End November, President Waheed announced the termination of the 2010 contract with a joint-venture dominated by Indian GMR infrastructure company which planned the extension of the Male international airport and the concession to operate it for 25 years. The decision was allegedly motivated by legal irregularities thereby making it “void and invalid”, and confirmed by a Singapore court of appeal ruling. However, GMR still hopes to get some compensation. The cancellation of the deal is sensitive and contentious not only because it was the country’s single largest private investment (worth USD 511 Mio) but also for the risks it entails for fundamental ties with India.

Impact on country risk

Waheed’s de facto (temporary) nationalisation of the airport could question protection of FDI in the Maldives and lead to higher expropriation risks. When Waheed ousted democratically elected President Nasheed last February, it raised doubts about the democratic rule in the archipelago and rising influence of Islamists in the domestic political sphere. In fact, the termination of the contract was most likely motivated by political factors, notably nationalist and anti-Indian  stances. Waheed’s move is  unwelcome both politically and economically at a time of poor economic performances. This might indeed deter future foreign investors and, given the magnitude of the necessary investments in the capital’s airport, leave Chinese investors as the most credible potential candidates. Such a prospect would thwart India’s regional plans given the Maldives’ strategic position for India in the Indian Ocean, despite the fact that Delhi quickly recognised Waheed as new president after what looked like to be a coup.

Analyst: Raphaël Cecchi, r.cecchi@credendogroup.com