India errs on the side of caution in Maldives

Indrani Bagchi
New delhi, November 28, 2012
A day after Maldives cancelled its biggest FDI by GMR, the Indian company is getting ready to challenge the decision by going to court. India, after reacting angrily to the Maldives’ decision on Tuesday, pulled its punches by refusing to add to its statement.
On Wednesday, too, Maldives’ politicians, particularly from the Islamist Adhalath Party were expected to take out a “victory rally.” Meanwhile, Maldives Attorney General Azima Shukoor was quoted as saying although the agreement had stated that GMR should be given a 30-day notice of termination, the government believed that it need not be followed since the contract was void.
“The government has given a seven-day notice to GMR to leave the airport,” said Shukoor, adding the government reached the decision after considering “technical, financial and economic” issues surrounding the agreement. GMR has been given a week to get out of Maldives.
Government sources said they did not want to fan the flames, because it appeared to be tied to local politics. The Islamist Adhaalath party which has taken a strong anti-India stand, has been tweeting Islamist messages all day, including calling for the removal of the Indian high commissioner, DN Mulay by November 30. In one of their tweets, they say, “India can't do anything. We have the upper hand, we have dealt it and it was a flush, GMR has been flushed out. Next the Indian nationals.” While GMR sources are confident that they have a very good legal case against the Maldives government, some analysts here say the move could be an expression of local politics. In fact, the Maldives’ government’s official letter to GMR, while saying that the agreement was terminated ab initio, also gives the company room to take legal recourse.
The Waheed government may be trying to undo all the decisions taken by his predecessor, Mohamed Nasheed, who was overthrown in February. Waheed is also expected to face a no-confidence motion on December 9, so India is ready to give Maldives some breathing room.
GMR sources said they had been assured by World Bank that it would impress upon Maldives that the process of awarding the contract to GMR was fully in line with Maldives laws and conducted transparently.
Earlier this year, Maldives objected to GMR charging an airport development charge of $25 to departing passengers, even though it was part of the contract. GMR, sources said, agreed to stop the charge and defray the costs from the revenue they pay to the government. The cabinet decision came after this agreement.
A culmination of a year of turmoil, maldives’ recurrent crises are now having a diplomatic impact. Sources said that apart from GMR, Taj and Tata Housing were also invested in Maldives.
The Maldives government statement of Tuesday stated, “The government’s decision was based on a paper presented by the Attorney General’s Office at today’s cabinet meeting. The paper was based on findings of a thorough research done for the past 9 months by a cabinet committee…. Following exhaustive discussions at today’s cabinet meeting regarding the above mentioned reports, the cabinet decided to terminate this agreement on grounds that there were many legal, technical and economic issues regarding the agreement, and that it was legally invalid, and impossible to further continue.”
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