Additional reporting by Neil Merrett and Mohamed Naahii
The Waheed government’s decision to void the GMR contract and issue the developer a seven day ultimatum will “put off potential investors for decades,” former President Mohamed Nasheed has said.
“Waheed’s government has cynically used xenophobia, nationalism and religious extremism to attack GMR, the country’s largest foreign investor. Waheed is leading the Maldives down the path to economic ruin,” Nasheed said, following Attorney General Azima Shukoor’s issuing of the ultimatum on Tuesday (November 27) evening. The ultimatum was made while arbitration proceedings are pending in the Singapore courts.
The government’s party to the 25 year concession agreement – the 100 percent state-owned Maldives Airports Company Limited (MACL) – issued a statement on Wednesday declaring that the company was “now working with stakeholders to take over the operations of Ibrahim Nasir International Airport (INIA) on or before the expiry of the seven days period provided to [GMR] to handover possession of the INIA pursuant to the notice issued by the government of the Maldives and MACL.”
GMR meanwhile yesterday denounced the move as “unilateral and completely irrational”.
“We have no plans to go. We have 23 more years here,” GMR’s Head of Corporate Communications Arun Bhaghat told Minivan News.
CEO of INIA, Andrew Harrison, told Minivan News that the airport’s 1700 staff were “quite concerned” and “not exactly jumping for joy”.
The company had held several meetings with staff following the announcement and called on them to ensure continued smooth operation of the airport while the legal team was working to resolve the issue.
“People who have seen their businesses improve since GMR took over have been calling me up expressing support,” Harrison noted.
The company had received no communication from the government apart from the notice issued yesterday, he added.
The Indian government was quick to back GMR yesterday following the announcement by its Maldivian counterpart, noting that the company was awarded the deal “through a global tender conducted by the International Finance Corporation (IFC), a member of the World Bank.”
“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,” said the Ministry of External Affairs.
The Indian government added that it was prepared to take “all necessary measures to ensure the safety and security of its interests and its nationals in the Maldives.”
Surprisingly, GMR’s stock showed an upward trend following the government’s announcement.
Traders on one broker’s website predicted that stock was reacting positively due to the Indian government’s quick defence of the company and the prospect of significant compensation for the infrastructure developer following arbitration proceedings.
“Stock will definitely react in a positive manner as it has now become a matter of national prestige,” predicted one trader on Indian finance portal, Moneycontrol.
The Maldives’ decision was widely derided in the Indian media. Forbes India suggested that “the decision to send the Indian consortium packing has brought into focus the risk of doing business in emerging markets with rapidly changing political landscapes.”
“India Inc has had its share of relatively minor `law and order’ problems in its journey into Africa and a few brushes with shifting goalposts in places like Indonesia and Russia. But being thrown out after signing a 25-year, supposedly iron-clad international contract, is a first,” Forbes observed.
Locally, the Progressive Party of the Maldives (PPM) of 30 year autocrat Maumoon Abdul Gayoom praised the government’s move as “important for protecting the rights of Maldivian citizens”.
“It is PPM’s hope that the government’s decision to terminate the agreement with GMR will not affect the historic friendship between the governments and people of the Maldives and India,” the PPM said in statement.
The largest party in the ruling coalition, the Dhivehi Rayyithunge Party (DRP), was more reserved.
“The government should act responsibly and according to the legal contract,” said DRP MP Dr Abdulla Mausoom. “The consequences of government decisions should not adversely affect the lives of the Maldivians.”
The 2191-member Dhivehi Qaumee Party (DQP), which during the Nasheed administration filed the Civil Court case outlawing the airport development charge (ADC) stipulated in GMR’s concession agreement which deprived MACL of airport revenues and cost the government several million dollars, praised President Waheed as a national hero.
“[The] decision will be noteworthy in the history of this country,” DQP Leader and President Waheed’s Special Advisor, Dr Hassan Saeed, was reported as saying in local media.
“No one would expect such a decision to be made by a country that heavily relies on India. But Waheed has decided what is best for his country,” said Saeed. “President Waheed will be remembered in the years to come.”
Saeed earlier wrote to Indian Prime Minister Manmohan Singh urging him to terminate the Maldives’ airport development contract with GMR, warning of rising fundamentalism and anti-Indian sentiment should he fail to do so.
“I want to warn you now that there is a real danger that the current situation could create the opportunity for these extremist politicians to be elected to prominent positions, including the Presidency and Parliament on an anti-GMR and anti-India platform,” Saeed informed Singh.
“That would not be in the interests of either the Maldives or India. You are well aware of the growing religious extremism in our country,” Saeed warned the PM.
Seven day stand-off
GMR has shown no interest in complying with cabinet’s direction and has expressed confidence in the professionalism of the Maldives National Defence Force (MNDF) and its assignment to protect the airport, raising speculation as to how far the government would be willing to go to enforce its decision to void the concession agreement and reclaim INIA.
President’s Office Media Secretary Masood Imad told Minivan News on Wednesday that the government’s role had “solely been to advise MACL to take control of the site.”
“We are not engineering any handover [of the airport],” he said. “What we have done is just given our opinion after being advised that [terminating the contract] was the proper thing to do.”
GMR has responded that it did not recognise a legal basis for the government’s decision while the arbitration is still ongoing in the Singaporean courts, stating that it would continue to manage and oversee development at the airport for the remaining 23 years of its tender agreement.
Masood claimed that any decision to retake the airport would be “the responsibility” of MACL.
“Well I suppose if MACL decide to terminate the agreement and the company hasn’t moved, procedures are in place for the MACL to address these issues,” he said, forwarding further inquiries to MACL Managing Director Mohamed Ibrahim.
Ibrahim however told Minivan News he was “not willing to disclose anything at this moment.”