract to a court of arbitration in Singapore.
Several pro-government parties – including the DRP, the Dhivehi Qaumee Party (DQP), People’s Alliance (PA) and Jumhoree Party (JP) – advised President Waheed in June this year 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.
Thasmeen’s comments today about assessing the potential impacts of terminating the contract were made as Progressive Party of Maldives (PPM) Deputy Leader Umar Naseer alleged in local media that the DRP was now the “main obstacle” to the state resuming management of the airport.
The PPM is a coalition partner of the DRP in the government of President Dr Mohamed Waheed Hassan.
According to newspaper Haveeru, Naseer contended that an invitation from Indian Prime Minister Manmohan Singh to meet with Thasmeen this week was directly related to the GMR airport dispute.
With the Maldivian Democratic Party (MDP) and the PPM respectively holding the majority and minority leadership roles in parliament, he questioned the reason for Thasmeen’s invite other than discussing the airport case.
“I do not think this trip is related to anything else. The DRP not the main opposition anymore as everyone knows. Even if it is taken in an official manner, the parliament minority leader is from PPM,” Naseer was quoted as saying.
Naseer also claimed that President Mohamed Waheed Hassan’s government wanted to reclaim the management of the airport from GMR – a pledge he hoped would be carried out even without the support of the DRP.
An Anti-Corruption Commission (ACC) investigation into allegations that DRP Leader Thasmeen and Parliamentary Speaker Abdulla Shahid accepted US$1 million in bribes from GMR was last year reported to have “investigated thoroughly”, both men were cleared of wrongdoing over the case.
Thasmeen, Shahid and GMR have all vehemently dismissed the allegations of bribery.
Responding to Naseer’s claims today, Thasmeen told Minivan News that his recent visit to India was the result of a long-standing invitation by the Indian government to discuss a number of issues including the current political situation in the Maldives. He added the visit had not been related to GMR’s dispute with the government.
Thasmeen was not drawn into whether the issue of the GMR contract formed part of discussions, adding only that the prime minister had shown a desire for long-term stability in the Maldives during the talks.
“He was clear in his desire to see a resolution to the current political problems in the Maldives,” he said.
In addressing the issue of GMR, Thasmeen claimed that the DRP has already responded to a request by President Waheed for the views of his coalition government on how to proceed over the matter of the GMR case – but had yet to decide on possible renationalisation.
“In making a decision on this case and the GMR contract, there are three things to consider. These are the impacts on investor confidence from pulling out of such a deal, the impact this will have on bilateral relations with friendly nations and the extent of the financial repercussions from terminating such a contract,” Thasmeen claimed. “What sort of compensation might there be for example? The government is best placed to make such an assessment and we will wait for it to do so before making a decision on the case.”
While GMR has pledged to have the new terminal open by July 1, 2014 “irrespective” of outside issues, the Maldives government has pledged to back the will of parliament should it decide on re-nationalising the project.
The relationship between the airport developer and the government soured further late last month after the government temporarily called for a halt to work on the new airport terminal, alleging it had “violated rules and regulations” by not acquiring certain permissions from the Civil Aviation Authority.
In a statement, the infrastructure giant said the GMR Malé International Airport Private Limited (GMIAL) joint venture company had obtained “requisite approvals” under the regulations at the time construction commenced, but had since been asked to seek further approval from authorities.
“We have received a letter from Maldives Civil Aviation Authority asking us to seek its approval pursuant to a recent regulation, for the construction works related to the proposed new Passenger terminal building. Pending the approval, MCAA has directed stoppage of the said works,” GMR stated. “This has no impact on the operations of the airport at the existing terminal.”
Amidst claims by Attorney General Aishath Azima Shakoor that the “doors for dialogue” were still open over resolving the matter of the ADC case, a GMR spokesperson told Minivan News today that the company was not able to comment if fresh discussions with the government were taking place. Shakoor was not responding to calls by Minivan News at the time of press.
The attorney general told Sun Online that the company could be waiting for up to two years for a resolution to the ADC court case in Singapore. She claimed that discussions between the company and the government remained the “best way” to resolve the issue therefore.
Compromise
Earlier this year, GMR said it had sought to compromise with the government by offering to exempt Maldivian citizens from paying the ADC. However, the Transport Ministry continued to demand that the infrastructure giant repay US$8.2 million deducted from the concession agreement.
Under the concession agreement, a US$25 Airport Development Charge (ADC) was to be levied on all outgoing passengers to part-fund the airport development.
However, while in opposition, the Dhivehi Qaumee Party (DQP), led by Dr Hassan Saeed, now President Dr Mohamed Waheed’s special advisor, and Dr Mohamed Jameel, now Home Minister, filed a successful case in the Civil Court in December 2011 blocking payment of the ADC on the grounds that it was effectively a tax not approved by parliament.
Nasheed’s government as a stopgap measure agreed to deduct the ADC from the concession fees payable by GMR, while it sought to appeal to verdict.
According to financial statements sent to MACL and released to local media, in the second quarter of 2012, GMR deducted the ADC revenue of US$7.1 million from total revenues of US$5.6 million, leaving the government with a bill for US$1.5 million.
Managing Director of MACL Mohamed Ibrahim told local newspaper Haveeru at the time that the government would not pay the amount, alleging that GMR’s deduction of the ADC from the revenue was illegal.
In its defence, MACL has said that its board of directors had been reformed with the arrival of the new government, and a decision made to annul the old board’s agreement to deduct the ADC revenue.
“The advisory work was supported by AusAid (Australia), the Ministry of Foreign Affairs of the Netherlands, and DevCo. DevCo is a multi-donor program affiliated with the Private Infrastructure Development Group and funded by the UK’s Department for International Development, the Ministry of Foreign Affairs of the Netherlands, the Swedish International Development Agency, and the Austrian Development Agency,” the IFC explained, following a visit by the delegation in June to address the government’s concerns.
Following the first quarter deduction, GMR announced an employee benefits scheme converting 50 percent of employee salaries to US dollars from July onwards, and a one-percent profit-share.
An ongoing dispute between Ibrahim Nasir International Airport (INIA) developer GMR and the incumbent Maldivian government concerning a US$25 Airport Development Charge (ADC) has been referred to a court of arbitration in Singapore.
The government-owned Maldives Airports Company Limited (MACL) faces a US$1.5 million shortfall in concession fees owed to the airport developer for the second quarter of 2012; the legacy of an opposition-sponsored Civil Court case in late 2011 that scuttled the airport’s ability to charge the ADC as stipulated in its concession agreement.
GMR signed a 25 year concession agreement with former President Mohamed Nasheed’s government to upgrade and manage Ibrahim Nasir International Airport (INIA). Under the concession agreement, a US$25 Airport Development Charge (ADC) was to be levied on all outgoing passengers to part-fund the US$400 million development – the country’s single largest private investment.
However, while in opposition, the Dhivehi Qaumee Party (DQP), led by Dr Hassan Saeed, now President Dr Mohamed Waheed’s special advisor, and Dr Mohamed Jameel, now Home Minister, filed a successful case in the Civil Court in December 2011 blocking payment of the ADC on the grounds that it was effectively a tax not approved by parliament.
Nasheed’s government as a stopgap measure agreed to deduct the ADC from the concession fees payable by GMR, while it sought to appeal to verdict.
According to financial statements sent to MACL and released to local media, in the second quarter of 2012, GMR deducted the ADC revenue of US$7.1 million from total revenues of US$5.6 million, leaving the government with a bill for US$1.5 million.
Managing Director of MACL Mohamed Ibrahim told local newspaper Haveeru that the government would not pay the amount, alleging that GMR’s deduction of the ADC from the revenue was illegal.
In its defence, MACL has said that its board of directors had been reformed with the arrival of the new government, and a decision made to annul the old board’s agreement to deduct the ADC revenue.
The government meanwhile sought to invalidate the GMR contract – and the clause invoking arbitration – by challenging the handling of the bidding process by the International Finance Corporation (IFC), a member of the World Bank group and the largest global institution focused on private development sector in developing countries.
“The advisory work was supported by AusAid (Australia), the Ministry of Foreign Affairs of the Netherlands, and DevCo. DevCo is a multi-donor program affiliated with the Private Infrastructure Development Group and funded by the UK’s Department for International Development, the Ministry of Foreign Affairs of the Netherlands, the Swedish International Development Agency, and the Austrian Development Agency,” the IFC explained, following a visit by the delegation in June to address the government’s concerns.
Following the first quarter deduction, GMR announced an employee benefits scheme converting 50 percent of employee salaries to US dollars from July onwards, and a one-percent profit-share.
Around the same time, the company sought to compromise with government by offering to exempt Maldivian citizens from paying the ADC. However, the Transport Ministry continued to demand that the infrastructure giant repay the US$8.2 million deducted.
Several pro-government parties – including the Dhivehi Rayithunge Party (DRP), Dhivehi Qaumee Party (DQP), People’s Alliance (PA) and Jumhoree Party (JP) – meanwhile advised President Waheed that they continued to endorse an agreement signed in June 2010 calling for the airport to be taken back from GMR and nationalised.
The relationship between the airport developer and the government soured further last week after the government temporarily called for a halt to work on the new airport terminal, alleging it had “violated rules and regulations” by not acquiring certain permissions from the Civil Aviation Authority.
“When the government decides that a project be stopped, we will make sure this happens,” President’s Office Spokesperson Abbas Adil Riza previously told Minivan News. “GMR have not discussed the construction with relevant authorities.”
Following the second quarter deduction, the airport developer declined to comment, as the matter “has been referred for arbitration by the parties.”
“GMR Male’ International Airport Pvt Ltd has made the said adjustment as per the concession agreement,” a spokesperson said.
The concession agreement includes an option for the government to buy out the contract from the developer, however the cost is likely to reach upwards of several hundred million dollars.
President’s Office Spokespersons Abbas Adil Riza and Masood Imad had not responded at time of press.
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.
Infrastructure giant GMR has said the new terminal at Ibrahim Nasir International Airport (INIA) will open two years as of yesterday (July 1) “irrespective” of outside issues.
The government has meanwhile pledged to back parliament should it decide on re-nationalising the project.
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.
At the same time, work is also under way on an entirely new terminal structure on the Eastern-side of Hulhule’ island that GMR has claimed will completely transform the country’s foremost transfer hub for local people and international visitors alike.
Work conducted by GMR to reclaim the new terminal ground
Local media outlets were on Saturday updated on the redevelopment of the island and shown around the new terminal site which, when completed, will aim to cater for increases in international traffic predicted in the country up to 2035. The site is also required to bring INIA’s operations in line with international aviation standards.
With contractors already having begun work on the new structure as of last month, the government has stressed that it will not seek to interfere or “disturb” the project that officially commenced back in November 2010 under the administration of former President Mohamed Nasheed. This government commitment was made despite raising concerns over what it claimed are minor issues relating to business regulations on the site.
However, President’s Office Spokesperson Abbas Adil Riza said 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 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.
GMR’s contract is currently under scrutiny by a committee appointed by President Waheed, which includes the Attorney General, the Finance Minister and the CEO of Maldives Airports Company Ltd (MACL). The president has previously pledged during a visit to India that he would protect investment from the country in the Maldives.
A delegation from the IFC, which brokered the deal between GMR and the government of Maldives, recently addressed the government’s concerns over the concession agreement in a meeting with senior government officials.
Coalition concerns
When asked whether he believed GMR’s pledge to present the Maldives with a entirely new airport structure by July 1 2014 – in line with a 25 year concession agreement to develop and manage the site – would be met, Abbas claimed that concerns raised by several former opposition parties would need to be addressed.
“The point to note is that during the agreement’s signing, several unlawful points were raised by [former opposition] parties over why the government could not enter the agreement with GMR,” he claimed. “Under the law of the contract [GMR] did not perform sufficient due diligence and they must validate the legality of the contract. If any court of law rules the contract is illegal, the law must be upheld.”
The claims were made after local media reported that GMR had begun construction last month without a Civil Aviation Authority permit needed for work to begin. GMR responding in newspaper Haveeru said that the terminal construction had been approved in an existing master-plan agreed with the government.
Clarifying the report, Abbas 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.
Under the law, he stressed that companies were required to undertake an Environmental Impact assessment (EIA) – which had been completed by GMR – as well as meet all other local business regulations.
Abbas claimed that the permit was an issue likely to have resulted due to a contractor error and could be addressed within the space of a week without major delays.
“Normal procedure would be for the cessation of work on the airport while the permit was awaiting approval. This takes about a week. I don’t see any reason for delays,” he said.
Aside from the permit issue, the government also alleged that it wished to resolve an issue over a duty-free law that outlawed duty-free shops at arrival terminals. With alcohol outlawed for consumption or purchase outside of licensed resort properties under Maldivian law, duty free stores within the airport’s arrival area was raised as a legal issue.
“These issues can easily be resolved, we are not looking to disturb the GMR deal,” he claimed. “Larger corporations need good governance, if one company does not meet its obligations everyone else may start looking for loopholes.”
Disturbance
Abbas said the most pressing issue concerning the INIA construction agreement remained the US$25 Airport Development Charge (ADC) outlined by GMR within its original agreement – a practice the infrastructure group contends is commonly used by airport developers around the world to aid the costs of large-scale renovation projects.
“The law does not allow for deduction of the ADC without parliamentary approval,” Abbas said.
The country’s Civil Court had blocked GMR charging the ADC last year on the grounds that it was a tax not approved by parliament. As the ADC was stipulated in the contract, former President Mohamed Nasheed’s administration had signed with the airport operator, the government at the time agreed that GMR would deduct the charges from the concession fees due the government, pending appeal.
With the present government having contested these deductions, GMR released a statement back in May proposing a compromise agreement whereby Maldivian nationals would be excluded paying the ADC when departing the airport.
While seeking to maintain an open dialogue with the government, GMR said Saturday that there had been no reply so far in regards to the options it had offered the government in order to find a resolution to the ADC matter.
Business politics
Despite the ongoing issues with the ADC, the infrastructure group said it did not pay too much attention to politics in the country, claiming it instead remained focused on the development of INIA.
“We don’t do politics well at all,” said INIA CEO Andrew Harrison, when questioned by local media about the impact politics was potentially having on the construction.
Speaking during a tour of the new airport structure yesterday, Harrison added that the airport construction was on track at present, and already providing improved returns to the state when compared to earnings before the agreement came into place.
He added that although there was no set deadline in order to reach consensus with the government over the resolution of the ADC charge, long-term delays could have “time and cost implications for the project”.
“Additional improvements”
Aside from contractual obligations to improve tourist processing capacity in the existing terminal, Harrison said that GMR was committed to a number of additional improvements not specified in the original concession agreement.
These improvements include an entirely new outdoor food court for the present terminal including Thai Express, Burger King and Coffee Corner restaurants that would be open to the general public as well as visitors.
He also pointed to other high-profile developments such as the refurbishment of the airport’s domestic terminal and toilets, a new executive lounge and behind the scenes modifications to boost capacity at the site as a reflection of the company’s claims it is going beyond its contractual obligations.
The new terminal meanwhile has been devised to include new shopping complexes, increased seaplane capacity via two new water runways and a considerably larger structure built above an large artificial lagoon.
The construction, comprising of a 70 percent glass structure, has been designed architecturally to play up the appeal of the Maldives’ oceans, whilst being four times the size of the terminal presently used to accommodate airline passengers.
Emergency runway
Addressing concerns raised in local media about the development of the existing runway, Harrison said that GMR had sent proposals to the government for possible construction of an emergency runway.
He stressed the the construction, which would require additional funding support either directly through the government or through the concession agreement, could be used only in case of emergencies should the main airport runway be out of action owing to an accident or emergency.
Harrison claimed that if approved by government, the emergency runway, which would not be ready by the opening of the terminal on July 1, 2014, would not be in full compliance to International Civil Aviation Organisation (ICAO) regulations, due to its distance to grounded aircraft.
With the new terminal in place, aircraft would be grounded 212 metres away from the proposed emergency runway, meaning it would not meet recommended international regulations. However, GMR claimed this distance would still be preferable in terms of regulatory requirements to the current space available between INIA’s runway and aircraft parking area.
Beyond the new terminal aiming to meet full ICAO compliance by the time it is open to tourists, the passenger terminal is also expected to meet LEED Silver Certification environmental standards.
The contruction will also include a new VIP terminal to deal with diplomats, heads of state and other high-profile guests, along with a brand new cargo terminal and a Airport Fire and Rescue Building to deal with any potential on-site emergencies.
GMR said that the terminal had been designed by Singapore-based architect Winston Choo, who had devised a structure making the most of natural ocean surroundings while also playing up garden areas and a lagoon equivalent to two football pitches in size.
As part of the terminals proposed aesthetic, distressed wood, granite and coral like materials designed to emulate the feel of high-end resort properties around the country are expected to be used, the company added.
A virtual walk through of the proposed terminal design can be viewed here.
Discussing the ongoing political backlash against the awarding of the contract to GMR back in 2010 on nationalistic grounds, Harrison contended that INIA would remain a Maldivian owned enterprise that would be continuously developed by the company for the duraction of the tender.
“We are just the caretakers here,” he said. “The airport remains and has always been owned by Maldivians.”
Harrison contended that to ensure profitability for its investment in the airport, GMR was itself committed to strengthening the wider Maldivian economy by working with local businesses, industry and contractors.
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