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Maldives hits GMR, India furious

New Delhi, Nov. 27: The Maldives has cancelled an agreement with Indian infrastructure firm GMR to develop an airport in capital Male, sucking New Delhi into diplomatic confrontation and a treacherous cesspool in its backyard.

The $500-million (Rs 2,750 crore) deal, supposed to have been executed by a consortium of GMR and the Malaysian MAHB, is the largest foreign direct investment in the Indian Ocean archipelago of 1,192 islands.

Announcing the cancellation, the Maldivian cabinet today referred to “technical, fiscal and economic issues” but did not elaborate.

The project has been mired in controversy for long, fuelling conspiracy theories and a claim by the Maldivian government spokesperson that Indian high commissioner D.M. Mulay had been “bribed” by GMR Infrastructure. President Mohamed Waheed had later dissociated himself from the statement.

The cancellation comes against the backdrop of allegations by Mohamed Nasheed, the ousted Maldivian President known as “the Obama of the East” among his supporters, that corporate interests were at play in his removal and the high commissioner had kept the Indian government in the dark.

Some sources claimed the airport agreement was cancelled under pressure from the International Finance Corporation (IFC), a member of the World Bank. The IFC has not substantiated such claims but if the financial institution did play a role, it will have wide ramifications for the subcontinent. The World Bank has already enforced changes in the Bangladesh administration after a bridge project there got entangled in a scandal.

In the Maldives, the GMR agreement had become something of a political albatross around both the regimes.

Nasheed’s cabinet had awarded GMR the contract but when protests, allegedly fuelled by fundamentalists, broke out, he reportedly favoured a review. Nasheed’s successor Waheed had initially supported the project.

Last week, an emissary of Nasheed was in Delhi and he had claimed that sections in the new coalition government had turned against the project. “These fundamentalists have links with terror group Lashkar-e-Toiba,” the emissary had said.

The grievances against the project range from complaints of high cost and fears of a cultural invasion by tourists.

The cancellation of the contract drew a sharp response from the Indian foreign ministry. “The decision to terminate the contract with GMR without due consultation with the company or efforts at arbitration provided for under the agreement sends a very negative signal to foreign investors and the international community,” an Indian statement said.

Broad-basing the concerns beyond that of one company, the statement added: “We call upon the government of the Maldives and all concerned parties to ensure that Indian interests in the Maldives and the security of Indian nationals are fully protected. The Government of India proposes to monitor the situation in the Maldives closely and is prepared to take all necessary measures to ensure the safety and security of its interests and its nationals in the Maldives.”

The Indian statement pointed out that the consortium “had been awarded the contract through a global tender conducted by the IFC. The IFC has stated that it has complied with Maldivian laws and regulations and followed international best practices at each step of the bidding process to ensure the highest degree of competitiveness, transparency and credibility of the process”.

GMR, which operates Delhi and Hyderabad airports, threatened to take legal action against the “unilateral and completely irrational move” by the Maldives government.


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