Mumbai: The Maldives government repossessed the country’s main airport from Indian infrastructure firm GMR Infrastructure Ltd on Friday after revoking a 25-year lease of the Male airport.
The opposition Maldivian Democratic Party of former President Mohamed Nasheed, who kick-started the privatization of Ibrahim Nasir International Airport with GMR in 2010, staged a peaceful protest against the government move. The termination of GMR’s contract sparked a diplomatic spat between the Maldives and India.
In a phone interview, Masood Imad, media secretary to Maldives President Mohamed Waheed, said GMR had not been willing to find a solution to the dispute through discussions. He also said the government had launched a criminal investigation into the events that led to the award of the airport project to GMR and legal action will be taken against anyone found guilty of corruption. Edited excerpts:
Are you feeling bad for GMR Group?
Deep inside my heart, I believe GMR is a good company and that they came here with good intentions which were mutually beneficial for Maldives and GMR. But the former government took GMR for a ride. They were not honest in dealing with GMR. They gave false hopes and made illegal deals with GMR which others will find reason to undo.
Unfortunately, GMR was sticking to the terms and conditions the former government had promised them and was not willing to budge an inch. The current government has launched a criminal investigation into the events that led to the awarding of the airport to GMR. Legal action will be taken against those found guilty of corruption.
Are you aware that International Finance Corp. (IFC, an arm of the World Bank) was also involved in the deal?
The role of IFC in the GMR odyssey is questionable. IFC should have advised GMR clearly. When IFC knew that GMR cannot collect airport development charge (ADC), they should have informed GMR about it or suggested amendments to the concession agreement. When the courts in Maldives ruled that an ADC cannot be charged on departing passengers, the former chairman of MACL (Maldives Airport Co. Ltd) I. Salem authorized GMR to deduct the ADC charges from the concession fees that were due to the MACL.
Won’t your action send wrong signals to the investor community?
It is a clear message to the international investors—we will abide by the rules and will not engage with anyone outside the framework of the law. Everybody is welcome here. Even on the case of termination of the contract, we waited for 45 days for an appointment for the President’s special envoy to meet with Indian prime minister to explain the situation before terminating the contract. But, as you know, time never waits for anyone.
Meanwhile, we sought advice from lawyers in the UK and Singapore; they unanimously agreed that the contract with GMR was void ab initio and that it could be terminated.
There are rumours that other political issues were the real reasons behind the termination of this deal.
The reason for termination was pure financial. MACL was bleeding. MACL as the owner of the INIA (Ibrahim Nasir International Airport) had to pay GMR $3.5 million just to keep GMR in Maldives. How do you understand that? We have a good relationship with India, and we have valued it and cherished it through centuries.
The rumour that China is behind this move is incorrect and I categorically deny it. We have strong links with India and Sri Lanka. We had joint military operations in this region, and the brotherly relations between our two countries are set for even better day, I believe.
On the same note, let me tell you, there is no hand of any extremist elements in terminating the contract. Maldivians are not extremists and we are very sensitive to India sentiments. India was the first country to recognize our government.
What exactly led to the cancellation of the deal?
The reason is purely commercial. Maldives is primarily a tourism-driven economy. GMR wanted to charge $25 ADC. In this country, nobody is allowed to tax public without parliamentary approvals. There is already a passenger service charge (PSC) for those using the INIA—$18.
The parliamentarians did not see it appropriate to levy ADC of $25. Such a move could be vulnerable for the tourism-based economy of Maldives.
On the issue of fuel revenue sharing, as per the original agreement, GMR was supposed to offer 14% revenue to the government. The revenue share agreement was revised to bring it down to 1% later. This brought MACL to the point of bleeding.
How did GMR deal with this exercise?
GMR did a poor job in public relations in Maldives. They did not walk that extra mile to keep their reputation by bolstering their public relations skills. Instead, GMR was hell-bent on working on the former government’s terms.
Do you know GMR has a similar concession agreement in Delhi?
I don’t have details of Delhi International Airport’s concession agreement signed by the Indian government and GMR Group. But I believe it was not as bad as the Malé International Airport deal. I do recall that there were some critical issues regarding ADC (airport development fee, or ADF, in India), even in the Delhi airport.
Tata Housing Development Co. Ltd and Tatva Global Environment Ltd are also complaining that they are feeling uncomfortable after the new government’s coming in...
There were some sticking points and misunderstandings on the issue of Tata Housing. The former government had promised to offer a prime land to build flats which was originally earmarked for the construction of the Supreme Court building. The current government has resolved the issue by offering another prime beachfront land to Tata Housing for their project.
As we speak now, the issues are resolved between the government and Tata Housing.
Similarly, I believe that the sticking issues of Tatva, relating to conversion of waste into energy, have also been resolved. Both are happy now.
We offered to find a solution through discussion with GMR too. But GMR was never forthcoming. We understand that we are not here forever. It is important, therefore, that we make deals with foreign investors that are transparent, sustainable and work within the framework of the law of the land.
What kind of compensation would you be paying GMR?
At this time, I would rather not go into the details of compensation. The government’s stand is very clear. We have filed a case for arbitration in the Singapore court, and we will also engage a neutral globally reputed accounting firm to conduct a forensic audit of the MACL and INIA. I rest it to the courts to rule on the figures (of compensation).