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Maldives defends scrapping India airport deal

world Updated: Nov 28, 2012 10:03 IST

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The Maldives defended on Wednesday its controversial decision to terminate an airport management contract with an Indian firm, saying the deal was dogged by "legal, technical and economic issues".

President Mohamed Waheed's government gave five days to GMR Group to leave after prematurely ending the 25-year lease of the nation's main international airport for a one-time fee of $78 million and revenue share thereafter.

The government said it was advised by unnamed British and Singaporean lawyers to abrogate the agreement, prompting India to warn that the move could scare away foreign investors from the archipelago.

"The cabinet decided to terminate... on grounds that there were many legal, technical and economic issues regarding the agreement, and that it was legally invalid, and impossible to further continue," Waheed's office said.

Waheed's government had objected to the privatisation carried out by his predecessor Mohamed Nasheed, the country's first democratically elected leader who quit earlier this year and claimed he was forced out.

There was no immediate comment from GMR that ran the airport -- which handles 2.6 million passengers a year -- since November 2010 together with Malaysia Airports Holdings Berhad. GMR held a 77% stake in the operation.

Former leader Nasheed who initiated the deal with GMR described the termination as a major blow to foreign investment and tourism, the country's main source of foreign exchange.

"This decision is bad for tourism, bad for the economy and bad for the Maldivian people," Nasheed said in a statement. "This will put off potential investors for decades."

He accused his successor of leading the nation of 330,000 Sunni Muslims "down the path to economic ruin".

The Indian foreign ministry has said that they will closely monitor the developments and asked the Maldivian government to ensure the safety of Indian nationals in the country.