Government terminates Tatva waste management deal

The government has decided to terminate the agreement made with India–based Tatva Global Renewable Energy to provide waste management services in the capital Malé and nearby areas.

A company source said that the cabinet’s Economic Council informed them last month, citing unfavorable relations with the city council and the government’s preference for a state-owned service.

Speaking to Haveeru today, Economic Council Co-Chair and Tourism Minister Ahmed Adeeb confirmed the move to terminate the contract.

“The current government is looking to completely solve the waste management problem in the next two years. The previous government talked a lot about environmental issues but there was no actual work done to solve the issues,” said Adeeb.

The termination marks the latest in a number of terminated or renegotiated contracts signed under the government of Mohamed Nasheed, while current President Abdulla Yameen continues moves to improve the country’s investment climate.

City Mayor Mohamed Shihab informed Minivan News that Malé City Council had not been consulted over the decision despite being one of the parties involved in the project.

“The city council will continue on its waste management operations like it has been so far. The work so far has been done by MCC and not Tatva and this will not lead to any differences in the short run, however we would need to start looking into long term alternatives again,” said Shihab.

The council – dominated by the opposition Maldivian Democratic Party (MDP) – has this year introduced trash cans and fines for littering. Persistent conflicts with the central government, however, have continued.

The agreement with Tatva was presented as a solution to the capital’s ever-pressing waste management issues, with formal plans to generate power by recycling the waste and improving existing waste management systems.

However, the agreement faced delays following the fall of the MDP government in 2012, with renegotiations initiated as the new government of Dr Mohamed Waheed sought more “mutually beneficial” terms.

Mayor Shihab told Minivan News in May that the latest delay to the project involved the failure of the finance ministry to fund the repair of equipment required as part of the deal.

Investor Confidence

Similar problems have beset other Indian investors in recent years, with a US$190 million housing project in Malé by India’s TATA group delayed for more than two years pending renegotiation of the original terms agreed with Nasheed’s MDP government.

Shortly after the project stalled in 2012, officials from Apex Realty reportedly told Indian media of fears that local politics were derailing their investments in the Maldives.

Negotiations were concluded last month and the project resumed, with the Indian High Commission in Malé confirming that the deal now had “firm assurances from both Government of Maldives and TATA Housing”.

The most prominent Indian project curtailed by the change in government was the US$511 million lease to develop Ibrahim Nasir International Airport, terminated in November 2012 after the contract was declared void by Waheed’s cabinet.

After GMR challenged the legality of the move in a Singapore court of arbitration, the contract was deemed “valid and binding”, leaving the Government of Maldives liable for damages. Though the figure owed is yet to be determined by the court, it is expected to be considerably less than the US$1.4 billion claimed by GMR.

A 2012 report in India’s Business Standard brought forward concerns by Indian companies operating in the Maldives over political interference which they companies claimed is derailing their substantial investments in the country.

Since assuming the presidency in November 2013, Abdulla Yameen made the introduction of special economic zones the flagship of his legislative agenda, passing the SEZ Act in August.

With a minimum investment of US$150 million required for any investment projects in the special economic zones, Adeeb – also chairman of the SEZ investment board – has suggested that just one of the government’s proposed mega-projects could diversify the Maldives’ tourism-reliant economy.

While no major deals have yet been signed, a team of Chinese surveyors are expected in the country this week to carry out a survey for Malé-Hulhulé bridge – a project mooted by successive administrations.


Police ask government to revoke Artur brothers’ investor license

An investment license issued by the Tourism Ministry to a pair of Armenian brothers is to be revoked on recommendation of the police, reports local media.

Haveeru reported that police advised the Ministry of Economic Development not to issue an investor license to the Artur brothers, who were alleged to be involved with drug trafficking, money laundering, raids on media outlets and other serious crimes in Kenya. The Ministry then reportedly issued a letter to the Tourism Ministry requesting the license be revoked.

Police Spokesperson Chief Inspector Hassan Haneef is not responding to calls at time of press.

Photos of the Arturs in the company of Defence Minister Mohamed Nazim and Tourism Minister Ahmed Adheeb emerged on social media last week. The ministers denied involvement in the pair’s business activities, however a letter signed by Adheeb in late January requesting immigration authorities grant the brothers residency permits was later leaked to the media.

Adheeb claimed Artur brothers had previously invested in the country through a registered joint venture company with members of the opposition Maldivian Democratic Party (MDP).

“They complained to me that these partners had [defrauded] them and that their visas had expired,” he said at the time.

“I advised them to leave peacefully and they agreed to sort out their visa and leave. They have now left,” Adheeb said.

According to Haveeru, police advised the Economic Development Ministry revoke the Artur brother’s investment license by saying that the brothers’ presence in the Maldives was “a threat to the economy and security of the country.”

The company ‘Artur Brothers World Connections’, was registered in the Maldives in October 2012, with the Artur brothers holding an 80 percent share in a 61-19 percent split.

French nationals identified as Godzine Sargsyan and Edga Sargsyan had a 10 and 7 percent share, while a Maldivian national Ismail Waseem of H. Ever Chance was listed as holding the remaining 3 percent.

Waseem’s share was subsequently transferred to Abdulla Shaffath of H. Ever Peace on November 25.

A statement on the President’s Office website dated April 4 noted that President Mohamed Waheed was advised in January that the brothers were in the Maldives “but had not broken any laws and were being monitored by the police as a precaution. The administration later decided to ask them to leave once their visa extension expired.”

“The Artur brothers are no longer in the Maldives nor do they currently hold visas to return. The President, along with the Ministry of Tourism, Arts and Culture, Ministry of Economic Development, Ministry of Defence and National Security, and the Maldives Police Service are looking into any irregular dealings during the time the Artur brothers and their associates were here and will determine if there were any breaches in protocol or conduct that need to be addressed,” the statement read.

However Immigration Controller Mohamed Ali told local media this week that while Sargasyan Artur had left the Maldives on March 31, given issues with the country’s border control system “there are questions surrounding the second brothers’ exit from the Maldives.”

Meanwhile, reports in local media today (April 8 ) suggested that Zaidul Khaleel, General Manager of the Club Faru resort, operated by the state-owned Maldives Tourism Development Corporation (MTDC), had been dismissed after he was found to have paid the brothers’ US$6000 bill.

A spokesperson for the MTDC told Minivan News the company would shortly be issuing a statement on the matter as there were “heavy factual inaccuracies in the public domain and on electronic media”.

The brother’s activities in the Maldives have sparked substantial local interest following their dramatic departure from Kenya, after they allegedly pulled guns on uncooperative customs officials.

Subsequent investigative reports in Kenyan media found the pair had ingratiated themselves with senior government officials to such an extent that they were granted Kenyan citizenship and appointed Deputy Police Commissioners.

Local media interest in the pair extended to the publication yesterday of a photo apparently depicting former President Nasheed and former SAARC Secretary General Ibrahim Hussain Zaki apparently meeting Artur Sargsyan.

However the photograph turned out to be an edited photo taken during a formal reception for US Deputy Secretary of State James Steinberg, held at the former Presidential residence of Muleaage in January 2011, with Sargsyan Artur’s head carefully photo-shopped onto Steinberg.

Local media outlet Channel News Maldives (CNM) reported that the photograph was originally leaked by the former Immigration Controller and current State Minister for Defence, Ilyas Hussain.

Ilyas refused to comment on the matter, and edited versions of the photo featuring Nasheed meeting characters ranging from Big Bird to Justin Bieber began circulating on social media.


US private equity fund buys both Maldivian seaplane operators for undisclosed sum

US-based private equity fund Blackstone has bought a controlling stake in both the Maldives’ seaplane operators, Trans Maldivian Airways (TMA) and Maldivian Air Taxi (MAT).

Blackstone, with annual revenue of US$3.119 billion and total assets of US$18.845 billion, bought the seaplane operators for an undisclosed sum.

Senior Managing Director and Chief Investment Officer at Blackstone’s Private Equity unit based in New York, Prakash Melwani, said the investment “will enable us to build a strong partnership with the Maldives.”

“We are excited to partner with MAT and TMA, whose seaplane operations have contributed significantly to the development of resort islands further away from Male and making them accessible to tourists. Blackstone manages, through its portfolio companies, the largest number of hotel rooms in the world and this transaction marks our sustained enthusiasm for the travel and tourism space,” he said.

Founder of MAT Lars Erik Nielsen and majority shareholders of TMA, Lars Petré and Hussain Afeef, will retain “a substantial shareholding and continue to play a significant role in the companies, including serving as directors on the board,” Blackstone said in a statement.

“The Maldivian economy will gain from the presence of one of the world’s largest and most respected investment firms,” said Petré.

Nielsen stated that the move will benefit the career growth of the workers employed by the two airlines.

“In addition, together we look forward to delivering more efficient services to the tourists coming to the Maldives and the resorts in which they are staying. This combination will increase service efficiency to our resorts,” he said.

TMA Director Afeef said Blackstone would “bring to Maldives a wide global experience and an established track record in the tourism and hospitality sector. Incorporating global best practices would be beneficial not just to the companies but to the tourism industry, in general.”

TMA was started in 1988 as a helicopter operator under the name ‘Hummingbird’, which was changed to TMA in 1998 after the fleet was switched to Twin Otter aircraft. Competing operator MAT was set up in 1992.

Together both airlines operate over 40 aircraft and play both an iconic and critical role in the country’s tourism industry, transferring arrivals at Ibrahim Nasir International Airport (INIA) to resorts in neighbouring atolls and greatly expanding the capacity for tourism around the capital. Domestic air travel over longer distances – to destinations such as Addu Atoll – is served by conventional aircraft.

The substantial investment comes months after the Maldivian government expropriated the main international airport from Indian infrastructure giant GMR, declaring its concession agreement void and ordering it out of the country within seven days. The US$511 million project was at the time the country’s single largest foreign investment.

Tourism Minister Ahmed Adheeb said the Blackstone investment was a sign of confidence in the Maldivian economy, and represented a “green light” to other foreign investors.

“When a large company such as Blackstone invests in the Maldives, it shows that investors have confidence in the Maldives. Moreover, investors have set their sights on Maldives and is on their radar,” Adheeb told local media.

Deal creates a monopoly in critical sector

Former Minister of Economic Development Mahmood Razee, also former Minister of Civil Aviation, noted that the purchase “is not really a foreign investment since no additional equity is being brought into the country. Another firm has just bought the shares,” he said.

Moreover, the purchase of a controlling stake in the only two seaplane operators by a single company had effectively monopolised the market, he warned.

“This is a very exclusive market, and critical to the tourism industry. Even though both MAT and TMA operate the same aircraft, they have not previously been willing to cooperate,” Razee said.

“Now, without any discussion, they have been taken over and effectively become a monopoly,” he said, explaining that the Maldives did not have anti-monopoly laws which may have otherwise obstructed the sale: “We were looking at these when we were putting together the economic reform package [under the former government].”

Previously, resort managers could approach both companies seeking the better price for seaplane services, upon which they were reliant for the vast majority of their guest arrivals: “Now there is no effective competition, as the major shareholder is one and the same,” Razee said.

He acknowledged that “in an ideal world” prices could come down, as the two companies have been operating identical aircraft but duplicating maintenance and other services. However the end of this practice could affect jobs, he suggested.


GMR presents government with US$1.5 million bill for Q2, as ADC dispute sent for arbitration

An ongoing dispute between Ibrahim Nasir International Airport (INIA) developer GMR and the incumbent Maldivian government concerning a US$25 Airport Development Charge (ADC) has been referred to a court of arbitration in Singapore.

The government-owned Maldives Airports Company Limited (MACL) faces a US$1.5 million shortfall in concession fees owed to the airport developer for the second quarter of 2012; the legacy of an opposition-sponsored Civil Court case in late 2011 that scuttled the airport’s ability to charge the ADC as stipulated in its concession agreement.

GMR signed a 25 year concession agreement with former President Mohamed Nasheed’s government to upgrade and manage Ibrahim Nasir International Airport (INIA). Under the concession agreement, a US$25 Airport Development Charge (ADC) was to be levied on all outgoing passengers to part-fund the US$400 million development – the country’s single largest private investment.

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.

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

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 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 government meanwhile sought to invalidate the GMR contract – and the clause invoking arbitration – by challenging the handling of the bidding process by the International Finance Corporation (IFC), a member of the World Bank group and the largest global institution focused on private development sector in developing countries.

“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.

Around the same time, the company sought to compromise with government by offering to exempt Maldivian citizens from paying the ADC. However, the Transport Ministry continued to demand that the infrastructure giant repay the US$8.2 million deducted.

Several pro-government parties – including the Dhivehi Rayithunge Party (DRP), Dhivehi Qaumee Party (DQP), People’s Alliance (PA) and Jumhoree Party (JP) – meanwhile advised President Waheed that they continued to endorse an agreement signed in June 2010 calling for the airport to be taken back from GMR and nationalised.

The relationship between the airport developer and the government soured further last week 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.

“When the government decides that a project be stopped, we will make sure this happens,” President’s Office Spokesperson Abbas Adil Riza previously told Minivan News. “GMR have not discussed the construction with relevant authorities.”

Following the second quarter deduction, the airport developer declined to comment, as the matter “has been referred for arbitration by the parties.”

“GMR Male’ International Airport Pvt Ltd has made the said adjustment as per the concession agreement,” a spokesperson said.

The concession agreement includes an option for the government to buy out the contract from the developer, however the cost is likely to reach upwards of several hundred million dollars.

President’s Office Spokespersons Abbas Adil Riza and Masood Imad had not responded at time of press.