Malaysia to mediate Talks between GMR and Maldives Govt

Malaysia Goverment has agreed to mediate the talks as Maldives has scraped the Airport Contract with Bangalore based GMR Group and Malaysia Airports Holdings Berhad (MAHB).

Malaysian Foreign Minister Anifah Aman met his Maldives counterpart Abdul Samad Abdulla on friday and said later the sit-down was “fruitful”, according to Haveeru online daily.

Following the Maldives government’s decision Tuesday to scrap the contract for the Ibrahim Nasir International Airport (INIA), the Malaysian foreign minister along with MAHB managing director Basir Ahmed arrived in the Maldives Friday afternoon.

The Malaysian foreign minister expressed confidence that a solution can be sought out through discussions with the Maldives government.

“As we are two friendly nations, there is no reason why this matter cannot be resolved,” Anifah told reporters prior to departing from Maldives Friday evening.

In the consortium, GMR holds 77 percent stake and Malaysian Airports the remaining 23 percent.

Haveeru said it has been unable to obtain a comment from the Maldives government on the Malaysian minister’s visit.

MAHB currently manages three airports abroad – the Delhi International Airport and Hyderabad International Airport in India and the Sabiha Gokcen International Airport in Turkey. At home, it operates 39 airports, including the Kuala Lumpur International Airport.

Meanwhile, Malaysian media reported that despite the abrupt termination of the agreement, MAHB is not too perturbed about the development.

According to the Malay Mail, its chief financial officer Faizal Mansor said: “We had only invested RM20 million in the operations and profited about RM40 million from the project.”

He said MAHB is still at good terms with the new Maldivian government and noted the Maldives Airport Company Ltd will take over possession and control of the airport and its facilities in a week’s time – together with the Maldivian ministry of finance and treasury.

While MAHB hasn’t been informed on the cause for the termination, Faizal said it is likely due to political problems between India and Maldives.

“We were never the problem. Maybe the new Maldivian government did not want Bangalore-based GMR Group to be in the picture. If so, we don’t want to be caught in the middle,” Malay Mail quoted him as saying.

The Maldivian cabinet on Tuesday decided to terminate GMR’s contract for developing the airport and issued it a notice to hand over the airport within seven days to state-owned Maldives Airports Company Ltd.

It had also asked GMR to vacate and remove all property from the airport within 30 days.

Termination of GMR’s contract had evoked sharp reactions from India which said that it sends a “very negative signal” to foreign investors.

“The decision to terminate the contract with GMR 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,” a spokesperson of India’s ministry of external affairs had said.

Maldives government has defended its move by insisting that the decision was made purely on legal grounds as the contract was invalid from the beginning.

The agreement awarding the airport to GMR group for 25 years was signed on June 28, 2010 by then president Mohamed Nasheed’s government.

ASSOCHAM, an Indian Body for promotion of trade and commerce has criticized the step of Maldives Government and termed it against the spirit of international concession agreement that was signed after the GMR Group won the bid to operate and develop the Male airport.

In a communication to the Maldives envoy to India, ASSOCHAM secretary general D.S. Rawat urged the Maldives government to provide an opportunity to GMR Group to discuss and find an amicable solution to the dispute.

“This (to discuss and find an amicable solution) will certainly further strengthen the spirit of economic relations amongst the South Asian Association for Regional Cooperation (SAARC) nations,” Assocham said in a statement.

The industry lobby has also urged the Indian government to take immediate steps to protect the interests of GMR, its employees people working in Male and Indian investments in the project.

The GMR Group has termed the cancellation of the contract as unlawful and is planning to take legal action against the Maldives government for scrapping its investment of more than $500 million in the project.

Several Indian banks like Axis Bank, Indian Overseas Bank and Indian Bank have contributed about $368 million to the project. This is also the single largest Indian foreign direct investment in the Maldives.

The project was awarded to the GMR Group through an international tender advertised by the Maldives government under the tenure of former president Mohamed Nasheed, who was ousted in February 2012.

The Indian government said that the move will “inevitably affect bilateral ties” and expressed apprehensions at the way the issue has become “a platform for anti-India elements” in the archipelago nation.

India has also asked the Maldives government to ensure the security of around 30,000 Indian nationals living there.

Official sources said that India wants legal process to be followed in resolving the commercial dispute and has made it clear to the Maldives government that the scrapping the contract is sending a negative message not only to Indian investors but also to international investors.

However, the Maldives government on Wednesday defended its decision to terminate the GMR contract, saying the deal was dogged by “legal, technical and economic issues”.

“GMR is taking legal steps against the Maldives government. The legal process should be played out,” said a source.

There are many interests at work, the source added, indicating that the external affairs ministry was closely looking at reports that suggest that a pro-China lobby in the Maldives was behind the cancellation of the contract.

“It has become an election issue and it has ceased to be a purely commercial matter,” said a source.

Elections are scheduled to be held in the Maldives late next year, but there are indications that these could be held early next year.