09 December 2012, 12:44 PM IST
In a "solemn" ceremony at midnight on Saturday, the Maldives government took over control of the Male international airport from GMR, an Indian company, that had made the largest ever FDI investment in the tiny island country in the Indian Ocean. On Thursday, a Singapore court of appeal ruled that Maldives had the right to take back its airport.
The GMR issue did not come out of the blue. It has been festering, waiting to bite. When previous president, Nasheed, a political dilettante, signed the agreement with GMR in 2011, he came under fire from Islamists, particularly as a Maldives court struck down the imposition of a $25 airport development charge (ADC) to departing passengers. So Nasheed allowed GMR to deduct the amount from its own revenues to the government. This was a brewing disaster -- in a few months, the Maldives government found it owed GMR about $3.5 million. After that it was easy to raise the bogey that big Indian company was raping a small country.
Having cancelled the GMR contract ab initio, the matter is now in an international tribunal. There is the small matter of compensation to GMR and Axis Bank, lead banker to the deal. But that's not the real problem here.
The implications for this eminently avoidable fracas will be deep.
First, the deal was a World Bank tender, managed by the International Finance Corporation (IFC). The Maldives government had tried and failed to win bidders for the airport project. After the IFC intervention, a selection was made among 6 bidders. The cancellation will have repercussions within the Bank system. The Maldives government does not have the wherewithal to manage and run this airport. Having done a Dabhol on GMR, they are likely to scare away other international investors who might feel vulnerable to rampaging Islamists who might turn against international deals. It's therefore, not inconceivable that Maldives could turn to the only other country that has deep enough pockets to absorb all this. Welcome, China.
The current coalition in Male supporting Waheed is a hodgepodge of Islamic parties who thrive on an anti-India platform, some of it indigenous, much of it inspired by Pakistani elements, funded by extremist Saudi money. Waheed has also shown that the anti-India plank is a perfectly successful political one. Scalping a big company like GMR can be expected to keep the Islamists to his side and produce political results in the next elections. It could even give him a leap-frogging advantage over former president Maumoon Abdul Gayoom who apparently wants to return. Waheed had promised in May that the issue would be resolved because it was merely "procedural". Clearly it's not. Waheed's press secretary, Masood Imad told journalists initially that India refused to play ball. "We had asked to send defence minister Nazim (principal opposer of the GMR deal) as special envoy to India to explain our stand. He was kept waiting for over a month." MEA officials say India had welcomed the special envoy. Later, Imad said, GMR had been made a "victim" of former president Nasheed's machinations. The upshot though is, Waheed has just lost a ton of goodwill in India, and that's not going to be good for him.
As for GMR, it may have won an international tender, but persistent problems with the agreement should have compelled them to attempt a renegotiation with Maldives. Their proposal that Maldivians could be exempted from paying the ADC did not fly with the government there. The word in Maldives is that this is a patently unfair agreement. Was GMR too complacent? Did it think the Indian government would prevail in such a situation and tell Maldives off? As an industrial analyst pointed out, "You would find similar complaints with, say, Arcelor Mittal (France) or GMR (Maldives). But have you heard of such complaints with say, Tatas, Mahindra or Thapars, all of whom are operating in foreign countries?"
The ultimate loser in this game is India. Assessing the damage, former diplomat, Kuldip Sahdev says. "This was a tender floated by World Bank and IFC, so we can't say anything was irregular. This is a clearly anti-Indian move by elements in government. It is a clear manifestation of anti-Indian sentiment. We have to take note."
On February 7, a highly unusual transfer of power (most commonly described as a coup) saw Nasheed gone (he resigned and went home to sleep, as he said himself) and his vice-president Waheed installed as president. India's MEA did not know what hit them. But within 24 hours, India went ahead and recognized Waheed, and even kept off pesky democracy warriors from the Commonwealth off his back. The US followed in India's wake and recognized Waheed too. But Waheed was an unknown quantity and there remained confusion in Delhi, but India was reluctant to engage. Foreign minister Salman Khurshid told TOI, "After the transfer of power, we have kept them at arm's length." Well, fat lot of good that did India.
Maldives is extraordinarily important for India's security considerations, a lynchpin for India's strategy in the Indian Ocean and for power projection. India has sensitive radar installations in Maldivian islands which is part of India's plans to control and keep watch on the all-important sea lanes of communication. India, Maldives and SriLanka form a core troika for the Indian Ocean. Bottomline __ India cannot afford to let the Chinese or Pakistanis get a foothold in this nation.
But we just did.
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