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The Maldivian government’s sudden decision to cancel a contract awarded to a consortium in 2010 to run the capital’s airport and build a new passenger terminal is unlikely to hit the crucial tourism business, vacation operators say.
But it raises a bigger question about how the country, known for its high-end, ocean-atoll vacations, can meet the needs of a booming tourist industry.
The cancelation of the airport contract, which was won by a consortium of India’s GMR Infrastructure Ltd and Malaysia Airport Holdings Berhad for $511 million through a global bidding process, is part of larger turmoil that has gripped the country since February. Back then, the government of president Mohamed Nasheed was overthrown in what Mr. Nasheed claims was a coup, paving way for Mohammed Waheed Hassan Manik to take charge of the country.
The new regime has given seven days to the consortium to hand over airport operations to the government though GMR Thursday challenged the cancelation in a Singapore court.
The contract cancelation comes at a time when the tourism season is at its peak, though Maldives’ resorts and tour business executives said they don’t expect any impact on tourist inflows for now.
“GMR is a professionally-run company and they will ensure that operations happen smoothly. In any case, the air traffic control activities have always been handled by the government, so we don’t expect much disruptions,” said Abdullah Ghiyaz Riyaz, managing director of Inner Maldives Holidays.
Mr. Riyaz said airlines have been calling him to ask whether flights could be disrupted. “I assured them there’s nothing to worry about for now,” he added, saying that he’s keeping his “fingers crossed” that no problems occur at a time when most hotels in the island nation are booked to the hilt.
Maldives, a country of around 400,000 people, is dependent on tourism for its economy and employment. The country’s hundreds of tiny islands have world-class resorts that draw wealthy tourists from the around the world, with the biggest markets being China and Europe. Tourist arrivals have jumped 63% since 2000 to 931,333 in 2011.
Most tourists never spend time in Male, the capital, but take short flights or boat rides to remote islands. But Male airport is the sole gateway to the country.
“A good airport is an essential part of the tourist experience, so, yes, we do need improvements in Male airport,” said Mohamed Khaleel, president of Maldives Association of Travel Agents and Tour Operators.
He said improvements had started taking place over the last 18 months after the GMR-led consortium took over.
Mohamed Riyaz, managing director of tour operators LetsGo Maldives, said the airport contract cancelation may be a dampener for foreign investments in the country.
“The entire infrastructure of Maldives needs improvement and investment. It’s not just airport, but also our roads that need investments to be improved,” he said. “When tourists come in they expect the infrastructure to be on par with what they see in countries like India, for instance.”
Foreign investors and tourists already had a scare in Maldives, when February’s change in government shattered the peace of the pristine islands. Tourists have kept coming, with government statistics showing a 3.9% jump in tourist numbers for January to September compared to a year earlier. But the former foreign minister of the Maldives said the airport deal cancelation could prove terrible for the investment climate.
“This termination is absolutely lunacy and won’t give any confidence to foreign investors. Maldives is a small country which really needs investment from a friendly country like India,” said Ahmed Naseem in an interview.
The government, however, has said it’s not worried about GMR’s exit. “There has been no major developments in the airport in the last three years, except for some cosmetic changes. GMR didn’t bring in any investments either. Their plan was to develop the airport by collecting fees from passengers and other levies charged on the airport,” said Masood Imad, spokesman for President Waheed.
Mr. Imad said that GMR didn’t bring any technical expertise to the operations, relying on Maldives staff and systems to run the airport, as was being done before.
He said the Maldives state-run airports authority would take over operations from GMR, but didn’t say whether the government would seek fresh bids for the Male airport’s operation and expansion.
Arun Bhagat, spokesman for GMR, said the consortium had paid an up-front fee of $78 million for the rights to build and operate Male airport while it also raised funds on its own and through issuing debt.
“Airport development charges are collected at every major global airport. We had proposed to the government two weeks back that GMR was willing to waive off any fees on domestic passengers and charge a flat $28 on overseas tourists. The government never responded to our offer,” he said.
Mr. Bhagat added that both GMR Infrastructure and Malaysia Airports had significant experience in running airports globally and were bringing a lot of that experience to develop Male airport.
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