Category: Business & Tourism

Maldives business news

Conrad resort claims resolution found to on-site strikes

Strike action at the Conrad Maldives Rangali Island resort was bought to an end last night as staff at the site returned to work following alleged disputes over service charge policy, management have said.

In a statement issued today, the resort, which is part of hospitality conglomerate Hilton Worldwide, claimed that operations were returning to normal after being affected in “a small way” by a number of its staff convening in their quarters on Tuesday (22 March) to call for increases in the amount received from service charges.

As the country continues to review labour laws that would outline policies for striking at resorts, possibly outlawing protests by workers on the “shop floor”, the Conrad Maldives Rangali Island said this week’s industrial action had not result in any customers prematurely checking out from the site.

With the wider national Labour Act still awaiting approval in the Majlis, the Conrad resort said that it had attempted to try and open up negotiations with staff following commencement of the strike action on Tuesday evening.

“The hotel respects the rights of all employees to express their points of view in a lawful and non-disruptive manner. As such, team members were invited to discuss the issue with the management team in order to resolve the matter quickly and fairly,” the resort stated. “The staff were unwilling to discuss the matter despite several approaches.”

By yesterday morning (March 23), figures from the Crown Company, which owns the resort in question, as well as representatives from the labour and tourism ministries arrived to discuss the strikers’ grievances – initially without success. However, the company has claimed it was able to find a resolution by 7:00pm on Wednesday evening with staff returning to work “immediately”.

Although the Conrad Rangali Island was unable to provide details to Minivan News of the exact changes it might be making to its operations to conclude the strikes at the time of going to press, the resort claimed in a previous statement that it was willing to review its operations.

“The management’s position is that it is happy to re-evaluate the calculation of the service charge. Additionally, the resort will arrange for independent auditing of accounts to demonstrate that the service charge is distributed in its entirety,” the company said yesterday in a statement.

“The staff had already been informed on Tuesday that salary increases will be offered across the board and are expected to be higher than in previous years following a month-long survey of wage levels in the country.”

‘Sim’ Mohamed Ibrahim from the Maldives Association of Tourism Industry (MATI) said following the resolution of the strikes that regulations that would outlaw strike action on resort property were currently under the consideration of the country’s parliament.

Sim claimed that the regulations, expected to be passed as part of a new Labour Act outlining a framework for the nation’s work practices had been drawn up by lawyers along with the assistance of a number of bodies including the President’s Office.

“There is regulation in the works that would govern strikes in the country,” he said. “It has been made very clear in public notifications from the labour ministry that has clarified that ‘wildcat strikes’ should not be tolerated.”

Although the strike regulations are still being reviewed within the Majlis, Sim said that they would likely be passed in their final form as part of a national labour act rather than an individual bill relating to industrial action.

He claimed additionally that the regulations were not related to outlawing strikes, but ensuring instead that industrial action did not take place on the private property of resort owners.

To this end of trying to ensure worker’s rights, Sim said he believed that the Ministry of Tourism, Arts and Culture had already sent details of correct resort grievances procedures to the striking workers, which he claimed had not been followed.

Workers’ groups in the country such as Tourism Employees Association of Maldives (TEAM) have been openly critical of initial drafts of the strike regulations though, which it claimed were less about regulating industrial action but rather outlawing them altogether.

TEAM president and serving Maldivian Democratic Party (MDP) MP Ahmed Easa has previously claimed that the organisation openly supported regulations that accepted that there has to be a reason to instigate strikes, as well the manner of how they should be conducted.

Back in November, a bill outlining possible standards for strike action was passed to the Majlis’ National Security Committee concerning possible amendments to regulations for industrial action at the country’s resort properties

The bill was initially passed to parliament in August by the Dhivehi Qaumee Party (DQP) in attempts to try and curb strikes such as those seen last year at Kurumba resort that reduced occupancy rates to zero for a period.

Parliamentary debate over the bill has seen both fierce opposition and support from figures across the tourism industry, who have argued that current unregulated strike action is detrimental to travel income.

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180 days later: GMR at the helm of Male’ International Airport

Rising prices for aviation fuel and increased ground handling charges made by GMR, the Indian infrastructure giant that is now managing and developing Male’ International Airport, are in line with international prices, the airport’s CEO Andrew Harrison has told Minivan News.

The price of fuel at the airport has increased 35.39 percent at the airport and 35.67 percent internationally, Harrison said, in an update on progress at the airport during an initial 180 day strategy period following the company taking the reins.

“We are not even passing over the full increase in prices of fuel – we’re sensitive to airline customers and what the price of fuel means to them,” Harrison said. “The escalating price is affecting the whole global economy, and affects airlines directly not just here but at all other locations.”

Harrison sought to head off concerns aired recently that the cost of fuel at Male’ International Airport was impacting airlines’ willingness to fly to the destination.

“No airline has come forward and said they are unhappy with our pricing, but they are concerned about the global price of fuel,” he said. “With all the volatility there are challenges there.”

“We are working on some strategies to reduce the cost of providing fuel to them. We’ve spent the last six weeks meeting airlines – some want credit terms, others a set supply criteria – we are trying to meet the need of the majority.”

“The pricing of fuel is not something we compare one place to another, because there are many variables including the method of delivery and the volume you’re buying. The size of the berth we have limits the size of vessel we can charter, and these factors affect the price we can buy and supply fuel at.”

GMR had signed a US$140 million contract with the State Trading Organisation (STO) to supply fuel, he added, switching the contract over from Dubai-based Galana Petroleum.

“Our sense was it was better to use a company right here with us that would share in the risk and opportunity and try to get us the best possible price – for instance, the STO has its own vessel, and may not need to charter one. They made an extremely competitive bid.”

Many airlines, he explained, used a middleman reseller who bought fuel and sold it by offering components such as credit terms.

“Resellers may be in a better position to do that, as we are not a company in the business of providing credit terms to airlines. But what we are saying is that because the airline is our direct customer we prefer a direct relationship with them.”

This had led, Harrison said, “to a number of airlines leaving intermediaries and coming to us directly. They have a choice – but they are coming to us.”

Ground handling spikes

GMR has significantly increased ground-handling charges to bring the price in line with other international airports, Harrison said.

The ground-handling charge for a B777, used by many airlines flying to Male’, was recently raised from US$1990 to US$2985 ( at daytime) and US$3585 ( at night) – an increase of over 50 percent.

“It’s not necessarily unreasonable or overpriced –  it may seem like a jump but there’s been no increase in 12 years, and we are still more competitive than a number of international markets,” he claimed, noting that the comparable cost in an Australian airport was US$4286 and US$4388 in Europe.

Most other services, such as the provision of ground power, were either cheaper than comparable rates in India or included – airports such as Hyderbad charge airlines for services such as the provision of wheelchairs, or use of a scissor-lift for people unable to climb the stairs to the plane.

Free storage of airline baggage containers had actually resulted in the airport being inundated, “but instead of charging we are asking airlines to reduce them to realistic levels.”

Ground-handling charges were less that four percent of an airline’s operating cost, he noted, “but that doesn’t mean we want the issue to escalate.”

Corruption allegations

Despite persistent allegations from opposition parties that there was corruption in the airport bidding process, including several cases forwarded to the Anti-Corruption Commission which vowed to investigate, “we have not been approached by the ACC,” Harrison said.

“There has been no formal communication [with the ACC], and we are extremely confident of standing up to any scrutiny because of the way the bid was scrutinised by the World Bank’s International Finance Corporation (IFC).

“They been here recently as part of their due-diligence process, meeting members of the public, ministers and stakeholders, and holding a community meeting in Hulhumale’ about the impact of the development. They wouldn’t be here doing that if they felt they were part of something that had not been done properly. We are confident that irrespective of what is being discussed in the media that we followed a legal and due process that was transparent and respected.”

There were, he acknowledged, “people who believe in what we doing, people who feel they haven’t seen sufficient evidence of what we’re doing, and people who will never be convinced no matter what we do.”

Cultural construction

The first 180 days, Harrison explained, had been spent merging the cultures of the three organisations now operated under GMR Male’ International Airport – the former Maldives Airport Company Limited (MACL), Island Aviation’s passenger check-in and passenger handing operation, MIC’s interior cleaning, “as well as GMR’s culture.”

The company’s organisational structure had been unveiled with an emphasis on staff training, involvement in decision making and addressing issues such as a noticeable gender imbalance.

“We found a gender imbalance in the workplace – there were not many ladies operating at levels where they had significant levels of responsibility,” Harrison observed. “So we tried to address this – the new Head of IT Operations is a very qualified lady who is very good at her job, but she was many levels below and wasn’t being allowed to operate at a level that matched her potential.”

GMR was making an effort to communicate in both Dhivehi and English, he said, launching Dhivehi language classes for non-Maldivians and producing documents in both languages.

Staff suggestions and involvement had led to the creation of a non-punitive safety system, encouraging reporting rather than punishment, upgrade of the airport’s sea rescue capabilities and the replacement of 350 unbranded assembled computers with a consistent Dell IT infrastructure – and paid software licences.

Glitches in communication emerged as well – GMR took a dim view at the beginning of March when security staff began conducting pat down searches of every passenger trying to enter the terminal.

“A pat-down check is more efficient when people are experienced, but not when you introduce it on a peak morning with queues all the way down to the seaplane check in area, with no notification to the airlines or us,” Harrison said. “As a result of that we had unprecedented delays – nearly every flight that morning was delayed. Security took a line that nothing new was introduced, but after an emergency meeting the pat downs were stopped and the queues disappeared.”

He was, he said, happy to look at industry best practice and whatever technology was required, “but [I] am not prepared to introduce something not in line with international standards. Heathrow and Gatwick search 25 percent of those who don’t set off the alarm. Here we were searching 100 percent.”

CEO Andrew Harrison (left) at the airport handover

Physical infrastructure

Harrison was very conscious of public expectations regarding the airport upgrade – following the release of artist impressions of the airport, GMR has kept a low profile while introducing its organisational structure and attempting to win over staff to its nearly US$400 million vision for the airport.

Managing such expectations had been one of the key challenges, he said: “A lot of people felt there would be changes to the terminal the day we took over – but there have been many considerations, such as impact of work in peak periods, and understanding what work we want to do.”

Many physical improvements were scheduled to begin as the Maldives leaves peak travel season: “We weren’t in a position to remove even a single baggage carousel,” Harrison said.

GMR has a lot of work ahead of it if it plans to meet its target of upgrading the existing terminal by October.  The refurbishment is “essentially throw-away” considering it will have  less than a three year lifespan until the new terminal is completed in 2014.

During a tour of the present airport terminal Harrison provided a running commentary of planned improvements – including a food court (selling, among other foodstuffs, Turkish kebabs – a Male’ first) and raising the ceiling of the arrivals area so tourists could see the sea from the gate.

Harrison admitted that the scale of investment in the upgrade made it tempting to just bring forward the date of the new terminal, however he acknowledged the local appetite to see quick improvements.

“People will see changes in the coming months. For example, we’re about to start work on the domestic terminal, increasing the space available by 50 percent. This falls outside the concession agreement, which mostly concerns international travellers – but a lot of domestic passengers are Maldivian and deserve to benefit from the improvements as well.”

Other improvements will include redesigned and standardised tourist counters that are branded individually by resorts, a left luggage service, baggage wrapping service (“this is popular for a number of destinations, especially Eastern Europe”), porter service (“people particularly from the Middle East want the services of paid porters”), ‘fast-track’ immigration and customs as well as the potential for a ‘premium’ jetty.

There will also soon be a spa in the departure area offering 20 minute shoulder and foot massages, and possibly a nap and shower facility. Moreover, ‘soft skills’ trainers loaned from Singapore Airlines, “some of the best in the world”, had been invited to help train front-of-house staff at the airport.

Following construction of the new terminal, Harrison said the goal was to turn Male’ into one of the top five airports in the 1-5 million passenger category (the airport presently sees 2.4 million visitors through its gates a year).

“Look at the kind of experience a tourist coming to the Maldives goes through,” he said. “The natural beauty of the resort environment, and then the airport experience they go through at the end – it’s not right, standing in extensive queues, with a level of service so far apart from that of the resorts.”

Economy and marketing

Asked whether GMR had concerns about operating in the Maldives given the state of the country’s economy, Harrison said he believed the improved airport itself was part of the solution.

“An airport is an economic engine for a country,” he explained, “allowing trade, travel – both passenger and cargo – and employment. If the processes are made efficient, it has positive impact on the economy.”

Moreover, GMR’s involvement provided resources and expertise in opening up new tourism markets for the Maldives, Harrison explained, particularly undeveloped markets such as the United States.

“We want to talk to resorts, the Ministry of Tourism and the airlines about possibly marketing the Maldives in the US,” Harrison said.

“The US is the most underrepresented market in terms of direct tourism, however 14 percent – the highest single percentage – of tourists arriving coming into Delhi hold US passports. If they are willing to fly to India it’s only a short hop to the Maldives – I think it’s a matter of awareness and understanding connectivity and flight options, and most importantly, what’s here at end of the journey.”

The Maldives, he said, represented a “more interesting prospect” than traditional nearby island destinations visited by US tourists, such as the Bahamas and the Caribbean, adding that GMR was keen to explore this untapped market.

“We didn’t go to ITB [the recent travel industry trade show held in Berlin] this year because we didn’t think we had anything to say and I didn’t really want it to just be a jolly,” Harrison said. “But next year we’ll have a stand showcasing what we are doing here.”

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Staff strike at Conrad Rangali Island Resort

Management at the Conrad Maldives Rangali Island resort have confirmed that a “number” of it staff have resorted to strike action at the site over alleged disputes with management.

Minivan News understands that Maldives tourism authorities have sent a team to the site to try and resolve the dispute.

In a statement the resort, which is part of the multi-national hospitality group Hilton Worldwide, said that it was working to try and resolve the strikes as quickly as possible, while prioritising the safety and security of employees and guests.

Head of the Tourism Employees Association of Maldives (TEAM), Maldivian Democratic Party (MDP) MP Ahmed Easa, alleged that some staff at the resort had resorted to the action over concerns about possible discrimination between the earnings of local and expatriate staff.

The resort statement did not confirm any key grievances of staff involved in the strike action.  The company did claim though that all its employees, or “team members” as they are known, received equal service charge payments, along with being offered the fourth highest service charge allocations of resorts operating in the country and various staff amenities including a gym and recreation areas.

Easa said that he believed that the Conrad resort was widely considered a “beautiful” property with a very good management that took care of its staff.  However, he claimed that some staff at the resort were contending that there was an issue of discrimination relating to staff earnings based on nationality. He conceded he did not yet have full details of the strike action.

“From what I understand, the issue has been created by the resort’s general manager not communicating with staff over concerns about discrimination between European and Maldivian staff,” he said.

TEAM said it was therefore calling on the workers involved with the strikes to sit down and find an amicable resolution to potential concerns held by both parties and try to establish any truth in these grievances.

Easa said there had been claims from staff that Maldivian workers had been receiving different salary rates and accommodation standards when compared to their European counterparts.  He added that there were also criticisms that local workers’  services charge payments were being split unevenly on similar grounds.

The TEAM president said that he would therefore look to clarify the current allegations concerning employers striking at the resort and what action could possibly be taken in regards to resolving the dispute.

“We hope that the company will meet with both sides and not just listen to senior management before deciding if the allegations are true or false,” he said.  “However, if employees are wrong in their accusations, we will say they are wrong. Both the employer and the employee have rights under the Maldives constitution.”

In its statement, Conrad Maldives Rangali Island rejected claims that service charges were kept by the property itself or undistributed unevenly, adding that management were proud with the level of staff satisfaction in its annual team member survey.

“The resort has a sector-leading reputation for our team member training programmes. We offer opportunities for promotion and career advancement and wherever possible recruit from within,” the company stated.  “We also have a highly developed employee representation structure to ensure all employees can express their points of view to the management team.”

The statement claimed additionally that management at the site constantly sought to review rates of pay in order to make adjustments based on “current market conditions” for its staff, which are made up of 70 percent Maldivian workers and 30 percent of expatriates from 25 different countries.

“In addition to the service charge allocation, team members receive a range of additional benefits including access to a team member soccer pitch, some of the best team member accommodation in the Maldives, a recreation area, gym, internet café and regular team sporting and social activities,” the statement said.

Back in November, a bill was passed to the Majlis’ National Security Committee concerning possible amendments to regulations for industrial action at the country’s resort properties

The bill was initially passed to pariliament in August by the Dhivehi Qaumee Party (DQP) in attempts to try and curb strikes such as those seen last year at Kurumba resort that reduced occupancy rates to zero for a period.

Parliamentary debate over the bill has seen both fierce opposition and support from figures across the tourism industry, who have argued that current unregulated strike action is detrimental to travel income.

Secretary General of the Maldives Association of Tourism Industry (MATI) Sim Mohamed Ibrahim, said at the time of the debates that that the organisation was not looking to prevent strikes.

However, Ibrahim added that the association was looking to prevent strikes from taking place directly on private resort property.

“No striking on the resort is a fundamental right of the owner,” he said. “You don’t strike on the shop floor.”

An resort employee told newspaper Haveeru that staff were protesting in the staff recreation area “in such a way that it would not cause any disturbance to the tourists.”

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‘G-Spot’ doesn’t exist, contends shop owner in ongoing case against Economic Development Ministry

Mohamed Nizam, the owner of a shop in Male’ called ”G-Spot” has sued the Economic Development Ministry after it was declined permission to operate as a business because of its name, reported SunFM.

Today the first hearing of the case was conducted in the Civil Court.

SunFM reported that in the court, Nizam said that the name was first approved by the Economic Development Ministry and was also registered in the ministry.

He also said that he had spent a lot of money making the name board of the shop, printing paper bags and tags, all of which were done in the name of ‘G-Spot’.

State Attorney Aishath Seeza argued that the name ‘G-Spot’ was inappropriate to be used as a shop’s name and that it referred to the sexual organs of a male or female, according to SunFM.

She also said that the name was inappropriate for viewing by women and children.

In response to the state attorney, Nazim contested that the ”G-Spot” as Seeza understood it did not exist, submitting articles published in The Times, BBC and CNN to support his argument.

He also said that by’ G-Spot’ he did not mean what the state attorney was referring to.

Judge Maryam Nihayath queried him as to the meaning of G-Spot, to which he replied that G stood for ‘Girls’ and that his shop was a ‘Girls-Spot’ and sold female garments.

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Gayoom condemns Thasmeen’s leadership of opposition in 12-page letter

A letter from former President Maumoon Abdul Gayoom denouncing the current leader of the Dhivehi Rayyithunge Party (DRP) reflects the concerns of a wide number of members over the party’s opposition of government policies, such as the privatisation of Male’ International Airport, MP Ahmed Nihan has said.

The letter was linked to on Haveeru in Dhivehi. Minivan News is currently working on an English translation.

In the letter, Gayoom accuses Thasmeen of “dictatorial” characteristics and claimed he was writing the letter “in order to protect the Islamic faith of the Maldivian people and the sovereignty of the Maldives.”

Following his retirement from politics in February 2010, Gayoom endorsed Thasmeen as his successor to the leadership of the opposition. Thasmeen was then appointed to the leadership unopposed during the party’s congress.

However, after months of infighting between two factions – one loyal to Thasmeen and the other to dismissed Deputy Leader Umar Naseer – and speculation as to which side the party’s ‘Honorary Leader’ would back, Gayoom’s letter finally puts the former President’s card on the table.

“Disputes and conflicts always arise within the party, as you are leading the party against the democratic manners, and in a dictatorial way,” Haveeru translated Gayoom as saying.

Gayoom’s particular point of contention with Thasmeen was his “taking decisions without the advice of the party’s council and against the council’s decisions” – namely, an apparently unanimous decision made by 21 council members in an urgent meeting in on June 24, 2010, to fight the government’s leasing of Male’ International Airport to Indian infrastructure giant GMR.

“Decisions are being taken on force and on your influence on several organs of the party, outside the system of the party. This should not be the case in a party that is being run on values of democracy and transparency,” Gayoom said.

The former President criticises Thasmeen for the party’s dismissal of Umar Naseer, accusing his of having “a personal grudge” against Naseer. Gayoom said he had requested Thasmeen resolve his difficulties with Naseer outside the Council, and retract his request with the Elections Commission to remove Naseer from the party.

“I was given the short answer of ‘out of the question’. Your answer proved to me that you have a personal grudge towards this particular Deputy Leader, Umar Naseer, as you have not taken an action against the other Deputy Leader Ilham Ahmed, who was involved in the matter to the same extent as Umar Naseer,” Gayoom stated.

“I believe that every political leader should be free-minded and patient in order to be able to live with people of different ideas. It is democracy. I believe that the severe action taken by you against the Deputy Leader [Umar Naseer] proves the small scope of your political views,” Gayoom said, in Haveeru’s article.

Gayoom also attacks Thasmeen for contributing only Rf300,000 (US$23,300) to his campaign for the 2008 Presidential election – a campaign Gayoom said cost Rf33 million (US$2.6 million), and criticised him for not accompanying Gayoom’s son Ghassan on his campaign trip to Thaa Atoll during his bid for the Thimarafushi constituency in the 2009 parliamentary election.

Gayoom further accused Thasmeen of trying to damage his reputation by following the recommendations of a British public relations firm, The Campaign Company (TCC). The same firm was used by Hassan Saeed, leader of the minority opposition and now coalition partner Dhivehi Quamee Party (DQP), during a PR trip to the UK last year in a bid to gain international support for the opposition. The firm employed an individual named Peter Craske to arrange meetings with politicians and journalists, who falsely presented the DQP as “an alliance between the DRP and MDP parties.” Craske later acknowledged the error in an email letter to Minivan News.

Gayoom claimed that TCC’s cofounder, Jonathan Upton, visited the Maldives and recommended that Thasmeen sideline him.

“[Upton] did not have any idea of the views of the Maldivian people and the political situation of the Maldives. His recommendation to keep me aside, without knowing the support of the majority of the Maldivian people as they have seen the development and changes during my presidency, was not a politically mature recommendation,” Gayoom said. “You are showing characteristics that cannot be prevented after being deceived by the words of people who are unaware of the political scenario of this country.”

The letter puts the writing on the wall for Thasmeen and is likely to split the opposition’s membership. There was heightened speculation this week that the party would actually split into two parties and potential names were reportedly being circulated among MPs through SMS – however the fight for the right to keep the DRP’s name is likely only beginning.  Thasmeen is showing no sign of bowing to the wishes of the former President, and has already told local media that he considers the letter “slanderous” and dared Gayoom to make it public.

Thasmeen’s ability to use his democratic mandate – though unopposed, he was still elected – to survive the  factional struggle within the opposition will serve as a bellweather both for the extent Gayoom’s continuing influence in the Maldives and the potential for Maldivian parties to mature beyond personality politics.  However if Thasmeen remains, the split opposition could mean an easy re-election for the Maldivian Democratic Party (MDP) in 2013, given the party preferences in the recent local council elections.

DRP MP Nihan, who said he is yet to fully read the leader sent by Gayoom, believes Gayoom’s correspondence reflects dissatisfaction among a number of “ordinary members” during the last ten to eleven months concerning the leadership of his successor.

Thasmeen was unavailable for comment at the time of going to press concerning the letter.  However in response he has written his own letter stating that he will “stand firm and with full confidence” of winning the presidential election 2013.

“In my trips to more than 100 islands during the local council election campaign, members of the party, heads of the party’s wings and supporters have assured me of giving their full cooperation and have asked me to continue with this work,” Thasmeen said in a letter, translated by Haveeru.

Earlier this week, DRP MPs from both sides of the spat said they believed a split within the party appeared imminent; with some members even considering potential names for new political bodies as internal divisions and infighting between factions has continued to escalate.

These factions relate in part to a war of words between the supporters of Thasmeen and dismissed Deputy Leader Umar Naseer that has continued to escalate, at times, into violent confrontations over the legitimacy of decisions taken by the party’s council, such as the latter’s removal.

In light of these divides, Nihan said he believed the letter, without having read it in detail, was not so much part of a vendetta against Thasmeen from factional rivals in the party, but a reflection of complaints that Gayoom has received from party members dating back almost a year.

“There have been reports received by Mr Gayoom as to what has been seen as mismanagement on the part of Thasmeen,” he said. “Ordinary members of the party are very unsatisfied with party leadership and they have complained to Maumoon [Gayoom] about this.”

One of the key issues Nihan stressed that was behind the complaints levelled against Thasmeen had been in the work of the party to hold the government accountable for its actions, particularly in terms of deals such as the decision to allow Indian infrastructure giant GMR to manage and devlope a new terminal building at Male’ International Airport.

“Like with the GMR issues, there is a sense that Thasmeen hasn’t done enough to oppose this,” he said. “The divided thinking in the party has really been seen in the last six months from around when the airport was handed over [to GMR] in November.”

DRP Leader Ahmed Thasmeen Ali told Minivan News in November that a coalition of political parties formed in opposition to the GMR airport deal remained committed to a Memorandum of Understanding (MOU) focusing on legal recourse to try and prevent the privatisation agreement.

“We simply believe the deal is not in our national or security interests,” Thasmeen said. “With the privatisation of other [existing or soon to be] international airports in the north and south of the country, the state will not have an airport under its control.”

Thasmeen soon came under fire amidst allegations that both himself and fellow party member and Parliamentary Speaker Abdulla Shahid has taken bribes from GMR to hinder opposition to the deal. Both politicians and GMR have denied the allegations, which they claimed were a complete “fabrication” by political opponents.

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MP Nazim highlights decentralisation as budgetary concern on back of IMF findings

As the International Monetary Fund (IMF) this week released its latest update on the Maldives’ finances, prominent opposition MPs have criticised the government’s budget strategy in areas such as decentralisation, despite conceding the need for greater political cooperation from rival parties.

Ahmed Nazim, MP for the People’s Alliance (PA) party and a member of the Majlis’ Public Finance Committee, told Minivan News that he believed current government policy was ultimately stifling economic development, claiming administrative costs within the civil service remained a notable problem.

“We have small percentage [of funds] to invest in the economy.  We cannot move finances to a higher level though as the government doesn’t have the right policies to do this,” he claimed.  “For instance, we need to reduce the number of [inhabited] islands by linking them and cutting the overall number of cost centres required for decentralisation.”

The comments were made as the IMF claimed that the Maldives economy was currently “unsustainable” even after cuts made to the annual 2011 budget, as it concluded its Article IV consultation.

The IMF’s Mission Chief to the Maldives, Rodrigo Cubero, told Minivan News at the time, that while the government had introduced the core components of a modern tax regime that would begin generating revenue from this year, these achievements were offset by new spending on legislative reforms such as the decentralisation act.

Ultimately, the 2011 budget was passed on December 29, days ahead of a constitutionally-mandated New Year deadline, with 69 out of 77 MPs voting to pass the bill with five amendments.

Earlier during the same day, Mahmood Razee, acting Finance Minister of the time, said it would also be vital to try and ensure the predicted 2011 budget deficit remained at about 16 per cent, after coming under pressure institutions like the IMF to cut the 2010 figure of around 26.5 per cent.

While preliminary figures had pegged the 2010 fiscal deficit at 17.75 percent, “financing information points to a deficit of around 20-21 percent of GDP”, down from 29 percent in 2009, the IMF reported.

Ahmed Nazim, who was part of a multi-party evaluation of the draft 2011 State Budget before it was sent for Majlis approval, said that joint committee meetings to discuss the IMF’s findings were set for next week (9 March).

However, talking to Minivan News ahead of these consultations, the PA MP said that he believed one of the key concerns highlighted in the report was that of recurrent government expenditure.

According to Nazim, the costs, which he said resulted from use of electricity and other day-to-day needs, were accounting for about 17 percent of total government expenditure – charges, he claimed, that could have been cut further.

In line with these concerns, Nazim took the example of the number of decentralised administrative posts created through last month’s Local Council Elections as an example of unsustainable spending.

The PA MP claimed that present government policies based on building housing or harbours across a wide number of islands was creating further problems for future national cost cutting.  As a solution, Nazim, claimed that it would be important to consider depopulating and reducing the total number of inhabited islands by offering the population a choice of relocation possibilities.

“It [depopulation] is the only way to reduce the wage bill, otherwise every island will have to have services like health centres and councils,” he said.  “The only way to cut spending is to transfer small island populations to other habited islands of their choice.”

Nazim claimed that a government strategy of attempting to increase mobility of the population to find jobs and homes in other atolls and islands through an improved transport network had failed to achieve these goals so far.

However, the PA MP said that he believed some opposition groups such as the majority opposition the Dhivehi Rayyithunge Party (DRP) had been too “heavy handed” in their approach to working with government on decentralising the country.

“I was advocating that even now, we will work with the MDP to reduce the number of [island] councilors in small areas from five to three posts.  There is simply not enough work for all of them to do,” he said.  “Some opposition took a heavy handed approach meaning there was no need for compromise.  The DRP wanted it their way when it came to each of the wards.”

Nazim claimed that he still hoped to work with the Maldivian Democratic Party (MDP) on plans to reduce the number of posts on councils. He said this was particularly the case on smaller islands, boasting populations of less than 1000 people, which could be cut to just three council representatives instead of five.

State Minister for Finance Ahmed Assad said that he was ultimately encouraged by the role of parliament and political opposition in working to try and reduce the country’s budget deficit compared to last year.

“If we look back to the passing of the budget in 2010, this time parliament were much better [in evaluating the budget].  They just asked for some shuffling about of the figures,” he said.  “That tells us they tried to work within the framework and limits of the budget set by the treasury and finance ministry.”

However, in considering affordability of the overall budget and government financing in the year ahead, Assad claimed that he believed that cost cutting would have been easier with the support of legislative bodies and the judiciary.

As of January 1 2011, the government reinstated the wages of civil servants and political appointees to similar level before respective cuts of 15 per cent and 20 per cent were made back in 2009. The government claimed revenue expectations for the year would ensure the salaries were sustainable.

Addressing recent controversy, over issues such as a Privilege Bill for judges and parliamentary figures, Assad said that MPs and the judiciary also needed to bear the brunt of cost cutting.

“Civil servants understood the need for salary cuts, but at the same time why should only they have to face it.  It is a hardship everyone should share,” he added.  “It is a matter of sharing the responsibility.  The government was not followed by the judiciary on the issue of wages.”

While accepting that more cuts were needed to be made to the civil service in line with IMF expectations, Assad claimed that it was not possible to make redundancies in the civil service without creating additional jobs elsewhere.

“Obviously, we appreciate that we can’t just make lots of people unemployed from the civil service,” he said.  “But, we can’t go on like this.”

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Speaker calls on Majlis to speed up legislative duties as president opens parliament

As the People’s Majlis today reconvened for the first time in 2011, the Parliamentary Speaker Abdulla Shahid called on MPs to speed up the rate in which they worked to pass legislation with a very “busy” session ahead.

Shahid’s comments were made after President Mohamed Nasheed opened the year’s first parliamentary session with an address to MPs on the current state of national finances and developments.

Nasheed used his annual address in order to play up what he saw as “marked improvements“ in various national sectors, as well as warning of the need for further national budget cuts and unity amongst MPs in relation to recently formed local councils over the year ahead.

“The most important accomplishment is the establishment of local councils. Obviously, there are obstacles in the management of some of these councils,” Nasheed said during his opening remarks. “The government’s aim is to solve these complications in introducing decentralisation in a manner that does not compromise the features of a unitary state stipulated in the Constitution.”

The Presidential Address is required under the constitution to be given during the first meeting of the Majlis each year.

Nasheed claimed in the speech that he hoped that competitive parties would “not deliberately participate” in trying to sabotage the role of local councils, in reference to disputes over the location of some Atoll Council offices this week.

Speaking to Minivan News after the address, Abdulla Shahid, the Parliamentary Speaker and MP for the opposition Dhivehi Rayyithunge Party (DRP) said that today’s meeting of the Majlis was solely for delivery of the Presidential address. He added that no administrative duties were therefore carried out at the sitting.

Shahid claimed that DRP leader Ahmed Ali Thasmeen – as the head of the country’s largest political opposition – would be providing the response of his party to the president’s speech within 14 days as allowed under law.

However, in reflecting on the work ahead for Parliament when it meets next on 8 March, Shahid claimed that vital bills related to the country’s Penal Code and judiciary were among key early acts that he hoped to see passed within the Majlis.

Yet, the agenda for the next Majlis sitting expected to be unveiled within the next 24 hours, Shahid claimed that parliament had a full schedule ahead on the back of what he called a busy session last year.

As such, the parliamentary speaker added that parliament needed to speed up its work rate in the year ahead and could not afford to relax while a number of important bills had yet to be passed.

Shahid accepted however that there were challenges in passing laws, particularly in translating bills from their original English form, made in consultation with “overseas experts”, into Dhivehi to gain approval through the Majlis.

“When we look at the original English documents [of bills] they make a lot of sense,” he said. “Sometimes it is when these documents are translated into Dhivehi that they don’t always make much sense. There is a lot of work that needs to be done.”

Speaker encouragement

However, the speaker claimed that he was encouraged by the work of the parliament during 2010, despite partisan infighting that led to the resignation of the country’s cabinet at protest at so-called scorched earth politics adopted by some MPs.

“The amount of work concluded by parliament last year is quite remarkable,” Shahid claimed. “The passing of 42 bills out of a total of 52 that were submitted was quite good I think.”

The sentiments appeared to be shared by President Nasheed who believed the Majlis has helped bring about a number of improvements for infrastructure and development in the country despite overall differences.

“2010 was a year of achievement in many areas,” he said, during the speech.

Economy

Taking the economy as an example of the developments, the president claimed that after the previous budget was delivered back in December 2009, the country’s financial deficit was about Rf3.8 billion – amounting to 18.7 percent of the country’s Gross Domestic Product (GDP). Nasheed said that despite expenditure being higher than revenue on the back of recent budget cuts, the deficit as of the latest budget delivered in December 2010 was down 2.3 percent to 16.4 percent of total nationa GDP, amounting to Rf3.1 billion.

“By the end of 2010, the income revenue of the government amounted to Rf6 billion.” he said. “By 2010, the government had estimated recurrent revenue of Rf9.1 billion.”

While continuing to address financial developments, Nasheed said that the government would also aim to try and increase the value of Maldivian currency by strengthening existing monetary regulations.

“Additionally, we need long and mid-term measures for effective solutions to the economic infrastructure. According to the Strategic Action Plan, recurrent expenses and income are required to be kept in line with national income,” he said. “The government had made several efforts to achieve this target, including corporatising and privatising government services.”

In addressing the passing last year of taxation structures such as a Business Profit Tax and a Maldives Tourism Goods and Services Tax (GST), the president thanked parliament for supporting these bills.

Nasheed claimed in addition that small and medium enterprises would also continue to receive financial assistance from the government under a programme of soft loans and other financial packages designed to try and compliment schemes like business development centres.

These development centres – set up in Kulhudhuhfushi and Hithadhoo – were designed to offer training in fishing, guest houses, handicraft and agricultural training amongst other disciplines.

“Important steps taken to eliminate obstacles facing those wishing to start a business, include enabling vital information, trade licenses and permissions to be submitted and received via the Internet,” Nasheed claimed in the speech. “These will be facilitated this year.”

Agriculture

In areas such as agriculture the president said that the government was focusing on a number of regulations outlining new guidelines for catch and exporting products aimed at improving the income within the fisheries sector.

“Last year, much work was also done to develop agriculture in the Maldives. In this regard, agricultural products of 3 islands were brought out to the market, by contracting tourist resorts and food supply companies,” he said. “Moreover, efforts were made to raise the prices of poultry farming and agricultural yield through the production and marketing of locally produced goods. In addition, Rf1.7m worth of goods were made available to farmers at reasonable rates and 1,932 farmers were trained in various aspects of agriculture.“

The president claimed that this focus had also allowed for the establishment of subsidies totaling about Rf50m in order to allow 25 islands to be sufficiently capable of regularly marketing produce grown there. The focus was also expected to be backed by an Agricultural School in Laamu Atoll Gan, according to Nasheed.

Tourism

In addressing plans for the country’s tourism sector, Laamu Atoll was also highlighted as a zone that would be developed to additionally host three to four star resort properties as part of stated aims to cater for more middle-market tourism.

The president also focused on national developments in the form of land reclamation and the construction of a number of airports that were started during the previous year.

“This would introduce even greater opportunities to all the islands in the region, and multiply economic activities,” he said. “The construction of an airport in Fuvahmulah is underway and the airport in Baa Atoll Dharavandhoo is likely to reach the stage of completion by the end of 2012.”

Developments at Gan International Airport were also touched upon in the speech in relation to a local joint venture between the existing site’s management, the State Trading Organization (STO) and the Maldives Airports Company. The president expressed hope that the partnership would lead to a boost in services in and out of Addu Atoll.

Transport

The issue of transport networks was also raised during the speech, with Nasheed stating that modernisation of transport systems between the country’s numerous islands and atolls was still being planned as a vital development challenge for Maldivians.

Infrastructure

Among planned infrastructure developments, the president claimed that the government remained committed to pledges to try and provide sewerage and drinking water, along with affordable housing wider to wider numbers of the population.

“We have commenced the project of building a total of 10,000 housing units, of which 4,150 have been contracted and 1,750 of which are currently under construction,” he said. “In order to resolve the issues of congestion and lack of housing in Male’, under the first phase of Veshifahi Male’ programme, application forms are being issued for those wishing for housing. The second phase of the Gulhifalhu Project is underway and the reclamation of the 50-hectare land is scheduled to begin next month.”

A further 298 housing units were also said to be in the course of being supplied to people in areas such as Gaaf alif Atoll who still required shelter following the 2004 Indian Ocean tsunami.

Environment

Alongside these infrastructure developments, the president also used his speech to touch upon the environmental programmes that he had been a vocal campaigner of internationally – such as the Maldives becoming a carbon neutral nation by 2020.

“Various efforts were exerted by the government last year to transform the Maldives into a carbon-neutral nation. In this regard, auditing of carbon present in the Maldives and the measure of greenhouse gases emitted into the atmosphere were identified,” he claimed. “It is highly essential that we embrace renewable energy and diversify sources and techniques used to generate renewable energy. The environmental changes instigated by the emission of greenhouse gases into the atmosphere are directly linked to the life of every Maldivian.”

The tourism industry was not deemed immune to the need for greater attempts at providing sustainable initiatives, with the president claiming that sub divisionary offices of the Environment Protection Agency (EPA) would be also be established to expand their presence and influence around the country.

Health

Looking at areas such as health, the president said that over 56,000 Maldivians had been signed up to the state run health insurance scheme known as Madhana, a figure that was expected to grow during the coming year.

“The government expended over Rf144m on social protection last year in an effort to assuage the public plight of having to depend on handouts for healthcare,” he said. “Work will continue this year on increasing the number of people registered under Madhana. The government’s aim is to raise the number of Madhana clients to nearly 100,000 by the end of this year.”

Nasheed also played up the developments such as Telelmedicine in his speech, a service he claimed was currently introduced in five islands to alleviate potential strain on medical services, with a further 34 islands expected to adopt the system in 2011.

“This system would instead allow patients to benefit from the expertise and facilities of hospitals and doctors all across the world,” he said. “This service would be introduced in another 34 islands of the Maldives in the future.”

Two additional bills were also expected to be put in front of the Majlis during the coming year. According to the president, both the Health Service Bill and the Medical Negligence Bill were devised to bring important overhauls to the country’s medical services that he hoped would see them put in place as soon as possible.

Nasheed claimed that important breakthroughs had also been brought in by the Majlis in areas such as protecting rights for disabled people along with providing financial aid.

“In order to maintain social security costs at a sustainable level, a social security fund has been established and is being developed further to protect people from economic instability and insecurity,” he said. “A special budget has been allocated for this purpose.”

Education

The president claimed that “significant steps” had also been made by parliament during 2010 to finalise and roll out an amended national education programme including technical training and standards.

The measures, outlined under a new Education Bill had now been submitted to the Majlis. Despite the government’s intentions, Nasheed accepted that not all aims were as yet being made.

“Last year, I stated that our main goal for 2010 was to increase the percentage of graduates holding 5 [O-level] passes from 32 per cent to 41 per cent,” he said during the speech. “Even though this goal was not reached, the figure has now been increased to 35 percent. Performance improvements were achieved by 100 schools in 2010 over 2009. To sum up, the percentage of students who passed in 5 subjects has increased in those schools.”

The President also claimed that his government had also obtained the grandest achievement within the country’s academic history so far with the establishment of theMaldives National University.

“The university will serve the purpose of creating, preserving and disseminating knowledge and skills required for national development in cultural, social, economic and public spheres to safeguard the Maldives as a sovereign Islamic nation,” he said. “I take this moment to sincerely thank the honourable members of this Majlis for granting passage to the National University Act”

Religion

The president also used his speech to claim that 2010 had seen “notable achievements” within the Maldives in regards to strengthening religious awareness and rejuvenating Islam among the public.

To this end, Nasheed said that religious scholars had been used to provide sermons across the country, while additional mosques were constructed in 12 islands across the nation.

“Alms collection was also increased compared to last year, and the funds were used for major projects. 39 islands were selected for construction of new mosques this year, 21 of which would be funded by the state budget,” he said. “Construction of these mosques is set to begin this year, and work is being done to procure foreign assistance for the construction of another 18 mosques. In addition to those, I would like to highlight that the first Islamic bank to be established in the Maldives will be opened during this month.”

Crime

In relation to criminal activity in the Maldives, the president claimed that the number of crimes, at least reported, to the Maldives Police Service had fallen by eleven percent in 2011. Nasheed added that a new police strategy to run from this year until 2013 had also been put in place in order to try and focus additionally on emerging areas such as cyber crimes.  Drugs were said to remain a key focus for law enforcement officials.

“The efforts exerted by the government to prevent the illegal trafficking of narcotic drugs into the country have been rewarding,” said Nasheed. “This is evidenced by the reduction in the number of people reported for drug offences by 46 percent in 2010, compared with that of in 2009, according to recent Police records. Moreover, these records indicate a 40 percent reduction in the percentage of youth exposed and therefore, are highly susceptible to adopting the habit of drug abuse.”

Culture and sport

According to the president, another important area of focus for the country was deemed to be in the development of cultural and literary talent.

The inaugural Hay Festival Maldives, a sister event to the annual Hay Festival in Wales, UK, was seen as an important step in highlighting the works of local artists and writers alongside their international counterparts.

The president claimed that on the back of the event, the government was looking to try and develop local skills and talent with the aid of an Arts Council and Heritage Council during 2011.

Similarly, Nasheed praised developments made in the fields of national sports such as the success of the Maldives cricket team after its triumph in the ACC Trophy Challenge held in Thailand this year.

Gender

Raising the issue of equality, Nasheed said that significant steps had been taking to try and reduce gender discrimination.

“In this regard, a resort forum was held to promote products crafted by women and financial aid was rendered to organizations striving to encourage and emancipate women in our society to gain their rights and opportunities, and to extend and employ their potential in managing trade and businesses,” he said.

Security

Under plans outlined for the year ahead and beyond, the president said that the work of the country’s National Security Council was in the process of trying to be expanded. An office of a National Security Advisor had also been set up to extend this work including laying out marine security, identifying internal threats and improving bilateral relations.

“This action plan will be devised within 90 days forward,” the president added. “For the first time in the Maldivian history, Maldivian soldiers will participate in the UN Peace Keepers’ regiment under a contract to be signed this year.”

Political privileges

In discussing the controversial Privileges Bill that the Majlis had attempted to pass at the end of last year within the budget, the president said that he felt that revisions needed to be urgently considered in line with recommendations he had provided.

“I regard it as being highly important that the members of the Majlis receive their necessary privileges and protection,” Nasheed said. “During the history of 77 years of the Majlis, there have been several circumstances under which some respected members of the Majlis, either incumbent or resigned then, had to face various contemptible consequences concerning politics, justice and other controversies.”

In considering these potential difficulties, the president asked parliament to consider a Privilege Bill that was provided under an established and legitimate law.

Judiciary

Nasheed added that with democracy being a key aim of his government, ensuring efficient division of the different branches of the state were a key part of these goals. Amidst recent concerns addressed by some bodies like the International Commission of Jurists (ICJ) that the nation’s judiciary may not be working independently, Nasheed said he believed the role of the Majlis in trying to ensure this was increasingly important.

“A noteworthy example is the establishment of important offices that come under the judicial system in the Maldives last year,” he claimed.

“Today, my main appeal is for you endeavor to instill trust and faith in the judicial system of the Maldives and in the work of parliament. I appeal for unity in the national interests and prioritize constructive judgment and wisdom to allow for peace, progress and order in our country, without being associated with those seeking abrupt opportunities to disrupt and topple the government.”

The full address can be read here.

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Male’ airport security official rejects GMR delay criticisms

Security officials at Male’ International Airport have rejected criticism that increased scrutiny during passenger checks was responsible for the delay of a number of flights yesterday morning, claiming there has been no additional or emergency measures put in place.

In a statement issued by infrastructure giant GMR, which is currently managing and renovating the existing airport site ahead of opening an entirely new terminal to open in 2014, the company said that six international flights were “heavily delayed” on 1 March.

The adoption of new security measures yesterday at the airport that it had not been informed of were alleged to be responsible for the delays.

According to the company, six flights scheduled to take off between 9:00am and 10:00am were unable to leave on time due to the congestion of passengers waiting to pass through security checks to catch their planes.

“These delays were the direct results of additional security measures introduced by the Aviation Security Division,” the company stated. “These measures included the physical hand pat‐down of each departing passenger which led to longer processing times extending the queuing time. These additional measures were not communicated by the Aviation Security Command to GMR Male’ International Airport Pvt. Ltd. or the customer airlines.”

GMR claimed that i a physical pat-down of every passenger after passing through metal detectors was believed to have resulted in flights being delayed during the morning by up to one hour and twenty minutes.

The company added that it was common practice at airports all over the world to use hand-held scanning devices instead during security checks.

“The standard queuing time required under the Concession Agreement is 10 minutes until processing at the x‐ray machine,” GMR stated. “This morning processing time for a large number of passengers was in excess of 40 minutes and as a result, flights could not close check‐in at the allocated time which led to the extensive departure delays.”

GMR claimed that although it was focused on trying to ensure improvements to all areas of airport service during its tenure – particularly by working with airlines and regulators – the company said that the “highest standards” must be maintained without severely impacting the experience of passengers.

In responding to the criticisms, Moosa Habib from the airport’s Aviation Security Command said that no new procedures such as pat downs of all passengers had been put in place during the morning before clearing passengers for their flights.

Habib claimed that many other factors outside their control were also responsible for any delays.

“The security measures are the airport and very important and sometimes they can be strict,” he said. “But there are many factors out of our control that can delay flights.”

Habib told Minivan News that there had not been any changes to security procedures during the morning and that he believed “business operated as normal” with pat-down procedures taking between 20 to 30 seconds per passenger.

A spokesperson for the Maldives National Defense Force (MNDF) told Minivan News that it had no real role in providing security at the airport.

The spokesperson added that the MNDF currently did not hold any concerns about security at the site.

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Economic stability threatened by “significant policy slippages”, warns IMF

The Maldives has suffered “significant policy slippages” that have undermined the country’s capacity to address its crippling budget deficit in 2011 and beyond, the International Monetary Fund (IMF) has warned, in a statement concluding its Article IV consultation with the Maldives.

“On the expenditure side, there have been no net fiscal savings from public employment restructuring, public sector wages will be restored to their September 2009 levels earlier than expected, and the new Decentralisation and Disability Bills will lead to considerable spending increases,” the IMF stated. “Also, the Business Profit Tax will come on stream eighteen months later than planned.”

The IMF warned that the Maldives economy was presently unsustainable, on the back of “expansionary fiscal policies” from 2004 which left the country especially vulnerable to the decline in tourism during the 2008-2009 recession.

The country’s financial deficit exploded on the back of a 400 percent increase in the government’s wage bill between 2004 and 2009, with tremendous growth between 2007 and 2009. On paper, the government increased average salaries from Rf3000 to Rf11,000 and boosted the size of the civil service from 24,000 to 32,000 people – 11 percent of the total population of the country – doubling government spending from 35 percent of GDP to 60 percent from 2004 to 2006.

While preliminary figures had pegged the 2010 fiscal deficit at 17.75 percent, “financing information points to a deficit of around 20-21 percent of GDP”, down from 29 percent in 2009, the IMF reported.

The IMF said that while it recognised “the difficult political situation facing the authorities”, “decisive and comprehensive adjustment measures” were required to stabilise the economy, allow sustainable growth and reduce poverty. In particular, it raised concern about the “lack of significant progress in public employment restructuring.”

“Efforts to strengthen the financial sector and improve the business climate will also be critical,” the IMF said, noting that private sector credit had all but stalled. However it generously conceded that the pace of adjustment “should take into account political constraints.”

The IMF’s Mission Chief to the Maldives, Rodrigo Cubero, told Minivan News that while the government had introduced the core components of a modern tax regime that would begin generating revenue from this year, these achievements were offset by new spending on legislative reforms such as the decentralisation act.

“We see bringing the fiscal deficit down as the key macroeconomic priority for the Maldives,” Cubero said. “A large fiscal deficit pushes up interest rates, thereby undermining private investment and growth, and also drives up imports, putting pressure on the exchange rate and inflation, all of which hurts the Maldivian people, particularly the poor.”

“Further efforts are still needed to reduce the fiscal deficit. Those efforts should comprise further tax reforms as well as measures to reduce expenditure and to improve the channelling of social expenditures to the needy.”

He would not be drawn into the politics of the Maldives’ economic situation, “but what we can say with confidence is that broad political support will clearly be needed both to design an economic programme and to carry it out as planned. That is why we also support as broad a spectrum of consultations with different stakeholders as possible.”

Graduation impact

The Maldives graduated in January 2011 from the UN’s ‘Less Developed Country’ designation to ‘Middle Income’, a move which reduces its access to certain concessional credit and donor aid.

Cubero said that as far as the IMF was concerned, “the Maldives remains eligible to the IMF’s concessional financing under the Poverty Reduction and Growth Trust (PRGT). The IMF follows its own rules and procedures to determine PRGT eligibility; the criteria include income per capita, market access, and short-term vulnerabilities.”

The Maldives had, he said, “made significant economic progress in recent decades, allowing it to reach middle-income status. However, given the large public debt and still very large fiscal deficit, it is very important that the financing terms for the Maldives’ public borrowing remain as favourable as possible. While reducing the fiscal deficit is imperative to maintain debt sustainability, favourable financing conditions would also help keep debt manageable.”

Confidence

In its report, the IMF was broadly confident that the Maldives could stabilise its economy in the medium term, due to the tight monetary policy of the Maldives Monetary Authority (MMA) in mopping up excess liquidity, as well as the passing of the Business Profit Tax and a Tourism Goods and Service Tax.

The economy had rebounded strongly after shrinking 2.25 percent in 2009, and GDP growth for 2010 was an estimated 4.75 percent, the IMF said, with an expected inflation rate of five percent in 2010.

As for the ongoing dollar shortage, while the IMF did not actively advocate a revision of the pegged exchange rate, it did call for “continued discussions between the authorities and the staff on this issue while being mindful of the risks involved and the impact on the poor.”

“The MMA continues to ration the supply of foreign exchange to banks, while fully meeting the demand from the central government and some state-owned enterprises,” the IMF stated. “Dollar shortages persist, and the parallel market premium has increased somewhat.”

In November 2010 the IMF delayed a disbursement under the second review of its program with the Maldives, ahead of the 2011 budget.

The delay, Cubero explained at the time, was due to the “fiscal slippages” caused by insufficient progress towards reducing the wage bill and passing tax legislation – most significantly, the Business Profit Tax.

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