The government of Maldives is in talks with the Japan Bank for International Cooperation (JBIC) and China Exim Bank to secure a US$600 million for airport development.
Tourism Minister Ahmed Adeeb said the government is seeking US$200 million from JBIC and US$400 million from China’s Exim Bank to develop a terminal and runway respectively.
Sinagpore’s Changi Airport Group will be hired as consultants as they are better qualified to work with Chinese and Japanese contractors, he added.
The government is in the process of finalising an agreement with Changi, he said.
Speaking to the press on Tuesday, Adeeb said he does not expect a Singaporean tribunal’s ruling ordering the government to pay damages to former airport developer GMR Infrastructure for wrongful termination to affect the government’s new plans.
In abruptly terminating the contract, the government had chosen to protect the country’s multibillion-dollar tourism sector, Adeeb said. He claimed major airlines had threatened to cease operations in the Maldives following the GMR takeover – a move that may have led to collapse of tourism.
Adeeb has dismissed opposition fears of an imminent sovereign debt crisis if forced to pay GMR’s initial claim of US$ 1.4 billion, repeatedly stating the government has the capacity to pay compensation.
“God willing, our airport will be developed. Our economy will grow with the special economic zone bill, and our government will become rich, we will overcome our budget deficit and god willing we will be able to pay any amount we have to,” he said.
Adeeb also said the arbitration tribunal had ruled out the US$1.4 billion claim as a large percentage of the claim is business opportunity losses.
The exact amount of compensation is to be set in a second phase of arbitration and will factor in concession fees and the amount GMR invested in INIA.
President Abdulla Yameen has previously predicted compensation to be approximately US$300 million, while former Attorney General Azima Shakoor in 2012 said the figure may be as high as US$700 million.
The World Bank in December said GMR’s compensation will place severe pressure on the country’s already “critically low” reserves.
As of April 2014, the Maldives’ gross foreign reserve stood at US$434.8 million, while total outstanding debt at the end of 2013 stood at US$793.6 million dollars.
GMR or tourism?
The concession agreement was “lopsided,” “biased” and negatively affected airline operations in the Maldives, Adeeb said.
“[I]t was either tourism or GMR contract. Only one of them would survive in the Maldives. Airlines were complaining, some airlines were moving out – as you know, for big airlines like Qatar, it is no big deal for them to stop operations here. For them, this is a very small market. If airlines stop operations, a country’s tourism will go bankrupt. We have seen the decline to tourism in Seychelles and Mauritius. We had to take action,” he said.
“IATA research shows seat capacity from Europe decreased from 2010 – 2012, and it was not affordable for charter airlines to fly to the Maldives. They were increasing fuel prices, by week, by month, for big scheduled airlines, without considering world prices, because they had a monopoly. Due to the agreement, there was nothing the government could do,” he added.
However, a 2013 Auditor General report presented a “mixed picture”, stating only Sri Lankan airlines definitively ceased refueling due to increased price of fuel.
Adeeb said he believed airport infrastructure are tourism investments, and pledged to integrate tourism and regional airport development.
“We want responsible investors, not just investors,” he said, adding that the government will sue former government officials who have caused losses to the government through lopsided business contracts.