India announces $500 million connectivity project, cargo service to boost trade ties with Maldives

New Delhi [India], August 13 : India on Thursday announced that it will fund the implementation of the Greater Male Connectivity Project (GMCP) to revitalise the Maldivian economy through a $400 million Line of Credit (LOC) and $100 million grant linking its capital Male with Gulhifalhu Port and Thilafushi industrial zone along with a regular cargo ferry service between the two countries to boost trade and commerce.
"Happy to announce the start of regular cargo ferry service between India & Maldives to boost trade and commerce. We are also starting an air travel bubble with Maldives to sustain and promote the dynamic people-to-people ties between the two countries," Jaishankar said in a tweet during the meeting with Maldives foreign minister Abdulla Shahid.
"India will fund the implementation of the Greater Male Connectivity Project through a $400 mn LOC & $100 mn grant. This 6.7 km bridge project connecting Male with Gulhifalhu Port & Thilafushi industrial zone will help revitalise & transform Maldivian economy, he added.
"There has been a reset in our relations with the Maldives since President Solih assumed office in November 2018. In the last one and a half years, President Solih and his government has acted on its 'India First' policy in right earnest. In line with its 'Neighbourhood First' policy, India has worked proactively to deepen its ties with the Maldives," as per sources.
"India's total financial commitment in the Maldives covering all loan and grant projects is well over US$ 2 billion, all of which have been announced after the coming into power of President Solih in November 2018," they said.
The Greater Male Connectivity Project (GMCP) is a high visibility project which will be the largest ever infrastructure project to be implemented in the Maldives. The project was a key election promise of the ruling Maldivian Democratic Party (MDP) for which the current President of Maldives has personally sought India's assistance during his meeting with External Affairs Minister S Jaishankar in the Maldives in September 2019.
"It is noteworthy that approvals for a project of this scale were obtained in less than a year. This is unprecedented and is testimony to the special relations between India and the Maldives," sources said.
The GMCP involves the construction of 6.732 km of bridge and causeway links between the islands of Villingili, Gulhifahu and Thilafushi with Male. Out of the total length, the bridge-section will be 2.08 km, 780 m causeway section and 3.87 km embankment and causeway section, they added.
As of date, the 1.39 km Maldives-China Friendship Bridge (connecting Male with Hulhule and Hulhumale to its east) is the most visible infra-project in the Maldives. Once implemented, GMCP will render the infrastructure project insignificant in comparison, sources said.
"It will help in demonstrating India's overarching presence in the Maldives through a high-visibility project in the Greater Male region and showcase India's expertise in conceptualizing and implementing a complex infrastructural project of this scale," they stated.
The GMCP has the potential to change the economic landscape of the Maldives. This project will be an infrastructural complement to the Gulhifalhu commercial port project which is being done under an Indian LoC of USD 800 million.
Since the current Male port has already reached its maximum physical capacity, the Maldives Government has decided to shift the Male port to Gulhifalhu island. This has given rise to the need to consider the development of link bridges to the three industrial islands for seamless connectivity, as per sources.

With tourism and fish exports coming to a grinding halt in March, the Maldivian economy is under immense strain due to the COVID-19 pandemic. Financial assistance has been requested personally by the President of Maldives, during his telecon with Prime Minister Narendra Modi, sources said.
"Maldives is facing a financial gap of USD 395 million for the rest of the year. The government has forecast GDP contraction of over 11 per cent, while World Bank has estimated a contraction of about 13-14 per cent," it added.

This is the first financial assistance that has been announced by the Indian government to any country to deal with COVID-19 pandemic. This assistance will help the Maldives government tide over the financial crisis, till their main revenue earners like tourism and fisheries exports return to normal.

It may be recalled that in order to bolster Maldives' dwindling Forex reserves, India provided USD 150 million to the Maldives under the bilateral currency swap agreement of USD 400 million.
The Government of Maldives can draw the remaining USD 250 million anytime till July 2021 to increase forex liquidity and exchange rate management. On the request of Maldives Government, the currency swap agreement has been further extended for a period of one year, sources said.

The proposal of a ferry service between India and Maldives was announced by Prime Minister Modi during his visit to the Maldives in June 2019.

During the COVID-19 pandemic, while Maldivian imports have fallen, exports from India have relatively increased, making it the second-largest exporter to the Maldives proving that India is a reliable supply partner, it said.
A direct cargo ferry service presents an opportunity for India to replace other countries and become the top trade partner of Maldives.
"In this context and with many bilateral projects slated to commence in the next few months, it is the right time to start a cargo ferry service with the Maldives," they said.

Right from the start of the COVID-19 pandemic, India has proven that it stands with the Maldives in the time of any crisis. India has donated consignments of 5.5 tonnes of essential medicines, helped in the evacuation of Maldivians from Wuhan, provided 580 tonnes of food aid, deployed a medical assistance team in order to help the Government of Maldives in dealing with the unprecedented situation, sources said.
In line with India's commitment to assist the Maldives in its economic recovery, it has been decided to create air travel bubble with the Maldives, which has opened its borders for international tourists since July 15.

Sources said the creation of an air bubble will help revive its tourism industry and boost its economy, which is under immense financial strain due to the COVID-19 pandemic. The Maldives will be the first country in the neighbourhood with which an air travel bubble will be established.
In addition, with the resumption of economic activities in the Maldives, it would also help the Indians who left the island country, in the wake of the COVID-19 crisis, to return and resume their jobs.
Every year, the Indian government makes quota allocations for the supply of essential commodities to the Maldives in line with our commitment under the bilateral trade agreement of 1981.
"Being a country which is almost 100 per cent dependent on imports, the quotas provide certainty and price stability for such items in the Maldives. This year the quotas are larger than ever in the past," sources said.
Seven big projects are being implemented under the USD 800 million Line of Credit (LoC) extended by India to the Maldives. The projects are -- water supply and sewerage systems on 34 islands, Addu Development Project-Road Development and Reclamation, Expansion of Maldives Industrial Fisheries Companies (MIFCO) Facilities, Gulhifalhu Port Project, Hanimadhoo International Airport Redevelopment, Construction of International cricket stadium in Hulhumale and Cancer hospital in Hulhumale.
With a geographical span from the northernmost to the southernmost islands of Maldives and by covering infrastructure, socio-economic and sports projects, these projects are expected to be transformational for the country and take India-Maldives relations to new heights, sources further said.