Maldives and India are in the middle of a dispute that threatens to setback their relations. The root of the problem is the dissolution of a contract given by the Maldives to a Indian multi national company GMR known for making airports; a contract that was arbitrarily cancelled. However, tied to this issue are many larger questions that include the role of Indian development assistance and its linkage to Indian businesses? How much should India intervene on behalf of Indian capital on foreign shores? How tough should India be with the region? How does India manage its strategic, economic and political interests with norms of cooperation and other such fundamental issues?
This particular dispute arose because GMR was given the contract to construct the airport in the capital city of Male by the Maldives government in 2010, by the former democratically elected president Mohamed Nasheed. He was overthrown in a coup by the current incumbent, Mohammed Waheed, whom India recognised as it did not wish to intervene in the internal instability that followed. Waheed’s government subsequently cancelled this $500 million contract to build the airport at Male.
GMR went to a Singapore court that was to be an arbiter, laid down as part of the original contract. The court gave interim relief to GMR, but President Waheed said he was firm on terminating this contract. In its next order the Singapore court ruled that the Maldivian government has the authority to reclaim the airport and the process of compensation should follow. The reason given by the Maldives government is that GMR was levying an airport development tax that would not benefit the Maldives. If the airport on the other hand is controlled by Maldives they can levy a pass through or service tax, which is will give them more income in years to come.
Maldives has alleged that GMR displaced labour from the Maldives with that of Indian labour and several airport shops owned by the Maldivians lost out. GMR claims this is untrue. These allegations however require fair investigation and looking into in more details. If GMR violated this, the Indian government should warn Indian multinationals to follow their commitments.
If this however is the excuse used to terminate a contract, it should have been thought of much earlier, when the contract was awarded on the basis of international bidding with the International Financial Corporation involved. It is not only economics but also politics involved. Clearly the new president wants to have his own impact on Maldives development, especially as this contract was given by his adversary.
Even while Indian businesses started fuming and asking India to intervene on their behalf, India was correct to wait because a court ruling was necessary to establish the validity of the contract. Now India can take a fairly clear position. The external affairs minister has reminded the Maldives that such contracts need to be honoured. Other companies will hesitate before going into the Maldives. If however, Maldives wants its own state-led or only national capital investments it is another matter. Then it should be clear on its growth paths.
India has been giving fair amount of foreign aid to Maldives over the years. This aid, now called development assistance goes through multiple ways like capacity building through the Indian Technical and Economic Cooperation Programme (ITEC); loans, lines of credit, etc. The ministry has indicated that India may need to slow down the aid to Maldives to rap its knuckles. In the current year Maldives was to receive $25 million worth assistance, a sum that has gradually been rising every year. India has also given the Maldives international support and legitimacy because it sees them as a strategic ally and part of the SAARC.
At the same time, India talks of its own development assistance as being unconditional, unlike Western foreign aid that has conditions attached like democratic values, rights etc. India has resented when foreign governments have intervened on behalf of their companies. India’s aid is couched in terms of South-South cooperation, mutual benefit, but aid in not purely charity, and is always accompanied by the ‘mutual benefit’ aspect. Thus Maldives is clearly playing dubious politics.
Maldives’ response will be predictable. They will talk of Indian regional hegemony, whip up some nationalist sentiment, which President Waheed desperately needs and has done so in the past with sectarian violence. Maldives will also give some signals to India like giving China some naval bases and more. This fear is the ultimate for most Indian strategists. Who might then forgive and forget the issue in favour of the Maldives.
The point can also be made that India cannot blatantly intervene on behalf of its capital in the economic sovereignty of a neighbouring country. Especially since India itself has responded to erring multinationals by cancelling their licenses, asking their governments not to intervene on their behalf. However, there can be a fine line drawn between being a neo-colonial regional power and seeking to have a level playing field in a competitive global economy. This level playing field can come through better diplomacy and creative ways of political-economic relations within the global south, on India’s part.
This better diplomacy can come with deepening partnerships with different forces in countries where India has interests, so that when two polarised sides like the Waheed versus Nasheed in the Maldives are now both whipping up anti-India sentiments, they slow down their tirade and look at the domestic roots of the crises. Another important step is not to give in when any neighbouring country whips out the China card. China is not a permanent threat and it is possible to collaborate with China on regional issues.
Currently about 40 per cent of India’s GDP is linked to trade and India is dependent on imported natural resources, like energy and minerals and on export markets. The MEA however should support not just businesses, but also Indian labour while looking at ‘mutual interest’ of the host country as well, without which it may well lose out on all fronts. For such a strategy, India has to build in a host of new measures. India’s new development assistance agency is handling huge money and should have clarity on accountability, transparency and efficiency. Except for a handful of economists and strategists, there has been little public debate on the issue. It is time that this comes into the public domain.
The Maldives archipelago remains not just strategically important to India, but is also now a test case of how India handles the multiple tasks of diplomacy, international economic relations as well as balancing the interests of labour, capital, nation and the global south.
Anuradha Mitra Chenoy is professor at the School of International Studies, Jawaharlal Nehru University.
E-mail: chenoy@gmail.com