Tag: GMR

Comment: Eight reasons why MACL’s share sale either doesn’t make sense, or is a giant scam

Mohamed Waheed’s government has been eyeing Ibrahim Nasir International Airport (INIA) just like a hawk circles around its prey before going for the kill.

Ever since MACL took over the airport from GMR, Waheed has been coming up with one scheme after the other to somehow move assets and ownership of INIA. Whenever such changes in ownership of valuable assets occur, a number of people invariably end up making a lot of money during the process.

First, he changed the MACL board and filled it with his political cronies in order to gain total control over the goings-on at INIA. Then, he tried to move all the assets of MACL into another company created through a secret Presidential decree so that it became a shell company, with all the value pulled into the new company.

This failed due to a number of legal issues. But now Waheed has now decided to sell shares in MACL to ‘Maldivian individuals and companies’ directly.

I will count eight reasons why I believe this proposed sale of MACL shares to ‘Maldivian companies and Maldivian individuals’ makes no sense and may potentially be a big scam-in-the-making.

1. Maintaining economic sovereignty or undermining it?

One reason Waheed’s spokesperson gave for this action was to “prevent foreigners from owning the airport in the future and protect the sovereignty of the airport”.

Essentially, rather than keeping control of MACL’s shares with it and hence ensuring the stated objective, it wants to sell these shares to third parties who can then go ahead and sell their holdings to foreigners. You can see the irony in the very argument that Waheed government is making for selling shares in MACL and wants us to lap up. Clearly, they believe that an average Maldivian on the street is silly and will happily agree to anything thrown his way as long as its wrapped with terms like ‘foreigner’, ‘sovereignty’ or ‘enslavement’.

On the contrary, by selling shares to Maldivian individuals and companies Waheed’s government is in fact opening doors for foreigners to actually go ahead and own INIA in the future.

Currently, the secondary financial markets in the Maldives are practically non-existent and it is easy for shares to change hands in off-market transactions. The regulatory framework for share sale & purchase is rudimentary and fails to ensure that equity shares of a company are not effectively transferred to a foreign entity. In fact, Waheed hailed the sale of two sea plane operators to American investment firm Blackstone as a shining example of how he has been able to bring investments into the Maldives. However, these transactions were an equity share sale of two businesses that are at the centre of Maldivian tourism, to foreign companies.

As a result of this share sale, significant control over Maldivian air space as well as businesses that are central to the health of Maldives tourism was given to an American investor. We have already heard of the problems most resorts are facing with the two sea plane operators and how they are being arm-twisted into signing long term agreements on unfavourable terms.

What will stop a foreign investor like Blackstone buying equity shares in MACL from a bunch of individual or large investors, and ultimately becoming the owner of INIA? In reality, it is this proposed sale of shares in MACL that is the start of potential ‘economic enslavement’ rather than a measure to stop the same in the future!

2. An economic necessity?

One argument that could have possibly been put forward by more aware and informed politicians would have been that this share sale is intended to plug the huge gap in the country’s financial position.

All of us know very well about the grave financial situation that the country and the government is in right now. After exhausting all of the recurrent expenditure budget for the year in the first four months, Waheed’s government has been relying on rolling over T-bills to finance its day-to-day expenses. However, it has already ruled out a supplementary budget for finance these expenditures and stated that it would continue to roll-over these T-bills in the short term. In this context, such a significant decision on divestment of state asset to private individuals is clearly neither a part of the government’s strategy to finance its projects and daily expenditures, nor an economic necessity in the current context.

3. All in the course of seven days

When Nasheed’s government privatised the airport, it put up the airport through an international bidding process managed by the World Bank’s International Finance Corporation (IFC). Work on the privatisation started in July 2009 and finished through announcement of the winning bidder in June 2010. Hence, it took 11 months for the previous government to complete a financial transaction related to the airport.

There were many allegations of corruption around the way the process was managed, which were later ridiculed by the Anti-Corruption Commission (ACC). Now, we have a situation where those who alleged financial irregularities in an 11-month long international bid process are looking to sell shares in the same company over the course of one week!

Even if one were to not compare this plan of share sale to local companies and individuals with the previous bidding process, a share sale like this typically takes more than a year for most companies to complete. Planning and execution of a public offering in most cases is a 6 to 12 month process at the minimum in most countries with well-developed regulations and mature financial markets.

However, here we have a case where an outgoing government wants to complete a public sale of shares of the most valuable national asset in a week. Quite clearly, there is much more to this share sale than meets the eye, which is why it may be important to finish the whole process in the blink of an eye.

4. Eerie silence on the valuation of shares or lack of it

Waheed’s government has given no indication at all of the proposed valuation of MACL and the price at which it is planning to sell the shares. Fair valuation of a share is a matter of opinion and a matter of sound professional judgement of bankers who typically assist with share sales. There are no investment banks in the Maldives who could assist with the sale of shares and no research houses which could come out with an investment report for the public to determine whether the determined price of MACL shares is fair value or not. If a share sale has to be conducted, such experts would typically have to be brought in from other countries such as India, Singapore and Malaysia which have developed financial markets.

GMR made a claim of US$1.4 billion for the loss of profits that it would have earned in the next 10 years, which it couldn’t due to the alleged illegal termination of its contract by Waheed government. Equity shares in MACL would entitle one to profits from INIA for the course of eternity. Hence, what we are looking at is a multi-billion dollar financial transaction – 40 percent of this is also going to represent hundreds of millions of dollars, if not billions.

In this context, the fact that no one in the government has made any statement about engaging an international bank or an expert to help determine the fair value of MACL shares is a clear giveaway. There has been no attempt to find out what would be the fair value of MACL shares, and the intention is to sell these to Maldivian companies and individuals in the matter of a week. One can only deduce from all this that the price (likely to be peanuts) and the buyers of MACL shares have already been decided, and what is proposed to be undertaken over the course of next is a likely to be big sham.

5. Waheed’s moral and constitutional authority to make this decision

Waheed’s term is coming to an end on  November 11 and as this column goes to press, efforts are still ongoing to ensure that a new President is put in power by then. Clearly, this is a significant economic policy decision which must be taken by the new President in line with his announced economic policy, based on which he would have been voted into power. Waheed was never voted into power and his manifesto was given a big thumbs-down in the first round election where he received only 5.13 percent of the votes. Clearly, he doesn’t have the moral authority to make such a significant economic policy decision one month before he is scheduled to hand over power to his successor.

As far as constitutional authority is concerned, your guess is as good as mine. With much larger constitutional questions open for debate today, I wouldn’t dare comment on this but I would certainly be surprised if it allows an outgoing President to make such significant economic decisions that have long term economic impact on the state of the nation.

6. A thick cloud of secrecy

What is most important is to understand whether he plans to bypass the Majlis for undertaking this transaction. It was Waheed and his current and former allies who raised their voices against how the GMR concession was awarded without Majlis approval. In fact, this is the legal reason that Azima Shakoor cited as the basis for declaring the GMR contract void ab-initio.

Now that the Waheed government wants to go ahead with share sale in MACL, has he sought or planned to seek Majlis approval for this? He doesn’t have majority in the Majlis now since DRP and MDP have joined hands and this proposal is likely to be shot down given the lack of any ground work as well as his own unpopularity with majority of the Majlis.

Leaving aside Majlis approval, it is not even clear if the majority of the MACL board has passed a resolution authorising any such sale or shares. There are only two statements made by members of the government till now in this regard – by Finance Minister Abdulla Jihad confirming that “40 percent of the shares will be sold to Maldivian public and Maldivian companies as soon as possible” and by the President’s Office confirming the intent of this sale in the next seven days.

MACL CEO Bandhu Saleem has deflected all questions to the Minister of Finance, who has in turn deflected all the detail related questions to the Attorney General. The Attorney General has not spoken on this in public till date, let alone answered any questions in this regard.

7. An ill-timed transaction that suits vested interests

The Maldives is burning today – literally so with Monday morning’s arson attack on the pro-opposition media house Raajje TV. Protests are taking place every day and every night on the streets of Male’ calling for elections as scheduled and for restoration of the basic constitutional right to vote. Credibility of the Supreme Court and other state institutions is under the scanner and the country is almost in a state of constitutional void.

Whichever way one looks, the political environment couldn’t have been more ill-suited for carrying out one of the most significant multi-million dollar economic transaction, of a public asset, in the history of the Maldives.

However, this is also the reason why it is the most suited for a malafide transaction since the national agenda is dominated by fears for the future of democracy. This provides the perfect opportunity for undertaking the most outrageous looting of a national asset and sweeping it under the carpet. Public memory is too short to remember this for long and too preoccupied right now to notice anything else.

8. More of the same game that has been played a few times over the last one and a half years

During Waheed’s tenure over the last 1.5 years, his Transport Minister signed a 99-year lease extension for Mamigili Airport in favour of his political boss Gasim Ibrahim. On the face of it, the minister was fired but the decision was never reversed. The loss that this ad-hoc extension may have caused to the exchequer was never quantified and never spoken about in public.

Under Waheed’s tenure, KASA Holdings owned by ‘Champa’ Afeef bought 30 percent of Addu International Airport for ~US$4 million, thereby valuing Gan Airport at close to US$13 million. This was a private transaction of a public asset and was done under utmost secrecy with news of the sale  given only afterwards in a press briefing by STO’s Managing Director Shahid Ali. There was no justification, no clarification and no questions asked or answered with respect to this private sale of a public asset. It is not even known till date whether the company was even valued higher than the scrap value of its assets.

A very rushed-up transaction, no discussion or record of economic merit, bypassing the Majlis and an eerie silence about the transaction until it is completed have all been fundamental to the modus-operandi till date.

Clearly, this sale of shares in MACL is more of the same game that has been played again and again under Waheed government.

Summing up, this is about to be the biggest looting ever done in the Maldives and it is happening right now in front our very own eyes, orchestrated by a man  none of us ever elected and 95 percent have rejected less than a month ago.

All comment pieces are the sole view of the author and do not reflect the editorial policy of Minivan News. If you would like to write an opinion piece, please send proposals to [email protected]

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Government targets public share sale in airport operator MACL over next seven days

The government has announced its intention to begin publicly selling shares in the state-owned Maldives Airports Company Limited (MACL) – the current operator of Ibrahim Nasir International Airport (INIA).

Although the country’s Finance Ministry today told Minivan News that no timeline had been finalised for the sale owing to “legal process”, the President’s Office confirmed the state had planned to begin offering shares to the public within the next seven days.

India-based newspaper ‘The Hindu’ has meanwhile quoted an unnamed government source as claiming the administration of President Dr Mohamed Waheed was expected to hold most of the shares in the state-owned company on the back of such a sale.

The share sale has been announced despite arbitration hearings pending in Singapore into a US$1.4 billion compensation claim filed by India-based GMR, after a 25 year agreement to develop and manage a new terminal at INIA was declared void by the current government in November 2012.

The government maintains the decision to terminate the World Bank-approved GMR tender was made over allegations of corruption, claims ultimately rejected by the country’s Anti-Corruption Commission (ACC) this year.

President Waheed’s administration last November gave the foreign investors seven days to hand over the unfinished airport to the government-owned Maldives Airports Company Limited (MACL), which later sought to transfer the assets to a newly-created, state-owned entity called Male’ International Airport Limited (MIAL).

The government later abandoned its intentions towards such a transfer by June this year, on the basis that the “the termination of the contract between the government of Maldives and GMR [is] currently in the arbitration stage.”

With the transfer cancelled, Finance Minister Abdulla Jihad told Minivan News today that the cabinet had approved plans to sell shares in MACL to members of the public, although no date had yet been agreed to begin such a sale.

“There is a legal process we have to follow. We are working on the time frame,” he added.

Jihad request that all other questions over the legal implications of the share sale amidst ongoing arbitration should be directed to the office of Attorney General (AG) Azima Shukoor.

President’s Office Media Secretary Masood Imad said he too was aware the government was looking to sell shares over the “coming week”, but said any further queries should be forwarded AG Shukoor or other members of special committee charged with overseeing the airport’s development.

AG Shukoor and Deputy AG Ahmed Usham were not responding to calls from Minivan News at time of press.

Meanwhile, Maldives Airports Corporation Limited (MACL) CEO Ibrahim ‘Bandhu’ Saleem requested Minivan News contact the Ministry of Finance regarding all information on the MACL share sale.

Asset concerns

In May this year, a global body representing the world’s airports, issued a notice advising its members to exercise caution before making any investments relating to INIA, over concerns of the government’s intention of transferring MACL’s assets to MIAL.

In an email obtained by Minivan News dated May 8, Airports Council International (ACI) advised: “due diligence while considering any investment in the Maldives, considering the latest developments, uncertainty of outcome of elections, the legal and financial risks of the current arbitration and the nascent legal framework.”

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National Movement plans protests against Elections Commission

The youth wing of the self-titled ‘National Movement’ – comprised of several NGOs and the religious conservative Adhalaath Party (AP) – has called for protests against the Elections Commission (EC), alleging that the first round of the presidential election was rigged.

The group “harshly criticised” the EC, citing the “many irregularities” the Jumhooree Party (JP) has belaboured regarding the presidential election’s first round, according to local media accounts of Tuesday’s (September 17) press conference.

They also accused Parliament and independent institutions, such as the EC, of not providing enough support to address these alleged “irregularities”.

National Movement youth wing leader Sobah Rasheed accused authorities of rigging the presidential election’s first round, held on September 7, and declared the group’s intention to hold protests demanding reform of the EC and independent institutions in the Maldives.

“The Elections Commission must not hold the second round of the elections before the issues surrounding the first round of polls are properly addressed,” said Rasheed.

The ‘National Movement’ will “not go home until they receive answers” and will protest until “the outcome desired by the people is reached”, he vowed.

The ‘National Movement’ declared they are working to hold the people responsible for the polling “irregularities” accountable.

“The Maldives has long had a culture of [people] not having the courage to voice out the truths about vote rigging,” the group declared.

JP Event Coordinator and National Movement youth wing member Ahmed Ghaalib also spoke during the ‘National Movement’ youth wing press conference, and stressed that taking the initiative to protest was not directed by a political party – but all political parties are welcome to participate.

“The National Movement’s youth wing will be leading the entire movement’s protests,” Ghaalib told Minivan News yesterday.

He explained that the group had planned to start protesting Tuesday night, but decided to delay after the High Court issued its ruling.

“We are waiting on the Supreme Court ruling – until the court says [the EC is] right or wrong. We will fully respect and obey court rulings,” said Ghaalib.

“We are not going to disturb, just raise our voices and share some information with the international media,” he added.

Ghaalib explained the main point of the protests is to highlight the EC’s “many flaws to help them improve”.

“We are working to build trust between the people and the [Elections] commission, not destroy them,” he said.

Ghaalib clarified that the entire EC is not the issue, but rather three individual commission members, the Chair Fuwad Thowfeek, Vice Chair Ahmed Fayaz, and Member Ali Mohamed Manik, who he personally believes have Maldivian Democratic Party (MDP) affiliations.

He believes protests alone will not build trust between the EC and Maldivian citizens, however National Movement members “raising their voices” will.

“Regarding the GMR issue, we worked very hard to do those things,” said Ghaalib. “This time everybody has decided to come out and raise their voices, we are ready to reform the Elections Commission.”

“The JP is not affiliated with the ‘National Movement’, however Ghaalib himself can go to whatever he likes in a personal capacity,” JP Spokesperson Moosa Rameez told Minivan News yesterday (September 18).

The ‘National Movement’ was born out of the unofficial December 23 coalition of eight political parties – now part of the coalition government of President Dr Mohamed Waheed – and an alliance of NGOs that rallied at a mass gathering to “defend Islam” in late 2011. The rally was held to oppose the allegedly liberal policies and “secularisation agenda” of former President Mohamed Nasheed.

Following the controversial transfer of presidential power on February 7, the “civil alliance” led a campaign dubbed “Maldivians’ Airport to Maldivians” calling on the government to terminate the concession agreement with Indian infrastructure giant GMR to manage and modernise Ibrahim Nasir International Airport (INIA).

Elections Commission

The EC has raised concerns that there may not be a suitable environment for the presidential election’s second round should Villa TV (VTV) – owned by JP leader Gasim Ibrahim – continue to deliberately spread false information and incite people to rise up against the commission.

The media has continued to disseminate unsubstantiated information about the commission, and threats have been directed at the EC’s chair, his family, and the vice chair, as well as EC official Ibrahim ‘Ogaru’ Waheed in the week-and-a-half since the presidential election’s first round.

The EC has emphatically dismissed allegations of vote rigging as “baseless and unfounded”, highlighting its transparency, its ongoing complaints investigations, and the praise from a broad spectrum of election observers who noted peaceful voting and the preparedness of the EC.

“With [election] officials from different sources [working] in front of [election] observers, there was no way the type of fraud [JP is alleging] could be made,” EC Chair Fuwad Thowfeek recently told Minivan News.

“In front of all those people – as well as election monitors and observers – there is no way anyone can do any sort of mischief,” he continued.

“Polling station officials were not all from the EC. We hired various officers from public sector organisations, as well as young people looking for work,” he noted.

“Every ballot box had a combination of all types of individuals, selected at random, and a balance was kept between females and males, young and old,” he explained. “Many met for the first time during training or [polling station] duty. All the people belonging to [and responsible for] each ballot box were not trained together [as a group].”

Thowfeek also addressed the voter registry concerns raised by the JP – and previously raised by the PPM prior to elections.

“The voter’s list was published two weeks before voting and the lists were [also] sent to all ballot box locations in addition to EC officials, presidential candidate representatives, observers from each political party,” said Thowfeek. “Anyone who has this [list] will know that they will not be able to show a single person who voted under a false name.”

He explained that the EC obtained the voter registration lists from island council offices as well as the Male’ municipality office. This data was compiled and the lists cross-checked with the Department of National Registration to verify its accuracy.

Thowfeek also emphasised that many individuals are not aware or are misunderstanding the Male’ Dhaftharu – a special registry for people who are Male’ residents, but are from other islands – registration process.

“In the past people were placed on the Dhaftharu with the municipal council [listed as their residence], but this time they put the places where they live,” said Thowfeek.

“They are Maldivian citizens [from the islands] residing in Male’ but they don’t have a permanent residence – they have the right to vote,” he declared.

Last week, the EC also announced that eight deceased individuals the JP had claimed to be on the electoral register had been found to be living.

The commission has determined that the eight people did cast ballots and has met five of them, EC Vice Chair Ahmed Fayaz told local media. The commission has received information that the other three individuals are also alive, though the EC has not yet been able to meet them.

Department of National Registration

Meanwhile, the Department of National Registration (DNR) has dismissed the possibility of individuals voting with forged national identity cards.

DNR Director General Fareeda Yoosuf has insisted there was no chance forged ID’s could be used to vote.

Each individual identity card is unique and does not change even when renewed and, even in cases where lost IDs are replaced, the same identity number is used, Yoosuf noted.

No complaints of forged identity cards have been received by the DNR so far, she noted.

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Nasheed government sought to make Maldives an “economic slave”: Economic development minister

Economic Development Minister Ahmed Mohamed yesterday (September 16) accused former President Mohamed Nasheed of working to make the Maldives “an economic slave” to an unspecified foreign company.

Ahmed, a senior member of the Dhivehi Rayyithunge Party (DRP), which this week announced it would be backing Nasheed’s in a second round of voting for this year’s presidential election, was quoted in local media as being highly critical of the former head of state.

Although Economic Development Minister Ahmed did not reportedly name the foreign company accused of trying to enslave the nation.  However, the present government last year controversially scrapped a US$511 million contract signed under by Nasheed’s administration with India-based infrastructure group GMR to develop and manage an entirely new airport terminal.

The Maldives is presently facing a US$1.4 billion compensation claim from GMR for its decision to terminate the contract over allegations that the International Finance Corporation (IFC)-approved tender was open to corruption. The allegations were ultimately rejected by the country’s Anti-Corruption Commission (ACC).

However, Ahmed was reported in Sun Online as slamming Nasheed for alleged efforts to make the Maldives what he called an “economic slave” to a foreign business by taking loans with high interest rates and short repayment periods. The comments were made during a rally held by the Progressive Party of Maldives (PPM) and its election coalition partner the Maldives Development Alliance (MDA).

Despite the claims, the government earlier this month said it hoped to secure longer-term financing to plug a shortfall in annual revenue that has seen the number of 28-day Treasury Bills (T-bills) sold by the state almost double in July 2013, compared to the same period last year.

Finance Minister Abdulla Jihad told Minivan News at the time that the state’s increased reliance on short-term T-bills between July 2012 and July 2013 reflected the current difficulties faced by the government in trying to raise budgeted revenue during the period. He cited minimal interest from the private sector in providing finance as adding to these difficulties.

Jihad added that the current administration was also reliant on 28 day T-bills, which were being sold as a means to “roll over” debt one month at a time.

“We are trying to have banks get longer-term finance such as T-bills at present,” he said.

Economic Development Minister Ahmed also claimed yesterday the number of doctors had fallen by the time of his controversial resignation last year following a mutiny by sections of the police and military, while also criticising the former president’s record towards education.

“By the time Nasheed resigned, the value of Maldivian Rufiyaa had been decreased by 32 percent, which means that a commodity which earlier cost MVR 100 (US$6.5), cost MVR 132 (US$8.5) by the time he resigned,” he was quoted as saying.

According to Sun Online, the economic development minister also said that the aim of unspecified peoples was to “remove” Nasheed from office.

Ahmed Mohamed was not responding to calls from Minivan News or requests to clarify his comments at time of press.

The comments were made as PPM vice presidential candidate Dr Mohamed Jameel Ahmed last week declared that former President Nasheed “will not be allowed to assume power”, even should he emerge as the clear winner in the run-off.

Clarifying his remarks to Minivan News at the time, Dr Jameel stated that his comments during the rally reflected the “criminal charge filed against Nasheed” concerning his role in the detention of Criminal Court Chief Judge Abdulla Mohamed, who stands accused of corruption and halting investigations into his conduct through the courts.

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Maldives must address “deteriorated” tourist services to protect industry: Chamber of Commerce

The Maldives National Chamber of Commerce and Industry (MNCCI) has warned that the “deteriorated” and “outdated” amenities used to support the Maldives’ lucrative resort industry will negatively impact growth across the tourism sector, if left unaddressed.

MNCCI Vice President Ismail Asif told Minivan News that despite the “seven star” reputation of the country’s exclusive island resorts, the group was receiving growing complaints that the service, amenities and treatment afforded to guests by the country’s public and private sector threatened to significantly damage the destination’s reputation.

The comments were raised after several multinational hospitality groups alleged earlier this month that the sale of the Maldives’ two main seaplane operators to US-based private equity fund Blackstone in February was having a “significant” negative impact on the wider tourism industry as a result of the monopoly created.

MNCCI Vice President Asif told Minivan News that the chamber had not received any “particular concerns” related to the Blackstone deal, but had instead noted growing criticisms of standards of service from state and private institutions vital to the country’s resort industry.

“We have had e-mails from foreign investors and business people about the general service and standards at the country’s airport as well as the quality of transportation [available to tourists],” he said. “We are not able to distinguish [whether the complaints] are about seaplanes or speedboats.

Airport condition

Asif also identified the current condition of Ibarahim Nasir International Airport (INIA), a general lack of amenities, and the attitude of customs and immigration officials towards foreigners visiting the country as major concerns needing to be addressed by the wider industry.

Late last year, the present government controversially scrapped a US$511 million contract signed under the previous administration with India-based infrastructure group GMR to develop and manage an entirely new airport terminal.

The state is subsequently facing a US$1.4 billion compensation claim from GMR for its decision to terminate the contract over allegations of corruption, claims ultimately rejected by the country’s Anti-Corruption Commission (ACC).

The MNCCI has nonetheless maintained that the government’s decision to abruptly terminate the GMR contract did not hurt foreign investor confidence, with Asif claiming that the existing airport structure could be modified to improve service standards. With the eviction of GMR construction of the new terminal is stalled at 25 percent complete, according to the government’s own engineering assessment.

“Foreign businesses don’t want to get into politics here. In the meetings we have had there are two major concerns raised. Internationals want the Maldives to remain as it is. The feedback we get is they want the airport as it is, but with improved services,” he said. “This doesn’t mean a new five story building is needed. For instance free wifi is not [at the airport at present]. Certainly not at the standards visitors would expect.”

Criticisms had also been raised over the conduct of customs officials and regulations banning tourists from bringing alcohol into the country to consume on the country’s resorts, according to the MNCCI.  Asif claimed there was minimal information provided to visitors about restrictions on alcohol and pork products outside of resorts.

“Expensive wine is often confiscated from guests, who are not getting it back. I understand visitors must act within local laws, but it is also important to correctly inform them as well,” he said. “Often these are very expensive gifts given to people while they are travelling, and I don’t see why they cannot bring such items to their resort.”

“It’s not like tourists will bring large amounts of liquor with them. Often the value of the goods they are holding is high, but a customs person will have no idea of the goods or the culture. Their response is ‘liquor is prohibited here’,” he claimed, accusing police and other state authorities of favouring restrictive laws on tourists to reduce their own levels of responsibility.

Asif argued that all national bodies needed to take greater responsibility to ensure treatment of tourists matched the services being provided by the resort industry.

“If it is too much hassle for tourists to visit, people will not come here [on holiday] and will look to other destinations,” he said. “Tourism is is based around trying to make clients happy. We are concerned about this and the need to make things easier here.”

Stability concerns

The MNCCI has also stressed the need for political stability, the lack of which he had alleged has had a considerable impact on investor confidence and business development since the controversial transfer of power on February 7, 2012.

With a run-off vote scheduled for September 28 expected to decide whether former President Mohamed Nasheed or MP Abdulla Yameen will take office over the next five years, Asif said it was important to have an elected and head of state – no matter the candidate.

He argued that a Commonwealth-backed Commission of National Inquiry (CoNI) last year dismissed Nasheed’s allegations that he was removed from office in a “coup d’etat” had led to an increase of larger-scale investment – particularly with resorts.

However, with a number of properties remaining under construction, stability within the country’s domestic politics and court system was a huge problem needing to be addressed, he said.

Tourism Minister Ahmed Adheeb was not responding to calls at time of press in response to the MNCCI’s concerns.

Meanwhile, the government earlier this month said it hoped to secure longer-term financing to plug a shortfall in annual revenue that has seen the number of 28-day Treasury Bills (T-bills) sold by the state almost double in July 2013, compared to the same period last year.

Finance Minister Abdulla Jihad told Minivan News at the time that the state’s increased reliance on short-term T-bills between July 2012 and July 2013 reflected the current difficulties faced by the government in trying to raise budgeted revenue during the period.

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Presidential hopefuls differ on GMR: The Hindu

“Both the hopefuls in the Presidential race in Maldives said that they would welcome and encourage foreign direct investment, but differed on the issue of the ousted Male airport operator GMR,” writes R. K. Radhakrishnan for the Hindu newspaper.

“Former President Mohamed Nasheed and former President Maumoon Gayoom’s half-brother, Yaameen Abdulla, are pitted against each other in a second round run-off, scheduled for September 28. The first round, held on September 7, did not throw up a clear winner. To win, a candidate has to garner over 50 per cent of the votes.

Asked if he would invite GMR to come back to manage the Ibrahim Nasir International airport, Nasheed said: ‘We have always been saying that the contract has to be reinstated. Of course it has to go through procedures.’

The Nasheed Government had earlier granted the contract to GMR–MAHB (Malaysia Airports Holdings Berhad) to operate the airport.

After he resigned under controversial circumstances on February 7, 2012, the next government, headed by Mohamed Waheed, terminated the contract, claiming it was invalid from the beginning. GMR had slapped a $1.4-billion compensation claim against the Maldives Government in an arbitration that is now underway in Singapore. Yaameen said that the contract was not done properly.

‘Foreign investment and GMR are two different issues. We welcome foreign investment. In the case of GMR, the law was not followed,’ he said, when asked about FDI in general and GMR in particular.

President Mohamed Waheed’s secretary Masood Imad too was of the view that the airport issue should be treated as closed. ‘GMR can come into Maldives with some other project. The Male’ airport is too much an emotional issue,’ he said.

Read more.

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Comment: Conspiracy of silence over GMR arbitration

Amidst the high decibel of the election campaign, it is easy to completely miss out on some critical issues.

This seems to have happened last week, when the Maldives Airport Company Limited (MACL) recorded an early loss in its legal battle with GMR over [President Dr Mohamed] Waheed’s government’s decision to terminate the Male airport concession agreement. There has been no word or confirmation from the Waheed government on this and his eager-than-ever spokespersons are nowhere to be found. This is especially interesting since they have been more than keen to take any credit they can on the entire airport saga.

Per a report in Minivan News, this is an “early legal skirmish” for GMR in its $1.4Bn claim against Government of Maldives and MACL for illegal termination of its concession agreement in December last year. In one of the earlier comment pieces in this same publication, it has been argued how the termination was a political decision, not an economic decision and how politicisation of the airport by Waheed and his ex-allies is systematically destroying our national asset. This latest news now is all the more concerning and I am certainly surprised to see that it hasn’t been picked up by any of the other newspapers which leads me to believe many people didn’t realize what this may mean for us as a nation.

While Minivan News hasn’t highlighted their source for this judicial order. I wish they had.  In this column I will highlight what I believe are the implications of this order.

Legal setback – arbitration panel leaning away from MACL?

No doubt this is a major setback for Waheed and his Attorney General, Azima Shukoor. Waheed’s government has lost the first round of the battle and the first blood has gone to the other side. The judicial order provides early indications as to which way the arbitration panel may be leaning based on the arguments that they have heard from both parties till now.

Waheed government could not convince the tribunal members on the right way to proceed with the case and this would certainly make one nervous about whether they will be able to convince the panel about their legal position that the contract is void. We have to keep in mind that members of the government and their allies were publicly criticising the deal, protests were being staged against GMR and cries of nationalisation were being made just before Azima suddenly pulled the rabbit out of the hat and claimed that there was no contract all this while!

Details of the political campaign run by members of the government are in the public domain, and they raise questions as to whether the contract was invalid or if the lawyers were asked to find ways of canceling it.

Certainty of compensation by Maldives for termination?

The most important part of the article that the tribunal has discussed is awarding three different types of claims according to which way the panel decides on the legal question of whether the contract was void ab initio or not: “GMR-MAHB’s claim for compensation as per the termination clause of its concession agreement, its parallel claim for loss of profits over the lifespan of the agreement due to its termination, and the government’s counter-claim for restitution should the tribunal decide in its favour”. If one thinks deeply about it, this doesn’t sound like good news at all for Waheed and Azima, or for our nation.

If we lose the legal arguments, we will be faced with a US$1.4 billion claim that we may have to pay for how the airport contract was terminated. However, if Azima wins the legal arguments in the panel then it’s the restitution claims that will be relevant. Otherwise, the contract itself has some termination clauses and this is the third type of claim that may be awarded by the panel based on legal arguments. Let’s look at each of these three claims one by one.

GMR’s US$1.4 billion claim is what it is and we will have to wait and watch if they are awarded this claim. The more interesting aspect is what the panel seems to have said on the other two types of claims.

On the termination payments per the contract, I am all but reminded that in a press conference last year Azima herself said that if the contract is cancelled, we may have to pay GMR anywhere between US$600-700 million in compensation. Given that Azima has been maintaining that Nasheed’s government did not do any due diligence while procuring the contract, whereas she has done extensive due diligence before canceling the contract, I am tempted to take her word on the estimated cost of termination. Hence, in this case, we may have to pay GMR around US$600-700 million.

Now, for the worst part and which Azima has argued in court: in case we win the legal arguments in court, the panel will decide for restitution. If one quickly goes to Wikipedia and understands what restitution refers to in legal terms, it means “orders the defendant to give up his/her gains to the claimant… to restore the benefit conferred to the non-breaching party”.

In essence, if restitution is done in this case, the government will have to give back all the money that GMR brought to Maldives with them to invest and GMR will have to give back what they got from Maldives. Even some quick ‘back-of-the-envelope’ calculations reveal that this would still mean paying around US$240 million to GMR!

If one believes their statements that they have already invested ~US$240 million in the airport, then this money will need to be given back to GMR. At the same time, they have also said that they haven’t taken investment out of the airport and whatever they earned was put back in the airport. Hence, we are still looking at a claim of US$240 million that we may need to give GMR even if we win the legal case!

Conspiracy of silence?

During his controversy-ridden reign in which he has lost allies one by one, Waheed has taken a number of suspect decisions which he has been too happy to slip under the carpet. He perhaps thought that the decision to axe the airport contract was a populist decision and he had probably hoped that it would bring him back to power.

This is why his spokespersons as well as the AG were trigger-happy to announce that nothing will happen in the arbitration before next year – “since there is no valid contract, there can be no compensation”.

Now, this early legal setback– which may cost us millions of dollars in damages even if we win the arbitration– has laid bare all the arguments that Azima gave when the contract was cancelled. The shallowness of her arguments has now left the nation with a US$240 million bill in the best case, and more than a billion dollars at worst! So much for the “legal due diligence and advice of foreign lawyers” that she received.

No wonder that there has been no word from the government on this so far. This may be either because they have nothing to say given the early setback that they have received or they would rather push this under the rug and hope they can get through the elections without making any comment which may jeopardise their chances. At the end of it, they seem to have taken advantage of a tight election schedule to hide without giving any explanations whatsoever!

All comment pieces are the sole view of the author and do not reflect the editorial policy of Minivan News. If you would like to write an opinion piece, please send proposals to [email protected].

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Arbitration tribunal in GMR hearing agrees separate assessment of liability

The GMR-Malaysia Airports Holdings Berhad (GMR-MAHB) consortium has won an early legal skirmish in the Singapore-based arbitration hearings into its US$1.4 billion compensation claim for early termination of its contract by the Maldivian government.

GMR-MAHB won a concession agreement to manage and upgrade Ibrahim Nasir International Airport (INIA) under the Maldivian Democratic Party (MDP) administration, which was ousted from power on 7 February 2012 amid protests and a police mutiny.

The new government, comprising a coalition of former opposition parties under current President Mohamed Waheed, declared in late 2012 that GMR-MAHB’s agreement was ‘void ab initio’ (invalid from the outset) and gave the developer seven days’ notice to leave the country.

The US$511 million agreement was at the time the country’s single largest foreign investment. According to the government’s own engineering assessment, the development was 25 percent complete at the time GMR-MAHB was evicted.

The consortium has since lodged a US$1.4 billion claim with the Singapore Court of Arbitration, an amount eclipsing the Maldives’ annual state budget. The government is being represented by a Singapore National University Professor M. Sonarajam, while GMR-MAHB is being represented by former Chief Justice of the UK, Lord Nicholas Edison Phillips. The arbitrator is retired senior UK Judge, Lord Leonard Hubert Hoffman.

Latest hearings

During the second round of procedural hearings earlier this month, the tribunal acceded to GMR-MAHB’s request to split the proceedings into firstly determining liability, before quantifying the amount of compensation to be paid separately.

Minivan News understands that the tribunal agreed this would simplify examination and quantification of what was effectively three claims being made in the hearing: GMR-MAHB’s claim for compensation as per the termination clause of its concession agreement, its parallel claim for loss of profits over the lifespan of the agreement due to its termination, and the government’s counter-claim for restitution should the tribunal decide in its favour.

According to a source familiar with the matter, the government’s legal team opposed splitting the proceedings in such a fashion as they had not had access to GMR-MAHB’s documentation, and would therefore be unable to assess the scope of the claim at stake.

Minivan News understands that the tribunal rejected the government’s position on the grounds that it would be quicker, fairer and less costly to resolve the case by first determining liability for each of the claims, and then quantifying these.

Separate development paths

Local media has meanwhile reported that Maldives Airports Company Limited (MACL), which took over management of the airport following the government’s eviction of the foreign investor, has sought a US$150 million loan from Thailand’s Exim Bank for the construction of a new runway.

Sun Online reported MACL Managing Director Bandhu Saleem as stating that MACL’s three-year development project, involving reclamation of land for the runway and development of a new terminal, would cost a total of US$380 million.

“The terminal is being designed. The funding will be available in the next six months or so. We are planning to start the construction of the terminal as soon as the runway is completed,” Saleem reportedly told Sun.

Future development of the airport and fallout from the arbitration proceedings is likely to be affected by the upcoming election.

Of the four presidential candidates contesting the presidential election on September 7, both resort tycoon Gasim Ibrahim and incumbent President Mohamed Waheed have taken strongly nationalistic positions on MACL retaining full control (and responsibility for financing) the airport’s development.

Gasim’s running mate, Dr Hassan Saeed, was an early and emphatic proponent of GMR-MAHB’s eviction, previously issued a pamphlet calling for the cancellation of the agreement and likening it to “taking bitter medicine to cure a disease” or “amputating an organ to stop the spread of cancer.”

The Progressive Party of the Maldives (PPM), a major opponent of the MDP’s government’s signing of the concession agreement, has in recent months appeared to have taken a more conciliatory position, blaming the fallout of the agreement’s sudden cancellation on President Waheed.

“We told the next President Mr Waheed that he should hold discussions with the GMR Group and the Indian government to arrive at an acceptable solution, after which the government was free to act on its own,” PPM head and former Maldivian President Maumoon Abdul Gayoom told Indian media in June. “Unfortunately, this was not done and suddenly there was this unhappy ending.”

The MDP has meanwhile signalled that if elected, it intends to negotiate the return of the developer. Construction of the new terminal was originally pegged for completion by 2014.

“The coup government nullified the agreement, and we will see how best to rectify it,” former Economic Development Minister Mahmoud Razee told Minivan News.

“If need be we will go to the Majlis. Our objective is to get work restarted as quickly as possible,” he said.

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State developments to recommence by 2014 after Nasheed administration’s bills settled: President Waheed

President Dr Mohamed Waheed has claimed the country will be in a position to restart development projects next year as a result of his government repaying millions of US Dollars in bills incurred through the previous administration’s borrowing.

The government announced it would be suspending state-financed development projects in April after exhausting its annual budget for recurrent expenditure (including salaries, allowances and administration costs) in the first quarter of 2013.

The current government has continued throughout the last year to try and establish loan and credit facilities with foreign nations and banks for the stated purpose of “budget support”.

However, speaking during a campaign rally in Noonu Atoll this weekend, President Waheed was quoted by Sun Online as claiming that unpaid bills arising from the government of former President Mohamed Nasheed had now been settled, with no expense expected to be carried over to the 2014 budget as result.

“We have been through a very difficult time over the past two years. We could not do several things, not because we didn’t want to do them. The previous government left the country bankrupt,” he said during the rally.

“The money necessary to buy medicine for our children, the money necessary to repair the school building, the money necessary to repair the harbour of this island – all this money had to be repaid, the unpaid bills for work done by citizens, had to be paid.”

Finance Minister Abdulla Jihad and Minister of Economic Development Ahmed Mohamed were not responding to calls today, while Minivan News was awaiting a response from President Waheed’s Senior Advisor Teresa Wells at time of press.

Former administration’s borrowings

Ahmed Nazim, head of the Parliamentary Financial Committee and MP for the government-aligned Progressive Party of Maldives (PPM), said that former President Nasheed has undertaken “short-term borrowings” during his time in office.

He added that this borrowing included “US$200 million bond” sold to the Indian government with a maturity of one year that was later extended to 24 months.

Nasheed controversially resigned from office on February 7, 2012, following a mutiny by sections of the police and military.

Following the change in government, Nazim said that the Waheed administration had paid US$100 million and “settled the full payment” after Indian authorities requested the country be reimbursed by February 2013.

“Since this was a substantial component of the total foreign debt, [foreign borrowing] has come down because of this,” he said.

Asked whether the committee believed President Waheed had managed to reduce total state borrowing and spending since coming to power, Nazim said he would respond by tomorrow ( August 18 ) after having time to study relevant statistics.

In 2012, President Waheed reportedly said he would not resort to borrowing from foreign governments in order to finance government activities.

However, the government has since sought a number of foreign loans to supplement the state budget.

Earlier this month, the state requested parliament approve a US$29.4 million loan from the Bank of Ceylon to finance the 2013 budget approved by parliament.

In July, the President’s Office confirmed discussions had been held with Saudi Arabia, seeking a long-term, low interest credit facility of US$300 million to help overcome “fiscal problems” facing the nation.

Supplementary finance plans

Finance Minister Jihad claimed back in December 2012 that the MVR 15.3 billion (US$992 million) state budget approved by parliament might not last until the end of 2013 – requiring supplementary finance for the state.

In April 2013, Jihad sought authorisation from parliament to divert MVR 650 million (US$42 million) allocated for infrastructure projects in the budget to cover recurrent expenditures.

Jihad warned that government offices and independent institutions might be unable to pay salaries or electricity and phone bills if funds were not transferred from the MVR 1.8 billion (US$117 million) Public Sector Investment Programme (PSIP).

“Reckless financial management”: MDP

In July, Maldivian Democratic Party (MDP) MP and Spokesperson Hamid Abdul Ghafoor said that the heavily partisan parliament now effectively controlled state finances as a result of former opposition politicians – now part of President Waheed’s government – imposing tighter spending restrictions on former President Mohamed Nasheed’s administration.

The opposition party also accused the current government of reckless financial management, pointing to a potential US$1.4 billion compensation bill facing the state after it decided last year to abruptly terminate a US$511 million airport development contract agreed with infrastructure group GMR.

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