India, Maldives Row Over Airport Contract
Image Credit: Office of India's Prime Minister

India, Maldives Row Over Airport Contract

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Bilateral relations between India and Maldives have hit a new low this week after a commercial deal between an Indian company and the Maldives government was cancelled.

The controversy erupted over last week’s cancelation of a U.S. $511 million contract between the Maldives government and a consortium of the Indian-based GMR Infrastructure and Malaysia Airports Holdings to run the Ibrahim Nasir International Airport in Male. The GMR had won the contract through an international bidding process overseen by the World Bank-affiliated body International Finance Corporation in June 2010 when Mohammed Nasheed was still the president of Maldives.  Difficulties arose when Nasheed was ousted from power earlier this year and Mohammed Waheed replaced him as president

A Singaporean court arbitrating the dispute issued a stay on the Maldives decree to terminate the contract, ordering that it continue to be executed as the court hears the case in full. The government in Male has indicated it will ignore the court’s ruling.

For weeks, Masood Imad, a media secretary in the Maldivian presidential office, has been making hawkish statements against Nasheed and Indian interests in the country. Today he went further by accusing GMR of bribing Nasheed with millions of dollars in order to secure the contract. He also questioned GMR’s claim of having paid a U.S. $100 million fee to the Maldives government in 2010 and said the government had received only U.S. $78 million.

“Where has the remaining $22 million gone? Did it go to Nasheed’s account?” he was quoted as saying by Indian media outlets. Adding, “Our government has already filed a criminal police complaint against GMR on this matter after we served them with an eviction notice.”

The Indian government has threatened to suspend U.S. $25 million in budgetary aid to the Maldives if the latter does not reconsider the contract.

The threat of aid suspension appears to have impressed upon the Maldives government the seriousness of the situation. Maldives Foreign Minister Abdul Samad Abdullah spoke to his Indian counterpart Salman Khurshid on Tuesday and assured him that President Waheed would soon be sending a detailed letter to Prime Minister Manmohan Singh.

According to an Indian Ministry of External Affairs (MEA) spokesperson, during the conversation on Tuesday, Abdullah told Khurshid that the Maldives government would not allow relations between India and Maldives to be undermined and that there was consensus on this issue. For his part, Khurshid reminded Abdullah of his earlier discussions noting that the legal processes involved in the GMR case should be permitted to take its own course based on the contractual obligations of the parties involved, and Male should not allow the situation to go out of hand.

“It is expected that no arbitrary and coercive measures should be taken pending the outcome of the legal process underway.  Resort to any such actions would inevitably have adverse consequences for relations between India and the Maldives,” the MEA spokesperson said. 

Incidentally, the GMR issue had come up during discussions between Manmohan Singh and Mohammed Waheed when the two recently met in Delhi. At the time the Maldives President had assured the Indian Prime Minister that negotiations would be held with GMR to resolve the issue amicably. The MEA went on record today saying that no negotiations had thus far been held.

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