Lease Of Male' International Airport To GMR

CONSTITUTIONAL AND LEGAL QUESTIONS, AND FINANCING RISKS INVOLVED

November 29th, 2010

This brief document summarizes the award of the Male' International Airport (MIA) to GMR of India, the prior and subsequent events leading to the award, constitutional and legal issues involved, ethical and moral questions, questions involving lack of transparency in the awarding process, and financing risks involved.

1. Introduction
On 28th June 2010 the Government of the Maldives entered into a contract with GMR to lease the airport for a period of 25 years. It offered the Government:
a. A sum of U$78 million as advance payment which is to be deducted from the profit due to Government.
b. 1% of the Gross Revenue in the first four years (2010-2014) and 10% of the Gross Revenue from the general business in the remaining years.
c. 15% of the Gross Fuel Sales in the first four years and 27% of the Gross Fuel Sales in the remaining years.
d. GMR is also to invest a USD 375million over a period of 25 years.

In return GMR is given right to levy over US$2billion dollars from international bound passengers. These include:
a. A levy of USD25 for every international departure passenger (this is in addition to the current levy of USD18 for foreigners and USD14 for locals).
b. A levy of USD2 for every international departure passenger.
c. In addition to that several other concessions are given to GMR.

Despite the huge concessions given to the GMR as well as billions of dollars the company stands to gain, the proposal does not involve extension and expansion of MIA runway which means for the next 25 years airplanes like A380 would not be able to land at the MIA.

2. Circumstances Surrounding the Award
a. On18th October 2009 President Nasheed's 20 month old Government sold, without any competitive bid process, majority shares of the State's most profitable company Dhiraagu to Cable and Wireless (Britain) 122 days later, in the height of world financial crisis, the Government bought and few days later sold 20% shares of the country's second most profitable government shareholding company - MWSC to Hitachi of Japan for MRF209.4 million. Government lost a total of MRF3.88 million from this later sale alone. Initially Parliament recommended not to sell state assets without its approval. However the Government, continued. Eventually the Parliament passed an amendment to Public Finance Act which effectively barred sale of state assets without parliamentary approval. Two hours later, in clear violation of the amended Public Finance Act, the Government leased MIA to GMR for 25 years!
b. MIA is a property of the Maldives Airports Company Limited (MACL) - a statutory body created under the Company Act [1996]. MACL board, headed by President Nasheed's relative, was summoned to the President's Office, and was asked to rubber stamp theGMR deal. It refused to do so on the ground that the Government did not share basic information and relevant documents with it. The Government, in violation of the Company Act, immediately dismissed the MIA board and replaced with its own cronies which there and then rubber stamped the deal.
c. Earlier on 26th June 2010, four opposition parties, representing majority members of Parliament, formed an Opposition Alliance to oppose the Airport Lease. In a nationally televised event the Opposition Alliance warned all the concerned people not to proceed with the deal and signed a written pledge to:
-Undo any deal,
-Propose a specific law dealing with the MIA,
-Mount legal challenges in the Courts,
-Ask the country's independent anti-corruption watch dog to investigate allegation of corruption involving the deal,
-Take action (including taking no-confidence vote) against ministers responsible for the deal (Minister for Finance and Treasury and Minister responsible for privatization)
d. The Government rushed the award of MIA to GMR after a comprehensive bill on Privatization has been adopted by open Parliament and committees thereof.

Despite all the above factors and events GMR proceeded with the contract!

3. Subsequent events
a. One day after the award of the MIA to GMR, the entire cabinet resigned citing no-cooperation from the Parliament. However the real reason appears to be to avoid parliamentary scrutiny of the GMR deal, including possible impeachment of senior ministers.
b. Only four hours after the cabinet resignation, the government in clear violation of Constitution mobilized military to arrest leaders who formed a united front to oppose the award. When the Criminal Court ordered to produce the two for a habeas corpus hearing the Government declined. The government also prevented, again in clear violation of the Constitution and Parliamentary Rules, the detained leaders from attending the Parliament.
c. Fourteen days later the Supreme Court declared their arrest unconstitutional and ordered them to be released. The Government then sent military with tanks and heavy armory to re-arrest one of the Opposition Alliance Leaders and held him for 9 days. When the Criminal Court ordered to produce the detained leader for a habeas corpus hearing senior military officials told the Chief Judge that they WILL NOT obey any court order!
d. After a series of street marches and protests led by the resigned ministers, and a series of threats and intimidation to judges and members of Parliament, the President, again in outrageous disregard to the Constitution, on 7th July 2010 "re-appointed" his cabinet! Under the Constitution ministerial nominees must obtain parliamentary consent before assuming office or taking oath of office. However, since 7th July these self-proclaimed "ministers" have acted as ministers without parliamentary consent!
e. To make things worse, on 28th September 2010 these self-proclaimed ministers and the Cabinet decided that they will subject themselves to Parliamentary scrutiny!
f. Upon submission of the "re-instated" ministers for Parliamentary consent, the Parliament refused consent to seven out of twelve ministers, including Minister for Finance and Treasury, Minister for Home Affairs, Minister for Defence and Minister for Foreign Affairs. The President says that regardless of the rejection by the Parliament they will continue as ministers! The issue is being challenged in the Supreme Court.
g. In the meantime the President on 3rd June 2010 returned the amended Public Finance Act to Parliament (which he is entitled to do so under the Constitution). The Parliament however, passed the amendment with sufficient numbers to overrule presidential veto. The president then refused to gazette the law! The issue too is being challenged in the Supreme Court.