Maldives cancels GMR's $511 million airport project

MALE Wed Nov 28, 2012 11:37am IST

Indian policemen rest inside the constructed Terminal 3 at Indira Gandhi International Airport in New Delhi July 3, 2010. REUTERS/B Mathur/Files

Indian policemen rest inside the constructed Terminal 3 at Indira Gandhi International Airport in New Delhi July 3, 2010.

Credit: Reuters/B Mathur/Files

Related Topics

Stocks

   

MALE (Reuters) - Maldives has cancelled its biggest foreign investment project, a $511 million deal with Indian firm GMR Group to develop its international airport, raising questions over the future of foreign investment in the islands renowned for luxury resorts.

The cancellation of the deal signed in 2010 follows President Mohamed Waheed's failure to renegotiate terms, sources close to president's office have told Reuters.

GMR, a subsidiary of Bangalore-based GMR Infrastructure Ltd (GMRI.NS), has been given seven days to leave the Indian Ocean island chain.

"It is cancelled by the cabinet on the instructions of the president. It was not a valid agreement," Imad Masood, the president's spokesman told Reuters late on Tuesday.

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 a president and months of unrest.

In a statement GMR said the cabinet's decision was "unilateral and completely irrational," as legal arbitration over the deal was currently in the Singapore High Court.

"We are therefore 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."

The Maldives action exacerbated already strained relations with neighbouring India, which warned it would "take all necessary measures to ensure the safety and security of its interests and its nationals in the Maldives".

"The government of India would...expect that Maldives would fulfill all legal processes and requirements in accordance with the relevant contracts and agreement it has concluded with GMR in this regard," it said.

India said the move sends a "very negative signal to foreign investors and the international community".

GMR won the contract in 2010 to upgrade and operate the Maldives airport and build a new terminal after a global tender overseen by the World Bank.

The deal with the GMR was signed under former president Mohamed Nasheed's administration, following a competitive bidding process conducted by the World Bank's International Finance Corporation (IFC).

The project was implemented through a joint venture company comprising GMR Infrastructure Limited and Malaysia Airports Holding Berhad (MAHB.KL).

However, Nasheed's rivals filed legal action saying the contract was invalid as it contained a $25 airport development charge per outgoing passenger which was not authorised by the parliament.

Nasheed said in a statement that cancelling the GMR contract would deter potential investors for decades and accused the president 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.

She gave no more reasons why the contract was invalid

Shukoor said the government had already informed both GMR and the Maldives Airports Company Limited of its decision.

It is not clear whether the Singapore arbitration case will continue after the Maldives nullified the contract.

(Additional reporting by Ranga Sirilal in COLOMBO, Writing by Shihar Aneez in Colombo; Editing by Michael Perry)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Economic Pulse

Economic Pulse

New govt promises low and stable tax regime for economic revival.  Full Article 

Global Growth

Global Growth

IMF cuts outlook, warns of stagnation risk in rich nations  Full Article 

Market Eye

Market Eye

Nifty retreats from record highs on profit taking.  Full Article 

Waning Enthusiasm

Waning Enthusiasm

Markets' post-election enthusiasm lost on consumers.  Full Article 

Banking Sector

Banking Sector

Banks not allowed to trade in bonds for infra lending - RBI.  Full Article 

Gold Imports

Gold Imports

Govt has no proposal to reduce gold import duty.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage