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India, Maldives look to put ties back on track

Hope: The debt-ridden Maldivian Government, led by President Ibrahim Mohamed Solih (left), is seeking India’s help to tide over its financial crisis.

Maldives President Ibrahim Mohamed Solih’s recent visit to India, his first foreign tour after assuming power, was aimed at giving a new lease of life to bilateral ties, which had nosedived during the reign of his China-backed predecessor, Abdulla Yameen. The development augurs well for the stalled India-funded projects in the tropical nation.

The India-Maldives relationship, which had suffered during the regime of Abdulla Yameen, is again looking up with the coming to power of Ibrahim Mohamed Solih, who had contested the elections as the joint Opposition candidate. To undo the damage done during the previous regime and to take bilateral ties to a new level, President Solih recently came to India on a three-day visit. Through this visit, he wanted to give the message that India and the Maldives are close neighbours and partners and what happened during Yameen’s reign was just an aberration.

This was the first foreign tour of the Maldivian President after assuming power. The new government is facing a financial crisis. A key objective of the visit was to seek help from India so that the new government stabilises. Solih has found that the state coffers are empty due to massive corruption and embezzlement that took place during Yameen’s rule. To make matters worse, Yameen has taken hefty loans from China that is difficult for the Maldivian Government to repay.

Yameen allowed the Chinese to undertake a number of infrastructure projects at inflated costs. The Chinese have been engaged in building a mile-long bridge that links capital Male with its airport, which is located on another island, Hulhule. Besides, the Chinese are engaged in the expansion of this airport and building a housing project on the reclaimed island of Hulumale. This has left the Maldives in huge debt. According to one estimate, the total Maldivian debt is about $3.7 billion, which is about 53% of the GDP (gross domestic product). Of this, the Maldives owes $1.4 billion to China. A major part of this debt is attributed to dubious loan agreements signed by Yameen. With annual revenues of $1.5 billion and an annual GDP of around $3.9 billion, it would be hard for the Maldives to service such a high Chinese debt.

In recent times, China has been consciously following this policy, especially under its Belt and Road Initiative, whereby it creates grand infrastructural projects whose cost the recipient countries often find difficult to repay. This has made Sri Lanka surrender its port in Hambantota in debt for equity swap. The Maldives is also among the debt-stressed countries under the BRI programme. It fears that now the Chinese would also infringe on their sovereignty using debt as a pressure tool.

The new government of the Maldives is seeking help from India so that it can manage its financial crisis. India has tried to help the Maldives as much as possible. It has given the country a package of $1.4 billion, out of which $200 million is the grant for budgetary support. The rest is a concessionary loan.

During Yameen’s rule, India-Maldives ties had nosedived. He pursued policies at the behest of the Chinese, mortgaging the future of Maldivians. According to an estimate, every Maldivian owes about $8,000 to China. Yameen justified the inflated costs of these projects, saying that they were being completed in a very short time. The joint opposition at that time, however, believed that these projects were undertaken with political purposes.

Yameen tried to delay Indian projects. He cancelled the project of expansion of the main Male airport, which was given to an Indian company, GMR, and awarded the contract to a Chinese firm. The Maldives had to face a big financial loss for this decision as the international court ruled in favour of GMR and the country had to pay the company for its losses. A number of other Indian initiatives, such as a training academy for Maldives defence personnel and the creation of a special economic zone, have suffered because of the hurdles created by the then Yameen government.

Yameen had also tried to harm ties in the areas of defence and security. The installation of coastal radars is still incomplete as the previous Maldivian government was not providing the visa to Indian technicians. What’s worse, Yameen asked the Indian Government to take back choppers it had provided. There was confusion on the issue of Dornier aircraft. Yameen probably wanted to take a loan from Pakistan and buy the aircraft from them, whereas India was providing them as a gift.

Though defence cooperation was not a priority during the visit of President Solih, his government has agreed to follow an ‘India first’ policy which was given up by Yameen. Both countries have asserted that they will not allow their respective territories to be used for inimical purposes. Both agree that their security challenges are the same in the Indian Ocean region and they need a common approach to deal with them. The new government has reversed the decision on the return of choppers and has accepted the Dornier aircraft. They have also signed a new visa agreement which will facilitate people-to-people contact. Under Yameen, Indian investors had found it difficult to get a visa to travel to the Maldives and some of the India-funded projects were put on the back-burner.

Possibly, some of these projects would now be expedited and new ones started. Male needs to relocate and refurbish its existing commercial port, as it can no longer deal with the number of ships coming in. A part of the credit line given by India is likely to be used for this purpose. India has also agreed to provide 1,000 additional slots over the next five years for training and capacity-building in diverse fields.

The Maldives, on its part, has reiterated its support for India’s candidature for permanent membership of an expanded and reformed UN Security Council. It will also support India’s candidature for a non-permanent seat for 2020-21.

India and the Maldives have tried to mend their ties during Solih’s recent visit, but it would be hasty to conclude that Chinese influence would start waning immediately. The Solih government has already stated that China remains a friend and one that has brought the Maldives economic benefit. It is possible that once the Solih government stabilises, it might again start leveraging both India and China against one another to get the best deal for itself. Countries such as the UK and Japan have opened their embassies in Male, realising the geo-strategic importance of the Maldives. The interest of so many external players in the Maldives will ensure that India would have to spend considerable time, energy and resources to maintain its sphere of influence.

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