Independent MP proposes amendment to “defend” local businesses from airport developer

Kulhudhuffushi-South Independent MP Mohamed Nasheed has proposed an amendment to the Business Registration Bill in a bid to reserve airport shops and services for local ownership.

India infrastructure giant GMR currently claims exclusive rights to certain duty free items to be sold at Ibrahim Nasir International Airport (INIA), he said.

“My view is that GMR’s role has shifted from management to ownership,” Nasheed told Minivan News. “This is all about excessive and detrimental penetration into the local economy.”

A parliamentary committee is reviewing the bill and its proposed amendment.

In response to inquiries from Minivan News, GMR issued the following statement: “As part of the concessionaire we follow the terms and conditions of the agreement between the government of the Maldives and us and expect the government too to abide by it.

“The concessionaire agreement grants and specifies entitlement to directly or concession out retail activities at INIA.”

GMR is currently leasing Ibrahim Nasir International Airport (INIA) for a 25-year development project. Upon assuming management of the airport earlier this year, all airport shop contracts were set to expire on December 31, 2011 as per an earlier agreement with Maldives Airline Company Limited (MACL), with the exception of Spice Island.

The Economic Ministry today announced that GMR Male’ Retail has been registered in the Maldives. It is one of two locally-registered businesses under the corporation’s name.

Nasheed said his proposal refers to “duty free, customs clearance, cargo clearance, and the management of bonded warehouses,” industries which he believes can safely be trusted to Maldivian ownership.

“I have always objected to divesting ownership of Maldivian businesses with foreign investors when the business is within the local capacity and competency,” he explained.

“I respect that there are some areas of business and industry in which the Maldives has neither capacity nor competency. But the enterprises covered in my proposal have traditionally been local affairs. There is no reason to exclude them now simply as perks for foreign investors.”

Nasheed pointed out that many Maldivian businesses grew up around and depend on airport operations. Maldivian Island Aviation has allegedly lost business since the transfer of management, while the group running the Commercially Important Persons (CIP) lounge is now defunct.

In November of this year, GMR announced its intention to take control of cargo handling services starting in 2012. The move has allegedly forced Maldivian businesses Freight Forwarding Services and Bonito Group to lay off several employees.

In recent news, the Alpha MVKB duty-free shop at the airport was forcibly vacated by GMR and Customs officials eight months after GMR’s original notice. Rulings from the Civil and High courts upheld GMR’s right to terminate the shop’s contract, however company CEO Ibrahim ‘MVK’ Shafeeq has launched a protest under the slogan ‘Go GMR Go!’

“I understand the contractual obligation on the government’s part, and I respect the bidding process and the business competition that comes with it,” Nasheed reflected. “The airport is a gateway for tourism, but GMR’s excessively favorable terms are excessively disadvantageous to Maldivians.”

The Maldivian government signed a 25-year contract with GMR on 28 June 2010.

Under the contract the Maldivian government receives:

  • A sum of US$78 million as advance payment which is to be deducted from the profit due to government.
  • 1% of the Gross Revenue in the first four years (2010-2014) and 10% of the Gross Revenue from the general business in the remaining years.
  • 15% of the Gross Fuel Sales in the first four years and 27% of the Gross Fuel Sales in the remaining years.
  • GMR is also to invest US$375 million over a period of 25 years in construction of the new terminal.

Nasheed claimed that the government saw the GMR deal as an income generating source to solve income problems at the time. “But the deal wasn’t revised over the years,” and GMR has meanwhile made significant profits from jet fuel sale.

“GMR gets its fuel from State Trading Organisation (STO). STO rates have remained the same over the past year, however GMR’s rates have been raised twice.” He added that landing and airline fees have increased, and voiced concern that the price hike would deter business.

Meanwhile, GMR has recently opened a 30-office Airline Offices Complex, and several airlines including Ethihad and Hainan have lately begun services to Male’.

The Business Registration bill reserves certain areas of business for local owners. Nasheed said his proposal aims to enlarge that domain by two to three commodities.

“I intend to use my role as a parliamentarian to propose this amendment,” he said. “It’s just an initial step for the proposal, and I’m not sure whether it will survive the whole process. But I’m hopeful and I feel good about having done it.”