The Maldives’ pay out to Indian infrastructure giant GMR is set to increase by hundreds of millions of dollars after a tribunal ruled Tuesday that the claim should include the company’s debt to a Singaporean bank.
The loan from Axis Bank amounts to at least US$170 million and adds on to the US$803million claimed by GMR over the government’s abrupt termination of the 25-year concession agreement to upgrade and manage the Maldives’ main airport.
The tribunal, which had ruled that the government wrongfully terminated the contract, is now examining the GMR’s claim and will complete its assessment by October, according to a letter from the company to the Indian National Stock Exchange.
GMR had put in a claim for the loaned sum when a separate tribunal, also based in Singapore, ruled against Axis Bank last year. The bank had first sought repayment of the loan from the government and not GMR.
The US$511 million agreement to develop Ibrahim Nasir International Airport – signed during the tenure of former President Mohamed Nasheed – represented the largest foreign direct investment in the Maldives history.
President Abdulla Yameen said last year that he does not expect the pay out to amount to more than US$300million, which he said would be “manageable” for the state-owned Maldives Airports Company Limited.
The World Bank has previously said the pay out would place severe pressure on the Maldives’ already low foreign reserves.
The government is already grappling with high external debt that is expected to rise with several mega projects in the pipeline. According to the central bank, Maldives’ external debt stood at US$688million. A US$373million Chinese EXIM bank loan for airport development and US$100million for a bridge project secured last year will add to the debt.
Legal and political wrangling over the deal began before GMR had even assumed management of the airport. The then-opposition attacked the deal as part of vitriolic anti-government campaign that led to Nasheed’s controversial resignation in February 2012.
Nasheed’s successor, Dr Mohamed Waheed Hassan, declared the airport contract void ab initio, or invalid from the outset, months after assuming power. GMR and its partner Malaysia Airports were given seven days of notice.
When GMR contested the eviction, the Singaporean Supreme Court ruled that the Maldivian government “has the power to do what it wants, including expropriating the airport.” GMR and Axis Bank then went on to initiate separate arbitration proceedings against the government.
According to submissions made by the government and the Axis Bank to the tribunal, Waheed considered buying GMR out, but lacking the necessary funds, declared the agreement invalid.
The airport takeover had soured Maldives-India relations with India imposing visa restrictions and freezing the export of construction materials.
Relations were normalised only when Yameen assumed power in 2013. But the president is now facing pressure over the jailing of political leaders.