Maldives has historically enjoyed a close friendship with India. In addition to sharing certain ethnic, linguistic, and commercial links, religious affinity with Buddhism has strengthened their bonds. Both were part of colonial British India. In the early decades after its independence, India had developed substantive ties with it including in foreign policy. People-to-people bonhomie has persisted over the decades, and India has endeavoured to assist it in the process of economic and social development.
However, with the notable economic and military resurgence in China since the 1980s, the situation has undergone a perceptible change. China’s extensive use of these to peddle influence in the nations around India, as part of its policy of creating a necklace of pearls, has put stress on India’s relations with Maldives.
An archipelago comprising 198 inhabited islands and numerous atolls, Maldives is located barely 90 miles away from the Lakshadweep & Minicoy Islands. A portion of its population of 550,000 has Tamilian and Sinhalese origins. Approximately 30,000 Indians work there in careers such as medical care, nursing, teaching, construction, and tailoring.
Tourism serves as its largest source of revenue and is the biggest employer, contributing over a quarter of the country’s GDP and 60% of its foreign exchange earnings. With a per capita income of $10,600, Maldives is classified as an uppermiddle-class nation. Besides securing financial assistance from the Asian Development Bank, the Indian official development assistance has played a crucial role in creating and maintaining essential infrastructure, including a full-fledged hospital, an engineering college, and a large housing facility. During natural disasters like the tsunami, acute drinking water shortages in Male, the capital, and the Covid-19 crisis, India had delivered timely relief and succour.
Currently, the Greater Male Project (GMP), involving the construction of a 6.74 km long sea bridge and a causeway to link Male with three major islands, is underway. Extensive material and training assistance have been rendered in building and modernizing infrastructure, air links, health, telecommunications, labour resources, and extending scholarships to study in India under the Indian Technical and Economic Co-operation (ITEC) program.
A line of credit of $500 million, with $400 million as a loan and $100 million as an outright grant, has been sanctioned to finance the ambitious GMP being constructed by AFCONS, an Indian private construction entity. Indian leaders, in their periodic interactions with the islands’ counterparts, have committed themselves to enlarge such aid. Indian businesses have invested in hotels, holiday resorts, solar energy, and tertiary health care.
The State Bank of India has contributed over $500 million to fund such projects. Fuelled by concerns that one of its island-resorts could be targeted by terrorists in 2009, India initiated efforts to integrate the island country into its security grid. As part of this initiative, India strengthened Maldives’ surveillance and threat-response capabilities, providing two Air Force helicopters, a chain of coastal radars, a couple of fast attack landing crafts, and a fast patrol vessel. Aerial sorties are conducted to monitor the surrounding seas.
Subsequently, Ekuverin, a joint military exercise aimed at counter-terrorism operations, is held annually between the armed forces of the two countries. India has also extended a $50 million Line of Credit for the revamping of the Maldivian Uthuru Thila Falhu Naval Base. In 2016, a comprehensive Action Plan for Defence was signed to consolidate the defence partnership. Over the last decade, India has trained 1,400 military personnel, meeting 70% of the island’s defence training requirements. Hitherto, the benevolent Indian aid was universally welcomed in Maldives.
However, with China showing a keen interest in providing more liberal assistance and demonstrating a better track record of implementation, notable oscillations in the local attitude have emerged. Since 2013, periodic parliamentary elections have become polarized, with the Maldivian Democratic Party (MDP), headed by the recently ousted President Ibrahim Solih, being pro India, while the Progressive Party of Maldives (PPM), under another ex-President Yameen Gayoom, favours China.
Consequently, between 2013 and 2018, policies in Maldives have acquired a distinct pro-China tilt. In the recently held elections, PPM ran an India Out campaign, seeking the ouster of Indian personnel, especially the military. Last week, the newly elected proChina President Mohamed Muizzu went a step further and decided not to renew the joint hydrographic exercises conducted in the seas around Maldives.
This decision followed his meeting with Prime Minister Narendra Modi on the sidelines of the recent COP28 meeting in Dubai. While such volte-faces may be dismissed as political necessities in a young democracy like Maldives, if they occur frequently and are acted upon, India must become more vigilant.
Maldives’ participation in China’s Belt & Road Initiative (BRI) in 2013 and a Free Trade Agreement (FTA) in 2017 has inserted the country into the Bay of Bengal and Indian Ocean, raising significant geopolitical and security concerns for India, given their shared maritime border. China’s substantial contributions, such as the upgrade of Maldives’ main international airport and the construction of critical infrastructure, demonstrate its implementation capabilities, while also leaving Maldives burdened with an additional debt of $1.5 billion.
China’s establishment of a military outpost at the Feydhoo Islands, strategically positioned near Maldives and not far from the Minicoy Islands, poses a potential threat as the facility could serve as a naval base, impacting Indian security in the region. With a pro-China government now in power, and an increased Chinese presence in Maldives, it is imperative for India to address the threat posed to its security, as well as the freedom of movement in the Indian Ocean.
While the scale of the “softer assistance” provided by India calls for an increase, there is a need to enhance its project execution capabilities to match those of China. Instead of the Indian government directly engaging in the execution of civil aid projects through its own public enterprises, it would be more effective to leverage the implementation capabilities of the large private sector.
Involving non-government players in the investment process could also contribute to the necessary funding, facilitating the scaling up of development engagement. Given Maldives’ nascent FDI policy that already permits overseas investment, the Indian government could support such investment by guaranteeing against expropriation by the host government.
Implementing such positive measures may help ensure that the new government refrains from passing laws required to lower tariffs, as mandated by the Free Trade Agreement (FTA) with China. Currently, Oman and the UAE are the largest sources of imports for Maldives but with an operational FTA with China, the pecking order could change quickly.
Addressing the security concerns of Maldives, especially considering the 1988 coup d’état involving mercenaries, including Sri Lanka-based LTTE, should remain a constant priority for assistance. While the Indian Navy played a crucial role in swiftly handling the situation, the evolving suspicions of Maldivians towards territorial designs of all foreigners necessitate a change in approach.
India should focus on providing the necessary hard defence capabilities to handle such eventualities, allowing the Maldivian National Defence Forces (MNDF) to lead engagements. Indian troops should adopt a less visible and more behind-the-scenes role, staying in the background, but being ready to assist up front when called upon. This approach, including arranging extensive training for the MNDF on Indian shores rather than in the Maldives, respects local sensitivities and reduces suspicions about India.
Unlike India, China lacks the physical proximity to arrange collaborative efforts with the same flexibility, making a shift to a more circumspect approach challenging. India could also explore the option of offering Maldivian citizens travel and work facilities similar to those extended to Nepalese citizens, allowing them to enter and exit freely without the need for travel documents and enabling them to take jobs in each other’s jurisdictions.
Given the significantly higher wage rates in the Maldives, with a per capita income almost five times higher than that of India, it is anticipated that only a limited number of young individuals might seek employment there. Additionally, many of them may prefer the nearby Southern Indian states, which offer greater job opportunities. Such economic strengthening initiative for the small, strategically situated neighbour could potentially reduce its dependence on China-dominated networks of trade and investment, such as the Regional Comprehensive Economic Partnership (RCEP).
Instead, India should persuade Maldives to join BIMSTEC or the Bay of Bengal Initiative for MultiSectoral Technical and Economic Co-operation. The initiative is tasked with accelerating regional co-operation with South Asian and South Eastern countries in a variety of commercial fields through trade and transit facilitation, as well as energy and digital connectivity. Setting up a development fund with funding from multilateral agencies is also on the cards. With China not in the region, there would be logical grounds for it not being a member.
Dr Ajay Dua, an ex Union Secretary, Ministry of Commerce & Industry is a frequent writer on public policy. Two more articles in the series on Myanmar and China would follow.