Economic Highlights

New Delhi, 7 December 2012

GMR Episode

MALE’S WARNING SIGNALS

By Shivaji Sarkar

India is losing out to tiny Maldives. The regime in the island nation is less friendly and its decisions are causing enough politico-economic concern. This is not because India has lost the $ 511 million airport contract but that the regime there is not only drifting away from New Delhi but is also trying to inch closer to China.

The island nation is strategically important for India. It is situated on the international maritime route, and is being eyed by China and even the US for having their dominance. The US was the first to recognize the new regime, when democratically elected President Nasheed was deposed in a coup in February 2012. Nasheed was close to India and had influenced many decisions that led to a number of investments from Indian companies. New Delhi though caught unawares of the coup, was quick to recognize the new regime of Mohammed Waheed primarily to safeguard Indian interests.

However, the new regime had not taken kindly to the contract given to GMR Infrastructure (GMR). The airport contract, with a provision to levy an airport entry fee of $25, has been in controversy since the beginning. The parties opposing Nasheed had reportedly expressed their dissatisfaction and the non-transparent way the contract was given to GMR. The report of the Comptroller and Auditor General (CAG) on Delhi airport with GMR had further accentuated the crisis. Ultimately, the Maldivian government unilaterally cancelled the order. It has justified the termination on grounds that “there were many legal, technical and economic issues”.

The UPA-II Government is obviously unhappy that Maldives hasn’t paid heed to Minister for External Affairs Salman Khursheed’s appeal to iron out differences with GMR through a neutral international expert. And thus was left with no option but to react sharply and upped the ante, freezing major aid promised to the neighbouring nation. The consequences include a freeze on $ 25 million budgetary commitment to Male and putting on the back burner other infrastructural projects and construction of a police academy.

Fringe groups such as Adhaalath Party, which are partners in the Waheed regime, too have been displaying anti-India sentiments. On the Male airport contract, the Adhaalath Party has stated: “We would rather give the airport contract to our friends in China.” This is what pinches India the most.

Worse, even the Tata group which has planned an investment of about Rs 1,000 crore in the housing sector is facing problems. Housing minister Muizu, who is also from the Adhaalath Party is learnt to be taking an unfavourable stance despite meeting Tata officials. The Maldivian government has thus sought to take over the site already given to the Tata group venture Apex Realty project and offer an alternative one. Tata’s pleas against the move are falling on deaf ears. This apart, officials of the firm as well as some top ones in the Indian High Commission have been asked to leave. As a result, New Delhi replaced High Commissioner D Mulay with Rajiv Shahare, sending the former as Consul General to New York.

All this is despite the fact that it hasn’t been easy going for Maldives. Even though its democratic process has often been hampered, it has been a destination for Indian investment. More than that India needs to keep the Maldivian regime under its influence for securing its strategic and maritime economic interests. As such the island nation does not provide very large investment opportunities, but whatever little could be cornered by the Indian firms has been significant during the phase of severe global recession.

Besides, Maldives can provide immense opportunities for India to prospect maritime resources. It has potential to create enough trouble for India if it turns hostile or becomes an ally of China.  Beijing with its policy to encircle India has already set up bases in Cocoa Islands, not far from the naval base at Andamans.

It goes without saying that Maldives has been roped in to form a security ring for the country. If it slips out, as it appears now, it would not only endanger economic activities in the Indian Ocean region but would also substantially increase the cost of securing India’s defence mechanism. As is well-known New Delhi is facing problems in the South China Sea as Beijing has claimed that the ONGC site prospecting oil for Vietnam belongs to it.

Additionally, India is aware that even the US naval base at Diego Garcia is not so far from these islands. If the Chinese presence in Malaysia increases, the region could become a hotbed for Sino-US conflict. The Chinese foray into Maldives is almost like entering Indian strategic waters and threatens it not only militarily but even economically, because if it is not deftly tackled diplomatically it could impact the movement of Indian ships.

While the Ministry of External Affairs is all set to blame the Maldivian government for the rash and unfriendly action on GMR, it appears that diplomatically the island nation has not been dealt with the kind of expertise and strategic intervention it requires. Maldives has opened up many jobs for Indians in construction, tourism, teaching and other areas. It employs about 30,000 Indians in the foreign workforce of about one lakh. However, at the same time it is known to seize passports of Indian, Bangladeshi and other foreign workers, which the Indian High Commission hasn’t been able to handle properly.

On the other hand, the locals too have complaints. More India invests, more the locals complain as it does not benefit them. Jobs are being grabbed by the outsiders and Indian companies are accused of being exploitative. Sadly, India is being seen more as a colonial power rather than a friendly neighbour.

At the same time, proximity of Waheed and his political allies to China is considered as a move to balance Maldives domestic political needs. Nasheed had lost support because he was seen to be too close to New Delhi and had signed controversial deals such as the GMR. The Maldivians considered the price quoted by GMR to be too high as well they had objected to some provisions of levying fees. While the GMR deal was viewed as a major gain, in reality it has created an anti-India sentiment in Maldives.

It is important to keep in mind that even earlier, India has lost opportunities in Bangladesh and Nepal as Indian business sought to create monopoly and hegemony. Opportunities were lost in Bangladesh soon after its independence in 1971, when the Indian businessman started selling commodities at exorbitant prices.

Unfortunately, Indian business has not learnt from its mistakes. Worse, officials and political functionaries in the Government have turned a blind eye to the misdemeanour of the businesses particularly in South Asia. India rightly may have concerns in Maldives but if it wants a favourable regime, it has to start afresh by winning the hearts of the people. Maldivians need to see India as a friend and not a colonial ruler. The GMR episode should be seen as a warning. ---INFA

(Copyright, India News and Feature Alliance)