Government authorised to award multi-million dollar projects without bidding

Government authorised to award multi-million dollar projects without bidding
August 02 21:17 2015

Changes brought to the public finance regulations by the finance ministry in late May has authorised the cabinet to award ‘mega projects’ and projects carried out with concessional loans or assistance from a foreign country without a bidding process or approval by the tender evaluation board.

The new regulations also allow the cabinet or its ministerial economic council to award projects to private and state-owned companies, bypassing the previously mandatory bidding and evaluation processes.

State institutions were previously required to seek approval from the tender evaluation board to award contracts for projects worth more than MVR1.5 million (US$97,276).

Under the new rules, the economic council is only required to review information such as the project’s details, estimated cost and chosen contractor before approving contracts. The information must also be shared with the Anti-Corruption Commission (ACC) and Auditor General’s office.

“The cabinet’s economic committee or council must ensure that the party to which the project is awarded is qualified in terms of financial [means] and expertise,” reads the provision added to section 8.15.

The economic council can also award “special projects” to state-owned companies, publicly listed companies with a portion of shares held by the government, or “institutions that the government accepts as a national organisation or association”.

Finance minister Abdulla Jihad was unavailable for comment at the time of publication.

Speaking to Maldives Independent today, ACC president Hassan Luthfee expressed concern with the changes.

“Regulations are made with good intentions. Successive governments have previously handed projects to state-owned companies without a bidding process. When these companies have the capacity, it isn’t a problem, such as companies like the MTCC [the Maldives Transport and Contracting Company],” he said.

“But others, such as the Road Development Corporation, it takes on contracts and then outsources it to other private companies, which means the procedures outlined in the Public Finance Act are bypassed.”

However, the cabinet authorising ‘mega projects’ without bidding was not “necessarily a problem,” he added.

Former economic development minister Mahmood Razee told Maldives Independent today that the changes “demonstrates the current administration’s attitude towards accountability, or lack thereof.”

Razee argued that the phrase ‘mega projects’ can be “misleading.”
“If it stated the type of investments – housing, hospitals, university, bridges – then as these are national infrastructure facilities, then it is reasonable,” he said.
“An efficient administration is one that is capable of and inclined to work within the ‘given parameters,'” he continued. “Changing the rules of the game in mid-stream or when desired, and then getting things done, maybe ‘workable’ but certainly not reflective of a fair or judicious [process].”

An expert on public finance and accountability who wished to remain anonymous meanwhile explained that the regulations previously only allowed the government to procure items without a bidding process in extremely rare cases, and in cases of emergencies.

“The new regulations are unacceptable,” the source said.

“The state is tasked with spending public money in the most transparent manner, and to ensure best value for public money. How can one know this without a competitive and transparent bidding process? This allows for corruption and allows the government to award projects as they see fit.”

A number of projects were awarded to the state-owned companies last month ahead of celebrations to mark the golden jubilee of independence, including the construction of a new official jetty in Malé to MTCC.

The home ministry was also given special permission from the finance ministry to award some projects without a bidding process due to lack of time. The ACC has been investigating the home ministry’s use of an MVR150 million (US$9.7 million) budget allocated for celebratory activities to mark independence day.

Controversial constitutional amendments authorising freeholds for foreigners who invest US$1 billion were meanwhile passed in late July.

The amendments allow foreigners who invest more than US$1 billion to purchase land within the project site. At least 70 percent of the area when the project is completed must also be reclaimed land, which must also not exceed 10 percent of the Maldives’ total land area.

The constitution previously prohibited foreign ownership of any part of Maldivian territory, but allowed leasing of land for up to 99 years.

The amendments state that the projects must be authorised by a special law passed by the People’s Majlis.

MP Ahmed Nihan, parliamentary group leader of the ruling Progressive Party of Maldives, told Maldives Independent today that the changes to the public finance regulations were not tailored for freeholds. The government is drafting the project-specific legislation in consultation with “international lawyers and prominent Maldivian lawyers,” he said.

Freeholds cannot be authorised under the existing public finance regulations or laws such as the government’s flagship special economic zones (SEZ) legislation passed in August last year, Nihan noted.

Nihan said he expected MPs to receive a draft of the legislation “in a week or so.”

Discussions are underway between the government and potential investors on mega projects such as a transhipment port in the northernmost atoll, he added.

In April 2014, President Abdulla Yameen had said the SEZ law would enable investors to have “freeholds” in the country and allow investors “to engage in really, really long gestative projects.”

The opposition contended that the SEZ law would pave the way for money laundering and other criminal enterprises, undermine the decentralisation system, and authorise a board formed by the president to “openly sell off the country” without parliamentary oversight.

But the government maintained that the law was necessary to attract large-scale foreign investments and to launch ‘mega projects,’ which President Yameen has said would “transform” the economy through diversification and mitigate the reliance on the tourism industry.

The mega projects include the construction of a bridge connecting Malé to Hulhumalé and the development of a ‘Youth City’ in the reclaimed artificial island.

Other mega projects envisioned by the government includes the development of a transhipment port in the Maldives’ northernmost atoll. The Ihavandhippolhu Integrated Development Project (iHavan) also involves the development of an airport, offshore docking and bunkering facilities, an export processing zone, real estate businesses, and tourism facilities.