Preliminary debate begun on three bills

Parliament began preliminary debate on three bills during its sittings this week, including legislation on small and medium-sized businesses proposed by the government as part of its economic reform package.

Presenting the bill on Monday, MP Nazim Rashad of the ruling Maldivian Democratic Party (MDP) said the legislation would establish a centralised mechanism to register small businesses and facilitate loans for investment.

In the next sitting on Tuesday, Independent MP Ali Mohamed presented a bill on medical devices. The former opposition Dhivehi Rayyithunge Party (DRP) MP explained that the absence of relevant legislation on medical equipment precluded hospitals from ascertaining their quality.

The legislation would encourage training staff to operate the machinery and establish a regulatory board to enforce standards.

Meanwhile at today’s sitting, the last of the week, preliminary debate began on the government’s arbitration bill, which seeks to introduce alternative dispute resolution in the Maldives. The bill is also part of the government’s 18-bill economic reform package.

The first of the reform bills – now the General Goods and Services Tax (GST) Act – was passed at the final sitting of the last session on August 29.

Also during this week’s sittings, the government’s bill to amend the Import-Export Act of 1979 to reduce and eliminate custom duties entered the final committee stage. The amendment bill is likely to be put for a vote when Majlis resumes next week.

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ACC to sue Maldives Media Council over illegal ‘living allowance’

The Anti-Corruption Commission (ACC) has said that it has decided to sue the Maldives Media Council (MMC) after the Auditor General’s report revealed that members took almost Rf 900,000 in additional allowances.

President of the ACC Hassan Luthfy confirmed to local media that suits will be filed against the MMC, one in the Civil Court and one in the Criminal Court for corruption.

Meanwhile, the Maldives Journalists Association (MJA) has called on the members to resign following the publication of the audit report.

In a statement, the MJA said that “this raise questions about the integrity of MMC which was established by the Parliament to regulate media. The MMC Act which was passed by the parliament clearly stipulates that no additional money other than wages shall be given to the council members for their work, unless it is approved by the Parliament.”

The MJA said the MMC Act required the council to comprise of eight members from the media and seven members from the public, but questioned the legitimacy of the council after noting that member from the public had been employed by the Maldives National Broadcasting Corporation (MNBC) after he was appointed as a member.

“This has dropped the number of members representing public to six, and increased the number of members representing the media to nine,” the MJA said, asking parliament to probe the issue.

The MJA said it was unacceptable for the NGO to see an institution assigned to regulate the media breaching the laws and democratic principles.

“This primitive action by the MMC has tarnished the trust and dignity of the local media in front of the citizens,” the MJA said. “We are very concerned, as this may also damage the reputation of the Maldives media in front of international organisations, and may raise questions about the integrity of the sole media regulatory body in the country.”

The opposition joint parliamentary group has meanwhile told the media that next week they will submit a bill to parliament to dissolve the council and transfer its mandate to parliament’s Maldives Broadcasting Corporation (MBC).

Spokesperson for the opposition parliamentary group, MP Ahmed Nazim, told newspaper Haveeru that the council had not been fulfilling its responsibility and noted that the Anti-Corruption Commission (ACC) has accused the council of corruption.

He said that the MMC’s initial refusal to obey the direction of the ACC and repay the money was also an issue.

President of the Maldives Media Council (MMC) Mohamed Nazeef did not respond to Minivan News at time of press.

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Hanimaadhoo MP Mujthaz joins PPM

Dhivehi Rayyithunge Party (DRP) MP Mohamed Mujthaz resigned from the party yesterday and signed for former President Maumoon Abdul Gayoom’s Progressive Party of Maldives (PPM).

Mujthaz signed the membership form at a small ceremony attended by Gayoom. PPM Spokesperson MP Ahmed Mahlouf told press that the MP for Hanimaadhoo had pledged to join the new party formed by the breakaway Z-faction of the DRP.

With the exodus of MPs to join PPM, the DRP now has 16 MPs in parliament.

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US foots bill for better water on “climate-resilient islands”

The United States Government will provide US$7.1 million towards an integrated water resource system on Lhaviyani Hinnavaru and Haa alif Dhihdhoo islands, a project with an estimated total cost of US$7.5 million.

Ground water aquifers on these islands have deteriorated, and residents are experiencing water shortages due to salt water intrusion and poor sanitation practices.

“Funds from this project will prevent water shortages and ensure clean groundwater, reduce coastal erosion, improve sanitation and provide safe drinking water,” said US Ambassador to Sri Lanka and the Maldives, Patricia Butenis, at a press conference held in the President’s Office today. “The people on the island will also receive training to take over the management and training of these projects.”

In addition to pooling all major water resources on the islands, the plan aims to strengthen institutional water distribution capacity and governance, particularly during dry spells.

In the dry seasons of 2009 and 2010, the Maldivian government supplied desalinated water to over 90 islands at a cost of Rf10 million. The average cost of this service is expected to rise with fuel prices.

Both islands have approximate populations of 4000. The Government of Maldives hopes to uphold the two islands as models of “climate-resilient islands.”

US Agency for International Development (USAID) has partnered with the Ministry of Housing and Environment, island councils and residents, and provincial utility companies to develop the household water distribution network.

The project, which is part of US President Barak Obama’s Global Climate Change Initiative, will improve clean water circulation, sewage systems, and waste management services. Project workers will also educate island residents on managing coastal erosion, land use, and the marine environment.

Lhaviyani Hinnavaru and Haa alif Dhihdhoo islands received assistance from USAID following the 2004 tsunami, which crippled much of the Maldives. A sewerage system was introduced on Dhidhoo and Hinnavaru received a desalinated water system.

“Climate change becomes a serious issue for us because of its implication on water, among other reasons,” said President Mohamed Nasheed, and the press conference today. “The water table is contaminated by salt water intrusion from sea level rise. We must find other solutions, and this is a substantial grant for our adaptation work.”

At the same time, Nasheed said, “we have to be able to stand on our own feet. We have to tax our economy and fend for ourselves. We are a middle income country and it is not always ethical to ask for donations while there are so many others who are much poorer.”

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Comment: US needs to strengthen ties with South Asia

Last week, the United States and India concluded the fourth strategic dialogue on Asia-Pacific regional affairs, illustrating the importance that Washington places on its relationship with New Delhi. India’s surging economy has deepened interest among US policymakers eager to advance bilateral ties with a large country in the region that shares a democratic identity. Factors contributing to this shift include China’s ascent as an economic and strategic power and the possibility that the US military may favor an offshore strategy in the future.

However, India should not be the sole hope on which US security strategy rests in South Asia. US relations with this new strategic partner are guaranteed to experience bumps, as evidenced by the recent rejection of US firms in the Indian Air Force’s Medium Multi-Role Combat Aircraft (MMRCA) competition. Moreover, India has long maintained a strong non-aligned foreign policy tradition, enforced by policymakers who face continual domestic political pressures not to appear too pro-American. This is not to say that the US-India strategic partnership appears ready to fail. Still, one possible scenario could find relations with India not progressing as quickly as desired, while relations with Pakistan and Afghanistan remain in tatters, leaving minimal US relations with other South Asian states. Even if this scenario does not occur, the United States cannot afford to ignore the need to forge deeper strategic relationships with the smaller countries in the region.

Relations with Bangladesh, Sri Lanka, the Maldives and Nepal hold many unexplored possibilities and reasons for expansion.

First, as Assistant Secretary of State for South and Central Asia, Robert Blake pointed out in Congressional testimony earlier this year, all these countries are governed by democratically elected leaders. As with the “shared values” discourse supporting greater relations with democratic India, the United States has a similar foundation for fostering ties with these nations.

Second, three of these countries are maritime states. Given the importance of securing Indian Ocean sea lanes, through which 50 percent of the world’s container traffic and 70 percent of the world’s crude and oil products transit, it is in US interests to promote maritime security cooperation among South Asian countries and deepen defense ties with these navies as a form of burden-sharing in the Indian Ocean.

Further, smaller countries provide better test cases for realizing new strategic visions and more permissive environments in which to experiment than do the larger states of India and Pakistan, where constraints are omnipresent and the stakes are much higher. In the Harvard International Review, Doug Lieb has discussed the importance of analyzing international relations in “marginal states” that are often overlooked in a structural realist worldview that privileges the study of large countries. The smaller countries of South Asia could be easy wins for the United States, especially in the face of increasing Chinese dealings there.

US ties are probably the strongest with Bangladesh, a Muslim-majority and democratic nation. Given the country’s vulnerability to nontraditional security threats such as cyclones and earthquakes, the Bangladeshi military would appreciate increased help with weather forecasting technologies and cooperation on humanitarian assistance and disaster relief issues. Before the next environmentally related cataclysm occurs, the United States should further develop security relations with Bangladesh.

The Maldives, like Bangladesh, is a relatively pro-American Muslim democracy. It faces the challenge of countering Somali pirates and Lashkar-e-Taiba terrorists from Pakistan seeking harbor on any one of its 26 atolls. The Maldives National Defense Forces would likely not be equipped to handle a potential Mumbai-style attack on its tourism industry and could benefit from US counter-terrorism assistance.

US relations with Sri Lanka have been strained due to charges of human rights violations during its defeat of the Liberation Tigers of Tamil Eelam (LTTE) in 2009. Yet as Sri Lanka’s economic and diplomatic ties with China grow, the United States must try not to alienate Sri Lanka given its strategic location in the Indian Ocean. In fact, the US Navy could benefit from exchanges with the Sri Lankan military. For example, learning the swarm attack tactics that were employed during the country’s civil war could help the United States prepare for the threat it may face from Iran in the Strait of Hormuz. In addition, the Sri Lankan navy could benefit from US assistance in transitioning its patrols from the north to the south, where roughly 300 ships pass the tip of the island daily.

Regarding Nepal as it draws down its forces and integrates Maoist rebels into the military as part of its peace process, US security cooperation and expertise could be critical in this operation.

Finally, judicial capacity-building would be another low-cost way to advance US ties with all these countries.

By comparison, China has been strengthening its ties to South Asian countries, especially in the form of infrastructure development. Chinese port construction in Chittagong, Bangladesh; Hambantota, Sri Lanka; Gwadar, Pakistan; and Kyaukpyu, Burma have all been cited as prominent examples of a supposed “string of pearls” that China may be seeking to build in an area outside its traditional sphere of influence. Regardless of actual Chinese intentions in South Asia, Indian analysts have voiced concern about being “encircled” by China’s economic, military, and diplomatic inroads with these countries, including Nepal.

In recognition of the growing challenges South Asia presents to the United States, experts are beginning to discuss ways of reorganizing the US government’s bureaucracy to address the region’s new realities. Bruce Riedel and Stephen Cohen have proposed the creation of a “South Asia Command” (SACOM) to overcome the seam issues posed by Pacific Command (PACOM) and Central Command (CENTCOM) separating India and Pakistan in US defense policy. Others have suggested an Indian Ocean Region Command (IORCOM). With such talk and broader discussions about a realignment of US force posture in Asia, now is the time to also examine relations with the smaller countries in South Asia and the prospects for building partner capacities in the region.

As the United States winds down its commitment in Afghanistan, while confronting unbounded uncertainty in its relationship with Pakistan, it can look to the promise of partnership with India only to a certain extent. If disappointments such as the MMRCA rejection happen too often, or if India tests nuclear weapons again and Washington re-imposes sanctions, the United States would be left without strong security partners in the region. For too long, the United States has ignored the potential benefits of fostering relations with the smaller countries in South Asia. Prospects for advancing US security ties with Bangladesh, Sri Lanka, the Maldives and Nepal deserve serious examination.

Nilanthi Samaranayake is an analyst in the Strategic Studies division at the Center for Naval Analyses in Alexandria, Virginia.

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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High Court upholds lower court verdicts over unpaid Bank of Maldives loans

The High Court has upheld Civil Court verdicts ordering Mahandhoo Investments and Kabalifaru Investments – two companies with ties to Dhivehi Rayyithunge Party (DRP) Leader Ahmed Thasmeen Ali – to repay millions of dollars worth of loans to the Bank of Maldives Plc Ltd (BML).

DRP MP Mohamed Nashiz, brother of the DRP leader and managing director of Kabaalifaru, and MP Ali Azim, a loan guarantor, were among the appellants at the High Court.

Both MPs had signed ‘joint and several guarantee and indemnity’ agreements for the loans issued in mid-2008.

In the verdicts delivered today, the High Court ruled that there were no legal grounds to overturn the lower court verdicts.

In the first case involving Mahandhoo Investments, BML had issued a US$23.5 million demand loan, a US$103,200 bank guarantee and US$30,090 letter of credit on July 10, 2008.

After BML sued Mahandhoo for non-payment, the Civil Court ruled on October 19, 2009 that the company was not paying the loans in compliance with the agreement and authorised the bank to sell mortgaged properties – including Reethi Beach Resort – to recover the outstanding debts along with incurred interest and fines.

The court ordered the company to settle the outstanding debt in a one year period. However the verdict was appealed at the High Court and remained stalled for almost two years.

The second case meanwhile involved a US$3.3 million loan issued to Kabaalifaru Investment and the appeal of a Civil Court verdict on September 30, 2009 ordering the company to settle the debt in the next 12 months.

Meanwhile a third case involving a Civil Court verdict in December 2009 ordering luxury yachting company Sultans of the Seas – with close ties to the DRP leader – to pay over US$50 million in unpaid loans and incurred interest and fines had also been appealed at the High Court.

In a BML audit report released in January 2009, Auditor General Ibrahim Naeem warned that defaults on bank loans issued to influential political players could jeopardise the entire financial system of the country.

Over 60 per cent of the US$633 million worth of loans issued in 2008 was granted to 12 parties, the report noted.

According to the report, US$45 million was granted to Sultans of the Seas and US$36 million to Fonnadhoo Tuna Products, two loans which comprised 13 per cent of the total loans issued in 2008.

The report noted that Fonaddhoo was owned by current DRP Leader Ahmed Thasmeen Ali – running mate of former President Maumoon Abdul Gayoom in the 2008 presidential election – while the owners of Sultans of the Seas were closely associated with the minority leader.

In September 2009, Maldives Customs filed a case at Civil Court to recover US$8.5 million from Sultans of the Seas in unpaid duties and fines for allegedly defrauding customs to import two luxury yachts.

In February 2010, the court ordered the company to pay Rf110 million (US$7 million) as fines and evaded import duties.

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MP Muthalib re-joins Adhaalath Party

Former Adhaalath Party MP Ibrahim Muthalib, who resigned from the party and joined the Jumhoree Party (JP) until August this year, has re-joined the Adhaalath Party.

In a statement, the party said that Muthalib resigned from the party due to differences in opinions between the party’s then leadership.

‘’Many citizens hope that other MPs in parliament who love the nation and the religion will join Adhaalath Party,’’ the Adhaalath Party’s statement said. Muthalib was the first treasurer of the Adhaalath Party.

Muthalib resigned from JP – led by local business tycoon Gasim Ibrahim – claiming that his dreams of making the JP the country’s third most active party had been “shattered due to lack of cooperation.”

‘’I resigned because I did not want to remain depressed with these thoughts. For now I just want to relax and remain independent for the time being,’’ Muthalib said at the time. Newspaper Haveeru quoted Muthalib as saying that his resignation came following Gasim’s vote in favor of the appointment of Dr Ibrahim Didi for Fisheries Minister and Thalhath Ibrahim for Defense Minister.

Until Muthalib last night joined Adhaalath, the party had no MP representing them.

Today Muthalib told Minivan News that he decided to join Adhaalath because the party was in need of his assistance and ‘’I have always said that I would join Adhaalath when the change I needed to bring to the party was brought. I resigned from Adhaalath Party on November 2011, and although when I was elected to the parliament I was registered in the Adhaalath Party, I was elected as an Independent MP,’’ Muthalib said.

‘’I had to resign from the Adhaalath Party because of some issues I don’t want to talk about right now,’’ he said. ‘’After resigning from the Adhaalath in November, I joined the Jumhoree Party at the request of some persons, and I worked to make the party a strong opposition party. But it did not work out that way so I had to resign from JP.’’

‘’I want to work with the scholars, I think that is the only way we can set this country the right way – by working with the scholars,’’ he added.

The Adhaalath Party recently terminated the coalition agreement made between the government, and asked Islamic Minister Dr Abdul Majeed Abdul Bari and State Islamic Minister Sheikh Hussain Rasheed to resign from their positions.

Dr Bari respected his party’s decision and resigned from the position yesterday, while Sheikh Hussain has said that he will not resign unless the President requests him to do so.

Dr Bari meanwhile withdrew his resignation from the Adhaalath Party’s religious council, of which he was formerly chairman.

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MP Ismail Abdul Hameed appeals Criminal Court ruling

MP Ismail Abdul Hameed, who was recently sentenced to one year and six months banishment after the Criminal Court found him guilty of corruption, has appealed the case in the High Court.

The Prosecutor General pressed corruption charges against Hameed alleging that he had abused his authority as the former Director of Waste Management at the Male’ municipality to financially benefit a Singaporean company named Island Logistics, in a deal to purchase a barge.

According to local media reports that time, Judge Abdulla Didi noted in the verdict that the agreement stipulated the barge was to be delivered within 90 days of signing the agreement, upon which 50 percent of the value was to be paid to Island Logistics.

Although the barge arrived in the Maldives on October 23, 2008, Hameed had however signed a document claiming that the barge was delivered on schedule on April 28, 2008.

The judge ruled that Hameed’s actions were intentional and in violation of the Anti-Corruption Act.

Under article 73(c)(3) of the constitution, MPs found guilty of a criminal offence “and sentenced to a term of more than twelve months” would be stripped of their seat.

Article 78 of the constitution meanwhile states that “whenever there is a vacancy among the members of The People’s Majlis, an election shall be held within sixty days from the date of the vacancy. A by-election shall not be held within six months prior to a general election.”

However, Elections Commissioner Fuad Thaufeeq previously told Minivan News that the commission does not consider the seat in the parliament is vacant, and noted that Hameed had requested the commission to delay the by-elections as he planned to appeal the case.

When Minivan News contacted Hameed for a comment today, he said he was busy.

Meanwhile, Jumhoree Party (JP) Youth Wing leader Moosa Anwar filed a case in the Supreme Court, requesting the court  determine whether the Kaashidhoo seat should be made vacant after the Criminal Court ruling or if it would  be vacant after appeals were exhausted.

The case was first rejected however Anwar resubmitted the same case to the Supreme Court on September 26. No further information about the case has been reported.

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“Democratisation has its costs”: Maldives comes to terms with tax reform

The Maldives is coming to terms with a reformed tax system, following the introduction of a General Goods and Services tax this week.

Finance Minister Ahmed Inaz said the new system, which has raised the eyebrows of businesses, consumers and politicians alike, is a natural consequence of recent political changes and requires everyone’s support to function sufficiently.

“I think anybody could see that after the 2005 democratic reform, costs increased. These costs had to be met by additional revenue, but they weren’t,” he said.

Currently, the Maldives’ has a state deficit of Rf1.3 billion (US$85 million). Since democratisation, the Maldivian government has surpassed other national governments’ employment rates by employing 10 percent of the national work force. One third of government spending goes to state employees, and nearly half of the 2011 budget was spent on salaries and allowances.

The Goods and Services Tax (GST), which became operative on October 2, has raised a 3.5 percent tax on certain items. Contrary to an earlier tax which was paid for at the point of import and effectively invisible to the customer, the GST requires most businesses to charge an additional 3.5 percent directly to the customer at point of sale.

Certain items are tax exempt, a detail which has allegedly made it difficult to implement at stores selling a variety of products.

Inaz is optimistic that new tax reform system will cut costs and improve business operations. He said many businesses are compliant with the new measures, and are trying “their level best to be sure that this happens.”

“Business owners will have to crunch the numbers, and that will show them more about what is happening in their businesses. They will be able to better see how things operate.”

The GST is part of a larger tax reform system described in “a package of policy reforms that will help stabilise and strengthen the Maldives’ economy” agreed to by the Maldives and the International Monetary Fund (IMF) in May.

The policy reforms include raising the Tourism Goods and Services Tax (TGST) from 3.5 percent to 6 percent from January 2012, and to 10 percent in January 2013. Tourism is one of the Maldives’ leading economic contributors.

Inaz stressed that the tax was a step towards self-sufficiency for the Maldives.

“The international community will not give us the money required to balance our deficit, it is us who have to raise that money and that’s everyone’s responsibility. We have to make sure we can stand on our own feet.”

Meanwhile, opposition party Dhivehi Rayyithunge (DRP) has expressed concern over the tax. After supporting its initial pass through Parliament, DRP released a booklet titled “DRP’s response to the government’s economic nuisance package.” The booklet said businesses were not sufficiently prepared for the transition, and requested a six month delay.

Noting “administrative confusion” and the country’s heavy reliance on imports, the DRP also suggested levying a customs duty at the entry point to the country as a more effective means of raising revenue.

“We believe the GST is a regressive expense. The government doesn’t have the infrastructure to support it, implementation of GST means it will have hire a lot of people.”

DRP Spokesperson Ibrahim ‘Mavota’ Shareef said today that the tax system had not been implemented prematurely, but that it would only benefit large businesses while harming smaller ones.

“The government is doing the opposite of what it preaches,” he said. “Our main problem with the bill is that the government has decreased the tax burden on the very rich, especially in the tourism sector. We want to see the current tax system overhauled and replaced with a modern one.”

Shareef said DRP supports other progressive taxes, and was in favor of the recently announced plan to decrease import duties starting in January 2012.

President Mohamed Nasheed yesterday said a policy to reduce import duties would bring prices down starting early next year.

The President’s Office Press Secretary Mohamed Zuhair told Minivan News that the waiving of certain import duties would be significant.

“Once the new tax system is fully operating, all will fall into place. Prices will drop to even lower than originally,” Zuhair said.

A bill to finalise the tax system is currently before the Majlis, and is expected to take another two or three months to be properly processed.

During the President’s tour of retail, grocery, and supermarket stores on October 3, Zuhair said that operations were “running smoothly”.

“The only issue was that many businesses had a shortage of coins. Maldivians have a habit of rounding up to avoid coin transfers, but in a successful economy coins are important. Maldives Inland Revenue Authority (MIRA) has been doing a commendatory job in distributing coins, and the Maldives Monetary Authority (MMA) foresaw the issue and has a distribution system in place,” he said.

When asked about the DRP’s opposition to the GST, Zuhair alleged that the party’s motives were political.

“They made their case to the President, but the President was advised by his advisors and economic experts that a taxation system needed to be implemented,” said Zuhair.

“It is true that the very rich have not been taxed appropriately as per their earnings,” he acknowledged. “Once the tax system is fully in place, things should stabilise.”

Shareef did not accept that there were political motivations behind the DRP’s objections. “It’s an economic and social issue, concerning the distribution of wealth,” he said.

Inaz did not wish to comment on the matter. “This is an economic issue,” he said.

State Minister for Finance Ahmed Assad previously observed that even with the new taxes proposed by the government, the Maldives still had the most generous tax system in the region – even compared with other island nations, and neighbouring countries such as India and Sri Lanka.

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