Tag: economy

Week in review: December 8 – 14

This week saw the repeatedly delayed budget introduced to the People’s Majlis. Coming in at MVR17.5billion rufiya, the budget – purportedly revised to incorporate President Yameen’s austerity measures – eclipses all previous spending programmes.

A report from the World Bank made clear the tough task the new government faces in nursing the economy towards good health. The report stated that the Maldives continues to spend “beyond its means”.

Noted areas of excess include a high civil service wage bill, with the World Bank suggesting that the government’s short term financing measures risked further damaging the economy.

The exploitation of the country’s persistent shortage of dollars by criminal elements was exposed this week as police reported the activity of thieves masquerading as legitimate exchangers of currency.

When accused of illegally obtaining a budget support loan, recently reappointed Finance Minister pleaded desperation. Abdulla Jihad argued that he had sidestepped the onerous approval procedure to avoid a financial catastrophe in May 2012.

Yameen took fitful steps towards fulfilling his campaign’s austerity pledges this week, ordering the reduction of salary for two grades of state minister – though the cut was only around 12.5 percent instead of the 30-50 mooted before the election.

Similarly, the new government appeared to have reneged on its pledge to provide cash-handouts to old-age pensioners – opting for an insurance scheme instead.

Government performance

Former President Maumoon Abdul Gayoom, however, appeared pleased with his half-brother’s performance thus far, praising his handling of Indo-Maldivian relations while the Defence Minister discussed enhanced military cooperation with Indian counterparts.

The indistinct ‘National Movement’ this week suggested ulterior motives in the bureaucratic thwarting of its plan to celebrate the eviction of Indian infrastructure giant GMR, whose deal to develop the international airport was prematurely terminated twelve months ago.

Elsewhere, the coalition member Adhaalath Party, quashed rumours that it had parted ways with Yameen’s government this week, despite previous reports that it intended to campaign independently in the upcoming local and parliamentary elections.

The ‘roadmaps’ for the first one hundred days of the government continued to be drawn this week, with comprehensive lists now produced in the areas of  transport, health, and immigration.

Whilst the Transport Ministry has promised finished plans for the redevelopment of Ibrahim Nasir International Airport, the health minister talked of significant changes to the IGMH public hospital.

The police service also joined in the policy pledging, with its own promises to improve its service and to build public trust in the institution. The Police Integrity Commission this week suggested that the prosecutor general assist in this task by prosecuting two officers it had found to have been negligent during the arson attack which destroyed Raajje TV in October.

The vacancy at the head of the PG’s Office did not stop the filing of charges in the 8 year old ‘Namoona Dhoni’ case. Pro-democracy activists – prevented from reaching Malé for a national demonstration – now face fresh charges of disobeying lawful orders.

Trust between the Supreme Court and the judicial watchdog appeared scant this week as the Chief Justice baulked at the JSC’s re-shuffling of a number of senior judges. Members of the JSC were later reported to have rejected Chief Justice Faiz’s legal objections.

Corruption and human rights

Confidence in the transparency of the public in public institutions also appeared to be on the wane this week, as Transparency Maldives’ Global Corruption Barometer (GCB) survey revealed that 83 percent of its sample felt corruption to have increased or stayed the same over the past two years.

Despite only appearing mid-table in the list of organisations perceived as being corrupt, the MNDF reacted disproportionately to the local media’s reporting of the survey, labelling CNM’s article on the survey “highly irresponsible journalism”.

The Anti Corruption Commission announced the discovery of graft in the capital’s largest housing programme. The highest number of bribes reported in the GCB was in the area of land services.

International human rights day was observed by the government and civil society in the same week the president ratified the country’s first anti-human trafficking bill. Whilst welcoming the new law, both the Human Rights Commission and the immigration department suggested that institutional strengthening would need to accompany a successful anti-trafficking policy.

Finally, this week saw the release of a United Nations Population Fund report, calling on the state to review existing practices related to sexual behaviour within the judicial process, law enforcement, education and health sectors.

The report stated reproductive health services ought to be expanded to non-married couples as evidence makes clear that the assumption sex does not, or should not, occur outside of marriage is increasingly out of step with social realities.

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Government continues plans for first 100 days

Twenty-six days into the administration of President Abdulla Yameen, state institutions have been unveiling plans to commence or to resume projects within a 100 day period of the government’s November 17 inauguration.

A number of ‘roadmaps’ have emerged in the transport, health, and immigration. Similar lists of projects have also been devised for customs, the police, and the military.

Transport and communication

On December 8, the Transport and Communication Ministry revealed that it would finish drafting plans and begin the groundwork within a 100 days to develop the Ibrahim Nasir International Airport (INIA) to be able to cater to 5 million passengers.

Plans were also made to introduce the nighttime landing of flights in Thimarafushi and Fuvahmulah airports within this period.

In the field of land transportation, the ministry pledged to improve local ports, connect islands via seaplane transport and to improve ferry services between atolls.

There are further plans to establish a broadband internet policy and to provide fast-speed internet to all inhabited islands. Besides this, the plan also includes the introducing number portability between the two telecom service providers currently available in the country.

Transport Minister Ameen Ibrahim said that the government’s object was to make the Maldives the most advanced among the SAARC countries in the field of communication.

The government has also announced its intention to build a bridge between Hulhule’ – the airport island- and capital Male’, and have requested proposals from interested companies.

Health

Just a week after the new administration was established, Vice President Dr Mohamed Jameel Ahmed announced that the government had begun to solve issues in providing health services to the people.

Visiting the sole state-owned hospital – IGMH – in capital city Malé on November 24, Jameel announced that the government would begin fulfilling its health policies “as soon as we get the budget for it”, adding that this would include revamping the Aasandha insurance scheme and training nurses and doctors.

Early in December, prior to the appointment of a health minister, President’s Office Minister Abdulla Ameen announced that chemotherapy treatment for cancer patients would be introduced within the first one hundred days.

Stating that the lack of the service forced many Maldivians to live abroad for medical purposes, Ameen said that the introduction of chemotherapy facilities in the country was crucial. He added that screening to diagnose cervical cancer would also be introduced -both under a government insurance scheme.

Echoing Ameen’s assurances of fast development to IGMH, Health Minister Mariyam Shakeela said at a press conference held today that the government was drafting a policy to “bring major development to IGMH in a very short period of time to an extent never before seen”.

She said that this included a complete renewal of the management figures at the hospital.

The minister further revealed that the government had decided to transfer specialist doctors to the atolls for a period of time which would be allocated by the ministry.

Shakeela stated that funds for development are included in the budget, and that the government is also seeking aid from international donors for some of the projects. She hoped that such developments would  lead to “decreasing the burden on Aasandha”.

Shakeela promised that the full 100 day programme would be revealed next week.

Immigration

Immigration Controller Hassan Ali announced on December 5 that the institution’s biggest focus in the first 100 days of Yameen’s government would be to control the issue of illegal immigrants.

The plan itself includes work to offer illegal immigrants a chance to change employees, and increasing the number of illegal immigrants who will be deported in 2014.

The immigration controller also revealed plans to establish an online system of obtaining work visas from Kulhudhuhfushi, establishing a single office to deal with all migrant related work, and a mechanism where e-passports can be issued from two areas of the country.

Customs, Police and Military

The Maldives Police Services has also created a roadmap of goals they will work to achieve in the first 100 days of the Yameen administration.

On December 9, police revealed that the foremost goal in this roadmap is to complete investigation of 80 per cent of ongoing cases – the total amount of which was not specified – and to forward them to the Prosecutor General’s office.

Other goals include completion of investigation into small and petty crimes within a 30 day period, pre-emptive identification and intervention in cases of intention to commit crimes, and the setting up of additional security cameras in Male’ and Addu City.

Police will also be working to eradicate sexual abuse of children, and to establish what they have termed ‘be ready camps’ to achieve this goal in two atolls.

Facilitating youth employment by helping to get sea vessel driving licences, increasing women’s employment in the policing field to 50 percent, and the establishment of a juvenile detention centre is also included among the listed aims.

The roadmap also includes internal work like the establishment of a new system to address complaints against police officers, the creation of a police clinic for health support to officers and their families, and the compilation of a four-year strategic plan on professional development of the force.

Police, together with customs, have also initiated programs to tackle the illegal import and abuse of narcotics and serious and organised crimes.

Customs – which has also revealed a roadmap for the same period – have on December 12, expressed concern that budget limitations may prove to be an obstacle in the realisation of their goals.

Commissioner General of Customs Ahmed Mohamed stated that the budget cuts would affect the institution’s reaching of its objectives, including the provision of more convenient online services.

Maldives National Defence Force (MNDF)’s 100 day strategic plan includes the submission of various amendments to relevant laws – including the Armed Forces Act and Narional Security Act – to the parliament, and the establishment of a ‘justice system’ within the force.

The plan further consists of a variety of other projects, including the addition of a helicopter and landing crafts to its fleet, and the establishment of fire stations in the islands of Kahdhoo and Naifaru.

The military intend to lay the foundation for a new eight story building where the current Coast Guard offices are, to conduct additional international training for officers – especially with the Indian Army, to provide medical care at low fees for general citizens at the Senahiya military hospital, and the establishment of a day care centre for the use of officers and families.

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President meets with Chief of IMF Mission to the Maldives

President Abdulla Yameen Abdul Gayoom met with International Monetary Fund’s (IMF) Chief of Mission to the Maldives Dr Koshy Mathai today.

According to the President’s Office, Yameen briefed Mathai on the new administration’s economic policies and discussed ways to promote sustainable economic development in the country.

Yameen has warned Maldives’ economy “is in a deep pit” and pledged to reduce state expenditure.

In November 2012, the IMF called on the government to strengthen government finances by reducing the fiscal deficit, better target electricity subsidies, reduce and rationalize government’s health program Aasandha and control the high public sector wage bill.

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Maldives economy “seriously damaged and destroyed”: former President Gayoom

Former President Maumoon Abdul Gayoom has expressed concern that the Maldivian economy has been “seriously damaged and destroyed”.

Speaking during a campaign rally on the island of Kudahuvadhoo in Dhaalu Atoll, Progressive Party of Maldives (PPM) Leader Gayoom was quoted by Sun Online expressing concern at the “serious economic problems” presently facing the country.

Gayoom argued that PPM presidential candidate Abdulla Yameen was the most capable person to save the country’s economy based on his previous government experience.

The PPM, which has the second highest number of MPs behind the opposition Maldivian Democratic Party (MDP), is part of the current coalition government of President Dr Mohamed Waheed that came to power after the controversial transfer of power on February 7, 2012.

The former President’s concerns were raised as the Maldives Monetary Authority (MMA) this month criticised current levels of government expenditure as being “beyond appropriate”.

However, Finance Minister Abdulla Jihad responded at the time that efforts had been successful over the last twelve months to curb recurrent government expenditure, while state borrowing had remained consistent.

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Local exhibition highlights Maldivian made merchandise

From shoes, bags, and clothes made in Maldives, to locally grown fruits and vegetables – a variety of local products and services were on display at the “Dhivehinge Fannu” (Maldivian talents) exhibition organised by the Economic Ministry.

The three day exhibition opened at the Art Gallery on Thursday is part of the ministry’s efforts to promote local brands of goods and services.

“We wanted to bring the locally produced goods and services provided by Maldivian businesses and individuals under one roof” says Aminath Asma, Assistant Manager of Sales Marketing of Asaree Services, the event’s planner.

Around 20 different exhibitors including large and small businesses, non-profit organisations, and individuals are participating this year said Asma, adding that the Ramadan and Eid holidays had overshadowed their efforts to get parties to sign-up for the exhibition, affecting the number of participants.

“But, we are still happy with the turnout and in next two years we will increase efforts to get more businesses to join.” she added.

Taste of Maldives

The most successful stalls at the exhibition seemed to be the one’s displaying Maldivian tuna products.

Among other things, visitors had the chance to try out samples of barbecued tuna, crispy tuna sticks, and Rihaakuru – a traditional thick fish-based paste eaten by almost every Maldivian.

Next to the stalls of big fish processing companies such as MIFCO (Maldives Industrial Fishing Company), individuals running home-made businesses making small finger foods – mainly made from tuna – were also bravely marketing their products.

One of the ladies selling home-made Rihaakuru pointed to the jars on her table and said:

“Our Rihaakuru is much better than MIFCO’s products. Everyone knows it.”

At the exhibition Minivan News also came to learn about Maavahi island – an uninhabited island in the north where local vegetables and fruits are grown to supply both resorts and the domestic market.

A garden-like Maavahi stall displayed a wide range of fruits and vegetables including lettuce, chillies, pumpkins, dragon fruits, papaya, bananas, and mangoes.

Due to the geographical disadvantages of dry climate conditions and infertile soil, the Maldives has never had a large agricultural sector and almost all the food products – besides tuna – are imported for domestic consumption and resort supply.

According to the Maavahi stall manager, they have been using hydroponic technology and also fertilisers to increase their productivity and overcome the natural disadvantages.

“However, we still don’t have the production capacity to match the demand” the official pointed out.

Very “special” products

Among the exhibitors, two stalls run by the Ministry of Gender and Family and the Care Society of the Maldives also stood out. They displayed a collection of beautiful handicrafts and artwork including paintings and picture frames made by children and elderly people with special needs.

“It takes lot of handwork and time for the children to make these things,” said an official from Care Society, a non-government organisation supporting rights of special needs people and providing educational and training services.

Meanwhile, the lady at gender ministry’s stall noted that they did not have sufficient funds to market these “special products by special needs people”.

“So we mostly rely on exhibitions such as these to market and sell it,” she added.

Among other exhibitors, custom made shoes, bags, and slippers made by local company ‘Slippers’ were on display. According to the shop owners, they import leather, fur, and other raw materials before manufacturing the items in the Maldives.

Clothes, cakes, andcultural artifacts made by Maldivian’s were also items on display at the exhibition.

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Yameen pledges to halve president’s salary, slash wages for political appointees

Progressive Party of the Maldives (PPM) presidential candidate Abdulla Yameen has pledged to halve the presidential salary and slash the wages of political appointees by 30-50 percent, should he be elected in September.

Yameen also pledged to cut the salaries of independent institutions – which include the Human Rights Commission of the Maldives (HRCM) and the Political Integrity Commission (PIC) – a step he described as pivotal for the country to avoid a sovereign default.

The MP also vowed to work towards reducing the salary and allowances of parliament members. At the same time, he pledged to increase the wages of civil servants.

The PPM presidential candidate also emphasised the need for youth employment, promising 90,000 new jobs for young people across the Maldives by the end of his five year term.

The numbers

The Maldives has one of the highest percentages of government employees to population of any country in the world, at around 11 percent.

Salaries and allowances have also rocketed up, unmatched by government revenue. Much of this growth occurred in the two years leading up to the 2008 election and the introduction of multi-party democracy.

An internal World Bank report leaked in 2010 showed that Increases to the salaries and allowances of government employees between 2006 and 2008 reached 66 percent, “by far the highest increase in compensation over a three year period to government employees of any country in the world.”

With the introduction of the new Constitution and its requirement for an assortment of independent institutions to oversee various aspects of government, the share of the wage bill to revenue soared to “an astronomical 89 percent.”

The President of the Maldives receives a base salary of MVR100,000 (US$6500) per month. During his government’s attempts to reduce civil servant spending on the urging of the International Monetary Fund (IMF), former President Mohamed Nasheed took a voluntary pay cut of 20 percent.

Despite this, the government’s attempt to impose austerity measures was blocked by the Civil Services Commission, leading to a series of scuffles between the Finance Ministry and the CSC.

The opposition at the time, now in power following Nasheed’s controversial resignation in 2012, contested Nasheed’s expenditure on 244 political appointees – a figure partly the result of the government’s early efforts to consolidate state employees under government-owned companies outside the purview of the CSC.

Figures released by the Ministry of Finance and Treasury showed that these 244 appointees were being paid MVR 99 million (US$6.4 million) a year, however Nasheed’s administration contested that this constituted just two percent of the state’s 2011 wage bill, comparing it to the 39 percent that went to the civil service, 24 percent to uniformed bodies, 17 percent to local councils, 10 percent to independent institutions, 5 percent to the judiciary, and 2 percent to parliament.

In comparison, President Waheed’s government during 2012 spent MVR 60 million (US$3.9 million) on 136 appointees, according to figures procured by Sun Online.

At the time, the monthly spend included 19 Minister-level posts at MVR 57,500 (US$3730), 42 State Ministers (MVR 40,000-45,000, US$2600-2900), 58 Deputy Ministers (MVR 35,000, US$2250), five Deputy Under-Secretaries (MVR 30,000, US$1950) and 10 advisors to ministers (MVR 25,000, US$1620).

Overall public expenditure in 2012 increased 12 percent on the previous year.  This was in large part due to measures such as the intensified recruitment and promotion of a third of the police force, and repayment of civil servant salaries cut during the Nasheed era.

The Maldives Monetary Authority (MMA) noted that while total expenditure for the year was three percent lower than 2011, this was only due to the government’s failure to pay a large number of bills. Total public debt at the end of 2012 was 72 percent on GDP, the MMA stated.

Meanwhile, the government’s wage bill was in May projected to increase by 37 percent in 2013 as a result of hiring more employees, notably 864 new staff for the police and military – an increase of almost 20 percent.

In its professional opinion on the budget submitted to parliament, the Auditor General’s Office also observed that compared to 2012, the number of state employees was set to rise from 32,868 to 40,333 – resulting in MVR 1.3 billion (US$84.3 million) of additional expenditure in 2013.

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No intention to transfer assets to MIAL: MACL to Axis Bank

The Maldives Airports Company Limited (MACL) and its lawyers have denied any intention of dissipating the state-owned company’s assets by transferring them to a newly-created, state-owned entity called Male’ International Airport Limited (MIAL).

MACL and the government of the Maldives are currently party to arbitration proceedings in Singapore after one of the lenders to the terminated GMR-Malaysia Airports (GMR-MAHB) development – Mumbai-based Axis Bank – called in US$160 million worth of loans which had been guaranteed by the Ministry of Finance.

A copy of the agreement from November 24, 2010, in which the Ministry of Finance guarantees the loans to GMR-MAHB, is signed and stamped by both then-MACL Chairman Ibrahim Saleem and Finance Minister Ali Hashim on behalf of the government.

Eviction and arbitration

In December 2012, the GMR-MAHB consortium, which had signed a 25 year concession agreement with the former government to manage and upgrade Male’s airport, was given a seven day eviction notice by the new government after it declared the concession agreement void ab initio, or ‘invalid from the outset’.

That decision is currently subject to arbitration proceedings in Singapore, with GMR-MAHB’s compensation claim expected to reach upward of US$1 billion. Axis Bank is pursuing the US$160 million in separate proceedings.

President Waheed’s government on March 14 meanwhile declared in a one-line statement that it was establishing MIAL as a new 100 percent state-owned company, and several weeks later announced the appointment of a board of directors including tourism tycoon and Chairman of Universal Enterprises, Mohamed Umar Manik, and Island Aviation Chairman Bandhu Ibrahim Saleem as managing director.

Finance Minister Abdulla Jihad informed local media on May 21 that MIAL would take over the operation of the airport under a management contract by July.

The apparent move to transfer MACL’s management functions to MACL led to a flurry of letters from Axis Bank to both MACL and the government, with the bank expressing concern that “if MACL ceases to manage and operate Male’ airport, and MIAL instead performs that role, then MACL will lose almost all of MACL’s revenue stream, and become a shell.”

MACL’s denial

In a letter responding to Axis Bank’s CEO Bimal Bhattacharyya, dated April 24, 2013, and obtained by Minivan News, MACL’s Managing Director Ibrahim Mahfooz claims “your insinuation that MACL is attempting to dissipate assets to avoid and satisfaction of any judgement is insulting and without any basis.”

“For the record, we can confirm that MACL has no plans to transfer any of its assets to another company,” Mahfooz writes.

He accuses Axis Bank of making a case on “hearsay and speculation”, and asks whether its threat of legal action was “part of a concerted plan with any other parties”.

“You have tried to assert that your claim of US$163,596,347.78 remains unsatisfied. We had in our previous correspondence to you made it clear that you do not have a valid claim against MACL,” Mahfooz states.

“At best your alleged claim (at its highest) is purely a monetary claim against MACL and GOM. Please set out clearly the basis in which you think your claim will not be satisfied by MACL and GOM in the event Axis Bank is not successful,” he writes.

That letter triggered a further flurry of correspondence between Axis Bank’s legal representation Norton Rose and MACL’s Singapore-based firm Advocatus.

The latter firm, acting on behalf on MACL in December 2012, successfully overturned an injunction in the Singapore Supreme Court blocking MACL from taking over the airport, on the grounds that the arbitration court had no jurisdiction to prevent the Maldives as a sovereign state from expropriating the airport.

In the Singapore Supreme Court’s full verdict, a copy of which Minivan News has obtained, Financial Controller for the Ministry of Finance, Mohamed Ahmed, “affirmed in an affidavit that the Maldives government would honour any valid and legitimate claim against it. He also stressed that the Maldives government had never defaulted on any of its payments.”

Lawyer representing MACL, Christopher Anand Daniel, “also accepted that if the arbitration tribunal found that the Appellants were wrong in their asserted case that the Concession Agreement was void ab initio and/or had been frustrated, but the Appellants had by then already gone ahead with the taking over of the airport, they would at least be liable to compensate the respondent for having expropriated the airport” (emphasis retained).

Legal barrage

Stern letters exchanged throughout late April and most of May between the two sets of lawyers suggest brewing disagreement over whether MIAL’s assumption of management responsibilities for the airport can be construed as a transfer of assets and an attempt to dissipate its assets in preparation for a costly verdict.

“Almost all of MACL’s income comes from MACL’s management and/or operation of Male’ Airport,” notes Axis Bank.

“The stated purpose for the incorporation of MIAL is for MIAL to manage and operate Male Airport. This is a role presently performed by MACL. The natural consequence of the above facts is that if MACL ceases to manage and operate Male’ Airport and MIAL instead performs that role, then MACL will lose almost all of MACL’s revenue stream, and become a shell company,” Axis Bank’s lawyers noted, adding that the government had made no effort to deny this despite repeated invitations.

In response Advocatus, in a letter dated May 10 and obtained by Minivan News, declared “Your client [Axis Bank] has no evidence that MACL is dissipating assets to begin with. It is obvious that your client is attempting to see if it can create a case by correspondence when it has none.”

Following Finance Minister Abdulla Jihad’s pledge that the transfer of assets to MIAL would be completed by July 1, widely reported in local media, Norton Rose wrote another letter noting “[the Minister’s] statements are in direct contradiction to MACL’s position in its letter of April 24 stating that ‘For the record, we can confirm that MACL has no plans to transfer any of its assets to another company.’”

“These new developments, stated in the various news reports, lend credence to Axis Bank’s legitimate concerns that MACL is in fact attempting to dissipate its assets in favour of MIAL or any other third party and, consequently, there will not be sufficient assets to satisfy any arbitral award that may be rendered in favour of Axis Bank against MACL in the arbitration,” the lawyers wrote.

Advocatus responded on May 29, again accusing Axis Bank off “desperately trying to create a case where none exists.”

“The Minister, who had given the interview in Dhivehi, had been misquoted in the English version of news reports you mentioned,” MACL’s lawyers stated.

“When he gave the interview, the Minister had in fact said that ‘asset management is going to be officially handed over to MIAL’,” Advocatus contended.

Assets, management and the draft agreement

Meanwhile, a working draft of an ‘Operations and Management’ agreement between MACL and MIAL, dated May 21 and obtained by Minivan News, notes that MIAL “is a company established with the primary objectives of operating, maintaining and managing the airport.”

The agreement states that while the Finance Ministry has granted MACL the lease of the site and rights to operate and manage the airport, “MACL, in the interest of the better management of the airport, and/or overall public interest, is desirous of granting to MIAL the functions of operating, maintaining and managing the airport.”

The agreement includes provision for the transfer of employees from MACL to the new company, and the requirement that it obtain an aerodrome certificate from the Ministry of Civil Aviation – the core authority issued by the state for a company to operate an airport.

It also noted that “no proceedings against MIAL are pending or threatened, and no fact or circumstance exists which may give rise to such proceedings that would adversely affect the performance of its obligations under this agreement.”

MIAL would be paid management fees by MACL, although the extent of these are not included in the particular draft obtained by Minivan News. The agreement does however set out how “MIAL shall, on behalf of MACL, deposit all monies received from the operation of the airport into one or more bank accounts in the name of MACL.”

Board issues

Despite the Finance Minister’s comments on May 21, MIAL’s appointed CEO Bandhu Saleem has told Minivan News that “until the arbitration is complete, I think it will be very difficult to start a new company.”

Minivan News is seeking to establish the current status of the new company. However further obstacles appeared this week in the form of the government’s Attorney General Aishath Bisham, who informed local media that President Waheed lacked the authority to appoint the boards of government-owned companies following the ratification of January’s Privatisation Act.

Instead, she said, the privatisation board created under that act operated as “a separate legal entity, and has the sole authority to appoint board members.”

Besides MIAL, President Waheed also in February appointed the board of the Maldives Ports Authority Limited (MPL).

“The Privatisation Board should investigate those cases,” suggested the attorney general.

Former President Maumoon Abdul Gayoom, whose Progressive Party of the Maldives (PPM) was among the most strident opponents to GMR-MAHB’s development of the airport, meanwhile appeared to have adopted a conciliatory tone during a visit to India last week to smooth troubled relations.

“[The cancellation] was a very populist move at the time as the public had a perception that the contract was bad for the country. The way it was handled was not good,” Gayoom was reported as telling Indian newspaper The Hindu.

“I am sad that this has somehow affected our bilateral relations. We want to overcome that and restore our relationship with India to its former level,” Gayoom told the paper.

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Government calls for immediate Tourism GST increase to 15 percent

The government has submitted a bill to parliament calling for the Tourism Goods and Services Tax (T-GST) to be increased from 8 to 15 percent, effective immediately.

The bill was submitted by Dhivehi Qaumee Party (DQP) MP Riyaz Rasheed last week on behalf of the government.

A T-GST of 3.5 percent was first pushed through parliament by the former government in 2011, with planned increases to 6 percent in 2012 and the current 8 percent in 2013.

Prior to the introduction of the T-GST, the primary sources of state income from the tourism sector included resort rents, import duties, and a flat eight dollar a night ‘bed tax’.

During the first month following the introduction of the T-GST, the government collected US$7.2 million from 800 of the newly registered 871 tax papers, a figure that revealed the Maldives had been underestimating the total size of its main industry by a factor of three.

Economic crisis

The proposal to increase the tax comes as the Maldives faces increasingly dire economic circumstances.

Finance Minister Abdulla Jihad revealed in April that the government had exhausted its annual budget for recurrent expenditure (including salaries, allowances and administration costs) in the first quarter of 2013, and announced the suspension of all development projects.

The State Bank of India’s refusal to roll over loans at the start of the year has seen central bank reserves at the Maldives Monetary Authority (MMA) “dwindle to critical levels”, as noted by the World Bank, to barely a month’s worth of imports.

The State Electric Company (STELCO) – the country’s main supplier of electricity to inhabited islands – meanwhile revealed this week that the government had failed to pay electricity bills to the tune of MVR 543 million (US$35.2 million), and warned Parliament’s Public Accounts Committee in a letter that it faced cash flow problems and an inability to roll out new projects as a result.

T-GST rise contentious

Tourism industry figures have previously warned that a sudden increase in T-GST would have an immediate effect on the industry’s bottom line, as many resorts are locked into year-long supply and pricing agreements with tour operators.

An overnight near-doubling of the tax to 15 percent would have “serious ramifications on tourism and the Maldivian economy,” warned one resort manager.

“Most wholesalers will not accept price increases mid-contract irrespective of what clauses we put in a contract, as laws within the EU prevent this. Hence, this will have to be absorbed by the resorts,” he explained.

“I am aware that many resorts are struggling financially and this may be enough to put them over the edge. It will be very difficult to attract much needed foreign investment when the government continues to give these signals,” he added. “Why hamper and reduce demand to a destination that is already struggling to attract its core and traditional markets?”

The resort manager said that it was unreasonable to expect the resort industry to foot the bill for the state’s financial irresponsibility, “considering there have been limited efforts within the government to reduce its expenses. [The proposed tax increase] is short term thinking that will lead to a major default within the Maldivian economy and industry, if this proceeds.”

“What continues is a large bureaucracy that makes it as difficult as possible for tourism to provide high end service to its guests in order to maintain our positioning [in the market],” he observed.

“What is basically required is that these slow and lethargic government departments to go through a productivity and efficiency program. Make the processes more efficient, make civil servants accountable for productivity targets, reduce the government workforce and increase the percentage of Maldivian workers in resorts,” the manager suggested.

The issue here is that the resorts will need to cut costs and increase efficiency to counteract this. This may hamper guest service, product enhancements and refurbishment, and staff benefits which is again detrimental to the industry as a whole. The Maldives is a premium destination with premium levels of service and this tax increase would hamper this positioning. The Maldivian people will need to expect cost cutting and in some aspects retrenchments.”

New tax fatwa

Prior to the submission of the government’s proposed increase to the T-GST, local media reported that the Fiqh Academy had issued a fatwa (an Islamic ruling) prohibiting the government from levying taxes of any sort except under exceptional conditions.

Announcing the Fiqh Academy’s ruling in a statement on May 22, the Islamic Ministry noted that taxation was only permitted under Islam in certain circumstances.

“Tax can be taken from citizens to fulfill their basic needs, and only up to the amount required to fulfill these needs in cases where the state does not have enough money [for this],” the statement read.

According to local media, the fatwa requires that any tax money collected be “invested fairly and according to Islamic principles”.

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MDP propose US$1.05 billion mariculture industry as part of election pledge

The opposition Maldivian Democratic Party (MDP) has pledged to develop a mariculture industry in the country should former President Mohamed Nasheed be reelected in September 2013.

Mariculture is a specialised form of aquaculture which involves the cultivation of marine products such as pearls, oysters, fish and sea cucumbers in the open sea, or in nets or ponds exposed to the sea.

During a function launching the party’s policy on Kendhikulhudhoo island in Noonu Atoll on Saturday, the former president suggested that such an industry could generate US$1.05 billion (MVR 16.19 billion) within five years, should the government be able to successfully run at least 60 mariculture projects throughout the country.

“If we can successfully run  60 projects within five years, we will create 1800 new jobs and the country will receive MVR 16 billion in export revenue,” Nasheed said.

Nasheed claimed the party would establish a soft loan scheme worth MVR 200 million to support the people who wished to become involved in the new industry. He said the MDP hoped to establish mariculture as one of the country’s key industries, alongside fishing and tourism.

The Marine Research Center (MRC) established in the Maldives in the 1980’s has extensively researched the country’s reefs and lagoons and identified several ways in which mariculture activities could be carried out, Nasheed noted.

“What we have learned from this research is that mariculture is a very viable industry that could reap a lot of benefit to the country,” he said.

According to the MRC’s website, current aquaculture products farmed in the Maldives include grouper, sea-cucumber and pearls.

The MRC noted that the first pearl culture activity occurred with financial assistance from the United Nations Development Programme (UNDP) in 1996. When the five year project ended, MRC and the UNDP carried out a follow-up five year project from 2003 to 2008.

During a function to launch a sea cucumber development project on the same island in 2011, Nasheed – then President – elaborated that aquaculture and mariculture projects in the Maldives would ensure “the economic growth and economic viability of the society”.

Nasheed, who partook in a sea cucumber hunt during the event, also claimed at the time that it was beneficial for the country utilise the commercial benefits of marine resources in order to “achieve means of income other than revenues gained from the tourism industry”.

Speaking during Saturday’s function, Nasheed highlighted that while successful mariculture projects had been carried out during the three years of his government, a lack of technical expertise in the field was a key challenge for the expansion of such an industry.

A future government led by the MDP would open higher education opportunities in the country in collaboration with the Maldives National University (MNU), he said.

Eco-education

In 2011 during Nasheed’s presidency the MNU began offering courses in environment management – the first higher education program focused on environmental consolidation in the country – with levels varying from bachelors degree, advanced diploma, diploma and degree foundations.

In a bid to encourage people to take up the program, then Ministry of Environment and Energy also opened full scholarship opportunities to those who wished to take up the course.

Nasheed, speaking of the challenges involved in establishing a mariculture industry, said the lack of a hatchery to produce fish-feed was a key challenge.

Others included difficulties with transportation and logistics, which he said could be resolved by enhancing the transportation system established during the last three years of his presidency, would resolve the issue.

“Attention must be given to the environment surrounding us when we carry out any type of business and we should not obstruct the natural life surrounding us while carrying out any business,” he said

Nasheed also promised to establish both quarantine facilities and research facilities that will monitor and evaluate the businesses and would utilise the existing Maldives Food and Drug Authority (MFDA) to ensure the products produced by the industry met the necessary standards.

“Everything we do should be carried out in a sustainable way. MDP will seek to maintain the mariculture industry in a sustainable manner and that businesses involving mariculture will be properly monitored and evaluated,” he said.

Large-scale mariculture not viable; “Fish feed doesn’t grow on trees,” says DRP

Deputy Leader of the government-aligned DRP, Ahmed ‘Mavota’ Shareef, questioned the viability of introducing large-scale mariculture to the Maldives, and slammed the MDP’s economic predictions as inaccurate and an election ploy.

Shareef told Minivan News that when considering the huge investment costs required for mari-culture, funding would be better spent on providing technologies and know how into expanding industrial fishing in the Maldives.

“As opposed to mariculture, which needs large amounts of capital investment, it is much easier to go out and catch fish,” he claimed. “Tuna here is easy and cheap to catch, all people need is a boat. With freshly-caught fish you will get a much higher price than for mariculture.”

As a comparison, Shareef argued that massive amounts of bait and feed would be required to support the MDP’s predictions of a mariculture industry that would generate just over a billion US dollars in revenue over a five year period.

“The availability of fish feed will be a major issue. It does not just grow on trees,” he added.

Shareef also claimed that the mariculture sector was presently dominated by India, China and the US, mainly based around shellfish. However, he argued that mariculture represented just a small proportion of total global fisheries industry.

Shareeef said the DRP would instead favour boosting resources available to the country’s fishermen through supplying bait, satellite communications equipment, longer lines and focusing on forming cooperative fishing companies to boost catches and help establish large-scale industrial fishing.

Responding to Shareef’s remarks, former Press Secretary during Nasheed’s presidency Mohamed Zuhair dismissed claims that the MDP’s predictions were an election ploy, insisting the party had extensively studied the subject.

“The DRP is entitled to their own views. But I don’t believe they have studied the matter that is being discussed. Our predictions are based on extensive research study. The Maldives has previously tested and tried mariculture and the results are promising,” he said.

Zuhair also claimed the MRC had promoted many opportunities in the field of mariculture during former President Maumoon Abdul Gayoom’s government, but these had not progressed because of a lack of incentives from the central government.

“Each of our islands has direct access to the sea and can easily engage with mariculture. This is not something new to the Maldives; it is tried and tested,” Zuhair said.

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