Opposition calls for no-confidence motion against Economic Minister over ADC

The opposition has announced it will forward a no-confidence motion against Minister of Economic Development, Mahmoud Razee, for handing the airport to Indian infrastructure giant GMR.

The Civil Court last week ruled against GMR in a case filed by the Dhivehi Qaumee Party (DQP), challenging its right to collect a US$25 (Rf385.5) Airport Development Charge (ADC) and US$2 (Rf30.8) Insurance Charge from January 2012.

The DQP had claimed that a pre-existing Airport Service Charge (ASC) of US$18 (Rf277.56) invalidates the ADC, which was specified in the concession agreement signed with the government last year.

GMR shares on the Mumbai stock exchange fell 7.57 percent on the day of Civil Court ruling, which could potentially leave GMR facing an annual US$25 million shortfall, India’s Economic Times reported.

“GMR has been permitted to collect ADC and Insurance charge under the Concession Agreement signed between GMR-MAHB, Maldives Airport Company Limited (MACL) and The Republic of Maldives (acting by and through its Ministry of Finance and Treasury), and as such has set up processes for ADC collection from 1st January 2012 supported by an information campaign to ensure adequate awareness,” the company said in a statement following media reports of the ruling.

Villufushi MP Riyaz Rasheed alleged today challenged the legally of Razee’s signing of the document, claiming that it allowed GMR to “unlawfully tax” passengers, and claimed he was responsible.

Haveeru reported that the opposition parliamentary group allied against Razee included MPs from the Dhivehi Qaumee Party (DQP), Progressive Party of Maldives (PPM) and several independent MPs.

Razee said he was “waiting for the  awaiting the motion to be duly processed.”

“There’s nothing wrong or illegal about [the contract]. It’s up to the MPs to deliberate and decide what is to be done,” he said. “If there was anything illegal, then MPs should have had a look at it when it went through the Majlis. There were some issues that were sent to the Anti-Corruption Commission (ACC), which looked into it and things moved forward.”

Following the civil court ruling last week, President Mohamed Nasheed’s Press Secretary Mohamed Zuhair said he believed the government was obligated to appeal the ruling in the High Court. However neither Zuhair nor the Attorney General were responding to calls at time of press.


Comment: Energy for all

The Maldives has recently announced ground breaking plans to become the world’s first carbon neutral nation by 2020. The government has published its ‘renewable energy investment framework,’ which includes a mandatory target for the country to generate at least 60% of its electricity from solar power by 2020.  The plan also proposes a shift to wind, batteries and biomass to complement solar power.

Energy is hope: hope for economic development, for a better future. Together with its partners, Norway is working to establish an international energy and climate initiative to increase access to energy services and limit greenhouse gas emissions from the energy sector in developing countries. This initiative will be presented at the conference entitled “Energy for all – financing access for the poor” in Oslo starting today. The conference is being arranged in cooperation between Norway and the International Energy Agency (IEA). Mahmood Razee, the Maldivian Minister for Economic Development, will attend the conference where Norway and the Maldives will announce a partnership on renewable energy.

Globally today, 1.4 billion people lack electricity. That is 20% of the world’s population. Electricity failures create huge problems: for the girl who cannot attend evening classes, for the doctor who cannot keep medicines cool, for the businessman who has to close down production. Such problems are widespread in many developing countries.  Many countries also experience frequent power cuts due to an overburdened grid and inefficient energy use. Better energy systems would benefit everyone, as well as improving the economy and the environment.

Energy for all is an important goal. This means considerably more than just providing each family with a light bulb and the opportunity to charge a mobile phone. It means creating jobs, strengthening the economy and making it possible for doctors to use lifesaving equipment and medicines. It also means giving people access to new, clean cooking facilities. Today, around 1.5 million people – mainly women and children – die due to the cooking facilities in their homes.

If we are to achieve energy for all – including for industry – we must plan 10–20 years ahead. Electricity consumption will increase over these years, at the same time as there is considerable potential for using electricity more efficiently. Without a plan for improving efficiency, greenhouse gas emissions will increase.

In order to achieve the goal of access to more sustainable forms of energy, efforts are needed from many parties. The countries concerned must give priority to this sector and provide a good framework for investment. Companies must identify opportunities. Rich countries and the major international institutions must play their part, and so must NGOs by providing information and implementing concrete measures to increase access and improve efficiency.

Norway would like to play a leading role in this work by taking part in the financing of energy developments in other countries based on the results achieved in terms of increased energy access and reduced emissions for the country as a whole. Norway will also encourage companies to invest in enterprises that increase energy access in poor countries. The Maldives is taking a lead in implementing renewable energy policies, setting a new international standard for the future of energy.

Political will is vital for change, and we have enough examples that show that it is possible. Energy for all represents hope for a better future – for all. And together we can make it happen.

Erik Solheim is Norway’s Minister of the Environment and International Development. Mahmood Razee is the Maldives’ Minister for Economic Development

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]


Maldives one of the world’s most economically-repressed countries: report

The Maldives has been ranked as one of the world’s most economically-repressed countries, in the 2011 Index of Economic Freedom report produced by the Wall Street Journal and Washington think-tank The Heritage Foundation.

The Maldives is ranked 154th out of the 183 countries ranked, a slight drop on last year but still significantly below the global and regional average, placing 34th out of 41 countries in the Asia Pacific region.

Economic freedom, as defined by the report, “is the fundamental right of every human to control his or her own labor and property.”

The Maldives scored well for several indices, including business, fiscal, trade and labour freedom, but scored poorly for government spending, corruption and property rights.

“The Maldives’ weaknesses include chronically high government spending, inefficiency of the outsized public sector, and widespread corruption,” the report observed.

The government’s role in the economy through state-owned enterprises – and employment of over a third of the country’s total labour force – was “crowding out private-sector activity.”

Furthermore, “public-sector graft remains a challenge for foreign firms operating in the Maldives”, while “bureaucracy can be non-transparent and prone to corruption. Dispute resolution can be slow, complicated, and burdensome.”

Minister of Economic Development Mahmoud Razee noted that with regard to corruption, “in the past the country has not had the institutions to monitor and provide transparency, but now the information is available. It’s the difference between having a dirty or a clean window – one lets you see inside to the full picture.”

Several companies investing in the Maldives – including Indian infrastructure giant GMR and Malaysian security technology firm Nexbis – have had their share prices become collateral in local political rivalries following accusations of corruption.

“It’s one thing to be accused of something,” Razee said. “I’m sure most companies think about this [problem], but we have not seen it become a huge issue.”

Development of the private sector was stymied by “costly credit and limited access to financial services” the report noted, and while labour regulations were flexible, “enforcement is not effective in the absence of a dynamic labor market.”

The International Monetary Fund (IMF) has consistently urged the Maldives to reduce the size of its bloated civil service wage spend, which ballooned 400 percent between 2004 and 2009.

“With the government borrowing at the rate it has, it reduces the amount of credit available to the private sector, and that constrains the ability of the private sector to provide jobs and employment,” leader of the Maldives IMF delegation, Rodrigo Cubero, said in November last year.

“That then constrains economic growth. Furthermore, by spending more than it earns, the government is putting pressure on imports and the exchange rate.”

Razee noted that the introduction of new tax regulation such as the GST and Business Profit Tax, “while not the panacea to everything, shows the government’s willingness to come to terms with [the country’s economic condition].”

“If you look at the level of companies interested and investing in the Maldives, it has not lessened,” he said.

On a positive note, the report observed the potential of the government’s mobile phone banking project, dubbed ‘Keesa’, to enhance development in the private sector. Keesa is being jointed developed by the Maldives Monetary Authority and Dhiraagu, with World Bank assistance.

Summarising, the report observed that higher levels of economic freedom “correlated strongly to a country’s overall well-being, taking into account factors such as health, education, security and personal freedom.”

Hong Kong and Singapore were ranked top, followed by Australia, New Zealand, Switzerland and Canada. North Korea, Zimbabwe and Cuba were ranked at the bottom.


Government signs Male International Airport to GMR-Malaysia Airports consortium

The government today signed a 25 year lease agreement with the GMR-Malaysia Airport Holdings consortium to develop and manage Male’ International Airport, hours after parliament voted in favour of a bill requiring parliamentary approval of lease transactions with overseas parties.

Chairman of the Privatisation Committee, Mahmoud Razee, claimed parliament’s decision today would not impact the signing “as it yet to be ratified by the president.”

The signing ceremony was scheduled for yesterday but was derailed at the eleventh hour after reported disagreements between board members of the Maldives Airport Company Limited (MACL), the organisation which currently manages the airport.

Minivan News understands the four MACL board positions were reshuffled by the government last night in an effort to proceed with the signing today, although this has yet to be officially confirmed – new chairman Ibrahim Saleem, also Chairman of the Maldives Tourism Development Corporation (MTDC), signed the contract today in place of former chairman Ibrahim Nooradeen.

An official of the President’s Office observed to Minivan News that as the MACL is a public company with 100 percent of its shares owned by the government, “it is the duty of the board to act in the interests of the major shareholder.”

Minivan News is currently seeking comment from the board members.

Under the new agreement, the consortium will establish a new local company to manage the airport which will be operated by Malaysia Airlines Holdings. The Maldives National Defence Force (MNDF) will remain in charge of security, and immigration will remain under government control. A briefing document obtained by Minivan News also indicates that the agreement comes with a clause that no staff can be made redundant for two years unless for “disciplinary or performance related reasons.”

The deal has proved controversial with four opposition parties signing a statement on Saturday evening condemning the decision on nationalistic grounds, arguing that handing management of the airport to a foreign company compromised the sovereignty of the Maldives.

Deputy Leader of the main opposition Dhivehi Rayyithunge Party (DRP), Ibrahim Shareef, said last week that the DRP would not honour “shady deals of this type” if it came to power in the next election, unless they were approved by parliament, while today another of the party’s deputy leaders, Umar Naseer, said the deal was “ridiculous” and would result in the dismissal of half the airport’s 3000 staff.

Speaking briefly to the media following the signing, Managing Director of GMR Infrastructure Sri Pathi hinted acknowledgement of the controversy, stating that “airports always belong to the people – never to us.”

“Please don’t think we came here to take over the airport,” he said. “We perhaps become the trustees – but emotionally in terms of ownership it belongs to the people. We are of course here to invest our money and make a business deal on the best terms possible – but the airport still belongs to the people. We make a commitment that we will operate the airport to the best international standards that we can, and prove to you that the trust you place in us will never be betrayed.”

Managing Director of Malaysia Airports Holdings, Basheer Ahmed, noted that the majority Malaysian-government owned company managed 39 airports in Malaysia and several overseas, including airports in Hyderbad and Delhi.

“Every country needs an excellent airport because it is the visitor’s first impression,” he said.

The briefing document obtained by Minivan News contains forecasts of the government’s expected earnings (reportedly provided by GMR) from the airport over the lifespan of the contract. It reveals that a majority of the predicted revenue, a major factor in calculating the NPV (net present value) used to determine the successful bid, derives from the 27 percent fuel revenue share once the airport is completed in 2014:

  • 2015-2020: 12.8m gross + 74.25m fuel = US$87.05m per year
  • 2020-2025- 17.02m gross + 90.99m fuel = US$108.01m per year
  • 2025-2035 – 20.43 gross + 108.27m fuel = US$128.7 m per year

The document contrasted this with the dividends paid to the government by MACL over the last three years, noting that the majority of the dividends paid in 2008-2009 were achieved “by taking a loan.”

  • 2007 – 2.3 million
  • 2008 – 13.3 million
  • 2009 – 5.05 million

On the suggestion that MACL should be allowed to raise finance and invest in the upgrade itself, a predicted US$300-400 million, the document noted that MACL “already has debts of Rf 600 million (US$46.69 million)” and would be unable to obtain further leverage “without a sovereign guarantee – simply not allowed due to the IMF measures.”

The airport was signed to GMR-MAH late this afternoon.

Meanwhile, daily newspaper Haveeru featured an interview with the Turkish-French consortium TAV-ADPM, who have reportedly expressed dissatisfaction of the bid evaluation process “and urged for a re-evaluation of the bids.”

“The newspapers started reporting that GMR won the bid even though we were not told the party who won the bid. We faced many problems, since the two companies in our consortium are also listed in stock exchange,” Haveerru reported head of the consortium, Gusiloo Betkin, as saying. “It cannot be said that a certain party won the bid without signing the concession agreement.”

Betkin expressed disbelief to Haveeru that the GMR-MAH bid could offer the government 27 percent of fuel trade “without facing any loss. We are a party that provides services to 170 million passengers annually in 39 airports. We also have experience in fuel trade,” Betkin told the newspaper.

TAV-ADPM had offered 16.5 percent of fuel trade to the government, he noted, the highest deemed feasible, and that at 27 percent, flight arrivals to the Maldives would be affected by rising fuel prices.

“The main thing is the fuel. If the fuel prices are high, no one will take in fuel from there – Maldives will lose that income. The airlines will also focus to other destinations,” Betkin told Haveeru.

The government’s Net Present Value calculations:

    Upfront fee: US$7m
    Variable concession fees share – non fuel – 2011-2014: 31%
    Variable concession fees – fuel – 2011-2014: 16.5%
    Variable concession fees share – non fuel – 2015-2025: 29.5%
    Variable concession fees – fuel – 2015-2025: 16.5%
    NPV: 454.04
    Upfront fee: US$78m
    Variable concession fees share – non fuel – 2011-2014: 1%
    Variable concession fees – fuel – 2011-2014: 15%
    Variable concession fees share – non fuel – 2015-2025: 10%
    Variable concession fees – fuel – 2015-2025: 27%
    NPV: 495.18
  • Unique-GVK
    Upfront fee: US$27m
    Variable concession fees share – non fuel – 2011-2014: 27%
    Variable concession fees – fuel – 2011-2014: 9%
    Variable concession fees share – non fuel – 2015-2025: 9%
    Variable concession fees – fuel – 2015-2025: 9%
    NPV: 266.94