Tag: GMR

GMR failed to conduct political risk assessment prior to investing, says President Yameen

President Abdulla Yameen has warned foreign companies of the importance of political risk assessment before investing in countries such as the Maldives.

“At a time when you had a very heightened political environment in Maldives, at a time when the parliament was polarised, it was a pity that political risk assessment was not undertaken by GMR,” said the president.

Yameen’s comments came during the scholarship awards ceremony of Trans Maldivian Airways’ (TMA) youth pilot training programme – a company he cited as an example of successful foreign investment after its takeover by the Blackstone Group last year.

“Whenever we hear about GMR, the issue that comes right to the limelight is their inability to assess political risk at the time.”

GMR’s landmark airport development deal – signed during the prematurely ended term of President Mohamed Nasheed – was itself abruptly ended by the succeeding administration in December 2012.

The concession agreement to develop Ibrahim Nasir International Airport was signed in June 2010, the same month in which Nasheed’s entire cabinet resigned in protest against what it considered to be the obstructionist policies of then-opposition parties.

Legal action initiated by the deal’s opponents eventually invalidated the deal’s funding arrangements, leading the government of Dr Mohamed Waheed to justify the annulment using the legal principle of ‘frustration’ – in which unforeseen events render contractual obligations impossible.

In June this year, a Singapore court of arbitration ruled the deal had been  “valid and binding”, finding the Government of Maldives liable for damages still to be determined by the court.

The Maldivian Democratic Party had subsequently called for the reinstatement of the GMR deal, threatening to dissolve any future deals to redevelop the country’s major international airport.

Foreign diversification

During yesterday’s ceremony, President Yameen continued to appeal to foreign investors, expressing the country’s desire to diversify from the dominant tourism industry.

“We are not just about the sun, the sand, the sea – Maldives is more subtle. That is the message we are trying to give to the world now,” he told those in attendance at Traders Hotel.

The government’s drive for new investment has focused upon five ‘mega-projects’ as well as an improved climate for new investors, facilitated by controversial plans to establish special economic zones via legislation recently introduced to the People’s Majlis.

Tracing the journey of foreign investment in the Maldives alongside his own public career, Yameen noted that foreign investments were seen as “punitive” in the mid 1980s, with local laws designed to prevent them.

“My task was to encourage political leaders and the president that foreign investment was not such a bad thing. It is only through foreign investment that small countries such as Maldives could forge ahead.”

Yameen – who spent two decades with the Ministry of Trade and Industries – went on to describe frequently “lonely” and “solitary” overseas discussions on potential investment in the Maldives.

Indeed, the president described the difficulty he had in persuading Blackstone’s risk management personnel to invest in the country. The deal saw the US private equity firm gain a monopoly in the vital seaplane sector as rival firm Maldivian Air Taxi was bought simultaneously.

Congratulating those awarded the TMA training scholarships yesterday, Yameen pointed to the country’s “motivated”, “highly intelligent” and “easily trainable” youth as a key resource, urging the seaplane operator to increase the number of Maldivian staff members.

He also expressed his gratitude to the company for providing assistance in his “endeavour which is to bring prosperity throught the avenue of finding ways for the youth”.

The government recently revealed that a number of companies had expressed interest in the government’s Hulhumalé youth city project – which will reportedly include youth-specific housing, international class sports facilities, a theme park, and a yacht marina, catering to a population of 50,000.

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Government pays GMR US$ 4 million in arbitration fees

The Maldives Airports Company Ltd (MACL) has paid US$4 million to Indian infrastructure giant GMR as compensation for legal costs of arbitration proceedings in Singapore.

Following an 18-month arbitration process, a Singapore tribunal ruled last month that a concession agreement with the GMR-led consortium to manage and develop the Ibrahim Nasir International Airport (INIA) was “valid and binding” and held the government and MACL “jointly and severally liable in damages” for losses caused by the premature termination of the contract in December 2012.

The Singapore Court of Appeal ordered the Maldivian government and the 100 percent government-owned airports company to pay GMR US$4 million within 42 days for the cost of arbitration proceedings.

Finance Minister Abdulla Jihad told Sun Online last week that the US$4 million was paid out of the MACL’s revenues and not the state budget.

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Government seeks US$600 million from China and Japan for airport development

The government of Maldives is in talks with the Japan Bank for International Cooperation (JBIC) and China Exim Bank to secure a US$600 million for airport development.

Tourism Minister Ahmed Adeeb said the government is seeking US$200 million from JBIC and US$400 million from China’s Exim Bank to develop a terminal and runway respectively.

Sinagpore’s Changi Airport Group will be hired as consultants as they are better qualified to work with Chinese and Japanese contractors, he added.

The government is in the process of finalising an agreement with Changi, he said.

Speaking to the press on Tuesday, Adeeb said he does not expect a Singaporean tribunal’s ruling ordering the government to pay damages to former airport developer GMR Infrastructure for wrongful termination to affect the government’s new plans.

In abruptly terminating the contract, the government had chosen to protect the country’s multibillion-dollar tourism sector, Adeeb said. He claimed major airlines had threatened to cease operations in the Maldives following the GMR takeover – a move that may have led to collapse of tourism.

Compensation

Adeeb has dismissed opposition fears of an imminent sovereign debt crisis if forced to pay GMR’s initial claim of US$ 1.4 billion, repeatedly stating the government has the capacity to pay compensation.

“God willing, our airport will be developed. Our economy will grow with the special economic zone bill, and our government will become rich, we will overcome our budget deficit and god willing we will be able to pay any amount we have to,” he said.

Adeeb also said the arbitration tribunal had ruled out the US$1.4 billion claim as a large percentage of the claim is business opportunity losses.

The exact amount of compensation is to be set in a second phase of arbitration and will factor in concession fees and the amount GMR invested in INIA.

President Abdulla Yameen has previously predicted compensation to be approximately US$300 million, while former Attorney General Azima Shakoor in 2012 said the figure may be as high as US$700 million.

The World Bank in December said GMR’s compensation will place severe pressure on the country’s already “critically low” reserves.

As of April 2014, the Maldives’ gross foreign reserve stood at US$434.8 million, while total outstanding debt at the end of 2013 stood at US$793.6 million dollars.

GMR or tourism?

The concession agreement was “lopsided,” “biased” and negatively affected airline operations in the Maldives, Adeeb said.

“[I]t was either tourism or GMR contract. Only one of them would survive in the Maldives. Airlines were complaining, some airlines were moving out – as you know, for big airlines like Qatar, it is no big deal for them to stop operations here. For them, this is a very small market. If airlines stop operations, a country’s tourism will go bankrupt. We have seen the decline to tourism in Seychelles and Mauritius. We had to take action,” he said.

“IATA research shows seat capacity from Europe decreased from 2010 – 2012, and it was not affordable for charter airlines to fly to the Maldives. They were increasing fuel prices, by week, by month, for big scheduled airlines, without considering world prices, because they had a monopoly. Due to the agreement, there was nothing the government could do,” he added.

However, a 2013 Auditor General report presented a “mixed picture”, stating only Sri Lankan airlines definitively ceased refueling due to increased price of fuel.

Adeeb said he believed airport infrastructure are tourism investments, and pledged to integrate tourism and regional airport development.

“We want responsible investors, not just investors,” he said, adding that the government will sue former government officials who have caused losses to the government through lopsided business contracts.

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India should assist Maldivian people in changing the government, says Nasheed

Assistance in changing the government is the biggest relief the Indian government could offer the Maldives regarding compensation owed to GMR for the premature termination of its airport deal, former President Mohamed Nasheed has said.

Speaking at a rally at the reopened Maldivian Democratic Party (MDP) haruge (meeting hall) last night, the main opposition party’s acting president said he had learned that GMR would inform the Indian government of the situation.

“In my view, that relief is for that [Indian] government to work together with us, the Maldivian people, to change the government of the Maldives,” Nasheed said.

After 18 months of arbitration proceedings, a Singapore tribunal ruled last week that the concession agreement signed by the MDP government with the GMR-led consortium in June 2010 to manage and develop the Ibrahim Nasir International Airport (INIA) was “valid and binding.”

Former Attorney General Azima Shukoor – incumbent at the time of the termination – has this week maintained that the agreement was invalid under Maldivian law.

Nasheed yesterday contended that parties in the ruling coalition had fanned anti-Indian sentiment and incited anger among the public towards the country in their efforts to topple the MDP government, which he claimed were orchestrated by former President Maumoon Abdul Gayoom.

He also referred to anti-Indian rhetoric by senior officials of the current administration in the weeks leading up to the eviction of GMR in December 2012.

Former President Gayoom exploited nationalism and Islam – which are “accorded the highest place in the hearts of the Maldivian people” – to mislead the public with “lies”, Nasheed argued.

The MDP has also announced its intention to sue former President Dr Mohamed Waheed for defamation and damages caused by his administration’s unilateral termination of the concession agreement.

Sovereign debt crisis

The Singapore tribunal concluded that the Maldivian government and the Maldives Airports Company Ltd (MACL) were “jointly and severally liable in damages to GMIAL for loss caused by wrongful repudiation of the agreement as per the concession agreement.”

The Bangalore-based company is seeking US$1.4 billion in compensation for “wrongful termination” of the contract – an amount that eclipses the Maldives’ annual state budget.

The compensation owed is due to be determined in the second phase of the arbitration process.

In the wake of the arbitration decision, Attorney General Mohamed Anil said that current administration would honour the verdict and expressed confidence that the government would not have to pay the US$1.4 billion sought by GMR.

“According to the agreement, [we] mostly have to compensate for the investments made. We said we do not have to pay the amount GMR has claimed,” Anil told reporters on Thursday (June 19).

President Yameen had predicted in April that GMR would only be owed US$300 million in compensation.

Nasheed, however, predicted last night that the compensation figure would not be “lower than US$800 million”, a fee which would plunge the Maldives into a sovereign debt crisis as the foreign currency reserves are currently below US$100 million.

Warning of an impending economic crisis, Nasheed called on the public to awake from its “slumber” and “consider what is happening to our country”.

Nasheed also accused former Attorney General Azima Shukoor – who had advised cancellation of the contract on the grounds that it was void ab initio (invalid from the outset) – of attempting to mislead the public concerning the arbitration ruling.

Shukoor has told newspaper Haveeru that the contract was illegal under Maldivian law.

“Even if the agreement is legit under Common Law, it does not necessarily concur that the agreement had also been made according to Maldivian laws.

“Nobody sitting as AG in Maldives can still pronounce the deal to have been done as per the Public Finance Act. No one can. That’s why I spoke against it even then,” she was quoted as saying.

She further argued that the termination of the agreement was justified as the domestic economy would have suffered “unimaginable losses”.

Nasheed however questioned the “literacy” of ministers in the “coup government,” noting that a legal process for terminating the contract through arbitration was laid down in the concession agreement.

Public-private partnership

Nasheed also defended the initial awarding of the contract – in a bidding process overseen by the World Bank’s International Finance Corporation (IFC).

As public debt was over 60 percent of GDP when the MDP government took office in November 2008, Nasheed said his administration believed loans should only be obtained for capital investments and infrastructure projects.

The government decided to privatise the airport in a public-private partnership as loans could be put to better use to “upgrade hospitals, improve schools and build water and sewerage systems,” he explained.

Referring to the Anti-Corruption Commission (ACC) ruling out corruption in the airport privatisation deal, Nasheed noted that the commission had concluded that the government would have received US$534 million from the consortium during the 25-year lease period.

Conversely, MACL would have made a profit of about US$254 million in the same period if the airport was operated by the government-owned company.

While MACL paid on average MVR96 million (US$6.2 million) a year to the government from 2005 to 2010, Nasheed noted that GMR paid MVR872 million (US$56.5 million) in 2011 as concession fees.

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MDP to sue former President Waheed for defamation, damages over GMR airport deal cancellation

The Maldivian Democratic Party (MDP) is preparing to sue former President Dr Mohamed Waheed for defamation and damages over his administration’s unilateral termination of the GMR airport development deal.

The main opposition party announced in a press statement on Thursday (June 19), following a Singapore arbitration tribunal ruling that the agreement was “valid and binding”, that it would pursue legal action against the former president and other responsible parties in both Maldivian and international courts.

“Dr Mohamed Waheed Hassan Manik and his coup partners had spread falsehoods concerning the GMR agreement, incited hostility and antagonism towards the MDP among the public, and attempted to defame this party,” the press statement read.

“And [they] plunged the nation into serious strife and discord, paved for the way for a coup, and toppled the first democratically elected government of the Maldives in a coup d’etat.”

The party contended that Dr Waheed’s administration was responsible for the compensation the Maldivian government would likely have to pay GMR – which would be “a financial burden the country cannot bear” – as well as loss of investor confidence, soured bilateral relations, and the damage to the Maldives’ international reputation.

The concession agreement signed with the GMR-led consortium in July 2010 to Ibrahim Nasir International Airport was beneficial to the Maldives, the statement continued, and its abrupt termination was unlawful.

“Void ab initio”

In November 2012, following a campaign spearheaded by Adhaalath Party President Sheikh Imran Abdulla calling for the nationalisation of the airport, Dr Waheed’s cabinet declared the concession agreement void ab initio – invalid from the outset – and gave the consortium a seven-day ultimatum to hand over the airport.

On December 7, the government took over the airport and evicted GMR, prompting the Indian infrastructure giant to seek US$1.4 billion in compensation for “wrongful termination” of the contract – an amount that eclipses the country’s annual state budget.

In a letter sent to the Bombay Stock Exchange last week, GMR explained that the arbitration tribunal concluded the Maldivian government and the Maldives Airports Company Ltd (MACL) were “jointly and severally liable in damages to GMIAL for loss caused by wrongful repudiation of the agreement as per the concession agreement.”

The determination of liability – the first of two phases of arbitration – will now be followed by the determining of compensation owed.

In the wake of the arbitration decision, Attorney General Mohamed Anil said that President Abdulla Yameen’s administration would honour the verdict while expressing confidence that the government would not have to pay the US$1.4 billion sought by GMR.

“According to the agreement, [we] mostly have to compensate for the investments made. We said we do not have to pay the amount GMR has claimed. We always said we will have to pay compensation, and that this compensation has to come through the agreement,” Anil told reporters on Thursday.

President Yameen had predicted in April that GMR would only be owed US$300 million in compensation.

False pretext

Meanwhile, addressing supporters in Malé at an MDP maahefun (traditional celebratory feast ahead of Ramadan) Thursday night, former President Mohamed Nasheed argued that opposition parties misled the public to topple the MDP government in February 2012 with false allegations.

Opposition parties at the time had claimed that privatising the international airport posed a threat to Maldivian independence and sovereignty as well as Islam, Nasheed recalled.

The concession agreement with the GMR-led consortium was characterised as detrimental to the Maldives, he added, which was used as the pretext for the “coup” on February 7.

“Today it is becoming clear to us that the agreement was valid, and that it was terminated in violation of legal principles as well as international norms, in a way that causes serious damage to the Maldivian people,” Nasheed suggested.

Referring to AG Anil’s insistence that the compensation figure would not be too high, Nasheed accused President Yameen’s administration of continuing to mislead the public.

Nasheed stressed that the amount owed to GMR as compensation was not yet clear, noting however that the arbitration tribunal has ordered the government to pay US$4 million to the company to cover its legal expenses.

“The question we are asking now is, who will be paying those dollars? The dollars will be paid from our pockets. Legal action must be taken against those responsible for us having to pay these dollars,” he insisted.

“We have to seek compensation for the damage caused to our government. We know, we can see, that President Yameen’s government will not last. We know that President Yameen’s government does not have the support of the people. They cannot rule over all of the people in this country with the support of just 25 percent of the public.”

Changing the current government was “a duty and an obligation” for the MDP, the former president said, advising supporters not to despair.

“God willing, our courage will not flag. We will not be afraid and we will not back down either,” he said.

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Settling disputes – The Weekly Review

June 14th – 20th

The government’s legal and political tussles grabbed headlines this week, with past, present, and future disputes all making the news.

This week’s biggest story came courtesy of spurned Indian infrastructure giant GMR, who revealed a Singapore arbitration court had deemed their terminated airport development deal “valid and binding”.

Being requested to pay US$4 million in procedural costs while the court determines the amount owed to GMR, the government interpreted the outcome as a success, predicting that the damages owed would be far less than the US$1.4 billion sought.

After the issue of a warrant to enforce the appearance of Home Minister Umar Naseer at his disobedience to order trial, the minister appeared at the Criminal Court of his own volition upon his return from his official trip to Europe.

Naseer promptly refused to cooperate with the trial until his procedural objection – already rejected by the judge – had been appealed.

The government’s disputes in the political arena also continued this week, with ejected coalition partner, the Jumhooree Party (JP), striking a conciliatory tone after the recent break-up.

The JP maintained that the coalition agreement had not been breached, while the party continued to haemorrhage members to its former ally the Progressive Party of Maldives – the economic development minister and two more MPs being the latest to switch allegiance.

The Progressive Coalition’s fast-growing majority in the Majlis resulted in what the Maldivian Democratic Party (MDP) interpreted as excessive representation in the Majlis’ standing committees, leading to the cancellation of sittings and threat of street action.

While taking pains to distance his party from such maneouvres, MDP leader Mohamed Nasheed suggested President Abdulla Yameen’s fate would likely be the same as his – predicting his eventual removal in a future coup.

Brigadier General Ahmed Nilam this week submitted a case to the Human Rights Commision, suggesting his suspension and subsequent dismissal were linked to the events of Nasheed’s chaotic departure from office in February 2012.

The second UNDP Human Development Index report raised questions as to how equitably economic growth was being distributed, with research revealing glaring disparities opening up between progress in the capital and the atolls.

Phase two of expansion of Malé’s suburbs continued regardless, with a US$50 million dredging contract awarded to a Belgian company for phase two of the Hulhumalé expansion project.

Despite expressing continued reservations about the Maldives’ public account imbalances, the World Bank this week anticipated continued development of the economy with 4.5 percent GDP growth predicted.

Meanwhile, Hope for Women this week predicted unwelcome growth in the workload of female civil servants during Ramadan after the alteration of working hours for the month of fasting.

The World Cup in Brazil – for which the government has already allowed extended trading hours – was suggested as a possible reason for the adjusted working times, though the President’s Office maintained that the change was intended to facilitate late night prayers.

This week also saw the Islamic Ministry hold a closed conference with scholars to discuss reports of Maldivian jihadis journeying to Syria, while Foreign Minister Dunya Maumoon called on the Umma to assess the persistent association with terrorism and intolerance.

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Government will honor arbitration verdict, says attorney general

President Abdulla Yameen’s administration will honor a Singaporean tribunal’s ruling on compensation owed to Indian infrastructure GMR for the terminated airport development deal in order to uphold investor confidence, Attorney General Mohamed Anil said.

The Rt Hon Lord Hoffman’s Tribunal on Wednesday found the contract termination to be wrongful and ordered the Maldives government and Maldives Airports Company Pvt Ltd (MACL) to compensate GMR for losses.

The exact figure is to be set in the next phase of arbitration.

Speaking to reporters this morning, Anil said he is certain the figure will not amount to GMR’s initial claim of US$ 1.4 billion – the figure eclipses the country’s annual budget.

“According to the agreement, [we] mostly have to compensate for the investments made. We said we do not have to pay the amount GMR has claimed. We always said we will have to pay compensation, and that this compensation has to come through the agreement,” explained the AG.

“That is why the compensation amount has been limited. This amount will not go up to the US$1.4 billion GMR is claiming,” Anil said.

He called the limitation of damages a success for the government of Maldives.

In April, Yameen predicted GMR would only be owed US$300 million in compensation.

Minivan News understands the concession agreement allows MACL to terminate the agreement for reasons of public interest and imposes a cap on losses.

A lawyer familiar with the case said the government must thank the Maldivian Democratic Party (MDP) – under which the GMR won the concession – for its foresight in inserting the clause.

The lawyer further said that the government had chosen to terminate the agreement “in the worst possible way” despite the existence of provisions for lawful termination.

“And in the process, it affected foreign investor confidence in the Maldives, the country’s reputation and it strained our relationship with India,” he added.

GMR won the 25-year concession agreement to develop and manage Ibrahim Nasir International Airport under former President Mohamed Nasheed. The US$ 511 million deal was the country’s single largest foreign investment.

The opposition at the time attacked the deal as part of a vitriolic anti- government campaign, which eventually led to Nasheed’s ouster in February 2012.

In December 2012, new President Dr Mohamed Waheed declared the agreement void ab intio – or invalid from the outset – and gave GMR seven days to leave.

The agreement’s abrupt termination saw cooling of relations with neighbor India and questions regarding foreign investor confidence in the Maldives – issues Yameen has sought to address since his election in November.

The World Bank in December said GMR compensation will place severe pressure on the country’s already “critically low” foreign reserves.

As of April 2014, the Maldives’ gross foreign reserve stood at US$ 434.8 million. Meanwhile, the total outstanding external debt at the end of 2013 stood at US$ 793.6 million dollars. Debt amounts to 34.6 percent of the country’s GDP.

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GMR wins arbitration case, tribunal deems airport deal was “valid and binding”

Additional reporting by Zaheena Rasheed

Indian infrastructure giant GMR has won its arbitration case against the Government of Maldives (GoM) for the premature termination of its airport development agreement in 2012.

In a letter sent to the Bombay Stock Exchange, the company explained that the tribunal has said the 18 month tribunal found the agreement to have been “valid and binding”.

“GoM and MACL [Maldives Airports Company Ltd] are joint and severally liable in damages to GMIAL for loss caused by wrongful repudiation of the agreement as per the concession agreement,” read today’s letter.

“It has always been our firm belief that the cancellation of our  concession agreement amounted to wrongful repudiation by the Government of Maldives and the Tribunal has upheld this standard,” wrote GMR Company Secretary C.P. Sounderarajan.

The determining of liability – the first of two phases of arbitration – will now be followed by the determining of compensation owed, with the Indian company seeking US$1.4billion – a figure which exceeds the Maldives annual budget.

Current Attorney General Mohamed Anil has recently expressed his belief that the government was liable only for GMR’s initial outlay of US$78million, plus any costs for construction work completed after the 2010 deal was agreed.

The President’s Office has said that the attorney general will provide a briefing on the case later today.

With the compensation fee yet to be decided, the impact of the tribunal’s decision is still unclear, although the World Bank has previously noted that it would place severe pressure on the country’s already “critically low” foreign reserves.

Hamid Abdul Ghafoor, spokesman for the opposition Maldivian Democratic Party  – under whose tenure the deal was brokered has described the decision as a “major breakthrough”.

Void ab initio?

As well as ordering the Maldives to pay GMR’s Malé International Airport Limited (GMIAL), US$4 million within 42 days for cost of proceedings, GMR have revealed further details of the award.

According to GMR the private arbitration proceedings – disclosed in line with its regulatory requirements – deemed the deal “not void for any mistake of law or discharged by frustration”.

The decision to cancel the deal was made in November 2012 by the administration of President Dr Mohamed Waheed, with then Attorney General Azima Shukoor declaring the deal void ab initio – meaning that the contract was invalid from the outset.

Shukoor further cited English contract law of ‘frustration’, 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.

GMR have today revealed the tribunal’s finding that the collection of Airport Development Charge and Insurance Surcharge – contentious points preceding the contracts termination – to have been lawful under Maldivian law.

The US$511 million agreement to develop Ibrahim Nasir International Airport (INIA) – signed during the tenure of former President Mohamed Nasheed – represented the largest foreign direct investment in the Maldives history.

Legal and political wrangling regarding the deal began before GMR had even assumed management of the airport, however, with the then opposition attacking the deal as part of an increasingly fervent anti-government movement which would eventually lead to the controversial resignation of Nasheed in February 2012.

Concession and compensation

The previous December a case filed in the Civil Court  by opposition parties ruled that the Airport Development Charge – key to the agreement’s financial viability – was deemed illegal.

Following the ruling, the Nasheed government reached an agreement with GMR to deduct the lost revenue – anticipated to have been US$25 million per year –  from concession payments owed to the government.

This decision resulted in further tensions after the fall of the Nasheed government, with GMR contract’s detractors – now in office –receiving a series of bills as the lost ADC revenue eclipsed any concession payments owed.

The ADC matter was subsequently referred to the Singapore arbitration court – as agreed in the initial concession agreement – while senior figures in the government pleaded with Indian PM Manmohan Singh to cancel the agreement, citing growing anti-Indian sentiment in the country.

In today’s letter, GMR revealed that the tribunal had ruled both the charge, and the subsequent adjustment was also “lawful and binding on MACL and GoM”.

The termination of the contract was accompanied by a cooling of relations with neighbour India as well as questions regarding foreign investor confidence in the Maldives – both issues that incumbent President Abdulla Yameen has sought to address since his election in November.

Future investment

Yameen – whose Progressive Party of Maldives has distanced itself from termination of the GMR deal, despite being the largest party in the coalition government at the time –  has pledged to create an environment conducive to further foreign investment.

As well as introducing plans for special economic zones within the country, Yameen’s government has embarked on a drive for foreign investors – suggesting that even GMR would be welcomed back to work on new projects.

“We are going to open up the Maldives in a huge way to foreign investors. Our thirst cannot be quenched. The opportunity to foreign investors is going to be enormous,” said the president in April.

Projects outlined at a landmark Singapore Investment Forum included the further development of Malé International Airport, though Yameen has said that overall management would remain in Maldivian hands due to its national commercial and security importance.

New plans for redevelopment of the airport will include foreign investors – an issue that continues to cause controversy – under the management of the state-owned MACL.

MDP Spokesman Hamid today suggested that the tribunal’s decision would deter further investment and foreign financing in the Maldives and – depending on the compensation amount – could result in the state’s bankruptcy.

Hamid reiterated his party’s recent calls for GMR’s reinstatement, stating the the MDP would be considering further legal action following the tribunal’s decision.

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MATATO expresses concern over airport outsourcing deal

The Maldives Association of Travel and Tourism Operators (MATATO) has expressed concern regarding rumours that a private Jet terminal and aeronautical services facilities at Malé International Airport will be outsourced exclusively to a foreign company.

“MATATO is very concerned that this will create an unhealthy market structure and put many local companies at risk,” read the statement.

Minivan News has learned that the cabinet’s economic council is currently discussing a deal with billionaire Thai businessman William Heinecke.

American-born Heinecke’s Minor International hospitality chain is reported by Forbes to consist of 1,500 restaurants, 100 hotels, and 250 retail outlets spanning 18 countries – including the Maldives’ Anantara resorts.

MATATO, which represents more than 50 local businesses, revealed that it had been approached by a number of concerned members whom it believed would suffer as a result of such a deal.

“Presently there are many local businesses that act as supervision agents, and ground handlers for the considerable corporate and private jets that visit Maldives year round. Many of these local companies depend solely on the income generated from this business,” read the statement.

The association requested that all stakeholders begin a dialogue that might consider alternative arrangements to an exclusivity deal which it suggests lacks market competition, leading to poor services and “consumer exploitation”.

“The absence of competitive pricing that benefits the consumer, allows companies with exclusivity rights to charge higher prices for services, and inconvenience buyers.”

Following the purchase of both the Maldives’ seaplane operators by US private equity group Blackstone last year, hospitality groups revealed a subsequent raising of prices and reduction of services, reporting a potentially negative impact on industry profitability.

MATATO today argued that the airport deal would “only lead to unnecessary outflow of foreign exchange, loss of job opportunities for locals, a significant amount of control of the local market to foreign bodies, among many other negative factors.”

Alternatives suggested by MATATO was for the current management of the airport – the state-owned Maldives Airports Company Ltd (MACL)  – to retain control and upgrade the facilities itself.

MACL took over management of Ibrahim Nasir International Airport (INIA) following the premature termination of the Indian company GMR’s 25-year concession agreement by the previous government.

Shortly after winning the presidency last year, President Abdulla Yameen pledged to redevelop the airport with new foreign investment, while the government would retain the overall management of the airport.

The expansion of INIA – to accommodate five million passengers per year – subsequently featured among the ‘mega-projects’ presented to international investors during a landmark investment forum held in Singapore in April.

Shortly after the Singapore forum, the Maldivian Democratic Party – in power when the original GMR deal was signed – called for GMR’s reinstatement, vowing to annul any new airport contracts should it return to the power.

GMR’s US$1.4 billion arbitration claim was also concluded in Singapore in April, though the court has yet to announce a verdict.

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