Maldives pays US$271m in damages to India’s GMR

Maldives pays US$271m in damages to India’s GMR
November 17 05:55 2016

The government of the Maldives has paid US$271million in damages to Indian infrastructure firm, GMR, for the abrupt termination of a lucrative contract to develop and manage the country’s main airport.

Attorney General Mohamed Anil said that the state-owned Maldives Airports Company Ltd had settled the payment on Tuesday without drawing on the state budget.

Former President Mohamed Nasheed, whose government signed the contract with GMR in 2011, subsequently condemned his successor, Dr Mohamed Waheed Hassan, for terminating the deal against international law in a Twitter post. Waheed responded by defending the move as “the right decision for the Maldives.”

The pay out, ordered by a Singaporean Arbitration tribunal, includes the debt, equity invested in the project along with a return of 17percent, termination costs and legal costs.

Anil said: “Today, as we finished the payment, it includes the US$185million Axis Bank loan which GMR obtained. This includes the principle amount of the loan, the accumulated interest rates and legal costs as well. US$86million is the actual pay out to GMR.”

“The pay out was not made through the state budget, but all state institutions cooperated in helping us,” he added.

The MACL’s Managing Director, Adil Moosa, had previously said the company had built up a “massive reserve” from its profits since GMR’s eviction in 2012. MACL has not paid dividends to the government for the past two years, according to finance ministry figures.

GMR had initially sought damages of up to US$1.4billion from Maldives but later revised the claim to US$803million. The tribunal, however, ruled to limit the pay out to the amount the firm had spent on the Ibrahim Nasir International Airport.

Nasheed defended the GMR contract in an op-ed published in Mihaaru on November 10, contending that his debt-ridden administration would have received US$2.9billion or MVR45billion from GMR in the 25-year concession period “without having to spend a single laari on the airport.”

The termination of the contract and President Abdulla Yameen’s plans to borrow some US$800million to develop the airport only saddles the Maldives with further debt, he said.

The GMR had faced legal and political wrangling over the airport deal before it had even assumed management of the airport. The US$511 million concession agreement represented the largest foreign direct investment in Maldivian history.

Critics alleged corruption in the awarding of the contract to GMR and claimed that the deal would bankrupt Maldivian businesses. The then-opposition attacked the deal as part of vitriolic anti-government campaign that led to Nasheed’s resignation in February 2012.

The anti-graft watchdog in June 2013 had ruled out corruption in the awarding of the concession agreement.

President Yameen, who has branded the deal an “economic crime”, maintains that the GMR deal was detrimental to Maldivian interests. The state broadcaster, Public Service Mediapraised the president on Wednesday for “resolving the dispute without placing a burden on the Maldivian people.”

Meanwhile, Anil said Tuesday that the government faced difficulties in defending its position during the arbitration proceedings because of the loss of key documents.

“The main challenge we faced when we defended our position was that many important documents regarding the award of the airport to GMR was lost. The loss of documents was the result of negligence on the part of the people who handled the GMR deal,” he said.

The attorney general went on to accuse the International Finance Corporation, which oversaw the bidding process for the airport, of “gross incompetence”.

Moosa, the MACL managing director, meanwhile told newspaper Mihaaru that the amount paid to GMR could be recovered within three years.

“It is sufficient proof of the strength of the company that we managed to pay off such a huge amount in full. As we made the payment, we are also raising equity on our own to finance loans worth hundreds of million dollars to invest in the airport,” he said.

“The quality of service provided by the company will not go down because of this. In the future we will focus on streamlining expenses and expanding businesses as widely as possible,” he added.

The government is yet to secure the full US$800million needed for its ambitious airport expansion plan.

China’s Exim Bank and the Saudi Fund for Development have pledged to lend US$373million and US$100million, respectively.

The government has also secured an additional US$50million loan from the Kuwait Fund for Arab Economic Development and US$40million loan from the Abu Dhabi Fund for Development. It is also in talks with the Islamic Development Bank to obtain a fifth loan of US$110million.

MACL has enlisted China’s Beijing Urban Construction Group to build a new 3.2-kilometre runway, a fuel farm, and a cargo complex in the airport. A US$300million project to build a new passenger terminal at the airport was also awarded to the Saudi Bin Laden Group in May.