The sudden and inexplicable way in which an ‘investor-row’ involving the Indian infrastructure group, GMR, is getting a new twist in recent days in Maldives, if unchecked, has the potential to rock bilateral relations.
Coming just days after the successful visit of Indian Defence Minister A K Antony to the atoll-nation, the demands for the ‘nationalisation’ of the Ibrahim Nasir International Airport (INIA) in Male has left a bad taste. The larger questions however concern the internal political dynamics of Maldives, whose emerging international economic image could impact on the investment-climate when the nation can ill-afford any reversal in FDI inflows.
It was Antony’s second visit to Maldives in three years as Defence Minister, and the only one from another nation holding the post to have visited Maldives in recent history. It was also the first visit by an Indian Minister after the regime-change in Male in February this year.
Going by the joint statement issued on the occasion, the visit and the discussions reportedly were productive for both sides, indicating a greater level of security cooperation between the two South Asian neighbours. Among others, India has promised a new Defence Ministry building, an additional helicopter for the fledgling air arm of the Maldivian National Defence Force (MNDF) and naval personnel to help with the maintenance of the Maldivian fleet.
Minister Antony used the occasion to inaugurate the India-aided military hospital in Male with expert personnel on hand, and also laid the foundation for a police training school.
There is an acknowledged need for greater professionalisation of the Maldivian security forces. It has become necessary in the light of the events of the past years and more, when it became clear that the bifurcation of what once used to be known as the National Security Service (NSS) has not served the purpose. In a fledgling multi-party democracy, the uniformed forces came to be a burden to transition even after electoral changes had effected a quiet political transition three years ago.
The Maldives also wants military hospitals in the atolls, which could then be thrown open for serving the common man in the remote islands. Given the increasing levels of bilateral security cooperation between the two countries, New Delhi will also be posting a Defence Attache at the Indian High Commission in Male. At present, the Indian Defence Attache at Colombo, Sri Lanka, is also in charge of India’s specific security interests in Maldives.
Increasing relevance of sea-lines
The Indian initiatives come in the wake of the bilateral, bi-annual Dhosti-XI Coast Guard exercises that were put in place after the coup bid in 1988, which was aborted after India rushed immediate military help. This year’s edition of the exercises also involved neighbouring Sri Lanka, considering that all three nations face shared threats to peace and tranquillity of their shared Indian Ocean waters. Indications were that extra-territorial nations had shown an interest in these maritime exercises, which were promptly kept out, given the immediacy and relevance of the issues, like ‘Somali piracy’ in the shared neighbourhood.
The realisation in India and Maldives for increased offshore military cooperation flows from the increasing relevance of the Indian Ocean sea-lines to the overall geo-strategic concerns of the global community, starting with ‘energy security’. It has been equally reflected in on-shore policy and decision-making in New Delhi, which used to be reciprocated in more than a full measure in Male over the past decades.
In recent times, however, the non-security centric Indian interests and concerns in Maldives have seen enough ups and downs, threatening to unsettle the process, time and again.
This has often resulted in the Governments and policy-makers of the two countries having to start clearing the mess already generated before they could start off on something new. This has had the potential to put the clock back on bilateral cooperation. The delays often get attributed to India, particularly the institutionalised democratic decision-making processes inherent to the Westminster model of parliamentary democracy. Oftentimes, the reverse may be true. The current criticism and opposition to the INIA project, coming as it does from most partners in the government of President Mohamed Waheed, is only the latest in the series, but it also has the potential to rock the boat more violently than in the past, for a variety of reasons.
One agreement, multiple crises
All this does not mean that the government, polity and people of Maldives may not have reservations about the ‘INIA agreement’, which essentially is a lease deed with elements of large-scale investments for modernisation, thrown in, for the tourism-driven economy to upgrade the Male airport to international standards.
Some of the issues being flagged two years after the signing of the agreement – and after substantial progress has been made on the ground – are factors the like of which are involved in any private sector investment in any country. It would be more so when those investments are of overseas origin.
Maldivian political parties that were opposed to the airport contract, when signed, are in power at present. If nothing else, their constituencies would expect them to review the policy that they had derided when in the opposition.
In the Indian context, the ‘civilian nuclear deal’ with the US, and the on-going opposition protests against the sanctioning of ‘FDI in retail trade’, can be parallels. If any or many of them are to return to power at a future date, the political opposition in the country would be called upon to revisit their positions on such issues. Either they accept the ground realities as they existed at that time, or revise the government policy on issues of the kind. These are different from other charges of corruption, for these ones do not involve any complaints of fiscal wrong-doing or loss to the government, per se.
Unlike in India, on the airport deal in Maldives, policy issues, allegations of procedural violations, possibilities of other wrong-doing and loss to the government have all been aired already. Some of them, like the charge that the previous government had circumvented constitutional mandates and legal provisions in the process, or had not acted with care on the prioritisation of contractual conditions and obligations all relate to the domestic front. What they may have to deal with the foreign investor, India’s GMR in this case, are something flowing from the former, but are also independent of the same.
The current phase of the protests owe to President Waheed Hassan’s letter to all parties participating in his government for their views on the matter, for the government to put the inherited problem in the backburner to the mutual satisfaction of all stake-holders. At the end of the day, the airport deal is huge and unprecedented in procedural and financial terms for the country. There is also a need to evolve national consensus on issues and procedures in particular if a successor government has to uphold the national commitments made by a predecessor.
It should in context involve the opposition Maldivian Democratic Party (MDP) of predecessor Mohamed Nasheed at some stage, if ‘consensus-building’ has to make sense to the domestic constituencies and means commitment for the investor company from overseas, from whichever part of the world they come from. It was in the absence of such a consensus when the Nasheed government cleared the deal that the entire issue has been raked up all over again by a successor-government. ‘Due diligence’ became a possibly casualty to political expediency, all round.
The result is that the same agreement has come to be played out politically for a second time in as many years. Earlier, when the agreement was ready for signing, it brought together the divided opposition parties on the same firing-line against the government. They cited various violations of laws and procedures. The after-thought of a parliamentary legislation, directing prior legislative clearance for ‘transfer of national assets’ to private parties, led to the government of the day crying foul, and all 13 nominated members of the cabinet quitting in haste.
Today, when all those parties are in government together, the revival of the issue has threatened the government. One of the government partners, namely, the Dhivehi Rayaththunge Party (DRP) has argued that the government would not have the kind of monies required to pay back the contractor if the deal was rescinded. A few others have called for the ‘nationalisation’ of the airport while some have described it more clearly and carefully as ‘taking it back’. In the process, attributing motives to the DRP leadership and the questioning of their ‘nationalism’ have begun threatening the stability of the government.
That the inherent differences within the ruling coalition cannot but come out in the open once the common adversary in President Nasheed and his MDP had been neutralised was known even to a casual observer of coalition politics the world over. It is written into any coalition arrangement. In Maldives, it reflects a perception of lessening political challenge posed by the MDP, among the partners in the ruling alliance. Such perceptions and decisions based on such perceptions can come to trouble the alliance, just as a perception of a ‘social alliance’ that the MDP thought it had at its disposal when in power failed the party when and where it mattered.
Not different from tourism FDI
This is not the first time that Maldives is faced with policy issues pertaining to overseas’ investments. FDI has been at the centre of the resorts-driven tourism industry, which in turn continues to be the backbone of Maldivian economy over the past decades. The country is yet to find a substitute or a supplementary to the same. So dependent has the economy been on tourism that every global meltdown and every tsunami-like natural catastrophe has upset the Maldivian apple-cart, thankfully to revive in good time and through innovative approaches.
Yet, when the tourism economy evolved, the policy involved long-term lease of individual islands/islets for the foreign investor to build his resort, market it mostly to foreigners, and also repatriate his profits in dollars, and without going through the Maldivian banking system. There were no tabs or restrictions other than the payment of ‘bed tax’ on a pro rata basis to the Maldivian government. The policy has paid very rich dividends to the economy of Maldives, changed the face of the country and has inspired individual Maldivians to aspire for more.
The evolution and implementation of the nation’s tourism policy owed mainly to the presence of a strong and single leadership at the helm through those formative years of what should be acclaimed as the modern, Maldivian economic success story. President Maumoon Abdul Gayoom’s three-decade long rule also helped reach out modern education and healthcare across the atolls, but through the state system. The Gayoom regime adopted a combination of divergent economic policies that benefited the nation on the fiscal front and the people on the socio-economic front.
Through the Gayoom initiative, an imaginative mix of overboard globalisation in the South Asian region of the times at the level of revenue-generation and the socialistic pattern of distribution of the nation’s income made wonders. Neighbouring Sri Lanka was the closest (in terms of geography) and immediate (chronologically) neighbour to experiment with market capitalism. Yet, close to 35 years down the line, the results of the combination are mixed at best in Sri Lanka. In Maldives, however, it has been an unqualified success.
Under the Maldivian scheme, tourism industry, structured as a policy and product of the norms of market economy generated funds for the government to take the benefits of education and healthcare to the largest yet dispersed sections of a dis-spirited society. The benefits in terms of national growth and individual’s development have all occurred in front of the present-day generation, and they have relished and cherished them, too. It is the model that could be said to have been applied to the airport modernisation lease contract, too, though on details of procedure and benefits, there could be differences, both of concepts and of consequent opinions.
In a limited way at least, the airport development and long-lease of the existing reconstruction and accompanying reimbursement of the investment should thus be seen as an extension of the previous policy that the Nasheed government had inherited and explored for further exploitation for the medium and long-term benefits of the people at large. On a related issue, of course, the Nasheed government may have departed from the set norms and practices that did rise the hackles then as now. Included in the list was the decision to grant resort licenses in ‘inhabited islands’, interfering with local culture and also the Islamic tenets against sale and consumption of liquor.
‘Nationalism’ and ‘nationalism’
It is in this context a closer look needs to be given to the demands for the ‘nationalisation’ of the airport. For starters, INIA continues to be owned by the Maldivian State and Government, the GMR has been given only a long lease of the same. To demand ‘nationalisation’ would thus be a travesty of the truth, and challenges the nation’s inherent and inalienable right – which anyway has not been alienated. In a nation where the State owns all the land, such a construct could also hit at (though not at all in the legal sense) later claims for a return of the property to the State when due. If nothing else, it could create a mood of resignation, not just of reservation if only over decades, which in turn is at the heart of the current protests, instead.
GMR at no point in time is known to have demanded ownership of the airport, to begin with. It is thus clear that the State cannot nationalise what it already owns, and continues to own. Worse still, given the traditional meaning attaching to a terminology like ‘nationalisation’, street-demands for the same in the context of INIA could sent jitters down the spines of all those who have already invested hugely on the resort-islands, benefitting all stake-holders in the process.
Unless otherwise proscribed, what may apply to other lessees of islands should apply to whichever lessee of the airport islands, be – as long as it is for development against the payment of lease money and on prescribed conditions for a fixed period of time. The reverse should also be true the same way – what is sought to be applicable to the single largest investor in the nation’s history could be applied to lesser mortals without anyone being wiser of any unforeseeable situation when an agreement is signed or a situation is created, later.
It is not unlikely that there may still be a need for the Maldivian Government to revisit the lease-policies as a whole and applying the yardstick to the GMR deal too. Whether such changes could be specific to a particular project or agreement, or can have retrospective effect is a question that needs to be agitated in the context of the individuality or otherwise of individual agreements involved. However, responsibility needs to be restored to the national dialogue and clarity evolved through a consensus process, lest any foreign investor – existing one or a future one – would have doubts of his own on entry-exit terms and timelines.
Product of sweat and toil
All this does not preclude the present-day sentiments attaching to what has since been rechristened as INIA in the living generation of middle-aged Maldivians and above, particularly so those in Male. The airport was a product of their sweat and toil, and literally so. As students and youth in their growing-up years, they had contributed physical labour and whatever a poor nation could afford for the up-gradation of the airport in the mid-Seventies. Both sentimentally and politically, it had contributed in some ways to the Independence of the Maldivian protectorate from the British ‘Protector’. The airport is thus of a sentimental value to many grown-up in the country.
All this should not mean that the ‘sovereignty’ of the Maldivian state and the security of its territory should be reduced to be identified with the airport near-exclusively in parlour discussions, if not national discourses. If the argument is that the INIA is a tool for defending the sovereignty of the nation and its territorial integrity, there are other, smaller airports across the country, including those for the dozens of hovercraft dotting the lower skies, which are all vehicles of economic growth, not military-threat. So has been INIA, barring the one occasion, when the Indian Air Force (IAF) was called upon to defend the airport and the nation through it, from marauding mercenaries in 1988.
Yet in the new millennium for those who made the airport possible in the first place, and their younger generation to confuse ‘nationalism’ with ‘sovereignty’, raising arguments based on such perceptions would not help the nation, after a point. The spirit and phraseology are not inter-changeable, nor can they be inter-mingled in legal and commercial terms, either. Arguments thus based on non-existent linkages could make for good politics, but would not contribute to good policy. They have to be separated and addressed as individual aspects – but addressed they should be.
Despite a further expansion and growth of resort-tourism in the country, the limitations for the future are being systematically exposed. The Maldives does not have answers to the ever-increasing demands on the economy, whose expansionist pace is slowly coming to a grinding halt. With no scope for unlimited advent of manufacturing or even the services sector, as a money-spinner and/or forex-earner, the country would have to look at infrastructure as a source for attracting investments and creating the kind of jobs that the average Maldivian youth will be happy with, and paid for, in full measure.
Reviewing investment policy is one thing, but revisiting an individual contract is another. The two shall not meet – and the nation cannot afford it if the matter is allowed to drag on either. The alternative should be to learn from the mistakes, if any, and apply correctives where possible to the issues on hand – and also in revisiting the policy for the future. That alone would help.
Profitability, vulnerability
It is in this context investments from across the world have to be assessed for their overall profitability for the Maldivian people and economy, and the relative vulnerability that such arrangements could throw the nation into. In the current phase of the expansion of the Maldivian economy and growth, small-time investments in international/regional relevance would not suffice, as used to be the case for the funds requiring for putting up a resort or two. Either foreign governments or international agencies will have to put in the money, which will be in the form of repayable credit, even if at a low rate of interest and over the long term.
The alternative, which comes without any political or fiscal tag, over the medium and the long-term, is to encourage FDI, particularly in the infrastructure sector, where the foreign investors’ perceived propensity for political mischief over time would be minimal, as against their investments in the stock market, for instance. There are no repayment-tags attaching to such investments, but for the licensed fees, which however have to be negotiated with care and foresight.
Over time, the experiences of other nations have shown that investor-nations have often used their investments and repayments to muscle their political way in the host-nation, through the short, medium and long-terms. In their case, the repayment terms and schedules hang over the nations’ head like the Damocles’ Sword. Against this, overseas-investor has often been seen as a friend and advocate of the host-nation in his native land, in political, economic and security terms. The lessor-nation does not have to repay him with interest, with profligacy and bad-planning in the interim adding to the fiscal and economic vows of Governments as mightier nations have been over the past years.
In its place, a carefully-negotiated lease agreement provides for his recouping his investment-cost with interest over in a calibrated time-period. What may thus be required at the moment is re-negotiation of the INIA agreement on the one hand, and the need for the Maldivian government and legislature to fix certain loopholes that they might have found in their existing policies and procedures, possibly with the view to evolving a consensus approach, which had eluded the nation on this score in the past. Therein may lie the solution now to the Maldivian airport row, too – not elsewhere or otherwise!
The writer is a Senior Fellow at Observer Research Foundation.
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