With additional reporting by Daniel Bosley and Ismail Humaam Hamid
Splitting the Maldives Industrial Fisheries Company Limited (MIFCO) into three competing companies was a “mistreatment of state resources”, says a report from the auditor general.
MIFCO was divided into three companies in 2010, with the introduction of Kooddoo Fisheries Maldives Limited and Felivaru Fisheries Maldives, before President Abdulla Yameen reversed the decision last year.
“Even after the split the main business of these three companies [MIFCO, Felivaru and Koodoo] was the buying and selling of fish which resulted in competition amongst each other,” the audit report read.
With regards to the financial impact of the move, the report’s figures suggest that the overall profits of the state-owned fisheries business was not significantly affected.
“After the split in 2010, MIFCO’s losses amounted to 4.1 million rufiyaa [US$265,888] in 2011 and 2012 and Felivaru Fisheries Maldives operated at a loss of 19.26 million rufiyaa [US$1.2 million],” the audit report read.
“However, Koodoo Fisheries had a profit of 88.8 million rufiyaa [US$5.7 million] in this period,” it continued.
Founded by the state in 1993 for the purposes of buying and selling fish, MIFCO had made a net accumulated loss of MVR317.4 before the split, while all three companies were seen to have a total profit of MVR65.4 million in 2011 and 2012.
The audit report said that numerous faults had occurred in the splitting of MIFCO, citing several mistakes made by the Ministry of Finance and Treasury.
“While not providing an alternative to conduct business [Finance Ministry demanded] MIFCO pay the entire overdraft, which amounts to 70.56 million rufiyaa. The National Planning Council had planned how to divide MIFCO’s fleets amongst the three companies, but the finance ministry did not follow,” the report stated.
The dividing of physical assets between the three companies was not carried out properly, resulting in financial losses and even the breaking down of some equipment, read the report.
Auditor General Hassan Ziyaath recommended that the transfer of physical assets between companies be done according to “accounting principles”, and that a more thorough analysis of the impact on stakeholders be made before any similar decisions in the future
Ziyath concluded by saying that the restructuring of a company’s physical assets should be accompanied by a report demonstrating the potential impact on state income.
Fish exports make up the 98 percent of the Maldives’ exports, of which MIFCO is the leading exporter.
Minister of Economic Development Mohamed Saeed has said that there are over 116,000 expatriates working in the Maldives, amounting 50 percent of the working population.
Speaking at an event held to celebrate the inauguration of a programme to train 2000 salespeople, Saeed said that 81,000 Maldivians are currently registered as employed at the pensions office – equal to 23 percent of the population.
The preliminary results of last year’s census officially recorded the number of foreign workers at 58,000, though the government has previously admitted the figure to be much higher, even after the removal of 8000 undocumented workers last year.
Saeed noted that while 81,000 expatriates in the Maldives worked with proper visa and documentation, approximately 35,000 were working illegally, reported Haveeru, costing the Maldivian economy MVR1.28 billion (US$83 million) annually.
The government’s drive to build the economy on ‘Maldivian work for Maldivians’ has seen a restriction on foreign photographers working in the country, while it will be illegal to hire expatriates as cashiers from April onwards.
Saeed is reported to have told those in attendance yesterday that Maldivians must be willing to work in all types of job.
“Maldivians need to make jobs a high priority. One can’t be a resort owner in one day,” he said.
“A road sweeper could become a manager of a big office tomorrow. You need courage to be successful,” said the waiter turned cabinet minister, sharing his personal story of success.
He stated that the economic growth for this year “stands at 10.4 percent”. Figures from the Maldives Monetary Authority estimate last year’s growth as 8.5 percent.
Youth employment has been a major focus of the Yameen administration, which has pledged to create 94,000 new jobs during its five year term.
Local youth-led NGO Democracy House states unemployment among the youth (aged 15-24) may be as high as 43 percent, with the group having highlighted a “disconnect” between the current school curriculum and life skills.
While the government has established a youth unemployment register with 13,000 individuals, youth minister Mohamed Maleeh Jamal has reported complaints from businesses about individuals failing to attend interviews and quitting jobs within a few weeks.
Former Maldives Airports Company Ltd head Bandhu Ibrahim Saleem – dismissed last month – told a Majlis committee in December that difficulties with local staff had resulted in a dependence on foreign employees, to keep the international airport running.
Also speaking at yesterday’s ceremony, Minister of Finance and Treasury Abdulla Jihad suggested that the government’s Special Economics Zone (SEZ) Act would also create large numbers of jobs.
“36 percent of the Maldivian population is the youth,” Haveeru reported Jihad as saying. “The SEZs is an example of how much the government prioritises the youth’s welfare”.
The controversial legislation, which promises to deregulate as-yet unspecified areas of the country in order to attract foreign investors was passed in August last year.
Despite a lack of investments having resulted as yet, governing coalition leader Ahmed ‘Sun Travel’ Shiyam claimed last weekend that the government would bring investments, the likes of which the country had not seen before.
The Civil Court has ordered the Ministry of Tourism halt all proceedings regarding the seizure of uninhabited islands and lagoons granted to Villa Hotels and Resorts Private Limited.
Villa – owned by Jumhooree Party (JP) leader MP Gasim Ibrahim – requested the stay order after the government’s decision to hand back the uninhabited islands and lagoons given to the company as compensation for the nationalisation of several development projects, including Kadhdhoo airport
According to the order, although the government has said Villa can be compensated for the seizure of the islands and lagoons, the areas were handed over due to the government’s inability to bear the burden of a financial or monetary compensation.
The islands and lagoons that had been ordered to be returned are Thaa Atoll Elaa, Raa Atoll Maanenfushi, Gaafu Dhaal Atoll Gazeera, Kaafu Atoll Maadhihgaru lagoon, and Vaavehdhi lagoon.
Speaking at a joint rally of JP and Maldivian Democratic Party (MDP), Gasim stated that “the Maldivian people will not allow injustice” and reiterated calls for the charges against MDP leader and former President Mohamed Nasheed to be dropped.
“Forget it, nobody can push us back, we will be in the service of the Maldivian people. We will defend the fundamental rights and freedoms of the constitution”, Gasim said.
“You can seize everything, take it. Take it. After all, things can only be taken from people who have them,” he told attendees of the joint rally of Maldivian Democratic Party (MDP) and JP held on February 5, 2015.
“Yameen, do not think that a well-built man can come and shoot me with a gun. No, No, No. I am not afraid even one bit.”
President Abdulla Yameen has denied Gasim’s business reversals were a result of political events, stating that all businesses were treated equally under the law.
Twenty NGOs have urged President Abdulla Yameen to stop plans for oil exploration in Maldivian waters, or risk the country’s economic and environmental health.
In a joint statement of concern, marine conversation NGO OceanCare’s President Sigrid Lueber warned that the oil explorations could have “severe socio-economic consequences in the fisheries and tourism sector”.
After pledging during his election campaign to begin new efforts to find oil, President Yameen’s government has claimed investor interest in the project, while a German research vessel carried out a seismic survey last August.
Speaking to Minivan News today, founder of local environmental NGO Ecocare, Maeed Zahir, said that the public does not take seriously the concerns put forward by local NGOs.
“Several people have questioned our technical expertise on oil exploration and used it as an excuse to dismiss our concerns,” said Maeed. “However, with several international NGOs speaking out against the exploration we hope it will be taken more seriously.”
The statement of concern was also sent to several members of the cabinet, including fisheries minister Dr Mohamed Shainee, tourism minister Ahmed Adeeb, economic development minister Mohamed Saeed, and environment minister Ahmed Thoriq.
President’s Office Spokesperson Ibrahim Muaz said that only the president could comment on correspondence addressed personally to him, directing Minivan News to the relevant ministers for updates on the exploration project – none of whom were responding to calls at the time of publication.
The Maldives has also been included OceanCare’s silent oceans campaign. The NGO – which was granted Special Consultative Status with the UN’s Economic and Social Council in 2011 – is encouraging people to write to Adeeb urging an end to exploration.
Seismic impact
The NGO coalition’s statement of concern warned that exploration will have adverse effects on the Maldivian economy as a result of negative impacts on fisheries.
Seismic air guns – one of the most commonly used survey methods for offshore oil exploration – produce loud bursts of sound by introducing air into water at high pressure which then penetrates hundreds of kilometers into the earth’s crust.
OceanCare stated that the air guns produce a pulse of noise lasting 20 to 30 milliseconds, which is repeated an average of every 10 to 15 seconds, often for 24 hours a day.
“Three decades of controlled scientific studies leave no doubt that intense sound damages fish and impact fisheries,” said the Swiss NGO. “Ocean noise has a negative effect on at least 55 marine species.”
A recent study commissioned by the Namibian government revealed a sharp decline in catch as a result of increased seismic exploration in the Orange River Basin. The country’s tuna catch shrunk from 4,046 tons in 2011 to a mere 650 tons in 2013 after a shift in migratory routes.
(IMAGE: Championsforcetaceans.com)
Similarly, the Australian tuna industry has said the process may threaten the survival, abundance, or evolutionary development of native species or ecological communities.
Additionally, a recent study into the impacts of air guns on marine life ranked them as the second highest contributor of underwater noise caused by humans – only underwater nuclear detonations have been found to cause more.
The NGO statement also noted the adverse effects on marine biodiversity as a result of such surveys, pointing out that Maldivian tourism is heavily dependent on a healthy and diverse marine eco-system.
Tourism and fishing account for 90 percent of the Maldives’ GDP, while providing three-quarters of all employment and two thirds of foreign exchange earnings.
The government’s development plans include both a reduced reliance on tourism, as well as minimising the country’s dependence on imported fuel through the enhanced use of renewables. Imported fuel consumes around one third of the Maldives’ GDP.
Preliminary Research
Last year, the German research vessel ‘Sonne‘ – which came to the Maldives to conduct research into global warming – conducted preliminary research exploration free-of-charge on the government’s request.
While pointing out the importance of proper Environmental Impact Assessments in oil explorations, the coalition of environmental groups expressed concern that no such EIA or public consultation was undertaken prior to this research.
Speaking at the time, fisheries minister Dr Shainee said that explorations will be carried out in one of three areas which have properties suggesting the presence of oil and gas. The identified locations were located 100 miles east of the area between Laamu and Thaa atoll.
Shainee also said that the information obtained will be shared with the Maldives in the first quarter of 2015. He said that the data would not be shared with any third party, and that further explorations would follow to confirm any positive findings.
Speaking at the 18th Saarc Summit held last year, Indian Prime Minister Narendra Modi said that India wishes to assist Maldives in its search for oil reserves, while cabinet members reported that oil exploration was on the agenda of the first China-Maldives joint commission on trade, held in December.
The Maldives government has started technical discussions with China regarding the feasibility of a free trade agreement between the two nations.
At a meeting held at the Ministry of Economic Development today (February 4), a technical committee consisting of experts from both countries engaged in discussions over what would be the Maldives’ first free trade agreement with a single country.
Haveeru reported economic development minister Mohamed Saeed as saying that the committee is tasked with determining the feasibility of such an agreement and identifying any potential difficulties.
“The truth is we want to set up the free trade agreement as soon as possible,” he told the paper.
He said the two main reasons in pursuing a free trade agreement with China were duty-free exports of fisheries products, and an increase in air travel between the countries which will bring more Chinese tourists to the Maldives.
Fish accounts for 98 percent of the Maldives’ exports, while Chinese tourists make up 30 percent of all visitors to the Indian Ocean nation.
Speaking with Minivan News today, former Economic Development Minister Mahmoud Razee said that free-trade is most advantageous when taken up by nations at the same level of development, with a demand for goods exported by both countries.
“Maldivian fisheries products are mainly imported by European countries, Japan, and America. The question is whether China imports enough fisheries products from the Maldives,” he said.
Razee also said noted that there was a potential risk of China ‘dumping’ low quality and undesirable goods into the Maldivian economy.
Minister at the President’s Office Mohamed Shareef has previously said that free trade talks were initiated by the Maldives, and that China has taken a flexible approach with regards to the final agreement.
Last year, President Abdulla Yameen declared a foreign policy shift to the East, slamming the European Union after regulations resulted in the non-renewal of the Maldives’ preferential trade partner status.
The government’s decision to engage in free-trade with China was revealed in December 2014 after the cabinet’s economic council visited China to hold discussions on Chinese-assisted projects in the Maldives.
“The biggest advantage of the free trade will go towards fishermen. With free trade, the 12 percent export duty will be gone, thus the 12 percent becomes profit for fishermen,” said fisheries minister Dr Mohamed Shainee at the time.
The cabinet members’ visit to Beijing in December also saw the Maldives officially sign up to the Maritime Silk Road project, which will provide a trade route between China and east coast of Africa and the Mediterranean.
China currently has free trade agreements with eight countries – including Pakistan, Costa Rica, Peru, and New Zealand – as well as a regional agreement with the Association of South-East Asian Nations.
The Maldives is currently a member of the South Asian Free Trade Area, along with its fellow SAARC nations.
The Maldives Monetary Authority (MMA) has revealed that the outstanding payments for treasury bills and bonds had risen to MVR17.6 billion at the end of 2014.
According to the Monthly Economic Review of December 2014, published yesterday (February 3), stocks of government securities comprising T- bills and T-bonds increased 22 percent and 55 percent, respectively, comparing monthly and yearly terms.
“As for the outstanding amount of T-bonds, it increased significantly in both monthly and annual terms and reached MVR6.4 billion compared to MVR3.1 billion recorded in November 2014,” the review stated.
The MMA’s economic review revealed that 103,744 tourists arrived in the Maldives in December 2014, which is 1 percent lower than the arrivals of the same period in 2013, due to the “decline in arrivals from Asia and Europe”, but an increase of 16 percent compared to November 2014.
Among Asian countries, China contributed the most tourists, with 363,000 of the 1.2 million visitors in 2014 – a year-on-year rise of 9.6 percent.
It was also noted that the occupancy rate of the Maldivian tourism industry as a whole decreased by two percent, from 76 percent in December 2013 to 74 percent in December 2014 due to the decrease in total bed nights by 3 percent, and the average duration of stay to 6 days.
Comparison of figures from November and December of 2014 suggest that there was a 12 percent increase in international reserves and a 17 percent increase in state revenue, leaving international reserves at US$614.7 million by the end of last year.
Reserves held at the end of November equated to 3.3 months of imports, compared to 2.3 months recorded at the end of November 2013, said the MMA.
“The increase in total revenue during December 2014 was largely due to a 32% growth in tax revenue (mainly contributed by the increase in T-GST receipts),” stated the monthly review.
Trade balance worsened by 42 percent in December 2014 compared to corresponding the same period in 2013, as imports rose by 34 percent while exports only increased by 11 percent.
“The growth in imports was mainly due to the increase in imports of transport equipment, while the growth in exports can be attributed to the rise in re-exports”.
According to a statement from Maldives Customs Services on January 14, imported goods in 2014 amounted to MVR30.7 billion – a 22 percent increase compared to 2013.
Customs figures also showed that the decline in exports saw the total value of goods leaving the Maldives in 2014 valued at MVR2.24 billion, compared with MVR2.56 billion in 2013.
(PICTURE: MMA MONTHLY ECONOMIC REVIEW – JANUARY 2015)
The State Trading Organisation (STO) has been losing MVR12 million (US$ 780,000) per year since Fuvahmulah Airport opened in 2011, Managing Director Ahmed Azim told Haveeru.
“I requested the government to take over the airport because it has been causing that much damage to the company,” said Azim, noting that the state-owned company had lost in excess of MVR170 million (US$11 million) since the airport opened.
Speaking at the 50th anniversary of the STO last week, President Abdulla Yameen said that he does not believe the STO will ever earn profit from the airport.
“Even though STO had to suffer numerous losses and had to bleed because of it, it has constructed an airport at Fuvahmulah,” said President Yameen – who had previously served as Chairman of STO. “We have decided to take over the airport and re-compensate the company for its losses.”
Upon assuming the presidency in November 2013, Yameen declared the STO bankrupt before Azim announced a campaign to cut operational costs by MVR50 million (US$3,242,542) in 2014.
Last week Yameen warned that “managing directors of state owned companies will change if the companies cannot perform” to the required standard, shortly after the dismissal of Maldives Airports Company Ltd chairman Ibrahim ‘Bandhu’ Saleem.
Despite being constructed as part of the STO’s social responsibility, the airport was not economically viable, said Yameen, warning that the boardrooms of state owned companies should consider such investments more carefully in the future.
Yameen did, however, call upon the STO to widen its scope into international global markets. He spoke of diversifying the company into numerous fields such as shipping and oil tanker operation, while promising government support for such ventures.
Fuvahmulah Airport – which has a runway of 1200 km runway – was constructed and opened in 2011 by the STO during former President Mohamed Nasheed’s administration. It operates flights to Malé and Gan International Airport, to the south.
Nasheed tweeted today that the airport would yield profits if the originally envisioned tourism activity were to be developed. The single island atoll has no resorts, and only a single guest house registered with the tourism ministry.
During his presidential election campaign in 2013, Nasheed had pledged to transform the island via 70 separate development projects, as well as awarding it city status.
With 8,579 people, according to the 2014 census, Fuvahmulah has the fourth largest population of any island in the Maldives.
China has denied former President Mohamed Nasheed’s suggestions that the Maldivian government is planning to hand over large parts of Laamu Atoll to China for a military base.
A Chinese embassy press statement released yesterday described Nasheed’s allegations as “completely false”.
“It is a common knowledge that China pursues a national defense policy that is defensive in nature”, read the press release. “China does not maintain any military in any foreign country”.
“China always upholds the five principles of peaceful coexistence in its foreign relations, and believes in peace, development, and win-win cooperation. This is also the foundation for China-Maldives relations which are not only mutually beneficial but also transparent to the outside world,” it continued.
While speaking at the inaugural ceremony of the Laamu Atoll link road – to be built and financed by the Chinese government – last month, President Abdulla Yameen revealed that the government had identified the area as a potential special economic zone (SEZ).
Following the Chinese response, Nasheed today (January 25) tweeted: “it is encouraging to see the Chinese Government reconsidering their strategic plans in the Indian Ocean”.
Regional presence
China’s rising economic presence in the Indian Ocean region has stoked concerns in New Delhi that China is creating a ‘string of pearls’ to encircle India, including Chinese investments in ports and other key projects in Sri Lanka and Pakistan.
Last month, the Maldives officially agreed to participate in China’s Silk Road trade route, becoming the third country to do so, while also revealing that the two countries have agreed to engage upon free trade in the future.
Chinese state media has connected the Maritime Silk Road Project, which which will link China to the east coast of Africa and the Mediterranean, to the proposed ‘iHavan’ transshipment port – one of five mega-projects designed to take advantage of the US$18 trillion worth of goods transported across the seven degree channel annually.
The British armed forces maintained a base in Addu Atoll between the Second World War until 1976, while a leaked Status of Forces Agreement with the US in 2013 prompted speculation about a new military base, though this was subsequently denied by US officials.
President Abdulla Yameen was reported to have said, during a visit to Sri Lanka last year, that he had decided against pursuing the SOFA deal for fear of upsetting regional neighbours.
President Xi monitoring progress
The Chinese press release noted today that China had been a close neighbour of the Maldives for centuries, and that bilateral relations had “expanded greatly in recent years”.
“We hope that Maldivian politicians can conduct more dialogues that are conducive to China-Maldives friendly relations, and engage in more actions that could promote the mutually beneficial cooperation between our two countries.”
The Chinese Ministry of Foreign Affairs is also reported today as saying that President Xi Jinpeng was closely monitoring the progress of the Hulhulé bridge project and development of Ibrahim Nasir International Airport (INIA) – both of which China has expressed an interest in.
An agreement for a feasibility study into the bridge linking the airport island of Hulhulé with the capital Malé was signed with China late last year, while financial arrangements for the development of INIA are said to be under discussion with China’s Exim Bank.
A preliminary contract agreement for the airport’s development was signed during President Xi’s visit to the Maldives in September – the first by a Chinese head of state to the Indian Ocean nation. President Xi expressed hope at the time that the bridge might be named the Maldives-China friendship bridge.
President Yameen has made clear his intention to further pursue already rapidly expanding ties with China, announcing a policy shift to the east while criticising the interference of western powers.
China also accounts for one third of all tourists visiting the Maldives.
Three Maldivian resorts have been named among the world’s top 25 hotels by TripAdvisor, but industry specialists have expressed concern over the new green tax and rising prices.
Gili Lankanfushi Maldives placed top in the recently announced Traveler’s Choice Awards, based upon the quantity and quality of reviews posted on the website, while two other Maldivian resorts – Cocoa Island and Constance Moofushi – ranked at number six and fifteen, respectively.
The survey by the world’s largest travel website acknowledged over 8,100 properties based on one year’s worth of reviews and opinions from its 315 million unique monthly visitors.
“We are very glad that three of our resorts got included as top hotels in the world,” said Maldives Association of Tourism Industry Secretary General Ahmed Nazeer.
Four other Maldivian locations were named as part of the top 25 hotels in the Asian region. Baros Maldives was awarded ninth place on the regional list, Soneva Fushi placed 13th, while LUX* Maldives and Komandhoo Maldives Resort earned 21st and 22nd, respectively.
Meanwhile, industry specialists have expressed concern that the Maldives might soon become an overpriced destination due to increasing taxes and service charges, with the latest levy taking the form of a US$6 green tax.
“The green tax will definitely have an impact,” said Shafraz Fazley, Managing Director of Viluxur Holidays to ttgasia.com. “It is (already) becoming too expensive to go to top resorts because of all the service charges and taxes.”
The US$6 green tax was announced in November last year with the tourism minister Ahmed Adeeb saying that the revenue generated from the tax will go into managing waste from local resorts and other islands.
Rising arrivals, rising costs
The tax is part of new revenue raising measures outlined in the record MVR24.3 billion (US$1.5 billion) state budget for 2015, which also includes the addition of ten resorts to the current 109 registered facilities. These measures are anticipated to raise MVR3.4 billion (US$220 million) in revenue for the government.
The green tax will be introduced 11 months after the abolition of the US$8 per night bed tax, and one year after the hike in the Tourism Goods and Service Tax (T-GST) from 8 to 12 percent. Airport service tax was also raised from US$18 to US$25 in July 2014 for visitors leaving the country.
Maldives Association for Travel Agents and Tour Operators President Abdulla Ghiyas was reported as having told TTG that the resort contracts will be unaffected as the bed tax had been taken into account, though the opposition has previously called the levying of this and T-GST simultaneously as “double taxation” on the industry.
“Have a look at the TripAdvisor Forum,” Michelle Flake from Koamas Luxury Escapes told TTG. “I am sure people are moaning and saying it will be too expensive for them to come soon.”
After receiving more than one million tourists for the second consecutive year in 2014, the tourism ministry estimates that the Maldives will see 1.4 million tourist arrivals this year.
Speaking to Minivan News about the past year, however, Tourism Employee’s Association of Maldives Secretary General Mauroof Zakir said that, despite the increased arrivals, the tourism industry suffered as a whole in 2014.
“Total tourist arrivals have increased compared to the previous year. However, as arrivals from Europe and Russia decrease, less income is generated as the replacing Chinese visitors spend less and stay for lesser periods,” said Zakir.
Last year’s Maldives visitor survey in January 2014 appeared to confirm Zakir’s point, showing that Asian tourists stayed for shorter periods of 3 to 4 days while the average stay for European tourists was between 7 and 11 days.
According to the Tourism Yearbook 2014 – published by the tourism ministry – average duration of stay by tourists is declining, from 8.6 days in 2009 to 6.3 days in 2013.
The Chinese and Russian tourist markets are two of the fastest growing in the world, with arrivals increasing by an average of 54 and 10.7 percent, respectively, between 2009 and 2013.
Adeeb has acknowledged the negative impact of the falling Russian rouble on arrivals, saying that the Maldives must diversify its tourism markets as the international arena “heats up”.
(5)Dislikes
(0)