Government to release full details of economic reform agenda

The government will publicise its entire economic reform agenda at a launch on Monday, President Mohamed Nasheed has said.

Speaking during his weekly radio address, Nasheed downplayed the “unfavourable consequences” of the reforms he said were being predicted by some members of parliament and “a few business associations”, stated that the package of bills would allow further development and promote growth in the Maldives.

Nasheed also noted that 40 convicts had been released under the government’s ‘Second Chance’ program and were currently being rehabilitated. The government is also running a program to train 8500 local workers in various skills, in a bid to combat widespread unemployment, particularly among young people.

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No maritime agreement, confirms Sri Lankan High Commission

The Sri Lankan High Commission has refuted the existence of a special agreement allowing Sri Lankan vessels to cross Maldivian territorial waters.

News of such an agreement was published last week in Maldivian media after Sri Lanka’s Deputy External Minister Neomal Perera was quoted in Sri Lanka’s Daily Mirror newspaper as saying such an agreement had been signed.

In the Maldives, Fisheries Minister Dr Ibrahim Didi and Foreign Minister Ahmed Naseem denied such an agreement existed, while the President’s Press Secretary Mohamed Zuhair said foreign vessels already had such permission under the UN Convention on Law of the Sea.

The opposition Dhivehi Rayithunge Party (DRP) denounced the supposed agreement as an assault on soverignity and “an insult to Maldivian fishermen”, questioning the capacity of the country to monitor illegal fishing, while Maldivian Democratic Party Chairperson ‘Reeko’ Moosa retaliated by saying such a statement was “very irresponsible” as it implied Sri Lanka were “thieves”.

The matter entered parliament and MDP MP Mohamed Musthafa threatened to present a motion without notice to reverse the supposed agreement.

However in a letter sent to the Maldives Foreign Ministry seen by Minivan News, referring to articles on the matter published in local newspapers Haveeru and Miadhu, the Sri Lankan High Commission stated that “The Deputy Minister of External Affairs of Sri Lanka has made no statement claiming that a maritime agreement to facilitate Sri Lankan vessels to cross Maldivian territorial waters has been signed between the two countries. This is the official position of the Government of Sri Lanka.”

Attached to the letter was the original statement from Sri Lanka’s External Ministry, reporting that the minister had successfully negotiated the release of seven Sri Lankan vessels held by the Maldives on suspicion of poaching, but made no mention of a signed agreement to allow vessels traffic through the Maldives.

The Ministry of Fisheries meanwhile noted that while “innocent passage” was routinely granted for foreign vessels, unlicensed foreign fishing vessels were required to notify the ministry before entering the Maldives exclusive economic zone.

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President forms office to oversee “second chance” inmates

President Mohamed Nasheed has formed an office to oversee the release of almost 400 inmates released under the “second chance programme”, and has also formed a steering committee and a technical committee to monitor the reintegration of former inmates into society.

According to the President’s Office, the Second Chance Office will be administered by the Department of Penitentiary and Rehabilitation Services (DPRS), which is under direct authority of the Ministry of Home Affairs

“The Second Chance Programme Office is a government agency which will provide employment assistance, counselling for substance abuse, mentoring and other services that can help to reduce recidivism and promote social reintegration of inmates,” the President’s Office said.

The Steering Committee consists of Minister of Health and Family Dr Aminath Jameel, Minister of Human Resources, Youth and Sports Hassan Latheef, Minister of State for Home Affairs Mohamed Naeem, Deputy Minister for Health and Family Lubna Mohamed Zahir Hussain, and Director at the Ministry of Human Resources, Youth and Sports Aishath Rasheed.

The members appointed to the Technical Committee are the Mayor of Male’ City Maizan Ali Maniku, Deputy Minister of Islamic Affairs Mohamed Farooq, Deputy Commissioner of Police Ahmed Muneer, and Deputy Director at the Maldives Police Service Sabra Nooraddeen.

At a press conference today, Deputy Health Minister Lubna Mohamed announced that 47 inmates will be released this evening.

Lubna told press that all inmates will be given three days free to spend with their families before they will have to come out for work and attend programmes held at the Second Chance Office.

Of the 47 inmates to be released tonight, 16 have job placements secured at the Maldives National Defence Force (MNDF) engineering corps, Lubna said.

Speaking at the press conference, State Minister for Home Affairs Mohamed Naeem stressed that all the inmates will be closely monitored by police.

He added that any inmate that fails to fully comply with the Second Chance Office will be promptly sent back to prison to complete the rest of their sentence.

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Former DRP MP wins beachfront house in Hulhumale’ with Rf4.6 million bid

Former opposition Dhivehi Rayyithunge Party (DRP) MP Ali Waheed, who recently joined the ruling Maldivian Democratic Party (MDP), has just won a beachfront house for Rf4.6 million (US$300,000), bidding Rf3020 per square foot.

Local newspaper Haveeru reported that Ali Waheed’s wife had also won a house from the 36 beachfront residential plots on Hulhumale, bidding Rf 3020 per square foot, for Rf 4,749,651 (US$310,000). Waheed and his wife were the third highest bidders for the property, under the Hulhulmale Development Corporation (HDC)’s housing programme.

Waheed’s former opposition colleague, MP Ahmed Nihan, questioned Waheed’s ability to afford such a property on his MP’s wage. Waheed, he alleged, “was quite a poor boy when we first met him as a DRP MP – that’s why we spoke with a friend and arranged him a house for rent that did not require an advance paid upfront,” said Nihan. “There was no way that Waheed could afford to buy a house in Hulhumale’ for Rf4.6 Million unless there was a hand of corruption in it.”

Nihan claimed that Waheed “earns a little more than Rf 60,000 (US$4000) a month like other MPs, pays Rf 25,000 (US$1600) in monthly rent for the apartment he currently lives in, and has to spend the rest on living expenses and helping constituents and travelling to islands to attend meetings and stuff – where did he get the Rf 4.6 million?” Nihan questioned.

Waheed, who was dropped to parliament every session by a fellow MP, “now owns a Mazda 3 with a driver”, Nihan added, further claiming that the MP had paid an advance for his apartment in US dollars.

“Since he joined MDP he always seems very happy and contented. He now has a Mazda 3, has paid the advance payment of his rented house in US Dollars – the payment we delayed for him because he wasn’t wealthy and the landlord was a DRP supporter.”

If Waheed got all the money genuinely by being a MP, “Why does no other MP get to buy a beachfront house in Hulhumale’ for Rf4.6 Million? I cannot afford that,” Nihan claimed.

“MDP MPs are not only fortunate enough to win houses, they also have been winning reefs, uninhabited islands and resorts as well,” he claimed.

Waheed was not responding to calls at time of press.

Aside from Ali Waheed, President Mohamed Nasheed’s brother Dr Ibrahim Nashid and two children of Human Rights Ambassador Mohamed ‘Go Go’ Latheef also won bids for houses in Hulhumale’.

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Fiscal responsibility bill presented to parliament

A fiscal responsibility bill to impose limits on government spending and ensure public debt sustainability was proposed to parliament yesterday.

Presenting the draft legislation on behalf of the government, MP Ahmed Easa of the ruling Maldivian Democratic Party (MDP) said that a lot of effort was needed to “change the inherited, outdated and indebted economic system.”

“Since 2005, [expenditure] in the annual state budget was out of proportion to income and the budgets had a very high level of debt,” he explained.

As a consequence of issuing treasury bills (T-bills) to finance the budget deficit, Easa continued, banks reduced lending to local businesses in favour of buying government securities, which exacerbated unemployment and slowed growth.

Easa noted that according to the World Bank, a 66 percent increase in salaries and allowances for government employees between 2006 and 2008 was “by far the highest increase in compensation over a three year period to government employees of any country in the world.”

“We are seeing the bitter consequences today of spending out of the budget without any control or limit,” he said.

As measures to mandate fiscal responsibility, said Easa, the legislation would set limits on government spending and public debt based on proportion of GDP (Gross Domestic Product).

Borrowing from the central bank or Maldives Monetary Authority (MMA) should not exceed seven percent of the projected revenue for the year, Easa said, while the loan would have to be paid back in a six-month period.

Moreover, a statement outlining the government’s mid-term fiscal policy must be submitted annually to parliament at the end of the financial year in July.

Opposition

Opposition Dhivehi Rayyithunge Party (DRP) MP Dr Abdulla Mausoom however argued that the purpose of the legislation was to negate controversial amendments brought to the Public Finance Act last year.

Mausoom explained that the passage of the fiscal responsibility bill would abolish article five of the Finance Act amendments bill, which stipulated that the government must seek parliamentary approval before obtaining loans.

According to the amendments voted through by the opposition majority, “any relief, benefit or subsidy provided by the state” would also be subject to parliamentary approval.

The amendments were cited as the main reason for the cabinet resignation on June 29 last year – President Mohamed Nasheed announced at the time that he would veto the bill as the new laws would make it “impossible for the government to function.”

While President Nasheed has since ratified the bill after parliament overrode the veto, the government filed a case at the Supreme Court in December 2010 contesting the constitutionality of some provisions.

The DRP MP for Kelaa meanwhile argued that the fiscal responsibility bill was drafted to “take away all the powers given to local councils [under the Decentralisation Act] and give it back to the Finance Minister and President.”

Mausoom also criticised a provision that would empower the Finance Minister to change cash flow plans proposed to the state budget by independent commissions.

Debt sustainability

Finance Minister Ahmed Inaz informed parliament yesterday that the public debt of the Maldives – excluding government securities – stands at US$637.6 million – including US$446 million outstanding debt inherited from the previous administration.

A UNDP paper on achieving debt sustainability in the Maldives published in December 2010 observed that “as a percentage of GDP, public debt levels have almost doubled from 55 percent in 2004 to an estimated 97 percent in 2010.”

“Public debt service as a percent of government revenues will more than double between 2006 and 2010 from under 15 percent to over 30 percent,” it continued. “The IMF recently classified the country as ‘at high risk’ of debt distress.”

As short-term contributing factors for the country’s “rapid accumulation of public and private debt,” the paper identified the devastating tsunami of December 2004; the cost of the democratisation process that began in the same year; the concurrent global food-fuel-financial crises between 2007 and 2010; and the Maldives’ graduation from a Least Developed Country (LDC) in January 2011.

The UNDP paper noted that the reconstruction effort was largely financed by international donors: “Following the tsunami, ODA [Official Development Assistance] increased sharply from US$72 million in 2004 to US$824 million in 2005. ODA levels remained above US$500 million annually for the next four years,” the paper explains.

However as a consequence of high demand for local expertise by multilateral agencies, “increases in public sector salaries were implemented in order to retain qualified personnel with the government.

“Between 2004 and 2009, the average monthly salary of a government sector worker increased from MRF 3,223 (US$250) to MRF 11, 136 (US$866),” the paper notes.

It adds that the government of former President Maumoon Abdul Gayoom responded to growing calls for democratisation with “a substantial fiscal stimulus programme” of increased government spending, “much of which was not related to post-tsunami reconstruction efforts.”

“This strategy led to a large increase in the number of civil servants from around 26,000 in 2004 to around 34,000 by 2008 or 11 percent of the total population. Thus the government simultaneously increased the number of public sector workers as well as their salaries,” the paper notes.

Consequently, by 2010 recurrent expenditure – wage bill and administrative costs – was projected to exceed 82 percent of total expenditures “while capital expenditures will amount to just 18 percent in the same year.”

Moreover when the impact of the worst global recession in decades struck the Maldives in September 2008, “the Maldivian economy was already in the middle of a severe economic crisis with substantial fiscal and current account deficits, high liquidity growth, double digit inflation, pressure on the fixed exchange rate, increases in public and private sector debt, rising inequalities between the capital and the atolls, and a costly civil service.”

Meanwhile as the ballooning fiscal deficit reached 26 percent of GDP in 2009, tourist arrivals declined ten percent in the first year of the new administration.

However the new government’s efforts to reduce government spending with pay cuts of up to 20 percent and plans to downsize the civil service – which employs a third of the country’s workforce – was met with “a severe political backlash from parliament.”

“In March 2010, the parliament passed a 2010 budget with amendments which increased the government’s proposed budget by 7 percent (or 4.5 percent of GDP),” the paper observed.

“Three quarters of this increase funded a reversal in civil service wage cuts implemented the previous year. Progress on redundancies has also been slower than expected and reforms in this area are unlikely to be completed until the end of 2011 at the earliest. This will have important fiscal consequences.”

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Tourism Ministry condemns “misleading statements” from MATI over economic reform

The Tourism Ministry has condemned the Maldives Association of Tourism Industry (MATI) for “making statements to media outlets in a way that misleads the public about the government’s economic agenda”.

In a statement, the Ministry claimed that “MATI’s misleading statements in various media recently about the tax bills of the government’s economic reform agenda imply that the government’s efforts were undertaken without consulting officials from the tourism industry.”

The Ministry said it had “consulted a number of parties active in the tourism sector and sought advice for shaping the tax bills so that it would not be a disproportionate burden on the industry.”

“After these consultations, the Ministry is assured that businesses in the tourism industry support the reform agenda. Likewise, those in the front ranks of the tourism industry as well as MATI support it. Therefore, [the ministry] regrets an organisation like MATI making statements that are contrary to the advice and suggestions of senior industry leaders.”

Secretary General of MATI ‘Sim’ Mohamed Ibrabim was not responding at time of press.

The government has presented a raft of economic reform bills to parliament detailing several new taxes, including a business profit tax, general GST and income tax of those earning over Rf 30,000 (US$2000) a month. The government is also looking to increase its previously-passed tourism goods and services tax (TGST) of 3.5 percent to 6 percent, in exchange for lowering import duties, claiming that this will benefit businesses by allowing them to pay tax at the point of sale.

Secretary General of the Maldives Association of Travel Agents and Tour Operators (MATATO), Mohamed Maleeh Jamal, told Minivan News that his organisation had been consulted by the Maldives Inland Revenue Authority (MIRA) prior to the passage of the TGST, and was pleased to see some clauses implemented reflecting the input.

While no government body had sought to meet MATATO regarding the latest batch of bills, Jamal said parliament had forwarded them to MATATO for comment and input.

The Maldives pledged to the International Monetary Fund (IMF) earlier this year that it would pursue a package of policy reforms in exchange for a a three year economic programme to stabilise and strengthen the Maldives’ economy.

Under the new IMF program the Maldives has committed to:

  • Raise import duties on pork, tobacco, alcohol and plastic products by August 2011 (requires Majlis approval);
  • Introduce a general goods and services tax (GST) of 5 percent applicable to all sectors other than tourism, electricity, health and water (requires Majlis approval);
  • Raise the Tourism Goods and Services Tax (TGST) from 3.5 percent to 6 percent from January 2012, and to 10 percent in January 2013 (requires Majlis approval);
  • Pass an income tax bill in the Majlis by no later than January 2012;
  • Ensure existing bed tax of US$8 dollars a night remains until end of 2013;
  • Reduce import duties on certain products from January 2011;
  • Freeze public sector wages and allowances until end of 2012;
  • Lower capital spending by 5 percent
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MIRA sues to recover over US$2.5 million from Giraavaru Island Resort

The Maldives Inland Revenue Authority (MIRA) has filed a case at the Civil Court today to recover over US$2.5 million owed to the state by Giraavaru Island Resort owner Abdul Rauf, M. Sunrose.

Haveeru reports that the US$2.5 million was incurred as fines for non-payment of lease rent. The resort had failed to make timely rent payments for the past three years.

MIRA calculated the fine at 0.5 percent of the amount due for every additional day after the rent payment deadline.

The tax collection authority appealed today for a court order to compel Rauf to make the payments in full. The judge adjourned the first hearing after providing a ten-day period for Rauf to respond to the claim.

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Coastguard rescues crew of capsized boat

The coastguard of the Maldives National Defence Force (MNDF) rescued three crewmen of a boat that capsized around 3:00am this morning.

According to MNDF, the “Sharaf 4” 83-foot long boat was carrying wood and timber from Male’ when it encountered rough seas en route to the south and capsized in the Kaafu Vaadhoo sea.

The three crewmen – two Maldivians and one foreigner – was rescued at sea by the coastguard and brought back to Male’.

Divers from the coastguard has meanwhile been dispatched to help recover the submerged vessel.

As the cargo of the boat was lost at sea, the coastguard has appealed vessels traveling through the Vaadhoo sea to be wary of floating wood.

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Kuredhu quad-bike unregistered and unauthorised for use, MDP MPs claim

A quad-bike that crashed into a tree in Kuredhu Resort killing two British tourists last week was neither registered nor authorised for use, MPs of the ruling Maldivian Democratic Party (MDP) claimed during debate on a motion without notice today.

The emergency motion proposed by MDP Chairperson ‘Reeko’ Moosa Manik noted that the King Quad 700 model bike was not legally registered at the Maldives Transport Authority while its driver Filip Eugen Petre – a Swedish national and son of a resort shareholder – did not have a license to operate the vehicle.

“Two kinds of vehicles are commonly used in Maldivian resorts,” Moosa said in his opening remarks of the debate. “That is vehicles used for lifting goods and golf carts or buggies for transporting guests.”

Moosa alleged in parliament that attempts were made to “to hide the boy [Petre] and put the blame [for the accident] on a Maldivian employee in the resort.”

The former MDP parliamentary group leader called on the government to investigate the accident “even if it involves bringing officials from the British government to uncover how this really happened.”

Other MDP MPs expressed concern about the impact of such incidents on the tourism industry and repeated calls for a thorough investigation.

“I don’t know for what reason such a vehicle used in big mountains or at high speeds should be used in resorts,” observed MP Ahmed Sameer, deputy parliamentary group leader of the ruling party.

Several opposition MPs however strongly objected to the motion, arguing that it should not have been tabled in the agenda as it represented “a personal attack” by Moosa.

Opposition Dhivehi Rayyithunge Party (DRP) MP Ali Azim claimed that Moosa was motivated to submit the motion by DhiTV’s continuing coverage of alcohol bottles found in his car – a network owned by Champa ‘Uchoo’ Mohamed Moosa, who also owns the Kuredhu resort.

The motion was however approved for debate in a 29-7 vote.

“Some people who have resorts in this country are using private media to defame others and hide their crimes,” Moosa said, referring to DhiTV.

“It is noteworthy that some media connected to this resort has not covered any news of [the Kuredu accident].”

Moosa also strongly criticised resort owners for “mortgaging state property” and propping up an autocratic regime to enrich themselves.

MP Riyaz Rasheed of minority opposition Dhivehi Qaumee Party (DQP) meanwhile accused the MDP chairperson of corruption – in a US$21 million deal to reclaim land in Thilafushi – and suggested that Moosa should be evaluated to “see if he is even fasting today.”

Independent MP Ahmed Amir cautioned against speculation regarding the accident as foreign media could report “MPs implying in parliament that this was done by Maldivians.”

In his turn, Jumhooree Party (JP) MP Ibrahim Muttalib alleged that police destroyed or hid evidence in some criminal cases “probably on orders from the government.”

DRP Leader Ahmed Thasmeen Ali meanwhile contended that the incident should not be debated at parliament as a police investigation was ongoing.

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