President launches US$400m airport runway project

President Abdulla Yameen launched Monday morning a US$400 million project awarded to China’s Beijing Urban Construction Group to build a new runway at the Velana International Airport.

Speaking at the inauguration ceremony, Adil Moosa, managing director of the state-owned Maldives Airports Company Ltd, said the new runway will be completed in 2018.

“This is our journey towards President Yameen’s vision of the airport catering to seven million passengers a year,” he said, referring to ambitious plans unveiled in April last year to upgrade the main international airport with US$800 million worth of foreign loans.

The 3,400-meter-long, 60-meter-wide runway will open the airport to the Airbus A380 jetliner, the world’s largest passenger airline, Adil said. It will be developed parallel to the present runway, which will be converted to a taxiway to make landings easier and resolve runway traffic issues.

The Chinese construction giant will also build a fuel farm with a storage capacity of 45 million litres and a cargo complex with the capacity to handle 120,000 tonnes.

In his remarks at the ceremony, BUCG Chairman Chen Dai Hua said 78 percent of land reclamation for the new runway is now complete.

Reclamation work to expand the Hulhulé island by some 62 hectares – subcontracted to the Dubai-based Gulf Cobla – is expected to be complete by the end of May.

“All required materials for the runway construction are under shipment. Heavy-duty vehicles have arrived on site,” he said,

Describing BUCG as “among the most respected construction and project management companies in China,” he said ongoing projects include the new Beijing airport.

“In September 2014, during a visit of His Excellency President Mr Xi Jinping to the Maldives, both governments agreed to build the 21st-century maritime silk road by deepening mutual trust and enhancing connectivity,” he added.

As the general contractor of the “gateway for both capitals,” Dai Hua said BUCG will also strengthen the friendship between China and Maldives.

The Maldivian government had secured a US$373 million concessionary loan from the Chinese EXIM Bank in December 2015 for the runway project. Loan agreements worth US$200 million have also been signed with the Saudi Fund for Development, the Kuwait Fund and the OPEC Fund to finance the airport expansion.

A contract was signed with the Saudi Binladin Group in May 2015 to build a new passenger terminal for an undisclosed amount.

Both the opposition and international financial institutions have warned that the Maldives is facing a high risk of debt distress due to the current administration’s unprecedented infrastructure scale-up, which includes the US$200 million China-Maldives Friendship Bridge.

As a result of large-scale borrowing, the International Monetary Fund predicts that the Maldives’ debt will reach 121 percent of GDP by 2020.

But Yameen previously said that the government expects “a full return from the airport in the not-too-distant future.”

In November, MACL meanwhile paid US$271 million to Indian infrastructure giant GMR as compensation for the termination of its concession agreement to upgrade and manage the airport.

It was later revealed that the central bank used the Maldives’ international reserve to buy a US$140 million bond from the airport company to help settle GMR’s arbitration award.

MACL MD Adil said today that GMR had no plans to build a runway. The Indian developer’s main focus was to “pave the way to do as much business as possible at the airport.”

After Yameen called the previous government’s decision to lease the airport “an economic crime,” GMR had accused the president of “sullying” the company’s reputation with incorrect figures.

Speaking at the ceremony, Economic Development Mohamed Saeed meanwhile heaped praise on Yameen, calling him “a living legend and a hero”.

Upon completion of the expansion project, Saeed said “there is no reason this airport would not be the most beautiful in the world.”

Saeed said MVR1.8 billion (US$118 million) has been invested in the airport since Yameen assumed office in November 2013, stressing that the funds came from the MACL’s savings.

The investments included repairing the existing runway and attracting fast food franchises. A top class VIP terminal will also be completed by the end of the year, he said.

Wang Fukang, Chinese Ambassador to the Maldives, said both sides have been implementing important agreements reached during Xi Jinping’s visit in 2014, “further developing the China-Maldives future-oriented, all-round, friendly, cooperative partnership.”