Business & Tourism – Page 59 – Minivan News

Waheed opposes GMR’s concession fee deduction, seeking a “solution”

President Dr Mohamed Waheed Hassan has said that the government is seeking a “solution” to the deduction of US$8.1 million from concession fees paid by GMR, the Indian infrastructure giant which has been developing and operating Ibrahim Nasir International Airport (INIA) since it was awarded the concession by former President Mohamed Nasheed’s administration in November 2010.

The government received only US$525,355 out of an expected US$8.7 million in concession fees for the first quarter of 2012, after GMR deducted the Airport Development Charge (ADC) chargeable under its contract but which was thrown out after a Civil Court case on the matter was filed by the opposition during Nasheed’s tenure.

The ADC was intended to be a US$25 fee charged to outgoing passengers from January this year, as stipulated in the contract signed with GMR in 2010. The Civil Court blocked the fee on the grounds that it was essentially the same as a pre-existing Airport Services Charge (ASC), and that any new fees would constitute a new tax and was subsequently required to go through the People’s Majlis.

The case was filed by then-opposition Dhivehi Qaumee Party (DQP) – which had opposed the handing of the airport to GMR.

“I do not believe [the ADC] can be charged in the current situation because of the court’s decision,” Dr Waheed stated while speaking to the media at the inauguration of the Civil Air Navigation Services Organisation (CANSO) Asia-Pacific Conference held today in the Kurumba Maldives Resort.

According to the President, GMR can only take the Airport Development Charge following the “completion of all necessary legal procedures”.

“We are now having discussions with GMR. The government has now formed a team. As they are proceeding with the discussions, I believe a solution will be found without further delay,” President Waheed noted.

“Some of the things related to [the ADC] must be coordinated with the parliament. Therefore, when parliament convenes after the recess, we will submit the matter. So the work will proceed with parliament’s decision,” he said.

Parliament is now in recess until early June.

Managing Director of the Airports Company Mohamed Ibrahim was recently quoted in the local media as saying that the current administration does not support the decision of former President Mohamed Nasheed’s government to allow GMR to deduct the ADC from the concession fees.

GMR has been asked to reimburse the deducted amount, Ibrahim said.

GMR has not commented recently on the subject, however it noted following the civil court ruling that the payment of a development fee was “a common concept in many airports globally”.

“The reason for the inclusion of ADC in many global concession agreements is to address the funding needs to meet the investment model required to upgrade and develop new airport facilities at significant costs,” GMR stated.

The company further stated that the charge was included in the concession fee proposed between GMR and the government in 2010.

Speaking at the groundbreaking ceremony for INIA’s new terminal on December 19, then-President Nasheed said he wished to assure GMR that the government was “200 percent behind your contract, and every single other contract the government has signed with any other foreign party in this country. Not just contracts signed by our government, but also contracts that any ruler of the Maldives has signed with any party. We will honour it.”

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Rise in female unemployment, growth in gender pay disparity

A woman working in the Maldives between 2006 and 2010 monthly earned a third less than her male counterpart in the same job, according the results of a new survey by the Department of National Planning, while young female entrants are struggling to find jobs.

High female unemployment

According to the ‘Household Income and Expenditure Survey 2009-2010’, 38,493 people (28 percent) were unemployed in 2010, of which 14,142 (37 percent) were male while 24,351 were female – almost double the male rate of unemployment.

The report highlights that between 2006 and 2010 unemployment increased by 20,000 – an increase of over 100 percent. The number of jobless women and men rose by 93 percent and 141 percent respectively.

According to the report, unemployment continued to be highest among females. In 2006, the overall unemployment rate for women was 15 percent, increasing to 39 percent in 2010, while male unemployment increased 10 percent to 19 percent in the same period.

Furthermore, nearly half the population of working-age women (45 percent) were recorded as not economically active, while only a fourth of the male working age population fell in this category. However the study did not take into account the high proportion of women working in small household-manufacturing activities, or those working on industrial islands or resorts – which if included, will significantly affect the results drawn under this survey.

While 40 percent women surveyed reported the reason for their unemployment as “unable to find suitable employment”, the second highest reason for female joblessness was due to their “engagement in household chores”. This was followed by “lack of opportunities” and “school attendance”.

The report also concluded that most unemployment existed in the young age groups, with the 15- 19 years and 20 – 24 years age group accounting for about 43 percent of the unemployment in the country. Out of the 17,083 unemployed youth, 51 percent are males, and 49 percent female.

The planning department stated that “for policy purposes, it is very important to decipher the reasons for the high levels of unemployment, in the youth age group as well as among the females, and understanding the differences between locations.”

Among the reasons for unemployment in the youth group (15 – 24 years), “unable to find suitable employment” ranks the highest followed by “lack of opportunities” and in third “youth engaged in studies”, according to the survey.

Struggle for work

Employment of males increased four percent during the four year period, while employment of women fell seven percent.

The planning department concluded that “this indicates a huge influx of ‘new working age population’ to the labour force, of which more male entrants succeeded in obtaining a job while the fairer sex did not.”

“It is clear from the rising levels of unemployment that the Maldives has been unable to create jobs to accommodate new job seekers. Particularly young new entrants, and specifically females in the job market, struggle to find a job.”

“For males, it is the age groups at both ends that experience significant unemployment, while for the females, all age groups have similar unemployment rates except for the 65 years and above,” the department added.

Between 2006 and 2010, the total working age population increased significantly, however, “new jobs did not emerge to absorb this huge increase, boosting unemployment,” the report observed. “In fact compared to 2006, in 2010 there were close to 600 fewer jobs in the labour market.”

The total larbor force amounted to 136,886 people in 2010, of which 45 percent were women.

According to a UNDP report “Women in Public Life in the Maldives” published last year a “considerable gap” exists in women’s opportunities in taking active part in economic and political life” while “there were no policies in place that provide equal opportunities for women’s employment.”

“The absence of childcare facilities make it difficult for women to remain employed after they have children. The HRCM also received reports that some employers discouraged women from marriage or pregnancy, as it could result in employment termination or demotion,” the report said.

Restriction on women’s mobility and reluctance from family members to allow women to travel alone to other islands for work were also identified as key obstacle to employment.

While the tourism industry contributes indirectly to over 70 percent of the national income, a report published in September 2011found that social stigma prevented women from working in the sector.

According to the study, “Women in Tourism: Challenges of Including Women in the Maldivian Resort Sector”, Maldivian women accounted for only three percent of all women working in the sector – which was already 92 percent male dominated.

Gender earning gaps

The planning department found during the survey that “similar work paid different remunerations depending on sex and location.”

According to the report, on average a male earned Rf7036 (US$456) per month, whereas a female earned about a third less of what a male earned – Rf4674 (US$303). This discrepancy is observed across Male’ as well as the atolls.

For example, in the ‘Financial Intermediation’ and ‘Extra-territorial’ industries, which account for highest monthly incomes, a male earned more than Rf11,000 (US$713) whereas a female in this same industry earned 19 percent less – Rf9000 (US$583). Men earned more than women in almost all industries studied.

Meanwhile, legislators, senior officials and managers across the board on average earned the highest monthly income, with males in this occupation category earning more than Rf13,000 (US$843) while females earned only a little more than Rf 9000 (US$583).

“Those employed in Male’ earn more than those in the atolls for all industries except quarrying and the financial intermediation industries,” noted the Planning Department in the report. “This signifies that across all industries, males are paid higher than females and earners in Male’ are paid higher than those in the atolls.”

“It is interesting to study the returns to employment for wage earners by occupation, by location, and gender. The question why males are paid higher incomes than females, for the same jobs and in the same occupation or same industry, is worth additional research,” the department suggested.

Financial intermediation sector and extra-territorial organizations and bodies sector were found to have the slightest indication of gender balance in the workforce, while all other industries were dominated by male or female.

More women were employed in elementary occupations with a substantial 21 percent increase while male employment decreased in this occupation by three percent, the report noted. A high proportion of these jobs are concentrated in the public administration, with a higher share of women amongst the government employees.

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MATI concerned over “concerted international campaign” against several resort owners

The Maldives Association of Tourism Industry (MATI) has issued a statement expressing “serious concern” over what it describes as a “concerted international campaign” against several of the country’s resort operators.

MATI claimed that calls from the Maldives Tourism Advisory (MTA) for tourists to avoid certain properties on the basis of ownership were “libelous in the extreme”, as the allegations against the tourist resort operators “have not been proven either through an investigation or a court of law.”

The MTA website features a ‘traffic light’ system with “red” resorts recently appearing to have been expanded to include an assortment of 18 properties owned by Vice President Waheed Deen and senior figures associated with the new ruling coalition, including Jumhoree Party (JP) Leader Gasim Ibrahim, Progressive Party of the Maldives (PPM) MP Abdulla Jabir, and Hussain ‘Champa’ Afeef.

MATI claimed that “unsubstantiated charges directed at some resort operators [will] result not only in loss of business at their resorts, but in loss of reputation and standing in international markets and the global community.”

“A call to boycott the resorts could [also] lead to enormous loss of business and lay-off of resort staff and support workers, not to mention those several small businesses that cater to the tourism industry that will be affected.”

The resort body accused the campaigners of “not having the decency to come out in the open” and “hiding behind the safe veil of the internet.”

“It is our belief that the several accusations and charges directed at the operators of resort businesses must be proven in a court of law before these businesses are subject to industrial action or denunciation.”

The MTA yesterday released a statement in response to MATI, emphasising that it was not calling for a boycott but rather “supplementing” existing travel advice from the UK’s Foreign and Commonwealth Office (FCO).

“Visitors choosing to be selective and avoiding resorts tainted by the actions of their owners might lead to some loss of business to these resorts, but we are quite convinced that it would not have an overall impact on the economy of the Maldives,” the MTA said in a statement. “Nor would it seriously affect the prospects of employment for Maldivians. This is proven by the government’s own figures showing a healthy increase in tourism arrivals.”

“While MATI mentions investigations of resort owners in a “court of law” it can clearly be seen that the Maldivian judiciary would be an inappropriate institution for such an investigation, given that one of MATI’s senior members (and whose resorts we recommend avoiding) sits on the Judicial Services Commission (JSC), the body tasked with overseeing the judiciary,” the MTA noted.

“”The only ‘investigation’ that we are aware of at present is the Commission of National Inquiry (CNI). This is deemed to be neither serious, timely nor unbiased by international observers and most Maldivians. No serious efforts have been made to address the deficiencies in this investigation, and they do not involve the resort owners mentioned in the MTA.

“The MTA always carefully considers all the available facts from several sources when recommending resorts to be avoided. There is no necessity to await ‘investigations’ and “courts of law” (as the MATI statement suggests) as MTA recommendations are based on important information that serves to enable visitor choice.”

Quarterly tourism figures published by the Maldives Marketing and Public Relations Corporation (MMPRC) showed a 3.3 percent rise in visitor arrivals compared to the same period in 2011, however this was lower than the 12.6 percent growth seen in the first quarter of 2011 compared to 2010.

Growth in Chinese arrivals slowed dramatically due to cancelled charter flights, while several of the country’s mainstay markets declined – including Italy, France and the UK. Russian, German, Swiss and Middle Eastern arrivals showed strong increases.

Tourism Minister Ahmed Adheeb and former Tourism Minister Dr Mariyam Zulfa were not responding at time of press.

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Finance Committee proposes ceasing Aasandha scheme in private hospitals

Parliament’s Finance Committee has suggested ceasing the country’s universal health care scheme Aasandha in private hospitals, citing that the scheme would not be economically viable unless private hospitals were excluded.

The decision to do so will only be confirmed after parliament passes the committee’s report. If the parliament does pass the report, the Asandha service will only be available in the government’s Indira Gandhi Memorial Hospital (IGMH) and other government health centers and health corporations around the country.

However, medical services that are not currently available in IGMH would still be available from private hospitals and clinics, but the new arrangements would require a doctor’s referral to use such services, according to the report.

The Finance Committee’s report, compiled last week, also suggests that in order to reform the scheme, all political positions including parliamentarians and those for which parliament sets the salaries be excluded from the scheme, and that Auditor General conduct a complete audit of the scheme to ensure the absence of any fraudulent transactions.

Earlier, the Health Ministry suggested to the Finance Committee that a co-payment mechanism be introduced to the scheme in order to mitigate the system’s spiraling costs.

However, members of the committee were keen not to impose any fee on the public, and insisted that the focus of efforts should be on reducing costs and introducing controls that will reduce demand over time.

The scheme came under fire after the new government of President Mohamed Waheed Hassan came to power in February 7, which claimed that the scheme’a current rate of expenditure threatened to reach Rf1 billion (US$64.8 million) on an approved budget of Rf720 million (US$46.6 million).

The government has anticipated its annual spending will be Rf2 billion (US$129.6 million) over budget this year, after the International Monetary Fund (IMF) warned that economic growth and stability in the Maldives were unlikely to be maintained “in the medium term” unless the government substantially cut its spending.

The President’s Office claimed two weeks ago that figures showing that 150,000 people had used the healthcare scheme a total of 250,000 times indicated that something must have gone wrong with the system.

Minivan News tried contacting Minister of State for Health and Family, Thoriq Ali Luthfee for his comments on the report, but did not respond at the time of press.

Health Minister Dr Ahmed Jamsheed was also not responding at time of press.

Opposition Maldivian Democratic Party (MDP) MPs, MP Mohamed Shifaaz, MP Ilyas Labeeb and MP Imthiyaz Fahmy criticised Finance Committee’s actions alleging that since the parties supporting the current government have a majority in the Finance Committee, the committee was trying to find excuses to stop the scheme.

The MPs stated that the party would take “all necessary measures” to prevent the government from manipulating the scheme.

Aasandha is a public-private partnership with Allied Insurance. Under the agreement, Allied will split the scheme’s shared 60-40 with the government. The actual insurance premium will be paid by the government, while claims, billing and public awareness will be handled by the private partner.

The service was initially intended to cover emergency treatment, including treatment overseas if not available locally, along with all inpatient and outpatient services, domestic emergency evacuation, medicine under prescription, and diagnostic and therapeutic services.

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Middle East arrivals up 77.8 percent in first quarter 2012

The Maldives has registered a 77.8 percent increase in tourist arrivals from the Middle East region in the first quarter of 2012 compared to the same period last year, while some traditional markets have shown signs of recovery.

The quarterly report from the Maldives Marketing and Public Relations Corporation (MMPRC) speculated that the Middle Eastern increase came following the opening of several hotel chains from the region.

“In particular it is important to note the exceptional growth from the Saudi Arabian market,” the report noted.

Arrivals from Germany increased 20.4 percent on the back of improved economic conditions and increased flight frequency, while Switzerland increased 24.5 percent – largely due to the availability of direct flights from Zurich.

However several of the country’s other high-volume markets registered substantial decreases. Arrivals from the UK – the Maldives’ second largest market – fell 12 percent, while Italy and France also recorded a decrease. Small increases in arrivals from Denmark and Norway were offset by declines in arrivals from Finland and Sweden..

Growth slowed in Chinese arrivals, which last year eclipsed the UK as the country’s largest market by volume, with a 16.4 percent increase on the back of cancelled charter flights due to the country’s ongoing political turmoil. Tour operators suggested growth would return in June-July, the MMPRC noted.

Russian arrivals, 19,919 of whom accounted for 7.8 percent of the country’s market share, increased 19.7 percent: “Eastern European region remains the most important emerging market for Maldives,” the report noted.

The MMPRC identified South Africa, India and the USA as potential new opportunities for Maldives tourism, but noted the need for improved flight connections. Growth in the Indian market was hampered by the lack of air connections and the financial difficulties of Indian airline operators.

“Much interest has been generated amongst the Americans with the emerging trend in live aboard cruises in the Maldives,” the MMPRC observed.

Arrivals from selected markets and growth in first quarter 2012 on 2011:

Germany 26,355, +20.4% (10.3 percent market share)
Switzerland 11,803, +24.5%
China 46,662, +16.4%
Russia 9,919, +19.7% (7.8 percent market share)
South Korea 4329, +21.7%
France 25,195, -1.3% (9.8 percent market share)
UK 24,395, -12%
Italy 26,939, (10.5 percent market share)
Japan 8114, -5 percent
India 6179, -10.4 (2 percent market share)
Austria 7152, +11.4%
South Korea 4329, +21.7%
South East Asia (inc Indonesia, Malaysia, Philippines, Singapore and Thailand) 4515, +12.1%
USA 3566, +6.6%)
Middle East 4344, +77.8% (1.7 percent market share)
Spain and Portugal 1828, -1.33%
South Africa 576, -21.2%
Northern Europe 4499, – 9.2% (Denmark, Finland, Norway and Sweden)
Israel 713, +61.7%
Turkey 1088, +20%

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Withdrawing US$1.2 million case against Meridian Services “a mistake”, says STO

A request to withdraw a US$1.2 million case against Dhivehi Qaumee Party (DQP) MP Riyaz Rasheed’s Meridian Services Pvt Ltd was sent to the court “by mistake”, the State Trading Organisation (STO) has said.

Managing Director of STO Shahid Ali was quoted in local media as stating that the letter had been mistakenly sent, and they had intended to delay the hearings.

“We sent the letter to the court regarding the case, because there were decisions that had to be made by the board of directors, and since the company did not have the required legal number of board of directors on STO’s board, we had intended to ask the court to delay the hearings,” Shahid Ali told newspaper Haveeru.

“But in the phrasing of the letter sent to the court from the STO, we had mistakenly asked for the withdrawal of the case. That letter was sent to the court asking to withdraw another case,” he added.

In a press statement received by Minivan News today from the STO, the organisation stated that the letter sent to the court had “typing errors” and that due to these errors, the context of the letter had differed drastically from that of what the organisation had originally intended, which was to delay the hearings until the board members had been appointed.

The statement also stated that the STO would resubmit the case again to Civil Court within a period of seven days, and the works were already underway in preparing the necessary documents that would be submitted to the court.

The case concerned an unpaid sum of money worth Rf 19,333,671.20 (US$1,253,804.88), regarding Meridian’s use of the STO’s credit facilities.

Civil Court Judge Abdulla Jameel Moosa on Sunday ruled that the case was dismissed, in response to a letter sent by the STO requesting the case be withdrawn.

Judge Moosa in his verdict stated that the court had received a letter from the STO requesting the court withdraw the case.

The letter sent to the Civil Court by STO stated that “there were decisions to be made by the STO’s board of directors, and that after the “change in government”, the board did not have a sufficient number of members left to meet quorum and hold a board meeting. Therefore, the board was unable to make the required decisions, the public company stated.

Initially, STO and Meridian Services made an oil trade agreement on 31 March 2010, which gave Meridian Services a credit facility worth 20 million rufiyaa (US$ 1,297,016.86) for purchasing oil from STO, and that payments had to be made within a period of 40 days.

However, in August 2010, STO lowered its credit limit from Rf20 million to Rf10 million (US$648,508.43) and shortened the payment period from 40 to 30 days.

Meridian Services sued the STO for breach of contract claiming that STO had brought in the changes to the credit facilities without giving the required notice of one month, in the event that the STO decided to change the credit facility with regard to a policy change.

However, Meridian Services lost the case after Civil Court Judge Abdulla Jameel Moosa ruled in favor of STO, stating that the STO had not breached the contractual terms agreed between the parties and that the documents the STO had submitted to the court was evident that it had brought the changes in proper compliance with the agreement.

Speaking to Minivan News at the time, former legal director of President’s Office and lawyer Hisaan Hussain questioned whether such a big case could be withdrawn without even a board resolution.

“We are not speaking of an ordinary company. This is a public company and its making such a decision without a board resolution is a huge concern. STO has public share holders; they have to be answerable to the share holders,” she told Minivan News at the time.

With Regard to the withdrawal of the case by STO, opposition Maldivian Democratic Party (MDP) Spokesperson, MP Imthiyaz Fahmy alleged that it another attempt in “cleansing” all the “corrupt politicians” who had been involved in bringing about “the coup on February 7”.

However, STO in its statement denied such allegations made against the organization and its staff, citing it as false and untrue.

STO is a major supplier of general goods and pharmaceuticals to the Maldives, as well as fuel. It also supplies aviation fuel to Ibrahim Nasir International Airport (INIA).

The organisation was initially formed in 1946 as a fully state-funded business, in the name of Athireemaafannu Trading Agency (ATA), with the task of purchasing and importing essential food items in bulk to be distributed nationally via local traders and their own retail outlets. It was later expanded and rebranded as the State Trading Organisation.

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Fiji: a case study in the realities of Commonwealth suspension

As Maldivian politicians contemplate renouncing the country’s membership in the Commonwealth amidst threats of suspension, a sign of some of the implications the country may face should this come to pass can be seen in the Pacific Ocean-based island nation of Fiji.

In September 2009 Fiji was itself suspended from the Commonwealth, a 54 member state intergovernmental organisation rooted in the former British empire, after Fiji’s military heads refused to hold previously-agreed elections in 2010 after coming to power.

Fiji’s suspension had significant economic and diplomatic ramifications for the island nation after some foreign powers began to see the country as a “rogue state”, resulting in a significant drop in aid and other assistance, according to New Zealand-based geopolitics consultancy, 36th Parallel Assessments.

Estrangement

Fiji found itself facing “estrangement” from western aid and other technical programmes after it was suspended from the Commonwealth three years ago.

Fiji’s suspension from the Commonwealth saw the country isolated from “aid donors aligned to western democracies”, observed Selywn Manning from 36th Parallel Assessments.

“This brand of authoritarian government caused aid donor nations and bodies (most significantly donor funds from the European Union) to be cut. Donors became reticent to commit development funds to Fiji, and indeed the Commonwealth member states in the Pacific region used this withdrawal of aid funds as a lever to pressure Fiji to return to democratic rule,” Manning explained.

The suspension also led to a shift in attitudes towards investment and business spending in the country, particularly tourism.

“Fiji’s isolation was made worse for its people due to the Commonwealth suspension decision following on from the position taken by the Pacific Islands Forum – a body consisting of 16 independent south/west Pacific islands states. The Pacific Islands Forum leaders had earlier decided to suspend Fiji until it recommitted to free and fair democratic elections,” Manning said.

“Fiji’s refusal to do so caused Australia and New Zealand to express a foreign policy that enforced travel and visitor sanctions levelled against Fiji’s ruling military elite and their families. The two western aligned nations also successfully lobbied the United Nations secretariat to de-commission, or discontinue, Fiji soldiers from taking part in peacekeeping operations around the world. The consequence of these moves caused Fiji’s economy to suffer. By late 2008, Fiji’s economy was in recession and this in-turn impacted on the livelihoods of ordinary Fiji families.”

International standing

The vacuum left by Western-aligned interests was quickly filled by other countries, especially China, Manning said.

China became the “most significant” of these external powers to befriend Fiji whilst more “Western aligned” bodies such as Australia, New Zealand and the wider Commonwealth organisation effectively enforced “estrangement” on the nation, he said.

“The People’s Republic of China (PRC) committed to aid and donor programmes and Fiji’s people began to notice positive change. PRC funds permitted the military regime to put its soldiers to work building new roads and improve infrastructure and government owned facilities. The military regime also permitted an increase in Chinese enterprise to establish inside Fiji, while western foreign and private investment stagnated or declined,” he said.

According to Manning, as Fiji has begun to accede to international pressure to host democratic elections by 2014, one of the key drivers towards the development was the belief that China’s donor support did not account for losses incurred by Commonwealth suspension.

“There are two elements that are able to be identified as significant influencers in [terms of scheduling elections for 2014]. The Peoples Republic Of China’s committed donor programme does not replace in dollar terms the loss Fiji has experienced to its total aid funds received ledger,” he explained.

“This has caused Fiji’s military government to move to sustain donor funds from the PRC while inching toward recreating Fiji as a post-coup democratic state,” he added. “Should elections be held in 2014, Fiji anticipates western aid funders will re-establish contact with its government and re-commit to assistance programmes.

“The second element is the United States’ position to establish warm relations with Fiji, encourage foreign investment in a post-election period and welcome Fiji back as a nation on friendly-nation status terms.”

While it remains suspended from the Commonwealth, Manning said Fiji has still been able to represent itself before the general assembly of the United Nations. However Fiji’s relationship with its wealthy neighbors, Australia and New Zealand, remained terse.

Manning added that Fiji had also retained membership in the Melanesian Spearhead Group (MSG), a four member inter-governmental body that includes Papua New Guinea (PNG), Solomon Islands and Vanuatu among its representatives.

“The Melanesian Spearhead Group (MSG) did not suspend Fiji but has given Fiji a degree of legitimacy around the Pacific region,” he noted.

“The MSG was usually dominated by Papua New Guinea’s wishes, but since 2010, PNG has supported Fiji’s Prime Minister and military leader Commodore Voreqe (Frank) Bainimarama’s chairmanship of the Melanesian bloc,” he said. “Once stable in the role, under Bainimarama’s leadership, Melanesian nations have moved to establish unprecedented independence – most recently Melanesian leaders agreed to establish a regional security force called The Legion which would arguably replace regional assistance missions led by Australia and New Zealand should civil unrest cause a Melanesian state to require external assistance to quell an uprising.”

As well as defence agreements, the MSG is also said to have moved to represent its members among global bodies without having Melanesian countries go through the Pacific Islands Forum. Funding to do this has come from donors including the People’s Republic of China, Timor Leste, and Luxembourg.

National mood

Asked how the Fijian public viewed the Commonwealth’s actions to suspend its membership, Selwyn responded that it was hard to identify a particular national mood, owing to the country’s strongly-polarised society around two distinct ethnic groups.

Of these two groups, indigenous Fijians and the Indo-Fijian population, Selwyn claimed the latter had benefited from a move by the present military regime towards a less racially segregated societal system.

“The regime’s goal is to legislate and enforce a new constitution which will remove political protections for Fiji’s indigenous peoples and stamp out so-called corrupt practice by Fiji’s former power-elite. It appears many Fijians, subscribing to both ethnic groups, support Bainimarama’s plan,” he said. “Also, due to staunch censorship decrees enforced in post-coup Fiji it is difficult to analyse a statistically accurate poll of public opinion.”

However, 36 Parallel Assessments, in its research, said that what support the current government did have among its people and international partners could well be dented by a failure to adhere to the 2014 election timetable.

In terms of the immediate future for Fiji, the nation still remains suspended from the Commonwealth, a decision that will be maintained until scheduled democratic elections are held in 2014.

However, Selwyn said that in terms of the Commonwealth’s success or failure in resolving the country’s political upheavals, it was important to look at the organisation’s work within the wider international community.

“The Commonwealth’s demand that Fiji must return to democracy has not set it apart as the stand-alone entity that will cause Fiji to return to democracy. Rather it is a voice among numerous bodies that are pressing the argument,” Manning said.

“It is the cumulative voice that has caused Fiji to take notice and to express a willingness to hold elections in 2014 post establishing a new constitution,” he added. “Should Fiji’s prime minister Commodore Bainimarama be elected as leader in 2014, then he will have pulled off a political coup, South-Pacific style. And that is a tempting proposition for an isolated military man to ponder.”

Maldives and CMAG

The Maldives has already been suspended from Commonwealth’s human rights and democracy arm, the Commonwealth Ministerial Action Group (CMAG). However, Commonwealth Secretariat Spokesperson Richard Uku cautioned against comparing the Maldives against a former member state like Fiji.

“Each country situation that CMAG has considered in the past has had its own particular characteristics. It would not be fair to compare one situation against the other,” Uku said.

As one of the more active elements of the international community in the Maldives following the controversial events of February 7, the Commonwealth has become a bellweather for the response of the wider international community.

The European Union told Minivan News last week that it continued to back CMAG and its Special Envoy Sir Donald Mckinnon in pursuing early elections, and an independent inquiry into the transfer of power that saw President Mohamed Waheed brought to office amid violent demonstrations, an assault on Male’s military base by mutinying police, and the storming of the state broadcaster.

While the Commonwealth has been criticised by Maldivian politicians associated with the new government, Secretariat Spokesperson Uku claimed the organisation’s experience had shown that no member state wished to be placed in such a situation as to be suspended from the group.

“Commonwealth membership carries political, economic and social benefits for member states and is valued by our member states. It also carries obligations about adhering to certain fundamental political values,” he said.

“Suspension from the councils of the Commonwealth has practical ramifications in terms of a member state being excluded from official Commonwealth meetings at various levels and being barred from receiving new technical assistance in many areas.”

Following its most recent meeting on April 16, Commonwealth Ministerial Action Group (GMAG) warned of “stronger measures” against the Maldives if conditions regarding the independence of Dr Waheed’s Commission of Independent Inquiry (CNI) were not met. Some MPs aligned with the government subsequently called for the Maldives to preemptively disassociate itself from the Commonwealth.

State Minister for Foreign Affairs and daughter of former President Gayoom, Dunya Maumoon, meanwhile accused the organisation of showing “bias” against the new President in its calls for early elections, claiming it had been misinformed. President’s Office Spokesperson Abbas Adil Riza said last week that the Maldives was committed to remaining a Commonwealth Member, but “only under the regulations of our constitution”.

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Civil Court issues injunction against Male City Council’s public referendum on the reopening of Fantasy Bakery

The Civil Court has issued an injunction to halt a public referendum planned by the Male’ City Council concerning the reopening of Fantasy Bakery, which was closed by health inspectors in October 2011 for selling expired food products.

The court’s injunction said if Male’ City Council held a public referendum that was not stipulated in any laws or regulations, it will hurt the business as well as making the public lose confidence in any verdict the court may deliver in Fantasy’s countersuit.

The Bakers Fantasy Private Limited had requested the court issue the injunction to halt the referendum, the Civil Court said.

The Civil Court’s injunction was delivered by Judge Abdulla Adheeb and a copy of the injunction was sent to Male’ City Council, Bakers Fantasy Private Limited and the Maldives Food and Drug Authority.

Male’ City Council was sued by Bakers Fantasy Private Limited following a decision of the council to withhold the license of the company to sell food products.

The company has claimed that they have paid the Rf 6500 (US$420) fine imposed on the company and have corrected issues noted by the council.

When Minivan News contacted Bakers Fantasy, the receptionist said no one was present who could speak with the media and would not provided a contact for management.

Last year when the issue came to light, police conducted an operation to close down the bakery and remove expired items from the store.

Police involvement came after the store disregarded orders from Community Health Services which had the legal authority to close food outlets.

The police at the that time went to the administrative office with a search warrant, but the staff refused to open the door stating that they did not have the authority to do so, according to police. Police called senior management, but they did not answer calls. Police waited outside for two hours before Fantasy management came to open the doors.

The Fantasy store was popular among locals as well as foreigners living in Male’, and was widely patronised.

Bakers Fantasy was closed by Male’ City Council on October 28. The council subsequently inspected three storehouses and Aioli Restaurant, which is also owned by Fantasy Pvt Ltd.

Male’ City Council’s head of health section Hassan ‘Jambu’ Afeef told local media at the timethat expired products were found in two of three storehouses, and that storehouses were not properly lit. All expired products were destroyed, he said.

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Budget deficit “substantially” underestimated while spending still unaddressed: IMF

The Maldives has “substantially understated” its budget deficit, the International Monetary Fund (IMF) has warned, by underestimating its spending and “probably” overestimating tax revenues.

“Moreover, not all of the financing for even the approved budget has been identified, and additional risks exist as well – including the need to clear reported unpaid bills carried over from 2011 and the possible loss of lease extension payments (Rf 700 million, or US$42.4 million) assumed in the budget,” the IMF’s mission chief for Maldives, Jonathan Dunn, told Minivan News.

While the 2012 budget put the deficit at less than 10 percent of GDP, “the IMF team sees the figure as more likely to be 17.5 percent of GDP, and perhaps larger than this,” Dunn said.

“The financing gap for 2012 is thus at least 7.5 percent of GDP, or about US$160 million, and possibly substantially larger than this,” he added.

As a result, economic growth and stability in the Maldives were unlikely to be maintained “in the medium term” unless the government substantially cuts spending.

Meanwhile, government revenue for the first quarter of 2012 has fallen 15.5 percent below projections, the Maldives Inland Revenue Authority (MIRA) has reported.

Revenue from tourism land rents fell 18.6 percent on the previous quarter, however the largest contributor to the drop were the new government’s changes to resort lease extension payments, which saw a 76.1 percent drop in revenue below projected figures.

Inflation meanwhile spiked 13.4 percent in February, with the price of food increasing 28 percent.

Government revenues for the quarter has nevertheless increased 76.2 percent compared to the same period in 2011, “mainly because of the significant increase in Business Profit Tax (BPT) and Goods and Services Tax (GST) collections”, MIRA noted: Rf 361.7 million (US$23.4 million) and Rf 721.9 million (US$46.8 million) respectively.

However, Dunn warned that revenue collection by MIRA “does not provide a full picture of total revenue performance in the country.”

“Revenue from import duties – previously the single largest revenue – collected by Customs and is not reported by MIRA. Due to implementation of the 9th Amendment to the Maldives Export Import Act, revenue collection from import duties is expected to decline substantially in 2012, fully offsetting the increase in tax revenues from GST and BPT.”

Solutions?

Dunn observed that printing money would only facilitate the much-larger-than-expected 2012 fiscal deficit.

“This, in turn, would imply that national imports would be substantially larger than expected, because in the Maldives, where most goods are imported, almost any spending by either the government or the private sector turns, directly or indirectly, into import demand,” he noted.

As a result, the imbalance between the demand for dollars and the supply would become even larger, “and the MMA would likely have to supply dollars from its own reserves to meet the shortfall.”

“Usable reserves at the MMA are low, so if the fiscal gap this year is financed via money creation, it is likely that the MMA’s usable reserves would soon dry up,” he said.

Another option, Dunn suggested, was for the Maldives to borrow more money. However borrowing from domestic sources “will be difficult to achieve, as it is unclear whether the banks have much more appetite for buying treasury bills.”

Obtaining foreign grants “would be helpful but is probably not realistic.” Foreign loans, meanwhile, “would have to be considered carefully, given that Maldives already has a very high debt-GDP ratio, but they may be needed in the short run to avoid the consequences of printing money.”

Dunn emphasised that the only sustainable solution was for relevant parties to rationalise the budget by boosting revenues and cutting expenditure, despite the political difficulties.

“These may be politically difficult measures, but the consequences of not reducing the budget deficit are likely to be even more difficult,” he warned.

Furthermore, ongoing dollar shortage would not be resolved while the Maldives continued to substantially increase spending, Dunn added.

The foreign currency crisis – the bane of many of the country’s importers, who are forced to use unofficial channels outside the banking system to obtain currency necessary to purchase overseas – was exacerbated by the number of unrestricted foreign exchange licenses issued to resorts and other private businesses, “without the requirement that they hold substantial capital to back up that business.”

This practice allowed such nonfinancial businesses to conduct large-value foreign exchange operations outside the banking system, “an unusual arrangement and sustains the parallel foreign exchange market,” Dunn noted.

“In a more typical situation, nonfinancial businesses [such as resorts] would have licenses only for the exchange of small-value cash transactions and would be required to channel large-value foreign exchange transactions through the banking system. In the case of Maldives, this would substantially increase liquidity in the official foreign exchange market,” he suggested.

However, “as long as the government continues to inject substantial amounts of new spending into the economy, the foreign exchange situation in the country will not be resolved.”

Growing expenditure

Dunn emphasised that “fiscal imbalances in the Maldives have been present for many years and that fiscal adjustment remains necessary”.

Faced with increasing pressure from the IMF to lower expenditure after failed attempts in 2010 to cut the salaries of civil servants – a maneuver blocked by the Civil Services Commission (CSC) and backed the then opposition – former President Mohamed Nasheed’s administration insisted that increased revenue from the new taxes would match expenditure, and boasted that the 2012 budget was the first in many years to balance income and expenditure.

Following the police mutiny and controversial change of government in what the MDP contends was a coup d’état, spending by President Dr Mohamed Waheed’s administration has escalated as it seeks to shore up support in a fractious political environment.

Newly-announced expenditure in the last few months includes:

The promotion of 1000 police officers – approximately a third of the force – and plans to both recruit 200 new officers in 2012 and appoint four new Assistant Commissioners;
Lump sum payment of two years of allowances to military personnel;
An unspecified amount for an international public relations firm, to combat negative publicity and “rally an alliance of support” in the international media following the controversial change of power and coverage of police crackdowns;
Rf 100 million (US$6.5 million) in fishing subsidies;
A proposal to create two new ministries, including the Ministry of Gender, Family and Human Rights, and the Ministry of Environment and Energy;
The reimbursement of Rf 443.7 million (US$28.8 million) in civil servant salaries from July 1, following cuts by Nasheed’s administration in 2010. In addition, civil servant working hours have been reduced to 8am-3pm;
The doubling of the budget for the Maldives Marketing and Public Relations Corporation (MMPRC) to US$S4.5 million.

Lost income has also increased, with MIRA warning in March of unrealised revenue from the new government’s recent decision to accept resort island’s lease extension payments in installments, an amendment that former Tourism Minister Dr Mariyam Zulfa contends was pushed through by several local resort owners with vested interests, that immediately cost the treasury US$135 million.

In March, MIRA anticipated receiving a total of Rf375 million (US$ 24 million) for lease extensions, however the income received dropped to Rf23 million (US$1.5 million) as a result of the decision.

Meanwhile today the publicly-owned State Trading Organisation (STO) dropped legal attempts to reclaim a US$1.2 million debt owed by the Meridian Services owned by MP Abdulla Riyaz of the new ruling coalition. The STO justified the decision in a letter to the court, by stating that it did not have enough board members to meet quorum and make decisions.

In a bid to address spiralling costs, the government is reviewing the Aasandha universal health scheme introduced by Nasheed’s administration on January 1 this year, which “is and will always be completely financially unsustainable in a country such as the Maldives”, according to President Waheed’s Special Advisor, Dr Hassan Saeed, in an article for newspaper Haveeru.

“The introduction of unrestricted, universal free healthcare with no agreed regulation or management was an act of folly, recklessness and irresponsible political immaturity that rivals any of the actions of Mr Nasheed’s administration,” Dr Saeed contended.

“And what’s more he knew this but still went ahead with it. And the consequence is that we now have the IMF breathing down our necks and a budget deficit that threatens to derail all government social programmes,” Dr Saeed wrote.

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