“The first day of the New Year, I am spending not with my people, I am spending with India. I have come to India at a very difficult time to the Maldivian people. Maldivian economy at this point in time is impoverished. I have come to India at a time of great need for Maldivian people. Anticipation from my visit is high. India has assisted the Maldives in times of need. India continues to assist us in all areas of development. We will be coming to India time and time again. The readiness on the part of Indian Government has been awesome. While we have had slight differences in the past, my regime is committed to resolving all of these issues. The relationship India and the Maldives has cannot be matched by the relationship that we can have with any other country. My visit to India is an accomplished visit…”
It is not always that any visiting head of state would be as candid and frank about the state, status and inherent strengths of bilateral relations with the host country as the new Maldivian President Abdulla Yameen was during his four-day visit to India.
Coinciding with President Yameen’s visit, India restored the export of sand and aggregates required by the Maldivian construction industry. Taking note of the increased fiscal pressure on the country, New Delhi also restored the US$25 million stand-by credit facility to the Indian Ocean archipelago. Visa restrictions on Maldivians wanting to undertake medical treatment in India, particularly in south Indian cities have also been eased.
Given the steep increases in global oil prices, which has further brought pressure on successive Governments in the Maldives when it comes to imports, India is now offering to export petroleum products to that country. In bilateral talks with President Yameen, Indian Prime Minister Manmohan Singh advised Indian agencies to “offer best possible terms and arrangements” for meeting the petroleum product requirements of the Maldives.
India is the single largest aid-giver and economic partner of the Maldives, although bilateral economic relations came under some stress in the face of anti-India protests that marked the change-of-power. President Waheed was seen not as reprimanding the kind of aides who had targeted then Indian High Commissioner, Dyaneshwar Mulay, but rather promoting them. In this background, the restoration of existing facilities that had been withdrawn augurs well for bilateral economic cooperation.
The present restorative economic measures from the Indian side may not be enough to put the Maldives’ on the recovery process wholly, or fast-track future direction and growth. Yet it could be a propitious beginning, considering that as a small nation desirous of catching up with the rest of the world in terms development, the Maldives has been swinging between the extremes of possibilities and desirability.
This has been the case ever since ‘resort-tourism’ became the mainstay of the economy in the seventies, when the Maldives was still an idyllic island-nation with capital Malé still one large fishing village, with a people eager to move up the development ladder. Today, the Maldives may have reached the next stage, in which fresh foreign investments have to be accompanied by fresh ideas for using those investments for the nation’s good.
While the nation’s energies and time may have been expended in the pro-democracy struggle and democratisation process through the past years, the economic travails did not lessen during the period. Now that multi-party electoral democracy has stabilised as the nation’s politico-administrative process for the foreseeable future, it is time that greater energy and urgency are conferred on the economy.
It is here that President Yameen’s past experience as the nation’s Finance Minister under his half-brother, President Maumoon Abdul Gayoom, is expected to keep him in good stead. Having identified the economy as his government’s priority area, and having acknowledged that close to half the nation’s voters did not vote for him in the presidential polls, he is well-equipped and well-placed to work towards a ‘consensus approach’ to economic reforms, which his bete noire and predecessor, President Mohammed Nasheed, had initiated.
It’s compensation for GMR?
It is in this overall context and background that the future course of the controversial construction-cum-concession contract for the Indian infrastructure major GMR Group – initiated by the Nasheed Government and annulled by the Waheed administration – needs to be viewed. There are those in the Maldives who view that many of the Indian decisions on the bilateral economic front over the past year had more to do with the GMR contract annulment than real issues. They have refused to acknowledge that it may have had more to do with domestic politics in the Maldives and that India may have been badly hurt by the unprovoked and unjustified street-sentiments.
In a nation where ‘coalition politics’ came to rule the roost with the first multi-party democratic elections in 2008, there is precious little that the Yameen leadership could be expected to do by way of restoring the GMR contract. What the Government now seems to be looking at instead are the ways and means by which it could restore investor-confidence in the future, aimed mainly at Indian investors and the Indian Government. These groups had previously shown a tremendous interest in creating non-governmental Indian initiatives for improving and stabilising the Maldivian economy and moving the balance of trade a little closer to parity.
GMR was just one of the few big-ticket Indian investments that have run into hurdles in the Maldives. Yet it was also the single largest FDI in the Maldives, and may remain so for a long time to come. Other Indian investments whose futures were put on the limbo included the Tatas, whose Taj Group has been running two resorts in the Maldives. An ‘amicable solution’ thus sought by Prime Minister Singh to the GMR issue thus covers other Indian investors in the Maldives, existing and future. Needless to say, other investors from other countries will also be looking at the ‘GMR issue’ for clues on what all may lie ahead of them for investing in the Maldives.
In talks with the Indian delegation led by Prime Minister Singh, and later at a luncheon with Indian business leaders in Delhi, President Yameen readily conceded that the ‘GMR issue’ was ‘politicised’. He was not known to have elaborated on whether he was referring to the annulment or the agreement; the Nasheed government was seen as playing a cat-and-mouse game with domestic stake-holders to have the GMR contract pushed through the governmental processes.
Given that President Yameen is still at the top of a pyramidal political coalition, and will need to maintian this alliance until after the parliamentary polls and even beyond, there can be little hope or expectation for his government to revive the GMR contract. It only needs to be recalled that the coalition had together protested the GMR contract at it conception, calling for its annulment when President Waheed was in power.
It is sad that domestic politics in the Maldives, aimed at whipping up ‘nationalist, religious’ sentiments, was allowed to make India a political, if not an electoral issue, in the country. In a televised message on the Maldivian National Day, coinciding with his India visit, President Yameen said that the “nation’s independence and sovereignty must not be compromised when facing major challenges”. He called upon all Maldivian citizens to consider protecting and upholding the Islamic faith and Maldivian nationhood as their foremost duty.
In his public statement after the bilateral talks in New Delhi, Indian Prime Minister Singh said that he had asked President Yameen to settle the airport issue ‘amicably’. Both sides acknowledged the existence of an issue, and did not shy away from the need for the Maldives to address the investor-concerns regarding possible long-term investments after future changes of government. President Yameen also told the Indian investors that his government was all for an out-of-court settlement with GMR, thus partially trying assuring that even if a contract went bad, investors’ interests would be protected to the limited/highest extent possible.
Stand-alone issue and debt-spiral
Ahead of the presidential visit, GMR Group chairman G M Rao had told the Indian media that they would be willing to operate the Malé airport, if invited by the Maldivian Government. President Yameen’s declaration since may have put an end to revived hopes on that score. Back home in Malé from the India visit, President Yameen did not lose much time in telling newsmen he was looking only at compensation for the GMR Group for monies expended on the airport project.
President Yameen also reiterated the Government’s resolve to continue operating the Malé airport through the public sector corporation, as it used to be before and after the ‘GMR saga’. In a way, it may have been aimed at silencing critics who suggested the forced exit of the GMR was paving the way for the entry of other corporates from countries not exactly friendly towards India.
If the government were to demand upfront payment from other foreign investors and seek to rotate those moneys for compensation to GMR, it would only cause a ‘debt spiral’ from which it would become difficult for future governments to escape. A nation that has continued to live off budgetary support and aid from India even when per capita income and GDP had been the highest in South Asia would have to look inward more than it is willing to do. GMR thus would have to be handled as a ‘stand-alone issue’ – not only in terms of rebuilding investor-confidence but also on the compensation front.
In the past, the compensation issue itself had proved ticklish with the Waheed government, contesting GMR’s claims both on the investments and losses at the Singapore arbitration court. Thankfully, the fact that the GMR Group had paid US$78 million upfront to the Maldivian Government of the day and had also visibly invested massive sums on the airport cannot be contested. In New Delhi, President Yameen told Indian investors that his officials were already talking to GMR representatives.
Promoting and protecting investments
The joint statement issued at the end of the official leg of President Yameen’s visit clearly spelt out the desire of the two nations to sign an investment promotion and protection agreement at the earliest. This would also mean that unlike in the case of the GMR investments, where the Government of India had encouraged the Indian private sector to invest in the Maldives to help sustain and stabilise the economy, New Delhi may have to ensure that there is no cause or circumstance for loss of investor confidence in the southern neighbour.
Independent of an ‘amicable settlement’ to the GMR dispute, Indian investors – and their counterparts elsewhere – would be looking hard at the future of such investments, even if investor-protection laws were to be put in place. Once bitten, they would be twice shy. Both sides, for starters, would be looking at the fine-print in future, and reading the political barometer in the Maldives with greater scrutiny. They would be looking at laws that would have to address conceptual and contractual issues in clear terms, going beyond political polemic of a given time and holding true for all political conditions.
For instance, the question of ‘national asset’ not applicable while leasing out resort-islands (the only tangible asset of investment of the host government) to foreign investors came to be flagged post facto in the airport issue. Procedural issues like the authorised bank guarantor from the government side to protect the investor’s interests have also come under question. ‘Political consensus’, ‘legal protection’ and ‘due diligence’ would be the phrases that could be expected to be in vogue as the government settles GMR’s claims on the one hand, and also seeks to put in place a legal and/or constitutional framework aimed at separating ‘national issues’ from economic concerns.
Peace in the Indian Ocean
Independent of the Indian media’s focus on economic matters, more abiding bilateral interests in political, diplomatic and security cooperation came to be discussed with the visiting delegation. With Maldivian Defence Minister Mohamed Nazim having met with his Indian counterpart less than a fortnight earlier in Delhi, President Yameen’s meeting with A K Antony thus was confined to a passing line in official statements. That did not in any way reduce the importance of bilateral defence and security discussions that the visitor had with Indian leaders, more so in the shared Indian Ocean context.
It was thus that both sides in the bilateral talks at different levels kept referring to mutual cooperation in the sensitive areas of diplomacy and security. President Yameen in particular highlighted India’s rushing immediately help to the Maldives, both during ‘war-like situation’ and peace-time – the 3 November coup attempt of 1988, and the Indian Ocean tsunami of 2004. He highlighted how the two countries had backed each other in international forums and would continue to do so.
From the Indian side, concern was expressed for ensuring peace in the shared Indian Ocean Region (IOR), which as during the ‘Cold War’ years is increasingly becoming a ‘hot-bed’ of geo-strategic competition as never before. In meeting with his Maldivian counterpart, Indian President Pranab Mukherjee said that New Delhi “wishes to work with the Maldives and other like-minded nations to ensure peace in the Indian Ocean region. India and the Maldives are natural partners in this enterprise,” he said.
President Mukherjee said that as India, like the Maldives, has had to address the challenges of piracy, smuggling, extremism and religious fundamentalism, both countries would like to see uninterrupted peace and security prevail in the Indian Ocean region. “India remains fully cognizant of the needs of the Maldives in dealing with these issues and is committed to assist in achieving the defence and security objectives of the Government of the Maldives,” a Rashtrapati Bhavan statement said, quoting President Mukherjee.
Prime Minister Singh’s opening statement at the news conference with President Yameen made the point further. Stating that the two countries have agreed on a number of initiatives to strengthen bilateral defence and security cooperation, through training, equipment supply, capacity-building, joint patrolling, aerial and maritime surveillance, Prime Minister Singh said: “We are also deepening trilateral maritime security cooperation with Sri Lanka, and look forward to expanding it to other countries in the Indian Ocean. India is ready to provide further assistance and support to the Maldives in strengthening our collective ability to address our shared security challenges.”
The reference was obviously to India and the Maldives inviting and involving Sri Lanka in the 11th edition of bilateral, bi-annual Coast Guard exercise, ‘Dhosti’ in 2012, and following it up with a trilateral maritime security cooperation agreement, addressing piracy, extremism, smuggling and environmental concerns, etc, the following year.
Whether the current initiatives would take a deeper defence and security meaning on the military side, and/or a political initiative that goes back to the ‘Cold War’ era, with a call for declaring the ‘Indian Ocean as a zone of peace’, but with demonstrable collective fire-power to back the demand remains to be seen. That security cooperation among the three nations has been robust even through the recent periods of bilateral strains between the two nations and India needs to be noted with satisfaction.
Likewise, the Indian strategic community should learn to appreciate the need for acknowledging areas of fiscal and development cooperation between neighbourhood nations and extra-territorial powers like China and the US, Russia and the EU, and Australia and Japan (the last two being extended neighbours, all the same). The commitment of the two nations not to allow their territory to be used in ways inimical to other’s security concerns would go a long way in reassuring India in particular, but the Maldives too, on issues religious and political extremism creeping in through the sides.
State visit and more
President Yameen was in India only weeks ahead of the commencement of the presidential polls in September last year, which proved to be as controversial as it later became conclusive. That was candidate Yameen coming to acquaint himself with the Indian leadership and to update one another mutually on understanding bilateral expectations and personal positions. This time, he came on a ‘State visit’ after India consciously decided that it should be one.
This meant that President Pranab Mukherjee as the Head of the Indian State received President Yameen on the forecourt of the Rashtrapati Bhavan, along with Prime Minister Singh, to the accompaniment of a tri-Services ceremonial guard-of-honour, not to be confused with such other ‘official visits’. As Prime Minister Singh later pointed out, it was appropriate that President Yameen was the first international visitor to India in the New Year.
India’s democracy experience over the past decades, including in areas of executive powers, legislative rights, and judicial activism – both in constitutional matters and others – can go a long way in the Maldives’ understanding of democracy and the role of democratic institutions in the South Asian or Third World context. As the Maldives aims at further economic reforms and investor laws, covering national interests and investment-protection, India’s experience with legislation-making could also be of help. The modern Maldives, always moderate, can also learn from India’s long experience in striking the right balance between religious codes and civil laws.
To this end already, the two nations signed an agreement during Prime Minister Singh’s bilateral visit in November 2011 (when the Addu City SAARC Summit was in greater focus) for helping with banking laws in the country. Agreements signed during the current visit of President Yameen also provide for increased cooperation in the all-important fields of education and healthcare, which are closer to the hearts of every Maldivian than is understood.
This could – but should – involve the deployment of experienced and well-equipped Indian doctors and paramedics in addition to teachers all across the Maldives, and equip Maldivian hospitals adequately. Though Indian medical and teaching professionals are already there, the Indian Government’s involvement in these peripheral areas would also go a long way toward improving people-to-people contact in a more meaningful way than already. And in a grassroots-level, electoral democracy that would also matter after a time – and at times, that alone would matter, too.
There is a long way to go in bilateral cooperation between India and the Maldives, but a lot was covered during President Yameen’s visit. Both in India and back home, President Yameen underscored the point that bilateral relations had peaked during the tenure of his half-brother and party boss, President Gayoom, indicating the scope and commitment to revive and continue on the same path, all over again. Democratisation in the Maldives, and the nation’s democratic experience and dynamism during the first five years may have identified even more areas of practical and pragmatic areas of cooperation.
The writer is a Senior Fellow at the Observer Research Foundation
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