President Abdulla Yameen unveiled Wednesday a US$800million plan to expand the Maldives’ main airport. The project, to be financed entirely by loans, was risky, he said, but claimed its returns would be transformational.
“If we take loans for projects, there is no doubt that Maldivians and their unborn offspring will have to shoulder a large debt, but if it is done through soft loans, our airport will give us the returns to pay back that loan,” he said at the project’s launching ceremony.
“Parents will think, yes there is a debt, but I wish we had more children to fill jobs at the airport. This is what transformational change looks like, and we have dared to take the risk.”
The government has only secured half of the cost – a US$373million loan from Chinese EXIM Bank – and is in talks with the Abu Dhabi Fund for Development, Islamic Development Bank and Saudi Arabia for finances.
The EXIM loan, of which the interest rate is undisclosed, is to be paid back in 20 years.
China’s Beijing Urban Construction Group is to handle the expansion, and will build a new 3.2kilomtere runway, a fuel farm, and a cargo complex. Plans for a new terminal are also in the pipeline.
The airport which now welcomes 1.5million tourist arrivals a year will cater to some 7.5million arrivals by 2018, the project’s estimated completion date, Yameen said. With some 70 properties leased out for tourism in his tenure, and some 60 resorts under construction, the venture would add up to 30,000 jobs, he said.
Thanking China President Xi Jingping for financing half of the project, he said: “Economic development is only possible if we expand our economic main gate. We are only able to open this gate as widely as we want, because it remains our property.”
The president remained confident of returns high enough to compensate GMR, the Indian developer that is seeking nearly US$1billion in damages from the government for abruptly terminating an airport development contract in 2012.
A Singaporean arbitration tribunal is due to determine the amount of compensation to be paid to the GMR-led consortium. The tribunal ruled last year that the government had “wrongfully” terminated a “valid and binding” concession agreement.
Yameen has previously said the GMR payout is likely to be “a manageable” US$300 million.
The US$511 million agreement – signed during the tenure of former President Mohamed Nasheed – represented the largest foreign direct investment in the Maldives history.
The pay out and the project’s loans will place severe pressure on the Maldives’ foreign reserves as the government is already grappling with high external debt that is expected to rise with several mega projects including a bridge between the capital Malé and the airport, as well as a seaport in the industrial island Thilafushi.
According to the central bank, Maldives’ external debt stood at US$688million by the end of 2015. Reserves stood at US$702.5million in February, of which usable reserves amounted to US$248.2million.