India offered to build naval dockyard in Maldives, says Indian media

India’s Army Chief General Bikram Singh has offered to build a dockyard worth MVR 7.7 billion (US$ 500 million) in the Maldives in his ongoing visit, Indian media has reported.

According to the Deccan Herald, China had already offered to develop the Uthuru Thilafalhu lagoon in the archipelago’s north.

Reclamation work is already underway in the area. Once completed, it will serve as the Maldivian Coastguard’s primary operations base and will provide a much-needed berthing space to naval ships and ocean liners.

India’s Foreign Secretary Sujatha Singh, during a visit to the Maldives in February, visited the Uthuru Thilafalhu project site. Minivan News understands discussions are underway on Indian investment in the project, but it is not clear if a decision has yet been made.

In recent months, India has been steadily increasing defense cooperation with the Maldives including the gifting of two ‘Dhruv’ Advanced Lightweight Helicopters (ALH) and development of the military hospital Senahiya.

Ties with India came under strain during President Dr Mohamed Waheed’s administration in the aftermath of Indian infrastructure giant GMR’s abrupt eviction. The company had won a concession agreement to develop the main airport.

Waheed went on to strengthen military ties with China, sparking Indian concern over “a Chinese policy to throw a ‘string of pearls’ – or a circle of influence – around India.”

Speaking during an official trip to India earlier this year, new President Abdulla Yameen stated that while the Maldives has “close ties” with China, “nothing will precede ties with India, which are far more precious”.

“While we have had a slight rough patch with India, the time of good relations far outweigh the rough patches we had. I suppose it is easy for us to be on the right track again,” Yameen said, referring to the airport dispute.

Singh’s visit is the first by a serving Indian Defense Chief since General Deepak Kapoor’s visit in February 2010.

An Indian High Commission press release on Tuesday said Singh’s three day visit – set to conclude today – will “further enhance bilateral defense cooperation.”

“India’s commitment to Maldives defense has been growing with each passing year. Both countries have inter-linked mutual security interests which need to be protected for the safety and security of the South Asian region and the Indian Ocean,” the statement said.

During his visit, Singh met with President Yameen, Defense Minister Mohamed Nazim and the Maldivian Chief of Defense Forces Ahmed Shiyam.

Singh also discussed the possibility of supplying fast-attack craft, amphibious landing craft and small arms from New Delhi, reported the Deccan Herald.

Another potential project is to train 40-60 officers of the Maldivian National Defence Force (MNDF) in Indian training establishments, the article continued.

“All such topics were discussed. But we will reveal details at a later time,” said MNDF Deputy Spokesperson Captain Ali Ihusaan, when asked for a comment on reports by Indian news sources.

Chinese investments including a US$54 million for an IT infrastructure project sparked Indian concern in 2013, with Indian Ministry of Communications and IT saying Beijing’s state owned companies must be “kept at bay.”

According to Indian media, the ministry – in an internal government note – suggested “substantial investment in the Maldives on similar projects [as being planned by China] ensuring that the traffic between India and the Maldives is handled through the equipment installed and commissioned in the Maldives by India.”


Defence Minister signs military aid agreement with China

Defence Minister Colonel (Retired) Mohamed Nazim signed a military aid agreement with Chinese National Defence Minister General Liang Guanglie during his official five-day visit that concluded yesterday (December 15).

Following official talks between the defence ministers, Chinese state-run Xinhua news agency reported Nazim as assuring Guanglie that the Maldives was “willing to cement relations between the two countries and their militaries.”

General Liang reportedly said China would “continue to develop friendly, cooperative and mutually beneficial relations with the Maldives under the principle of building a good-neighbourly relationship and non-interference in internal affairs”.

“China has always positively developed its military relations with the Maldives and hopes to enhance communication and cooperation, promote the construction of both militaries, and safeguard regional peace and stability,” he was quoted as saying by Xinhua.

According to a press release by the Ministry of Defence and National Security, Defence Minister Nazim held talks with his Chinese counterpart on December 11, which focused on Chinese military assistance to develop the Maldivian military.

The agreement to develop military ties and provide free Chinese aid to the Maldives National Defence Force (MNDF) was signed at the meeting, the press release stated.

Defence Minister Nazim also met the Vice Chairman of the Chinese Central Military Commission, Xu Qiliang, and discussed strengthening Sino-Maldives military ties.

Defence Minister Nazim in ChinaDuring his visit, Nazim visited the Chinese National Defence University to discuss securing education opportunities and toured the People’s Liberation Army (PLA) Naval Submarine Academy as well as the PLA Navy’s North Fleet.

The Defence Minister met MNDF coastguard personnel training at the submarine academy, the press release noted.

Nazim’s official visit to China followed the government’s abrupt termination of a 25-year concession agreement with Indian infrastructure giant GMR to modernise and manage the Ibrahim Nasir International Airport (INIA).

The move fuelled speculation in the Indian media of a Chinese role in the government’s decision to void the agreement and evict the GMR-led consortium.

President Dr Mohamed Waheed Hassan Manik has however dismissed suggestions that China urged the Maldives to push out the Indian company.

“The only significant cooperation we have with China at this time is through development assistance… like building the museum, housing projects. I don’t think India should worry about it at all,” Waheed was quoted as saying by The Hindu.

Meanwhile, India’s The Economic Times reported yesterday that China’s strengthening of ties with the Maldives may be part of its larger plans of dominating strategically-important sea lanes in the Indian Ocean, “according to an assessment of the Indian intelligence agencies.”

“Beijing is reportedly wooing Male’ to pre-empt a US move to set up a new military base in the Maldives’ southernmost island of Gan,” The Economic Times reported.

The paper also took note of recent statements by former President Maumoon Abdul Gayoom suggesting that it was “natural for a country with such huge resources to come and help us.”

“China has been with us for 40 years,” Gayoom told Indian media last week.

In November 2011, China became the first non-SAARC nation to open an embassy in the Maldives.

AFP at the time reported Indian officials as expressing concern that it was “part of a Chinese policy to throw a ‘string of pearls’ – or a circle of influence – around India.”


Government takes over airport, evicts GMR

Indian infrastructure giant GMR has handed Ibrahim Nasir International Airport (INIA) over to the state-owned Maldives Airports Company Limited (MACL), after the Maldivian government voided the concession agreement and gave it seven days to leave the country.

The sudden eviction of the developer – which won a 25 year concession under the former government to manage and upgrade the airport – scraps the project, which at US$511 million was the single largest foreign investment in the Maldives.

GMR had clung to the terms of its concession agreement while the government fanned growing nationalistic and anti-India sentiment. On November 27, President Mohamed Waheed’s cabinet declared the agreement ‘void ab initio’ – invalid from the outset – and ordered the developer to leave.

With arbitration proceedings already underway in Singapore over the contested airport development charge (ADC), GMR received a stay order on its eviction and appeared confident of its legal position even as the government declared that it would disregard the ruling and proceed with the eviction as planned.

On December 6, a day prior to its eviction, the government successfully appealed the injunction in the Supreme Court of Singapore. Chief Justice Sundaresh Menon declared that “the Maldives government has the power to do what it wants, including expropriating the airport.”

That verdict, effectively legalising the sovereign eviction of foreign investors regardless of contractual termination clauses or pending arbitration proceedings, was “completely unexpected”, according to one GMR insider – “the lawyers are still in shock”.

A last ditch request for a review of the decision was rejected, as was a second attempt at an injunction filed by Axis Bank, GMR’s lender to the value of US$350 million.

Following a meeting with staff yesterday, GMR issued the following statement:

“In deference to the orders of the Court of Appeals, Singapore; GMR Male International Airport Ltd (GMIAL) will facilitate a smooth takeover of the Ibrahim Nasir International Airport (INIA) by the Maldives Airport Company Ltd (MACL), effective midnight tonight.

GMIAL has been assured that as a result of this takeover all its employees, suppliers and other interested parties will not be put to any inconvenience. GMIAL remains committed to finding a suitable solution to this situation. We are taking requisite steps to work out the compensation receivable from the Government of Maldives, keeping in mind the judgement of the aforementioned court and the concession agreement dated 28th June 2010.

All actions as above are without prejudice to our legal rights and statements made before various courts/tribunals where matters are currently being pursued or likely to be taken up.”

An invitation-only press conference to mark the handover was held by Defence and Acting Transport Minister Mohamed Nazim in the airport VIP lounge at midnight. Minivan News understands that GMR did not participate for legal reasons.

During the ceremony, Finance Minister Abdulla Jihad presented the official handover documents to MACL Managing Director Mohamed Ibrahim, and said that the Maldives would pay whatever compensation was required “however difficult”.

Economic Minister Ahmed Mohamed claimed the eviction would enhance investor confidence:

“Investor confidence will only increase when they know that Maldives will do everything in accordance with the law,” Haveeru reported the minister as saying.

Attorney General Azima Shukoor expressed hope that the compensation would be lower than anticipated.

Estimates as to the amount of compensation for which the government is liable have ranged from the US$220-240 million GMR estimated it has already invested, up to US$700 million – a sizeable chunk of the country’s GDP.

Apart from the size of the compensation is the Maldives’ ability to ultimately pay, given the crippled state of its domestic economy.

Finance Minister Jihad in late October warned that the Maldives would be unable to pay government salaries without a promised US$25 million loan from India.

A month later, amid rising anti-India sentiment over the GMR issue and a diplomatic incident triggered by the government’s spokesperson, Jihad described India’s calling in of US$100 million in existing loans as “not a major concern”. The debts, he said, would be paid from the state’s reserves, which local media at the time reported could fall to as low as US$140 million (MVR2.2 billion) once the payments to India were settled.

An International Monetary Fund (IMF) delegation in November warned that the Maldives’ financial reserves “have been declining slowly, [and] now account for just one and a half months of imports, and could be more substantially pressured if major borrowings maturing in the next few months are not rolled over.”

Further pressure on reserves came from a ballooning public debt ratio, “which now stands at over 80 percent of GDP, and has helped to boost national imports, thus worsening dollar shortages in the economy and putting pressure on reserves,” the IMF warned.

Presenting the 2013 budget to parliament in late November, Jihad warned of “bitter consequences” should the spending trend continue.

His target budget deficit of 6.1 percent in 2013 takes into account a raft proposed revenue raising and cost cutting measures which would impact the tourism industry – such a proposed tourism GST increase to 15 percent – and require parliamentary approval.

Further modernisation of the airport – or even completion of the existing upgrade – is likely to require extensive outside assistance or further loans. The rusting foundations of GMR’s new terminal sits on 60 hectares of newly reclaimed land on the airport island, after the government ordered a halt to the development in August. Large sections of the old terminal remain boarded up for construction work, which the government’s ability to proceed with is in doubt.

Further modernisation of the airport is likely to depend on outside assistance. President’s Office Spokesperson Masood Imad told Indian newspaper The Hindu yesterday that after reclaiming the airport, the government would again float a tender for its modernisation “and get more parties in to take the work forward.”

“The tender will be floated by the Maldives government in a transparent manner and after consulting investors. The mistakes made during the float of the tender which has been cancelled will not be repeated,” Imad told the paper.

Environment Minister Dr Mariyam Shakeela has meanwhile separately appealed to China for financial and technical support, telling journalists from the Chinese government’s authorised web portal that the Maldives “needs funds for infrastructure building.”

“We are obviously in need of funds and technical assistance as we do not have the financial means, the technical know-how or the capacity to address these huge climate change issues,” said Mariyam, in an appeal for assistance with climate adaptation.

The government has dismissed speculation Chinese involvement in the development, however Minivan News has learned that senior Chinese military officials landed at the airport in the tense week leading up to the handover, even as India warned of “adverse consequences” should the government proceed with forceful eviction.

India’s reaction after the Singapore Supreme court ruling was muted. Ministry of External Affairs Spokesperson Syed Akbaruddin said the ministry was “studying” the judgement and that their lawyers “need to understand it”.

“There are two issues in the case – one the sovereign right of a nation and other the legality of the agreement, which was linked to compensation to GMR and its associates in Malaysia, he said the latter part has not been “affected or responded” in today’s judgement.

“These issues are not affected with the judgement or not responded to. Fulfilment of all legal process and requirement is what we want to see in this case and we hope that all relevant contracts and agreements would be adhered to and all legal process are carried through,” he said.


India grants further US$25million to Maldives

India has granted a further US$25million to the Maldives as part of the $US100million standby credit facility agreed during last November’s official visit from Prime Minister Manmoham Singh.

Indian High Commissioner D M Mulay signed the agreement with Minister of Finance and Treasury Abdulla Jihad at the Indian High Commission, local media reported.

Mulay, who was not responding to calls at the time of press, said that the deal represented the third instalment of the credit facility, with the previous two instalments having amounted to US$50million.

The previous tranche of US$30 million was released following President Waheed’s first official visit to India in May.

Mulay is also reported to have said that the rest of the promised credit will soon be handed to the Maldivian government:  “The paperwork on the agreement is being processed now, the amount will soon be awarded to the Maldives,” Haveeru quoted Mulay.

A standby line of credit is normally forwarded to countries which have reached macroeconomic sustainability but experience short term financing issues.

The release of this credit comes just days after Waheed completed his first official state visit to China.

During this trip, Waheed finalised agreements for a US$500 million Chinese loan with the assurance of more aid available when needed.

The loans, equal to nearly one quarter of the Maldives’ GDP, are said to include $150 million (MVR2.3billion) for housing and infrastructure, with another $350million (MVR5.4billion) from the Export-Import Bank of China, reported Reuters.

Jihad told Minivan News last week that, despite securing this money from China, the government would still be considering austerity measures which are being considered in order to reduce the state’s budget deficit.

With income lower and expenditure higher than predicted, this year’s budget deficit had been forecast to reach MVR9.1billion (US$590million), equivalent to around 28 percent of nominal GDP.

India has traditionally enjoyed close ties with the Maldives, although there have been increasingly strong links between the Maldives and China, largely due to the number of Chinese tourists visiting the Indian Ocean nation.

A Chinese embassy opened in Male’ in time for the opening of the SAARC summit last November, reciprocating the opening of a Maldivian mission in Beijing in 2007.

Indian officials were reported at the time as having concern that the move was part of China’s “string of pearls” policy which supposedly involves Chinese attempts at naval expansion into the Indian Ocean.

After the awarding of the Chinese loan, however, former Foreign Minister and current UN Special Rapporteur to Iran, Dr Ahmed Shaheed was keen to play down any suggestions that the Maldives was about to significantly change its foreign policy priorities.

“This is very much in keeping with past policy. The lines so far drawn have demonstrated that the Maldives remains primarily SAARC focused, followed by trading partners in the EU and Singapore. China has moved into this second category,” he added.

“Nothing will change the fact that we are only 200 miles from Trivandrum,” said Shaheed.

When asked upon his recent return from Sri Lanka what the Maldives’ policy was regarding Sino-Indian competition in the region, President Waheed is said to have responded that the policy of a small nation like the Maldives ought to be to avoid too great an involvement in geopolitics.


China’s expanding footprint in Maldives alarming: Times of India

Alarm bells are ringing afresh in the Indian security establishment over renewed efforts by China to expand its footprint in Maldives, writes Rajat Pandit for the Times of India.

“With China poised to establish a full-fledged embassy at Maldives, strategically located southwest of India astride major sea lanes in IOR, officials say Beijing has stepped up its ‘lobbying’ to bag a couple or more crucial development projects in the 1,190-island archipelago.

China, in particular, seems interested in developing Ihavandhoo and Maarandhoo Islands, with transhipment ports among other things, as well as grabbing a piece of action in the development of the country’s second international airport at Hanimaadhoo.

China’s efforts to make further inroads into Maldives have gained momentum after the visit of Wu Bangguo, the chairman of the standing committee of the Chinese National People’s Congress, to Male’ in May.

China has for long being building maritime and other linkages with eastern Africa, Seychelles, Mauritius, Maldives, Sri Lanka, Bangladesh, Myanmar and Cambodia, among others. Pakistan has been a more-than-willing partner in all this, with the Gwadar deep-sea port being built with Chinese help in Baluchistan.

China’s main aim is to ensure the security of its sea lanes facilitating its critically-needed energy imports. But there is no getting away from the fact that it also amounts to a virtual encircling of India, in what is called the “string-of-pearls” construct.

India, too, has been taking steps to counter China’s strategic moves by stepping up its defence engagement with countries like Maldives, Mauritius and Seychelles. After defence minister A K Antony’s visit to Male in August 2009, for instance, Indian warships and Dornier reconnaissance aircraft are helping Maldives in maritime patrol and surveillance. New Delhi is also assisting Male to set up a network of ground radars in all its 26 atolls and link them with the Indian military surveillance systems.”

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