The Maldives government on Tuesday decided to terminate a $500 million contract given to Indias GMR Group for developing its airport at its capital Male, drawing a sharp protest from New Delhi, saying it would send a very negative signal to foreign investors.
The GMR Group in turn, said the decision is being challenged by the company before the competent forums.
The project is the largest investment for the island nation accounting for a nearly a quarter of its annual GDP. But it has got stuck in controversy as it was awarded to the Indian infrastructure group during the term of previous President Mohammad Nasheed, who was replaced in a coup by current President Mohammad Waheed this year.
The decision to terminate the contract was taken by Waheeds cabinet and a notice has been issued to GMR Group, the Presidents press secretary Masood Imad said in a statement. The reason given for the termination of the contract is a proposed airport development fee to be levied by the company. The issue is, however, already pending as an arbitration issue in a Singapore tribunal.
In New Delhi, a ministry of external affairs spokesperson said the consortium consisting of GMR and MAHB (Malaysian Airport Authority) had been awarded the contract to manage the Male International Airport concession through a global tender conducted by the International Finance Corporation, the private sector arm of the World Bank.
He added that Maldives should fulfil all legal processes and requirements in accordance with the relevant contracts and agreement it has concluded with GMR.
A release from the GMR Group described the Maldives governments plan to take over possession and control of the Nassir International Airport as an unilateral and completely irrational move. Though India has a strong presence in Maldives which includes a $56 million annual support as technical and economic cooperation, the project had got locked in a political dispute. Some coalition partners of the Waheed regime had also held a rally against GMR on November 3 linking the award of the project to the issue of national sovereignty.
While GMR Group described the notice to terminate the concession agreement as unlawful & premature, analysts said any new plans for the airport, the largest in the region could benefit Chinese foray into the region. The airport contract was awarded to GMR Infrastructure after a ten-month global competitive bidding process in 2010. The company claims it has