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.”


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.


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.


Driver receives minor injuries after driving off airport runway

A Maldivian national received minor injuries today after losing control of a vehicle on the runway of Ibrahim Nasir International Airport (INIA) that crashed into the site’s surrounding waters, local media has reported.

Police confirmed that only one person was in the vehicle during the time of the incident, which occurred at about 11:30am today.  Officials at the airport said the driver, who was taken to Hulhumale’ Hospital for treatment, had not been seriously injured, according to local newspaper Haveeru.


Seaplane crash lands at Ibrahim Nasir International Airport

A seaplane crash landed on the water runway at Ibrahim Nasir International Airport with nine passengers aboard in poor weather conditions just after midday.

The Maldivian Air Taxi (MAT) aircraft was attempting to land in heavy rain on the eastern side of the seaplane lagoon on Hulhule Island at 12.08pm when it crashed into the water.

On board were a total of nine passengers and three crew who were traveling on a 25-minute flight from Lily Beach resort. One of the passengers was Maldivian, two were British and four were Vietnamese.

MAT officials were unable to confirm the nationalities of the rest of the passengers.

Everyone on board was rescued from the aircraft within 10 minutes. There were no serious injuries to any of the passengers or crew but some of the passengers were treated for mild shock.

The MAT Twin Otter seaplane remained afloat and upright but one of the floats was damaged, leaving it leaning to one side with one wing extended into the water.

CEO of GMR, the company which runs Ibrahim Nasir International Airport, Andrew Harrison, said: “Fortunately we have a very good emergency response plan.

“We were able to get the passengers rescued within ten minutes and because we knew they would probably be traumatised, we took them to the CIP ‘Koimala’ Executive Lounge for medical treatment for mild shock.

“I personally met with the passengers and told them that I wished their holiday had not ended on a sour note. All of the passengers actually said that it had not ruined their holiday and they commended the actions of the pilot and crew and congratulated them on their response to the situation.”

Work is currently underway to recover the MAT seaplane from the lagoon. The flight schedules of other seaplanes were unaffected by the incident.

Mr Harrison said: “The damage was limited to one of the floats which became detached from the aircraft, so the plane has been left on one side with one wing in the water. Every recovery is different, and as we are running out of daylight, the situation is becoming more challenging.

“Only the Civil Aviation Authority can comment on the exact cause and the nature of the crash. It’s important to note that this type of aircraft is a very durable and safe type of aircraft, and the pilots and crew operating the seaplanes have lots of experience of operating seaplanes.”

The passengers have now departed from the Maldives did not miss their connecting flights due to the incident.

The General Manager of MAT, Fredrick Groth, said: “At around noon today, one of our aircraft had an incident upon landing; one of the wings hit the water.

“We evacuated everybody and made sure there were no injuries. All of the passengers were okay and went on to their onward flights.

“We don’t wish to comment further until after the investigation has been concluded.”

The Maldives Civil Aviation Authority is now investigating the cause of the crash and interviewing witnesses. Deputy Director General, Hussain Jaleel, told Minivan News that he was unable to reveal the cause of the crash yet because the investigation is on-going.

“We cannot determine the cause of the crash yet because the investigation is not yet finished and the interviews have not been finished yet,” he said.

It had been raining heavily since the early hours of the morning and visibility was low. A seaplane pilot working at the terminal, who did not want to be named, described the weather conditions at the time of the crash as “poor” and added that the seaplane terminal had been closed several times earlier today leading up to the accident due to the bad weather.


Comment: Open Letter to the President

Open letter for his Excellency Mohamed Nasheed, The President of The Republic of Maldives.

Excellency, Honourable Mr. President: May I start this open letter by wishing you and your family to be blessed by God alike your Government and all Honourable Maldivians, people that I have in great esteem and very close to my heart.

The first time I was in your lovely country was long ago and naturally like most, I have
repeatedly come back. I did it as a tourist and as well as a business man with interests as I am (or… was until GMR destroyed my business) a small business man with economical activities in your country. At a certain moment I even created projects like the Sea University, that should develop studies and produce medicines using the elements exiting in the sea, as the sea is one of the greatest Maldivian assets. IT is not to be forgotten Excellency, that the day tourists will be gone, the sea will still be there.

The duty free island, a place where tourists could by all sorts of goods duty free, different from the airport, was another project that never saw the light but was design by me with all the love I have for Maldives.

The first time I landed in the Maldives, I was coming from Sri Lanka, and the contrast was so high that I really felt I was on paradise. The country was clean, peaceful, the water blue, the people nice. It was sunny and very organised. I was thrilled.

True that at that time, freedom of expression did not exist, and talking too much or too loud could mean something terrible. I understand that today under your presidency, the situation changed and Maldives is now part of a big international club where freedom and respect for life is a core subject. Being myself an European, I admire you Sir and I admire your government as the path to development and growth always goes via the respect and creativity of people, that naturally cannot exist without freedom.

Sir, I am not an important person. I’m a humble European, that dedicates his life to coach Presidents of corporations in management, as well other institutions like the Catalan High management of the police or the High management of the European Patent or Brand office. I am not a guru, certainly do not pretend to be, but I’m proud of being a humble person, hard worker and a thorough professional that enjoys working in life. I am not into politics and would never pretend to talk about something I don’t know.

I am writing you this open letter Excellency, because I really love your country and feel sad when I see that people taking advantage of it.

A country, Your Excellency, needs above all her people and needs to invest in developing her citizens. If there is not a critical mass of national brain power being the driving force of the economy and culture, the country will fall very easily into the hands of abusers, the same ones that in the international scene move the economy with the only goal of making money without values or respect for the people regardless where their operations take place. For them, the geography is not important. Once the cows are milked, they are ready to move to another pasture with no guilty feelings of what is left behind.

You and your government are making huge efforts to develop the economy and growth. That is perceived from the outside. You work hard under a climate of respect and social peace, thus increasing the well being of Maldivian citizens, and sometimes that takes time to be seen. Results don’t come quick, we know. In this sense it is clear that Maldives needed a bigger up-to-date airport, a modern gate to the country and to get it you had to do work with international corporations with expertise in the field. It is therefore normal that in return those corporations request to have for them the business cake represented by the flow of currency expressed in millions coming from the tourists, a cake that is very attractive. So far, so good, but what about Maldivians?

At this point I apologise as I don’t want to step into the internal affairs of your country, but Excellency I live in a country that has 17 autonomous regions, with 17 governments and with 17 Presidents with their cabinets and a central government, so I think I know something about nationalism and protecting the citizens when it comes to putting the economy into international hands. These days the world is as as small as a handkerchief, so international cooperation is inevitable, but what about the protection
and development of the local business people? Shouldn’t the airport structure consider this? Shouldn’t Maldivian citizens’ business be allowed to profit from their country’s development? Shouldn’t the airport have a place for all, Dhivehi people and international business people? Airports for a country like Maldives are a strategic subject.

Once more I apologise as I am no one to give lessons on the subject but being involved with the Maldives for so long, my love for the country cannot keep me silent. A country is made by it’s people and its people make the country. If that is not to be considered why should people vote for any government? The airport could and can have a place for everybody. The airport belongs to the Maldives, is it so difficult for international corporations to understand it?

With my greatest respect and admiration for you and your government, that is getting more and more respect in the international scene, I remain yours faithfully.

God bless the Dhivehi people.

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]


GMR to oversee cargo handling in 2012

Local companies providing cargo handling services at Ibrahim Nasir International Airport (INIA) have been asked by GMR to cease operations on January 1, 2012.

The request will force Bonito Group and Freight Forwarding Services, two of the companies involved, to lay off several employees, Haveeru reports. Fifty individuals are currently employed to handle cargo, 30 of whom are Maldivian.

GMR allegedly plans to provide all cargo handling services in the new year.

A Bonito official told Haveeru that GMR had discussed plans for contract termination with the cargo handling companies six months ago.


Airport runway under repair after airline complaints, says MACL

The runway at Male International Airport is being repaired, according to Maldives Airports Company Limited (MACL), in a bid to solve problems of water retention.

Managing Director Mohamed Ibrahim told Haveeru that an airline running Boeing 777 planes had complained of damage to the wheels, and had brought in a Boeing team to analyse the problem. The repair will be carried out overnight for the next two days, from midnight to 8am.

“We are repairing the touchdown area where the water retention occurs. We closed the runway early October for repairs. But there is a substantial area that still needs repairs,” he told Haveeru.

“It will be problematic to close the runway for many days at once. Internationally runways are repaired by rescheduling the flights when the traffic is lowest,” he noted.

“We have to correct this problem as soon as possible. In the future, we will also have to re-tar the entire runway. That has to be done once every 15 years. It was last done at the beginning of 90s,” he told Haveeru.