December 2010 – Page 13 – Minivan News

Positive economic development requires “less destructive political climate”, says World Bank

A strong rebound in tourism and government policy efforts to redress macroeconomic imbalances have stabilised the macroeconomic situation and spurred growth in 2010, but a fractious political environment and accelerating international commodity prices remain key challenges, according to a World Bank Economic Update Report published last week.

The report notes that fiscal consolidation – reigning in the ballooning budget deficit with austerity measures and the introduction of taxation on business profits – “remains the foremost challenge in the coming years”.

“A less destructive political climate” will be needed to maintain recent positive developments, the World Bank cautions.

“Despite having posted better-than-expected fiscal results in the first half of the year, the country will be hard-pressed to sustain this in the medium term,” it reads. “However, despite the challenges, the government remains steadfastly committed to fiscal consolidation.”

An internal report by the World Bank, obtained by Minivan News in May, revealed that the doubling of spending on state salaries in 2007-09 crippled the country’s economy, and left the Maldives “facing the most challenging macroeconomic situation of any democratic transitions that has occurred since 1956.”

Fiscal consolidation

While maintaining public sector pay cuts and other austerity measures introduced in October 2009 was “one of the government’s main achievements”, the most recent report notes that it is “highly likely that the forthcoming budget for 2011 will restore the civil service salaries to previous levels.”

With the restoration of civil service salaries in January 2011, salaries of police and army officers as well as political appointees will also be simultaneously restored – “thus completely reversing the pay cuts for all categories of public sector workers.”

The report flags slow progress on “rightsizing the public sector”, noting that planned layoffs “have not been carried out to a significant extent.”

Moreover, public sector workers transferred to corporatised entities – currently state-owned – “remain directly within the payroll of the government.”

In addition, the government’s pledge in May to the seven percent contribution from public sector employees to the pension fund “would likely result in an additional Rf94 million (or 0.5 percent of GDP) in expenditure over the remaining seven months of the year.”

The new structure of island and atoll councils is meanwhile expected to cost the government an extra Rf173 million (US$13.5 million).

However, the introduction of a tourist goods and services tax (TGST) and replacing resort leases with a land rent was a “positive fiscal development.”

As of July, the fiscal deficit was 15.5 percent of GDP “against a target for the year of 18.2 percent of GDP.”

Total expenditure during the first seven months of the year was meanwhile below the target of Rf6 billion at Rf5.25 billion “due largely to a cut-back of non-salary operating expenses and capital expenditure.”

However, total revenue as of July was 12 percent below budget as a result of marginal increases in import duty collection and tourism tax receipts.

While the budget for 2010 anticipated that parliament would pass legislation for Business Profit Tax in December 2009, the “earliest likely start date” for the tax is now expected to be the first quarter of 2011.

The report notes that continuing delays to passing the bill “will hurt the fiscal position.”

Transformation in monetary policy

The Maldives Monetary Authority (MMA) ceasing printing money to finance the budget deficit – deficit monetising – in September 2009 was “a transformation” of monetary policy in the Maldives.

The report notes that open market operations (OMO) commenced by the MMA in August 2009 “has been carried out successfully, draining much of the excess rufiyaa liquidity in the system.”

As a result of the successful OMO, “[net] credit outstanding to the government from the MMA has dropped, thereby reaching the target of the IMF program for end-August.”

The MMA has also been assisting the government to “broaden the base of the domestic T-bill [Treasury Bill] market”, augmenting the existing portfolio of government securities in July with the introduction of the 182-day T-bill.

In December 2009, the government issued US$100 million worth of T-bills to the State Bank of India, the first issuance of securities denominated in US dollars.

The report notes that despite a gradual recovery in global commodity prices, “national headline inflation remains benign and in single digits” at 6.3 year-on-year at August 2010, down from 6.9 percent in July.

In August inflation at the atolls dropped to just 4.4 percent, despite being traditionally higher than in the capital Male’.

Public sector credit (PSC) meanwhile continued to stagnate in 2010, contracting one percent by July.

“Business sentiment remains subdued, with work on resort construction having hit a snag, and the domestic banking system not showing enthusiasm for credit expansion,” it finds.

However, despite recording “the fastest growth in PSC for nearly 20 months – 1.5 percent –driven mainly by credit to the resort sector” in July, “it may be a while before the PSC shows a sustained sign of recovery, with the global conditions still weak.”

Widening current account deficit

While the Balance of Payments situation improved significantly in 2009 “with a faster contraction in imports relative to exports”, rising import prices have contributed to a widening trade deficit.

“During the first seven months of 2010, total import growth (12.3 percent) outstripped export growth (nearly 9 percent), and resulted in a widening of the trade deficit to US$ 506.5 million – 13 percent higher than in 2009,” it reads.

“If global commodity price growth does not accelerate, the trade deficit is likely to remain manageable during the rest of the year, and coupled with higher inflows from tourism,15 the overall current account deficit is expected to narrow further in 2010 to 27 percent of GDP.”

As the Maldives is “one of the most open economies in the world” with imports accounting for over 90 percent of GDP, the report warns that rising international food and fuel prices could worsen the trade deficit, put pressure on foreign exchange reserves and increase consumer price inflation.

“One positive aspect of the rising value of commodity imports is that fiscal outcomes could improve, if planned expenditure cuts are implemented, since 30 percent of government revenues come from import duties,” it concludes.

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Leaked cable from 2008 reveals US concerns about Maldivian national’s “unspecified links to al-Qaida”

United States diplomats expressed concern back in October 2008 regarding the activities of “al-Qaida associates” in the Maldives.

In a leaked cable prepared by then-Secretary of State Condoleezza Rice, the US reveals that the Maldives Police Service investigated and monitored the activities of Yoosuf Izadhy, Easa Ali, and Hasnain Abdullah Hameedh, the former of whom was believed to be in contact with a militant group in Waziristan with “unspecified links to al-Qaida.”

“Izadhy was clandestinely working to recruit others into his organisation, specifically seeking individuals who had undergone basic terrorism training in Pakistan,” the cable read, adding that Izadhy “planned to create a terrorist group in the Maldives with the assistance of the Waziristan-based group.”

In addition, the cable said that “Hameedh was in close contact with a number of individuals who had undergone training in Pakistan, including individuals who were members of Jamaat-ul Muslimeen and completed basic and advanced training by Lashkar-e-Tayyiba (LT) in Pakistan. They followed the ideology of Abu Easa.”

Izadhy was among the nine Maldivians that Defence Minister Ameen Faisal said in April 2009 were “arrested with weapons” near the Pakistani-Afghan border. Two men were arrested in Waziristan, the religiously conservative mountain region of northwest Pakistan.

In addition to Ali Shafeeq, 25, of R.Kandholhudhoo, who was arrested for alleged involvement in the Sultans Park bombing in 2007 but later cleared of all charges and released, those arrested included: Yoosuf Izadhy, 38, of M.Nicosia in Male’, Ahmed Ashraf, 31, of Hdh.Vaikaradhoo; Abdullah Sameer, 38, of Sh. Lhaimagu; Ali Faiz, 31, of Hdh.Vaikaradhoo; Moosa Yoosuf, 30, of L.Kalhaidhoo; Yoosuf Mohammed, 52, L.Kalhaidhoo; Mohammad Zuhree, 28, of Gdh. Dhaandhoo; and Arif Ahmed, whose details were unavailable.

The Defence Minister told press at the time that all nine of these individuals had travelled on three separate flights to Pakistan between February 27 and the March 1, 2009.

In Feburary 2010, the Maldivian government repatriated the nine Maldivian nationals held in Pakistan, who had been arrested by Pakistani authorities following a military raid on several armed groups.

No charges were filed against the men, and they were released to their families. Minister of Foreign Affairs Ahmed Shaheed emphasised at the time that the nine men had not been formally charged and stressed that “the types of activities they are alleged to have been involved in, while illegal, do not necessarily fall under terrorism.”

The role of the Foreign Ministry, Dr Shaheed said, was to “repatriate Maldivians when it is in the national interest to do so” and “not to mix that up with judgements of character”.

President’s Press Secretary Mohamed Zuhair told Minivan News there had originally been 12 Maldivians arrested in Pakistan “but three died while they were being transported between facilities”

Reports the group were carrying weapons were “conflicting”, he said.

Sleeper cell

Concerns about plans by Lashkar-e-Tayyiba to establish a ‘sleeper cell’ in the Maldives periodically surface in the Indian media – the group is believed to be responsible for the Mumbai attacks on November 26, 2008. The attacks saw gunmen enter the city by sea before going on to kill at least 173 people and leave 308 wounded. President Mohamed Nasheed has since downplayed the claims.

While the cable describes the “operational aspirations” of Izadhy, Easa , and Hameedh as “unclear”, “past reporting suggests Maldivian extremists have demonstrated interest in actively participating in global jihadi activities by attempting to arrange travel and terrorist training in Pakistan.”

“While many Maldivian participants of extremist online forums aimed to ultimately fight Coalition forces in Iraq and Afghanistan, mid-October 2007 debrief information following the September 29 bombing in Male’ that targeted tourists indicates at least two of the operatives participated in the attack in exchange for travel from the islands after the operation and arranged study at a madrassa in Pakistan.”

The Maldivian government has repeatedly expressed concern about Maldivian nationals travelling to Pakistan for free ‘Islamic education’ at unmonitored madrassas.

The leaked cable further mentions “recruitment activity” in May 2008 for a Kashmiri offshoot of Lashkar-e-Tayyiba by a Maldivian national Ahmed Zaki. The document refers to reports from 2006 detailing linkages between Maldivians belonging to a UK-based extremist group called Jama-ah-tul-Muslimeen (JTM) and an “anti-American Islamic extremist online forum called Tibyan Publications.”

“JTM is an extremist group based in the UK set up to follow an extremist ideology known as Takfiir that actively encourages violent jihad and supports criminality against apostate states,” the cable notes.

The US has stated that it will not comment on the specific contents of the 250,000 diplomatic cables published by Wikileaks.

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India pledges financial support for Male’ hospital overhaul: report

India’s government has pledged to provide Rf2.7m in aid designed to try and boost services being offered at Indira Gandhi Memorial Hospital (IGMH) in Male’, Haveeru has reported.

The funds form part of a package that is expected to provide new examination equipment and medical consumables at some point during the next month ahead of additional plans to renovate the hospital.

Zubair Mohamed, Managing Director of Male’ Health Services Corporation (MHC), reportedly announced that more details on the nature of aid being made available for renovating IGMH would be announced after the completion of negotiations between the Maldivian and Indian governments.

The hospital has recently experienced uncertainty over the issue of its future management on the back of protracted discussions with the India-based medical company, Apollo Hospitals.

Just last month, local media reported that Health Minister, Dr Aminath Jameel, claimed a deal between the Maldives government and Apollo Hospitals to manage IGMH had fallen through.

“We had to terminate the agreement because they [Apollo] were unable to meet the terms and conditions stated in the agreement.
Every agreement specifies deadlines to settle certain matters,” Dr Jameel reportedly said. “We have also informed them [Apollo] that the agreement has been terminated.”

Senior staff at the Health Ministry and Chair of the Maldives’ Privatization Committee, Mahmoud Razee, told Minivan News at the time that they had not been informed of the deal’s collapse and had only heard media reports.

The government reportedly terminated the agreement with Apollo after the Indian medical giant was unable to invest the agreed amount to develop the hospital.

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Hulhumale door-knocking reveals lack of awareness of constitution

Preliminary findings from the ‘Did you Know’ door-knocking campaign have revealed that half the 500 homes in Hulhumale visited by the volunteers were unaware that the Maldives had a new constitution, let alone what it contained.

The UNDP-run campaign, which launched on November 26, is an attempt to address a lack of public awareness into how the judicial system works – a critical problem for the development and promotion of human rights in the Maldives, according to the UN body.

One component is the ‘Did you Know?’ campaign, involving a team of 27 volunteers door-knocking around Male’, Hulhumale’ and Villingili explaining rights and distributing brochures.

“I found it was women who were the most disinterested, and I think more so among the older generation,” UNDP National Project Manager Naaz Aminath told Minivan News, after knocking on the doors of 500 houses in Hulhumale.

“But they would sit there and listen, particularly to subjects such as employment rights, and the right to a pension. One mother said she’d never heard of the constitution, but we asked her if she worked and talked about her employment rights, which she said was really useful.”

Only about 20 of the 500 homes approached in Hulhumale’ were unwilling to invite the volunteers in, Naaz noted.

“In those instances we left a pamphlet. But mainly people were very welcoming, even though they were busy doing things like cooking and minding children. We were often invited in for a drink.”

Many men showed awareness of their rights, but felt that getting involved in understanding the constitution meant getting into politics “and said they did not want to get involved. But they generally did listen,” Naaz said.

Glimpses into the private lives of so many homes was confronting for some of the volunteers – “We came across other issues – in one house a victim of domestic violence broke down in tears when we walked in. We can’t fix everything [with this project], but we can provide directions on how to contact authorities.”

The consensus after the Hulhumale’ campaign was that while households had an awareness of the new constitution gleamed through television, “there’s a difference between being aware of it and knowing what’s in it.”

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Half of Rf12.37 billion state budget to be spent on employees

The Finance Ministry has unveiled a state budget of Rf12.37 billion (US$962.6 million) for 2011 with a target of reducing the deficit to 15.3 percent of GDP in the coming year, down from 26.25 percent in 2009.

The Fiscal and Economic Outlook 2009 to 2013 published alongside the budget on the Ministry’s website this week states that the main objective of the government’s fiscal policy is to bring expenditure in line with revenue and maintain the deficit within a sustainable range.

The Finance Ministry reveals that while capital investment amounts to 21 percent of the budget, 49 percent of expenditure in 2011 will be on salaries and allowances for government employees.

“If the cost of health insurance to employees is included, half of the state budget is spent on employees,” reads the budget summary.

Foreign loan assistance along with Rf1.4 million (US$108,949) in income from privatisation and Rf1.3 million (US$101,167) expected from the sale of treasury bills was proposed to plug the budget deficit.

In November, the International Monetary Fund (IMF) delayed its third disbursement under a US$92.5 million program pending the approval by parliament of significant austerity measures in the budget.

In its Country Report for the Maldives published in June, the IMF warned that as a result of the failure to enforce pay cuts and the injection of an additional US$62.2 million in spending by parliament, “the annual deficit targets for 2010 and 2011 will be missed on current policies.”

An internal World Bank report produced for the donor conference in May identified dramatic growth in the public sector wage bill as the source of the ballooning budget deficit.

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

The deficit in 2010 is now expected to be at 16.4 percent of GDP, above forecasts of 14.8 percent in the 2010 budget.

While the economy grew by 4.8 percent in 2010 after a 2.3 percent contraction in 2009, nominal GDP, which accounts for a 5.5 percent inflation rate, grew by 12.2 percent this year.

Revenue and expenditure

Government income fell by 23 percent in 2009 in the wake of the global financial crisis, which saw tourist arrivals decline by 4 percent and revenue from import duties down by 25 percent over the previous year.

Offering resorts under development that were facing difficulties with financing an additional year to pay rent contributed to the decline in government income, resulting in a 36 percent decrease in revenue from resort rent in 2009.

While Rf6.8 billion (US$529 million) in revenue in 2010 was forecast at the end of last year, current estimates place the figure at Rf6 billion (US$467 million) – an 11 percent shortfall the Finance Ministry attributes to parliament’s failure to pass legislation on corporate profit taxation as well as delays in implementing a goods and services tax (GST).

Moreover, as only three out of 13 resorts expected to open in 2010 began operations this year, estimates of Rf1.7 billion (US$132 million) in revenue have been lowered to Rf1.1 billion (US$85 million).

However, income from state-owned enterprises is now expected to be higher than originally forecast at over Rf1 billion (US$77.8 million) by the end of the year.

Revenue in 2011 is projected to be Rf8.7 billion (US$677 million), a 44 percent increase from 2010 expected to be driven by the introduction on business profit taxes, GST and extension of resort leases.

Income from taxation is projected to account for 59 percent of government income in 2011, with Rf612.5 million expected from business profit taxes.

The Finance Ministry notes that delays in passing taxation legislation is “the biggest obstacle” to continued assistance from international agencies.

Main industries

The seven-year trend of decline in fisheries is expected to continue in 2011, with the industry expected to have contracted by 5.8 percent by the end of 2010.

After a 29 percent decrease in the construction industry in 2009, the industry is expected to have registered growth of 2.6 percent in 2010.

With nine new resorts under development next year, the industry is projected to grow by 9.7 percent in 2011.

A strong rebound by the tourism industry – which accounts for 27 percent of GDP – saw revenue in 2010 14 percent higher than projected in 2009.

While tourist arrivals increased by 13 percent in the first nine months of 2010 compared to the same period last year, arrivals are expected to have increased 20 percent by the end of the year.

Moreover, a 70 percent decline in occupancy in 2009 was followed by a 74 percent increase in 2010 – with 131,107 more visitors than 2009 recorded in 2010.

Nominal GDP per capita in 2010 is calculated to be at US$4,628 and is projected to climb to US$5,114 in 2011.

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Civil Court asks JSC for documentary proof it is carrying out constitutional responsibilities

The Civil Court has given the Judicial Service Commission (JSC) a week to locate ‘missing’ evidence it claims will exonerate it from accusations of bias and unconstitutional conduct.

JSC, the independent body constitutionally mandated to maintain ethical and disciplinary standards of the judiciary, is facing charges of professional negligence arising from its decision not to investigate complaints of serious misconduct made against two judges by Treasure Island Limited in 2009.

Treasure Island alleges that JSC decisions to dismiss his complaints against former Supreme Court Justice Mujthaz Fahmy and Judge Ali Naseer were taken arbitrarily and in breach of the Constitution. At the time Treasure Island made the complaints to the JSC, Justice Fahmy was the Commission’s deputy chair.

The JSC has denied any wrongdoing and, since the case began in early October last, has maintained that proper procedure was followed in responding to the complaints.

JSC regulations, and the Constitution, require that any decision or action it takes regarding a complaint against the judiciary must have the majority support of its ten members. The regulations also require that records be kept of the members present and how they voted when the decision was taken.

On Sunday Judge Mariyam Nihayath acceded to Treasure Island’s repeated requests for the court to demand that JSC provide documentary evidence to support its claims of having observed proper procedure.

JSC legal representative, Abdul Faththah, admitted in court yesterday that despite his many valiant efforts he had been unable to locate any such evidence – “yet”.

The court also noted that JSC had responded to one of the complaints by Treasure Island saying it was beyond the Commission’s duties to review the ruling of a judge. The letter sent, in August 2009, was signed by then Chair of JSC, High Court Chief Justice Ghani.

Faththah admitted in court yesterday that there was no evidence to prove the letter was based on a majority decision taken by Commission members as is required.

He told Judge Nihayath, however, that he had consulted with Ghani on the matter, and had been advised that circumstances do exist in which the JSC Chair has the legitimate authority to deal with a complaint without a majority vote by members.

Proof of when and how the JSC chair can exercise the said discretionary power, however, have not been located “yet”, Faththah said.

Judge Nihayath told Faththah the court could not wait indefinitely for the proof to turn up, and ruled that JSC provide the court with the documents when the case resumes on 14 December 2010.

She will also decide then, she said, whether to agree to Treasure Island’s request to summon as witnesses some current and former members of the JSC to verify their involvement – or lack thereof – in a majority decision not to investigate the company’ complaints.

The JSC has been increasingly riven with conflict. Some members have accused current Chair Supreme Court Justice Adam Mohamed Abdulla – in association with several others – to have deliberately and systematically avoided adopting a Standard Operating Procedure according to which it should be run.

Tensions escalated further last week when one of its members, Aishath Velezinee, accused Justice Abdulla of being mentally unfit to hold office. She has also accused certain members of the JSC of abusing their powers and using the JSC to sabotage all efforts to consolidate the new Maldivian democracy.

The JSC was required to have adopted a Standard Operating Procedure by 26 January last, but has so far failed to do so. By October this year there were over a 100 complaints against the judiciary the JSC had not attended to.

It also failed to meet the deadline for appointing an interview panel to approve judges to the High Court bench, almost two months after the deadline for applications elapsed.

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Aircraft collision not a major incident, says Civil Aviation Department

A collision that occurred yesterday between a Maldivian Air Taxi seaplane and another aircraft at Male’ International Airport resulted in no injuries or major damage, the country’s Civil Aviation Department has said, claiming it has no concerns over the safety of the aircraft.

Hussein Jaleel, Deputy Director General for the Civil Aviation Department that oversees airline regulation, said it had been made aware of a collision yesterday, which it downplayed as a minor accident involving the wingtip of an aircraft colliding with another aircraft that was not seen as “a major safety concern.”

“There was a collision yesterday involving a Maldivian Air Taxi aircraft, but it was actually not a serious incident,” Jaleel said. “No person was injured and no damage was recorded to the aircraft that could affect flight operations.”

Local newspaper Haveeru reported that the seaplane collided with the wing of an aircraft taking-off from Hulhule, at 6:30am while it was approaching the water runway.

The official, however, said the number of passengers and the cause of the accident could not be identified yet, as a full report has not been filed so far.

“We receive urgent reports only if it is a serious accident. So it will take some time to receive reports of minor accidents,” the official said.

MAT Ground Operations Manager, Inthikaab Ahmed said he was not aware of any accidents.

A spokesperson for airline operator Maldivian Air Taxi told Minivan News that there had not been any reports of an accident or minor collision in the company’s fleet, a track record they claimed has not changed for some time.

When asked about the Civil Aviation Department claims, the company spokesperson said its management had not been informed of any incidents with its vehicles and it had no idea where the information had came from.

“We [Maldivian Air Taxi] have had no accidents in the last few years, maybe even longer,” said the spokesperson. “There have not been any collisions.”

Regardless of whether the accident reported was a serious or a minor collision, Jaleel said Civil Aviation Department regulations required an investigation into any accident. However he added that “no further reports would be required” in relation to yesterday’s incident.

“We have no issues that the accident was the result of negligence, though if we ever have any serious concerns relating to safety issues then we would of course take action,” he added.

The Civil Aviation Department claimed it therefore remained confident of the effectiveness of safety measures employed by seaplane operators in the Maldives.

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Private groups sought for local heritage promotion

Private parties are being sought by the government to aid in the conservation and promotion of historical sites across the country, according to news reports.

Haveeru has reported that a total of 68 sites, including Utheemu Palace and the Ihavandhoo Hirigalu Mosque in Haa Alif Atoll, the Matheerashu coffin, the National Museum and a host of historical mosques, will all be included in the plan.

The country’s Heritage Department, which is linked to the Ministry of Tourism, Arts and Culture, said that the decision was made due to growing demand and interest among the public.

December 15 has been set as a deadline for private groups wishing to express an interest to the Heritage Department in supporting the programme, the paper added.

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Vice President meets overseas cadets

Cadets and officers from Bangladesh, India, Singapore and Sri Lanka, who are currently visiting the Maldives under the Youth Exchange Programme, met with Vice President Dr Mohamed Waheed Hassan yesterday under a programme to trade knowledge and experience between cultures.

The Vice President said the visit would give the young cadets them “a different perspective on climate change”, and an awareness of how immediate the threat of climate change was for some countries such as the Maldives.

The Cadet Youth Exchange Programme aims to visit and participate in cadet corps activities in the exchange countries, and create among participants the awareness, understanding and appreciation of other cultures and society.

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