The Maldivian government has to pay about USD 19 million (MVR 293 million) as compensation in a dispute related to the Fushidhiggaru lagoon that President-Elect Dr. Mohamed Muizzu's government plans to reclaim, Adhadhu has learned.
The size of the massive Fushidhiggaru lagoon north of Male' atoll Gulhi is 1,475 hectares.
Muizzu has allocated MVR 400 million in next year's budget to begin land reclamation during the first year of his administration.
After the project was announced, some people raised questions about whether work could be carried out as planned because of a case involving the lagoon under arbitration in Singapore.
According to media reports at the time, the lagoon was leased to a company called Prime Capital Maldives, a company registered in the British Virgin Islands with ties to Ukrainians.
The case was first made public during the 2013 presidential election by Umar Naseer amid his bid for the Progressive Party of Maldives (PPM) ticket.
Then-Tourism Minister Ahmed Adeeb and Finance Minister Abdulla Jihad sold the lagoon for 50 years, Umar alleged at the time.
The pair acted on the orders of Abdulla Yameen - who competed against Umar and won the PPM ticket - and unlawfully sold the lagoon to raise finances for Yameen's primary campaign, Umar alleged.
Umar also submitted a complaint with supporting documents to the Anti-Corruption Commission (ACC).
Amid the corruption allegations, Prime Capital sued the Maldives government at the Civil Court over alleged breach of contract.
In its lawsuit, Prime Capital sought an order for the government to form a joint venture company with a 25 percent stake for the state and the rest of the shares to be held by the company in line with the lease agreement.
The Civil Court ruled in favour of Prime Capital.
Fushidhiggaru timeline
- 28 August 2013 - Sale of lagoon to Prime Capital made public
- 29 August 2013 - Fushidhiggaru case submitted to ACC
- 24 October 2013 - Lawsuit filed at Civil Court for registration of joint venture
- 28 July 2014 - Civil Court orders formation of JV with government stake
- 18 February 2015 - Complaint resubmitted to ACC
- 7 December 2015 - Announcement made for development under real estate tourism model
- 9 March 2016 - ACC rules out corruption
- 1 August 2018 - Announcement made for reclamation to provide housing
- 23 December 2019 - Attorney General Riffath says a case has been submitted for arbitration in Singapore.
Despite the Economic Ministry forming a joint venture company in line with the court order, the lagoon was not handed over.
Instead, former President Abdulla Yameen's government at the time decided to put the lagoon up for bidding for development under a real estate tourism model.
The ACC was investigating the case at the time.
After questioning Adeeb and Jihad, the ACC concluded that there was no corruption in the lease transaction.
But as the acquisition cost had not been paid, the ACC ordered the government to ensure that the funds are collected before handing over the lagoon.
After failing to attract an investor for the Fushidhiggaru lagoon, Yameen's government abandoned the real estate tourism plan and announced plans to reclaim land for housing towards the end of his term.
It was to be a component of the "Hiya Accomplished" project envisioned at the time.
Prime Capital went to arbitration in 2019 after the current government came to power.
The asset recovery commission formed by President Ibrahim Mohamed Solih accused Jihad of acting against the interests of the state in the leasing of Fushidhiggaru.
Criminal charges were also raised against him over the case.
After a Singapore arbitration tribunal ruled in favor of Prime Capital, the government has been making payments in accordance with the judgment, Adhadhu has confirmed.
The company sought compensation of USD 106 million but the tribunal awarded USD 18.4 million.
Adhadhu has also learned that the arbitral award was the reason for the amount spent on compensation this year increasing fourfold from the budgeted amount.
According to the budget proposed for next year, MVR 397 million will be paid out as compensation by the end of this year.
The amount allocated for compensation in the 2023 budget was MVR 100 million.
A 'Fiscal Risk Statement' released by the Finance Ministry showed that MVR 95.5 million out of the budgeted MVR 100 million was paid out by the end of May this year.
The bulk of it was MVR 92.5 million paid to Tuf, the contractor of the Maafaru airport development project, after the company won an arbitration claim in Singapore.
The rest was spent on paying compensation ordered by the Employment Tribunal as well as a "special duty allowance" owed to civil servants at the former Ministry of Housing and Infrastructure.
The outgoing government faced criticism for large sums paid out to private companies as compensation based on decisions made a controversial Settlement Committee that operated under the President's Office and Attorney General's Office.
Information from various sources show that the government paid out MVR 1.7 billion as compensation during the past four years (2019 to 2022).
The figure will exceed MVR 2 billion with the compensation payments made this year.
