President Yameen urges STO to enter international markets

President Abdulla Yameen has called on the State Trading Organisation (STO) to widen the company’s scope into the international global markets.

At a ceremony held at Dharubaaruge last night to mark the company’s 50th anniversary, Yameen spoke of diversifying the company into numerous fields including the establishment of a national shipping line and operation of oil tankers, assuring the government’s support in these ventures.

“We must find ways to reduce the price of oil and to find low priced oil,” Yameen said.

Oil exploration – via the STO’s subsidiary Maldives National Oil Company – was an election pledge of President Yameen, with a German research vessel conducting oil and gas exploration research in August 2014.

Expressing his confidence that diversification into shipping would reduce costs, especially oil prices, Yameen said that the STO cannot always remain a small scale retailer.

The STO is the country’s primary wholesaler, responsible for bringing in the vast majority of basic foodstuffs such as rice and flour, as well as other imported commodities such as electrical goods

The president also warned that “managing directors of state owned companies will change if the companies cannot perform” to the required standard.

Yesterday (January 22), Ibrahim ‘Bandhu’ Saleem was dismissed from the post of Managing Director of Maldives Airports Company Limited (MACL). No specific reason was given regarding the decision.

Yameen said yesterday evening that his office was working with the treasury to audit state-owned companies in order to determine whether they are reaching set targets as well as to categorise the firms and to align their pay structures to ensure employees are paid fairly.

According to Article 212 of the Constitution the auditor general has the authority and power to audit all institutions primarily funded by the state and “any business entity, in which shares are owned by the State”.

The STO launched an austerity campaign twelve months ago, pledging to cut operations costs by MVR50 million by the end of 2014 after President Yameen had declared the company bankrupt upon assuming office in November 2013.

“Not only does STO not have dollars, it does not have Maldivian Rufiyaa either. Funding the oil import through STO is now a burden for the state,” said Yameen at the time of the announcement.

Managing Director at the STO Adam Azim said last month that the company’s debts will be paid off within three years, telling Haveeru that its US$144 million (MVR1.7 billion) debt was unprecedented, and that US$51 million had been paid off during his tenure as a result of reductions in expenditure.

Meanwhile, Haveeru yesterday published corruption allegations against Azim – the brother of recently dismissed Minister of Defence and National Security Mohamed Nazim.

The paper reported that it has obtained a copy of an Anti-Corruption Commission report which says Azim attempted to use the state-owned company’s money to influence the Football Association of Maldives’ congress.

Haveeru suggested the report revealed attempts to have a relative appointed to the post of FAM president through sponsorship money given to football clubs with voting rights in the congress.

Presidential spokesman Ibrahim Muaz said that no decision regarding the removal of Azim had been made and that relevant authorities and institutions will investigate and proceed with the issue of any corruption allegations.

Azim appeared alongside the president at yesterday’s anniversary celebrations.



Related to this story

State Trading Organisation bankrupt: President Yameen

Yameen bring changes to state institutions following Nazim dismissal

STO to pay off debts in three years

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SEZ bill designed to incentivise investment, says Economic Development Minister

The special economic zone (SEZ) bill submitted to parliament last week is designed to incentivise foreign investment with special privileges and tax exemptions, Economic Development Minister Mohamed Saeed has said.

Speaking at a press conference this morning, Saeed said the current administration’s objective was introducing new industries in order to overcome the dependence on the tourism industry, which was vulnerable to external shocks and global events.

The Maldives had to “outperform competitors” by offering incentives so that investors would choose the country over business hubs such as Dubai, Oman, Qatar, Singapore or Hong Kong, Saeed said.

According to the draft SEZ legislation (Dhivehi), investors would be exempted from paying either import duties for capital goods brought in for the development, supervision, and operation of the zone or business profit and withholding taxes.

Moreover, investors in the SEZ will be exempted from paying goods and services tax for a 10-year period.

Additionally, a board of investment – chaired by a minister – established by the law would have the authority to lease land to foreign companies for 66 years while local companies would be able to purchase land.

Saeed said he expects the SEZ bill to become the first piece of legislation to be passed by the 18th People’s Majlis, which began its five-year term last month.

Mega-projects

The Maldives became the number one destination worldwide for “lifestyle holidays” because resorts were developed in the early 1970s as “a kind of special economic zone,” Saeed contended.

While the tourism industry was the main source of foreign currency at the moment, Saeed said the government did not believe that other industries were “alien” or unsuited to the Maldives.

Saeed suggested that the turnover from new industries set up in the SEZs could be two or three times higher than tourism.

“That is because all the large developing economies of the world are near the Maldives. For example, China and India,” he said.

Referring to the government’s ‘iHavan’ transshipment port mega-project, Saeed noted that the Maldives is strategically located astride major sea lanes in the Indian Ocean, through which cargo ships carry US$79 trillion worth of goods from East to West and vice versa annually.

Nine ships an hour travel through these channels, he added.

“Lagoons with the natural depth needed to service those ships is found in this region only in the Maldives,” he said.

While other countries would have to dredge to build ports, Saeed said the Maldives has “wave-free natural ports” that could provide services such as offshore docking facilities throughout the year.

“If turnover from tourism is US$2.5 or US$3 billion [annually], when a shipping industry with offshore docking, bunkering and bulk-breaking facilities is set up in the Maldives – one of the world’s most spacious ports – then consider the benefits. For example, consider the turnover, the GST [goods and services tax] of the turnover, [and other] taxes,” he explained.

The iHavan or Ihavandhippolhu Integrated Development Project involves a transshipment port facility, airport development, a cruise hub, yacht marina, bunkering services, a dock yard, real estate, and conventional tourism developments.

“Freeholds”

The SEZ legislation envisions nine economic zones across the country, including an industrial estate zone, export processing zone, free trade zone, enterprise zone, free port zone, single factory export processing zone, offshore banking unit zone, offshore financial services centre zone, and a high technology park zone.

President Yameen had declared in April that the SEZ bill would become “a landmark law” that would strengthen the country’s foreign investment regime.

“What we would like to confirm for the foreign investors who come to the Maldives is that foreign investors should feel that Maldives is your second home here,” Yameen said at a function in Hulhumalé.

The SEZs would be “likened to cities in Dubai or the Emirates” and “the [business] environment we have in Singapore.”

The new law would enable investors to have “freeholds” in the country and allow investors “to engage in really, really long gestative projects,” Yameen said.

“We are embarking on an era of growth,” he said.

Moreover, addressing participants of the Maldives Investor Forum in April, Yameen had said his administration was “cognisant of the needs of our investors and the requirements to strengthen and redefine the legal and regulatory environment governing foreign investments.”

“To address investment climate and to facilitate mega investments with attractive incentive packages, a Special Economic Zone Bill will be tabled in the parliament soon. Additionally, the Foreign Investment Act and Companies Act are being revised to cater the ever increasing needs of the modern foreign investors,” he said.

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Three additional oil tanks to be placed in Funadhoo

The State Trading Organisation (STO) has announced plans to place three additional oil storage tanks in Kaafu Funadhoo, just off the northern side of the capital Malé.

Managing Director of STO Adam Azim said that the Maldives’ oil storage capacity needs to be increased, according to local media Sun Online.

“We are planning to place three more tanks in Funadhoo. If the oil reserve continues to decline at the present rate, we might face difficulties later. We’re planning to prepare for that,” the news outlet reported.

He added that efforts will begin soon to facilitate bigger vessels to enter the harbour.

“Right now the harbour can take up to about 8,000 ton vessels. We want to increase it to about 15,000 or 16,000 ton vessels.”

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MNSL board approves company shutdown after settling debts

A proposal to dissolve the  Maldives National Shipping Limited (MNSL) has been approved by the company’s board members as the group looks to settle any outstanding debts before ceasing operations.

Haveeru reported that the MNSL board had decided to discontinue its operations after settling the outstanding debts as part of a two stage shut down of the company.

Group Managing Director Ahmed Hameed said that the company would cease to exist under its current name  once debts estimated to amount to US$8 million were settled through a sell-off of assets like cargo ships.

With the Maldives Star, MNSL’s only currently registered cargo ship on its way for India for a possible Rf2.1 million  sale, Hameed claimed that the debts were expected to settled, according to the paper.

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MNSL appoints director to oversee closure of Singapore operations

Cabinet Secretary Abdulla Saeed has been appointed to manage the closure of the Maldives National Shipping Limited’s (MNSL) Singapore operations, according to media reports.

Haveeru reported that Saeed, who also serves as chairman of the Maldives National Oil Company (MNOC), will work as a director alongside a staff accountant in order to settle any outstanding debts and return company assets to Male’ ahead of the office being shut.

The decision to close the group’s Singapore office has reportedly been taken as the company’s cargo carriers were not operating in the country.

According to Haveeru, the former office head of the MNSL’s Singapore operations, Mohamed ‘MM’ Moosa Manik, had been offered the director post but had opted to leave the company instead.

Saeed is himself already based in Singapore, according to the report.

The MNSL operates as the Maldives’ flagship freight transportation group.

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Maldivian vessel held at Colombo port upon court order

A cargo vessel of Maldivian origin has reportedly been held by port authorities in Colombo, Sri Lanka, over claims the ship’s owners had not paid outstanding dues.

Haveeru has reported that the Sri Lanka Ports Authority has said that the vessel was detained last week following the issue of a court order concerning payments.

Shanthi Weerakoon, Director of Merchant Shipping for the local port authority, told the newspaper that ship detentions often occurred in cases where cargo companies were believed to have delayed payments to shipping agents or port officials. Weerakoon added that no timeframe had been set to release the ship at present depending on possible outstanding payments.

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The rise and fall of the Maldivian shipping fleet

Maldivians and the ocean have always gone hand-in-hand. Maldivians have always been good seamen, and the country’s sea-going culture has always been strong.

During President Nasir’s rule, Maldives Shipping Limited (MSL) was one of the region’s leading shipping companies.

Under the leadership of Ali Umar Maniku and the late Ali Hussein Didi, the company prospered as the flag carrier of the Maldives.

During the 50s and 60s, the MSL had a fleet of almost 60 ships. Many of these were ancient vessels, but due to the hard work of their crews were kept running at very high standards.

“There wasn’t a day when a port in Colombo, Bombay, Karachi, the Gulf or the Red sea had at least five MSL ships,” says a shipping analyst and former captain of a MSL vessel.

“All MSL ships in those days had the red white and green colours of the Maldivian flag painted as stripes onto the funnel; it was a very prestigious company.”

Maldivian seamen were recognised and sought after by international companies for their work ethic, despite being paid very basic salaries.

The MSL fleet was maintained due to the hard work of the many seamen – their diligence kept the ageing ships in excellent condition: “There wasn’t a moment when they wouldn’t be painting a hull.”

These were the glory days of the Maldivian shipping industry. Ships were running profitably and making a huge contribution to the Maldivian economy.

Fall of a fleet

However during the 80s, MSL ran into hardship. Most of the fleet consisted of bulk carriers, while container ships were fast becoming the preferred vessel for many shipping companies.

MSL was unable to keep up with the fast moving modern shipping industry, and its ageing vessels had finally reached their last port.

Many blame the fall of the MSL on the government at the time, for not investing enough in such a vital sector.

In a recent interview with Dhi FM, former President Maumoon Abdul Gayoom said “When I became president, the shipping that existed had started to decline… in the reign of the president before me, during Ibrahim Nasir’s time, vessels that were shipwrecked were salvaged and repaired for use. Then very old boats, as old as 20 or 25 years, were bought to create the shipping line.”

“What came next was the change to container shipping. We didn’t have [it] at the time. When it changed to container shipping, we had to find bigger boats that could fit containers. We didn’t have the capacity for it.”

However, many other parties believe this isn’t the case.

The shipping analyst told Minivan News that “If private parties could succeed in the shipping industry, I don’t see any reason why the flag carrier of the nation couldn’t succeed. The fleet was outdated, and the focus was not on the number of ships anymore, rather the total tonnage.”

Mismanagement?

Many people believe that the fall of the MSL was due to mismanagement and negligence.

In the 80’s, all vessels of the MSL were under the same company name, and all were under one insurance company.

In 1983, this particular insurance company went bankrupt and many MSL ships began to be impounded at ports.

This happened whenever an insurance claim was made against them – even if a ship did not have a claim against them, all sailed under the same company and were stopped for being a sister ship.

This most probably led to the fall of MSL.

What followed was an attempt to modernise the fleet. All the ships were renamed and each sailed under a different company.

MSL was renamed Maldives National Shipping Management Limited, MNSML, and the fleet size decreased. The size of the ships did begin to increase, but these ships were mostly still bulk carriers even though container shipping was becoming popular.

Today MNSML is known as MNSL, and opereates a modest fleet of three ships. The potential for growth is still there, as the Maldives still lies in the middle of a popular shipping route.

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