India has protested strongly against the Maldives' decision to immediately cancel its contract with GMR to build an international airport, saying the Maldives government's move would send "a very negative signal" to foreign investors. It also urged the island nation to ensure the safety and security of Indian interests and Indian nationals in that country.
The Maldives cabinet on Tuesday annulled the agreement made with GMR Group to develop and operate the Ibrahim Nasir International Airport (INIA) at Hulhulé Island near the capital Malé.
GMR, a subsidiary of Bangalore-based GMR Infrastructure Ltd, has been given seven days to leave the Indian Ocean island chain.
This was the Maldives' biggest foreign investment project, worth $511 million, and the move raises questions over the future of foreign investment in the islands renowned for luxury resorts.
The contract awarding the airport to GMR Group for 25 years was signed on 28 June 2010 by the then president Mohamed Nasheed's government, who was deposed by current President Mohamed Waheed Hussan.
The cancellation of the deal signed in 2010 follows President Waheed's failure to renegotiate terms, according to reports.
The cancellation raises concerns over investor protection in the Maldives, which is seeking foreign financing of tourism projects, and follows a year of political turmoil, with the ousting of President Nasheed and months of unrest.
The Indian external affairs ministry said the GMR contract "represents the single largest FDI in the history of Maldives", and the decision to terminate the contract "without due consultation with the company or efforts at arbitration provided for under the agreement sends a very negative signal to foreign investors and the international community".
The Indian government "would continue to remain engaged with the government of Maldives on this issue, and would expect that the government of Maldives would fulfil all legal processes and requirements in accordance with the relevant contracts and agreement it has concluded with GMR in this regard", a ministry statement said.
India also called upon "the government of Maldives and all concerned parties to ensure that Indian interests in Maldives and the security of Indian nationals are fully protected".
The statement said that India "proposes to monitor the situation in Maldives closely and is prepared to take all necessary measures to ensure the safety and security of its interests and its nationals in the Maldives. The Government of India will continue to be seized of the matter."
It said that the consortium consisting of GMR and MAHB (Malaysian Airport Authority) had been awarded the contract through a global tender conducted by the International Finance Corporation (IFC), Washington, a member of the World Bank.
"As the advisor to the government of Maldives, the IFC has stated that it has complied with Maldivian laws and regulations and followed international best practices at each step of the bidding process to ensure the highest degree of competitiveness, transparency and credibility of the process."
Maldives attorney general Aishath Azima Shakoor earlier announced the cancellation of the contract and said the decision has been conveyed to the Maldives Airports Company Ltd (MACL).
The project was hanging in balance ever since the regime change in the Maldives earlier this year.
After the civil court in the Maldives ruled that GMR cannot charge $27 from passengers as Airport Development Charge (ADC) and insurance surcharge, the Indian infrastructure giant had taken the case to Singapore for arbitration. GMR was deducting $27 from each passenger since January.
The agreement signed between GMR and former president Mohamed Nasheed's government to develop INIA has been labelled as "illegal" by pro-government political parties, who allege it was signed despite objections from the island nation's parliament.
President Mohamed Waheed told an Indian newspaper that the agreement is a "bad contract" signed "conceivably under dubious conditions" by the previous government.
Meanwhile, GMR Male International Airport Ltd (GMIAL) said the "unilateral and completely irrational move" of the Maldives government "is void".
"This unlawful and premature notice on the pretext that the concession agreement (CA) is 'void', is completely devoid of any locus standi, and is, therefore, being challenged by the company before the competent forums. The company disputes that the CA is void," it said in a statement.
"We are taking all measures to ensure the safety of our employees and safeguard our assets. We are confident that the stand of the company will be vindicated in every way," a GMR statement added.
Former president Mohammed Nasheed said in a statement that cancelling the GMR contract would deter potential investors for decades, and accused President Waheed of leading the Maldives down a path to economic ruin.
Maldives attorney general Azima Shukoor said that 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.