Budget committee meets MMA governor behind closed doors

In an unprecedented move today, pro-government MPs on parliament’s budget review committee voted through a motion to exclude media from a meeting with Maldives Monetary Authority (MMA) Governor Dr Azeema Adam.

The central bank governor was due to give her professional opinion on the 2015 state budget.

Article 85(b) of the Constitution states that the People’s Majlis could exclude the public and the press from committee meetings “if there is a compelling need to do so in the interests of public order or national security.”

However, Article 85(c) states that parliament could specify “additional reasons” for closed sessions.


Potential of Islamic finance yet to be fully explored in Maldives, suggests MMA governor

The scope and potential of Islamic finance, insurance, and banking in the Maldives is “yet to be fully explored”, suggests Maldives Monetary Authority (MMA) Governor Dr Azeema Adam.

Speaking at the opening ceremony of the first ‘Maldives Islamic Banking and Finance Industry Conference’ yesterday, Dr Azeema said Islamic finance “provides a springboard” to generate innovative ideas to cater to the financing needs of the domestic economy.

“The phenomenal growth of Islamic insurance and Islamic banking in the Maldives in the last few years suggest that there is still significant market to capture,” the central bank’s governor said in her keynote address at the conference.

“There is a need for financial institutions in the Maldives to strive to reach to every corner of the Maldives; every island in the country. There is a need to provide banking services to the unbanked,” said Azeema.

Islamic banking and capital market services were introduced in the Maldives in 2011, with the opening of the Maldives Islamic Bank (MIB).

Providing banking services to all inhabited islands “might not always be profitable,” Azeema continued, requiring innovation within the Maldivian financial sector.

“Financial products in the Maldives need to transcend the oceans and reach each and every person in the country, including those in the most isolated and remote islands.”

To support the growth of Islamic finance, Azeema recommended development of a “comprehensive legal and regulatory framework specific to Islamic finance”.

The MMA has formed a ‘Shariah Advisory Council’ to ensure Shariah compliance, she continued, while legislation on Islamic banking and Takaful has been drafted.

The governor expressed hope that laws on the “two key components of Islamic finance” could be enacted before the end of the year.

“Viable alternative”

Under Islamic Shariah, any risk-free or guaranteed rate of return on a loan or investment is considered riba (usury or interest), which is prohibited in Islam.

Conventional insurance is also prohibited in Islam because of forbidden elements such as riba.

Azeema observed that from a modest beginning in the 1970s Islamic finance was now a global industry with a total asset value of US$2 trillion.

At its current pace, the growth in Islamic finance stands sharply ahead of conventional finance which experienced significant de-leveraging and slowdown in the wake of the global financial crisis,” she noted.

“One of the reasons for the phenomenal growth of Islamic finance is the perception that it is more ethical, compared to conventional finance, which is traditionally viewed as predatory when needed.”

While the industry represented a niche market for Muslims, Azeema said it has since “transformed to a viable alternative for consumers of convention finance, irrespective of their religious beliefs.”

“The basic tenets of Islamic finance, like the idea of sharing profits and losses, investments only in ethically permissible areas, and the inseparable link of finance with real and productive economic activities, are understandably appealing to all,” she explained.

“It is this humane face that is required to encourage and reward those Maldivians who work hard. The individual and self-employed entrepreneurs who needs a financier to realise their dreams; the creative youth who need a bank to fund their ideas; the small and medium enterprises who need access to easy financing; and the large enterprises who need a wide range of investment and financial products.”

In addition to its ability to cater to the diverse groups in the Maldivian economy, Adam suggested Islamic finance could “bring about a more equitable society; a responsible and hardworking society; a society where individual creativity and free enterprise thrive.”

“Long journey”

The governor suggested that competition among financial products could help correct “market failures” and was welcome in the Maldives.

Islamic finance could also be “a reliable alternative source of funding” for investors, she added.

The introduction of Islamic finance has been “a long journey,” Azeema said.

While Amana Takaful started selling insurance in 2003, the Maldives Islamic Bank commenced operations in March 2011.

“The strong mobilisation of deposits that followed the commencement of MIB confirmed the latent demand for Islamic finance and the need for an institution offering Islamic financial services,” she observed.

Since 2011, she noted, housing finance based on Shariah principles have been made available while Allied Insurance was offering takaful products through their window named Ayady Takaful.

The Bank of Maldives has meanwhile been given approval to establish an Islamic banking window, she added.

“The development of an Islamic Capital Market has also been initiated with one listed Shari’ah compliant equity,” she said.

In March, Deputy Islamic Minister Dr Aishath Muneeza said that, in addition to the introduction of Islamic fund management this year, the government planned to “introduce an Islamic finance centre that will not only provide offshore Islamic financial services, but this centre will act as the Islamic finance hub for the whole South Asia region.”


Political consensus necessary for success of SEZs, cautions MMA governor

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.

Longterm plan

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”.