Tag: GMR

AG slams former government over foreign investment “damage” from alleged lack of financial research

Attorney General Azima Shukoor has accused the previous government of failing to conduct sufficient research before signing several major foreign investment projects, that had now been terminated by the present administration.

Azima was quoted by private broadcaster Villa Televison (VTV) (Dhivehi) as claiming that unspecified “economic damage” currently faced by the state had resulted from a lack of economic and legal research by the administration of former President Mohamed Nasheed.

She was quoted in local media arguing that “damages” to the state had resulted from a number of foreign investment projects signed by Nasheed’s administration, including the US$511 million concession agreement signed with GMR to build and manage a new terminal at Ibrahim Nasir International Airport. Azima also raised over another deal with Malaysia-based Nexbis to manage and operate a border control system in the country.

Both agreements have since been terminated by the administration of President Dr Mohamed Waheed, with the Maldives facing a US$1.4 billion compensation claim from GMR after its contract was suddenly declared void in November. The company was then given a seven day notice period to leave before being evicted by authorities.

Nexbis was last week given 14 days to vacate by the government, which likewise terminated its concession agreement with the company.

However immigration officials last week questioned whether  replacement technology was ready to be implemented, in place of the Nexbis system.

Former government response

Responding today to the attorney general’s criticisms, Mahmood Razee, former economic development minister during the Nasheed administration, stressed that the former government had engaged with the World Bank’s International Finance Corporation (IFC) before moving ahead with the airport privatisation program.

As such, he rejected accusations that no research had been conducted before undertaking such a high profile project.

“Clearly this was not a stab in the dark,” Razee said of the deal. “[The World Bank engagement] determined how best to proceed with the airport development for the benefit of the government and the people. After looking at the revenue streams, it was concluded that it was best to move forward with the public private partnership.”

He claimed that aside from potential financial benefits of agreeing the deal, the consortium consisting of GMR and Malaysia Airports Holdings Berhard (MAHB) had been picked based on the companies’ experience in managing other airport projects.

With the deal now terminated, Razee added that it remained critical to secure development at the airport as soon as possible, claiming the current facilities at INIA did not meet the required standards.

Waheed’s government last year accused the IFC itself of negligence during the bidding process for the development of INIA, charges the World Bank rejected at the time.

By June this year, the Maldives’ Anti-Corruption Commission (ACC) ruled out corruptionin the awarding of a concession agreement in June 2010 to the GMR/MAHB consortium. The government meanwhile continues to insist the sudden termination of the contract was in the national interest.

“Cause and effect”

Former Economic Development Minister Razee said the Maldives would remain reliant on development funding for future development projects, which would cost hundreds of millions of dollars out of reach of the government.

With the country now lacking sufficient rating to obtain credit commercially, Razee argued that development funds remained the only means for a country like the Maldives to secure sizeable finance.

The present government’s decision to cancel two major foreign investments would have a “cause and effect”, he suggested.

Should the MDP be elected to power in the presidential election scheduled for next month, the party would have to consider returning to negotiations with GMR in a bid to avoid huge financial fallout from arbitration proceedings now being conducted in Singapore.

He claimed that the cooperation of international bodies such as the World Bank in securing the GMR deal would likely to be sought in other high-profile investment projects sought under an MDP government.

Economic problems

The Maldives National Chamber of Commerce and Industries (MNCCI) meanwhile last month accused senior politicians under successive governments of trivialising the severity of the country’s economic problems.

MNCCI Vice President Ishmael Asif claimed parties were addressing financial concerns and issues impacting foreign investment with negative slogans rather than actual policies in the run up to September’s election.

While accepting the present “bad shape” of the Maldives economy, the chamber of commerce was particularly critical of what it called negative economic campaigning by senior figures in the last two governments – arguing they had done little to address an ongoing shortage of US dollars and a lack of investment banking opportunities and arbitration legislation in the country.

Asif’s comments were made in response to claims by the government-aligned Progressive Party of Maldives (PPM) that foreign investors were now turning away from the Maldives due to concerns about political stability and safety in the country.

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Maldives government terminates Nexbis agreement, gives 14 days to vacate

The Maldives government has terminated its agreement with Malaysian security firm Nexbis to install and operate a border control system, giving it 14 days to vacate.

Defence Minister Mohamed Nazim local media that the disputed contract – signed under the previous government of former President Mohamed Nasheed in 2010 – was terminated by the cabinet yesterday over fears it was causing unspecified “major losses” to the state.

The termination was announced as immigration officials today said replacement technology being provided by the US government was not presently functional, with implementation “on hold” pending a legal hearing into the matter.

Department of Immigration Spokesperson Ibrahim Ashraf told Minivan News this morning that he had not personally been made aware of any decision by the government to terminate the agreement.

However, Ashraf confirmed that replacement technology being provided free of charge by the US government was “not 100 percent functional” at present.

“Because of legal issues, the project has been on hold,” he explained.

Immigration officials last month confirmed that “testing” had been underway on the new US-donated system, while Nexbis’ border control technology remained in use to monitor the arrivals and departures of foreign nationals

Ashraf referred further questions on the Nexbis system to Immigration Controller Dr Mohamed Ali, who was not responding to calls at time of press.

Nexbis is the second high profile foreign investment to be suddenly evicted by the administration of President Dr Mohamed Waheed in the past 12 months.

The government last November announced it was terminating a 25-year concession agreement with India-based GMR to construct and operate a new terminal at Ibrahim Nasir International Airport (INIA) in Male, giving the company seven days to vacate the country.

GMR is currently seeking compensation totaling US$1.4 billion from the government as part of arbitration proceedings to be heard in a Singaporean court, damages eclipsing the annual state budget.

Speaking to local media today, Defence Minister Mohamed Nazim was quoted as saying that the government expected to assume control of the country’s borders at the end of the 14 day notice period given to Nexbis.

He claimed that the US system was also “ready to be operational”, although no decision had yet been made to use the technology.

Attorney General (AG) Azima Shukoor added that discussions were presently being held with Nexbis over reaching an out of court settlement for terminating the contract, although she declined to provide any more details to media today.

“We assure you that the burden on the state will be far less with the termination of the agreement rather than continuing with it. We will take this process forward in the best interest of the state,” she was quoted as saying by Haveeru.

Concession agreement

Under the concession agreement signed with the Maldives government, Nexbis levied a fee of US$2 from passengers in exchange for installing, maintaining and upgrading the country’s immigration system.  The company also agreed a fee of US$15 for every work permit card issued under the system.

Both AG Azima and Defence Minister Nazim were not responding to calls at time of press.

Nexbis last month invoiced the Department of Immigration and Emigration for US$2.8 million (MVR 43 million) for the installation and operation of its border control technology in line with a concession agreement signed in 2010 – requesting payment be settled within 30 days.

Nexbis’ lawyers argued that the company had expected the fee to be included in the taxes and surcharges applied to airline tickets in and out of the country, according to local media.  However, lawyers argued these payments had not been made due to the government’s “neglect” in notifying the relevant international authorities.

Minivan News was awaiting a response from Suood, Anwar & Co – the company’s legal representatives in the Maldives – at time of press.

Parliamentary vote

Parliament had voted unanimously to terminate the agreement on 25 December 2012, in line with a recommendation from the Finance Committee alleging foul play in the signing of the agreement with former Immigration Controller Illyas Hussain Ibrahim.

Presenting the Finance Committee report to the floor, Chair MP Ahmed Nazim explained at the time that the “main problem” flagged by the Anti-Corruption Commission (ACC) was that the tender had not been made in accordance with the documents by the National Planning Council authorising the project.

The Finance Committee also recommended terminating the agreement over concerns it contained clauses to waive taxes to the company, Nazim said.

He noted that imposing or waiving taxes was a prerogative of parliament under article 97(d) of the constitution.

Following parliament’s termination of the project in December, Nexbis sought a legal injunction to prevent any cancellation of the agreement while court hearings over the contract were still ongoing.

The company had sought to contest whether the ACC has the power to compulsorily request the government to cease all work in relation to the border control system agreement.

However, in April of this year, the High Court overturned a Civil Court ruling declaring the ACC could not terminate a border control system (BSC) agreement signed by the Department of Immigration with Malaysian mobile security firm Nexbis.

The High Court ruling (Dhivehi) cleared the way for the Civil Court to hear the case filed by the ACC should it be resubmitted.

Nexbis has emphatically denied allegations of corruption, previously speculating that “criminal elements supporting human trafficking” were seeking to sabotage the agreement.

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Comment: The unfortunate reality of an island airport

Milton Friedman, one of the most influential economists of 20th century, once said “If you put the federal government in charge of the Sahara Desert, in 5 years there’d be a shortage of sand”.

While it has been proved time and again that Governments have no business being in business, the issue is still widely debated and will probably linger on in eternity. However, in the Maldives, this issue of state ownership of businesses takes a totally different dimension. When Mr Friedman made this, now legendary, comment he referred to only the inefficiencies in decision making and economic management that most governments and politicians are riddled with. In the Maldivian context, one has to take into account the mala fide intent as well as narrow self-interests of people in the government as well.

An unfortunate example of how the Government of the day not only destroys value but systematically works against the interest of the people is our prized national asset – Ibrahim Nasir International Airport.

Caught in the middle of political wriggling and costly lawsuits, politicisation of the airport by everyone across the political spectrum and the mullahs typifies all that is wrong with our economy, our businesses and our government.

Ever since the ousting of GMR, whatever progress that had been made at the airport is now being undone – reversal of employees benefits such as employee insurance which was given by GMR to stalling of development works at the airport are just a few examples.

I have been told of way too many stories of flight delays due to systems outages, long unmanageable queues and leaking roofs to be convinced all over again of the Government’s inefficiencies in managing enterprises.

But I do not intend to focus on Government’s inefficiency in managing our national airport in this article. I would rather highlight the systematic manner in which the current Government seems to have taken control of the airport to serves its and its cronies’ own narrow self-interests rather than let it be run in a professional manner that is best for the passengers as well as the nation.

First, Dr Waheed’s government wanted to create a new airport company (MIAL) to take over management of Ibrahim Nasir International Airport with a new MD and a new Board of Directors with the intent of setting up tight control on the airport management. When the AG advised them of legal impossibilities related to this action, he appointed the same set of cronies to the MACL board to ensure he controls the board and all important commercial decisions at the airport.

Of course, at the time of cancelling the agreement, Government did say that new and professional management will be brought to manage the airport within 3 months and there will be no political influence in managing it going forward. Whatever happened to Dr Waheed’s ideas of ‘professional management’, Dr Hassan Saeed’s idea of ‘internationally experienced  foreign CEO and CFO’ and Sheikh Imran’s ‘national consultations for deciding the future of the airport’.

On political appointees and lack of professional management, it is interesting to note that Dr. Waheed’s political appointee as the MD of MACL– Bandhu Saleem has at least started making some noises around what are all the challenges that are facing the airport – lack of funds, no master plan and hardships & sacrifices for 3-4 years in each phase of airport’s development. He said these things in an interview to a local daily and what is most painful is that whatever he said only highlights the stupidity of the decision to oust GMR.

If it was that easy for a government company to get US$350 million funding for the airport, then why would anyone anywhere across the world privatise airports in the first place?

And by that logic, even Dr Waheed would have got his US$500 million loans from China and US$350 million grant from Saudi Arabia for budgetary support by now surely? As for the master plan for development, it was to be announced within 3 months of GMR’s ouster and we haven’t heard a word from anyone on this yet. There are bigger battles for all the politicians to fight, within themselves, in two months.

It’s clear by now that all these lofty promises always sound good to the general public and Bandhu Saleem’s game plan seems to be the same for now, even though reality it is most important to first take care of the basics. I have been told by sources that in one of the first meetings that he called after moving to his office at the airport, his authority was challenged and thwarted directly by the attendees. He intended to undertake frivolous discussions on the “Vision & Mission” for the airport when all the other attendees didn’t even have permanent contracts or medical insurance covers, something that they enjoyed under GMR management.

While airport’s development by MACL is an elusive dream that may never see the light of day, the fear really is that since it is back under MACL (effectively government) control, systematic corruption will rise like never before. What is most interesting for us to note is that all of these moves to take control of the airport operations come at a time when the Presidential elections race is heating up by the day.

Campaign funding is the need of the hour and we know that most elections are won or lost on the level of funding that is available to a candidate. With his allies deserting him thick and fast, what may still keep Dr Waheed in the hunt for the election is the money that his cronies are willing to bet on him while he is still in power.

It is well known that the likes of MVK Shafeeg and Najah have their eyes set on more airport concessions. MVK Shafeeg has been funding most of the anti-GMR protests and has been providing campaign funding aggressively to Dr. Waheed’s coalition.

So, I’ll not be surprised if we see MVK shops coming up in duty free section of the airport soon. A refurbished and world class duty free offering was one of the best things that GMR had done at the airport. MACL’s previous MD Mafooz had publicly stated that duty free is one of the best profit earners for the airport. It will only be in return for securing his campaign funding that Dr. Waheed’s government will allow MVK to get duty free shops at the airport for peanuts.

After all, securing massive amount of funds may be half the battle won in the presidential race of September 2013.  Whatever happens to the airport and its development after that can be put on the backburner like it had been for each of the last 25 years – except for the two when GMR managed it!

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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President opens Maldives’ first Burger King

President Mohamed Waheed has opened the Maldives’ first Burger King, one of four international restaurant chains in Ibrahim Nasir International Airport (INIA)’s new food court.

Besides Burger King’s there are two restaurants on either side of the departure gates.  The new restaurants include ‘casual’ Thai eatery Thai Express, a Australian cafe chain selling mixed drinks and snacks called Coffee Club, and Swensen’s ice creamery, which has already been operating in the airport for several months.

The chains were introduced by the Minor Food Group, a Thai-based subsidiary of the Minor International hospitality and restaurant brands conglomerate that also operates six resort properties in the Maldives, including Anantara, Naladhu and the Per Aquum brands.

The new food court was originally planned as part of the temporary refurbishment of INIA during the construction of a new terminal by Indian infrastructure giant GMR, prior to the government’s controversial eviction of the firm in December 2012. The company recently claimed it is seeking compensation in a Singapore court of US$1.4 billion, an amount four times the size of the Maldives’ state reserves.

The official opening of Burger King and the other restaurants began this morning with the recitation of the Holy Quran, followed by speeches, ribbon cutting, and the serving of food to the many assembled government dignitaries and school students brought across from Male’ for the event.

A company spokesperson told Minivan News that the reception and performance of the burger chain in its first two days of operation had surpassed expectation, perhaps unsurprising given the anecdotal practice by some Male’ families of bringing McDonalds and KFC takeaway back with them on weekend flights from Colombo. Certainly Burger King was extremely popular with the assembled school students, who steadily worked their way through mountains of whopper burgers.

Minor International Chairman and CEO William Heinecke meanwhile noted that the food court improved the quality of the airport by providing a variety of international food demanded by tourists.

“President Waheed told me earlier that this airport is very special to him because as a student he helped carry the stones to make the runway,” Heinecke said.

President Waheed expressed confidence that food court was a sign the airport was developing into a “world class facility”, “and all this under the leadership of our Maldivian colleagues”.

“This is the first big project since the new management took over the airport,” the president said. “Inshallah soon we shall see major investment such as a new runway, which we are currently seeking financing for.”

The manager of one outlet meanwhile identified “consistency of supply” as a key operational challenge in the Maldives for strict branded outlets, noting that chains such as Burger King in particular had extremely high standards of brand consistency.

Employment culture

Several speakers predicted that the introduction of the Maldives’ first major multinational fast food chain could usher in the concept of part-time employment to the Maldives, particularly for students, and help combat widespread youth unemployment.

Of the food court’s initial 53 employees eight were Maldivians who had been sent to Thailand for training, Heinecke said, stating that one of the company’s goals would be to increase the extent of Maldivian employment, particularly part-time students.

Minor Food Group CEO Paul Kenny observed that the firm had success introducing the concept 20 years ago in Thailand. Part-time work, he said, could contribute greatly to an individual’s development.

President Waheed urged young Maldivians to seek work in the fast food outlets, noting that during his tenure as a student he had worked as a tutor “as my parents could not afford to pay me an allowance.”

He also expressed hope that an outlet would open in Male’, and that the price of burgers would eventually come down (regular value meals were around the US$10-12 mark at time of press).

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Politicians trivialising severity of economic problems, foreign investment: Chamber of Commerce

The Maldives National Chamber of Commerce and Industries (MNCCI) has accused senior politicians of trivialising the severity of the country’s economic problems, claiming parties are addressing financial concerns with negative slogans rather than actual policies.

The concerns were raised as the government-aligned Progressive Party of Maldives (PPM) claimed over the past week that foreign investors were now turning away from the Maldives due to concerns about political stability and safety in the country.

“Bad shape”

While accepting the present “bad shape” of the Maldives economy, the chamber of commerce criticised negative campaigning on the economy by senior figures in the last two governments – arguing they had done little to address an ongoing shortage of US dollars and a lack of investment banking opportunities and arbitration legislation in the country.

On Saturday (June 29), PPM presidential candidate Abdulla Yameen was quoted in local media as expressing concern that foreign businesses were shunning the Maldives in favour of financing projects in other countries in the region.

“With our present woes no one wants to invest here. They are looking at Seychelles and Caracas. No foreign investor wants to come to the Maldives,” Haveeru reported him as saying.

The concerns were shared by Yameen’s running mate, former Home Minister Dr Mohamed Jameel Ahmed, who told a campaign rally in Raa Atoll days earlier that the PPM was the only party able to secure peace and safety in the country required to boost foreign investor confidence.

Dr Jameel was dismissed as home minister by President Dr Mohamed Waheed in May this year after announcing his decision to stand as running mate for rival candidate Abdulla Yameen in September’s election.

Minivan News was awaiting a response from Dr Jameel about the party’s economic policies at time of press.

While MNCCI Vice President Ishmael Asif accepted that political stability was a key challenge to building foreign investor confidence, he added that senior political figures such as Dr Jameel had failed to implement much needed legislative reforms to aid investment while in power.

Asif argued that Dr Jameel was not the only government figure in the last five years guilty of failing to try and boost investor confidence in the Maldives.

“We are not happy. People are using the economy as a campaign slogan. All parties are looking to come to power and they will do or say anything to be in power,” he said.

Asif expressed particular concern over various parties’ using the country’s present economic difficulties to score points during campaigning without offering their own solutions.

“The economy is not healthy right now. We do not hear any solutions from these people. We want to hear positives about will they change,” Asif said.

“What exactly did Jameel do for the economy? What did Anni [former President Mohamed Nasheed] do? What also did Dr Waheed do? What did any of them do?”

Economic record

Asif argued that ahead of the upcoming presidential election scheduled for September, it was hugely important that voters evaluated all candidates on the basis of their recent economic record.

He said that the Maldives’ first multi-party democratic election in 2008, the country had failed to implement a number of legislative reforms required to provide greater freedom to foreign investors.

According to Asif, key economic reforms lacking included the establishment of investment banks to encourage foreign parties to borrow domestically, and arbitration law to ensure that investments were protected in the country’s courts.

He said that with rival parties and President Waheed all campaigning ahead of this year’s election, there appeared to be little consensus to try and deal with “huge issues” such as the dollar shortage.

Accountability

Asif said he believed that the majority of voters had failed to properly hold their leaders to account since the democratic transition in 2008, comparing the nation’s democratic freedoms over the last five years as being comparable to “a child with a new toy”.

“We have not really understood democracy here. Many have not grown up with the right to question that comes with democracy, so we don’t know how to test the capacity of our leaders,” he said.

Raising concerns that the loudest and most controversial figures had dominated the country’s political arena since 2008, Asif said fears of a lack of accountability were a significant difficulty for the economy.

“Take the Ministry of Trade for example. There is a huge issue over the supply of US dollars, yet instead everyone is focused on their own parties. There is no mandate to address this,” he said.

Opposition concerns

The opposition Maldivian Democratic Party (MDP) meanwhile rejected criticisms over its foreign investment record, claiming it had attempted to introduce a raft of economic reforms for the economy while in power, before the government was controversially changed on February 7, 2012.

The present government, made up entirely of former opposition parties, came to power after former President Mohamed Nasheed resigned from office during a mutiny by sections of the police and military.

MDP MP and Spokesperson Hamid Abdul Ghafoor said that it was hypocritical for the PPM, or any other party serving in the present government, to raise concerns about political stability, given that they had intentionally deposed the country’s first democratically-elected government.

On an economic level, Ghafoor claimed the former MDP government had sought to introduce an economic reform package aimed at encouraging investment not only in the country’s tourism industry, but in a wider number of sectors such as energy, communications and infrastructure.

He said that this investment focus had been seen in the introduction by the former administration of direct taxation, the restructuring of government finances and the reduction or elimination of import duties on a wide range of goods.

Before Nasheed came to power, Ghafoor said the country had been managed much like a “corner shop” – with no mechanisms to attract and keep investors in the country.

He argued that one legacy of this approach to foreign investment could be still be seen in the country’s courts, which he continued to remain a “mess”.

Judicial criticisms

Before his resignation, former President Nasheed controversially detained the Chief Judge of the Criminal Court Abdulla Mohamed, in a move he claimed was needed to prevent him from continuing to rule on cases while charges of misconduct against him were investigated.

In November 2011, the Civil Court ordered the Judicial Service Commission (JSC) to take no action against the chief judge over an investigation into his alleged misconduct until the country’s court reached a verdict in a case filed against him. The Civil Court case preventing action against Abdulla Mohamed was filed by the chief judge himself.

In the build up to the judge’s arrest, Nasheed continued to raise concerns over allegations of perjury and “increasingly blatant collusion” between senior judicial figures and politicians loyal to the former autocratic President Maumoon Abdul Gayoom.

Since Nasheed’s resignation, NGOs and independent experts including UN Special Rapporteur for the Independence of Judges and Lawyers, Gabriela Knaul have expressed concern over politicisation within the country’s court system.

Accusing the PPM – as part of the present coalition government –  of being directly involved in instigating a mutiny within the country’s security forces prior to the change of government last year, MDP MP Ghafoor alleged the party was also culpable for ruining interest in foreign investment.

He accused PPM presidential candidate Abdulla Yameen in particular of using President Waheed as a “pawn” last November to abruptly terminate a US$511 million contract with India-based GMR to develop and manage Ibrahim Nasir International Airport (INIA).

Indian infrastructure giant GMR recently filed a claim for US$1.4 billion in compensation from the Maldives, following the government’s sudden termination of its concession agreement citing  “wrongful termination” and loss of projected profits.

Meanwhile, the PPM accused President Waheed of ignoring the advice of his coalition government by terminating the agreement.

Waheed’s allies hit back by accusing the PPM of making “contradictory statements” regarding the decision to terminate GMR’s concession agreement, claiming the party’s senior leadership tried to terminate the deal without discussion or following due process.

The MNCCI claimed in September last year that legal wrangling between the government and India-based developer GMR over the multi-million dollar airport development contract was not anticipated to harm confidence in the country’s “challenging” investment climate.

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PPM only party who can secure peace, investor confidence: Former Home Minister Dr Jameel

Dr Mohamed Jameel Ahmed, running mate of Progressive Party of Maldives (PPM) presidential candidate MP Abdulla Yameen, has said ensuring peace and safety in the Maldives will be vital to ensuring economic progress following September’s election.

Speaking on the island of Dhuvaafaru in Raa Atoll on Thursday (June 28), Dr Jameel was quoted by Sun Online as saying that the PPM was the only party able to secure peace and safety in the country required to boost foreign investor confidence.

He also praised the PPM’s founder, former President Maumoon Abdul Gayoom, for his efforts in trying to establish peace across the country during his time in office.

Dr Jameel said the former president had been able to attract major multinational companies and foreign leaders to the country due to the culture of “peace, solidarity and obedience that existed among the Maldivian people” during his rule.

Gayoom was the autocratic ruler of the Maldives for thirty years before being unseated by a coalition backing Mohamed Nasheed in the second round of the country’s first multi-party democratic elections in November 2008.

Dr Jameel’s claims were made after the PPM earlier this month accused President Waheed of ignoring the advice of his coalition government by abruptly terminating a US$511 million airport development contract with India-based GMR without holding talks with the company to first resolve the issue.

The PPM’s coalition partners later hit back by accusing the party of making “contradictory statements” regarding the decision to terminate GMR’s concession agreement, also claiming that its senior leadership tried to terminate the deal without discussion or following due process.

Dr Jameel, who served as home minister under the current coalition backing President Dr Mohamed Waheed, was dismissed from the role in May after announcing his intention to support MP Yameen’s campaign against the incumbent.

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Tata reaffirms commitment to stalled Maldives housing projects

Indian-based corporate giant Tata has said it has no intention of offloading its stake in a Maldivian joint venture overseeing several housing projects in Male’, despite local media speculation that land set aside for the company had  been sold off.

Tata this week confirmed to Minivan News that it remained invested in Apex Realty PVT Ltd, a Maldives joint venture established under the previous government between itself and developers SG18.

Tata Housing Development Spokesperson Vikram Kharvi added that the company was not considering selling its stake in the project, despite construction work having stalled on several commercial residential projects it was developing through the joint venture.

Kharvi confirmed that negotiations were ongoing with the government at present to resolve certain issues concerning the stalled developments on land provided to the company under its joint venture agreement.

He declined to clarify the exact nature of issues that had stalled the projects at time of press, forwarding specific questions on the matter to Sandeep Ahuja, Tata Housing Development’s Senior Vice President .

Minivan News was awaiting response from Ahuja at time of press.

Deputy Minister of Housing Abdulla Mutthalib confirmed to local media this week that the projects being overseen by Apex Realty had stalled due to what he said were a shortage of funds and construction materials.

Mutthalib expressed hope that the stalled projects could still be completed by year end.

“There are some constraints as they are also using subcontractors. The earlier deadlines given by the government have passed. Shortage of funds and construction material have brought both the projects to a complete standstill,” he was quoted as saying by Haveeru.

Local media also noted speculation that plots of land originally promised to Tata for its residential projects had since been purchased by local developers.

Contacted by Minivan News, Mutthalib declined to comment, adding that only Housing Minister Dr Mohamed Muiz was able to provide information to the press.

Dr Muiz was not responding to calls at time of press.

“Political interference”

In November last year, Tata was among a number of Indian companies reported to have expressed concerns over  political interference threatening their investments.

Officials involved in the Apex Realty housing development project told Indian media in November 2012 that the government was attempting to take over a site in Male’ given to the company, with the intention of building a new Supreme Court.

The current Supreme Court building was formerly the palace of former president Maumoon Abdul Gayoom, but became the court under his successor Mohamed Nasheed, who opted for the less ostentatious official residence of Muleaage.

A source involved in the Tata deal confirmed to Minivan News that the government had offered land on the island of Hulhumale’ to Tata as an alternative to the agreed site in Male’. However, the same source said the developers felt the change would affect the financing of the project.

The claims were made just weeks before the present government declared a concession agreement signed with infrastructure group GMR to manage and develop Ibrahim Nasir International Airport (INIA) “void” – terminating outright the country’s single largest foreign investment project. GMR were then given seven days to leave the country.

Tata, one of India’s most powerful corporate entities, announced its entry into the Maldives housing sector in 2011 as part of a multi-million dollar cooperation agreement with the administration of former President Mohamed Nasheed to build residential and resort properties.

The Wall Street Journal newspaper reported at the time that the Maldives government-commissioned programme, valued at an estimated US$190 million, required Tata to develop around 350 residential flats and a number of island villa properties that would be sold both to the state and on the open market.

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ACC defends report on airport privatisation deal as Sheikh Imran insinuates bribery from GMR

The Anti-Corruption Commission (ACC) has issued a press statement defending its investigative report of the airport privatisation deal signed by the previous government, harshly condemning “false and misleading” remarks by politicians of government-aligned parties.

On June 17, the ACC released a 61-page investigative report concluding that there was no corruption in the awarding of a concession agreement to a consortium of Indian infrastructure giant GMR and Malaysia Airports Holdings Berhad (MAHB) to develop and manage the Ibrahim Nasir International Airport (INIA).

The report was met with strong criticism and bribery allegations from parties in the government coalition.

Insisting that the government’s stand would not change as a result of the ACC findings, President’s Office Spokesperson Masood Imad told the Press Trust of India (PTI) that “if there is a reasonable cause of doubt, this report can be contested by some parties.’’

“Many people say here that the ACC Board is not an unbiased organisation. They say it is politically motivated,” he was quoted as saying.

Religious conservative Adhaalath Party President Sheikh Imran meanwhile described the report as “a slap in the people’s face” while President Dr Mohamed Waheed’s Gaumee Inthihaad Party (GIP) Spokesperson Abbas Adil Riza accused ACC members of corruption.

In an appearance on pro-government private broadcaster DhiTV last night (June 23), Imran insinuated that ACC members accepted bribes from GMR offered through former Indian High Commissioner D M Mulay.

The ACC report was “a highly unprofessional, semi-technical and procedural review” that did not amount to either a proper investigation or an audit, Imran said, calling for “a full-fledged investigation.”

In November 2012, the current administration abruptly terminated the US$500 million contract with the GMR-led consortium, declared the concession agreement ‘void ab initio’ (invalid from the outset), and gave GMR seven days’ notice to leave the country.

The decision followed weeks of protest by a self-titled “National Movement” spearheaded by Sheikh Imran and senior government officials – born out of the unofficial December 23 coalition of eight political parties and an alliance of NGOs that rallied at a mass gathering to “defend Islam” in late 2011 – calling on the government to “reclaim” and nationalise the airport.

Last Friday, GMR filed a claim for US$1.4 billion in compensation from the Maldives at ongoing arbitration proceedings in Singapore over “wrongful termination” of the contract.

Meanwhile, former Attorney General Azima Shukoor, who headed the cabinet committee that advised termination of the contract, contended on DhiTV last week that the ACC report was “incomplete” as the commission had overlooked several key factors.

“Did they omit the factors deliberately or unknowingly or simply just overlooked them? But a lot of factors have been overlooked and omitted from the report. The state will suffer great losses because of it. Especially when the country is tied up in a judicial case,” she was quoted as saying by newspaper Haveeru.

ACC response

ACCIn its press release on Thursday (June 19), the ACC stated that its investigation was “not based on what politicians say at podiums and in the media.”

“Instead, the case was investigated based on relevant information collected for the investigation, documents and statements taken after questioning those involved in the case,” the ACC said, denying the allegations of undue influence on its members or staff.

The ACC statement added that the commission in concluding investigations adhered to article 25 of the Anti-Corruption Commission Act of 2008, and did not reach its conclusions “after considering the wishes of a particular politician.”

The commission noted that it had not responded to any political rhetoric targeting the ACC in the past, adding that all corruption investigations followed criminal justice procedures, the ACC Act and regulations under the law.

The statement explained that article 25(a)(2) of the Act required the commission to submit cases for prosecution if sufficient evidence to secure a conviction was gathered.

In the absence of evidence to prove corrupt dealings, article 25(a)(1) of the Act stipulates that the commission must declare that the case does not involve corruption.

The report made public last week contained information collected for the investigation, observations and the reasoning for reaching the conclusion “without any omissions or additions,” the ACC added.

“This is the first time that an investigative report of a case investigated by the commission has been made public like this,” the statement continued. “It was released that way to provide details of the case to the public as transparently as possible.”

The ACC further noted that in December 2012 the commission submitted a case to the Prosecutor General’s Office (PGO) requesting criminal prosecution over the previous government’s decision to deduct a court-blocked Airport Development Charge (ADC) from concession fees owed to the state.

The ACC asked the PGO to seek reimbursement of MVR 353.8 million (US$22.9 million) from former MACL Chair Ibrahim ‘Bandhu’ Saleem and former Finance Minister Mohamed Shihab over the alleged misuse of authority the commission contended had led to significant financial losses for the state.

Bribery allegations

Responding to remarks in local media last week by an unnamed ACC member alleging that Imran attempted to influence the outcome of the investigation, the Adhaalath Party President admitted on DhiTV last night that he met commission members while the “National Movement” protests were ongoing.

Imran said he met ACC members after learning of efforts by GMR to bribe politicians through the former Indian High Commissioner Mulay.

Mulay also requested meetings with Imran himself on numerous occasions “through some of our ministers and even by directly calling our office,” he claimed.

Upon hearing of meetings between Mulay and ACC members, Imran said the leaders of the “National Movement” met commission members to “advise against accepting bribes.”

“[ACC members] said, ‘how can we go near that? we have sworn an oath,'” Imran said.

He claimed the ACC members told him that “the roots go deep” in the GMR deal and that former President Nasheed “completed the deal in Singapore.”

ACC members informed Imran that bribes from GMR was deposited to bank accounts in countries near Singapore, he claimed, while the commission members provided assurances that “everything would be made clear” once the investigative report was made public.

Imran said he would reveal further details of the “National Movement’s” meeting with ACC members if the commission responded to the allegations.

“In any case, we were working to liberate the airport on behalf of religion and the nation,” he said, adding that the government eventually decided to terminate the agreement without waiting for the ACC report.

As a result of pressure from the protests, he continued, the government was convinced it was not in the national interest to persist with the contract.

Imran also insinuated that the ACC would receive a portion of the US$1.4 billion compensation figure claimed by GMR.

State Minister for Home Affairs Abdulla Mohamed, who was part of the protests against GMR, meanwhile argued that the ACC releasing its report a few days before an arbitration hearing could not be “a coincidence.”

“Do we really have to comply with a court order from a Singaporean court?” he asked.

He contended that the Maldivian government would not have to compensate GMR despite a decision in favour of the consortium at the ongoing arbitration proceedings.

“Also, we can appeal such a judgment in Maldivian courts, can’t we? That’s not prohibited by Maldivian law. There’s no obstacle to that. So this is not something that the public should be concerned about at all,” he said.

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GMR compensation claim of US$1.4 billion eclipses annual state budget

Indian infrastructure giant GMR has filed a claim for US$1.4 billion in compensation from the Maldives, following the government’s sudden termination of its concession agreement to manage and upgrade Ibrahim Nasir International Airport (INIA).

According to Indian media, the 75 page claim for “wrongful termination” of the concession agreement includes payments to subcontractors and loss of profits over the lifespan of the 25 year agreement.

Both the government and the state-owned Maldives Airports Company Limited (MACL) will be invited to respond, with a final court order in the case expected in March 2014.

In separate Singapore-based arbitration proceedings one of the project’s lenders, Axis Bank, is also seeking payment of US$160 million for a loan guaranteed by the Maldivian Finance Ministry.

Axis Bank recently raised concerns with MACL and the government, after President Mohamed Waheed moved to create a state-owned airport company and transfer to it MACL’s management responsibilities.

The prospect of MACL’s assets being dissipated led Airports Council International (ACI), the global body representing the world’s airports, to advise its members to exercise caution before making any investment in the Maldives relating to INIA, warning of “legal and financial risks”.

The government subsequently dropped the attempt, after its Attorney General Aishath Bisham warned that President Waheed had exceeded his authority in appointing board members to the new entity.

The lead up to eviction

GMR, in consortium with Malaysia Airports, narrowly won the International Finance Corporation (IFC)-managed bid for the airport in 2010, and signed the agreement with MACL under the former government of Mohamed Nasheed

The then-opposition, including the Progressive Party of the Maldives (PPM), People’s Alliance (PA), Dhivehi Qaumee Party (DQP) and Adhaalath Party (AP), opposed the agreement primarily on nationalistic grounds, and alleged corruption in the bidding process.

Other concerns raised by the opposition at the time included the prospect of GMR allowing Israeli military aircraft to stop over in the Maldives and refuel “after bombing Arab countries”.

The DQP then filed a civil court case, managing to block the developer’s charging of an Airport Development Charge (ADC) stipulated in the concession agreement, on the grounds it was a tax and therefore required parliamentary approval.

Backing the concession agreement, the Nasheed government permitted the airport developer to deduct the ADC from its share of the revenue as a stopgap measure, while it sought to appeal.

However shortly afterwards the Nasheed government was deposed during February 7 2012’s controversial transfer of power, and the opposition parties assumed control of the government – and the prospect of paying GMR for the development of the airport.

The government received US$525,355 from the airport for the first quarter of 2012, compared to the US$8.7 million it was expecting, at time it was facing a crippling budget deficit, a foreign currency shortage, plummeting investor confidence, spiraling expenditure, and a drop off in foreign aid.

In the second quarter GMR presented MACL with a bill for US$1.5 million, and in the third quarter, US$2.2 million.

“The net result of this is that the Maldivian government now has to pay GMR for running the airport,” wrote DQP Leader and newly-appointed Special Advisor to President Mohamed Waheed, Dr Hassan Saeed, in a self-described “candid” letter to Indian Prime Minister Manmohan Singh.

A subsequent report by the government’s own Auditor General (AG) found concession revenue due the government had plummeted fourfold as a result of the court verdict sought by Saeed’s own party while it was in opposition.

According to the report, net concession revenue to the government had fallen to just US$6,058,848 in 2012, compared to US$25,424,877 in 2011.

Rather than appeal the Civil Court verdict obstructing the ADC, “The new government took the view that it would not be proper for it to intervene in the legal process for the benefit of a private concern,” the report noted, and instead, on April 19 2012, the informed the developer it was “retracting the previous agreement [to offset the ADC] on the grounds that the then Chairman of MACL did not have the approval of the MACL board to make the agreement.”

GMR asserted that this decision was a political event as defined within its concession agreement, and warned that this would amount to a breach of the agreement by the government.

“The government did not accept this argument,” noted the AG.

Seeking a way out of the agreement but wary of the heavy penalties in the termination clause, the government accused the World Bank’s IFC of “irresponsibility” and “negligence” in its conduct of the bidding process.

“The government must also consider how much money has to be paid back as compensation if terminating the agreement,” said Attorney General at the time, Azima Shukoor, during a prescient press conference in September 2012.

“It is clear to all of you that the Maldives financial and economic situation is at a critical level, and in this situation [termination] is not an easy thing to do,” Shukoor said.

In August 2012, with the new terminal and refurbishment 25 percent complete according to the government’s outside engineering assessment, the government ordered a halt to construction pending new ‘regulatory approvals’, and demanded a second runway not included in the original agreement.

GMR agreed to construct an emergency runway and proposed exempting Maldivian nationals from paying the ADC as a compromise. The company received no response to the offer.

Dr Hassan Saeed meanwhile issued a pamphlet calling for the cancellation of the agreement, likening it to “taking bitter medicine to cure a disease” or “amputating an organ to stop the spread of cancer.”

In his letter to Indian Prime Minister Manmohan Singh, dated September 19 2012 and obtained by Minivan News, Saeed further claimed that “GMR and India ‘bashing’ is becoming popular politics”, and warned that “as a result, “the Maldives is becoming fertile ground for nationalistic and extremist politicians.”

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

Saeed went on to accuse GMR of extensive bribery, including the payment of “millions of dollars to buy MPs to get a parliamentary majority for the then ruling Maldivian Democratic Party”.

He claimed that “politicians and MPs who end up in GMR’s pocket keep silent but no one – with the exception of former President Nasheed and his key associates – have defended the indefensible GMR deal in public.”

Eviction

In late 2012 the government declared the concession agreement ‘void ab initio’ (invalid from the outset), and gave GMR seven days’ notice to leave the country.

The move swiftly followed the Singapore Supreme Court’s lifting of an injunction blocking MACL from taking over the airport pending arbitration proceedings, on the grounds the arbitration court had no jurisdiction to prevent the Maldives as a sovereign state from expropriating the airport.

The full verdict however did not exempt the government from compensation for this maneuver. In fact, according to the verdict document, Financial Controller for the Ministry of Finance Mohamed Ahmed “affirmed in an affidavit that the Maldives government would honour any valid and legitimate claim against it. He also stressed that the Maldives government had never defaulted on any of its payments.”

Moreover, lawyer representing MACL, Christopher Anand Daniel, “also accepted that if the arbitration tribunal found that the Appellants were wrong in their asserted case that the Concession Agreement was void ab initio and/or had been frustrated, but the Appellants had by then already gone ahead with the taking over of the airport, they would at least be liable to compensate the respondent for having expropriated the airport” (emphasis retained).

ACC exonerates airport deal

The Auditor General’s report acknowledged allegations of corruption in the deal, but finding the evidence “not conclusive on this point”, deferred to the judgement of the Anti-Corruption Commission (ACC).

That arrived on June 17, 2013, in the form of a 61 page investigative report that concluded that the bidding process was conducted fairly by the IFC, and that the GMR-MAHB consortium won the contract by proposing the highest net present value of the concession fee.

The ACC further concluded that the awarding of the contract did not contravene amendments brought to the Public Finance Act requiring parliamentary approval for such agreements.

Furthermore,  “Considering the situation (2008, 2009 and 2010) when the decision was made to privatise the Male’ International Airport,” the ACC’s calculations showed that MACL would make a profit of about US$254 million in 25 years if the airport was operated by the government-owned company.

Conversely, the government would receive about US$534 million in the same period from the GMR consortium if the airport was privatised, the ACC found.

Reactions

Following publication of the ACC’s report, the government has backed away from allegations of corruption and instead declared to evict the developer was made due to its impact on state finances.

“Back before the government took back control of the airport from GMR, the reason we gave was that the deal was bleeding the country’s economy. We were paying GMR to keep them here,” President’s Office Spokesperson Masood Imad told Minivan News last week.

Azima Shukoor meanwhile labelled ACC’s report “incomplete” and “lacking professionalism”, in an interview with local media.

“There’s no contradiction between the government’s decision and the ACC report. We never levelled any corruption charge in terminating the agreement,” said the former Attorney General, in an interview with local media.

“Did [the ACC] omit the factors deliberately or unknowingly or simply just overlooked them? But a lot of factors have been overlooked and omitted from the report. The state will suffer great losses because of it. Especially when the country is tied up in [arbitration proceedings],” Shukoor was reported as saying.

“The state did a thorough investigation of the contract, including what happened during and after the signing of the agreement. So the government’s legal position doesn’t and shouldn’t change due to the report. We made a very firm decision,” she said.

Speaking at a campaign rally on the island of Thimarafushi in Thaa Atoll, former President Nasheed observed that the figure sought by GMR as compensation amounted to more than the annual state budget of the Maldives.

“Even today in my view it is one of the most important duties of the People’s Majlis to renew the contract, find a way to hold discussions with the company over [renewal], and save the Maldives from the great misfortune our people are about to face,” he said.

Former President Maumoon Abdul Gayoom’s PPM have meanwhile laid the blame for the airport debacle on President Waheed, accusing him of “ignoring advice”.

“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,” he said. “Unfortunately, this was not done and suddenly there was this unhappy ending,” Gayoom was reported as saying in the Hindu, following a visit to India and a meeting with Prime Minister Singh.

Following the PPM’s apparent turnaround on the GMR issue, Parliamentary Group Leader of the Waheed-aligned Dhivehi Rayithunge Party, Dr Abdulla Mausoom, said it was in fact senior figures in the PPM who were among the most vocal supporters for terminating the GMR agreement.

“It is ironic that we are hearing these statements from the PPM, whose leader has been witnessed supporting rallies demanding the cancellation of the [GMR] agreement,” he said.

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