Maldives: GMR, Nexbis and the Tale of Two Ousters

08 Jan, 2013    ·   3785

N Manoharan discusses the reasons and larger strategic implications of the ouster

In successive months, two foreign companies have been asked to leave the Maldives by its government citing various reasons. First it was GMR, an Indian infrastructure company, that was awarded a project to upgrade and manage Ibrahim Nasir International Airport; and then it was Nexbis, a Malaysian-based venture that was contracted to manage the border control system (BCS) of the atoll state. What reasons were cited by the Maldivian government for the ouster? How many of them were genuine and how many of them were motivated – politically, economically and diplomatically? What were the actual reasons behind the ouster and what are the consequences?

Overall, three broad reasons were offered by the government of Maldives to oust either of the companies. The first issue was on the transparency of the contract. President Mohammed Waheed alleged that the contract “was signed during the previous government conceivably under dubious conditions”. However, the fact of the matter is that the contract was awarded through an international bidding process overseen by the International Finance Corporation (IFC). In a letter dated 03 December 2012, the IFC’s Vice President, Karin Finkelston points out that the project “followed international best practices at each step of the bidding process to ensure the highest degree of competitiveness, transparency and credibility of the process.” The second reason cited was that the GMR contract was “illegal”. The IFC has contended this by observing that the contract “complied with Maldivian laws and regulations”. Even if one got to ignore this, the Maldivian Attorney General in his legal opinion dated 28 December 2010 clearly stated that the contract agreements “do not violate any provision of the Constitution of the Republic of Maldives or any law regulation, rule or decree...”

The third reason was that the GMR project was “against the national interest” of the Maldives. The same reason was cited for the termination of the BCS project undertaken by Nexbis Limited. It is highly unlikely that the abrogation of the GMR contract served any national interest of the Maldives. Economically, there would be a loss of around US$3.5 billion to the Maldives’ revenue over a period of 25 years. Significantly, when the project got underway in November 2010, it became the single biggest FDI into the Maldives; that too, at the time of global economic recession. The project was to upgrade, maintain and operate the existing airport; as well as build a new terminal by 2014. In the process, the aim was to increase traffic from 2.6 million passengers per annum to over 5 million. The airport is not only the largest in the Maldives, but is considered as one of the fastest growing in the region. All these have come to a naught now, despite GMR spending over US$230 million. The move has also sent negative signals to prospective investors in the Island; in addition to creating jitters and uncertainty amongst the present ones. Diplomatically, the ouster did upset India to the extent of shaking mutual confidence in the otherwise smooth bilateral relations.

As reasons offered for the termination of the contract appear unimpressive, one tends to look for actual motivations. In the process, one cannot miss local political and electoral factors. Despite unseating Nasheed in a “bloodless coup”, the present Waheed regime has been witnessing political crisis in the form of protests and non-cooperation from Nasheed’s Maldivian Democratic Party (MDP). Constituted mostly by anti-Nasheed parties, the present regime in the Maldives has been undoing whatever Nasheed did during his tenure; GMR and Nexbis being among them. The idea is to take the wind out of the MDP’s sails. As the country is going to polls this year, there are also electoral considerations. The parties wish to gain as much political mileage as possible, even if that is economically painful or diplomatically embarrassing.

More worrying is the favourable disposition of these groups towards China; that has been desperately looking for a strong foothold in the Indian Ocean. In a tweet, the Adhaalath Party that spearheaded the anti-GMR, anti-Nexbis movement stated, “We would rather give the airport contract to our friends in China, who now make the majority of our tourist population.” It further stated, “…the addition of the Maldives as a friend [by China] would be a massive blow to future Indian power in this region.” Beijing has, for long, been building maritime and other linkages with the countries of Eastern Africa, Southeast Asia and the Indian Ocean. The avowed objective behind this is to ensure the security of its sea lanes, especially the unhindered flow of critically-needed energy supplies from Africa and West Asia. At the same time, these linkages have had the impact of somewhat encircling India, which some term as the “String of Pearls” construct. The Maldives is undoubtedly an important “pearl”. Sino-Maldives interactions have increased in the recent past to the extent of China opening an embassy in Male in 2011. Lately, the Chinese have remained among the top visitors to the Maldives. Beijing has evinced a keen interest in developing infrastructure in the Ihavandhoo, Marao and Maarandhoo Islands of the Maldives. Therefore, it is not without reasons that the current dispensation in Male holds the view that “it will be to the detriment of the Maldives to not engage with China.”