A board director at State Trading Organization (STO) has blown the lid on the endemic mismanagement and corruption the company, painting a grim picture of the company heading towards economic ruin.
He said that there was a serious concern that supplies of fuel, staple foods, construction materials, and other products could face a lengthy disruption.
Fuel shortage, controls on fuel sales
To combat global fluctuations in fuel prices, the administration of Abdullah Yameen Abdul Gayoom entered a deal with Saudi Arabia’s ARAMCO in 2017. Under this agreement Saudi Arabia would provide the Maldives fuel at the cheapest rate possible in the market.
The deal was brought to an end in 2019, soon after the present Managing Director Hussain Amr was appointed to the position.
The deal, based on close ties between Maldives and Saudi Arabia, was brought to an end after Amr failed to gain a commission under the deal.
Documents submitted to the Anti-Corruption Commission (ACC) show that the Government of Maldives had entered into an agreement with Oman’s OQ company to purchase oil for STO. The new agreement added a nine percent commission, with the commission getting routed to coalition partner Qasim Ibrahim’s Villa Company via Dubai and Istanbul. OQ is the long-term fuel supplier to Villa Company.
Villa Company’s Managing Director Siyad Qasim was instrumental in hammering the deal out with Amr.
The documents submitted to ACC also show that the Commission is used to purchase goods under Villa Hakatha and Villa Trading and bring the cash into Maldives, in a deliberate attempt to launder the money.
After Dhiyares and TMJ reported on fuel shortages and resultant price caps by STO, several media and journalists have come forth alleging that the Government had paid them to report that a black market for fuel had started. Those papers had reported, quoting Amr, that some fuel suppliers in the atolls have purchased fuel in bulk and sold the excess to resorts.
Suppliers in atolls have refuted these claims. Those suppliers have reported that as STO had failed to meet demand requirements, they were forced to severely restrict their sales. Additionally, they said that STO had not been able to provide any evidence to back claims that fuel was sold to resorts.
Maldives Airports Company Limited (MACL) has also restricted jet fuel sales due to delays in STO fuel shipment. The company stands to lose revenue in jet fuel sales, with the company announcing a fuel shortage.
MACL Corporate Communications, General Manager Hassan Areef reported to Dhiyares that the company had to impose restrictions due to a supply side delay. He assured that a control mechanism was put in place to ensure that all airlines can receive jet fuel, even at reduced quantities.
Fiscal management failure, company in disarray
The board member said that there was serious concern that supplies of fuel, staple foods, construction materials, and other products. The company’s fiscal management had failed, he said, with corruption reaching endemic levels and management and daily operations at a complete disarray.
In last June, STO had signed a facility of US$ 175 million (MVR 2.6 billion) to purchase fuel, staple foods, and medication via the International Islamic Trade Financing Corporation (ITFC). This in itself, supports the Board member’s statements. STO had then revealed that this facility would be used to buy fuel, staple foods, medication, and construction materials.
STO subsidiary and the main fisheries body in the country, Maldives Industrial Fisheries Company Ltd (MIFCO), he said, was in the same state. He also revealed that the shipping subsidiary, Maldives State Shipping (MSS), had failed to gain traction, with the company paying millions to keep the company afloat.
MSS, he said, was running on extremely old vessels, purchased at inflated prices. Therefore, the operating and maintenance cost of these vessels were astronomical and severely impacting the bottom line. He added that the vessels were not running at full capacity, and operating at a loss.
Moreover, the vessels are plagued with drug trafficking scandals. As such, an MSS vessel coming from India on June 9th had drugs on it, while a MIFCO vessel was also incriminated in drugs bust on the 25th of the same month. The MIFCO vessel was coming from Bangkok and had alcohol on it in addition to the drugs.
The company had also purchased a cargo vessel to bring in construction materials. Reportedly, the vessel is stuck and unable to transport necessary material. Another source had confirmed that most of STO’s cement stock was bought by Apollo Construction.
A senior figure at STO’s Internal Audit department also confirmed that excessive spending on politically appointed individuals to STO and subsidiary companies have drained the once-profitable company. He also highlighted that STO and subsidiary companies engaged in cash for coverage, splurging on local media, without due process.
Unchecked credit limits, dollar transactions
Monetary laws in the country forbid the use of any currency other than the Maldivian Rufiyaa in the country. STO seems to have taken this as an option, with the company seeking payments in US dollars from private companies and resorts. Following STO’s lead, some private companies are also insisting that payments be made in US dollars. As such, some resorts have reported that Coca Cola company have begun demanding payment in US dollars.
The official at the Internal Audit Department said that in spite of the cash crunch and in spite of set company policies, companies affiliated with MD Amr had unchecked credit limits. Those companies can purchase fuel and some construction materials using this generous grant from the MD.
STO’s fuel subsidiary, Fuel Supply Maldives (FSM) is another company that is being used by MD Amr in this manner. FSM presently mandates that their customers should have no due bills and maintain their credit exposure. Orders, the company said, must be sent three days before requested delivery dates.
Amr, however, had cleared over MVR 70 million (US$ 4.6 million) for certain companies. These companies are also exempt from the recent changes FSM had announced – they can order fuel even with unpaid bills, the official reported.
The revelations came at a time when state agencies and independent oversight bodies remain, for the lack of a better term, snoozing on borrowed time. The Government’s Privatization and Corporatization Board and Parliament’s Committee on State Owned Enterprises are primed to take action, as both the Committee and the Board are filled with members from the ruling coalition. The cases regarding STO and subsidiaries, are at ACC – stalled, indefinitely.
At a time, when the global economy is grinding to a painful recession, STO seems paralyzed by willing inaction. This is in spite of how closely linked the company is to the country’s economy. This, is also in spite of why STO was formed in the first place.