- An Indian company dealing with infrastructure related business: airport Management, coal mining, highways etc.
- It operates the airports in Delhi, Hyderabad and Turkey.
- Grandhi Mallikarjuna Rao founded this company, hence the name “GMR”.
Male International Airport/ Government of Maldives
- Male=capital of Maldives.
- Maldives is a tourism economy. Their annual GDP=$2 billion annual GDP.
- About 1/5th (=20%), of that GDP comes from this Male Airport.
- So far this Male Airport was managed by Maldives Airports Company Limited (MACL).
- Maldives Airports Company Limited (MACL) = 100% Government owned company.
- In 2009, Government decided to handover Management and control this airport to a private company.
- Maldives Government itself did not have enough money to develop or modernize the airport, they were looking for some foreign private investment.
- Therefore Government of Maldives (under President Nasheed) decided to invite “Biddings/tenders” for privatization of Male Airport: Whichever foreign company agreed to share maximum profit with the Government, will get the contract to run the airport.
- But the bureaucrats of Maldives= had no prior experience of how to evaluate the financial, legal and technical worthiness of foreign bidders.
- So, Government asked International Financial Corporation (IFC) to oversee the bidding process.
International Finance Corporation (IFC)
- When foreign investor, wants to start business in developing country, IFC provides financing and technical advice and assistance, works as a catalyst.
- So, Aim of IFC= boost private investment in developing countries.
Impact on India-Maldives Relations
Ø Though it’s inevitable for the move to “affect bilateral relations”, India has hoped that the controversy would not be “allowed to be used “by firing groups in that country to lead to deterioration in ties.
Ø Foreign Minister Salman Khurshid has stated that with GMR Infrastructure reaching a settlement with the Maldives government, the Indian government would not intervene in the matter.
Ø While New Delhi has been assured by the Maldivian government about the safety of Indians in the island country, India feels that the attitude of the Mohammad Waheed government will work as a deterrent for potential Indian and international investors.
Ø The recent termination of GMR’s contract by the Government of Maldives has once again highlighted issues of propriety and legality of the conduct of sovereign parties to a contract in their dealing with foreign investors. Plenty of Indian companies now have large global footprint and similar issues are bound to crop up periodically.
Ø Very often, states, and particularly developing countries, require capital and technical expertise from nationals of other states. States enter into concession or other agreements for development of their natural resources or infrastructure by foreign investors.
Ø However, many a time, states have repudiated their contractual obligations, “expropriated” the foreign investor’s property or otherwise caused diminution in the value of such property. The question then is, how does the investor recover its investments and the projected returns?
The investor may consider certain precautions at the stage of negotiating and concluding the agreement. Some of these precautions are :
· Bilateral investment treaties are a defence against arbitrary state
· Diligence on the state’s assets by the investor before entering into a private contract.
· Make provision for a neutral dispute resolution mechanism with the seat of arbitration outside the territory of the host country.
· Appropriate investment backing, for example, through Multilateral Investment Guarantee Agency.