Tag: tourism minister ahmed Adheeb

New financial restrictions on tourism development exclude small and medium-scale investors: developer

An island owner involved in the country’s burgeoning mid-market holiday sector has slammed new regulations imposing financial restrictions on tourism joint venture projects with the government, claiming the legislation outright excludes small and medium-scale investors.

Speaking on condition of anonymity, the island owner alleged that the recently implemented amendments to the Tourism Act served to “shut the door” on small and medium-sized investors.

The Ministry of Tourism, Arts and Culture told Minivan News that the regulations were required in order to ensure future developments in the country were financially viable and that investors could guarantee a project’s completion.

However, the regulation is expected to favour much larger-scale investment projects such as resorts, to the detriment of mid-market tourism, claimed the island owner.

“The real issue here would be that only those with very high net worth can be venture partners with government. Very, very few tycoons are in that wealth bracket,” the source said.

“[Former President] Nasheed’s government tried to be inclusive in offering business opportunities. This regulation is exclusive and shuts the door for medium to small-size investors to partner with the government.”

Joint venture regulation

Published in the Government Gazette Volume 42, number 17 – dated January 28, 2013 – the regulation requires any joint venture partner working with the state on a tourism projects to have a minimum financial worth of US$300 million  and make a minimum initial capital investment of at least US$100 million.

The regulation, entitled the “Procedure to Follow Where the Government Undertakes Joint Venture Investment in Islands or Land”, allows a company with at least a 10 percent share held by the state to develop a resort from land set aside for tourism use, such as a picnic island.

Land used for water sports or diving would also be included once the lease for the area is acquired by a joint venture company.

“Notwithstanding that section five of the Maldives Tourism Act states that islands and land for development as tourist resorts shall be leased to the party that submits the best-qualified bid in respect of such islands or land in accordance with pre-established procedures in a public tender held by the Ministry of Tourism; the same section states that those Islands or land in which the Government makes an investment wholly or in joint venture shall be exempted from the Procedure provided therein,” the regulation reads.

“Therefore the object of this procedure is to determine the procedure to follow in that prescribed exemption status. Uninhabited islands or land may be leased to a company created under a joint venture with the Government for tourist resorts, tourist hotels and marinas development pursuant to this Procedure.”

An unofficial English translation of the regulation can be read here.

Development safeguards

Minister of Tourism, Arts and Culture Ahmed Adheeb told Minivan News this week that the regulation was needed to safeguard future resort development, claiming opportunities would continue to exist for small and medium investors in the tourism sector through sectors such as guest-houses and safari boats.

With what he called a “limited” number of islands presently available in the country to be developed as resort properties – a major earner for the Maldives government both in terms of lease payments and Tourism Goods and Services Tax (T-GST) – Adheeb said the regulation was already bringing in large-scale investment.

“We already have a Qatar-based group interested in the resort business here and they have signed a memorandum of understanding (MOU) on this,” he said. “We are now looking to find a suitable location for them.”

Adheeb claimed the legislation was particularly important considering the  number of pending tourism development projects approved under the former government that failed to be completed – resulting in an overall loss to the country’s economy as a result. He said that the regulation approved back in January would ensure a more “strategic” solution to finding investment partners to ensure financial returns on tourism projects.

Adheeb said that the regulations applied to land such picnic islands that were effectively being used “almost as a resort”, such as areas licensed to serve alcohol to tourists, something not allowed on islands designated as “inhabited”.

“The only difference [to these islands] is that tourists cannot sleep there for the night,” he said. “Now they can stay there the night, but [operators] have to pay land rent. It is to stop the concept from being abused.”

The tourism minister said that picnic islands open to the Maldivian public would not be affected by the regulation and would continue to be accessed and used by local people.

“Picnic island”

Speaking to Minivan News, former Tourism Minister Dr Mariyam Zulfa said the concept of a “picnic island” dated back to the 30-year rule of former President Maumoon Abdul Gayoom.

She said the Gayoom administration had opted to lease islands either for tourism – such as through the development of exclusive resort properties – or tourism-related purposes.

While islands leased for tourism went through a bidding process, land provided for tourism related purposes was said to have been provided on an “ad hoc” basis at the tourism ministry’s discretion, according to Dr Zulfa.

“These were often leased for the purposes of day picnics for tourists, safe harbours and other ancillary facilities of resorts,” she stated. “These islands were only for the use of those persons allowed by the leaseholder (and not available for public use). These islands came to be known as ‘picnic islands’, leased by the Ministry of Tourism.”

Dr Zulfa claimed that the method of providing land for tourism related purposes during the Gayoom-era meant that there had been a lack of regulation for how much an individual party paid to lease such islands.

“Originally these were leased at rates that were not based on a uniform formula and it was very difficult to justify as to why one party had an island for, say US$2,000  a month and others for double that or sometimes more,” she added.

“What has happened traditionally is that some of the leaseholders started building rooms on some of these islands for tourists and very soon some islands became, for all intents and purposes, a tourist resort but without being registered as one and of course without being registered for the taxes that were attached to tourist resorts.”

Under the Nasheed government, Zulfa claimed the former administration attempted to introduce “a fair and just” formula allowing “picnic islands” to be converted legally into tourist resorts at the leaseholder’s request in partnership with the government.

“Thus the uniform formula of US $600,000 per square hectare and all the other conditions were stipulated in our regulations and picnic island lease holders were invited to become legal – if they so required, and without involving the bidding process. These islands are very different to islands leased by other ministries as tourism legislation – and tourism tax, I might add – applies only to islands leased by the Tourism Ministry.”

She added that land leased for public purposes such as picnics by other ministries would not be affected by the Tourism Act.

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Maldives falls 40,000 short of million tourist target for 2012

The Maldivian government has narrowly failed to reach its target of one million tourist arrivals for 2012, according to figures released by Ministry of Tourism, after a year of political turmoil and an economic slump in key markets.

Despite arrivals falling short by roughly 42,000 tourists, figures released by the ministry have shown that overall arrivals rose 2.9 percent from 931,333 in 2011 to 958,027 in 2012.

Prior to the release of the figures, Tourism Minister Ahmed Adheeb predicted that while there may be a shortfall of roughly 20,000 in 2012, he was confident the ministry could achieve the one million mark in 2013.

“There were a lot of hiccups last year with the political turmoil that the country experienced. It is important that we do not compare ourselves to other destinations like Sri Lanka or Seychelles, as our tourism market is very different. We have a high-value tourism market.

“We will formulate a strategy to go forward this year and later this month [January] we are going to finalise the fourth master plan of tourism. I am sure we will get one million tourists in 2013. I can assure you of it,” Adheeb told Minivan News earlier this month.

Figures released by the  tourism ministry show that Europe, which accounted for 54 percent of all tourist arrivals in 2012, fell by 3.7 percent from 537,757 in 2011 to 517,809 in 2012. Arrivals from the United Kingdom – the second highest share of European arrivals to the Maldives this year – continued to fall from 104,508 in 2011 to 91,776 in 2012 – a 12.2 percent  drop.

Germany took over the UK in 2012 as having the largest share of European arrivals to the Maldives, growing by an extra 7,834 arrivals from 90,517 in 2011. The 8.7 percent increase in arrival numbers, meant that Germany was accountable for 10.3 percent of all tourist arrivals in 2012.

Italy, which had the second highest arrival share of European tourists in 2010, fell drastically in 2012 by 24.4 percent from 83,088 arrivals to 62,782.

Meanwhile, tourist arrivals from ‘Asia and Pacific’ regions continued year-on-year growth from 2010, increasing by 10.2 percent from 2011 and accounting for a 40.1 percent share in the overall market at 384,506 arrivals in 2012.

Shift to ‘low yield’ Chinese tourists

Chinese arrivals continued to grow in 2012, with a 15.6 percent increase from 198,655 in 2011 to 229,551 in 2012.

Chinese tourists now account for the largest share of arrivals from any nation in 2012 standing at 24 percent, a massive increase from Chinese arrival figures in 2009 which stood at 60,666.

Despite the high number of Chinese tourists, tourism experts stated back in 2010 that Chinese guests were relatively ‘low yield’ despite their high numbers.

Speaking to Minivan News in 2010, the now former Secretary General Maldives Association of Tourism Industry (MATI), Sim Mohamed Ibrahim, said Chinese tourists tended to spend less than their European counterparts.

“The Chinese who come do not come for the sun and the beach – they come because the Maldives is a novelty, a safe destination, and because of their new-found freedom to travel. Resorts are saying there are not many repeat visitors from China,” he said at at he time.

Tourism growth slowed to less than one percent in 2012

Tourism growth meanwhile slowed to less than one percent in 2012. While the tourism industry grew by 15.8 percent in 2010 and 9.1 percent in 2011, the industry’s growth in 2012 was expected to be 0.7 percent.

The two main reasons cited by the Finance Ministry for the anaemic growth were “the political turmoil the country faced in February” and a decline in the average number of nights tourists spend in the country “as a result of a decline in the average number of days a tourist spent in the Maldives.”

On average, tourism accounted for 28 percent of GDP during the past 10 years.

Despite the widely reported Ibrahim Nasir International Airport (INIA) dispute between the Indian infrastructure giant GMR and the Maldivian Government in December last year – as well as claims of anti-India sentiment within the country – arrivals from India  increased by 34 percent in December compared to the same month in 2011.

The largest increase in tourist arrivals compared to 2011 was from the Middle East, which saw close to a 50 percent rise in arrivals for 2012 at 21,843 from 14,570 in 2011.

Arrivals from United Arab Emirates grew the highest in percentage from 2011 by 76.6 percent. Despite the high percentage growth however, the number of tourists was comparatively low to other countries standing at 4,047 in 2012.

MVR 70 million tourism marketing budget in 2012

The Maldives Marketing and Public Relations Corporation (MMPRC) was allocated a budget of MVR 70 million (US$4.5 million) in 2012 to conduct marketing activities for the year, almost double the 2011 budget of US$2.3 million, which saw the country receive 900,000 tourist arrivals.

Following February’s controversial transfer of power, the incoming government of President Dr Mohamed Waheed Hassan sought to utilise public relations groups and advertising to try and offset the impact of negative news headlines resulting from the controversial nature of the change in government.

That focus included a US$250,000 (MVR3.8million) advertising deal to promote the country’s tourism industry on the BBC through sponsorship of its weather services, as well as signing a £93,000 per month (US$150,000) contract with public relations group Ruder Finn to try and improve the country’s image internationally.

Maldives tourism authorities said back in October that they were confident the country would meet its one million visitor target, despite ongoing “political turmoil”.

Registered beds up, occupancy rates down

According to the 2012 statistics released by the Tourism Ministry, the average number of registered beds between resorts, hotels, guest houses and safari vessels stood at 27,702 in 2012 – an increase of 1,346 from 2011.

Despite the increases in tourism arrivals, bed nights fell from 6,529,200 in 2011 to 6,450,794 – a total drop of 1.2 percent – and the average days spent in the Maldives by tourists fell from 7.0 days in 2011 to 6.7 days in 2012.

Occupany rates also fell across all types of accommodation aside from a 1.9 percent increase on safari vessels. Altogether the occupancy rates fell from 73.1 in 2011 to 70.6 in 2012.

Maldives top five markets by visitor numbers (2012)

China: 229,551

Germany: 98,351

United Kingdom: 91,776

Russia: 66,378

Italy: 62,782

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Club Faru resort to be closed within two months: Tourism Minister

Tourism Minister Ahmed Adheeb has revealed that the Club Faru resort is to be closed down within two months after the government took over the property this weekend.

On Saturday (January 5), the Ministry of Tourism, Arts and Culture said it had assumed control of Club Faru after the resort’s operators were said to have failed to hand over the property following the expiry of their lease agreement.

Adheeb told Minivan News that the resort would be closed as part of the government’s plans to begin the second phase of “reclaiming” Hulhumale’ this year.

“The resort is to be operated by a government company for two months and it will then be closed down and reclaimed,” he said.  “It was a seven year lease that expired on November 15. Now the government has decided to reclaim that part of Hulhumale’,” he said today.

The proposed closure has been described as “interesting” by the former secretary general of the Maldives Association of Tourism Industry (MATI), who expressed hope that the government would treat all resort operators equally going forward.

Adheeb today maintained that his ministry would not favour certain resort operators over others in terms of their treatment.

According to the tourism minister, the government offered other companies the chance to temporarily manage Club Faru after the first phase of reclaiming Hulhumale’ was completed.

However, Adheeb claimed that after the expiry of a seven-year lease on November 15, 2012, the resort’s operators had gone to court on two separate occasions to try and extend their lease.  He added that the operators had been unsuccessful on both attempts to obtain an injunction against the government.

Despite the lease termination deadline expiring last year and the subsequent takeover on Saturday, Club Faru’s website – when accessed at the time of press – displayed a pop-up sign dismissing rumours that the resort will be closed or temporarily shut down for renovation between November 1 to April 31.

“Attention!!! Against different phrased rumours that seem to circulate in the internet and in certain travel agencies: Fihalhohi and/or Club Faru will neither be closed nor will there be any renovation from November 1 to April 31 that could lead to disturbance. This info is valid for Fihalhohi and Club Faru. Both Islands continue as is,” the pop-up statement reads.

Management at Club Faru resort were not responding to calls from Minivan News at time of press.

Speaking to local media, Adheeb claimed that the handover had gone “smoothly” when he visited the resort yesterday (January 5).

“Everything went quite smoothly. The Finance Ministry’s financial controller, tourism’s permanent secretary, and legal officials of the ministry along with me came to the resort and took over,” he said.

“We will oversee the operations of the island as the [tourism] ministry has reclaimed ownership of this resort,” Adheeb told local newspaper Haveeru.

Local media reports have claimed that the government had assumed ownership of the island property while tourists were still holidaying at the resort.

According to Adheeb, an Italian company called Club Med had originally invested in the resort. However, after Club Faru was designated part of the Hulhumale’ reclamation plan seven years ago, Club Med was given another island as compensation.

Local media reported that the government leased the island for a period of five years on November 16 1995, after a delay in the second phase of reclaiming Hulhumale’. Following the expiry of the five year lease, it was then extended on an annual basis.

All resort operators treated the same: Adheeb

When contacted today, Former Secretary General of MATI ‘Sim’ Mohamed Ibrahim described the Club Faru handover as “interesting”, adding that no operators should be favoured when it comes to breaching legal contracts.

“While it is important that legal contracts are kept to and enforced, it is also important that individual resort operators are treated the same and not differently.  It appears that Club Faru has taken precedence over others, especially as Hulhumale’ is earmarked for development,” Sim told Minivan News.

Responding to the comments, Adheeb said that the tourism ministry did not favour any resort operator over another.

While there are no other resorts in the Maldives where an operating licence has been cancelled, Adheeb claimed that when dealing with rent payments, each resort will always have to pay or face a termination notice.

The tourism minister claimed that when he first took up his position following February’s controversial transfer of power, there were 12 resorts found to be not paying rent at the time. However, through flexibility on the interest rates, he maintained there were now “no resorts not paying rent”.

“We are not tolerating resorts who do not pay rent, any operating resort has to pay. Those who are not paying already have the termination notice. This culture has to go, by the end of this year all resorts will be paying and it will become a more stable industry,” Adheeb said.

At a press conference held on December 31, 2012, Adheeb said that resort operator Yacht Tours had been sent termination notices for both Alidhoo and Kudarah resorts, with a seven day period for handover.

He added that while the ministry had come to a payment system agreement with a number of other companies, Yacht Tours had sent no official written communication in regard to the payment of outstanding rents.

Following the termination notice, Yacht Tours, a company owned by opposition Maldivian Democratic Party (MDP) MP Abdulla Jabir, said it will take the government to court over the dispute.  The company has alleged that the Tourism Ministry had failed to responded to correspondence it had sent on the matter of rent payments.

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No plans to privatise airport, “might sublease”: Tourism Minister Ahmed Adheeb

Minister of Tourism Ahmed Adheeb has said the government is not planning to hand over full control of operations at Ibrahim Nasir International Airport (INIA), but might sublease specific development projects to international parties through a “transparent” bidding process.

Minister Adheeb told Minivan News that privatising the only international airport allowed it to become a monopoly which was not in the best interests of the country.

“What we saw was that handing over operation of the only international airport in the country meant it was monopolised. What we are saying is that if the airport is given like that without any competition, it is not in the best interest of the country,” he said.

Adheeb admitted that INIA needed further development and refurbishment, including the addition of an extra runway, and said such projects would be subleased to developers through a transparent bidding process. He also maintained that “operation and control” of the airport would not be given away as he alleged the former government had done with GMR’s concession agreement.

President Mohamed Waheed Hassan also highlighted in an interview to India’s Business Standard that MACL would “open tenders for major development projects”.

“I think it’s too early to talk about the rebidding but, yes, MACL will open tenders for major development projects in connection with the airport modernisation program. GMR is eligible to participate. I don’t see any reason why Chinese companies should be barred from participating in the bidding process,” he told the Business Standard.

However, when contacted by Minivan News, MACL Managing Director Mohamed Ibrahim denied any knowledge of such bidding processes and said he did not wish to further comment on the matter.

Minister Adheeb said 75 percent of the tourists coming into the country were from Europe and following the “European [economic] crisis, the Maldives government should have provided an incentive to those tourists arriving to the country, but because of INIA being operated by GMR, several airport fees were raised.”

“Flight operators operate as a business. They will not consider us if we give no incentives in such a time of crisis and when the airport handling charges are too high. We have to understand that INIA is a tourist airport, it is not a shopping airport or a transit airport,” he explained.

Therefore, the Minister said that the country needed an efficient airport where tourists can go through quickly, with an efficient check-in system.

Earlier on February 2, Qatar Airways CEO Akbar Al Baker warned the airline will re-consider flying to the Maldives if the airport operator maintained its plan to raise airport handling fees at INIA by 51 percent.

Reuters at the time reported that the airline was “‘dismayed’” over what it understood to be GMR’s plan to increase the handling fee at a future date, and suggested such a move would “threaten Qatar Airways’ continued presence in the Maldives.”

However, the GMR Group at the time denied the allegations stating that it had had received no official communication from the airline about its concerns.

GMR spokesman Amir Ali responded at the time saying that the fee hike had already been made by MACL shortly before GMR assumed control of the airport, adding that while there were no plans for a further increase at present, prices were dependent on factors such as fuel costs.

Adheeb also alleged that the former government intended to rush the development process of the airport rather than a “well contemplated phase by phase development plan”.

“Why do we really need to develop the airport to cater to four million people? We could have done that through proper planning in a phase by phase development process,” he said.

The INIA concession agreement

In 2010, the government of Maldives through its Finance Ministry, Maldives Airports Company Limited (MACL) and GMR-MAHB entered into a concession agreement withINIA whereby the Malaysian-Indian consortium were to develop and operate the airport for a period of 25 years.

According to the concession agreement a “project company” under the name GMR International Airport Limited (GMIAL) was to carry out the development project.

However, a lengthy dispute between the new government of President Mohamed Waheed Hassan and the GMR Group led to the eviction of the agreement.

On November 27, President Mohamed Waheed’s cabinet declared the agreement void, and gave the company a seven day ultimatum to leave the country.

Attorney General (AG) Azima Shukoor stated the government reached the decision after considering “technical, financial and economic” issues surrounding the agreement.

She also claimed the government had obtained legal advice from “lawyers in both the UK and Singapore as well as prominent local lawyers – all who are in favor of the government’s legal grounds to terminate the contract.”

The INIA was handed over to the government on December 8, in an invitation-only press conference; Finance Minister Abdulla Jihad presented the official handover documents to MACL Managing Director Mohamed Ibrahim, and said that the Maldives would pay whatever compensation was required “however difficult”.

With arbitration proceedings underway in Singapore over the contested airport development charge (ADC), GMR received a stay order on its eviction and appeared confident of its legal position even as the government declared that it would disregard the ruling and proceed with the eviction as planned.

On December 6, a day prior to its eviction, the government successfully appealed the injunction in the Supreme Court of Singapore. Chief Justice Sundaresh Menon declared that “the Maldives government has the power to do what it wants, including expropriating the airport.”

That verdict, effectively legalising the sovereign eviction of foreign investors regardless of contractual termination clauses or pending arbitration proceedings, was “completely unexpected”, according to one GMR insider – “the lawyers are still in shock”, he said at the time.

A last ditch request for a review of the decision was rejected, as was a second attempt at an injunction filed by Axis Bank, GMR’s lender to the value of US$350 million.

Scott Wilson Plan

Minister Adheeb said the Scott Wilson master plan produced during former President Maumoon Abdul Gayoom’s administration would have been “a better master plan to develop the airport.”

“Sir Scott Wilson’s master plan to development of INIA was a good master plan. We actually did not require a plan to be implemented immediately. The plan was to develop the airport in a phase by phase development process. Some of the development projects had already been completed at the time the airport was given to GMR for development,” he explained.

Following the signing of the concession agreement of INIA with India’s GMR group, the Scott Wilson master plan was abandoned for a new master plan produced by the International Finance Corporation (IFC) through another foreign consultancy firm – Halcrow – which the current government claimed was more costly.

“Scott Wilson’s phase one cost us US$390 million, and all the three phases summed up came to a figure around US$590 million. The IFC did not provide this information to the government. We are talking about a development of 30 years,” former Civil Aviation and Communications Minister Dr Ahmed Shamheed said previously.

The current government criticised the IFC for abandoning the Scott Wilson plan for a more “costly master-plan”  and alleged that the World Bank affiliated group had been “irresponsible” and “negligent” in advising the former government of President Mohamed Nasheed in the concession of INIA by Indian infrastructure giant GMR.

However the IFC denied the allegations, stating that its advice was geared towards achieving the “objective of upgrading the airport and ensuring compliance with applicable international regulations” and providing the Maldives government “with the maximum possible revenue”.

“A competitive tender was organised with the objective of selecting a world-class, experienced airport operator, who would rehabilitate, develop, operate and maintain the airport,” said an IFC spokesperson at the time.

Airport Development Charge

Highlighting the Airport Development Charge (ADC) that the former government intended to charge – prompting criticism from the opposition parties who are now currently in government of President Waheed – Adheeb said that the former administration proceeded to taking ADC without legislation.

“The way they intended to charge ADC was not a mechanism established in anywhere in the world. ADC is taken through a proper legislation and should be flexible and adjustable in parallel with the inflation rate,” he contended.

On November last year, former President Mohamed Nasheed’s government’s Transport Minister Adil Saleem announced that GMR will begin charging international passengers a US$25 (MVR 385.5) ADC at the departure check-in counters of INIA for all flights scheduled after 12:00am on January 1, 2012.

Saleem stated at the time that the fee had been previously approved by the government as part of its contract with GMR.

The matter was soon taken to Civil Court by then opposition Dhivehi Qaumee Party (DQP) – led by current Special Advisor of President Waheed, Dr Hassan Saeed. The DQP claimed that a pre-existing Airport Service Charge (ASC) of US$18 (MVR 277.56) invalidated the ADC.

The Civil Court in December 2011 invalidated the ADC charge, ruling that the clause in the concession agreement with GMR violated the Airport Service Charges Act of 1978, which was amended in 2009 to raise the charge to US$18 for foreign passengers and US$12 for Maldivians above two years of age.

The current government, after ascension to power, claimed in a “cabinet-committee report” that it was “not in the best interest of the country” to appeal the Civil Court decision to High Court, and thereby ignored the decision.

The former government had honoured the concession agreement following the civil court ruling, and,  under instruction from a letter sent by MACL, had been deducting ADC revenue from concession fees due the government.

Following the ousting of the Maldivian Democratic Party (MDP)-led government on February 7, the new government – which included the DQP – inherited the crippled concession revenues, under which it was effectively obliged to pay GMR to develop the airport.

The new government received a succession of bills from the airport developer throughout 2012. In the first quarter of 2012 the government received US$525,355 of an expected US$8.7 million, after the deduction of the ADC. That was followed by a US$1.5 million bill for the second quarter, after the ADC payable eclipsed the revenue due the government.

Combined with the third quarter payment due, the government owed the airport developer US$3.7 million (MVR 57.05 million).

On May 8, GMR offered to exempt Maldivian nationals from paying the contentious ADC in a bid to end a legal and contractual stalemate that had given rise to MACL going bankrupt and the deprivation of the majority of all airport revenue that the government was to generate through the agreement.

However, despite attempts to renegotiate the issue, the government decided to terminate the agreement at risk of compensation. The ADC case is still pending in the Singapore Arbitration Court.

Adheeb stressed that such major projects that is pivotal to the country’s economy should not be taken without thorough research and proper consultation and analysis. The current government, he said, would address these issues “with patience and with a proper plan.”

He also added that the current government of President Waheed would seek towards a “balanced economic and foreign policy” that would be in the best interest of the country.

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IFC responds to government’s allegations of negligence in airport bid

Additional reporting by Neil Merrett

A spokesperson for the International Finance Corporation (IFC) has defended the organisation against charges of negligence during the bidding process for the development of Ibrahim Nasir International Airport (INIA).

In a press conference last Thursday held by the Attorney General  Azima Shukoor, Economic Development Minister Ahmed Mohamed, Toursim Minister Ahmed Adheeb and Civil Aviations Minister Dr Ahmed Shamheed, it was alleged there were discrepancies in the bid awarding and concession process.

The cabinet members claimed that the IFC had been “irresponsible” and “negligent” in advising the former government of President Mohamed Nasheed in the concession of INIA by Indian infrastructure giant GMR.

“The current government believes that the IFC had not given the most appropriate legal, financial and economic advice to the Maldivian State,” Azima Shukoor said.

The IFC denied the accusations, stating that its advice was geared towards achieving the “objective of upgrading the airport and ensuring compliance with applicable international regulations” and providing the Maldives government “with the maximum possible revenue”.

“A competitive tender was organised with the objective of selecting a world-class, experienced airport operator, who would rehabilitate, develop, operate and maintain the airport,” said an IFC spoksperson.

The IFC – a member of the World Bank Group – was established in 1956 to stimulate private investment in developing countries through investment, advisory, and asset management services.

The spokesperson stated that the bids were evaluated by a government appointed committee, comprising senior government officials, using two key criteria.

The first criterion required firms to meet all the technical requirements set out in the tender documents which, Seth stated, were designed to meet the objectives of the government, and ensure the airport becomes a world class airport with ‘Leadership in Energy and Environmental Design’ certification (Silver).

The second criterion was financial, favouring the highest offer from firms that passed the technical stage. The financial criterion was a combination of a one-time up-front fee, and fixed and variable fees to be paid throughout, explained the spokesperson.

“The IFC’s advice complied with Maldivian laws and regulations and followed international best practices at each step of the bidding process to ensure the highest degree of competitiveness, transparency and credibility of the process,” the organisation stated.

“These processes have been followed globally in several Public-Private-Partnership projects in the airport and other infrastructure sectors,” it added.

Asked if the IFC was currently continuing assistance to GMR or the Maldivian government, it replied “We are currently not working in any capacity with the authorities on this project. We however remain available to address any issues or concerns that the government may have relating to the project.”

A GMR Spokesperson said that the company did not wish to comment on the remarks made by government ministers.

The Anti-Corruption Commission (ACC), which is currently investigating the GMR deal, said last week that continued work on the project may be delayed considerably whilst the investigations are completed.

ACC investigations began in June, although building work on the new terminal – due to open in July 2014 – was ordered to halt in early August after the government claimed that the company had not acquired the appropriate permits.

Government’s critique of bidding process

During Thursday’s press conference, Shukoor claimed that the role played by the IFC during the bid awarding process – as well as the technical, financial and legal advice given – was unacceptable and included “major inconsistencies” in the “loss-benefit assessment” carried out before awarding the project to GMR.

“The legal agreement also lacks equity between the state and GMR, and gives significant powers which have narrowed the government’s ability to manoeuvre within the agreement. For this reason, the state is facing a huge loss even in taking steps that have to be taken immediately,” she added.

Speaking about the prospective profit, Shukoor claimed the agreement made between GMR and the government would lose the country more than that it would earn, and a much more cost effective master plan had been made during the tenure of former President Maumoon Abdul Gayoom.

She said that as long as the agreement between GMR and the government is not invalidated, the agreement would be “legally binding” despite a “majority of the people” who wish to “terminate the agreement immediately”.

“The government must also consider how much money has to be paid back as compensation if terminating the agreement, and it is clear to all of you that the Maldives financial and economic situation is at a critical level, and in this situation it is not an easy thing to do,” she told the press.

Shukoor also expressed the government’s concern about the effect on investor confidence that may result if the agreement is terminated in addition to other “diplomatic issues” that may arise from such a decision.

The Economic Minister, Ahmed Mohamed, claimed that the Nasheed government had only considered the lump sum that it received as the upfront payment, rather than long term benefits that the government could have achieved.

“They awarded the bid to a party who proposed to pay US$76million, but if you look at the other bidders, their bids were more profitable in the long run. For example one of the bidders proposed to give a 31 percent share to all the businesses except that from oil trades until 2014, but GMR proposed only one percent,” he claimed.

He added that another bidder had proposed to share 16 percent of the profits gained from the oil trades with the government.

“It is clear that the government did not consider, when awarding the bid, the long term benefits of the people but rather an instant short term profit,” he argued.

Highlighting the already much disputed issue of the Airport Development Charge (ADC), Mohamed claimed the government had given up a lot of power to GMR in the contract, allowing them to dictate all the fees during the concession.

He stated that there were only two options left for the government: “Either find a solution within the concession agreement with GMR or terminate it.”

Civil Aviation Minister Dr Shamheed said the initial INIA master plan, made by British consultancy firm Scott Wilson, was considered too costly by the IFC.

“So we checked the truth of IFC’s report. The master plan by Scott Wilson is a phase based development. There were developments that were to be brought in the first phase, the second and other phases that followed were mentioned very much in detail,” he claimed.

Shamheed claimed that despite the fact that Wilson’s master plan was more cost effective the IFC made a new master plan, hiring another foreign Consultancy firm – Halcrow- which Dr Shamheed claimed was more costly.

“Scott Wilson’s phase one cost us US$390 million, and all the three phases summed up came to a figure around US$590 million. IFC did not provide this information to the government. We are talking about a development of 30 years,” he said.

Shamheed also alleged that the new master plan was made without even testing the status of the current runway at all and said they relied on a test that was made a long time ago.

“Even those tests showed that the runway needed significant repairs and some parts of the runway had to be removed,” he added.

“This is very irresponsible that the former government entered into a contract with a party who did not assess the situation of the existing runway,” he claimed.

Tourism Minister Ahmed Adheeb alleged that because of the new fees implemented by GMR following its take-over, the flight frequency from Europe had declined.

“Coming to Maldives is no longer feasible for most of the chartered flights.  Sri Lankan airlines’ Male to London direct flights have been pulled out following the decision. Even though the flight frequency from China has increased, the number of bed nights has declined,” Adheeb said.

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Maldives sponsors BBC weather in US$250,000 deal

Maldivian tourism authorities are pursuing private sector funding to secure advertising with prominent media networks such as CNN, after this week signing a sponsorship agreement with the British Broadcasting Corporation (BBC).

Deputy Tourism Minister Mohamed Maleeh Jamal told Minivan News that authorities were presently looking for ongoing partnerships within the country’s resort industry to help fund a year-long global media campaign to offset the impacts of negative international headlines believed to have affected tourism this year.

The government yesterday finalised a US$250,000 (Rf3.8million) advertising deal to promote the country’s tourism industry on the BBC through sponsorship of its weather services. Tourism authorities said the strategy reflected a collaboration between the government and the private sector to try and strengthen arrival numbers to the country.

Under the recently reinstated “Sunny Side of Life” branding, Maleeh said the sponsorship of the BBC’s weather services will run from June 18 to August 27 on both the BBC World TV service as well as the broadcaster’s website.

Pubic relations

In April, the Maldives Marketing and Public Relations Corporation (MMPRC) confirmed the appointment of New-York based public relations agency Ruder Finn to “oversee the overall media coordination and achievement of PR related solution for destination Maldives.”

According a contract speculated to be worth over US$150,000 per month, Ruder Finn is required to work to: “ instill confidence in the tourism industry of the Maldives, gain understanding and public acknowledgement of the Maldives in the international community and ensure sustainable development of the tourism industry.”

Questioned whether the BBC sponsorship agreement was designed to try and generate greater media coverage about the Maldives on international news services, Maleeh claimed the MMPRC’s promotion plans were focused on tourism rather than generating headlines.

“At present we are trying to build investor confidence in the country,” he claimed. “There has been too much focus on stories such as how the Maldives will be sinking in 30 years.”

Maleeh pointed to recent coverage of several events in the lead up to February’s controversial transfer of power – such as former President Mohamed Nasheed’s proposed spa ban – as an example of headlines that had damaged confidence among tourists and investors in the Maldives.

The previous government under Nasheed claimed a spa ban introduced back in December 2011 was made in response to criticisms made against it during a demonstration of opposition politicians and NGOS relating to “un-Islamic” practices in the country.

“Mainstream” promotion

Once the present BBC sponsorship agreement ends in August, Maleeh added that the MMPRC and tourism authorities hoped to secure more funding to continue its advertising plans. He said that the motivation at present was to extend advertising ideally to “all mainstream media organisations” such as organisations like CNN.

Maleeh stressed that funding remained the biggest issue at present to extending advertising efforts.

“We are seeking support from local and international hospitality groups right now,” he said. “We are still waiting to receive support. However, other hotel chains have shown an interest.”

During the signing of the BBC agreement yesterday at the Conrad Rangali Island Resort, Tourism Minister Ahmed Adeeb welcomed the assistance of local business tycoons Mohamed ‘Champa’ Moosa and Mohamed Umar Maniku in securing the deal, according to local media.

Adheeb told Sun Online that authorities had decided to re-use the country’s “The Sunny Side of Life” branding due to previous experiences the industry had with the slogan, as well as negating costs associated with setting up an entirely new brand.

“Over the past years it has become a very expensive brand. I believe that if we were to opt for a rebranding it would in the least cost us US$50 million. We don’t have that much of a budget. The new government decided to go forward with the old brand,” he was quoted as telling local media.

Meanwhile, Vice President Waheed Deen, who was also present during the signing, lauded the financing of the new ad campaign as an “achievement” and a “success” for the country as it celebrates 40 years since the inception of Maldivian tourism during 2012.

“Coup” allegations

The 50,000 member-strong opposition Maldivian Democratic Party (MDP) maintains it was ousted from power on February 7 following what then President Mohamed Nasheed described as a coup d’état planned by political opposition, sponsored by some wealthy resort tycoons and carried out by a mutinous police and military. The party has continued to claim that President Dr Mohamed Waheed Hassan’s government is illegitimate and represents a return to the autocratic era of Maumoon Abdul Gayoom.

Such criticisms of the present government have led to the establishment of the Maldives Tourism Advisory (MTA) by the Friends of Maldives NGO that names resorts alleged by the MDP to have involvement in the “coup”.

In April, the Maldives Association of Tourism Industry (MATI) has issued a statement expressing “serious concern” over what it describes as a “concerted international campaign” against several of the country’s resort operators.

MATI claimed that calls from the Maldives Tourism Advisory (MTA) for tourists to avoid certain properties on the basis of ownership were “libellous in the extreme”, as the allegations against the tourist resort operators “have not been proven either through an investigation or a court of law.”

The MTA website features a ‘traffic light’ system with “red” resorts recently appearing to have been expanded to include an assortment of 18 properties owned by Vice President Waheed Deen and senior figures associated with the new ruling coalition, including Jumhoree Party (JP) Leader Gasim Ibrahim and Progressive Party of the Maldives (PPM) MP Abdulla Jabir.

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MNCCI waits on Adeeb parliamentary backing before appointing new president

The Maldives National Chamber of Commerce and Industry (MNCCI) will wait for current president Ahmed Adeeb to receive parliamentary approval for his appointment as Minister of Tourism Arts and Culture before replacing him in the organisation.

Speaking to Haveeru, current MNCCI Vice President Ismail Asif said the organisation was in the process of setting out an election process to appoint a new president.

However, Asif stressed that no decision would be taken until Adheeb received parliamentary approval to become the country’s new tourism minister – a decision requiring him to step down from holding the chamber of commerce’s presidency.

Should parliamentary backing be obtained for Adheeb to succeed Dr Mariyam Zulfa as the nation’s tourism head, Asif was quoted as saying that a general meeting would then be held to find a new MNCCI head.

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