Maldives takes over airport from GMR

Male: At midnight, the Maldivian government took over the Ibrahim Nassir International Airport (INIA) from Indian conglomerate GMR Infrastructure, as per the directions of Singapore court. Sources told NDTV that no official from the Indian firm was present at the venue.

"Maldives Airport Company Limited has taken over the operations of the Ibrahim Nassir International Airport from GMR. The transfer process was very smooth and seamless," President Mohamed Waheed's Press Secretary Masood Imad said.

In a press release, on Friday, the Indian infrastructure giant had said, "we have been assured that as a result of this takeover, all our 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 June 28, 2010," the release added.

Setback for whom?

The development comes after the Singapore Court of Appeals on Thursday ruled that the Maldives had the right to annul the $511 million contract. The Chief Justice of Singapore's highest court said: "The Maldives has the power to do what it wishes to do in these circumstances, including the power to expropriate the airport."

However, with the detailed written judgement yet to be studied completely, GMR may have a silver lining. The Chief Justice, in his written order, also said: "The wrongful taking of the airport would amount to an act of expropriation for which GMR would be entitled to compensation in accordance with the agreement." The amount of compensation, depending on who one talks to, ranges from $400 million to $700 million. The Maldives has also filed a petition in the Singapore High Court asking it to determine the compensation.

India reacts

The Maldives government insists a transition committee will meet again this morning to continue the process of overseeing the handover. GMR insists it is still studying the order. Two other crucial reactions have come from the Ministry of External Affairs in Delhi and former President Mohd Nasheed, under whose regime the contract was signed. New Delhi said all legal processes must be fulfilled for the compensation. The ministry has also sent a strong message, saying no coercive action should be taken till legal proceedings are complete and warning Male that would have an adverse consequence on bilateral relations.

India: backseat driver or caught between two stools?

India has a crucial strategic, military and economic interest in The Maldives. The 1,190-island archipelago sits on crucial sea lanes in the Indian Ocean, which all global and regional powers are eyeing. India has a naval and coast guard surveillance and maritime presence in The Maldives. But it is closely watching China trying to extend its footprint. There are even unofficial reports of Beijing being behind the airport fiasco. Some mandarins argue Indian aid and assistance being withheld should be used as a diplomatic tool for leverage. But, then, China could have already neutralised that with a $500 million package agreed on during the current Maldivian President's visit.

Ex-president vs current president

Former President Mohd Nasheed has been raising both the Red bugbear and the threat of radicalisation hitting India where it hurts. But, India's security and intelligence systems are acutely aware of the possibility of a 26/11 type attack from one of thousands of uninhabited islands. To add to those fears are several reports of Maldivian youth being trained in terrorist camps in Pakistan.

In his latest salvo over the GMR crisis, the former president in a statement on Thursday likened his successor to Zimbabwe's Robert Mugabe regime. He said: "The Maldives is rapidly developing a reputation among foreign investors akin to Zimbabwe, where government might is right and contract law counts for nothing." He warned President Waheed's government "to pull back from the brink and cease its counter-productive behaviour".

Poll issue

Elections are due next year, and analysts feel that is one reason why positions are so rigid and there doesn't seem any possibility of a middle ground. Like most things political in The Maldives, this too boils down to a President Waheed versus ex-President Nasheed face-off. The confrontation boiled over in what the current President calls a constitutional change in regime and what his predecessor describes as a coup at virtual gunpoint early this year.

Root of the airport dispute

The root of the problem goes back to when the largest foreign investment contract was signed under ex-President Nasheed's regime in 2010. GMR and Malaysia Holdings won the $511 million contract to modernise and run the airport for 25 years.

A local court then struck down an Airport Development Cost (ADC) of $25 per departing passenger, saying taxes could not be imposed unless cleared by Parliament. GMR and Malaysia also offered a compromise solution of $27 per departing foreigner, excluding all Maldivian nationals. But, that has not been accepted. To make up for the shortfall under the agreed contract, then President Nasheed allowed GMR to receive those fees from revenues owed to the government. Soon, hardline parties, then in the opposition and now in the ruling coalition, were out on the streets. The regime changed -- and the crescendo has culminated in the subsequent political and legal developments that have left GMR on the brink of exiting the $511 million contract.