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Page added on September 16, 2012

IFC responds to government’s allegations of negligence in airport bid

IFC responds to government’s allegations of negligence in airport bid thumbnail

Additional reporting by Neil Merrett

A spokesperson for the International Finance Corporation (IFC) has defended the organisation against charges of negligence during the bidding process for the development of Ibrahim Nasir International Airport (INIA).

In a press conference last Thursday held by the Attorney General  Azima Shukoor, Economic Development Minister Ahmed Mohamed, Toursim Minister Ahmed Adheeb and Civil Aviations Minister Dr Ahmed Shamheed, it was alleged there were discrepancies in the bid awarding and concession process.

The cabinet members claimed that the IFC had been “irresponsible” and “negligent” in advising the former government of President Mohamed Nasheed in the concession of INIA by Indian infrastructure giant GMR.

“The current government believes that the IFC had not given the most appropriate legal, financial and economic advice to the Maldivian State,” Azima Shukoor said.

The IFC denied the accusations, stating that its advice was geared towards achieving the “objective of upgrading the airport and ensuring compliance with applicable international regulations” and providing the Maldives government “with the maximum possible revenue”.

“A competitive tender was organised with the objective of selecting a world-class, experienced airport operator, who would rehabilitate, develop, operate and maintain the airport,” said an IFC spoksperson.

The IFC – a member of the World Bank Group – was established in 1956 to stimulate private investment in developing countries through investment, advisory, and asset management services.

The spokesperson stated that the bids were evaluated by a government appointed committee, comprising senior government officials, using two key criteria.

The first criterion required firms to meet all the technical requirements set out in the tender documents which, Seth stated, were designed to meet the objectives of the government, and ensure the airport becomes a world class airport with ‘Leadership in Energy and Environmental Design’ certification (Silver).

The second criterion was financial, favouring the highest offer from firms that passed the technical stage. The financial criterion was a combination of a one-time up-front fee, and fixed and variable fees to be paid throughout, explained the spokesperson.

“The IFC’s advice complied with Maldivian laws and regulations and followed international best practices at each step of the bidding process to ensure the highest degree of competitiveness, transparency and credibility of the process,” the organisation stated.

“These processes have been followed globally in several Public-Private-Partnership projects in the airport and other infrastructure sectors,” it added.

Asked if the IFC was currently continuing assistance to GMR or the Maldivian government, it replied “We are currently not working in any capacity with the authorities on this project. We however remain available to address any issues or concerns that the government may have relating to the project.”

A GMR Spokesperson said that the company did not wish to comment on the remarks made by government ministers.

The Anti-Corruption Commission (ACC), which is currently investigating the GMR deal, said last week that continued work on the project may be delayed considerably whilst the investigations are completed.

ACC investigations began in June, although building work on the new terminal – due to open in July 2014 – was ordered to halt in early August after the government claimed that the company had not acquired the appropriate permits.

Government’s critique of bidding process

During Thursday’s press conference, Shukoor claimed that the role played by the IFC during the bid awarding process – as well as the technical, financial and legal advice given – was unacceptable and included “major inconsistencies” in the “loss-benefit assessment” carried out before awarding the project to GMR.

“The legal agreement also lacks equity between the state and GMR, and gives significant powers which have narrowed the government’s ability to manoeuvre within the agreement. For this reason, the state is facing a huge loss even in taking steps that have to be taken immediately,” she added.

Speaking about the prospective profit, Shukoor claimed the agreement made between GMR and the government would lose the country more than that it would earn, and a much more cost effective master plan had been made during the tenure of former President Maumoon Abdul Gayoom.

She said that as long as the agreement between GMR and the government is not invalidated, the agreement would be “legally binding” despite a “majority of the people” who wish to “terminate the agreement immediately”.

“The government must also consider how much money has to be paid back as compensation if terminating the agreement, and it is clear to all of you that the Maldives financial and economic situation is at a critical level, and in this situation it is not an easy thing to do,” she told the press.

Shukoor also expressed the government’s concern about the effect on investor confidence that may result if the agreement is terminated in addition to other “diplomatic issues” that may arise from such a decision.

The Economic Minister, Ahmed Mohamed, claimed that the Nasheed government had only considered the lump sum that it received as the upfront payment, rather than long term benefits that the government could have achieved.

“They awarded the bid to a party who proposed to pay US$76million, but if you look at the other bidders, their bids were more profitable in the long run. For example one of the bidders proposed to give a 31 percent share to all the businesses except that from oil trades until 2014, but GMR proposed only one percent,” he claimed.

He added that another bidder had proposed to share 16 percent of the profits gained from the oil trades with the government.

“It is clear that the government did not consider, when awarding the bid, the long term benefits of the people but rather an instant short term profit,” he argued.

Highlighting the already much disputed issue of the Airport Development Charge (ADC), Mohamed claimed the government had given up a lot of power to GMR in the contract, allowing them to dictate all the fees during the concession.

He stated that there were only two options left for the government: “Either find a solution within the concession agreement with GMR or terminate it.”

Civil Aviation Minister Dr Shamheed said the initial INIA master plan, made by British consultancy firm Scott Wilson, was considered too costly by the IFC.

“So we checked the truth of IFC’s report. The master plan by Scott Wilson is a phase based development. There were developments that were to be brought in the first phase, the second and other phases that followed were mentioned very much in detail,” he claimed.

Shamheed claimed that despite the fact that Wilson’s master plan was more cost effective the IFC made a new master plan, hiring another foreign Consultancy firm – Halcrow- which Dr Shamheed claimed was more costly.

“Scott Wilson’s phase one cost us US$390 million, and all the three phases summed up came to a figure around US$590 million. IFC did not provide this information to the government. We are talking about a development of 30 years,” he said.

Shamheed also alleged that the new master plan was made without even testing the status of the current runway at all and said they relied on a test that was made a long time ago.

“Even those tests showed that the runway needed significant repairs and some parts of the runway had to be removed,” he added.

“This is very irresponsible that the former government entered into a contract with a party who did not assess the situation of the existing runway,” he claimed.

Tourism Minister Ahmed Adheeb alleged that because of the new fees implemented by GMR following its take-over, the flight frequency from Europe had declined.

“Coming to Maldives is no longer feasible for most of the chartered flights.  Sri Lankan airlines’ Male to London direct flights have been pulled out following the decision. Even though the flight frequency from China has increased, the number of bed nights has declined,” Adheeb said.

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11 Comments on "IFC responds to government’s allegations of negligence in airport bid"

  1. Mald on Sun, 16th Sep 2012 6:16 PM 

    GMR is a curse on the Maldivian people! They think sending a dozen people to Hajj and giving a few scholarships can buy the Maldivian people. The agreement is so unfair and we should protest against this as long as the terms are like that.

    Speaking of investor confidence what about the confidence of airlines and tourists when fees are changes so frequently? They do not want to invest. They want to recover the investment by charging ADC even though it is already making millions of dollars! What is the purpose of an investor if they cant invest money? All foreign currency received are being pumped out.

    Kick these bastards out! We do not need greedy “investors” like these! They bought a bunch of cheap politicians from Nasheed’s administration like Raazee and Ali Hashim and look at what they re doing!

  2. Ibrahim Mohamed Shoppe' on Sun, 16th Sep 2012 6:44 PM 

    1. Regarding the numbers of tourism and well going of business, the regime jumps from “going well, increasing” to “decreasing because of : boycott, terrorism from protest, GMR, GST, …”. They adjust their comments as the opportunity suits.
    2. Everything whta’s going “wrong”, of course, must be blamed on somebody else. It’s always somebody abroad (foreigners, laadheenes) who were wrongdoing : GMR, now World Bank, the IMF, India, US, UN, UNHRC, … Whoever suits. Never the overspending thanks to the coup, never the large amounts of loans by coup leaders, never the waive of taxes to the resorts, the double promotions and rewards to the uniformed forces, and so on.

  3. Ceaser's wife on Sun, 16th Sep 2012 6:57 PM 

    The IMC is certainly no Ceaser’s wife – hardly above suspicion.

    Infact the work of other World Bank organs inluding the notorious IMF (who practically set the monetray anf fiscal policy here), should be scrutinized.

  4. Elian on Sun, 16th Sep 2012 7:34 PM 

    Someone with no political bias would come to the conclusion that this deal has the taint of corruption from the very beginning. This was done by a few corrupt officials in Nasheed’s administration. The issue was brought up in the second cabinet itself after Nasheed’s election. Once some cabinet ministers protested against it, the matter was never tabled and they went with it any way.

    When the issue was submitted to the then Airports Company board, they refused to approve. Nasheed then dismissed all members and appointed his own puppets. The deal was done in such haste. The agreement was drafted by GMR and was not properly reviewed by the government.

    I suspect IFC officials were bribed by GMR and the government officials such as Finance Minister Ali Hashim collaborated in the cover up.

    The agreement was kept as a “confidential” document and the terms were not even revealed for the public and the media. It is ridiculous when GMR is making millions of dollars from the current investment simply by increasing the prices. If the administration did not change they would have taken over the sea plane business as well. All they have done so far is a few refurbishments. They are making more profit from INIA that the one in Delhi or Turkey (which are much bigger and where passenger numbers are much higher).

    The agreement should be negotiated for more favorable terms or they should be kicked out!

  5. Moosa rasheed on Sun, 16th Sep 2012 8:02 PM 

    This is one monumental mistake of Anni.May he never forget this one in his life.

  6. Ahmed on Sun, 16th Sep 2012 8:19 PM 

    The coup backers want for themselves. Look at the state of it when they had it. What a disaster! This was a fair bid, they won and the you lost.

  7. amaldivian on Sun, 16th Sep 2012 8:49 PM 

    I agree there was a lot of corruption red lights on this deal. GMR is minting money off from our airport. They also tried to increase the departure tax at the Delhi airport and the locals demonstrated and got rid of it. Why can’t we do the same. They (GMR) hasn’t done any work at the airport still. Even the tarmac is in bad shape. I was horrified when I landed and the aircraft jolted when the tires hit a gap on the tarmac. Is this what you do when you make so many millions of dollars, boasting that Male’ International Airport brings you the highest profit.
    Can someone ask Mr. Zaki how much he was offered on this deal. He is the master mind behind all of it.
    I also feel that Nazima Shukoor should also be a bit honest to herself when she talks of all these corruptions and scandals. Ask how much of government money was used by his father and family on all those trips to Singapore. These are all facts.. Why aren’t the Anti Corruption Commission looking into all the scandals Maumoon and his family did during their 30 years of dictatorship. Remember Maldivian Airways was sold to Palestinians to use our flag carrier to ferry the arms .. and was shot down in Nicaragua. I guess the young economic and tourism ministers wouldn’t know, since they were not born yet:-)
    get some real facts before you open your mouth.

  8. Joker on Mon, 17th Sep 2012 3:01 PM 

    Every time I read anything to do with the IMF or the World Bank I just shake my head. For anyone interested in getting some education, I suggest reading “confessions of an economic hitman” I promise you will not look at theses two corporations the same way ever again. After reading this book everything becomes clear as day.
    Their priority is to get smaller, underdeveloped countries to take on huge loans based on economic projections and then hire their own companies to do the actual work. So it’s a win-win for the IMC, they get huge amount of money paid on interest in loans AND they make money by using their own contracting companies for the work. Of course the projections are based on best guesses so when it doesn’t work out, the country is for ever in debt to the creditors, who make billions every year from projects just like this one we are all witnessing here with the airport.
    Want another example right here at home? Take a look at the housing development happening in Hulhumale. An foreign (Chinese) country was hired to do that work too…but wait, there’s more! The next phase of building the next 4000 units are being hired out AGAIN to another foreign company.
    It’s happening right before our eyes people.

  9. Joker on Mon, 17th Sep 2012 3:04 PM 

    I actually meant to say “IFC”, and I forgot to mention the “IMF” which is another World Bank Group doing the exact same thing.

  10. Joker on Mon, 17th Sep 2012 3:21 PM 

    Here’s a good read on the IMF to do with the Maldives:

    http://www.imf.org/external/pubs/ft/survey/so/2009/car120809a.htm

    this is one paragraph of interest regarding “projections”

    “Under the authorities’ program, the fiscal deficit is expected to fall from a projected 29 percent of GDP in 2009—one of the highest levels in the world—to under 18 percent in 2010 and to about 4 ¼ percent of GDP in 2011″

    Perfect example of what I was talking about. They “expect” we will be all the way down to 4.25% of GDP by last year. What a joke. Of course they’re going to tell us that, they want us to borrow money!!!

    In this article:

    http://minivannews.com/politics/dire-economic-outlook-as-budget-deficit-estimated-to-reach-27-percent-of-gdp-36808

    It says we’ll be only down 2% from over three years ago! What happened to the expectation of 4.25%??? Sure, politics and bad managing of the country can be blamed, but let’s get real, there was not a chance we were ever going to be at 4.25% in that short of time, no matter how much money they gave us.

  11. Raniya on Sat, 22nd Sep 2012 1:41 AM 

    We love u Adheeb, for bieng the youngest and most courageous minister who can never be bought by GMR, thank u fir everything u are doing for this country.,,


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