On Tuesday, the Maldivian government cancelled a contract for the development of Ibrahim Nasir International Airport in Male. The $511 million contract was awarded to the Indian infrastructure company GMR Infrastructure. The event should force India’s foreign policymaking establishment to wake up.
The project got into trouble early. For one, GMR decided to levy a $25 airport development fee from passengers in December 2011. This was to be charged from January. As the Indian experience suggests, levying such a fee is often contentious. In institutionally well-established countries, such matters are handled by independent regulators. In India, for example, the Airports Economic Regulatory Authority has adjudicated on the matter. Since Maldives did not have this mechanism, arbitration proceedings were started in Singapore in August.
Were this process to be taken to its logical conclusion either way—GMR getting the right to levy the fee or the Maldivian government getting its way—the matter would have been a purely commercial one.
What imparts it a deep political colour to the cancellation is the internal politics of Maldives. The contract was awarded to GMR in 2010 during the presidency of Mohamed Nasheed, the country’s first democratic head of state. Nasheed resigned earlier this year in what almost amounted to a coup. The present government—headed by Mohammed Waheed Hassan—is virtually undoing all the steps Nasheed took. GMR has been a victim in this process.
India’s ministry of external affairs issued a strongly worded statement after the cancellation of the contract on Tuesday. In sum and substance, the ministry’s assertion is correct. Very often in the political evolution in countries with weak institutional orders—and Maldives is certainly one such country—sentimental slogans such as national sovereignty are pressed into service to camouflage what are essentially score-settling steps. This has happened in India’s immediate neighbourhood too. In times past, economic policymaking in India, too, has been hostage to such sentimentalism. This is unfortunate, but in the end, it is a country’s own matter.
What should concern India is something else—its inability to steer events, or prevent the emergence of inimical forces in its backyard. What has happened in Maldives is the ringing of a warning bell that the mandarins and ministers alike in South Block ought to heed. In recent years, Indian foreign policymaking has become hostage to woolly-headed thinking about peace, multi-lateralism and cooperation. The results have been disastrous. Virtually every country in India’s neighbourhood—ranging from habitual offenders like Pakistan to now even Maldives—are cocking a snook at it. New Delhi has been served just deserts.
Has India’s laxity cost GMR Infrastructure an important contract?