China Overtaking India in Maldives

15 Sep, 2016    ·   5128

Anjelina Patrick examines the repercussions of increased Chinese investment in Maldives for the Indian geo-political balance

The amendment allowing land holdings in the Maldives by foreign entities might contribute to the strong hold of the Chinese in the India Ocean Region (IOR) due to its huge investment in infrastructure development. These have the potential to alter the geopolitical calculations in the IOR, especially for India. 

Change in Land Amendment
The Maldives, since 2014 has gained strategic salience in light of the Chinese infrastructure development after the visit of  Xi Jinping, the First Chinese President to visit Maldives. 
More worryingly for India it is the swiftness by which the Maldivian government has passed the constitutional amendment allowing foreign nations or entities to own land if the total volume of investment excesses USD 1 billion, previously foreign entities could only lease the land for 99 years.  Given the disparities in the spending power of China and India this will certainly play into China’s hands, it must also be noted that the Maldivian government owes 70 per cent of its external debt to China. Abdullah Yameen, current Maldivian President, has been stating that the amendment will boast the Male economy, contrary to what the former President, Mohamad Nasheed asserted about it leading to foreign non-commercial logistical installations in the island.

The exploitation of land ownership rights may also hinder the sovereignty of a country, and while  land grabs are difficult to contemplate in the 21st century, newer and more sophisticated ways of control come about as a result of monopsony. Since India cannot afford to spend on commercially unviable infrastructure projects that show no signs of profitability in the future, Maldives' attempts at playing regional powers off against each other plays into the Chinese monopsony. The Maldivian government is stating that the new law will work in the best interests of the Maldivian citizens by attracting large scale investment, leading to development.

Loss of Contract
New Delhi is concerned about the contracts to the Chinese, the first being an expansion of the Male airport worth USD 800 million and second being the tentative victory of a Chinese consortium to build the Gadhoo port, in the Southern Atolls.

The Male Airport contract, initially given to an Indian company, GMR Group, for build-operate was cancelled in 2012 due to a change in the government (earlier headed by President Mohamed Waheed).This was surprising given the contract represented the single largest foreign investment in the Maldives. International arbitration held that the cancellation had been wrongful and awarded crippling damages to GMR worth USD 300 million. Coinciding with the tribunals’ award, it was shortly announced that the Chinese Beijing Urban Construction Group (BUCG) had won the contract to complete the stalled project as build-only. This will exacerbate the land owning situation. Significantly there have been reports that Chinese companies might get the contract for the new commercial port on Gadhoo Island on a build-operate model. 

It can be seen that two different parameters have been adopted in infrastructure investments and such ad hoc shifting of norms from build-operate to a build-only have been done with extreme lack of transparency and public study on the cost benefits. The tussle between the GMR Group and the Maldivian Government had initially started because of the underperforming revenues of the airport. China is footing most of the costs of this resurrected airport expansion plan at a much higher layout than the previous plans which failed to deliver. 

Awarding of the contract to China also highlights the vast spending power and project management skills of Chinese companies compared to Indian ones. Needless to say that in any direct competition between India and China in mega projects, China has a track record of timely and effective delivery contrasted with India’s abysmal performance on the score.
India's Concern
This brings out several areas of concerns as may be deduced that the current President Yameen’s government is more pro-China indicative of a shift in the Maldivian posture towards India.

As can be seen from the case of Gwadar (Pakistan) and Hambantota (Sri Lanka) China has a track record of building maritime infrastructure in the Indian Ocean for commercial gains; however a lack of commercial viability has then been used by the Chinese to expand their naval presence. These ports are now increasingly used by high threat Chinese power projection vessels such as nuclear submarines. The Gadhoo island port would be another example; while the Maldives is not known to be a commercial hub its economic zone seems unable to sustain such a large port. On the other hand the Maldives is one of the closest islands to the highly secretive US base in Diego Garcia and the Chinese pattern of deploying nuclear submarines in Hambantota to keep tabs on India may be replicated. The Chinese Embassy in Maldives maintains that such allegations of construction in Gadhoo are "completely false."

To conclude it is observed that the Maldivian shift towards China is not only in accordance with its national interest but more importantly due to the pro-Chinese Yameen government. This is highly threatening for India as a huge influx of infrastructural investment by the Chinese in Maldives is more military oriented than economic and in the coming days India might lose its foot hold in Maldives thereby hindering the current geopolitical balance of power in the IOR.