JV siphoned millions from struggling fisheries firm, audit reveals
The audit found that vessels were transferred to MMP without confirming the correct value.
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By
Ahmed Mizyal
An audit report has revealed that a joint venture was formed in collaboration with a Thai and local private company to give Maldives Industrial Fisheries Company (MIFCO) the lowest share which caused huge financial losses to MIFCO and hampered its operations.
According to the audit report published by the Auditor General's Office on Monday, in 2011, MIFCO, Thailand's MMP International and IOF Corporation formed a joint-venture company called Marine Maldives Products (MMP).
Shares were as follows:
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MIFCO - 30%
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IOF - 35%
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MMP International - 35%
The objectives of MMP include selling fish to domestic and foreign markets, operating resorts, other tourism businesses and construction work.
However, the audit report noted that the MMP suffered a total loss of MVR 44.5 million from 2011 to 2016 due to the failure to achieve its objectives and operate as a profitable company. While MMP was at a loss, MIFCO continuued funding the company. MIFCO has not received the due MVR 13 million from them.
The other two shareholders, except MIFCO, have not paid the full price for the purchase of the shares. Thus:
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Out of the MVR 30.2 million owed by the IOF, a barge worth MVR 24.7 million was pledged instead
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MMP International owes MVR 30.2 million
MIFCO offered to buy MMP shares by pledging:
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A vessel worth 1,999 metric tons of fish storage
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A diesel carrier worth 327 metric tons of diesel
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Three longline fishing boats with a capacity of 53 metric tons
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A 9 ton vessel used for boarding and loading supplies
The audit found that the vessels were transferred to MMP without confirming the correct value. According to the MMP feasibility study report, even though MIFCO will have to pay MVR 25.9 million for buying shares, the cost of these vessels were MVR 36.9 million, with a loss of MVR 11 million.
However, a board resolution of MIFCO has fixed the value of the vessels at MVR 21.1 million. The value of the vessels is not known from the MIFCO property registry.
Among the six vessels pledged by MIFCO to buy MMP's shares was the only vessel used by MIFCO to export fish at the time, MV Barosa. According to MIFCO's latest independent valuation, the ship was valued at MVR 18.5 million.
After handing over the vessel to MMP, MIFCO used it to export fish on a payment basis to MMP. Thus:
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From 2011 to 2016, MIFCO paid MVR 117 million to MMP as freight charges for using the vessel to export fish
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In 2021, MIFCO purchased a 2,481 metric tonne vessel for fish export at a cost of MVR 29 million
$5 million loan with vessels mortgaged
MMP's local private shareholder, IOF, took out a loan of MVR 77 million (USD 5 million) from BML on December 6, 2015, pledging two of the vessels issued by MIFCO and some of IOF's assets.
The loan will cost BML MVR 79 million (USD 5.1 million) by 2020 with interest due to non-payment of monthly repayments.
According to the agreement signed between the IOF and MMP:
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The purpose of the loan is to raise the funds needed to run the MMP
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The IOF agreed to pay MVR 31 million of the loan to improve the cash flow of the MMP
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All the benefits of the loan went directly to the IOF; The audit report estimated that the loan was taken for the misuse of MMP assets
IOF also owes MIFCO MVR 13.2 million. These include the costs of purchasing fuel and repairs to IOF vessels and the money not received by MIFCO from selling fish on credit to IOF.
