Delhi loses in its own backyard
A scrapped airport project in the Maldives encapsulates India's challenges in Asia.

Reuters

Maldives' President Mohamed Waheed Hassan Manik (L) speaks with Indian Prime Minister Manmohan Singh during their meeting in New Delhi May 12, 2012.

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  • Can India play a larger role in Asia with the rise of China and the growing strength of fundamentalist Islam? @dhume01

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  • China's heightened presence in the region has created an odd paradox for New Delhi.

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  • India's skittishness about engaging more overtly with the war of ideas limits its ability to shape outcomes.

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South Asia's smallest country just cocked a snook at the region's putative superpower. The Maldives (population: 330,000) is an Indian Ocean island chain best known for its coral reefs and sun-kissed beaches, but in recent weeks it played host to high-stakes commercial drama. At stake: Indian infrastructure company GMR Group's development of the tourism-dependent country's main airport.

At one level, the Maldivian decision to unilaterally scrap a two-year-old $500 million contract is a purely commercial matter. Bangalore-based GMR and Malaysia Airports Holdings were supposed to expand and run Male's Ibrahim Nasir International Airport for 25 years. But a new government, in power since February, objected to what it viewed as overly generous terms agreed to by its predecessor.

But the soured deal is also representative of the tests India faces as it jockeys for greater influence in Asia. Can it defend the commercial interests of a new breed of Indian companies with global ambitions? Can it play a larger role in Asia when the rise of China and the growing strength of fundamentalist Islam threaten its primacy in its own backyard? Or will the principle of non-interference hamper its ability to wield its influence against authoritarianism and religious extremism?

The airport controversy dates back to 2008, when a 41-year-old former human rights activist, Mohamed Nasheed, became president in the Maldives' first free and fair election. After ending the 30-year rule of strongman Maumoon Abdul Gayoom, the telegenic Mr. Nasheed garnered international attention for his tiny nation by, among other things, championing climate change human rights.

The new administration in 2010 granted the GMR-led consortium the airport contract in a process overseen by the International Finance Corporation, the World Bank's private arm. At the time, the proposed $500 million investment, the largest in Maldivian history, was widely hailed as a smart way to upgrade the nation's rudimentary airport and tap into the market opportunity offered by high-end tourists attracted to the country's fabled natural beauty. GMR also runs airports in Delhi, Hyderabad and Istanbul.

But the agreement attracted opposition from both Islamists and establishment figures, one opposition party labeling the deal "the beginning of slavery." And it was complicated by Maldivian internal politics. In February, Mr. Nasheed was replaced by his vice president, Mohammed Waheed Hassan in a backroom putsch. The new president, a former United Nations official, raised eyebrows by inducting former strongman Mr. Gayoom's daughter in his cabinet.

India quickly recognized the new president for the sake of realpolitik, which effectively ensured that he would command international legitimacy from the start. But Mr. Waheed has not returned the favor. His decision to unilaterally scrap an internationally brokered deal, rather than renegotiate, leaves Indian diplomacy in the region looking flatfooted. (A Singaporean court has upheld the Maldivian decision, though Male will likely have to pay compensation to GMR.)

New Delhi is now worried, because the unspoken assumption in the background is that China would be more than willing to step in with favorable terms. From Myanmar to Sri Lanka to Pakistan, Beijing has already dotted South Asia with high-profile infrastructure projects. On Tuesday, Chinese Defence Minister Gen. Liang Guanglie held talks with his Maldivian counterpart in Beijing during which both sides pledged to strengthen military ties.

China's heightened presence in the region has created an odd paradox for New Delhi. On the one hand, India is richer and more globally influential—through such bodies as the Group of Twenty—than ever before. But at the same time it has lost its once unquestioned sway over smaller countries like Maldives, Nepal and Sri Lanka that were once firmly in New Delhi's sphere of influence.

Then there's the Maldives' tilt toward a more fundamentalist form of Sunni Islam in the past two decades. Some of its politicians look to Pakistan as their natural ally, and islamists were at the forefront of protests leading up to Mr. Nasheed's downfall in February.

While a reluctance to appear heavy-handed may be understandable, ultimately India's skittishness about engaging more overtly with the war of ideas, and by extension domestic politics in its neighborhood, limits its ability to shape outcomes.
"Few countries have as direct a stake in combating radical Islam as India, yet few appear as reluctant to accept this and act upon it." -- Sadanand Dhume
Few countries have as direct a stake in combating radical Islam as India, yet few appear as reluctant to accept this and act upon it.

This doesn't mean attempting to turn the Maldives into a secular republic, but it does mean bringing India's considerable soft power—especially in education, entertainment and entrepreneurship—to bear in minimizing the impact of radical Islam in the region.

Lastly, on all the major issues the Maldives affair raises—the sanctity of international contracts, the preservation of political and religious pluralism in the Muslim world, and ensuring that China's rise is indeed peaceful—India finds itself in broad agreement with the West and Japan. Instead of chasing the meaningless chimera of a new global architecture under BRICS—Brazil, Russia, India, China, South Africa—New Delhi needs to figure out ways to work with like-minded countries to forestall further setbacks closer to home.

Mr. Dhume is a resident fellow at the American Enterprise Institute and a columnist for WSJ.com. Follow him on Twitter @dhume01

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