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Dollar shortage threatens to ground local airline sales

Sales agents for some international airlines operating in and out of the Maldives have said that a lack of US dollars circulating within the economy is causing concerns, and in some cases, temporary cessation of their day-to-day operations.

Galaxy Enterprises, which operates as a general sales agent for Sri Lankan Airlines in the country has said that it has temporarily stopped selling airline tickets in the country. The group have forwarded potential customers to the Sri Lankan Airlines official website to process booking requests.

The announcement comes as financial institutions like the Bank of Maldives concede that the high level of imported goods bought into the economy are not being matched by US dollar generating industries inside the Maldives. The bank has said that the disparity had created a “lag” in terms of supply and demand for the currency.

The situation this week led to police – with the assistance of the Madives Monetary Authority (MMA) – trying to crackdown on sales of the country’s US currency beyond the pegged rate of Rf12.75 per dollar at black market rates as high as Rf16.

In the statement issued by Galaxy Enterprises and printed in newspaper Haveeru today, the group said it had been forced to suspend sales of Sri Lankan Airlines flights as it was not receiving sufficient US dollars through the banks to pay the airlines after selling tickets to its customers in rufiyaa. The group said that it will resume selling Sri Lankan Airlines tickets once the dollar shortage was perceived to have “eased”.

Galaxy Enterprises is not alone in witnessing operational difficulties as a result of the state of the nation’s finances.

Tyronne Soza, Maldives Country Manager for Mack Air Services Maldives, which represents the local interests of multinational aviation group John Keells Airlines, said that dollar supply was a major concern for its operations, although it continues to sell tickets.

“We are having some issues with obtaining and paying in dollars right now. As we are part of the John Keells group we have been able to manage the situation though,” Soza said. “It’s illegal to charge customers in dollars and obviously we accept rufiya, but it is difficult.”

John Keells serves as a holding company for aviation groups link Jet Airways and Sri Lanka-based Mihin Lanka.

Not all operators have shared these currency concerns though, with senior management for one of the world’s highest profile airlines, which works through Universal Enterprises in the country, claiming it was “business as usual” despite reports of dollar concerns amidst some competitors.

Last week, Peter Horton, the recently appointed CEO of Bank of Maldives told Minivan News that he believed the country desperately needed new ways of creating a US dollar income to try and overcome the crisis.

“A reality of the economy is that we are importing so very much, and we have so few dollar generating industries. In very simple terms, any downturn in the economy incur losses in the economy when turnover drops below break-even level. That is where we are as an economy – our revenue in dollar terms, in terms of the imports we require, is lagging,” the CEO, a British national, claimed.

“We need to look at ways of keeping dollars in the country as much as possible. [A] number of entitites are taking money out of the country – and are free to do so without exchange control. I think we also need to look at other ways of enhancing dollar revenues through fresh or new industries – and I would include financial services among those industries.”

Horton added that the issue had been compounded by economic uncertainty within international financial markets during the last few years, representing a massive national challenge that needed to be overcome.

However, police attempts to crack down on potential black market dollar sales are claimed by some low-wage expatriate workers to have exacerbated difficulties faced in trying to transfer and provide funds abroad.

Many of the country’s 100,000 foreign workers, particularly a large percentage of labourers from Bangladesh, are paid in Maldivian rufiya by their employers and are forced to change the money on the blackmarket at rates often higher than the government’s pegged rate of Rf12.85, before sending the money to their families.

The set dollar rate in the Maldives is Rf12.75, however during the dollar shortage it has increased to 13, 14, 15 and sometimes even as high as 16 on the black market.

However, banks routinely refuse to change rufiya into dollars, and experts have claimed that the crackdown will do little to address the demand for foreign currency or the budget deficit, which has led to the pegged rate not reflecting the value of the rufiya.

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Comment: In power by default

Throughout Maldivian history, the system of government has been clearly structured on those who had property and connections. The leading positions of the government institutions as of late 2000 were unquestioningly a privilege to those born into aristocratic and landowning families and not based on merit. While they did not contribute to a productive Maldivian society, it was clear that, that system of government was the result of the society’s class structure and the institutional positions they maintained were by default and non debatable.

The system continues to exist even with the change of government and has been replaced by a group of hardcore political activists backed by the affluent and financially successful businessmen that the last regime fostered, holding more than 90 percent of the national wealth. The underclass, which covers at least 75 percent of the Maldivian population, continues to exist as one entity deprived of social standing while selected individuals both in the political and economic environment enjoy individualism and rights to become contributors and producers.

As the underclass continues as a permanent feature of both the regimes, both governments seemingly relied heavily on the pledges of the international community to bring about change. The promised change has been frustratingly slow and political representatives partly blame the lack of timely response and unfilled pledges by the international community being cause for non or slowed down government delivery. Although the country graduating from a least developing country this year onwards based on its per capita GDP of US$4600 (graduation criteria is US$900) the country’s social infrastructure has been heavily financed by development funding and donations. It is further characterised by low income families (16 percent of the population lives in poverty and unemployment rate is over 14 percent), weak human resources and a low level of economic diversification.

As before, most of the government ministries remain dysfunctional, lacking capacity and capability to perform, staffed by the people who are unable to produce results, lead by ineffective but loyal political activists of ruling political party.

Guarding the domain

A large underclass must exist for this model of society to function so that power hungry politicians can continue to dominate the country’s leadership. Within this exist the power hungry businessmen who are unwilling to let members of underclass enter into the realm of the “the privileged rich”. Within this exist the power hungry religious leaders, who try to formalise their control using religious mechanism. The three groups co-exist together relying heavily on each other to protect their existence. At the same time Maldives has a growing underclass indicating political, economic and religious control as three groups struggle to keep their supremacy over each other.

The privileged and the underclass need each other to function. Both the governments maintained the underclass by creating a large and dependent workforce making government the biggest employer in the country, a strategy to safeguard and retain loyalty. People’s values are formed by the structure in the society according to Karl Marx. To maintain functionality, the three groups work to create beliefs and conformity through various social, political and religious tools.

Functionalism at the cost of democratic principles

All the three groups work to create a consensus of belief and behavior (as functionalism has been described by Herbert Spencer (1820 – 1903) and upholding the norms is a function of society. The norms are further defined by rules and regulations that the society needs to adhere to function as a body. Within this type of societal model, anyone who upsets or threatens the norms has to be removed to recreate balance, taken away to prison and removed from mainstream society.

There is no individualism in the Maldivian society except for those in control. Individual’s needs are not validated and only the overall function of society is important. The Maldivian society is thus a singular being – something that can be manipulated and changed as a whole and poverty and inequality are just valid parts of society, so are juvenile delinquency, crime and domestic violence.

The functionalist approach is extremely convenient for politicians and others, who assume to be the sole representatives of the Maldivian citizens and speak out loud for the people while the underclass are not consulted nor are allowed to have any access to the political sphere. The MPs increasingly act in their personal interest as they try to add to their financial remuneration and privileges, political status and social standing.

Behavior has to be acceptable or punished in the functionalist society. As the gaps between the leadership and underclass widen and the income disparity grows, uprisings such as those in the tourism industry will occur. The outbreak of unhappy employees in tourism industry has drawn calls for measures to curb their activities and expression, regulating behavior and introducing new punishments. Attempts to unify religious behavior are an ongoing effort of religious leaders who condone religious freedom of individuals in the Maldivian society.

Don’t rock the boat

Democracy promoting change contradicts functionalism as change in society is seen as disturbance. It is the “don’t rock the boat” model. The groups within the society such as family must promote the norms and children are to do what their parents do and to be what their parents are. Employees are supposed to work without negotiating and be grateful for the hand that feeds them. Religious practices must be observed without questioning. Traditions that do not work for the three leading groups mentioned earlier may be discarded and new practices may be invented through their own consensus as long as they can maintain status quo and their power. Needless to say but people are comfortable when there is stability, status quo and life continues without disruptions.

Conflicting functionalism is people’s economic and spiritual needs that must be satisfied being human nature and cannot be controlled by regulated mechanism. Neither fear as a control tool is effective over a long period nor may rightful behavior as translated into rules serve to control people in the short run. For the society to develop, the change has to happen although it is irritating, but eventually leading to a new adjusted society where balance is restored.

Alliance for power

Would it not be great if the underclass could defeat the “ruling” class? Maldivians were elated in 2003 when the reform movement started. The Maldivians (along with the international community) thought this was the underclass and the suppressed breaking out of a rigid fascist regime. Those hungering for leadership were made up of three power hungry groups tapping on the ignorance of the underclass Maldivians to think they can expect and own a better share of the wealth that the country was earning. Maldivians were willing prey to promises of the leadership following the parties they thought would serve the purpose.

The affluent business community saw it was time to shift over and contribute a puny percentage of their wealth to bring the change. They also saw this as an opportunity to take positions of control so that their wealth could expand further. Later extension of resort lease deals was up for debate in the Parliament where politicians-cum-businessmen sat representing the citizens’ voice. Some MPs and activists in party leadership still claim they are first and foremost businessmen.

The pact between the religious party Adalaath and the then-opposition MDP at the time of the elections in 2008 was the only way religious leaders could secure a powerful position within the new government. Alliance with the likely party to win in the second round of elections was made on mutual advantage of holding power within their domains.

The main opposition saw their advantage in an alliance with the two groups mentioned above, business men representing resources and religious leaders representing norms and practices that the average (underclass) Maldivian did not dare contradict and commanded total obedience to their leaders. Both the groups taking a stand beside the main opposition won the elections.

Democracy is a threat to Maldivian politicians, businessmen and religious leaders because it calls for sharing or wealth and privileges, position and power. Democracy dilutes society as a entity, through its principles promoting equality, fairness and tolerance where the individual and minority are validated and majority will is respected.

Aminath Arif is the founder of SALAAM school.

All comment pieces are the sole view of the author and do not reflect the editorial policy of Minivan News. If you would like to write an opinion piece, please send proposals to [email protected]

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Letter on draconian immigration

Dear Editor,

I am a Maldivian, who is studying in UK. I have been living in UK for the past five years and have always been keen in travelling and exploring other places and cultures of the world.

For much of the westerns and other nations, Maldives is heaven on earth. It is a paradise they all highly value and dream of visiting for once at least in their life time. For they are all true regarding this. And I have no doubt their dream holidays are nothing beyond perfect and excellent during their visit to Maldives.

But they don’t enjoy Maldives only because of its sandy beaches and crystal clear waters. Nor it is only due to the exotic resorts or the delicious food. It is all about the hospitality and the welcome they recieve as well. Maldivians are well known to host their visitors with utmost care and excellent treatment. From the time the forigners land in Maldives and until they leave, they are always treated with a smile. They never face any difficulties or problems at the airport, transit to their hotel, stay in the resort and journey back to the airport. We serve them well with proficiency and excellence. This is how Maldivians are.

But I would like to tell you all some of the experiences I have faced while travelling to other countries. I have to say unfortunately I didn’t face the very same hospitality I expected despite the fact I was also paying for my trip just like the way other foreign visitors do when they travel to Maldives. My passport clearly says on its first page that the Foreign Minister requests the bearer of it to pass Maldivian national to pass freely without any problems for me. I guess this must be their in every country’s passport and to be honest no one cares about what is written on that page.

I went on a trip to Europe trip this winter. I was travelling on a Schengen Visa. I visited Switzerland, Austria, Germany, Italy and France. I was travelling with my study friends who were all British citizens and there was one Malaysian citizen too with us.

At each airport of the above mentiones countries, the immigration stopped me and asked lots of questions which made me feel very unwelcome and uncomfortable. Despite having the Schengen visa and all other travelling documents like tickets and travel cheques, I found myself subjected to unnecessary scrutiny by these immigrations. The French and the German immigration were the worst. My British colleagues passed the immigration in less than a second, without facing a single question from no one. I am not surprised for them as they are EU nationals, but what surprised me was my Malaysian friend. He was treated just like the British nationals and he did not face any questions from them. He even didn’t need prior visa to enter these countries. I was very surprised.

Here I am visiting some countires in Europe who send thousands of tourists to my country every day and I have been treated like some alien trying to intrude in to their property or something. It was very upsetting and I hope no other Maldivian faces this. May be the Maldivian diplomatic passport holders might not face what I have been through, but this doesn’t mean there aren’t simple ordinary maldivians like me who do travel through europe. I believe its time the Maldivian goverment (I mean all of you) try and work more harder with the Schengen blog to include Maldives in their Visa Waiver List. This would make Maldivians travel free without hastle in the EU, just like for Malaysians.

The previous governments foreign minister Mr Fathuhullah Jameel has travelled all around the world on his diplomatic passport but never bothered to do this during his long FM job. But can you all (the new government) do this for us, for the sake of simple ordianry Maldivian Passport holders? I don’t think Maldivians are a risk for the EU as we have visa free entry to UK and Ireland as well. The government could bridge this as a promoting factor for us to get into the Schengen blog. Can you all please do your best to get us travel free and avoid the difficulties at immigration at EU countries? I hope you all will work hard for this and this is my request as a Maldivian from you all. I believe we also deserve to have freedom of movement and be treated with respect just the way we treat the EU nationals when they come to our country, don’t we?

The next I experienced was during last year summer. I was going back home, Male’ from London. My flight was stopping at Dubai and it was a long transit of more than 24 hours.

I didn’t want to stay this long period inside the airport building and so thought of going out to see the city of dubai during this long transit period. To my surprise I needed a visa to go out. I don’t understand why. A person from Lithuania doesn’t need a visa to enter Dubai but here I am, a Maldivian, whose country has more close ties with Dubai needs a visa to see the city for just 24 hours. Any ways I asked for a visa which they issued me for US$75.

Now that’s a lot for a visa of 24 hours, isn’t it? And not only this, the authorities who issued the visa were utterly rude and unprofessional. They were very nice and pleasant with the white Europeans but I noticed they were very different with tone and customer relations with the dark skinned asians. And I was one of them.

I could not believe all this and I was very dissapointed. I did visit Doha also a year ago and faced a similar situation. I had to pay a visa fee to enter Doha too just for two days. I don’t think this is the way we should be treated. Maybe it is an arab thing, I don’t know, but I didn’t deserve it. I don’t think Arabs are treated like that when they visit Maldives. First of all we give them more respect I think because they are Muslims. Secondly they all get to enter Maldives free of visa without having a penny to pay for it. So why did I have to face the opposite when I visited their coutries? They are more rich in natural resources than Maldives and yet I have to pay for visa to see their country but they don’t have to pay nothing to see my country.

This is not fair. Plus I have to face discrimination and rude behavious from them when we treat them with respect and dignity. I believe these things have to addressed at formal level by all of you with these Arab and other countries. And I don’t think its fair to give them free visas when they charge so much from us to visit their country. May be its time and best that Maldives government also charge a visa fee from them too. I am sure their nationals are capable of paying the same visa fee I paid to see their cities for few hours or days. Plus the visa fee could generate some income to our economy too just like the way ot helps theirs. So I think it is better to bring some changes to the famous ’30 day free visa on arrival to Maldives’, maybe make some countries not included in this famous logo.

Maldivians are not generally big time travellers. But there are lots of us who do travel, aspire travelling and wants to travel. If all of you and the government make travel easy for us by asking other countries to make us visa free and provide hastle free immigrations, it can put more maldivians into travelling. Travelling bridges societies and cultures. It opens hearts and unites people. It makes us realise about others in this world and helps us more to realise how much more is there to life. So please can you all work on this. Make travelling easy for us. Ask other governments to make visa free for Maldivian citizens. At the moment there are just a handful of countries where we can go without a visa. I was very surprised to know that I need a visa to enter even Morocco as a tourist, a country whose national made us all muslims. So I guess the foreign ministry needs to do a lot of work.

I appreciate the new look of the website of our foreign ministry. But its sad to know it doesn’t contain a list of the countries where Maldivian citizens can travel to, as a tourist, without a visa. I think this list is very important and should be there on the ministries website (always up tp date). Also surprisingly there is no proper contact email address (for Maldivians) of the ministry given on the website.

I hope this letter is not offensive to any one of you. The purpose of this letter is to let you all know how an ordinary maldivian feels when he is subjected to such taunt by other countries immigrations. And its not my fault that I need a visa to enter those coutries. I hope you all will try to work with other foreign governments to make us visa and hastle free when we travel to other coutnries. For we are all humans and we all deserve freedom of movement, respect and dignity.

IY

All letters are the sole view of the author and do not reflect the editorial policy of Minivan News. If you would like to write a letter, please submit it to [email protected]

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BML Chairman grilled by shareholders

Bank of Maldives (BML) Chairman Adam Manik was grilled by irate shareholders at a general meeting held last night to elect two new members to the national bank’s board of directors.

New BML CEO and Managing Director Peter Horton and Adam Azim, M. Seenukarakaage, were elected to the board.

According to newspaper Haveeru, Adam Manik declined to reveal the amount of dollars released to BML daily by the Maldives Monetary Authority (MMA) in response to a query by a shareholder.

The Chairman said however that the bank has undertaken efforts to increase the supply of US dollars, including issuing loans in rufiyaa to be paid back in dollars.

Adam also told the 21 shareholders in attendance that efforts to collect outstanding loans dating back to 2008 were proceeding slowly due to legal obstacles.

A damning audit report published in January 2009 by the country’s first independent auditor general revealed that BML had granted loans in 2008 in excess of 40 per cent of the bank’s reserve of unimpaired capital – above the ceiling advised by the MMA.

The BML audit report alleged financial fraud and corrupt practices on a large scale, including issuing loans on the basis of political influence.

The report noted that the two largest loans, Rf577 million (US$45 million) and Rf459 million (US$36 million), were issued to Sultans of the Seas and Fonadhoo Tuna Products respectively.

The two loans amounts to 13 per cent of the total loans given by the bank in 2008. Neither loan has been paid back to date.

While the latter company is owned by opposition Dhivehi Rayyithunge Party (DRP) Leader Ahmed Thasmeen Ali, Sultans of the Seas is reportedly a family business of the opposition leader.

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Entertainment not the solution: Youth Minister

The government’s policy to solve problems facing Maldivian youth is not to provide more entertainment facilities but to spur job creation and encourage gainful employment, Youth Minister Hassan Latheef told press yesterday.

Speaking at a press conference at Dharubaaruge convention centre, Latheef said that the government did not believe that the “primary task of youth is entertainment,” adding that a steady income would lead to a more stable life.

A recently concluded survey of 24,000 businesses in Male’, Viligilli and Hulhumale’ revealed that there were over 1,600 unwanted jobs in the Greater Male’ region.

The results of the survey will be published on the ministry’s web site next week.

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HRCM calls for new laws to strengthen healthcare

The Human Rights Commission of Maldives (HRCM) called on the government today to formulate new legislation to strengthen and monitor health services delivery in country.

In a statement issued on the occasion of World Health Day the commission noted the lack of adequate laws to regulate the health sector as well as difficulties in enforcing existing regulations.

The delivery of health services in the country need to be developed, it continues, while stronger monitoring mechanisms should be established to protect the rights of citizens, particularly as the government’s policy was to privatise the health sector.

Among the “required basic legislation” include a public health law, a food and drug law and medical negligence or malpractice law. These laws, the HRCM notes, “are needed right now.”

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Expatriate hospitalised after mugging

An Indian national was stabbed in the back and robbed of Rf10,000 (US$778) in cash by two men on a motorcycle at around 11:00am this morning near the Artificial Beach in Male’.

Local media reports that the Indian man, Augustin Raj Elias, was attacked in Henveiru Roashanee Magu while he was on his way back to the Plaza Textile shop where he is an employee.

An employee at the shop explained to newspaper Haveeru that the victim was returning from the bank after changing Rf500 notes, adding that the perpetrators must have tailed him from the bank.

The employee said that Raj had been taken to the operation theatre in the afternoon and his condition was improving.

Eyewitnesses meanwhile told local media that a security camera at the nearby PC World shop must have caught the incident.

While the number plates had been removed from the Yamaha motorcycle, eyewitnesses said, the two men had not covered their faces for the daylight robbery.

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Public Accounts Committee “destroying” economy: DRP MP

An amendment proposed by minority opposition People’s Alliance (PA) MP Ahmed Nazim to the Pension Act of 2009 allowing MPs to opt out of the retirement pension scheme is intended to “destroy the economy”, opposition Dhivehi Rayyithunge Party (DRP) MP Abdullah Abdul Raheem claimed at parliament yesterday.

“At a juncture when the country is facing an economic tsunami and we’re trying to save ourselves [from it] this amendment has been proposed here today, by those in the Public Accounts Committee who know very well what the economy is, with the intention of destroying the economy,” said Abdul Raheem (pg 83).

Raheem added that MPs’ participation was needed to ensure the success of the fledgling pension system.

Deputy Speaker Nazim’s amendment, backed by most MPs of the ruling and opposition parties, would also allow the President, Vice-President and Justices of the Supreme Court to opt out of the retirement pension scheme.

Concluding the debate, Nazim, who also chairs the Public Accounts Committee (PAC), revealed that 34,000 government employees had already joined the pension scheme while an additional 25,000 private sector employees had submitted applications.

Nazim argued that exempting 86 persons would not affect the success of the scheme. The amendment will be put to a vote at the next sitting on Monday.

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Q&A: CEO of Bank of Maldives, Peter Horton

The Bank of Maldives (BML) has appointed British national Peter Horton to the position of CEO, replacing Ganesan Subramanyam who left the country in May 2010 amidst an internal investigation concerning allegations of sexual assault. Minivan News spoke to Horton about the challenges facing the bank, its strengths and opportunities such as developing the Maldives as an offshore banking destination for nearby emerging economies such as India.

JJ Robinson: What was it about your professional background that makes you suitable for the role?

Peter Horton: The very long story is that I’ve been in banking since 1984, spending the first 15 years in the UK with Barclays (one of the UK’s four major banks). I then moved out to Africa with Barclays operating initially as a risk director for the business, at the time the most profitable part of their business. That was in Botswana.

From there I ran Barclay’s corporate turnaround teams for the whole of Africa, so I have huge experience dealing with distressed portfolios and problem lending. I lived in Nairobi (in Kenya) for three and a half years.

Afterwards I spent time building my own company in South Africa, before going back into banking in the Bahamas with a subsidiary of the Canadian Imperial Bank of Commerce, where I was in charge of corporate banking. If there is any theme in my career it is one of building strong teams and re-engineering teams and businesses internally and externally. In many ways I’m probably more equipped for this role with BML than I first realised.

JJ: What were your reasons for accepting the BML role, how did it come about, and why did you decide to come to the Maldives?

PH: At this particular stage of my career I was looking for the right step in terms of progression and development. This is my first CEO role, although not my first leadership role.

It really fulfilled a number of my requirements. Here is a business with challenges facing it, and a CEO role with some degree of autonomy, and just happens to be in the Maldives. I was happy to come here – although I have limited experience of Asia, my wife is from Indonesia.

I am very hungry to develop myself and I wanted a challenge. I also know that at my age it’s important to advance your career properly, and I never hide from challenges or taking responsibility for my actions.

The bank was looking through many channels to recruit and the role came to me through an HR consultant I was working with in the UK. He recommended it and the rest is history.

JJ: Did you hear anything about the fate of your predecessor?

PH: It’s fair to say is that Google is a very powerrful tool and I’ve seen a lot of things, some of which might be true and some might not. Obviously on arriving here it was very important to understand the history of the business. Certainly I’ve taken time to understand some of the challenges the business has had to face in the last few years.

My predecessor did go some way towards making changes in the business, and I needed to understand where it was going to. I’ve spent the first two months learning the recent and distant past.

JJ: What do you see as the key challenges BML is facing?

PH: I think many [challenges] will dovetail ino each other. We have a very public and a very high non-performing loan problem. Whereever you are in the world, that is an impediment to any bank’s performance, and it has a carrying cost. It also creates a certain mood around the business internally and externally.

The economy we are operating in creates a challenge. We like any bank in the Maldives are restricted by the size of our balance sheet and in respect of having a single borrower limit, and also crediential industry limits. Knowing that the bulk of the industry here is tourism, but also having a limit up to which we are not able to lend any more to tourism, becomes a constraint and a challenge.

I think the other challenge we face is around service. I think this business grew very rapidly, not just the loan base but in terms of customers, especially if you look at what BML was 10 years ago.

That goes some way to explaining why we have such big queues in the banking hall. When I came out for my interview I took the time to walk around Male’ several times – and go in very incognito to see the BML branch. I have to experience what the customer experiences , and I don’t think that experience is what any of us want.

So for me a challenge is to create a great customer experience. That is a challenge: serving the segments we have chosen to serve, but acknowledging some aspects in which we have to do better. Some of that is service, some of that is embracing new technology, other looking is at our processes. The customer base often grows faster than processes.

Those are the key challenges: a challenging and relatively flat economy – we haven’t even touched on the dollar shortage – a high level of non-performing loans, concentration of activity in the economy which is at odds with what any bank has to have for a balanced portfolio, and personal service issues.

JJ: What are some of the ways you are planning to address these challenges?

PH: Without sidestepping the question, I am at the point where I am formulating a bigger strategy for the bank and it is only correct that I speak to the board and engage them first.

What I can say is that every single one of those issues we can address, and we can deal with. None of the challenges I’ve outlined daunt me. What I do not want to do is to rush into inappropriate quick fixes. I want this business to be successful in a very sustainable way.

We can talk about the challenges, but also focus on the upsides of the business and start to capitalise on them better than we have been.

JJ: What are some of key areas of potential for BML?

PH: Some of this is again part of the strategy. But as to the strengths: we already have some great innovation within BML. We issue credit cards, debit cards, and have invested substantially to be a card acquirer serving domestic and resort communities. We have unparalleled reach in this country. We are in every atoll and do our best to reach clients even if we don’t have a branch near them. It might not be the best in some respects, but we are trying.

We bank more parts of the sector in this country than any other bank, and we have some outstanding talent within our business.

JJ: One of the perceptions here is that despite the resorts being a major part of the economy and certainly moving a lot of money around, they tend bank outside the country – either because of concerns relating to the stability of the Maldivian economy, dollar issues, or because they already have a head office based overseas somewhere like Singapore or Thailand. Is there an issue attracting these businesses to bank locally?

PH: Every international business is going to to an international treasury function. I’ve seen it in Africa and the Caribbean. They will move funds around as it suits them best, and it isn’t necessarily negative towards the Maldives. [A company] in Sydney might have an offshore unit in Singapore for tax reasons because that suits them better.

If we were able to provide an offshore banking alternative, it is not inconceivable that the Maldives would attract some of that global flow of cash by having a favourable tax jurisdiction here. It is certainly a big plus.

I think that’s always what you are up against in terms of flow of cash. Ways we can attract more dollar flow to stay here is  probably by lending more dollars to make it stay here. If I am lending in dollars I am making a dollar profit – that dollar profit stays here because we don’t have dividends going outside the country. If we’re able to address the balance sheet and dollar contraints we have, that to me would be a way to increase the level of dollars that stay in the country.

Merchant services is one aspect – whilst the dollars might flow out of the country, we do make a profit on it – a profit I can lend, because my profits stay here. Beyond that it is very difficult to dictate to people where their cash should and shouldn’t be, and the decsions are largely dictated by people outside the country anyway, at least for the international groups.

JJ: What were some aspects of the Bahamas’ approach in making itself a favourable tax environment for attracting offshore banking, and are they things that can be applied in the Maldives?

BH: Some of it is historic [in the Bahamas], and that can be an advantage and a disadvantage. It is a disadvantage because you get very staid in your ways and you don’t move as quickly as you should. But the advantage is that you build up in your economy local and imported people who are experts in these areas. The legal and accountancy professions are very experienced in the industry and there are lots of local staff who are qualified trust professionals.

But some of the things that are a real advantage – a colossal advantage – is the Bahamas’ geographic proximity to the US mainland. But if you look at the world’s emerging economies, which are moving West to East, our proximity to India and to a lesser extent Sri Lanka, and with direct flights to most South-East Asian cities, should be a huge advantage for us.

The majority of offshore banking centres do rely on imported people and instiutions. They are truly migratory these days. We are in a global economy now where things move overnight, so if you were able to do the things to attract people, it is very, very doable.

The other thing is having sufficient protection around the business – having a strong regulator, a strong legal system, and probably some degree of monetary protection. If a private bank is bringing dollars into the country, there needs to be some degree of certainty that the dollars can sit in the country quite safely. A lot of the things are already here, and not many things need to be done. There is certainly quite a lot of sophistication in the Monetary Authority, certainly the Maldives’ geographic location is a huge plus, and you already have a tax regime which is friendly to anybody, more or less.

It is doable, but it shouldn’t be considered easy. You also have to decide on a specialisation – if you look at the Carribbean, jurisdictions tend to specialise in one area so you have to pick what horse you’re going to ride as well.

JJ: The ongoing dollar shortage is now among the top issues everyday people in the Maldives are facing. What is your impression of the origins of the dollar shortage, how it can be addressed, and do you agree with the government that it is an internal problem, or is else a product of outside factors?

PH: I’ve only been here for seven weeks so it is difficult to say. A reality of the economy is that we are importing so very much, and we have so few dollar generating industries. In very simple terms, any downturn in the economy incur losses in the economy when turnover drops below break-even level. That is where we are as an economy – our revenue in dollar terms, in terms of the imports we require, is lagging.

We need to look at ways of keeping dollars in the country as much as possible. You touched on the fact that a number of entitites are taking money out of the country – and are free to do so without exchange control. I think we also need to look at other ways of enhancing dollar revenues through fresh or new industries – and I would include financial services among those industries.

It is also an impact of the global [economic recession], and there are only so many things the Maldives’ economy can do. I know too little of the history of the dollar shortage to know the precise causes of it, but I agree that it is a real challenge facing the whole country right now.

JJ: One of the perennial issues is that most of the banks impose a quota on the amount of dollars they exchange for rufiya every day. Obtaining those dollars seems to be an issue of personal connections at whatever bank you happen to bank at – an issue of who you know. Do you forsee a situation where there will be a free-flow of dollars in the near future? Or do you think it will get worse before it gets better?

PH: I can’t really say if it will get worse before it gets better. I don’t see it [improving] in the short-term without some form of intervention, and correction of what is a difficult day-to-day problem for us. I think it may be as good as it gets right now, and it will be something more than today’s economy that will be required to correct the issue. It is hard to say – it is not going to get much better.

JJ: How does the dollar shortage affect the banks? The government is struggling with the problem and people are quick to blame “greedy banks hoarding dollars”.

PH: As all banks do we have an assets and liabilities committee and that is a sign of a bank very actively managing its balance sheet and its liquidity. As with every bank right now, you have a number of calls on your dollars. You have dollar committments yourself – you may have intermediary credit lines, commitments on credit card settlements you have to meet. If you are issuing credit cards to people using them overseas, that is a cash cost to me. We also have committments to try and help our customers as best we can.

However the inflows of dollars we have are really only in two areas – one is acquiring credit cards, so all the dollars from tourists using credit cards come through our accounts and might not stay with us, but we do make some fee income on those [transactions], and the second area is our lending. Hopefully what we earn on our loan is more than we lend once we settle our funding cost. It is a daily job managing that liquidity. We don’t have the luxury of not being able to monitor it closely.

[The dollar shortage] is very challenging for us because we see customer needs we are unable to fulfill, whether it be the guy trying to get money for medical treatment or the trader trying to buy goods from overseas, and we just can’t provide it because we haven’t enough money. We are credentially holding sufficient dollars to cover our short, medium and long-term commitments – which we have to, and which will be our first priority always. However after fulfilling that requirement we not hoarding any dollars – we are doing our best to satisty as many people as fairly as possible.

The challenge for us is that as a bank for the masses that is a very broad spectrum of people – we try to devise systems that are even-handed and fair, but it is difficult to satisfy everybody.

JJ: What kind of impact does it have on foreign investment when you go to a bank and find a withdrawal limit on your account, or a set exchange you can do in a day?

PH: A lot of the foreign investors will almost see their investment as being in a different country [to the Maldives], because you have a domestic economy and an international economy here. The resort business, which is substantially where the international investors are coming from, has clear dollar flows, and no restrictions on funds being repatriated.

Those companies can only speak from their own personal experience, and their own personal experience is probably that they’ve never had a problem getting money out of the country when they’ve needed to, after they’ve fulfulled their obligations.

I think for those without dollar inflows, it is a challenge. Anybody doing due diligence in the country is probably going to look at that as an issue. It is less of an issue if you are in a dollar-dominated business – I’ve spoken to resort owners who have a problem paying their workers because they are trying to get cash from the bank. You could argue that’s a separate matter, but for the bulk of international investors it’s probably not an issue.

If I was coming in to invest in something that wasn’t exclusively earning dollars, then I would have a problem because any investment you make is on the basis of a dividend coming to you. If you can’t repatriate money – through a dividend or a head-office charge – then the uncertainly would make it a consideration for you. Whether it’s a deterrent depends on the potential profit and competitive advantage, and that might be big enough to mitigate those issues. But it is undoubtedly an issue for incoming investors.

JJ: The MMA has been quietly replicating a successful mobile banking system popularised in Kenya by Safaricom’s M-Pesa. What is the status of mobile banking here and what kind of impact do you think it could have?

PH: The first thing about M-Pesa is that it is a cellphone company initiative – Safaricom – as opposed to what MMA is looking at here, which is a bank-led initiative.

JJ: Didn’t Safaricom effectively become a bank?

PH: Yes, but interestingly – and I havent reasearched it enough – they are taking deposits, but are not registered as a bank. The way they get around it is by converting deposits to ‘mobile currency’ which has a 1:1 value with the local currency. They buy and sell that currency at time of deposit and withdrawal – a highly successful model.

Yes the MMA have been engaging with BML, I have reviewed some of the material, but I’ve asked MMA to share more information with me. We already have a mobile banking option as part of a suite of electronic banking options that we offer to our clients. I think the sentiments and objectives of the MMA are first-class, which is to reach the unbanked, or partially banked. We have been doing that as BML – we have branches in the atolls, and we have a dhoni going around the islands – I suppose having a floating bank really is mobile banking!

I think the whole area of using techonlogy to break down barriers is exciting and appropriate, however within that there are solutions that are not appropriate and there solutions that are appropritate.

What we have to do is be careful and not rush in because something looks wonderful but is not right. At this stage we have to tread carefully to make sure it is right for customers primarily, and commercially right for the bank. We cannot enter into things that are substantially loss-making to us, or substantially wrong for us in terms of the risks it exposes us to. Equally we wish to the serve the customers, that is something we can achieve.

I’m very mindful of the difficulties some people have banking with us right now – or in having access to banking at all. I do want to bridge that, and that is a mandate that is implicitly BML’s. Once you are a bank to the masses you are a bank to the masses for life; you can’t go backwards from that.

We are genuinely proud of that, but it is important to look at how we can do it efficiently, with good serivce, and as a cost to business. It should always be profitable – we are not here to be a charity.

JJ: How much autonomy does BML and the CEO’s position have? How far are you able to operate independently of the MMA or the government?

PH: We have a very active board, and it is a board with plenty of experience in many different directions. The relationship between the board and its sub-committees are excellent, and I don’t want autonomy that doesn’t have that. We have a very strong corporate goverance structure and I think that comes out of the previous areas of criticism of the bank, which have since been corrected. They are robust and they work.

We work with the regulator, and I haven’t seen anything that would stop us working as a commercial entitity. We are commercially focused and operate as a commercial entity. I have not sensed any politics in my time so far, in terms of the business.

We know we’re regulated and have a generally good relationship with the regulator. I’ve met with officials and they are doing their job properly and professionally. I don’t feel constrained, but neither do I feel I can run off and do crazy bad things. Which is how it should be – we are properly regulated and governed.

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