Maldives can learn from Seychelles economic recovery, says President Nasheed

The Maldives can learn from the economic and fiscal reform of the Seychelles in reforming its own stricken economy, President Mohamed Nasheed has said during his visit to the neighbouring island nation.

“Our fishing industry is worth about US$500 million a year. We want to see how we will be able to work with Seychelles on improving on its productivity,” said President Nasheed, following the meeting with his Seychelles counterpart President James Michel.

President Michel said small island states shared many similar challenges, “such as economic development, climate changes, fisheries, tourism, and piracy. We have many commonalities and we share the same ocean. We must do more to improve our regional trade and share our expertise, especially as we are both focused on fisheries and tourism, and in this way develop sustainable solutions to regional challenges,” he said.

The two countries have discussed developing a maritime company in the Maldives, and the possibility of developing a joint airline corporation.

During the delegation’s visit, President Nasheed was briefed by the Governor of the Central Bank of Seychelles, Pierre Laporte, on the economic reform strategies adopted in the Seychelles.

Not far from home

The Seychelles is an upper middle-income country that, like the Maldives, has enjoyed rapid growth led by a tourism sector that, after emerging rise in the 70s, now provides 70 percent of the country’s foreign currency earnings and 30 percent of its employment.

In 2006, the government of the Seychelles allowed its rupee to depreciate after years of allowing it to be overvalued – a similar situation to the Maldives, which earlier this year launched a managed float of the rufiya, within 20 percent of a 12.85 peg, which saw it rocket to the maximum 15.42 where it now remains.

The value of the Seychelles rupee plunged 10 percent in the first nine months of 2007, and the country was subsequently hit by the economic recession and a foreign exchange shortage – another problem familiar to the Maldives. This culminated in a debt crisis in 2008 that threatened the country’s comparatively high standard of living.

The International Monetary Fund (IMF) in its country report on the Seychelles (published in January 2011) commented that in the years following 2008, the Seychelles had “achieved a remarkable turnaround of economic policies, including foreign exchange market liberalisation and floating of the rupee” – achievements, the IMF noted, that were “all the more remarkable since the Seychelles had to confront at the same time a global crisis that lowered tourism receipts”.

The IMF’s 2011 report documents the remarkable economic recovery of a small island nation, during a recession affecting its core business. In particular, the report praised the Seychelles for renewing the confidence of private investors, “which translated into increased foreign direct investment to develop the islands’ exceptional tourism potential”, the stabilisation of the exchange rate, price stability, and the rebuilding of reserves “which offer room for more expansionary policies.”

Prior to 2008, the Seychelle’s overall deficit had reached 9.8 percent and the country was facing “an acute balance of payments” as public debt was predicted to rise a further 20 percent in two years. Ratings agency Standard & Poor – which this week lowered the credit rating of the US for the first time in history – had downgraded the Seychelles to “selective default”.

Several attempts to increase the value of the rupee against the US dollar had been unsuccessful, and did little to address the country’s foreign currency shortage – at the beginning of 2007, the rupee was officially valued at 6 to the US dollar, while the blackmarket exchange rate sat at almost double.

In late 2007 the government of the Seychelles devalued the rupee, setting the official exchange rate to 8 rupees to the US dollar. As in the Maldives following the government’s effective devaluation of the rufiyaa from 12.85 to 15.42 to the US dollar via a ‘managed’ float, the blackmarket in the Seychelles simply adjusted for the increase, settling at 13-14 rupees to the dollar.

In November 2008, the government of the Seychelles dropped its peg and floated the rupee against the US dollar. The rupee immediately leapt to almost 18, and remained substantially volatile for much of the next year. By late 2009 it had plunged to 10 rupees against the dollar, and a year later had settled around 12, where it remains.

Despite several concerns about the lack of diversification of the economy and the impact of piracy – the Seychelles coastguard rescued 27 hostages in March last year after firing 10,000 12.7mm rounds at the engine of the pirate vessel – the IMF describes the outlook for the Seychelles as favourable and predicts medium term growth of five percent as the country’s tourism industry expands and promotes itself outside traditional markets.

“The Seychelles’s stabilisation success offers perspectives for a less painful path toward fiscal sustainability, but caution is needed to maintain external stability and growth prospects,” the IMF noted.


President visiting Seychelles

President Mohamed Nasheed has left the Maldives for an official visit to the Seychelles.

The Seychelles has recently undergone rapid economic reforms after facing many of the challenges currently being experienced in the Maldives, a fact the President noted prior to his departure.

Nasheed also revealed plans to hold discussions to establish a tourism link between the two countries, and ways to increase trade profits across the two countries.

During his visit Nasheed will also attend the opening ceremony of the Indian Ocean Island Games.


President Nasheed departs for Seychelles

President Mohamed Nasheed departed for Seychelles this morning on an official visit to attend the Indian Ocean Island Games.

Nasheed will also meet Seychelles President and Vice President during the trip.

Speaking to press before his departure, President Nasheed noted that the government’s economic reform package proposed to parliament would help with the fulfillment of the pledge to lower living costs and control inflation.

President Nasheed also stressed the importance of reducing government expenditure while increasing revenue through newly-introduced taxes.


Uncertainty remains over scale of Maldives piracy threat

With two separate attacks this month by Somalian pirates within a 30 nautical miles of Trivandrum, India, one maritime expert has warned that the Maldives’ growing use as crossroads for shipping routes make its own waters and businesses an increasingly attractive target in the future.

Tim Hart, a security analyst specialising in piracy from around the Horn of Africa for Maritime and Underwater Security Consultants (MUSC), told Minivan News that the two attacks reported this month off India’s southern coast raised wider security issues for the Maldives that have previously affected other nearby archipelago nations like the Seychelles.

While the Maldives National Defense Force (MNDF) this week said that the country’s territorial waters had not come under direct attack from piracy originating from Somalia, a spokesman said it shared the UN’s concerns over possible threats in the Indian Ocean.

Tourism angle

Increasing numbers of refugees from Somalia are flooding into northern destinations such as Kenya and Yemen, and with limited opportunities for those remaining, Hart said piracy was at believed to be the country’s second largest source of revenue.

In this lucrative market place for piracy, the UN has expressed concerns that the Indian Ocean is becoming in key battleground in trying to stem maritime attacks as suspects move increasingly further from Somali shores.

Hart said that as cargo fleets moved closer to the Maldives to try and ensure safer shipping routes, pirates were likely to follow in the search of viable targets.

Aside from the potential impact to the country’s own shipping enterprises, the maritime expert added that tourism had also been affected by piracy in other Indian Ocean nations.

“The Maldives is a large group of islands that can make monitoring difficult like in the Seychelles,” he said. “The [Seychelles] back in 2009 had a pirate issue that seriously affected its tourism. This has also been seen around the coast of Kenya in areas like Mombasa, where cruise ships were coming under attack in some cases.”

According to Hart, although cruise ship attacks are relatively isolated occurrences, the UK parliament has recently raised issues over an incident in Kenya that directly targeted tourists on board a vessel – an event that significantly affected cruise interest in the region.

“With the Maldives’ territories made up largely of ocean, (the country is 99 per cent water) the concern is that pirates might become influenced to make similar attacks there,” he added.

Targeting isolated resorts would be outside the traditional modus operandi of Somali pirates, Hart said, explaining that they only attacked targets other than merchant vessels out of opportunity.

“It really depends on how desperate a particular group of pirates becomes, generally larger merchant vessels offer the largest incentives for ransom,” he said. “To set foot onto an island, highjack and kidnap tourists and then try to get back to Somalia using their vessels would be very difficult.”

Despite the challenges posed by such an attack, Hart said that it had not been unheard of for pirates to mount land-based assaults in areas like the Niger Delta.

“Pirates are known to be very adaptive in terms of their methods and targets,” he said. “Wherever someone has tried to prevent them from operating, they have changed their target areas and tactics.”

However, Maldivian tourism officials and insiders have identified piracy as a potential security concern for the resort industry.

Adapting to piracy challenges

Hart claimed that the Maldives could take some lessons from the Seychelles in terms of further tightening maritime security against potential acts of piracy, he added that adopting a fix-all approach to the problem was impractical.

“With regards to piracy, it is difficult to set out a one-stop shop in terms of reducing risks, though I would suggest looking at how the Seychelles has operated in 2009 and 2010. Because of recent monsoon weather [in the Indian Ocean region], defining attack areas and establishing operational islands is very difficult,” he claimed. “However, anything to support additional maritime surveillance to protect islands and [local] waters would be encouraged.”

In terms of a national strategy for piracy prevention, MNDF Major Abdul Raheem said earlier this week that the Maldives is already collaborating with international naval forces – under wider UN military programmes – to patrol and monitor its territorial waters from pirate threats.

Raheem said that despite the serious concerns raised over potential piracy attacks in the Maldives, the MNDF would continue with existing initiatives to try and protect its waters in collaboration with naval forces from other nations like India, Turkey and the US. These nations have taken part in patrols across the country in the last few years.

“Piracy is seen as a major problem in the Maldives and we are very concerned about possible attacks occurring in our waters,” he said at the time. “However, we have not recognised piracy threats flaring up [around the Maldives]. With help from other nations, particularly India, we are continuing patrols.”

Raheem stressed that some Somali vessels had drifted into the country’s waters – often with engine troubles – though it was not clear if they were potential pirate threats or refugees trying to escape the country. Hart claimed that the dilemma over confirming legitimate pirate suspects was a major difficulty in policing international waters against attacks.

“The difference between a pirate and a refugee is often a crew that have thrown their weapons overboard. You have to catch pirates in the act, otherwise it can be impossible to try and stop them.”

From his experiences of studying emerging pirate threats off the Horn of Africa, Hart said it was increasingly common – even in the Indian Ocean – for Somali vessels to wish up on local coasts with no traces of weapons on them, then claiming that they are fishermen lost at sea.

“In certain cases, as opposed to dumping weapons at the threat of being spotted by naval vessels, some pirates will use reconnaissance and GPS systems and have weapons stored securely nearby in order to prepare for possible attacks on vulnerable targets.”

Hart said the situation was further complicated by the tens of thousands of Somalian refugees trying to escape the country that is wrought with political and social instability.

Just this week, the Agence France-Presse (AFP) news agency reported significant increases in the number of refugees from the country, with 20,000 nationals estimated to have attempted the arduous journey to escape to a Kenyan refugee camp in the last fortnight alone.

According to the report, the Dadaab refugee camp built initially for 90,000 people is now home to 360,000 displaced residents. The AFP report suggested that 1.46 million people are thought to have been displaced in Somalia.

Hart said that the domestic difficulties within Somalia, along with its geographic location, had made piracy a lucrative revenue source amidst the country’s many socio-political uncertainties.

“Piracy is a symptom of the problems being seen on the land. A lot of people have been trying to escape the civil war in the country’s south and have been trying to move north to areas like Yemen and Kenya,” he said. “Pirates have also used the very strategic [maritime] location that the Horn of Africa offers and exploited it.”

Amidst the difficulties of trying to find domestic solutions within Somalia as a means of confronting piracy, the UN Security Council has continued to discuss the formation of international courts and prisons to try and bring convicted pirates to justice.

However, Hart said that the effectiveness of these prisons as a potential deterrent to Somali nationals turning to piracy was uncertain.

“At present in Somalia, piracy is the country’s second largest industry. There are already huge risks, but you go out to sea and potentially have huge gains to make,” he claimed. “One possible deterrent would be being arrested and being held in prison. However, even these prisons are likely to be a better environment than life for many in places like Mogadishu – the Somali capital.”


Maldives takes on UK in high seas legal drama

The Maldives government looks set to lock horns with the UK Foreign Office over the Maldives’ long-running claim to 160,000 square kilometres of British Indian Ocean Territory (BIOT).

The Maldives wants an extension of its Exclusive Economic Zone (EEZ) which impedes on a 200 nautical mile EEZ that the UK claims extends from the island of Diego Garcia.

The island is presently occupied by a US naval base, under an agreement in 1966 whereby the UK received favours including a US$14 million discount on submarine-launched Polaris missiles in exchange for use of the island until 2016. The base is now among the largest US naval bases outside the country, and has reportedly been used as a stop-off point for the CIA’s highly-controversial ‘extraordinary rendition’ flights to Morocco and Guantanamo Bay.

More recently, the UK has declared the Chagos Archipelago in the BIOT a marine reserve – an area larger than France – theoretically making it the world’s largest marine protected area (MPA). Funds to manage the MPA for the next five years have been provided by Swiss-Italian billionaire Ernesto Bertarelli.

The matter is further complicated by the existence of an indigenous population, the Chagos, who were forcibly evicted after the British bought the Chagos Archipelago from Mauritius for £3 million (US$476,000) in 1965. The then-Mauritian Prime Minister Seewoosagur Ramgoolam subsequently received a knighthood that same year.

The British attempted to resettle 1000-odd Chagos in the Seychelles and Mauritius, which demanded an additional £650,000 (US$1 million) to settle the refugees.

The Chagos were known to Maldivians in the southern atoll of Addu, as they occasionally rescued a stranded fishermen who had strayed too far south and sent him home. The islands themselves were never settled by the Maldivians, although they retained the Dhivehi name of Feyhandheebu.

Dispossession and the courtroom

The Chagos won a high court victory in the UK in 2000 enabling them to return to archipeligo, but the decision was extraordinarily overruled by the Queen’s royal prerogative. In 2008 the House of Lords overturned the high court verdict, forcing the Chagos to appeal in the European court of human rights.

The Maldives contends that as the islands are uninhabited, according to the Law of the Sea Convention the UK had no right to claim a 200 nautical mile EEZ.

“We will send a delegation to the UN in February and the UN will question us as to our claim, which we believe we have according to the Law of the Sea Convention,” said State Minister for Foreign Affairs Ahmed Naseem.

“Sri Lanka has also filed claims, and we need clarification of them,” he added.

The Maldives’ interest in the area extends to fishing and potential exploitation of mineral resources, Naseem explained.

“We are saying that since there is no population benefiting from the area, the British government cannot claim it as their territory. We feel the [original] claim made by the British is not legally valid [under the Law of the Sea Convention],” Naseem said.

Were the Maldives – or any other country – to succeed in its claim, it would be indirectly benefiting from the homelessness of the Chagos by claiming the territory from which they were forcibly evicted.

“That’s not our issue – the fact of the matter is that there is no native population on the island,” Naseem explained.

On Tuesday the Chagos community in the UK, who live in Crawley next to their arrival point of Gatwick airport, expressed surprise at the UK Foreign Office’s apparent opposition to the Maldives’ claims on their homeland.

In an interview with the UK’s Guardian newspaper, Roch Evenor, chairman of the UK Chagos Support Association, said the Foreign Office “seems to be more interested in defending the seabed than the interests of Chagossians. Why did [politicians] give us all that sweet-talking before the elections and then afterwards we are back to square zero? We feel emotionally drained.”

Second Secretary at the British High Commission in Colombo, Dominic Williams, insisted on Wednesday that the UK was not protesting the submission by the Maldives to extend its territorial waters, but was rather making “an observation” to the UN’s Commission on the Limits of the Continental Shelf (CLCS).

“The UK observed that the Maldives’ submission had not taken into full account the 200 nautical mile Fisheries and Environment Zones of the British Indian Ocean Territory,” he said. “We are satisfied that the CLCS will be able to consider the Maldivian submission without prejudice to the position of the United Kingdom.”

Williams said that the UK believed that a Marine Protected Area (MPA) “is the right way ahead for furthering the environmental protection of the Territory.”

The decision to establish the MPA was, he added, “without prejudice to the current pending proceedings at the European Court of Human Rights. As such, there is no need to wait for a decision from the European Court of Human Rights before implementing the MPA.”

“The establishment of this MPA has doubled the global coverage of the world’s oceans benefiting from protection and gives the UK the opportunity to preserve an area of outstanding natural beauty containing islands and reef systems rich in biodiversity.”

He noted that once the area was no longer needed for defence purposes, “the UK is committed to cede the British Indian Ocean Territory to Mauritius.”


President Nasheed meets with Consul of Seychelles

President Mohamed Nasheed met yesterday with Honorary Consul to the Maldives in Seychelles, Lambert Bonne.

The meeting focused on strengthening bilateral relations between the countries, especially in the areas of tourism and fisheries.

President Nasheed said forging a stronger link between small island states would give a louder voice to those states in the international arena.

Bonne assured his full cooperation towards strengthening ties between the two nations and briefed President Nasheed on the economic situation in Seychelles.


Erroneous reports of pirates operating in Maldivian waters: Foreign Ministry

The Ministry of Foreign Affairs has claimed that while recent reports of pirates operating in Maldivian waters are unsubstantiated, the government is concerned about pirates operating off the Somali coast west of the Maldives.

Foreign Minister Dr Ahmed Shaheed said the government is keeping in touch “with the Indians and the Americans to enhance maritime security.”

“For now, Somali pirates are operating as far as the Seychelles, but not in the Maldives.”

Dr Shaheed said the government was taking “pre-emptive and preventive measures” to ensure the safety of the country.

State Minister of Defence Muiz Adnan said although there have not been recent reports of pirates operating in Maldivian waters, “this is a concern for everybody. A lot of pirates operate out of Somali waters.”

Adnan said the coast guard conducts regular sea and air patrols and also regularly schedules joint patrols with the Indian army, although “not only concerning piracy.”

He said if any pirate vessels are seen in Maldivian waters, “we will take the necessary measures to apprehend them.”

President of the Fishermen’s Union Ibrahim Manik said he had heard no reports of fishermen sighting any pirate vessels in Maldivian waters, but said that sometimes they saw foreign vessels illegally doing long-line fishing.

Manik said if fishermen saw any illegal vessels, they would “definitely cooperate with the government. We are fighting against this,” he said, but added that “we are not very concerned. We are stronger than that.”