“2012 is going to be a duty free year”: President

President Mohamed Nasheed ratified amendments to the Export-Import Act of 1979 on Thursday, enacting a key piece of legislation in the government’s economic reform package intended to reduce and eliminate import duties for a wide range of goods from January 2012.

Under the amended Act, zero rate now applies to construction material, foodstuffs and machinery run of renewable energy.

In his weekly radio address on Friday, Nasheed said the budget submitted to parliament “will make 2012 a duty free year.”

As a result of the shift from indirect to direct taxes, Nasheed noted, government revenue from custom duties levied upon imported goods will drop by Rf700 million next year.

Economic forecasts predict that prices for some items would fall by 9 or 13 percent, he added.


Fiscal deficit in 2011 expected to fall to single digit, says President

The government expects the fiscal deficit to have fallen to a single digit at the end of the year, below the previous forecast of 11 percent of GDP, President Mohamed Nasheed said in his weekly radio address on Friday.

“The budget deficit as a percentage of GDP or national productivity has been estimated for next year at [budget] meetings with ministers and heads of government offices,” he said. “From that estimate we know that government expenditure has been substantially reduced in a number of different areas. For this year, we forecast a budget deficit of 11 percent. We have noted now that it has been reduced by three or four points.”

The government hoped that the fiscal deficit would be below 10 or “a single digit figure” when it is calculated at the end of the year, he said.

The budget deficit, which stood at just 1.9 percent of the economy in 2004, expanded to 7.3 percent in 2006 and ballooned to 23.9 percent in 2007, according to the International Monetary Fund (IMF).

The fiscal deficit exploded on the back of a 400 percent increase in the government’s wage bill between 2004 and 2009, with tremendous growth between 2007 and 2009. On paper, the government increased average salaries from Rf3000 to Rf11,000 and boosted the size of the civil service from 24,000 to 32,000 people – 11 percent of the total population of the country – doubling government spending from 35 percent of GDP to 60 percent from 2004 to 2006.

While preliminary figures had pegged the 2010 fiscal deficit at 17.75 percent, “financing information points to a deficit of around 20-21 percent of GDP”, down from 29 percent in 2009, the IMF noted in March this year.

“We see bringing the fiscal deficit down as the key macroeconomic priority for the Maldives,” the IMF’s Mission Chief to the Maldives, Rodrigo Cubero, told Minivan News at the time. “A large fiscal deficit pushes up interest rates, thereby undermining private investment and growth, and also drives up imports, putting pressure on the exchange rate and inflation, all of which hurts the Maldivian people, particularly the poor.”

“Further efforts are still needed to reduce the fiscal deficit. Those efforts should comprise further tax reforms as well as measures to reduce expenditure and to improve the channelling of social expenditures to the needy.”

Meanwhile in a booklet issued to media titled “the DRP’s response to the government’s economic nuisance package,” the main opposition Dhivehi Rayyithunge Party (DRP) strongly objected to a bill on fiscal responsibility currently before parliament.

The bill was “a plot” devised to wrest financial control from local councils and negate parliament’s contentious amendments to the Public Finance Act, the DRP argued.

The DRP also noted that provisions on imposing limits to government spending would only come into force after 2013.

“In the past three years, the MDP [Maldivian Democratic Party] government earned billions of rufiya by selling off state assets, facilitating business opportunities for their friends and introducing new taxes,” the DRP said. “Nonetheless, while the health sector, the education and overall standard of living has gone from bad to worse, it is unclear how the government spent the billions and billions of rufiya it received.”


Government income must be doubled, says President

Government income has to be doubled to create fiscal space for increased capital expenditure and investment for development opportunities, President Mohamed Nasheed said in his radio address yesterday.

Speaking on the cabinet decision last week to incentivise voluntary redundancy in the civil service, President Nasheed reiterated that facilitating more attractive and higher paying employment opportunities for civil servants and government employees remains “a major goal for the government.”

“Development opportunities are going to be very limited if a large part of state revenue is recurrent expenditure,” he said. “We have to increase capital expenditure. The best way is to exponentially increase government income.”

While revenue was increasing year by year, Nasheed continued, current levels of annual income have to be “doubled” to make fiscal space for capital investments.

“It will take time for the state to reach that level,” he added. “It is necessary for the government to maintain recurrent expenditure at a certain level to reach [the goal]…The government’s purpose, or objective, is to find ways for employees to improve their standard of living.”

Under the scheme launched by cabinet on Tuesday, civil servants and government employees will be eligible for one of four retirement incentive packages: no assistance, a one time payment of Rf150,000 (US$11,700), a payment of Rf150,000 and priority in the small and medium enterprises loan scheme (for those 18-50 years of age), or a lump sum of Rf 200,000 (US$15,600) and priority in government training and scholarship programmes (for those 18-40 years of age).

Government employees above the age of 55 who retire voluntarily will be given the same benefits as those released by the Civil Service Commission (CSC) at the mandatory retirement age of 65.

The deadline to apply for the programme with the Finance Ministry is May 31, 2011.

Austerity battles

In August 2009, the government’s decision to implement austerity measures to alleviate the crippling budget deficit – including unpopular pay cuts of up to 15 percent for civil servants – was met with protests and fierce resistance from opposition parties and the CSC.

President Nasheed announced at the time that the government planned to halve the 32,000-strong civil service by 2011 through redundancies and transfer of employees to corporations.

While the President stated that the civil service should be composed of no more than 18,000 well-paid and qualified staff, CSC Chair Mohamed Fahmy told Minivan News last week that the commission currently has 19,000 permanent staff.

At the height of a protracted legal dispute between the CSC and government last year, the parliament-appointed independent commission was accused of attempting to topple the government and “plunge the Maldives into chaos.”

International organisations such as the International Monetary Fund (IMF) and the World Bank meanwhile insist that reckless expansionary fiscal policies from 2004 onward that saw doubling expenditure on salaries between 2007-2009 crippled the economy.

“The Maldives faces the most challenging macroeconomic situation of all democratic transitions that have occurred since 1956,” read a World Bank report in March 2010.


Government to guarantee loans for unfinished homes in Male’

Discussions are underway between the Housing Ministry and Finance Ministry to establish a mechanism to provide government loan guarantees for unfinished homes in Male’, President Mohamed Nasheed announced Friday in his weekly radio address.

President Nasheed said that an announcement will be made this week to invite applicants to seek loan assistance under the programme.

Of the 1,500 construction permits issued for Male’ from 2008 to date, said Nasheed, construction work has yet to begin on 47 percent of the houses. Work had ceased for 20 percent more while only 33 percent of homes reached completion.


President underscores progresss on housing pledge

The government has made considerable progress towards fulfilling its pledge to build 10,000 housing units to provide affordable housing for the people, President Nasheed said Friday in his weekly radio address.

The President revealed that the construction of 1,780 housing units was currently underway while work on 25 units each in Gaaf Dhaal Thinadhoo, Seenu Feydhoo, Gaaf Alif Kolamaafushi, Haa  Dhaal Kulhudufushi and Lhaviyani Naifaru was now 40 percent complete.

While over 20,000 residents of Male’ in recent weeks have applied for housing units to be built in the congested capital, Nasheed announced that construction of 350 housing units in Male’ by Kargwal 18 SG Developers of India was expected to begin in April.

Moreover, said Nasheed, the construction of 180 units in Hulhumale’ by Coral Ville was 35 percent complete.

Meanwhile on Thursday, the government signed an agreement with the Chinese National Machinery and Equipment Import and Export Corporation (CMEC) for the construction of 1,500 housing units in the southern atolls.

Of the targeted 10,000 units, the Chinese company has been assigned 4,000 units across the country.

At Thursday’s signing ceremony, Housing Minister Mohamed Aslam explained that the government hoped to secure loan facilities of US$150 million from the AXIM Bank of China, adding that he expected construction work to begin in the next four months.


President outlines transition to programme budgeting

President Mohamed Nasheed on Friday announced the transition from line-item to programme budgeting in 2011, a process that began in 2006 under the previous government.

In his weekly radio address, President Nasheed explained that the new budget will be based on the Strategic Action Plan formulated in 2009.

The purpose of a programme budget is to determine and identify means of achieving targets of government offices and institutions.

“After identifying the target, objective or the aim, what offices have to do is determine the work that will be needed to achieve it,” he said. “And then they have to determine the expenditure required for it such as machinery, services, people. That is what we consider the budget. But what is important are the programmes.”

Following the valuation of the estimated cost of government’s projects for 2011, said Nasheed, the provisional budget will be submitted to the People’s Majlis.

As next year’s budget will include projected revenue from newly introduced taxation, he continued, it will be “a budget with a completely new form.”


An IMF Public Financial Management Performance Report, made public in May 2010, meanwhile recommends an almost complete overhaul of the existing public finance management system in the Maldives.

The assessment found that budget credibility was weak as revenue fell well below estimates in each year except 2006, while budget documents for 2005-2008 showed “no clear linkages between budget figures and underlying policies.”

In 2007, actual primary expenditure deviated from budget estimates by -13.7 percent, while domestic revenue collections were below 92 percent of budgeted estimates in the same year.

Moreover, as funds for discretionary spending was released on an ad hoc basis, “there are critical weaknesses in the management of government cash, debt and guarantees.”

Among its other findings, the report states that “efficient service delivery has not been prominent priority for public financial management in the Maldives” as the emphasis has been on inputs as opposed to output or results.

While strategies and goals had been identified in national development plans, it had not been costed and “linkages to the budget have been unclear.”


Opposition PA leader under military protection “against his will”

People’s Alliance (PA) leader Abdulla Yameen has told local media outlets that he is being held against his will by the Maldives National Defence Force.

The MNDF has claimed Yameen sought their protection after violent clashes between MDP supporters, police and another group outside his house on the evening of July 14.

The leader of the minor opposition party, who was last week released from house arrest by the Supreme Court, had been accused by the government of corruption, bribery and treason. The MNDF have refused to present Yameen in court, despite an order from the Criminal Court on July 15.

The government has meanwhile said it intends to monitor the judiciary to ensure corruption does not obstruct the judicial process.

Speaking to private broadcaster DhiTV from the Presidential Retreat ‘Aarah’ last night, Yameen said he was contacted repeatedly by Chief of Defence Force Moosa Ali Jaleel and told that the army had orders to take him under protection by force if necessary.

Providing his account of the incident, Yameen stressed that he refused the offer of protection and requested that security forces control the crowd outside his residence.

He added that Moosa Jaleel informed him between 12:00am and 1:00am on Wednesday night that MNDF had “no choice” but to take him under military guard.

Yameen said he was at PA MP Ahmed Nazim’s house at the time when crowds began gathering outside his residence.

“MNDF suddenly somehow knew that I was at Nazim’s house and MNDF soldiers came and took over the whole area,” he said. “They started banging on the door and threatened to come in. Finally, my lawyer Abbas Shareef who was outside called me and said they have warned that they will break down the door and charge in if I did not come out.”

As he was a guest at Nazim’s house and did not wish to “dragged away so inhumanely”, Yameen continued, he left with the officers because “I was forced to and did not have any choice.”

Yameen, former Trade Minister and younger brother of former President Maumoon Abdul Gayoom, strongly criticised the government’s handling of the political unrest in the capital.

“Imagine, every night they come out and smash and destroy so many places,” he said. “What about the rights of my neighbours? It wasn’t just my house that was damaged. What about the children that are traumatised?”

Yameen called on the security forces not to be “too concerned with one individual” and ensure the safety of the public.

“They know who it is that come out like this every time and holler,” he said. “They will do well to take legal action against those people. In no event should they have to neglect maintaining peace and all the soldiers come and protect me.”

Yameen and Nazim along with MP Gasim Ibrahim is currently under investigation for alleged corruption involving “cash for votes” in parliament.

A press release issued by the President’s Office on Thursday states that the unrest was precipitated by an attack on the ruling Maldivian Democratic Party (MDP) rally on Wednesday night.

It adds that a group of people tried to incite violence and attacked participants at the rally.

In his weekly radio address on Friday, President Mohamed Nasheed said the government was “forced” to isolate political leaders after considering the consequences of inaction.

“Therefore, the isolated individuals will remain so for now,” he said. “The government has now decided to carry on with this.”

The Maldives was experiencing “teething pains” with the present political crisis, Nasheed continued, as multi-party democracy was in still in its infancy.

“When we mature for such a system, we have to always accept that we have to face a number of things that are inevitable and unanticipated,” he said. “I want to assure citizens, we have complete confidence that we can face this. We see the bigger picture. We know the difficulty we are facing today. God willing, we will emerge from it, and no matter how hard the road we have to walk, I have complete confidence that we can walk down it.”

Despite Nasheed’s apparent confidence in resolving the country’s political deadlocks lawfully and peacefully, the outbreak of violence has drawn the attention of international bodies such as the UN.

UN Secretary-General Ban Ki-moon issued a statement “urging all political parties to restrain those who promote violence and confrontation, and to resolve their differences through dialogue.”

“Political rivalries should not be allowed to jeapardise the significat gains the country has registered in democratic reform,” Ki-moon said, pledging the assistance of the UN in resolving the situation.

The UN “recogises the positive steps taken by the Maldives to advance democracy in recent years, and underlines the importance of cooperation and accomodation among the various political actors as an essential ingredient of building democracy,” the statement read.

The United States has meanwhile urged the Maldives to accept offers of mediation from the international community to resolve the political crisis.

“We call on all sides to refrain from violence and to come together to resolve disagreements through dialogue,” the US Embassy in Colombo said.

US Ambassador Patricia Butenis and Sri Lankan President Mahinda Rajapakse have already held mediation sessions in the country to resolve a deadlock between the executive and what President Nasheed has described as “elements within parliament.”


Next SAARC summit to be held in South Province: President

President Mohamed Nasheed said the 17th South Asian Association for Regional Cooperation (SAARC) meeting will be held in the South Province.

The president said the summit could take place in both Addu and Fuahmulah Atolls during his weekly radio address last Friday on the Voice of Maldives.

President Nasheed acknowledged it would take a lot of work and preparation to hold the summit in Maldives, but said he was “confident a successful summit could be held in the South Province.”

The president noted this would be the first SAARC summit to be held in the southern hemisphere.

The 16th SAARC Summit was held last month in Bhutan’s capital, Thimphu.


President hopes Decentralisation Act will be amended

President Mohamed Nasheed has said he will sign the decentralisation bill into law despite misgivings as any further delays would do “more harm than good”.

In his weekly radio address on Friday, President Nasheed said the constitutionality of some provisions could be challenged at court.

“I hope that after I ratify this bill, amendments will be made as soon as possible, within the present framework, to change the provisions where these conflicts could arise,” he said.

The president said grouping atolls into provinces and devolving decision-making powers concentrated in Male’ to seven regions was a campaign pledge of the ruling Maldivian Democratic Party (MDP).

“It’s not at all the case that the government decided to create provinces because there was a political opportunity or purpose in it,” he said, adding that it would be more politically advantageous to continue with the existing system of “considering the capital of the atoll to be the atoll council.”

Continuing with the traditional system would be the “narrowest” way of devolving powers, Nasheed said, adding he did not want to prolong the existing model of island and atoll development committees with “small, minimal powers”.

Meanwhile, the purpose of provinces was “to find a better path” for economic growth and development.

The province offices created in the first months of the new government was intended to “introduce and implement” the model, Nasheed said.

Moreover, he added, as the constitution empowers the president to create posts and offices for administrative purposes, desks were set up at the province offices for the main government ministries.

But, DRP MP Ahmed Nihan told Minivan News today the bill would not hamper development as it would vest “executive power” in the hands of the people and stipulate equal distribution of government funds.

He further accused the president of exercising executive power with “total disregard” to the constitution.

While the president was empowered to appoint councillors and state ministers by article 115 of the constitution, he said, the DRP did not accept that it could be done for the purposes of decentralisation in the absence of enabling legislation.

“We believe [the appointments] was made by misusing the powers granted by article 115 as it was done for political purposes,” he said.

Nihan added it would have been better for the president to voice concern about “building human resources” for decentralisation as the process was new to the country and was likely to result in teething problems.

On the issues of maintaining the existing administrative division into 21 atolls, Nihan said “the core reality is that Maldivians don’t want to lose their island identity.”

Moreover, he said the government’s fear that the bill would create “21 opposition governments within the country” was unfounded.


The decentralisation and regionalisation policy began with the appointment of state ministers under Home Minister Gasim Ibrahim, who quit his post 21 days into the new administration.

Gasim joined the DRP-PA MPs, several independents and the two MPs of the Dhivehi Qaumee Party to vote through the final bill by 42 votes.

The model of provinces was removed from the government’s bill by the opposition DRP-dominated committee after it was submitted for a second time in March this year.

Opposition MPs have argued that the atoll councils referred to in article 230(b) of the constitution must be established at the atoll level for the 21 administrative atolls of the country.

The battle over the legislation throughout the first two sessions of parliament involved forced cancellations, clashes in the chamber and protests.