Resisting the seductive pull of jingoism, India has adopted a prudent approach to the Maldives government decision rescinding GMR’s contract for operating and maintaining Male airport. In an era when diplomacy and business appear joined at the hip, some analysts have attempted to whip up nationalistic sentiments by describing the Maldivian action against the Indian company as a slap on the Indian government’s face. Nothing can be further from the truth and it is just as well that New Delhi appears not to have been misled by this logic. What is at stake is a commercial contract and as External Affairs Minister Salman Khurshid noted, “If they [the Maldives] have to take a decision in the interest of their society and country and if that decision is taken properly as per laws there, what objections can anyone have?” Yes, GMR had signed a legally valid and binding contract that has now been upended because the new administration considers it to be a bad deal. But if the expropriation of the airport is being done legally and Maldives is willing to compensate GMR for its investment and loss of business, what scope is there for the Indian government to intervene? India has to keep in mind its larger interests in the region, which are more important than the commercial contract of a single company.

That said, it is rather unfortunate that the Maldives government chose to abrogate a contract which was allotted to GMR through a transparent process designed and supervised by the World Bank-affiliated International Finance Corporation. GMR appears to have become a pawn, a symbol of the apparent excesses of the earlier government headed by Mohammed Nasheed, who was overthrown by Mohammed Waheed in February. Issues such as the Airport Development Charges sought to be levied by GMR based on the contract it signed with the Maldives government could have been negotiated and resolved across the table without taking recourse to the drastic action of annulment of the contract. Though GMR stands to suffer in terms of loss of business and profits, it is the Maldives that will be paying a bigger price over the long term. Not only will it now have to pay compensation running into a few hundred millions of dollars — the precise sum will be determined by arbitration — it will also have to find another promoter to develop and run the airport. While the compensation liability could be ruinous to the small economy of the island nation with an estimated GDP of $2.1 billion, it may be next to impossible to find a private investor willing to work with Maldives in any major project given the way it abrogated the GMR deal. All in all, the entire episode has turned out to be a lose-lose proposition for all those involved.

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