MTDC exposed

"The world is full of obvious things which nobody by any chance ever observes" –Sherlock Holmes

One should have smelt a rat the moment MTDC announced a dividend payment of Rf 90 per 100-rufiya share for year 2007. Where on earth would one find a company that returns 90% of the investment back to the investors within one year –that too before serving a single customer? It's fishy to say the least. And now Auditor General Naeem has pulled the lid off the mystery, exposing the dark secrets and ugly skeletons in the MTDC closet.

MTDC was formed in April 2006 to allow the ordinary man to participate in the tourist industry –a lofty aim no doubt, but too high to reach. The graph above tells it all. For year 2007 an ordinary man who bought shares up to the maximum legally allowed limit of 2645 would have received a dividend of about Rf 0.24 million –peanuts compared to Villa group's dividend of Rf 27.8 million and Champa group's Rf 5.2 million. These figures are based on the minimum number of shares controlled by Villa (309,207) and Champa (57,261) as estimated by the audit report, and the actual dividend paid per share –90 rufiyaa.

The audit report says MTDC acquired 10 islands at an average rent of $ 2738 per bed per annum, which is almost 10 times lower than the market value and 3 times lower than even the controlled rent fixed by Tourism Ministry ($6908). The report estimates that because of this low rent the exchequer loses a minimum of $ 11.8 million each year. And that's not all. MTDC has subleased the islands at rents considerably higher than $ 6908. This means the exchequer is losing far more than the $ 11.8 million estimated above. Where did all this money go? Part of the answer is seen in the graph. Part of the answer is the 70 million rufiyaa due to other private investors and the 135 million rufiyaa due to the government for its shares. But for a very important part one will need to investigate the subleases and who got them.

Now the question is, why did all this happen while there was a board of directors with 4 government directors in it to protect the rights of the public? The audit report explains how:

• Though the company was established for the public, two entities have controlled the company from day one by acquiring far more shares than the allowed maximum;
  


• Villa Group controls the board of directors of the company;
  


• All major decisions were taken for the company by a temporary board;
  


• The company was politicized at all stages in its formation and development;
  


• Conflict of interest because Tourism Ministry is both supervisor and regulator of the company;
  


• Managing Director is abroad on study leave and other people run the company;
  


• Company has dealings with firms where members of the board have interests;
  


• Family connections between a member of the board and a senior executive of the company;
  


• Inappropriate decision to pay a dividend of Rf 90 per 100 rufiyaa share, which is over and above company profits and reserves;
  


• Five persons own shares more than the limit of 2645;
  


• Exceeding the Herethere development budget of $ 30 million and spending $ 52 million;
  


• Herethere contracts were awarded without bidding;
  


• Over payment to Herethere sub contractors;
  


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  The government has only paid one third of what it has to pay as paid up capital;
  
  
  

  
  

  
  

  Based on the above findings the Auditor General has recommended dissolution of the company. He has also recommended prosecution of the people responsible for the malpractices.
  

"Where large sums of money are concerned, it is advisable to trust nobody." –Agatha Christie

The truth about Gasim’s philanthropy

With 700 students studying on Villa Scholarships and thousands of patients getting treated abroad, few would even think of denying Gasim Ibrahim's philanthropic credentials. His detractors have therefore concentrated on questioning his motives and casting aspersions on how he acquired wealth, slyly insinuating that he has some undisclosed obligations to spend on welfare.

One such insinuation revolves around the loans granted by International Finance Corporation (IFC) to Villa Shipping and Trade. A popular story alleges that Villa Foundation (which grants Villa Scholarships) is a precondition set by IFC for the loans. Let us examine this allegation in detail. IFC says its work is to provide investments and advisory services to build the private sector in developing countries. It operates commercially and grants loans at market-based interest rates up to a maximum of 25% of the project cost. Eligibility criteria for IFC loans do not include establishing national scholarship schemes. The detailed eligibility criteria merely require that a project must:

• Be located in a developing country that is a member of IFC;
• Be in the private sector;
• Be technically sound;
• Have good prospects of being profitable;
• Benefit the local economy; and
• Be environmentally and socially sound, satisfying IFC environmental and social standards as well as those of the host country.
  

Gasim is not the only Maldivian borrower from IFC, nor is he the biggest. According to information currently disclosed by IFC, it has granted a total of $ 74.5 million to the Maldives private sector. This includes $ 25 million to Universal Enterprises, $ 21 million to Villa, $ 20 million to Wataniya Maldives and $ 8.5 million to Taj Hotels. (see graph above.) These are all type A loans subject to the same terms and conditions.

A related insinuation is that the loan to Gasim was secured by a Government guarantee. Funnily enough, IFC regulations prohibit the organization from accepting government guarantees. IFC relies instead on the client company's proposal and track record. IFC "fully shares risks with its partners."

According to another widely circulated story, Gasim did not become rich but was made rich by Ilyas Ibrahim. The story says Gasim became rich through a petroleum monopoly served to him on a platter by STO, when Ilyas was running the company.

Gasim says, far from favoring him, the government has constantly put hurdles in his path. In an interview to TVM's Siyaasath program, Gasim revealed how the government willfully blocked him from bagging a dealership from Sri Lanka Petroleum Company. Gasim says STO also tried, though unsuccessfully, to block his dealership with Shell for importing Rotella and other petroleum products.

To put Gasim's revelations in perspective, one must recall that the backdrop for the alleged events was the 1980s, a period during which the government followed a policy of foreign exchange controls and restrictive import quotas. STO was involved in many dealership feuds with private companies during the period, one of the most celebrated of which was the one with DIK over the dealership of Benson and Hedges.

We may never know Gasim's true motives, if any, for his philanthropy. But one thing is certain. He was already the biggest individual spender on health and education long before there was any practical hope of standing for the presidency.

Rags to riches and finally Theemuge?

"Those who say I have a selfish motive to become president are right: I want the job to solve the difficulties people face today." –Gasim Ibrahim

In many a fairytale, the hero starts in humble beginnings and ends in riches… and of course a palace. But even the legendary narrator Hans Anderson will find it difficult to match the real life story of Gasim Ibrahim. The meteoric rise of the Maamigili boy from the job of a farm-help in an uninhabited island to the dizzy heights of his current position as the chairman of Villa Group will be a story that will continue to inspire generations of island boys.

If fortune changes men, then Gasim remains an illustrious exception to this rule. Despite his legendary wealth Gasim leads a fairly simple life and is arguably the most approachable tycoon in the Maldives. His humble days appear to be etched indelibly into his psyche.

"Those who say I have a selfish motive to become president are right: I want to deliver the things that people demand. I want the job to solve the difficulties people face today," Gasim told supporters during the official launching of his election campaign. Such a statement would normally be discarded as political hyperbole. But coming from Gasim Ibrahim, one must give it at least the benefit of doubt. After all, it has always been Gasim's lifelong mission to help people. Who has not heard of Villa scholarships and Villa welfare?

Gasim says his early days of suffering in Male implanted in him a strong desire to help people and improve their conditions. Here again one must give the benefit of doubt to Gasim that he may be telling the truth, because after all, the man has actually spent millions to help improve people's lives.

Some of Gasim's election promises appear to be extensions of the philanthropic work that he has been personally pursuing: the university and the hospitals. Along with this he also promised another welfare scheme –building 1000 flats a year in Hulhumale. This of course is a logistically impossible target, and it will be interesting to watch how Gasim deals with this promise if he gets elected.

Gasim's economic policies include a Mrf 1.5 billion fund to provide low interest loans, introduction of new taxes, establishing four economic zones, and oil exploration. While enhanced taxation will be crucial to implement Gasim's social programs, his ability to raise the level of taxation will remain questionable, given the composition of his core team, which includes some businessmen with doubtful reputations.

Only time will tell whether Gasim achieves his motive. With the election barely a month away, he is racing against time to establish sufficient party presence in the islands to put up a credible campaign. One thing is certain though. Anyone who knows Gasim will testify that the last thing on Gasim's mind is to occupy Theemuge and live like an Arab Sheikh.