Political consensus is necessary for special economic zones (SEZs) to be successful and beneficial to the nation, Maldives Monetary Authority (MMA) Governor Dr Azeema Adam has cautioned.
Speaking at a forum on state broadcaster Television Maldives (TVM) last night, Dr Azeema said one of the most important prerequisites for successful enactment of the SEZ Act was stability and consensus “on a political and national level.”
“If SEZ becomes caught up in political waves, it will not bear fruit,” she warned.
“Political confrontations must come to an end for investors to come to the country, to ensure investor confidence, and for jobs to be created for Maldivians.”
Political disputes should be resolved through “constructive, meaningful and academic debates,” she advised.
President Abdulla Yameen ratified the SEZ Act on Monday (September 1), which he has said would be a “landmark law” that would “transform” the economy through diversification and mitigate the reliance on the tourism industry.
The government has maintained that SEZs with relaxed regulations and tax concessions were necessary to attract foreign investors and launch ‘mega projects’ for economic diversification.
Opposition leader Mohamed Nasheed has, however, dismissed SEZs and the touted mega projects as “castles in the air” whilst his Maldivian Democratic Party (MDP) warned that the law would pave the way for money laundering and other criminal enterprises, undermine local councils, and authorise the president to “openly sell off the country” without parliamentary oversight.
Dr Azeema went on to stay that SEZs should create wealth and employment opportunities for Maldivians.
School leavers and university graduates should have the necessary skills when they enter the job market, she added, noting that a high employment rate was required for sustainable growth.
Citing International Labour Organisation (ILO) figures, Azeema said over 3,500 zones of varying sizes have been created in 130 countries.
“Economists agree that special economic zones play a very important role in the economic development of a country. It is known that at least 40 million people work in such zones,” she said.
Studies have shown that SEZs increase national productivity and income, she continued, and the zones contribute at least US$200 billion worth of exports worldwide.
However, she stressed that a longterm plan and strategies – which “should be transparent to investors and the public” – would be needed for SEZs to be successful.
While SEZs have been beneficial in some countries, “the results have not been so good” in others, she noted.
She added that SEZs in Singapore and China created in the 1960s and 1970s, respectively, took foresight and years to become successful.
At last night’s forum – organised jointly by the Maldives Broadcasting Corporation and the Maldives National University business school’s student association – MDP MP Fayyaz Ismail said large investments could not be secured while foreign businesses did not have confidence in the judiciary.
Fayyaz argued that the SEZ law lacked provisions for oversight and adequate legal protection for investors, relying solely on the benevolence and integrity of the government.
Tourism Minister Ahmed Adeeb – co-chair of the economic council – said the law was designed to attract investments beyond the ‘seaplane zone’ close to Malé’s international airport.
Under the existing tourism law, a flat rate of US$8 per square meter was charged for development of tourist resorts, Adeeb explained, which led to investors choosing uninhabited islands closer to the capital.
The SEZ Act combines the government’s policies on population consolidation and foreign investments to expand the economy and develop infrastructure in the north and south, Adeeb said.
Economic Development Minister Mohamed Saeed said SEZs were “tried and tested” in many countries, including small island states in the caribbean, which had a thriving banking sector.
“A zone is created to establish infrastructure that we don’t have through foreign funds,” he said.
Referring to the the iHavan transhipment port project, Saeed said the Maldives could capitalise on its strategic location and the “trillions of dollars” worth of trade that passes through the seven degree channel.
Saeed explained that the Ihavandhippolhu integrated development project would include offshore docking, bunkering facilities, an export processing zone, real estate businesses, and non-convention tourism facilities.
He noted that the development of Singapore’s port saw establishment of banks, a hotel industry, and other subsidiary services.
Adeeb stressed that the SEZ law allows the government to offer incentives and “for the first time” negotiate directly with investors, who preferred “a one-stop solution” for applications, permits and licenses.
While US$5 billion has been invested in tourism since 1972, Adeeb suggested that even if one project such as iHavan “takes off” with US$1.3 billion worth of investment, the economy would be transformed through multiplier effects.
Mohamed Ali Janah, former president of the Maldives Association of Construction Industry, meanwhile said emulation of the SEZ model implemented in the Caribbean and the ‘tiger’ economies of East Asia could take the Maldivian economy to “the next level”.