Debt-Ridden Govt To Pay USD 250 Mn To GMR Over Termination Of Airport Contract

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Maldives government has been ordered to pay USD 250 million to Indian infrastructural company GMR by a 3-member Singaporean Arbitration Tribunal in its final order over illegal termination of contract to run Ibrahim Nasir International Airport (INIA).

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The court ordered government to pay USD 208 million in damages with interest which amounted to approximately USD 250 million, Maldives Attorney General Mohamed Anil was quoted as saying by the Sun Online.

“The compensation covers the debt, equity invested in the project along with a return of 17% and also termination payments and legal costs. The compensation is net of taxes that GMIAL may be required to pay in the Maldives,” the company said, according to an Indian newspaper.

Maldivian government under the then President Mohamed Waheed terminated USD 500 million GMR contract on November 27, 2012 alleging legal and national security implications following which the company moved a plea to the international tribunal for award of damages and  loss of reputation due to abrupt termination of the contract.

GMR had won the contract for 25 years through competitive global bidding process and the agreement was signed on June 28, 2010 under ex-President Mohamed Nasheed’s government.

Problems for GMR began when it decided to levy USD 27 for Airport Development Charge (ADC) and insurance charge, which was struck down by a civil court. The company had called the decision “unlawful and premature” and said the notice was devoid of any locus standi, as quoted by The Hindu.

The contract to expand and maintain the international airport was then given to Chinese company Beijing Urban Construction Group and which was later awarded to in May this year.
Saudi Arabia, known as one of the closest friend’s of the Maldives, also granted the single largest loan of USD 100 million to the to the expansion of INIA in September this year.
Government is already facing highest deficit at 14.4 per cent, highest deficit since 2010, according to World Bank which warned in May that the Maldives is at risk of external debt distress and public debt could rise from 73 per cent of GDP or USD 693.7 million to 120 per cent of GDP by 2020 owing to large infrastructure projects.

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