Tag: State Trading Organisation (STO)

STO head assures oil imports problem will be resolved

The Managing Director of the State Trading Organisation (STO) has assured that the country’s looming oil payment crisis will be resolved tomorrow after the central banking authority committed to financing overdue payments.

“MMA [Maldives Monetary Authority] has given certain commitments – we still need to arrange everything – tomorrow we are going to work on it,” Shahid Ali told Minivan News today.

Shahid told MPs last week that the STO would run out of oil as early as November 10 if it did not pay some of its US$20million oil debt.

“The exact amounts have not been agreed upon,” Shahid explained today (October 3). “Tomorrow we need to make at least some payments.”

During an emergency meeting of the Majlis Finance Committee last week – with both MMA Governor Dr Fazeel Najeeb and Finance Minister Abdulla Jihad in attendance – Shahid told MPs that government-owned companies owed the STO more than MVR600 million.

Jihad informed the committee that he had asked the MMA to provide MVR50 million to the STO but was told that the central bank could only arrange for MVR20 million as the public bank account was overdrawn.

The MMA governor said the state did not have the financial resources to provide the requested amount, adding that the central bank would be forced to print money to meet the government’s requirements.

In the event that the country runs out of oil on November 10, Jihad then said he would resign from his post.

“I am asking the MMA for cooperation to provide the funds. This is a basic necessity. Otherwise there is a fear that we could completely run out of oil. Funds have to be arranged for citizens’ basic needs even if the public bank account is overdrawn,” he said.

Minivan News was unable to reach Dr Najeeb at the time of press.

When asked if the MMA was printing money in order to finance the oil payments, Shahid simply repeated that the authority had “given certain commitments”.

The MMA’s quarterly figures show that the Maldives’ petroleum imports amounted to US$248.4 million in the first half of 2013 – representing 29 percent of the cost of all goods brought into the country.

Najeeb also told the Majlis Public Accounts Committee last week that state reserves were insufficient to balance the country’s growing deficit.

Local media reported Najeeb as warning that the state was on the verge of being forced to print money.

“Parliament must also consider ways to reduce the structure of the State. I think this is very serious. Or else, the value of our money will keep dropping,” the Governor was quoted as saying.

The MMA’s most recent Quarterly Economic Bulletin revealed that government finances had “further deteriorated in the first six months of 2013” due to a sizeable shortfall in expected revenue coupled with a marked increase in recurrent expenditure.

After measures to raise 15 percent of total revenue budgeted for 2013 – MVR1.8 billion (US$116.7 million ) – failed to materialise, Finance Minister Abdulla Jihad was forced to seek parliamentary approval to divert MVR 650 million (US$42 million) allocated for infrastructure projects in the budget to cover recurrent expenditure.

In recent months, the government has become increasingly reliant on the issuance of short term treasury bills in order to plug gaps in the current budget.

Whilst introducing a proposed MVR16.4 billion (US$1 billion) budget for next year to the Majlis last week, the Finance Minister urged the government to pursue austerity measures.

In November 2012, a team from the International Monetary Fund (IMF) advised that strengthening government finances was “the most pressing macroeconomic priority for Maldives”.

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State Trading Organisation stops rationing of oil supplies

The State Trading Organisation (STO) has ceased to ration oil supplies, following the arrival of a delayed shipment from Dubai last week, reports local media.

After the oil shipment arrived Thursday (August 15), STO resumed selling oil without any restrictions, STO Managing Director Shahid Ali told local media yesterday (August 18).

“The shipment was delayed because the vessel could not approach the loading bars. Since they are charter boats, even a delay of one day would cause problems,” said Ali.

He explained that delays in oil shipment arrivals requiring oil supplies to be controlled is not a new problem and STO has had to ration oil on several past occasions.

“In spite of the control, we supplied oil to STELCO and other important customers without any restrictions, but supply to other groups was somewhat controlled,” Ali noted.

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Diesel fuel rationed after STO shipment delayed

The State Trading Organisation (STO) has controlled the sale of diesel fuel in the Maldives due to a shipment delay.

The delay of diesel shipments occurs “sometimes during the year” when ships carrying diesel from Dubai are “held up” in port, STO Managing Director Shahid Ali told local media.

While diesel will be made available to the State Electric Company (STELCO), resorts and general customers, new orders for diesel are being controlled by STO, according to Ali.

“This is a common problem. But there is enough oil in stock for STELCO and all the resorts, who buy oil on a regular basis. It is only the sale of oil to other groups that has been controlled,” said Ali.

“We might not be able to meet the demand of a sudden order. But regular customers will have continued supply,” he added.

The diesel shipment will arrive on Wednesday (August 14) and STO expects the control of diesel to be lifted by Thursday, according to Ali. No restrictions on petrol supplies have been enacted.

Meanwhile, Fuel Supply Maldives has also restricted the sale of diesel, following STO’s control of diesel supplies, Managing Director of Fuel Supply Maldives Adam Saleem told local media.

“We have rationed the sale of diesel to resorts. We have faced this problem before as well, but this time the delay has been prolonged,” said Saleem.

Fisherman are also facing problems due to the limited diesel sales, while resorts are complaining about running out of diesel supplies, according to local media.

Diesel fuel is the primary source of power generation in the Maldives, with most islands having separate power house facilities. Marine diesel is also used to fuel the country’s fishing and transport fleet, accounting for roughly 80 percent of the country’s consumption.

The near total dependence saw the Maldives ranked dead last in report published by the UNDP in 2007 on the vulnerability of developing countries to fluctuating oil prices, a fair stretch behind Vanuatu, effectively placing the country among the world’s most oil-addicted nations.

“Island countries in general are extremely vulnerable to increased oil prices. They comprise distant and small markets and have to bear the burden of higher shipping costs, while electrical power generation is largely fueled by diesel,” the report noted.

The Maldives dependency on oil was discussed in October 2012 by President Mohamed Waheed at the World Energy Forum in Dubai.

“A development path primarily based on expensive diesel generated electricity is unsustainable in any country, let alone a small country like Maldives,” said Waheed at the forum’s opening ceremony.

“Today, we spend the equivalent of 20 percent of our GDP on diesel for electricity and transportation. We have already reached the point where the current expenditure on oil has become an obstacle to economic growth and development,” he continued.

Waheed explained that the current price of 35-70 US cents per KW hour meant that the government was being forced to provide “heavy subsidies” to consumers, giving little option but to move towards a low carbon alternative.

State Trading Organisation (STO) Managing Director Shahid Ali was not responding to calls at time of press.

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Addu International Airport Company outsources dredging and reclamation of Gan International Airport

Addu International Airport Company (AIA) has contracted a Dubai-based group to undertake the dredging and reclamation component of developing Gan International Airport, Addu City Mayor Abdulla Sodig said today.

He confirmed a company called Gulf Cobla had been awarded the $11.7 million (MVR 180 million) project, which will include land reclamation to build seaplane terminals.  The contract will also include work on constructing revetments on the reclaimed land.  Revetments are barricades used to prevent aircraft from overshooting a runway.

“I had a word with [AIA and the State Trading Organisation (STO)] Managing Director Shahid Ali this morning and he said the project is going well. However, some people have misinterpreted the situation because a contract was given to Lagan and another was awarded to Gulf Cobla,” Mayor Sodig told Minivan News.

AIA is itself a joint venture formed by the Gan Airport Company Ltd (GACL), Maldives Airports Company Ltd (MACL) and the STO.

Sodig explained that a UK company called Lagan had won the main contract to develop the airport, but added that it was AIA who had outsourced additional dredging work that was required to be completed before the main runway expansion could begin.

AIA and STO Managing Director Shahid Ali confirmed to Minivan News today that: “AIA contracted directly with Gulf Cobla to conduct the dredging and land reclamation components.”

Shahid previously told local media that Gulf Cobla’s segment of the project would be completed within eight months and that it will facilitate seaplane services being provided from Gan International Airport.

“Dredging will take about eight months. We predict that the physical work can begin within one month of signing this contract,” he said.

Shahid said he expected the overall airport development project to be complete by September 2014.

AIA is also conducting negotiations with Sri Lankan Airlines, Bangkok Airways, and Air Asia to increase the number of international flights from the airport,” he added.

Gulf Cobla’s Managing Director Joost Post has also made assurances to media that the project would be completed within eight months, noting that the company had previously conducted four projects in the Maldives.

“Southern gateway to the world”

Mayor Sodig today said that the airport development would provide a huge boost to  transport links in the country.

“The airport will start seaplane operations to resorts in the Southern Atolls. Once the Gan Airport is developed, it will be the southern gateway to other parts of the world,” Sodig declared.

Gan Airport’s main runway needs a one kilometre extension toward the northwest and it will also be resurfaced with asphalt, Sodig explained.

“The seaplane base will be developed on the western side of the island,” he added.

“The shallow lagoon across from the western beach will be dredged and the sand will then be used to develop the seaplane strip and reclaim land for the main runway.  The area of the former Maldives National Defence Force (MNDF) Commander’s residence will be used to develop the seaplane terminal.”

Airport development controversy

Thirty percent of the AIA was sold in November 2012 to tourism pioneer ‘Champa’ Hussain Afeef’s Kasa Holdings to raise finances to develop the Gan airport in Addu City.

Goverment-aligned Jumhoree Party (JP) Leader MP Gasim Ibrahim previously denied in parliament that he had spoken against the sale of shares of AIA with the intention of buying shares himself. He claimed he had done so “in the best interests of Addu and the country.”

JP MP Alhan Fahmy added that he also wished to see the Addu airport developed, but was concerned with how the sale of shares had been carried out. Fahmy said that 30 percent of shares being sold off for MVR 60 million (US$3.89 million) was “nothing but daylight robbery”.

Meanwhile, a number of MPs from the opposition Maldivian Democratic Party (MDP) stated at the time that the party supported the concept of privatisation, adding that the development of the Addu airport was originally an MDP initiated plan.  However, the opposition MPs also expressed concern over how the bidding process had been carried out.

During a November 2012 press briefing, STO Shahid Ali stated that contrary to general speculation, the airport had not been “sold”, but rather shares from the company AIA that had been sold to KASA Holdings.

He also refuted allegations of corruption, saying that KASA Holdings had been given higher priority since it was a local company and that all proceedings had gone through the bidding process in a matter which was completely free of any corruption.

Addu City Council previously released a statement welcoming the signing of the contract which they said would lead to the development of the Addu airport.

The statement further noted “the importance of leaving politics aside and for the good of citizens in letting the venture bring positive changes to Addu’s economy.”

The MDP also released a statement in November urging “not to let political feuds, political needs and power play interfere in important work directly related to the development of Addu City citizens, and generally all Maldivian citizens.”

The statement also condemned Gasim’s threats to sack Shahid Ali, stating “This party calls on political leaders to refrain from making unlawful threats through the greed for power and political wants.”

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STO puts resort development plans on hold

The State Trading Organisation (STO) has put plans to purchase a resort property on hold, citing “current economic conditions” as a barrier to any potential deal, local media has reported.

Back in June, STO announced its intentions to venture into the Maldives tourism industry, with the company targeting the purchase of “at least three resorts and one hotel” as part of attempts to increase its access to foreign currency.

However, the Sun Online news service yesterday quoted STO Managing Director Shahid Ali in announcing a temporary halt to the company’s resort purchase ambitions.

According to the report, the company remains committed to the ongoing construction of a 5-star hotel on  Hulhumale’ under a contract with USA-based multinational travel company, Carlson Group.

The STO is the Maldives’ state-owned importer, and is the primary supplier of general goods, fuel and pharmaceuticals to the Maldives. It also supplies aviation fuel to Ibrahim Nasir International Airport (INIA).

STO had formerly operated a resort property in the country, before selling it to a private group in 2007. Shahid had told Sun Online this week that the group had been focused on developing the island of Muthaafushi.

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Withdrawing US$1.2 million case against Meridian Services “a mistake”, says STO

A request to withdraw a US$1.2 million case against Dhivehi Qaumee Party (DQP) MP Riyaz Rasheed’s Meridian Services Pvt Ltd was sent to the court “by mistake”, the State Trading Organisation (STO) has said.

Managing Director of STO Shahid Ali was quoted in local media as stating that the letter had been mistakenly sent, and they had intended to delay the hearings.

“We sent the letter to the court regarding the case, because there were decisions that had to be made by the board of directors, and since the company did not have the required legal number of board of directors on STO’s board, we had intended to ask the court to delay the hearings,” Shahid Ali told newspaper Haveeru.

“But in the phrasing of the letter sent to the court from the STO, we had mistakenly asked for the withdrawal of the case. That letter was sent to the court asking to withdraw another case,” he added.

In a press statement received by Minivan News today from the STO, the organisation stated that the letter sent to the court had “typing errors” and that due to these errors, the context of the letter had differed drastically from that of what the organisation had originally intended, which was to delay the hearings until the board members had  been appointed.

The statement also stated that the STO would resubmit the case again to Civil Court within a period of seven days, and the works were already underway in preparing the necessary documents that would be submitted to the court.

The case concerned an unpaid sum of money worth Rf 19,333,671.20 (US$1,253,804.88), regarding Meridian’s use of the STO’s credit facilities.

Civil Court Judge Abdulla Jameel Moosa on Sunday ruled that the case was dismissed, in response to a letter sent by the STO requesting the case be withdrawn.

Judge Moosa in his verdict stated that the court had received a letter from the STO requesting the court withdraw the case.

The letter sent to the Civil Court by STO stated that “there were decisions to be made by the STO’s board of directors, and that after the “change in government”, the board did not have a sufficient number of members left to meet quorum and hold a board meeting. Therefore, the board was unable to make the required decisions, the public company stated.

Initially, STO and Meridian Services made an oil trade agreement on 31 March 2010, which gave Meridian Services a credit facility worth 20 million rufiyaa (US$ 1,297,016.86) for purchasing oil from STO, and that payments had to be made within a period of 40 days.

However, in August 2010, STO lowered its credit limit from Rf20 million to Rf10 million (US$648,508.43) and shortened the payment period from 40 to 30 days.

Meridian Services sued the STO for breach of contract claiming that STO had brought in the changes to the credit facilities without giving the required notice of one month, in the event that the STO decided to change the credit facility with regard to a policy change.

However, Meridian Services lost the case after Civil Court Judge Abdulla Jameel Moosa ruled in favor of STO, stating that the STO had not breached the contractual terms agreed between the parties and that the documents the STO had submitted to the court was evident that it had brought the changes in proper compliance with the agreement.

Speaking to Minivan News at the time, former legal director of President’s Office and lawyer Hisaan Hussain questioned whether such a big case could be withdrawn without even a board resolution.

“We are not speaking of an ordinary company. This is a public company and its making such a decision without a board resolution is a huge concern. STO has public share holders; they have to be answerable to the share holders,” she told Minivan News at the time.

With Regard to the withdrawal of the case by STO, opposition Maldivian Democratic Party (MDP) Spokesperson, MP Imthiyaz Fahmy alleged that it another attempt in “cleansing” all the “corrupt politicians” who had been involved in bringing about “the coup on February 7”.

However, STO in its statement denied such allegations made against the organization and its staff, citing it as false and untrue.

STO is a major supplier of general goods and pharmaceuticals to the Maldives, as well as fuel. It also supplies aviation fuel to Ibrahim Nasir International Airport (INIA).

The organisation was initially formed in 1946 as a fully state-funded business, in the name of Athireemaafannu Trading Agency (ATA), with the task of purchasing and importing essential food items in bulk to be distributed nationally via local traders and their own retail outlets. It was later expanded and rebranded as the State Trading Organisation.

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