Comment: FDI and strategic security concerns

Blackstone Group, the US-based MNC with multifarious investment interests across the world, has bought majority shares in the only two Maldivian air-taxi companies, together owning a fleet of close to 50 sea-planes, for an undisclosed sum.

Coming within weeks of the government throwing out Indian infrastructure group GMR  from the airport construction-concession contract, questions need to be answered on issues relating to FDI and strategic security considerations.

The government can take pride that FDI has not dried up after the ‘GMR row’. Nor have perceptions of political instability in the country upset foreign investors into staying away. Together, they could ease pressures on future governments, too, in an election year, and presidential aspirants can now promise the moon both to the foreign investor and to their own local population.

Yes, larger issues, settled decades ago, may need to be re-addressed if the ‘GMR kind’ of problem does not end up showing up without notice on a later date.

There is a major difference between the GMR contract and the current Blackstone deal. The Male’ airport and the company were/are state property, whereas the two sea-plane companies are privately-owned, to the extent they stand on separate legs.

Yet when the issue of ‘national security’ and other national concerns were flagged in the GMR case, the same would apply to an overseas ‘monopoly’ having a near-free access to Maldivian air space as any other state-owned airliner.

Strategic assets and national assets

Procedural issues were cited in cancelling the GMR contract, yet the question of handing over the nation’s sole international airport to an ‘outsider’ was also flagged almost from the day the deal was proposed to be signed. The question remains if it was time for Maldivian government to frame laws and rules to monitor and clear FDI in ‘strategic sectors’, and define in the process, what these ‘strategic sectors’ could well be.

Or, will eternal uncertainty about the prospective nature of retrospective investment contracts become the order of the day, with near-arbitrary decisions taken at whim, causing concern all around?

For now, the controversial and equally-rushed Finance Act amendment of 2010, compelling the government to seek parliamentary approval for altering the nature of ‘national assets’ may require re-visiting.

Like the GMR contract, the Blackstone deal was a done deed the day they were signed by the parties concerned. Yet there is no knowing if a future dispensation in Male and/or a newly-elected parliament, if not the present one, will impose new conditions on private sector national players for inducting foreign investments and investors into their existing and prospective ventures.

The irony of the argument based on ‘national assets’ in the case of the GMR remain. The new definition and consequent distinction was made full 30 years after the Maldivian government of the day encouraged FDI in the resort tourism sector in a very big way. It is this that has changed the face of Maldives from being a small and far-away island community living in a past of compulsive contentment into a vibrant nation that has become the desired destination of the global community as a tourism centre and investment-attraction.

As is known, the resort companies, with foreign equity participation and an excessive number of overseas staff at all levels, have been in possession of isolated islets for developing idyllic resorts – most of whose guests are foreigners, too.

The Ibrahim Nasir International Airport (INIA) in the national capital of Male, too, has been brimming with foreign-registered aircraft in their dozens and foreign tourists in their thousands, for years now. There has been next-to-nil security-checks in these islands, barring an occasional clash between the owners and the employees, or in times of accidental death in the adjoining seas.

Against this, the airport that was leased out to the GMR group was brimming with personnel of the Maldivian security agencies, including the MNDF, MPS, Customs and others. Yet, the question of ‘national assets’ was not posed against the resort islands at inception, or posted against them, when the phraseology was included to impose parliament’s will on policy-making.

The American MNC’s concept and confidence in the nebulous run-up to the twin elections for the presidency and parliament in the next 15 months, all in the midst of the tentative nature of the political stability in the nation, is thus noteworthy.

Geo-strategic perceptions

Post-Cold War, the global perception of geo-strategic concerns in the Maldives has undergone a sea-change. ‘FDI’ in Maldives has acquired a new dimension than at a time when the nation was inviting in the tourism sector. It has come to such a pass that FDI in the utilities sector, like desalination and power-supply, have come to be viewed with suspicion from within and anxieties from the outside.

It is thus that the western perception of India’s strategic concerns for the Maldives has revolved around the ‘China factor’ flowing from the ‘String of Pearls’ theory, an American academic construct.

What should add to the national discourse at the time is the emerging scenario of the Maldives becoming an oil-producing country. At least two presidential aspirants, and both former Finance Ministers, have begun talking about exploring oil extraction prospects if elected President. Abdulla Yameen of the Progressive Party of Maldives (PPM) and Gasim Ibrahim of the Jumhooree Party (JP) are otherwise credited with pragmatism in politics and political administration as in the businesses that they run.

Gasim has since recalled how as a losing candidate in the 2008 presidential polls, he had flagged the issue. He has since pooh-poohed Umar Naseer, a contender for PPM nomination for the presidential polls along with Yameen, that oil exploration could affect on the tourism sector, the mainstay of Maldivian economy at present. Yameen has pointed out how in the past oil exploration could not be taken up for want of adequate technology, which is now available.

In these times of ever-increasing fuel costs impacting on national economies the world over, the ‘strategic importance’ of any oil-find has greater significance for post-Cold War Maldives than is acknowledged. An infant democracy, still experimenting with the respective rights and powers of its constitutional institutions, the Maldives will soon be called upon to define, and decide upon, the nature and definitions of ‘strategic assets’ before moving on to the next stage of declaring what the nation intends getting out of them, and is willing to give in, too.

After all, oil exploration, like air-taxiing and airport-development, involves big-time FDI, relative to the Maldives’ aspirations and requirements. If one were to acknowledge that the Maldives cannot fund such ambitious projects without external funding, technology and skilled labour, then identifying sectors and partners assumes as much significance as electing a domestic government, entrusted with that very task.

The writer is a Senior Fellow at the Observer Research Foundation

All comment pieces are the sole view of the author and do not reflect the editorial policy of Minivan News. If you would like to write an opinion piece, please send proposals to [email protected]


3 thoughts on “Comment: FDI and strategic security concerns”

  1. Everyone is promoting FDI and here comes a well know writer journalist on GMR issue raising concerns about FDI and linking it to strategic security concerns.

    But whose security? Is it regional security?

  2. "....He has since pooh-poohed Umar Naseer, a contender for PPM nomination for the presidential polls along with Yameen, that oil exploration could affect on the tourism sector, the mainstay of Maldivian economy at present."

    No. It was Umar who said the oil exploration could affect Maldives Tourism and Fishing Industry which was in response to when Yameen first raised the issue.

    "...Yameen has pointed out how in the past oil exploration could not be taken up for want of adequate technology, which is now available."

    Actually, it was Gasim who said that the current technology would allow them to search for oil without harming the environment.

  3. If investments not too big, thats ok.

    Speaking of size, BBC today reports that condoms are far too big for Indians.

    also need t mention there are so many unfortunate incidents of rape..


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