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A new shift in Maldives’ leadership: India must be cautious with investments

Maldives: An optimistic Change:

A new unity coalition has come into power in Maldives. Maldivian Democratic Party (MDP) under the leadership of former President Mohamed Nasheed swept the September 23 general elections. After the surprise win, joint opposition Presidential candidate MDP’s Ibrahim Mohamed Solih took the oath of office. Indian Prime Minister Shri. Narendra Modi had attended the swearing-in ceremony marking a shift in the nations hostile relations. The country had a strained relationship with Maldives after a coup dé etat in 2012 led to the imprisonment of the then President Mohammed Nasheed.

Earlier policy:

Abdullah Yameen, the country’s second democratically elected President had followed a pro-Chinese foreign policy. He had virtually extended a blind eye towards a neighborhood first policy.

Criticism to the core:

The new president has launch a scathing attack on the former regime accusing them of emptying the coffers in the wake of the Chinese- boom. The massive Chinese-led mega infrastructure projects have put Maldives in a debt trap.

Audit the chinks:

The MDP leader had called for an audit of the projects that are sanctioned by the outgoing administration. This is necessary to payback the debt in real time. As Male owes billions of dollars to Beijing, there is a threat to the sovereignty of this small island nation.

Redemption of Gujral doctrine:

As the new government has prioritized its policy towards a neighborhood first, jumping guns by India to cater to this small nation has to be cautious driven. India shall follow the Gujral doctrine at this juncture. Private investments require a sovereign guarantee, otherwise, the political risks weigh more when compared to gains from projects that have long gestation period.

Areas of cooperation:

At a macro level, climate change is a big issue in India’s relations with Maldives. India’s expertise in fishing and allied activities, solar technologies and ISA are active areas of cooperation.

An advisory to Indian investors:

Indian enterprises must consider an export-driven investment model. Most importantly, this will help in the reciprocal development of trade. Maldives require heavy inflow of the greenbacks at this juncture to service its huge debt and the interest. A smart use of its resources to build a better export ecosystem has to be devised. India can help from the experience.

Future role:

In future we expect a change in the incumbents, therefore, it would be difficult to predict what policy a new regime would ollow. Hence, investments that could affect the credibility of the Indian companies and their subsequent defaults may endanger the banking ecosystem in the country. It is wise for the Indian companies to consider short gestation period projects in Maldives.

Image Courtesy: President’s Office, Maldives

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