GMR – Page 18 – Minivan News

New transport minister calls for redevelopment of airport runway

Minister of Transport and Communication, Dr Ahmed Shamheed, has criticised GMR’s plan to develop Ibrahim Nasir International Airport (INIA), arguing that it does not provide needed redevelopment of the runway.

Shamheed said there had been a temporary closure of the airport last week as a large crack on the runway was repaired.

“The development of the runway is not part of the agreement made with GMR. And the way the airport development plan is going, there is no possibility of constructing a new runway. A beautiful design can be made, but we have to consider its sustainability,” the Minister told Sun Online.

When asked to comment, Shamheed told Minivan News that he could not say anything more specific on his department’s next move regarding the repair issues.

“But we are conducting a study into the matter. Once we establish all the facts, we will brief,” said Shamheed.

“We are trying to find out how they are going to address the issue with the runway. There is no quick fix,” he claimed.

At over US$400 million the project is the largest single foreign investment ever made in the Maldives. The plan involves an upgrade the current terminal before the construction of a new terminal on the opposite side of the island of Hulhule, which the developer has pledged to complete in 2014. Ground was broken on the site for the new terminal in December last year.

The new transport minister alleged the runway was in poor condition and in need of critical repairs. An incident in 2010 saw experts from Boeing brought in to advise on such repairs after one of its aircraft sustained damage as a result of water retention on the runway.

Managing Director of the Maldives Airports Company Limited (MACL) Mohamed Ibrahim, previously responsible for the maintenance of the site, two years ago claimed that the runway had to be re-tarred every 15 years, having last been repaired in the early 1990s.

“Devious Indians”

The political opposition under Nasheed’s government, particularly the Dhivehi Qaumee Party (DQP), were persistently critical of the airport development, with allegations ranging from corruption in the bidding process to claims that the deal would allow the airport to refuel Israeli bombers enroute to bombing Arab countries.

Then leader of the People’s Alliance (PA) and brother of former President Gayoom, Abdulla Yameen, previously described the deal as “economic enslavement.”

Similarly, the Dhivehi Quamee Party (DQP) released a booklet in Dhivehi in December 2011 titled “Giving the airport to GMR: The beginning of slavery”, warning against “devious Indians”.

In the 24 page document (download in English/Dhivehi) the DQP claimed that the agreement did not include any requirement to develop a runway and would allow the GMR group to “colonise” large portions of the economy.

“Indian people are especially devious people”, the DQP booklet claimed. “There is no guarantee at all that GMR will invest the proposed amount. There is nothing the government can do but accept what they say and the documents they provide. This is how all the companies in partnership with the government are run.”

An unattributed letter on the party’s website published at the same time as the pamphlet claimed that the Indian government, in its backing GMR’s investment, “has a choice to make.”

“Does it want its backyard to be peaceful, prosperous, and free from corruption, nationalism, and religious problems? Does it want its backyard to be a place where wealthy Indians can spend their holiday and where its investors are respected and welcomed and not hated? Or does it want to be seen as a backer and sponsor of a corrupt and despotic regime, divorced from public sentiments, as was the case of the United States in the Middle East?”

Spokesperson for former President Nasheed, Mohamed Zuhair, claimed at the time of the contract signing in 2010 that the deal with GMR to upgrade and manage the airport had clashed with the vested interests of several tycoons, including Yameen and Gasim, drawing it into the political arena.

“Gasim was concerned the new airport might take the charter flights he had intended would be landing at the new airport he is building in Maamagilli,” Zuhair alleged at the time, “while Yameen is a third party supplier of fuel at Male International Airport through the Maldives National Oil Company, which has representation in Singapore.”

“These MPs are two individuals of high net worth – tycoons with vested interests,” he explained. “In pursuing their business interests they became enormously rich during the previous regime, and now they are trying to use their ill-gotten gains to bribe members in the Majlis and judiciary to keep themselves in power and above the fray.”

“Politically neutral”

The airport’s CEO Andrew Harrison in 2011 stated in an interview with Minivan News that he was “extremely confident of standing up to any scrutiny because of the way the bid was scrutinised by the World Bank’s International Finance Corporation (IFC)”.

Harrison today declined to comment on Shamheed’s recent statement. In a previous interview, he maintained that GMR had “always been politically neutral in that our remit is solely about developing and operating the airport.”

“We respect whichever party holds the seat of government in the Maldives. The government change is a change we respect and we remain politically neutral. We’ve got a concession agreement and we are sure that any government in power will respect that agreement. We’ve not heard anything that would make us believe otherwise,” Harrison told Minivan News at a press conference in February.

The criticism culminated in a successful court case filed by the DQP against GMR’s levying of an airport development charge (ADC), a source of revenue for the company outlined in the original contract. The court decision left the Nasheed government with the obligation to pay the difference.

Several days after assuming the presidency, Dr Waheed vowed the government would not approach the deal “from a political perspective”, adding, “It is not our intention to harm GMR. Our objective will be to resolve concerns of the public [regarding the company].”

Foreign investors should not be concerned about the political upheaval affecting their interests in the Maldives, said Dr Waheed, but hinted that some investments may come under scrutiny.

“We will not target anybody for political reasons,” he said. “If there are any reasons for concern over investment, of course any steps that need to be taken will be taken.”

Since the recent transition of presidential power, many of the former government’s policies have come under scrutiny. The Ministry of Economic Development announced that all future Public Private Partnership (PPP) schemes would be put on hold, adding to fears that the political turmoil currently engulfing the country would be detrimental to foreign investment.

Former Climate Change Advisor to Nasheed Mark Lynas recently expressed his concern over this issue: “Donors will turn away because of the political instability, and investors likewise.”

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GMR remains “politically neutral” as stock price shows short-term wobble amid political upheaval

The stock price of the Indian infrastructure giant operating Ibrahim Nasir International Airport (INIA) took a tumble on the Mumbai Stock Exchange following the ousting of former president Mohamed Nasheed last week, as images of the unfolding violence were beamed around the world.

GMR has made a US$511 million investment in the Maldives’ international airport. The price of shares in GMR Infrastructure, which was contracted to develop INIA by the previous government, dropped by almost five percent on February 7 following news that fierce clashes between security forces on the streets of capital Male’ had led to Nasheed’s resignation.

GMR’s share prices quickly recovered over the following few days, as Vice President Dr Mohamed Waheed Hassan Manik was sworn in, and rain tempered public demonstrations which on Wednesday turned violent after police attacked a march by members of Nasheed’s Maldivian Democratic Party (MDP).

Speaking on February 11 about foreign investments in the Maldives, Dr Waheed said that foreign investors should not be concerned about the political upheaval affecting their interests in the Maldives, but hinted that some investments may come under scrutiny.

“We will not target anybody for political reasons,” he said.

“If there are any reasons for concern over investment, of course any steps that need to be taken will be taken.”

Speaking specifically about the contract with GMR, Dr Waheed said he would not approach the deal “from a political perspective”, adding, “It is not our intention to harm GMR. Our objective will be to resolve concerns of the public [regarding the company].”

GMR’s stock price continues to teeter this week.

“Short term fluctuations”

Speaking to Minivan News, one of India’s leading political economists Paranjoy Guha Thakurta observed that the political situation in the Maldives has affected GMR to a certain degree but pointed out that “GMR is also politically influenced in the Indian state of Andhra Pradesh.”

Thakurta said that the fluctuations in GMR’s stock prices should be seen in a wider context.

“These are short term fluctuations,” he said: “By and large, the markets of the world have been in limbo for some time. India’s stock market has been politically prone in the past year. I wouldn’t read too much into it,” he said.

The multi-million dollar deal to operate and dramatically expand the Maldives’ international air hub has been the target of controversy from the political opposition, much of it flowing from the Dhivehi Qaumee Party (DQP), a member of which – Dr Mohamed Jameel – is now the country’s Home Minister.

Nasheed’s government offered GMR, in partnership with Malaysia Airports Holdings Berhad (MAHB), the 25-year contract in June 2010. Since that time, various opposition parties including Dhivehi Rayyithunge Party (DRP), Dhivehi Qaumee Party (DQP), Jumhooree Party (JP), and the People’s Alliance (PA) have questioned the contract’s legality while former airport employees have protested against what they have claimed is a foreign take-over of their business domain.

Opposition parties have accused MDP cabinet members of having “vested interests” in the deal. In late 2011 the DQP took their objections to press and produced a 24-page book claiming the deal would “enslave the nation”, while former DRP leader and current deputy leader of the Progressive Party of the Maldives (PPM) Umar Naseer said last year that his party would re-nationalise the airport if it came to power.

While Dr Waheed is not a member of PPM or DRP, Naseer’s recent actions indicate shared interests. On January 31, a delegation of the December 23 Coalition, including Naseer, declared its allegiance to Dr Waheed amidst protests against Nasheed’s government and called for all military and police forces to back Dr Waheed. Naseer also recently informed the public that he was instrumental in the events and discussions leading up to Nasheed’s resignation.

Speaking to press last week, Nasheed said he had been aware that his vice president was meeting with opposition leaders at his home.

Naseer also told Minivan News in June 2010 that “If [GMR] allowed it, an Israeli flight can come and stop over after bombing Arab countries”.

Nasheed’s government was criticised last year for entertaining a deal with Israeli airline El Al. Following demonstrations in defense of Islam on December 23, in which opposition party and religious NGO leaders spoke against relations with Israel, the National Security Committee advised against the deal.

Past events have shown that GMR is sensitive to political fluctuations in the Maldives. GMR’s price on the stock market saw a 7 percent fall in December, when the Civil Court blocked GMR from deducting an Airport Development Charge of US$25 (Rf385.5) from passengers departing on international flights, according to India’s Economic Times.

Thakurta said, “If they re-open the contract, it wouldn’t hurt them [GMR]. GMR is really big, they’re the company behind Delhi’s new airport, which is India’s biggest airport.

“As in the case of what happened in Mauritius, GMR has had some issues over the charging of airport development fees for passengers, and the same story is being replicated in the Maldives,” he concluded.

GMR unphased

Declining to comment on the stock market fluctuations, GMR CEO of Maldives operations Andrew Harrison said GMR expects the existing INIA deal to be upheld, despite the change of administration in the Maldives.

Speaking to Minivan News, Harrison stressed that the Indian company is “politically neutral” and added that it respects whichever party is in control of the government of the Maldives.

“We’ve always been politically neutral in that our remit is solely about developing and operating the airport,” he said.

Several foreign staff working in Male’ as GMR contractors were temporarily relocated to India after both they and their employers expressed concerns over their safety. The political situation in Male’ remains volatile.

Harrison said, “Our only concern is for the welfare of GMR staff, so we have advised them to avoid hotspots where it appears that riots and trouble is breaking out.”

He added that tourists traveling through INIA should not be too concerned about the events in Male’, as the airport and resorts are separated from the capital city.

Harrison said, “The resorts and the airport island are geographically separated from Male’, and we’re also fortunate in the fact that the Maldivian culture is both welcoming and friendly towards foreigners. We’ve seen demonstrations of great hospitality both at the airport and at the resorts, both during and prior to this situation.

“People visiting the Maldives are being made to feel very welcome in the Maldives, despite what’s going on in Male’. The Maldivians have a very warm and nurturing culture and a willingness to welcome visitors – and this won’t be affected by the political situation,” he added.

There have been no political protests at INIA or any of the resorts to date. As such, the majority of current travel advice issued by foreign embassies recommends that tourists specifically avoid visiting the island of Male’, but they are not issuing a blanket travel warning against visiting the Maldives, apart from the Ministry of Foreign Affairs of the Ukraine which advises it citizens to avoid the country as a whole.

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Seaplane crash lands at Ibrahim Nasir International Airport

A seaplane crash landed on the water runway at Ibrahim Nasir International Airport with nine passengers aboard in poor weather conditions just after midday.

The Maldivian Air Taxi (MAT) aircraft was attempting to land in heavy rain on the eastern side of the seaplane lagoon on Hulhule Island at 12.08pm when it crashed into the water.

On board were a total of nine passengers and three crew who were traveling on a 25-minute flight from Lily Beach resort. One of the passengers was Maldivian, two were British and four were Vietnamese.

MAT officials were unable to confirm the nationalities of the rest of the passengers.

Everyone on board was rescued from the aircraft within 10 minutes. There were no serious injuries to any of the passengers or crew but some of the passengers were treated for mild shock.

The MAT Twin Otter seaplane remained afloat and upright but one of the floats was damaged, leaving it leaning to one side with one wing extended into the water.

CEO of GMR, the company which runs Ibrahim Nasir International Airport, Andrew Harrison, said: “Fortunately we have a very good emergency response plan.

“We were able to get the passengers rescued within ten minutes and because we knew they would probably be traumatised, we took them to the CIP ‘Koimala’ Executive Lounge for medical treatment for mild shock.

“I personally met with the passengers and told them that I wished their holiday had not ended on a sour note. All of the passengers actually said that it had not ruined their holiday and they commended the actions of the pilot and crew and congratulated them on their response to the situation.”

Work is currently underway to recover the MAT seaplane from the lagoon. The flight schedules of other seaplanes were unaffected by the incident.

Mr Harrison said: “The damage was limited to one of the floats which became detached from the aircraft, so the plane has been left on one side with one wing in the water. Every recovery is different, and as we are running out of daylight, the situation is becoming more challenging.

“Only the Civil Aviation Authority can comment on the exact cause and the nature of the crash. It’s important to note that this type of aircraft is a very durable and safe type of aircraft, and the pilots and crew operating the seaplanes have lots of experience of operating seaplanes.”

The passengers have now departed from the Maldives did not miss their connecting flights due to the incident.

The General Manager of MAT, Fredrick Groth, said: “At around noon today, one of our aircraft had an incident upon landing; one of the wings hit the water.

“We evacuated everybody and made sure there were no injuries. All of the passengers were okay and went on to their onward flights.

“We don’t wish to comment further until after the investigation has been concluded.”

The Maldives Civil Aviation Authority is now investigating the cause of the crash and interviewing witnesses. Deputy Director General, Hussain Jaleel, told Minivan News that he was unable to reveal the cause of the crash yet because the investigation is on-going.

“We cannot determine the cause of the crash yet because the investigation is not yet finished and the interviews have not been finished yet,” he said.

It had been raining heavily since the early hours of the morning and visibility was low. A seaplane pilot working at the terminal, who did not want to be named, described the weather conditions at the time of the crash as “poor” and added that the seaplane terminal had been closed several times earlier today leading up to the accident due to the bad weather.

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Qatar flight delayed in payment dispute over ground handling charges

A Qatar flight scheduled to fly to Doha on Sunday night was refused permission to depart Ibrahim Nasir International Airport (INIA) following the airline’s ongoing refusal to pay increased ground handling charges.

The move came after the airline’s CEO Akbar Al Baker last week was recently reported as stating that Qatar would re-consider flying to the Maldives if airport operator GMR insisted on a 51 percent increase in ground handling charges.

“If we or any other major player withdraws services because of these unwarranted and draconian measures, it will be the people of the Maldives who will lose out, affecting their livelihoods as they rely heavily on the tourism industry,” Al Baker said.

Minivan News reported yesterday that GMR had requested that Qatar pay cash for the day’s flights.

INIA CEO Andrew Harrison told Minivan News today that the flight had been refused permission to depart due to the airline’s lack of payment of the revised charges.

The flight was delayed an hour and 20 minutes, he said, before GMR allowed it to depart “on compassionate grounds. There were women and children on board and passengers with international connections to make, who were being inconvenienced through no fault of their own,” he said.

Minivan News understands that GMR is currently in talks with several airlines regarding back payment of the increased charges. The company has said it will release a formal statement later in the week.

“MACL (Maldives Airport Company Limited) announced the revised charges in February 2010, after 14 years without increases,” Harrison said. “The charges are still below those for the same aircraft sizes at other airports in the region.”

MACL’s revised charges came into effect on 1 November 2010, Harrison explained. “They had an obligation to give six months notice, and they gave nine. We took over on 25 November. We included [the revised charges] as part of our business and revenue.”

Qatar’s Country Manager for the Maldives Sayed Mohammad Tariq said the matter was being dealt with at head office level by the airline’s senior management.

“Qatar’s CEO made his position very clear. We have nothing to say at station level,” he told Minivan News.

Morning and evening flights on Monday were cancelled. However Tariq said no decision had been made to cancel future flights which remained in the airline’s booking system.

The airline was today taking care of passengers affected by the payment dispute, he said. “We are taking care of all passengers and putting them on other flights.”

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INIA remains cheapest airport in region “by half”: Transport Minister

GMR will lower fuel charges by US$0.05 a litre on all domestic flights and raise it the same amount for international flights at Male’s Ibrahim Nasir International Airport (INIA).

Several airlines, including Qatar Airways and Sri Lankan Airlines, have meanwhile voiced concerns over the recent hike in set airport fees including landing and ground handling charges.

In response, the Transport Ministry has said that even with price changes INIA remains the cheapest airport in the region “by 60 to 80 percent” – and claims that some airlines have not been paying their dues.

“Doha, Dubai, Tivandrum – while they all charge US$3,000 turn-around fees, Maldives’ INIA was only charging US$1,080,” Transport Minister Adhil Saleem told Minivan News. “Even with a fifty percent increase in fees the total charge of US$1,500 is still half of what is being charged everywhere else in the region.”

Saleem noted that INIA’s rates had not changed since 1994, however in that time salaries had increased four times and development projects had been contracted. He added that the price changes – initiated by Maldives Airlines Companies Limited (MACL) and not GMR – should not have come as a surprise.

“In February 2011 MACL informed all airlines that the rates would increase in November, effectively giving them nine months’ notice. There has been no price change by GMR,” he said.

Yet several carriers including Qatar Airways and Sri Lankan Airlines have expressed concerns over the price changes and suggested they would make changes to their routes, reducing services to the Maldives.

Qatar CEO Akbar Al Bakr last week told Reuters News Agency that the airline was “dismayed” over what it understood to be GMR’s plan to increase the handling fee by 51 percent at some future date, and suggested such a move would “threaten Qatar Airways’ continued presence in the Maldives.”

GMR officials are reportedly meeting with CEOs of airlines serving the Maldives. Two airlines contacted by Minivan News did not wish to comment, including Qatar.

“The issue,” Saleem told Minivan News, “is that some airlines have not paid their dues to GMR in nine months. No airport can go on without payment.”

INIA CEO Andrew Harrison later clarified through GMR’s spokesperson that Qatar has an outstanding debt due to its refusal to pay the higher rates. Minivan News understands that GMR has requested Qatar pay cash for today’s flights, while other airlines are in the process of settling their payments with the airport.

Some have suggested that concerns raised by groups such as Qatar also stem from a drop in demand as the low season approaches. Saleem said that Sri Lankan’s strategy had always been to boost tourism numbers in its own turf.

“We believe the London flights were operated for Sri Lanka to achieve its tourism target. They’ve changed their summer schedule to this effect,” he said, explaining that the airline may cut down on direct flights to Maldives as a result, but that this was rather a matter of scheduling.

Responding to concern that reductions in carrier services would damage the tourism industry, Saleem pointed out that airline changes are a reflection of the already-changing tourism demographic.

Last year Chinese arrivals trumped all other tourist groups to the Maldives, while the Maldives’ traditional European market continued to slump under the West’s ongoing economic pressures.

“It’s a changing world,” Saleem said, noting that local airline Mega Maldives has expressed interest in expanding east to Japan. “The numbers from the East are rising, so it’s possible that the major Western carriers don’t have the demand to continue the same flight frequency that they did before. Singapore will be doubling its flights by 50 percent to 14 flights a week in March,” he said.

GMR spokesman Amir Ali reinforced that concerns over the price hike are misinformed. “There are concerns, but some people are using it in a political game,” he said.

Late in 2011 GMR’s intention to implement a US$25 (Rf385.5) Airport Development Charge (ADC) was blocked by the Civil Court, while minority opposition Dhivehi Quamee Party (DQP) campaigned against the industrial giant with a booklet titled “Handing the Airport to GMR: The Beginning of Slavery.” The government has since appealed the court’s decision, stating that it is obliged to honor its contractual relationship with GMR.

Maldives Association of Tourism Industry (MATI) Secretary General ‘Sim’ Mohamed Ibrahim agrees that INIA’s rates have been remarkably cheap for the region, but believes that the price hike – and ensuing negotiations with airlines – are a delicate business.

Although GMR “inherited” the current change in prices from MACL, “GMR’s strategy is to make as much money as possible any way they can – that’s business. But if it’s not done right then it’s not going to work. This has been too much, too fast,” Sim claimed.

According to Sim, the two overarching issues are the pace and method of the price hike. Rather than raising set fees dramatically during the high season, Sim suggests introducing the change in phases. He also recommends requesting payment post-service.

“In Singapore people are charged after they’ve seen the development and its benefits. People want to see what they are paying for, and it seems to be working alright,” he observed.

Pointing to the Maldives’ limited economy, Sim said airport development and fees “have to be weighed with the reality that the Maldives is totally dependent on tourism.”

Minister Saleem offered assurances that the Maldives’ appeal would continue to draw customers. “I’m sure there will be other airlines wanting to come in, especially as the demographic shifts,” he said.

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Qatar Airways CEO “dismayed” over airport fee hike, GMR denies plans

Qatar Airways CEO Akbar Al Baker has warned that the airline will re-consider flying to the Maldives if airport operator GMR maintains its apparent plan to raise airport handling fees at Ibrahim Nasir International Airport (INIA) by 51 percent.

Reuters reported that the airline was “‘dismayed’” over what it understood to be GMR’s plan to increase the handling fee at some future date, and suggested such a move would “threaten Quatar Airways’ continued presence in the Maldives.”

Noting that the Maldives’ economy is based on tourism, Akbar Al Baker called the planned increase “totally unreasonable.”

“My message to the Maldives authorities is to think rationally about the future prosperity of your tourism industry. These steps may have not been thought through seriously by the airport operator and I urge them to think again.”

GMR spokesman Amir Ali said that the fee hike had already been made by the Maldives Airport Company Ltd (MACL) shortly before GMR assumed control of the airport, adding that while there were no plans for a further increase at present, prices were dependent on factors such as fuel prices.

“I believe the fee was increased because of the rise in fuel prices, but I’m not sure since the decision was made by MACL some time ago,” Ali said.

GMR had received no official communication from Qatar Airways, he added.

Since taking over INIA in 2010 GMR has made several adjustments to airport operations in an effort to match the airport’s facilities to those expected by visitors to the country’s upmarket resorts. While progress has been rapid, the local population has also voiced discontent with changes to baggage handling services and departure fees.

GMR was recently challenged in court over its recent attempt to collect an Airport Development Charge (ADC) beginning in 2012, a stipulation which was included in its concession agreement with the government. While the Maldives Civil Court ruled against the ADC in December, the government appealed the case to the High Court, declaring that it was obliged to honor its agreement with the airport developer.

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Independent MP contests government agreement with GMR over ADC

Independent MP Mohamed Nasheed has said the government is circumventing the Civil Court’s ruling against a US$25 Airport Development Charge (ADC) by agreeing to deduct the anticipated revenue of US$25 million from GMR’s concession fee.

Nasheed also contends that the government has not breached its contract with GMR, but rather that the contract was breached by outside forces.

The minority Opposition Dhivehi Quamee Party (DQP) has also announced that it will investigate the recent amendment to the government’s contract.

GMR was set to collect US$25 from all passengers departing on international flights starting January 1, 2012. The expected revenue was to cover certain costs for the development of Male’s Ibrahim Nasir International Airport (INIA).

According to Nasheed, any agreement between the government and GMR will not undo the Civil Court’s ruling against the ADC. He argued that the court ruling rendered the clause allowing for an ADC null and void.

“That’s the only decision that interprets or explains the local law at the moment, and it has not been overturned, it has not been struck down by a superior court, therefore that is the position. You can’t circumvent it by deducting receivables from GMR,” said Nasheed.

“Now, the only viable option for the government would be to amend the legislation, allow for the GMR or any other party to collect ADCs or these kind of taxes in future, and then bring the GMR issue within the legislation as an amendment,” he said, adding that an amendment to the law would protect the government from incurring losses to ensure a base line of revenue for GMR.

A related bill is currently awaiting Parliamentary review in March. Nasheed understood that the ADC would be collected by the government only three times per year, yet “it is only January 10 and already the government is trying to make this agreement and circumvent the court decision.”

Meanwhile, the government is also awaiting the High Court’s verdict on the Civil Court case, which was appealed in December. Nasheed said a contract cannot be revised while it is before a court.

Previously, members of the government including President Mohamed Nasheed have expressed firm support for the contract with GMR. Speaking at the groundbreaking ceremony of a new terminal construction project at INIA, the President said the Maldives was “200 percent” behind the contract, while Press Secretary Mohamed Zuhair yesterday stated, “it should be a matter of pride and joy for any Maldivian to help with the development of their airport.”

DQP previously voiced strong opposition to the deal with GMR, filing a case at the Civil Court and releasing a booklet entitled “Handing the Airport to GMR: The beginning of slavery.”

In MP Nasheed’s opinion, however, the government has allowed itself to be bullied into a compromise of terms.

The agreement implies that the government has taken responsibility for the ADC as stipulated in the original contract with GMR. If the ADC is charged for the duration of the 25-year contract, the government could potentially be facing a total payment of US$625 million for GMR’s investment of US$400 million in the airport project.

“The government gets peanuts at the end of the day,” Nasheed said.

“My argument to the government would be, Maldives government too must have gotten into this relationship based on certain calculations. Why should the Maldivian government suffer their calculations to keep GMR’s calculation unaffected by the court decision, over which the government has no control?”

Addressing the matter in a press statement yesterday, the Ministry of Finance claimed that the contract between GMR and the government would be violated in the event that GMR could not collect a stated fee. Therefore, the government had breached its contract.

The ministry did express support for the government’s recent agreement, however, stating that any damages should be deducted from GMR’s concession fee due the government.

Expressing shock at the Ministry of Finance’s statement, Nasheed clarified his intent to defend the government from the ministry’s first point.

“I would like to defend my government and say that the government did nothing on its own or within its control to breach an agreement. They have allowed certain charges to be made based on an opinin of the Attorney General that that charge was permissible under Maldivian law. Now, the Civil Court has said otherwise, and the government has not done anything to breach the contract. It’s a frustrating event that’s happened outside the contract and the government won’t take any responsibility for that.”

Nasheed today said he understood that a only small fraction (12 to 15 percent) of internationally-bound travelers leaving INIA are Maldivians.

“If the ADC was allowed, the burden of payment would have been born by international passengers, and only 12 percent Maldivians. And the government won’t have to bear any burden because the fee would be collected directly from passengers by GMR,” he said, reiterating that under the current arrangement the government would be paying revenue to GMR.

Minivan News asked whether exempting Maldivians from the ADC could put the matter to rest.

Nasheed believed exemption could improve the situation, and added that parliamentarians have discussed exemptions for Maldivians traveling to SAARC countries.

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Government agrees to amend GMR fee while rooting for ADC

The government has agreed to deduct expected revenue from the US$25 (Rf385.5) Airport Development Charge that was to be charged from passengers departing on international flights from Ibrahim Nasir International Airport (INIA) from GMR’s concession fee to the Maldives government.

The agreement is subject to change according to a verdict from the High Court in a related case, and the passage of a bill currently before Parliament.

GMR’s request that the amount be deducted from its concession fee to the government was made to Maldives Airports Company Limited (MACL) last week, and approved following discussions between the Finance Ministry and the Maldives Airports Company Limited (MACL).

MACL officials did not respond to phone calls at time of press.

The ADC was to be charged after midnight on January 1, 2012, however the Maldives’ Civil Court blocked the fee on the grounds that it is essentially the same as a pre-existing Airport Services Charge (ASC) of US$18 for foreigners and US$12 for locals above two years of age.

Citing a contractual obligation with GMR, the government subsequently appealed the case to the High Court, where it is currently awaiting a verdict.

Having received nearly 1 million tourist arrivals in 2011, the government and GMR expected the ADC would generate US$25 million in revenue towards the current renovation of INIA.

Although the expected revenue is said to include fees charged from foreigners and Maldivians traveling abroad, it appears that at US$25 apiece the nearly 1 million tourists alone would meet the revenue needs stipulated in GMR’s original agreement.

President’s Office Press Secretary Mohamed Zuhair informed Minivan News that the notion of exempting Maldivians from the ADC had been raised in meetings, but rejected on the grounds that such an exemption would not generate the necessary revenue.

“The government and GMR have calculated to assure that shareholders and banks are properly recompensed,” he explained. “It should be a matter of pride and joy for any Maldivian to help with the development of their airport.”

Economic Development Minister Mahmoud Razee did not believe the deduction of ADC revenue from the concession fee would impact airport development.

“The government agreed to GMR’s request because the numbers were calculated accordingly” to ensure that the project was not compromised, he said.

Razee added that the agreement is only temporary.

“The government is working through the courts and the Majlis [Parliament] to find a resolution,” he said, affirming that the government continues to favor an ADC.

“When the IFC (International Finance Corporation) did the sums it took as part of the income the ADC revenue,” he explained. “Maldives receives a couple million passengers coming and going every year, but if you compare it to a place like Singapore which transits 30 to 40 million passengers a year, and you need to ensure that you are getting an internal rate of return satisfactory to the investor, you need to adjust that rate.

“So we are trying to maintain a good rate of return for the government and the airport,” he explained.

The matter is being addressed at the parliamentary level in an Amendment of Collection of Airport Tax (international travelers) Act 7/78 Bill. However, Parliament is in recess until March.

GMR previously noted that the payment of a development fee was “a common concept in many airports globally”, particularly as a part of concession agreements where airports are privatised.

“The reason for the inclusion of ADC in many global concession agreements is to address the funding needs to meet the investment model required to upgrade and develop new airport facilities at significant costs,” GMR stated.

The company further claimed that the charge was included in the concession fee proposed between GMR and the government in 2010.

Speaking at the groundbreaking ceremony for INIA’s new terminal on December 19, President Nasheed said he wished to assure GMR that the government was “200 percent behind your contract, and every single other contract the government has signed with any other foreign party in this country. Not just contracts signed by our government, but also contracts that any ruler of the Maldives has signed with any party. We will honour it.”

GMR’s 25 year concession agreement to construct and manage a new US$400 million terminal (to be competed in 2014) is the single largest foreign investment in the history of the Maldives.

Meanwhile, in April India’s Supreme Court ruled against the charging of airport development fees which are not approved by India’s Airport Economic Regulatory Authority (AERA). However Delhi airport, developed by GMR, continued to charge the fee as GMR had obtained permission to collect the sum in 2010.

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GMR and government to seek “win-win situation”: Razee

Infrastructure company GMR has said it will deduct revenue received from collecting a US$25 (Rf385.5) Airport Development Charge (ADC) from every passenger departing on an international flight from the concession fee to be paid to the government.

GMR informed Maldives Airports Company Limited (MACL) last Thursday of its decision. MACL officials had not responded to inquiries at time of press.

GMR planned to begin collecting the ADC at midnight on January 1 this year as per its contract with the Maldives government. Revenue was expected to amount to US$25 million (Rf385.5 million) in 2012, and would be put towards the ongoing development of Ibrahim Nasir International Airport (INIA).

However, a Civil Court ruling in December blocked the ADC on the grounds that it was identical to an existing Airport Services Charge (ASC) of US$18 (Rf277.56). The company’s shares on the Mumbai stock exchange subsequently fell 7.57 percent, India’s Economic Times reported.

The government subsequently appealed the case to the High Court. Meanwhile, GMR is not collecting the ADC.

Economic Development Minister Mahmoud Razee said that the concession agreement between GMR and the government assured each party a certain level of income.

“Because the ADC was included as revenue, until the matter is resolved any money that was going to be received from the ADC should be deducted from what GMR owes the government,” Razee explained.

Razee said that the Ministry of Finance will work with GMR and the government to resolve the matter, adding however that much of the decision rests on a verdict from the High Court.

He added that the related Amendment of Collection of Airport Tax (international travelers) Act 7/78 Bill is also before the Parliament, which is currently in recess until March.

Razee was optimistic about the outcome, however far in the future.

“The contract between the government and GMR allows for certain changes which are mutually respected and agreed upon by both parties,” Razee observed. “They will reach a win-win situation, even if some revenue is lost.”

GMR previously noted that the payment of a development fee was “a common concept in many airports globally”, particularly as a part of concession agreements where airports are privatised.

The company further claimed that the charge was included in the concession fee proposed between GMR and the government in 2010.

The public response has not been so positive. Following GMR’s closure of duty-free shop Alpha MVKB, company CEO Ibrahim Shafeeq organised a protest under the slogan “Go GMR Go!” The protest was held on the grounds that the company was “demonstrating our opinions and dislike of what GMR has done to us and to get public responses,” Shafeeq told Minivan News at the time.

Kulhudhuffushi-South Independent MP Mohamed Nasheed also proposed an amendment to the Business Registration Bill in a bid to reserve airport shops and services for local ownership and “clip GMR’s wings”.

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