Day: April 13, 2011

Fear and acclimatisation in Fares-Maathoda

In the first part of a special report from the island of Fares-Maathoda, Minivan News looks at the challenges for communities developing beyond Male’s glance as they attempt to switch to decentralised governance and overcome their natural vulnerabilities.

If the rate of development in the Maldives could be measured in the availability of Lavazza-branded espresso, then the conjoined islands of Fares-Maathoda in the Gaafu Dhaalu Atoll, while offering a very warm welcome, remain an instant coffee type-of-place.

With its sparsely populated community estimated at about 1000 people, the island is dense with jungle vegetation that rests alongside inhabited and incomplete homes, while crabs on the beach nestle between piles of coconut husk, used food wrapping and milk cartons amidst views of an apparently endless blue horizon.

The relatively unique geography of the islands could be said to reflect a wealth of challenges facing the wider country regarding waste management, coastal protection and economic development.

Since being formed back in the 1990’s via reclaimed land over a shallow passage of water linking the two islands in an attempt to create a small craft harbour for its residents, the UN has cited concerns from Fares-Maathoda’s residents that flooding has been made worse and far more frequent as a result.

While the islands may not specifically serve as a microcosm for the nation’s delicate beauty and democratic reform process, UN Resident Coordinator Andrew Cox said he believed that Fares-Maathoda was very typical in reflecting the Maldives’ vulnerability to natural elements as well as the development needs of its people.

“This counts as a vulnerable island; vulnerable economically and all the other issues that come along with that,” he said. “People make their money off fishing here and there are not a lot of other options or a strong tourism industry in the area. So you don’t get people earning money and bringing income in that way. One of the things that research shows is that islands or communities do very well if their livelihoods are good and if they are well organised.”

Since coming to power, President Mohamed Nasheed has garnered huge international coverage, as well as foreign accolades for his attempts in trying to champion the Maldives as a small nation working towards becoming a fully sustainable economy. Yet at island level, how are these commitments being seen?

Cox added that the time had perhaps come for government to be more inward looking by opening up national debate and understanding of what climate change could mean for the Maldives on an everyday basis.

“The president has been exceptional at selling climate change issues to the world. Yet I think the Maldives will benefit at every level through a basic of understanding what [climate change] is going to mean for the country and how it is that decisions are going to be made in the future about what are the best chances for economic growth. Where is it that people are going to be living? How are they going to be living?” he said. “All these things I think could be and must be fleshed out. I think it could be a very interesting national dialogue to have. There has been a certain amount already, but this about the future in the Maldives.”

Cox himself, along with representatives from the Ministry of Finance and Treasury, the Ministry of Housing and Environment, the National Office and the United Nations Office for Project Services (UNOPS) visited Fares-Maathoda on April 12 to meet with local councilors, and outline how Danish donor aid for funding climate change adaptation would be allocated on the island.

The allocated funding, which totals 5 million Danish Krone (Rf12 million) will be put into a scheme to support a wider number of future development projects targeted at offsetting the potential impacts on the country from climate change and rising sea levels. On Fares-Mathooda, some of the funds are being set aside for drainage and waste management projects.

Beyond president Nasheed’s international sustainability pledges, positioned on the other side of the country, and indeed the political spectrum, Fares-Mathooda, which elected five councillors into power from the opposition Dhivehi Rayyithunge Party (DRP) in February’s local council elections, claims to have a great need for assistance in reducing its vulnerability to the sea and the elements.

Speaking to Minivan News, councillor Hussain Rasheed claimed that aside from the long-term threats of rising seas and freak natural disasters such as the 2004 Asian Tsunami, seasonal occurrences such as high tides were proving to be problematic for the island’s development.

The low-lying nature of the island had meant that storms and tidal swells were major problems for residents on the Fares side of the island, whom had in the past been forced to vacate to the Mathooda side for safety in certain circumstances.

“This is a very big problem, for instance, many people suffered psychologically when there was a tidal wave, and with many people affected, we needed a lot of assistance to relieve this suffering,” he said.

An engineer present at the meeting, as one of the bidders hoping to work on the climate change adaption projects for Fares-Mathooda, claimed that the low-lying geography of the island meant that waves of even a metre in height posed a huge flooding risk. The engineer added that the problem was made worse by the reclaimed land between the two formerly separate islands that had since been combined physically and administratively, limiting natural drainage options for water building up on the land.

In trying to address these concerns, Andrew Cox said that it was vital to focus on the specific vulnerabilities facing a community, island or an entire atoll in the case of the Maldives, rather than solely looking at large scale energy investments in a bid to provide national solutions to environmental and coastal management.

“What is it that people need? That is the bottom line,” he said. “People have been talking about climate change for a long-time, but it has been mostly focused around international negotiations to try and reverse carbon into the atmosphere. But so far there has not been an international deal,” he said.

Cox added that this failure for international agreement still hadn’t dampened interest from politicians, donors and NGOs in being seen to be “doing something” about climate change around the world.

“The big question that I think the Maldives can answer about climate adaption is, how do you do that? In real life what do these changes mean?” he asked.

According to Cox, like almost every other nation in the world, the Maldives does not have any large-scale examples of climate change programmes, but rather a great deal of smaller pilot projects designed to try and limit potential vulnerability to environmental changes. This he said, was often seen in a variety of areas such as water or waste management.

The UN representative said these smaller projects might be present on a number of islands in the form of different waste management projects that resulted in various levels of success.

“The central concept that we need to talk about and agree, is what happens when you bring all these things related to climate change together in one place? How do you make a material change in the vulnerability of one atoll?” he asked. “Even an atoll is too small, because the Maldives doesn’t have that much time, but you have to start somewhere. You take an atoll and see what it needs as a whole to get from point X on the vulnerability scale to point Y, which is hopefully above the minimum level of security.”

Just as important though, according to the UN Representative, would be the country’s attempts to overcome poverty through economic development measures, reducing a country’s vulnerability beyond investing in infrastructure alone.

“This is a concept that makes a lot of sense, but it hasn’t been done. The exciting thing for the Maldives is if you can go down that path, you can show donors the way. This will hopefully benefit the Maldives as well as international projects as well,” he said.

“It doesn’t necessarily mean all the answers will be here, but a lot of them might be.”

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Villingili assault victim on life support after gang attack causes serious head injury

A 25 year-old man who suffered severe head injuries in an assault by a gang in Villingili two days ago has been declared brain-dead and is currently on life support at Indira Gandi Memorial Hospital (IGMH).

Police Sub-Inspector Ahmed Shiyam said that police had received a report that the man had died, however this was not confirmed by the hospital.

”We can’t confirm whether he is dead, we have not yet received any official document yet,” Shiyam said, adding that five men had been arrested in connection with the attack.

IGMH Spokesperson Zeenath Ali told Minivan News that the victim’s condition was critical and that no progress had been observed since he was admitted to IGMH.

”The attack caused a very serious head injury,” she said. ”He is currently in a coma and on life support.”

Several media outlets have identified the person as Ahmed Mirza from the island of Maalhendhoo in Noonu Atoll.

Mirza, who works in a shop in Male’, was attacked on Monday night and rendered unconscious by his attackers. He was attacked while he was sitting in a park in Villingili.

Police have suggested the attack involved a gang, while Minivan News has received unsubstantiated reports that the assault was prompted following comments made about a girl.

A family member of the victim told local newspaper Haveeru that doctors had lost hope that Mizra would survive.

“He’s still on life support, hospitalised in the ICU because of the family’s request”, she told the paper. ”It’s like he’s gone, only with a pulse.”

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Comment: It’s the economy stupid!

There is only one thing on everyone’s mind – the dollar-rufiyaa exchange rate. In a country that imports everything from salt to the accountants that run its businesses, it is no wonder that everyone from the construction worker to the Maldives’ answer to Donald Trump (I’ll leave you to guess whom) is trying their hand at being an economist with a specialty in foreign exchange.

Whether you agree with the politics of it or not, the devaluation was needed. If anything it should have come sooner. The Maldives has been growing its rufiyaa-based economy at break-neck speed. Salary rises across the board, increased government spending and ever increasing infrastructure projects have become the norm over the past decade. By and large this ‘growth’ in the domestic economy has been driven by the public sector (government policy & the civil service) and paid for by printing Maldivian rufiyaa and clever manoeuvres with T-Bills (which the government has used since 2009 to be able conveniently sidestep the charge of printing money). In simple terms: successive governments printed/created money to drive domestic economic growth.

What it didn’t manage to do was increase it’s dollar receipts at the same speed (actually all foreign currency, but I’ll use dollar interchangeably in this article). Yes growth in the tourism industry increased the dollar receipts but nearly not enough to fund the increase of rufiyaa in circulation. The previous government had a spade of one-off dollar incomes by selling resorts, but by neglecting to make sure that these so called developers had the capacity to develop the properties and provide the country with a constant source of dollars, they missed a trick. The consequence: an imbalance in the amount of dollars the country has the capacity of earning and the amount of rufiyaa it is printing/creating and spending. If you increase the supply of rufiyaa without the corresponding increase in dollar receipts, it is inevitable that Maldivian rufiyaa will be worth less. It is simple demand and supply.

So the question is, where to from here? By creating a ceiling at Rf15.42, the government has effectively stopped a steep depreciation in the currency and has minimised the crippling effects of a severe shock to the economy – and it should be praised for that. There is however a cost. This will erode purchasing power in the short term and will hit people’s pockets (albeit tempered by the fact that the dollar was already trading at around Rf 14 in the black market despite the best efforts of the authorities). As always, it is the common ‘Mohanma’ on the street who will bear the highest burden. Prices will inevitably creep up and the inflation will put pressure on wages. Any subsequent wage increases which will lead to further effective devaluations. Let us not sugar coat this – it will be painful.

What the government needs to do is to come up with a credible plan to redress this imbalance and reassure the people that the pain is worth it. There are two fundamental way of doing this: i) reducing the rufiyaa in circulation, or ii) increasing the dollar revenue the country earns. In my mind there is no doubt the answer lies in a fiscal solution to get the economy back on an even keel. The dollar crisis is simply a symptom of deeper economic woes – not the problem itself.

Reducing rufiyaa in circulation

The main levers of doing this are a) reduce government spending – reducing wages and cutting unfunded government projects and/or b) increasing rufiyaa-based taxes.

Reducing government spending is an essential plank of what needs to be done to rebalance the books. This is the path that the UK and the EU (driven by Germany) are already following, and all indications are that the US will announce similar austerity measures after its Quantitative Easing splurge. Cutting too quick and too deep may the tip the economy into recession and that would be very painful – but not doing anything is simply not an option. The consequences are even graver.

The government also needs to ensure that it adopts a progressive taxation system on rufiyaa-based incomes. We need to ensure that the rich share ‘equitably’ in the pain of rebalancing our books. Equitably here means that they pay a much higher proportion of the cleanup costs – in practice this should be a combination of no taxes for the low income earners, close to 50 percent taxes for the ultra high income earners and a corporation tax system which exempts small local businesses.

Increase the dollar revenue

The most appealing of all options as it means no painful cuts. The catch is that this is largely out of the government’s control, at least in the short term. The only two significant sources of dollar income are through fisheries and tourism – and there are challenges in growing both sectors. Investment in fisheries is long over due, but ultimately the sector does not have the scale to solve the problem in the short to medium term – it is simply too small today.

Tourism, the great gold rush of this generation, is a much bigger challenge. Government types tell wonderful stories of 20 percent equity returns and 60 resorts waiting to be developed. The simple truth is that this represents close to US$3 billion of investment in a country where the nominal GDP is around £1.5 billion – an improbability to put it mildly. It is simply not realistic to pin our hopes on some sort of tourism growth bonanza in the short term – we might as well play the Euro lottery every week if this is the only plan.

The long term rebalance

In the long term, the structural solutions are through growth of our industries that translate into real economic growth underpinned by increases in our foreign currency receipts. The government needs to:

  1. Foster an environment where real growth can be achieved for our innovative companies in the fisheries sector (the next Big Fish, Horizon et al), and also create opportunities for Maldivian corporations and SMEs in other sectors to grow into the world market. Investing in revenue growth is more important that building airports on every island. Real growth in the economy driven by the private sector is the road to prosperity – not government spending based on printing money and clever manoeuvres with T-Bills.
  2. Move now to ensure a quick solution to all the tourism development projects stopped because they were awarded to parties with no money or track record. It is bizarre that they have been allowed to hang on to ‘their’ assets without fulfilling their obligations by cajoling the government and the banks. Moratoriums on lease payments or debt repayments may look innocuous enough, but they rob the country of vital growth opportunities and hence ultimately rob the people. We should not stand for it.
  3. Implement an equitable progressive taxation system. It is not fair that the low income people pay the same taxes as the highest earning group – through the flat import duty this means that the poor actually pay a larger percentage of their income as tax than the rich. And it is criminal that the resort owners are sitting in parliament legislating that they should not pay their fair share of taxes on the very substantial amounts they earn. This is a clear conflict of interest and something that needs to be addressed at a national level. The constitutional stipulation that Majlis members shall not vote on issues in which they have a personal vested interest must become more than just a nice idea on paper. The 3 percent tourism GST is simply not equitable enough!

The country’s economic troubles require a bold government that can show leadership and is honest with the Maldivian people about the tough choices ahead. Equally it needs a responsible opposition which accepts the reality of the problem and challenges the government on the merits of its economic policies by proposing viable alternatives. For their trials and tribulations, the Maldivian people deserve it. Whether they are lucky enough to have either, only time will tell.

Ali Imraan is the Director of Structured Finance at the Royal Bank of Scotland. The views expressed here are his own personal views and opinions and do not represent those of the Royal Bank of Scotland and should not be construed to do so in any way, shape or form.

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

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Opposition protests over managed float of currency end peacefully

Rival factions of the Dhivehi Rayyithunge Party (DRP) yesterday held separate protests against the government’s decision to allow the rufiya to be traded at rates of up to Rf15.42.

The faction led by former President Maumoon Abdul Gayoom last night marched from the tsunami monument and down Ameenee Magu, a main street of Male’, together with the party’s former Deputy Leader Umar Naseer and MPs Ahmed Nihan, Ahmed Mahlouf, Ahmed Ilham and Gayoom’s spokesperson Ahmed ‘Mundhu’ Shareef.

Meanwhile, a much smaller protest led by DRP Deputy Leader Ali Waheed and several senior officials of the Dhivehi Qaumee Party (DQP) made its way down the main street of Majeedee Magu. DRP Leader Ahmed Thasmeen Ali was absent from the march.

Gayoom’s faction marched towards Muleeage’, the official residence of the President, with the intention of handing him a letter from the DRP. However they were obstructed by lines of police blocking streets in some places standing shoulder-to-shoulder. Instead, the marchers headed to police headquarters, where the police were given the letter to hand over to the President.

Both marches ended peacefully, aside from minor confrontations between police and DRP protesters on the route to Muleaage’.

Following a crackdown on the blackmarket trading of dollars at rates higher than the pegged rate of Rf12.85, which was hovering around 14.2, the government on Sunday declared a ‘managed float’ of the currency within a 20 percent band.

Many companies dealing in dollar commodities immediately raised their exchange rates to Rf 15.42, along with the Bank of Maldives. The Bank of Ceylon was selling dollars at 14.5 yesterday, while Habib bank was selling at 13.75. HSBC was selling at 15.4.

The International Monetary Fund (IMF), which has been critical of the government’s growing expenditure despite a large budget deficit, praised Sunday’s decision as a step towards a mature and sustainable economy.

“Today’s bold step by the authorities represents an important move toward restoring external sustainability,” the IMF said in a statement. “IMF staff support this decision made by the authorities. We remain in close contact and are ready to offer any technical assistance that they may request.”

The government’s move, while broadly unpopular, acknowledges the devaluation of the rufiya in the wake of increased expenditure and its inability to overcome the political obstacles inherent in reducing spending on the country’s bloated civil service.

However the Maldives relies almost entirely on imported goods and fuel, and many ordinary citizens will be harshly affected by short-term spike in prices of up to 20 percent as the rufiya settles.

“We do not really know, based on the breadth of the domestic economy, what the value of the Maldivian rufiyaa is right now,” Economic Development Minister Mahmoud Razee admitted at a press conference on Monday.

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UN security council favours anti-piracy court formation

The UN security council has pushed for the formation of international courts and prisons – as well as new laws to support their formation – in an effort to combat piracy that has spread from the coast of Somalia to regions like the Indian Ocean, according to news reports.

Agence France-Presse (AFP) has reported that the security council has this week approved a resolution forwarded by Russian delegates to try and curb huge levels of international piracy stemming from Somalia.

Fears have risen during the last year that the territorial waters of Indian Ocean nations like the Maldives could become a realistic target for pirates.

Security officials like the Maldivian National Defense Force (MNDF) last month claimed that there had been no recorded attacks by Somali pirates on vessels in the country’s territorial waters.

However, the AFP reported that the passing of UN security council resolution 1976 has led delegates to praise the initiative as a step towards installing a specialised anti-piracy court.

UN Secretary General Ban Ki-moon was also called upon by the council to prepare recommendations over the next few months on establishing a court system to focus on suspected acts of piracy.

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Police celebrate 78th Anniversary

Police last night held a special function at Dharubaaruge to mark its 78th Anniversary.

President Mohamed Nasheed, Commissioner of Police Ahmed Faseeh and ministers were present at the special function.

Commissioner Faseeh pledged to control the gang violence in the Maldives if concerned authorities cooperated with the police.

Expressing concern at the number of juveniles involving in crimes, Faseeh called on parents to cooperate more with police in reforming the juveniles committing crimes.

President Nasheed also addressed the people at the function.

Nasheed urged businessman not to reject teenagers from employment for having a criminal record on their police report.

Instead he called on businessmen to give them the opportunity to work “for the sake of the nation.”

He also said that he did not wish to have “even a single Maldivian behind the bars.”

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