Cabinet ministers have opted to try expanding the number of investment opportunities available in the Maldives in order to generate interest from foreign enterprises.
Following discussions on a paper presented to the cabinet by the Ministry of Economic Development, a decision was taken yesterday to create a “scheme of action” outlining how to attract and handle foreign investments being made in the Maldives, according to the President’s Office website.
The cabinet was also said to have agreed on the need for a specific investor focus around the provision of basic needs, updating public services and developing the country’s economic landscape.
As a result of the investment plan, the islands of aakan’doodhoo and Firun’baidhoo in Shaviyani Atoll and Maakuredhdhoo in Noonu Atoll are expected to be leased out for long-term agricultural projects.
The cabinet’s decision comes as Indian media earlier this month raised concerns that enterprises including TATA and infrastructure group GMR – both presently operating in the Maldives – were struggling to overcome political interference they claim is derailing their substantial investments in the country.
GMR, contracted to develop and manage a new terminal at Ibrahim Nasir International Airport (INIA) in Male’ in the largest foreign investment project ever seen in the country, is facing opposition from some government-aligned parties over allegations about the validity of its contract.
GMR has denied the allegations, adding that all relevant documentation was overseen at the time by the International Finance Corporation (IFC).
Last month, Jumhoree Party (JP) Deputy Leader Abdulla Jabir criticised attempts to “politicise” the dispute between the government and India-based GMR over an agreement to develop INIA – fearing a negative impact on foreign investment.
However, the Maldives National Chamber of Commerce and Industries (MNCCI) has stated that legal wrangling between the government and India-based developer GMR over the multi-million dollar airport development would not harm confidence in the country’s “challenging” investment climate.
Jumhoree Party (JP) Deputy Leader Abdulla Jabir has criticised attempts to “politicise” the dispute between the government and India-based GMR over an agreement to develop Ibrahim Nasir International Airport (INIA) – fearing a negative impact on foreign investment.
The claims were made as the government-aligned Adhaalath Party (AP), which promotes religiously conservative values in the country, has continued to call on fellow coalition partners including the JP to take part in a series of “events” in the capital to protest against GMR’s development of the airport.
Speaking to Minivan News, Jabir, who is also a serving MP, highlighted the importance of maintaining an “investor friendly” atmosphere in the Maldives despite calls by some of the JP’s government coalition partners to re-nationalise the airport.
The MP said he instead advocated for sitting down and trying to find a compromise between the government and GMR, which is contracted to develop and run the airport for 25 years.
The dispute has centred, in part, over concerns like a disputed US$25 Airport Development Charge (ADC) that was to be levied on each passenger travelling through the site. GMR has maintained the the charge was contractually agreed, but later offered to exclude Maldivian nationals from paying it after the matter was contested in the country’s courts.
With the dispute unresolved, Jabir said he had sent a request to the Public Accounts Committee of the People’s Majlis for a review of the contract signed between GMR and the government of former President Mohamed Nasheed to “better understand” the agreement.
Several former opposition parties now serving in the government of President Dr Mohamed Waheed Hassan have continued to raise allegations of possible corruption behind GMR’s bid to develop INIA – allegations refuted by the company and the former government.
Jabir maintained that discussion and analysis, rather than politicised rhetoric in the media and at public events, would be required to move forward with the issue in a manner that did not damage future investment opportunities.
“We need an investor friendly environment here. Politicians should be here to resolve issues not complicate them further,” he said. “Any allegations of misconduct should be investigated, but we should be able to sit down and discuss a resolution. Yet many people do not know about or even understand the deal that has been signed.”
Jabir claimed that the GMR contract should therefore be viewed as a business issue rather than a political problem, something that he claimed would require greater parliamentary understanding of the agreement signed by the former government.
Under the terms of the agreement – a US$511 million deal that represents the largest ever case of foreign investment in the Maldives – GMR agreed to a 25 year concession agreement to develop and manage the site, as well as to overhaul the existing terminal by the end of this year.
The document was overseen by the International Finance Corporation (IFC), a member of the World Bank group and the largest global institution focused on private sector projects in developing countries.
However, the Maldives government earlier this month accused the IFC of negligence during the bidding process for INIA – allegations there were rejected by the organisation.
Both the government and GMR are presently involved in an arbitration case in Singapore over the airport development.
Coalition response
The coalition parties making up the government of President Dr Mohamed Waheed Hassan have at times appeared divided over how to proceed in regards to GMR the contract. Some parties like the Adhaalath Party have advocated to gather in Male’ as part of a rally next month calling for the airport to be “returned” to the Maldivian people.
Speaking to local media earlier this month, Adhaalath Party President Sheikh Imran Abdulla said that a ‘mass national gathering’ would be held at Male’s artificial beach area on November 3 at 4:00pm to coincide with Victory Day. Victory Day is held in remembrance of a failed coup attempt that was thwarted in 1988.
Sheikh Imran told the Sun Online news service that the gathering was devised as part of ongoing attempts to try and “reclaim” the airport from GMR. Imran was not responding to calls from Minivans News at the time of press.
Minivan News was also awaiting a response from Abdulla Ameen, Secretary General of the government-aligned Dhivehi Qaumee Party (DQP) at the time of press concerning its response to the proposed gathering. The DQP had previously published a 24-page book claiming that the former government’s lease of INIA to GMR was a threat to local industry that would serve to “enslave the nation and its economy”.
Meanwhile, the Dhivehi Rayyithunge Party (DRP) claimed last month that while it held issues with the overall benefit to the Maldives from the GMR deal, “due process” had to be followed through proper legal channels in order to establish if any wrong doing had occurred with the airport contract.
Parliament review
JP Deputy Leader Jabir himself this week criticised certain high-profile political figures in the country over their response to the GMR contract. He accused some of these figures of not “knowing what they are talking about” in regards to the deal, highlighting the need for a review of the agreement within the Public Accounts Committee.
Jabir was particularly critical of the Adhaalath Party’s response towards the GMR issue, which he claimed had complicated finding a resolution.
“Sometimes they are religious experts, sometimes they are financial experts. But everyone loves Islam here. Right now, foreign investors are finding it difficult to understand the climate here. This is not a perfect time for this issue to be happening with GMR,” he said. “I think these protests [against GMR] are unrealistic.”
Jabir claimed that from his experience as both a parliamentarian and business owner in the country, there was “no such thing” as a deal that cannot be renegotiated.
“However, if there is no talking then the country is only losing money whilst people take to the streets,” he added.
Earlier this month, INIA CEO Andrew Harrison told Indian media that the company had received no official word from the Maldivian government concerning a resolution to the dispute.
Yet despite MP Jabir’s concerns about the potential impacts the ongoing dispute over the airport development might have on future foreign investment, one national trade body recently played down fears that GMR’s case was proving to be economically detrimental to the Maldives.
The Maldives National Chamber of Commerce and Industries (MNCCI) claimed last month that legal wrangling between the government and GMR over the multi-million dollar airport development was not adversely harming confidence in the country’s “challenging” investment climate.
MNCCI Vice President Ishmael Asif contended that ongoing legal disputes linked to both the GMR agreement and another high-profile contract to manage a border control system with Malaysia-based Nexbis were not among concerns foreign investors had raised with the chamber.
“GMR has nothing to do with the investment climate here, at the end of the day it is a personal concern for the company and more a matter of local politics,” he claimed.
The Maldives National Chamber of Commerce and Industries (MNCCI) has claimed legal wrangling between the government and India-based developer GMR over a multi-million dollar airport development will not harm confidence in the country’s “challenging” investment climate.
Under the terms of the Ibrahim Nasir International Airport (INIA) agreement – the largest ever foreign investment in the Maldives’ history – GMR signed a 25 year concession agreement to develop and manage the site, as well as redevelop the existing terminal by the end of this year.
However, the coalition government of President Dr Mohamed Waheed Hassan since coming to power has continued to press to “re-nationalise” the airport, with the country’s Deputy Tourism Minister this week confirming in Indian media that the administration wouldn’t “rule out the possibility of cancelling the award [to GMR]”.
Both parties are presently involved in an arbitration case in Singapore over the airport development as several government coalition parties including the country’s religious Adhaalath Party (AP) held a gathering in Male’ on Thursday showing a “united stand” on opposing the GMR deal until the airport was “liberated”.
MNCCI Vice President Ishmael Asif contended that ongoing legal disputes linked to both the GMR agreement and another high-profile contract to manage a border control system with Malaysia-based Nexbis were not among concerns foreign investors had raised with the chamber.
“GMR has nothing to do with the investment climate here, at the end of the day it is a personal concern for the company and more a matter of local politics,” he claimed.
When questioned on the perceived financial factors behind the “quite challenging” investment climate, Asif pointed to political unrest in the country in the build up ad aftermath of February’s controversial transfer of power.
“A second factor is that in major investment markets like Europe, the economy is not doing very well, which does have an impact,” he said. “Locally of course, the problem is politics.”
Asif added that among the key concerns raised by foreign investors to the MNCCI about doing business in the Maldives were concerns about locals laws and regulations, particularly regarding depositioning and withdrawing funds.
The MNCCI also questioned the current importance of Sri Lanka and India for investment and trade opportunities in the country, compared to markets like Australia and the Middle East. Asif claimed that India and Sri Lanka mainly traded certain local foodstuffs with the Maldives, rather than providing large-scale investment projects.
“In terms of the affects to the investment climate, I don’t think there will be much of an impact on other investors from the GMR issue,” he said.
Conversely, Asif said that the MNNCI had been concerned about the impact of the GMR deal on local businesses, alleging that a planning council related to the infrastructure group’s bid had not been open to the public or its members.
“The public was kept in the dark over this matter,” he said, adding that local workers were concerned about the pact of GMR’s airport development. “All local businesses had to move out of the airport and were shut down.”
Asif pointed to the case of local enterprises such as MVK Maldives Private Limited, which in December last year was ordered by the Civil Court to vacate the Alpha MVKB Duty Free shop based at INIA after its agreement had expired.
On December 14, company CEO Ibrahim Shafeeq held a protest “to demonstrate our opinions and dislike of what GMR has done to us, and to get public responses.”
Speaking to private broadcaster Raaje TV this week, former Economic Development Minister Mahmoud Razee, who had worked with the previous government and international partners on the GMR agreement denied that the deal had resulted in local enterprises being kicked out.
“The privatisation policy does not itself kick others out. It is about honouring the contract. No one has actually been kicked out, but private parties have opportunities to participate. The issue that has always existed is getting cheap capital for small scale businesses,” he claimed.
Razee claimed that the GMR deal reflected a commitment by the former government to pursue privatisation as outlined in the Maldivian Democratic Party’s (MDP’s) manifesto.
“Firstly, if or when anything is run like a business, private people are more skilled and efficient. They are far more competent and they work for profit unlike the government,” he claimed. “This means it requires less cost for the government, but needs more outside investment or capital. Private people are more skilled and efficient in terms of managing. The end product thus is more beneficial.”
Addressing criticisms from some local politicians that privatisation provided no benefits to the nation, Razee conceded there was an element of truth to the assumption, but stressed it did not reflect longer-term economic benefits.
“Because the investment is huge, the project is big; the first beneficiaries are always the investors. True. The benefits go to the foreigners,” he said. “In foreign countries, they make a consortium, which means the profits are being shared within multiple parties. For example, if a Turkish company is investing here, it doesn’t mean they do everything themselves. If they are developing a property, the construction, or other necessary work is done through local companies.”
Despite the claims, local media reported that a gathering at Male’ artificial beach area went ahead on Thursday (September 27) as part of a protest under the name “The Maldivians’ airport to Maldivians”.
According to local media, of the government-aligned parties represented, only the leaders of the Adhaalath Party such as were witnessed in attendance during the gathering.
“The protest… was not participated [in] by large numbers of people,” according to the Haveeru newspaper.
During the demonstration, a number of speakers reportedly called for action to “regain” the airport from GMR and annul the current development agreement, while claiming the estimated US$700 million required by the company in compensation would be lower.
The gathering is expected to be the first in an ongoing series of events to push for the airport to be “renationalised”.
Both AP President Sheikh Imran Abdulla and Minister of State for Islamic Affairs Mohamed Didi were not responding to calls from Minivan News at the time of press.
Despite these commitments, the Dhivehi Rayyithunge Party (DRP) has said it would not join its fellow government coalition partners in protests to oppose the airport privatisation contract, claiming any resolution to the dispute must be made through the courts.
DRP Spokesperson Ibrahim Shareef has told Minivan News this week that while the party itself questioned if the GMR deal was in the best interest of the public, “due process” had to be followed through proper legal channels in order to establish if any wrong doing had occurred with the airport contract.
The Dhivehi Rayyithunge Party (DRP) will not join its fellow government coalition partners at a gathering in Male’ to oppose an airport privatisation contract with India-based infrastructure group GMR, claiming any resolution to the dispute must be made through the courts.
DRP Spokesperson Ibrahim Shareef has told Minivan News that while the party itself questioned if the GMR deal was in the best interest of the public, “due process” had to be followed through proper legal channels in order to establish if any wrong doing had occurred with the airport contract.
“Right now we do not feel that the best option is to take to the streets on this matter. We do not know what the purpose of this [coalition] gathering is, so we will not be taking part,” he said.
Shareef added that the party’s position remained that the government was bound to the agreement should it fail to prove through due process that the contract to develop and manage Ibrahim Nasir International Airport (INIA) was invalid.
The comments were made as key financial figures within the former government maintained this week that the deal was vital to not only modernise and boost efficiency at the airport, but also to address concerns over present state expenditure through a focus on privatisation.
Under the terms of the agreement – a US$511 million deal representing the largest ever case of foreign investment in the Maldives’ history – GMR agreed to a 25 year concession agreement to develop and manage the site, as well as redevelop the existing terminal by the end of this year.
The document was overseen by the International Finance Corporation (IFC), a member of the World Bank group and the largest global institution focused on private sector projects in developing countries.
However, the Maldives government earlier this month accused the IFC of negligence during the bidding process for INIA – allegations there were rejected by the organisation amidst continued calls from government-aligned parties to renationalise the airport.
With the arbitration ongoing, six government-aligned parties are set to hold a gathering from 9:00pm on Thursday night at the Artificial Beach area of Male’ calling for INIA, as the country’s main airport, to be “returned to Maldivians”.
Through a movement called “Maldivians’ airport back to Maldivians”, the coalition – excluding the DRP – told local media this week that the gathering represents the first in a series of activities aimed at regaining management of the airport.
According to local newspaper Haveeru, Sheikh Imran Abdulla of the government-aligned religious Adhaalath Party (AP) said the gathering was aimed at showing the coalition would take a “united stand” on opposing the GMR deal until the airport was “liberated”.
“Our hope is on the night the true feeling of the Maldivian people would be revealed on the airport issue,” he was quoted as saying by Haveeru.
The coalition movement is also expected to detail what it has claimed are losses sustained to the local economy from the awarding of the company to the Indian infrastructure group.
Sheik Imran was not responding to calls at the time of press. However, fellow AP member and Maldives’ Islamic Affairs Minister, Sheikh Mohamed Shaheem Ali Saeed, said he had “no idea” about any such gathering being held.
Meanwhile Dr Hassan Saeed, head of fellow coalition member the Dhivehi Qaumee Party (DQP), referred a query by Minivan News about the gathering to the party’s Secretary General, Abdulla Ameen. Ameen was not returning calls at the time of press.
Progressive Party of Maldives (PPM) Parliamentary Group Leader Abdulla Yameen meanwhile referred enquiries about the gathering to Secretary General Yumna Maumoon – daughter of former President Maumoon Abdul Gayoom. Yumna was not responding to calls at the time of press.
DRP Spokesperson Shareef claimed that even should the validity of the agreement between GMR and the former government be found to be questionable, it remained for the courts to decide on such a matter. Shareef added that senior members of his party had been penalised for holding such views by political opponents.
“Both [DRP Leader] Ahmed Thasmeen Ali and Parliamentary Speaker Abdulla Shahid have been accused of taking bribes on this matter and trying to obstruct efforts to take the airport,” he said.
Shareef claimed the allegations had been devised by a faction formed in the DRP by members loyal to former party head and national President Gayoom, which later branched off to form the PPM party last year.
“Gayoom’s supporters had wished to take the airport back by force,” he said. “I’m not saying the deal is fair, but first we can look to renegotiate terms and get a new agreement. Also the government has the resources to investigate the deal and make the best decision on how to move forward to benefit the Maldivian people.”
Shareef added that the party had therefore decided against “taking to the streets” with other parties in President Waheed’s coalition government.
“We are not saying that the former government were not involved in something improper with the agreement,” he claimed. “But we do not see the previous government as an MDP government, or the current government as a DRP or PPM government, it is always the government of the Maldives, so if an agreement made by the government is found to be valid, than it must be honoured under the law.”
Privatisation pursuit
Speaking yesterday on private broadcaster Raaje TV, former Economic Development Minister Mahmoud Razee said the GMR deal reflected a commitment by the former government to pursue privatisation as outlined in the MDP’s manifesto.
“Firstly, if or when anything is run like a business, private people are more skilled and efficient. They are far more competent and they work for profit unlike the government,” he claimed. “This means it requires less cost for the government, but needs more outside investment or capital. Private people are more skilled and efficient in terms of managing. The end product thus is more beneficial.”
Addressing criticisms from some local politicians that privatisation provided no benefits to the nation, Razee conceded there was an element of truth to the assumption, but stressed it did not reflect longer-term economic benefits.
“Because the investment is huge, the project is big; the first beneficiaries are always the investors. True. The benefits go to the foreigners,” he said. “In foreign countries, they make a consortium, which means the profits are being shared within multiple parties. For example, if a Turkish company is investing here, it doesn’t mean they do everything themselves. If they are developing a property, the construction, or other necessary work is done through local companies.”
Also speaking during the programme was MDP member and former Minister of Finance and Treasury Mohamed Shihab. Shihab claimed that in cases where there was limited national budgets such as in the development of a new airport terminal, then finance should be sought from outside sources.
He added that as within the case of technology and other expertise, and pointed to local resort groups such as Universal Resorts Maldives as examples in the country’s past where foreign partnerships had benefited the country’s economy.
“Resort owners do [private partnerships] because they profit from it. Let’s conduct a survey among resorts. Definitely the salaries and service charges are higher in foreign managed companies. It is a fact that, countries where foreign investment has been made are far more developed.”
Speaking earlier this year, INIA Chief Executive Officer Andrew Harrison claimed that INIA would remain a Maldivian owned enterprise that would be continuously developed by the company for the duration of the tender.
“We are just the caretakers here,” he said. ”The airport remains and has always been owned by Maldivians.”
Harrison contended that to ensure profitability for its investment in the airport, GMR was itself committed to strengthening the wider Maldivian economy by working with local businesses, industry and contractors.
President of the Anti Corruption Commission (ACC) Hassan Luthfee has said there may be an extended delay before work is resumed on GMR’s development of Ibrahim Nasir International Airport (INIA).
“It will take some time. It is not easy for us to finish it,” said Luthfee.
CEO of GMR Maldives Andrew Harrison last week said that no work had been completed on the site since August 2.
Work was initially halted due to issues relating to missing permits – an issue which Harrison said had now been resolved.
Luthfee said today that the government was now waiting for the ACC to finish its three cases concerning the Indian infrastructure company’s deal which was signed under the presidency of Mohamed Nasheed in 2010.
At US$511 million deal represents the largest foreign investment deal in the country’s history.
Luthfee refuted local media reports that two of the three cases will be completed by this Saturday.
“We have started the investigations and analysed the agreements and maybe we will finish our first reports in two weeks,” said Luthfee.
Luthfee was also keen to correct media reports that the ACC had requested a foreign expert to help specifically with the GMR investigations.
He stated that the ACC had been seeking an expert for assistance with all of the commission’s work but had struggled to accommodate one within the current budget.
Luthfee also added that the investigation would be conducted in conjunction with the Auditor General (AG) in order to give the process “greater transparency.”
Following a Supreme Court ruling on a separate case last week, Luthfee argued that the ACC was powerless without greater powers to prevent corruption.
“In other countries, Anti Corruption Commissions have the powers of investigation, prevention and creating awareness. If an institution responsible for fighting corruption does not have these powers then it is useless,” he said.
President’s Spokesman Abbas Adil Riza, who was not responding to calls at time of press, told local media yesterday that the government would not be able to take any decision regarding the GMR project until the ACC’s investigations were completed.
“ACC’s decision on the issue is very important for the government; it would assist the government in resolving this issue. There’s no legal action the government can take otherwise,” Abbas told Sun Online.
In June, pro-government parties re-affirmed a joint 2010 agreement calling for nationalisation of the airport.
The leader of one of these parties, Gasim Ibrahim of the Jumhooree Party (JP), was quoted in local media yesterday as saying he would oppose the GMR deal for as long as he lived.
These comments closely followed media reports that GMR had terminated the credit facility of Gasim’s Villa Air company after it had amassed MVR 17 million ($US1.1million) in unpaid bills.
There was no one from Villa Air available for comment at the time of press.
Fellow national unity government party, the Dhivehi Qaumee Party (DQP), filed a case last November against the introduction of an Airport Development Charge (ADC) which had been key to financing the project.
The DQP also produced a document criticising the deal and drawing parallels between foreign investment and colonialism.
After the Civil Court ruled the ADC an illegal tax, the Nasheed government reached an interim arrangement whereby GMR would deduct the lost revenue from the concessionary payments owed to the government.
This issue has become a major point of friction with the new government which subsequently declared this interim arrangement illegal also.
Transport Minister Dr Ahmed Shamheed, also not responding to calls today, met with India’s Civil Aviation Minister last week, informing him of the issues with the GMR project.
“The Civil Aviation Minister talked about this issue in detail, while we were on the subject of foreign investments. Until now, the Indian government had been aware only that the Maldivian government has an agreement with GMR. So we took the opportunity to explain the problems associated with this agreement. It was a good chance to inform them of this,” Shamheed told Sun Online.
Whilst Shamheed visited India, President Dr Mohamed Waheed Hassan, was in China where as well as meeting with prominent businessmen, he told the China-Eurasia Economy Development and Cooperation Forum that the Maldives was “open for business”.
Local business tycoon, media owner, MP, Jumhoree Party (JP) leader and member of the Judicial Services Commission (JSC), Gasim Ibrahim, has warned that the dollar exchange rate of the Maldivian rufiya may rise to MVR 20 by the end of the year – a 25 percent increase.
Speaking at a press conference on Sunday, Gasim told local media that the main reason for the Maldivian currency to go down was “selling Ibrahim Nasir International Airport to GMR, selling the shares of Dhiraagu, and the Maldives Water and Sewerage Company.’’
Gasim claimed the three companies were now taking US$2 billion dollars out of the country annually.
At the press conference, Gasim – who also operates domestic airline Villa Air, under the FlyMe brand – alleged the former government had not awarded the airport to GMR in a way that would benefit the citizens, and expressed concern over increased fuel prices and landing fees.
Gasim’s comments follow GMR’s suspension of Villa Air’s credit facility due to unpaid bills of MVR 17 million (US$1.1 million) for fuel, ground handling and passenger service fees, according to local media reports on Saturday.
His concern over currency devaluation follows the former government’s managed float of the rufiya within a 20 percent band of the pegged rate of MVR 12.85.
In April last year, then-Finance Minister Ahmed Inaz explained that the government decided to change the fixed exchange rate to a “managed float” to shape government policy towards increasing the value of the rufiya and ultimately bring the exchange rate down to MVR 10 – an oft-repeated pledge of former President Mohamed Nasheed.
The worsening balance of payments deficit could not be plugged without allowing the market to set the exchange rate, Inaz continued, adding that through lowering the fiscal deficit and spurring private sector job growth “a path would open up for us to reach the lower band (MVR 10.28).”
“My estimate is that it will take about three months for the market to stabilise and reach a balanced [exchange] rate,” he said.
Following this decision of the former government the then opposition Dhivehi Rayyithunge Party (DRP), which has since divided into two factions, held protests in the streets of Male’ against the decision.
The International Monetary Fund (IMF) however praised the Maldives’ decision to effectively devalue its currency as a “bold step by the authorities [representing] an important move toward restoring external sustainability.”
The Dhivehi Rayyithunge Party (DRP) has called on the government to consider the potential financial repercussions and impact on investor confidence should it renege on a contract with Indian infrastructure group GMR to develop Ibrahim Nasir international Airport (INIA).
DRP Leader Ahmed Thasmeen Ali today said the party had asked the current government to assess the possible implications of cancelling the GMR agreement in three key areas before his party decided on whether to agree to proceed with renationalising INIA.
An agreement now thought to amount to US$511M was signed between GMR and the previous government of Mohamed Nasheed in June 2010 to manage and build a new airport terminal by 2014, as well as renovate the existing airport facilities in the meantime
The deal, the largest single financial investment in the Maldives’ history, has since faced several protracted legal disputes resulting this month in the infrastructure giant referring a disputed US$25 Airport Development Charge (ADC) included in its contract to a court of arbitration in Singapore.
Several pro-government parties – including the DRP, the Dhivehi Qaumee Party (DQP), People’s Alliance (PA) and Jumhoree Party (JP) – advised President Waheed in June this year that they continued to endorse an agreement signed in June 2010 calling for the airport to be taken back from GMR and nationalised.
The agreement endorsed six main points which included taking legal action to prevent the government’s decision to award the contract to GMR.
Thasmeen’s comments today about assessing the potential impacts of terminating the contract were made as Progressive Party of Maldives (PPM) Deputy Leader Umar Naseer alleged in local media that the DRP was now the “main obstacle” to the state resuming management of the airport.
The PPM is a coalition partner of the DRP in the government of President Dr Mohamed Waheed Hassan.
According to newspaper Haveeru, Naseer contended that an invitation from Indian Prime Minister Manmohan Singh to meet with Thasmeen this week was directly related to the GMR airport dispute.
With the Maldivian Democratic Party (MDP) and the PPM respectively holding the majority and minority leadership roles in parliament, he questioned the reason for Thasmeen’s invite other than discussing the airport case.
“I do not think this trip is related to anything else. The DRP not the main opposition anymore as everyone knows. Even if it is taken in an official manner, the parliament minority leader is from PPM,” Naseer was quoted as saying.
Naseer also claimed that President Mohamed Waheed Hassan’s government wanted to reclaim the management of the airport from GMR – a pledge he hoped would be carried out even without the support of the DRP.
An Anti-Corruption Commission (ACC) investigation into allegations that DRP Leader Thasmeen and Parliamentary Speaker Abdulla Shahid accepted US$1 million in bribes from GMR was last year reported to have “investigated thoroughly”, both men were cleared of wrongdoing over the case.
Thasmeen, Shahid and GMR have all vehemently dismissed the allegations of bribery.
Responding to Naseer’s claims today, Thasmeen told Minivan News that his recent visit to India was the result of a long-standing invitation by the Indian government to discuss a number of issues including the current political situation in the Maldives. He added the visit had not been related to GMR’s dispute with the government.
Thasmeen was not drawn into whether the issue of the GMR contract formed part of discussions, adding only that the prime minister had shown a desire for long-term stability in the Maldives during the talks.
“He was clear in his desire to see a resolution to the current political problems in the Maldives,” he said.
In addressing the issue of GMR, Thasmeen claimed that the DRP has already responded to a request by President Waheed for the views of his coalition government on how to proceed over the matter of the GMR case – but had yet to decide on possible renationalisation.
“In making a decision on this case and the GMR contract, there are three things to consider. These are the impacts on investor confidence from pulling out of such a deal, the impact this will have on bilateral relations with friendly nations and the extent of the financial repercussions from terminating such a contract,” Thasmeen claimed. “What sort of compensation might there be for example? The government is best placed to make such an assessment and we will wait for it to do so before making a decision on the case.”
While GMR has pledged to have the new terminal open by July 1, 2014 “irrespective” of outside issues, the Maldives government has pledged to back the will of parliament should it decide on re-nationalising the project.
The relationship between the airport developer and the government soured further late last month after the government temporarily called for a halt to work on the new airport terminal, alleging it had “violated rules and regulations” by not acquiring certain permissions from the Civil Aviation Authority.
In a statement, the infrastructure giant said the GMR Malé International Airport Private Limited (GMIAL) joint venture company had obtained “requisite approvals” under the regulations at the time construction commenced, but had since been asked to seek further approval from authorities.
“We have received a letter from Maldives Civil Aviation Authority asking us to seek its approval pursuant to a recent regulation, for the construction works related to the proposed new Passenger terminal building. Pending the approval, MCAA has directed stoppage of the said works,” GMR stated. “This has no impact on the operations of the airport at the existing terminal.”
Amidst claims by Attorney General Aishath Azima Shakoor that the “doors for dialogue” were still open over resolving the matter of the ADC case, a GMR spokesperson told Minivan News today that the company was not able to comment if fresh discussions with the government were taking place. Shakoor was not responding to calls by Minivan News at the time of press.
The attorney general told Sun Online that the company could be waiting for up to two years for a resolution to the ADC court case in Singapore. She claimed that discussions between the company and the government remained the “best way” to resolve the issue therefore.
Compromise
Earlier this year, GMR said it had sought to compromise with the government by offering to exempt Maldivian citizens from paying the ADC. However, the Transport Ministry continued to demand that the infrastructure giant repay US$8.2 million deducted from the concession agreement.
Under the concession agreement, a US$25 Airport Development Charge (ADC) was to be levied on all outgoing passengers to part-fund the airport development.
However, while in opposition, the Dhivehi Qaumee Party (DQP), led by Dr Hassan Saeed, now President Dr Mohamed Waheed’s special advisor, and Dr Mohamed Jameel, now Home Minister, filed a successful case in the Civil Court in December 2011 blocking payment of the ADC on the grounds that it was effectively a tax not approved by parliament.
Nasheed’s government as a stopgap measure agreed to deduct the ADC from the concession fees payable by GMR, while it sought to appeal to verdict.
According to financial statements sent to MACL and released to local media, in the second quarter of 2012, GMR deducted the ADC revenue of US$7.1 million from total revenues of US$5.6 million, leaving the government with a bill for US$1.5 million.
Managing Director of MACL Mohamed Ibrahim told local newspaper Haveeru at the time that the government would not pay the amount, alleging that GMR’s deduction of the ADC from the revenue was illegal.
In its defence, MACL has said that its board of directors had been reformed with the arrival of the new government, and a decision made to annul the old board’s agreement to deduct the ADC revenue.
“The advisory work was supported by AusAid (Australia), the Ministry of Foreign Affairs of the Netherlands, and DevCo. DevCo is a multi-donor program affiliated with the Private Infrastructure Development Group and funded by the UK’s Department for International Development, the Ministry of Foreign Affairs of the Netherlands, the Swedish International Development Agency, and the Austrian Development Agency,” the IFC explained, following a visit by the delegation in June to address the government’s concerns.
Following the first quarter deduction, GMR announced an employee benefits scheme converting 50 percent of employee salaries to US dollars from July onwards, and a one-percent profit-share.
The Maldives government has called for a cessation of work on the new airport terminal by Indian infrastructure group GMR, over allegations the company has “violated rules and regulations” regarding the construction.
President’s Office Spokesperson Abbas Adil Riza confirmed to Minivan News that the cabinet, acting on information provided by the Transport Ministry, had requested that building work on the new terminal at Ibrahim Nasir International Airport (INIA) be halted.
“When the government decides that a project be stopped, we will make sure this happens,” he said. “GMR have not discussed the construction with relevant authorities.”
Abbas did not clarify if the alleged violation of rules and regulations by the company was related to previous reports that construction on the project commenced last month without obtaining construction permits from the country’s Civil Aviation Authority.
Transport and Communications Minister Dr Ahmed Shamheed was not responding to calls at the time of press.
A GMR spokesperson said today that the company itself had received no letter or communications calling for a halt to work.
However, local media has reported that the cabinet opted on Tuesday (July 24) to call for a “temporarily halt” on work on the terminal, over claims GMR had not acquired necessary authorisation and permit approval from the country’s Civil Aviation Authority.
GMR told Haveeru earlier earlier this month that terminal construction had been approved in an existing master-plan agreed with the government. The company has pledged that it will open by July 2014, “irrespective” of outside issues.
Addressing the matter of GMR’s construction work earlier this month, the government at the time claimed that the permit was “not a huge issue” and was believed to have resulted from an error by contractors presently working on the airport’s construction.
Development plans
The development of the airport – expected by the company to total US$511m in costs – is the largest foreign investment project undertaken in the Maldives’ history and includes commitments to renovate INIA’s existing terminal by September both in terms of operational efficiency and customer services, according to GMR.
With contractors already having begun work on the new structure in June, the administration of President Dr Mohamed Waheed has previously stressed that it would not seek to interfere or “disturb” the project that officially commenced back in November 2010 under the administration of former President Mohamed Nasheed.
However, President’s Office Spokesperson Abbas previously claimed that the long-term prospects of the construction ultimately depended on GMR validating the legality of their contract – a document that was overseen by the International Finance Corporation (IFC). The IFC is a member of the World Bank group and the largest global institution focused on private sector in developing countries.
Abbas added that should the (now government party controlled) parliament also decide on nationalising the airport in line with the wishes of certain pro-government parties to take back the project from GMR, then the present administration would have to comply with such a decision.
The government of President Dr Mohamed Waheed Hassan comprises a coalition of former opposition parties that represent the majority of elected representatives. The now-opposition Maldivian Democratic Party (MDP) presently has 29 MPs in the Majlis, the largest number of MPs belonging to a single party.
Nationalisation calls
Several pro-government parties – including the Dhivehi Rayithunge Party (DRP), Dhivehi Qaumee Party (DQP), People’s Alliance (PA) and Jumhoree Party (JP) – advised President Waheed last month that they continued to endorse an agreement signed in June 2010 calling for the airport to be taken back from GMR and nationalised.
The agreement endorsed six main points which included taking legal action to prevent the government’s decision to award the contract to GMR.
Infrastructure giant GMR has said the new terminal at Ibrahim Nasir International Airport (INIA) will open two years as of yesterday (July 1) “irrespective” of outside issues.
The government has meanwhile pledged to back parliament should it decide on re-nationalising the project.
The development of the airport – expected by the company to total US$511m in costs – is the largest foreign investment project undertaken in the Maldives’ history and includes commitments to renovate INIA’s existing terminal by September both in terms of operational efficiency and customer services, according to GMR.
At the same time, work is also under way on an entirely new terminal structure on the Eastern-side of Hulhule’ island that GMR has claimed will completely transform the country’s foremost transfer hub for local people and international visitors alike.
Work conducted by GMR to reclaim the new terminal ground
Local media outlets were on Saturday updated on the redevelopment of the island and shown around the new terminal site which, when completed, will aim to cater for increases in international traffic predicted in the country up to 2035. The site is also required to bring INIA’s operations in line with international aviation standards.
With contractors already having begun work on the new structure as of last month, the government has stressed that it will not seek to interfere or “disturb” the project that officially commenced back in November 2010 under the administration of former President Mohamed Nasheed. This government commitment was made despite raising concerns over what it claimed are minor issues relating to business regulations on the site.
However, President’s Office Spokesperson Abbas Adil Riza said the long-term prospects of the construction ultimately depended on GMR validating the legality of their contract – a document that was overseen by the International Finance Corporation (IFC). The IFC is a member of the World Bank group and the largest global institution focused on private sector in developing countries.
Abbas added that should parliament also decide on nationalising the airport in line with the wishes of certain pro-government parties to take back the project from GMR, then the present administration would have to comply with such a decision.
The government of President Dr Mohamed Waheed Hassan comprises a coalition of former opposition parties that represent the majority of elected representatives. The now-opposition Maldivian Democratic Party (MDP) presently has 29 MPs in the Majlis, the largest number of MPs belonging to a single party.
Nationalisation calls
Several pro-government parties – including the Dhivehi Rayithunge Party (DRP), Dhivehi Qaumee Party (DQP), People’s Alliance (PA) and Jumhoree Party (JP) – advised President Waheed last month that they continued to endorse an agreement signed in June 2010 calling for the airport to be taken back from GMR and nationalised.
The agreement endorsed six main points which included taking legal action to prevent the government’s decision to award the contract to GMR.
GMR’s contract is currently under scrutiny by a committee appointed by President Waheed, which includes the Attorney General, the Finance Minister and the CEO of Maldives Airports Company Ltd (MACL). The president has previously pledged during a visit to India that he would protect investment from the country in the Maldives.
A delegation from the IFC, which brokered the deal between GMR and the government of Maldives, recently addressed the government’s concerns over the concession agreement in a meeting with senior government officials.
Coalition concerns
When asked whether he believed GMR’s pledge to present the Maldives with a entirely new airport structure by July 1 2014 – in line with a 25 year concession agreement to develop and manage the site – would be met, Abbas claimed that concerns raised by several former opposition parties would need to be addressed.
“The point to note is that during the agreement’s signing, several unlawful points were raised by [former opposition] parties over why the government could not enter the agreement with GMR,” he claimed. “Under the law of the contract [GMR] did not perform sufficient due diligence and they must validate the legality of the contract. If any court of law rules the contract is illegal, the law must be upheld.”
The claims were made after local media reported that GMR had begun construction last month without a Civil Aviation Authority permit needed for work to begin. GMR responding in newspaper Haveeru said that the terminal construction had been approved in an existing master-plan agreed with the government.
Clarifying the report, Abbas claimed that the permit was “not a huge issue” and was believed to have resulted from an error by contractors presently working on the airport’s construction.
Under the law, he stressed that companies were required to undertake an Environmental Impact assessment (EIA) – which had been completed by GMR – as well as meet all other local business regulations.
Abbas claimed that the permit was an issue likely to have resulted due to a contractor error and could be addressed within the space of a week without major delays.
“Normal procedure would be for the cessation of work on the airport while the permit was awaiting approval. This takes about a week. I don’t see any reason for delays,” he said.
Aside from the permit issue, the government also alleged that it wished to resolve an issue over a duty-free law that outlawed duty-free shops at arrival terminals. With alcohol outlawed for consumption or purchase outside of licensed resort properties under Maldivian law, duty free stores within the airport’s arrival area was raised as a legal issue.
“These issues can easily be resolved, we are not looking to disturb the GMR deal,” he claimed. “Larger corporations need good governance, if one company does not meet its obligations everyone else may start looking for loopholes.”
Disturbance
Abbas said the most pressing issue concerning the INIA construction agreement remained the US$25 Airport Development Charge (ADC) outlined by GMR within its original agreement – a practice the infrastructure group contends is commonly used by airport developers around the world to aid the costs of large-scale renovation projects.
“The law does not allow for deduction of the ADC without parliamentary approval,” Abbas said.
The country’s Civil Court had blocked GMR charging the ADC last year on the grounds that it was a tax not approved by parliament. As the ADC was stipulated in the contract, former President Mohamed Nasheed’s administration had signed with the airport operator, the government at the time agreed that GMR would deduct the charges from the concession fees due the government, pending appeal.
With the present government having contested these deductions, GMR released a statement back in May proposing a compromise agreement whereby Maldivian nationals would be excluded paying the ADC when departing the airport.
While seeking to maintain an open dialogue with the government, GMR said Saturday that there had been no reply so far in regards to the options it had offered the government in order to find a resolution to the ADC matter.
Business politics
Despite the ongoing issues with the ADC, the infrastructure group said it did not pay too much attention to politics in the country, claiming it instead remained focused on the development of INIA.
“We don’t do politics well at all,” said INIA CEO Andrew Harrison, when questioned by local media about the impact politics was potentially having on the construction.
Speaking during a tour of the new airport structure yesterday, Harrison added that the airport construction was on track at present, and already providing improved returns to the state when compared to earnings before the agreement came into place.
He added that although there was no set deadline in order to reach consensus with the government over the resolution of the ADC charge, long-term delays could have “time and cost implications for the project”.
“Additional improvements”
Aside from contractual obligations to improve tourist processing capacity in the existing terminal, Harrison said that GMR was committed to a number of additional improvements not specified in the original concession agreement.
These improvements include an entirely new outdoor food court for the present terminal including Thai Express, Burger King and Coffee Corner restaurants that would be open to the general public as well as visitors.
He also pointed to other high-profile developments such as the refurbishment of the airport’s domestic terminal and toilets, a new executive lounge and behind the scenes modifications to boost capacity at the site as a reflection of the company’s claims it is going beyond its contractual obligations.
The new terminal meanwhile has been devised to include new shopping complexes, increased seaplane capacity via two new water runways and a considerably larger structure built above an large artificial lagoon.
The construction, comprising of a 70 percent glass structure, has been designed architecturally to play up the appeal of the Maldives’ oceans, whilst being four times the size of the terminal presently used to accommodate airline passengers.
Emergency runway
Addressing concerns raised in local media about the development of the existing runway, Harrison said that GMR had sent proposals to the government for possible construction of an emergency runway.
He stressed the the construction, which would require additional funding support either directly through the government or through the concession agreement, could be used only in case of emergencies should the main airport runway be out of action owing to an accident or emergency.
Harrison claimed that if approved by government, the emergency runway, which would not be ready by the opening of the terminal on July 1, 2014, would not be in full compliance to International Civil Aviation Organisation (ICAO) regulations, due to its distance to grounded aircraft.
With the new terminal in place, aircraft would be grounded 212 metres away from the proposed emergency runway, meaning it would not meet recommended international regulations. However, GMR claimed this distance would still be preferable in terms of regulatory requirements to the current space available between INIA’s runway and aircraft parking area.
Beyond the new terminal aiming to meet full ICAO compliance by the time it is open to tourists, the passenger terminal is also expected to meet LEED Silver Certification environmental standards.
The contruction will also include a new VIP terminal to deal with diplomats, heads of state and other high-profile guests, along with a brand new cargo terminal and a Airport Fire and Rescue Building to deal with any potential on-site emergencies.
GMR said that the terminal had been designed by Singapore-based architect Winston Choo, who had devised a structure making the most of natural ocean surroundings while also playing up garden areas and a lagoon equivalent to two football pitches in size.
As part of the terminals proposed aesthetic, distressed wood, granite and coral like materials designed to emulate the feel of high-end resort properties around the country are expected to be used, the company added.
A virtual walk through of the proposed terminal design can be viewed here.
Discussing the ongoing political backlash against the awarding of the contract to GMR back in 2010 on nationalistic grounds, Harrison contended that INIA would remain a Maldivian owned enterprise that would be continuously developed by the company for the duraction of the tender.
“We are just the caretakers here,” he said. “The airport remains and has always been owned by Maldivians.”
Harrison contended that to ensure profitability for its investment in the airport, GMR was itself committed to strengthening the wider Maldivian economy by working with local businesses, industry and contractors.
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