Tag: uk

Democracy must continue; “no return to autocratic rule”: UK High Commissioner

UK High Commissioner to the Maldives and Sri Lanka, John Rankin, has emphasised that democracy must continue in the Maldives, “and [there must be] no return to the autocratic rule that has been in existance prior to 2008.”

In his regular “Ask the High Commissioner” interview, Rankin said the UK had called on “all parties to exercise good faith to try to find a way throgugh the current problems and consensus for the way forward.”

“The UK recongises states, not governments,” he explained. “We made it very clear that it was for the government of the Maldives to establish democratic legitimacy both with its own people and the international community.”

Rankin said the UK backed the Commonwealth Ministerial Action Group (CMAG)’s call for early elections, and for agreement as to the constitutional changes required for that to happen.

“We have also joined calls for an independent inquiry into the circumstances surrounding the transfer of power,” Rankin said.

“We called for calm in the country and for demonstrations to be peaceful, and for the police to exercise maximum restraint.”

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Britain begged India to accept aid money: Telegraph

Indian Finance Minister Pranab Mukherjee last year asked the UK to cease giving aid to the country’s booming economy, but relented after being begged to take the money for fear of “grave political embarrassment”, reports the UK’s Telegraph newspaper.

“We do not require the aid. It is a peanut in our total development exercises [expenditure],” Mukherjee told the upper house of Indian parliament, during question time, adding that the government wanted to give it up.

India is the top recipient of UK foreign aid, according to the Telegraph expose. The UK has given £1 billion in aid to India in the last five years and has earmarked a further £600 million in aid by 2015.

Projects from Britain’s Department for International Development (DFID) are mired in controversy, reports the Telegraph. They include a £118,000 program to install satellite tracking on municipal buses in Bhopal – years before the technology was used in the UK – and program to deliver 7000 televisions to schools despite the lack of electricity.

Amid a surging anti-corruption movement in India, the Telegraph alleges that £70 million disappeared from one DFID-funded project along, and that £44,000 of British aid was “allegedly siphoned off by one project official to finance a movie directed by her son.”

Junior Development Minister Alan Duncan claimed that cutting off British aid to India “would mean that hundreds of thousands, if not millions, of people, will die who otherwise could live,” according to the Telegraph.

The admission by India is significant, implying India’s ascension as an aid donor in the region rather than a recipient, despite its own extremes of poverty and wealth. India now donates almost as much in bilateral development as it receives, according to the Telegraph’s report, of which the Maldives is a key beneficiary.

Indira Gandhi Memorial Hospital (IGMH) was donated to the Maldives by India, along with military helicopter, scholarships and copious financial assistance, among other interests. An Indian company, GMR, has the country’s single largest foreign investment in the US$400 million renovation and upgrade of Ibrahim Nasir International Airport (INIA), while the growing mid-market tourism industry is looking towards the huge Indian middle class as a wealthy market for the Maldives tourism product on the country’s doorstep.

“The Maldives is perhaps one of India’s closest partners,” observed The Indian High Commissioner Dynaneshwar Mulay during India’s recent Republic Day celebrations.

Cooperation also extends to the military, with the installation of a coastal radar array plugged directly into the Indian defence network.

More recently, Indian interest in the Maldives has been challenged by rival China, which conspicuously opened its embassy in Male’ last year during the SAARC Summit.

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Comment: Is privatization only happening in the Maldives?

Privatization is one of the economic policies of modern governments, be it large or small, democratic or authoritarian, capitalist or socialist. Privatization is a global phenomenon. The trend towards privatization can be traced back to the 1970’s and 1980’s.

Firstly, it was President Jimmy Carter who in the year 1976 said American Administration ‘lacked administrative skills’ for the performance of daily work, which shook entire public administration and changed its traditional performance. This led to  the emergence of new approach in the discipline of Public Administration called ‘New Public Management’ (NPM) perspective.  The successor of Jimmy Carter was Ronald Reagan, who was convinced that the administration must undergo changes to tackle new problems. America was facing huge budget deficits and inefficiency, which Reagan accused as the result of the misallocation and mismanagement of public funds.
The idea which promoted privatization was that government is not the solution to the problem, but rather it is the problem to the solution.
In England Margaret Thatcher, then prime minister, was faced with similar situations. The public spending was increasing, as productivity and efficiency of public bodies were in decline. This also added fuel to the growing idea of free markets, deregulation and privatization. The government which governed least, or the ‘rolling back of the state’, was the idea behind privatization.

What about communist and socialist states?
For a long time China was regarded as an ‘inward looking’ and isolationist country. During the revolution in 1949 chairman Mao was much inspired by the writings of Marx and Lenin which led to establishment of the communist state. However in the year 1979 Chinese leadership felt it must compete in international trade to help boost their economy. Today China is regarded as the world’s second largest economy, with growth rates around 10% per year.

With the fall of the Berlin wall in the year 1991 the Soviet Union disintegrated. This marked the end of the rivalry between communist Russia and Capitalist America, and was regarded as a triumph for democracy and capitalism. This made the whole world believe that democratic states are the best states and capitalism is the best economic policy. To perpetuate the idea of capitalism and democracy which favored privatization, international institutions such as IMF, World Bank and WTO promoted ‘Washington Consensus’ in the interest of the West.

It is also interesting to note that the so-called socialist state of Cuba, under the leadership of Raul Castro, talked in favor of privatization. Cuba planned to layoff half a million state workers stating that too many workers with low productivity burdens the budget.

The Indian case
Indhira Gandhi was the champion of Indian socialism during the 1960’s. The word ‘socialist’ was added into the Indian constitution to direct its policies towards socialism. The nationalization of 14 Indian banks and its coal industry came when socialism in India was at its peak. However India entered into a debt trap by the end of 1990’s because of excessive wasteful public expenditures and inefficiency in the public sector. Therefore India adopted the new economic policy Liberalization, Privatization and Globalization (LPG) in the year 1991 under the leadership of the then finance minister Manmohan Singh.  Today India is regarded as one of the major emerging economies of the world with the growth rate of around 8% per year.

The Maldives
Privatization of the Maldivian economy has been a hot topic since 2008, with the arrival of the first popularly elected government under the leadership of Mohamed Nasheed. Since this government came into power one of its economic policies has been privatizing the economy. The sale of Male’ International Airport to Indian company GMR was one of the very first steps in this direction. As Maldives tries to expand its tourism sector the need for a modernized airport and efficient management arises to compete with its counterparts, such as neighboring Sri Lanka. The airport was not developing enough to compete and give decent service to the tourists. The airport remained as it was without a major improvement in infrastructure.

In the upcoming year the current government has decided to privatize 5 more companies. This includes STELCO, Maldives Post Limited, Island Aviation, Housing Development Corporation and Maldives In-Flight Catering. However the privatization of these 5 companies was rejected by the parliament, which stated that it violates Maldivian financial laws.

There were plenty of objections to privatization in England and the US during 1980’s, protests in India during the 1990’s and also in Maldives since 2009 against the idea of privatization. I acknowledge the protestors also have points to prove, such as the private sector‘s objective to maximize its profit at any cost and the widening of income disparities because of private sector.  I shall talk about the process and defects of privatization in another occasion.

Therefore the idea of privatization is a global phenomenon and is happening in most countries in the world. It is happening because of inefficiency, delay, corruption, red tapism and nepotism in the public sector, in the interest of delivering results the people expect.

What comes to mind is a couplet written by English poet Alexander Pope. He wrote, “For forms of government let fools contest; whatever is best administered is best.” Therefore it is very clear that whether it be a democratic, authoritarian, socialist or communist government, at the end of the day if that government is not able to administer and live up to its promises, then that government will lose popularity.

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China leads Maldives’ 18 percent tourism boom

Over 700,000 tourists visited the Maldives in the first seven months of 2011, the majority of visitors from China.

The Tourism Ministry has released data showing that the number of tourists who visited the Maldives between January and July 2011 increased by 18.3 percent to 520,483. This was compared to the 439,864 tourists who visited the Maldives during the same period last year.

Maldives Association of Travel Agents and Tour Operators (MATATO) Secretary General, Mohamed Maleeh Jamal, told Minivan News that the timing of Europe’s economic decline matches that of the growing Chinese market. Asia’s high season corresponds with Europe’s low season, he said, and resorts are now catering more to Chinese tourists to keep business up.

Jamal also noted that airlines such as Qatar Airways had increased direct service to the Maldives in the last 10 months. He also noted that more airports are being constructed closer to resort islands, such as in Baa Atoll.

“The President has also decided to increase the marketing budget from US$1.5 million to US$7 million, since we expect the industry’s growth to continue,” said the MATATO secretary general.

Statistics show that Chinese tourists dominated the market in the first seven months with 103,734 individuals, accounting for 19.9 percent of the total arrivals. The United Kingdom was the second-largest contributor to tourism arrivals, composing 11.7 percent of the market.

Jamal forecasted “phenomenal growth” in the Chinese market, and estimated that the Chinese would account for 40 percent of the total tourists in coming years.

The Maldives currently hosts over 100 resorts boasting a total of 22,000 beds. Jamal said 3-4 more resorts were currently under construction, and noted that it was important “to always have excess demand and limited rooms to keep the appeal of the Maldives up.”

Secretary General of the Maldives Association of the Tourism Industry (MATI), Ibrahim Mohamed Sim, was more guarded on the issue. Sim told Minivan News that “we are holding steady in growth, but the market looks mixed since the decline of the US economy could affect our traditional European markets.”

Italy and the UK, formerly leading contributors to the Maldivian tourism industry, have declined, said Sim, but Germany was holding steady.

Sim said the demand from China was significant, and that the Maldives “is in a very lucky position to have the chance to meet that demand.”

Sources in the Chinese media and Mandarin-language tourism forums have meanwhile noted the rise of practices such as segregation of Chinese visitors from other guests at meal times.

Sim commented that although he did not believe there was segregation, the Chinese “stand out, they come here for a different reason than most tourists. They do not come here to sun tan, they come here to see a different place.” He noted that some resorts were also designed to specifically appeal to different groups.

Another recent event in the Maldives’ tourism industry was its withdrawal from the New7Wonders competition.

Jamal told Minivan News, “we think it was a loss that the Maldives pulled out. New7Wonders was a marketing tool, and major tourism companies were competing for the award.”

However he said he did not think that the Maldives’ decision had affected the tourism industry.

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Q&A: UK Deputy High Commissioner Mark Gooding

Outgoing Deputy UK High Commissioner for the Maldives and Sri Lanka, Mark Gooding, speaks to Minivan News about three years of observing dramatic changes in the country. His successor will be Robbie Bulloch.

JJ Robinson: What are the most dramatic changes you have seen in terms of the country’s transition to democracy, and have old habits died hard?

Mark Gooding: I’ve been covering the Maldives for just over three years. My first visit was in the middle of 2008, and we were discussing with the government the passing of the new constitution and the passage to multi-party elections. There was real uncertainty then.

The Maldives passed the new constitution and held successful elections – which were considered credible, free and fair – and is now in the process of consolidating democracy. That means establishing the institutions of democracy and passing legislation necessary to implement the new constitution. Clearly the process has been smooth at times and not smooth at other times. That’s democracy.

There is important legislation that needs to be passed by the Majlis – such as the penal code, the tax reform bill, and these are issues of significant national interest. These need to be addressed by both parties.

JJ: As somebody who has observed the corridors of power in the Maldives for three years, how much political will have you seen towards consolidating democracy, and do you think that this political will is necessarily unanimous across the country’s senior leadership?

MG: Honestly I think there is a large degree of political will. All of the parties participate actively in the democratic processes that exist, and I think that is very important. All parties recognise the need for legalisation to be passed to implement the constitution and broaden existing legislation to make it reflect the challenges of the day.

I think there is cross-party support for this – for the need to enact the legislation and broad support for functioning democratic institutions – be it parliament or police. People understand these are big challenges and that it is in the national interest for them to function effectively.

There are obviously questions that arise in parliament while the details get sorted out. But by and large people agree on the overall objective which is a functioning democracy.

JJ: As an outsider with a perspective on the Maldives both now and how it was three years ago, to what extent do you think that new democratic freedoms – such as those pertaining to human rights, and freedom of expression – to what extent have these freedoms ‘trickled down’ to the average citizen, as opposed to remaining buzzwords paraded at a diplomatic level?

MG: I think to a large extent. One very obvious change is that people can go out and vote now, and there are election campaigns. There was a huge amount of voter awareness work done in 2008. People are increasingly aware of the freedoms they now have – from voting to access to different kinds of media, and an increasingly active civil society.

People’s awareness of their democratic space has increased, and it certainly has in the time I’ve been working with the Maldives.

JJ: What is the extent of the engagement the UK High Commission has had with the government here?

MG: We have very close cooperation with the Maldives government on a range of issues. Obviously the history of the Maldives’ and the UK means we have enjoyed a close relationship this government and the last government. We have a lot of cooperation on global issues such as climate, trade and combating terrorism. There a lot of political dialogue there, also on domestic development in Maldives. The UK was a strong supporter of democratisation in the Maldives.

Practical assistance over the last few years has included the funding of economic specialists to advise the government on dealing with the financial and economic challenges faced, funding of police officers and specialists to develop the police, and we have funded capacity-building of the judiciary and the UN project in that respect.

We would like to build more contact between the Majlis and our own parliament.

JJ: In terms of future involvement with the Maldives, the country has graduated from a least developed country to a middle income country, and other countries reviewing their engagement with the Maldives perhaps now regard it as better able to fend for itself as a result. Does the graduation affect the UK’s engagement with the Maldives?

MG: We don’t have a bilateral development program in Maldives, and in that respect the project work hasn’t changed. In fact we increased project funding in the Maldives, although that had nothing to do with LDC status. There is no short answer. Clearly part of our dialogue with the government is that we strongly supported and the EU co-sponsored a UN resolution on the transition for LDC countries. This was a priority for [the Maldives] government and we were very happy to support it in an international forum.

JJ: Regular comments on Minivan News suggest a great deal of interest in why countries not just in the region, such as India, but those on the other side of the world such as the UK and US, have such an interest in a small island nation of 350,000 in the Indian Ocean that has existed in relative isolation for hundreds of years. Why do you think there is such strong international interest in the Maldives?

MG: There are a number of clear answers from the UK perspective. The UK has a close historical relationship with the Maldives and we regard the Maldives as our friends, and we want to support democratisation here. It is important that succeeds.

There are also 120,000 British tourists visit each year. We look after British nationals who are in the Maldives and we want them to have a positive experience. We also have very close cooperation with the government on climate policy – a serious issue for the Maldives, as climate change clearly could have a devastating impact on the country.

JJ: Concerns are sometimes aired locally that the government’s climate leadership in the international community has not resulted in much impact or change in local communities – many beaches are still routinely used as waste disposal sites, for example. Do you think climate leadership is being passed on locally?

MG: You have to realise that international climate negotiations are incredibly complex and that every country has its own unique situation, and opportunities to introduce low carbon technology. It is not a straight-forward negotiation.

If people are feeling the effects of climate change, extreme weather and beach erosion – rather than just rubbish on the beach – I would say that is a reason to keep arguing for an ambitious global deal on climate change. It would be counter-intuitive to suggest the government should be doing less to secure a climate deal.

The Maldives is an important player both because of its political position on climate change, but also because of its vulnerability. It does have a unique geography, and the potential impact js quite extreme. The Maldives is a significant player in international climate debate.

JJ: While there is a feeling pride in the Maldives’ new democracy, people associated things like rising crime and economic instability with new the democracy and that seems to risk affecting support for democracy as a concept. What do you see as the key challenges for the country, going ahead?

MG: Of course people are absolutely aware of the challenges that exist. They include criminality, drugs and gang violence. There are issues with radicalisation, and economic challenges that the Maldives has faced, like many other countries. Those are challenges that exist already, before implementing the legislation required by the new constitution. So of course there are big challenges and there is a need for national debate.

The interest here is making institutions function effectively as per any democracy. If a country has an effective police service, then action against gang violence is possible. If institutions fail, clearly the situation becomes worse.

JJ: The executive, judiciary and parliament have been busily testing the boundaries of the new constitution. Based on three years of watching this happen, do you think they are showing signs of settling into their functions and working together?

MG: It certainly remains a challenge, and it has not always been smooth. The institutions identify how much power they have and how it is exercised. We had problems last year between the Majlis and executive, but those were overcome. The parties have shown that at times they can work together and make institutions function.

JJ: The Maldives has a traditional and persistent culture of patronage, a society structured around senior figures who provide things such as medical treatment, scholarships, education and so on, be it a katheeb or an MP. In fact MPs quite openly admit to spending their salaries on funding financial demands from their constituents. Given that the culture is so deeply rooted in patronage, do you think there is hope that principles such as equality necessary for democracy can be applied in the Maldives?

MG: In a democracy it’s up to the people how they are governed. What you’re asking really is what level of power should be appropriate at island, regional and national level. Absolutely that is a debate that happens, and that is a debate people need to have. What is true in democracy is that power structures need to be held to account in both their decision making and their expenditure. Those are important principles to emphasize.

JJ: The recently changing of party affiliations parties among MPs has seen parliament be unfavourably compared to a “football transfer market”, and the MDP in particular seems to have embraced a new pragmatism in search of a parliamentary majority. Do you think there is a risk that by importing the odd skeleton in the cupboard that the party risks disengaging from the idealistic roots that made it into a political force capable of changing an entrenched government?

MG: I think there is a reality that when you are in government you need to focus on the ability to make decisions and exercise authority in an accountable way. I think it is possible to do that in a way that upholds principles. Certainly in our meeting with the President this morning he was very clear about this. There was no doubt about those principles. Clearly people in positions of power should be subject to public scrutiny.

JJ: The Maldives has been quick to use its platform in the UN Human Rights Council to denounce war crimes and crimes against humanity in the Middle East committed by countries such as Libya, but has taken a much gentler stance with Sri Lanka despite UN allegations about such crimes committed in the closing days of the civil war. What is the UK’s view on Sri Lanka, and how can the Maldives contribute to secure and progressive Sri Lanka in the future?

MG: The UK’s position on Sri Lanka is very clear: the need of the hour is reconciliation. In Sri Lanka reconciliation requires a number of things – humanitarian relief is one, but also progress on a political settlement. We believe there are serious allegations which are contained in the UN Panel report that need to be looked into – for us this is a very common sense position.

The Sri Lankan government has set up a reconciliation commission which is looking into a variety of issues in the later years of the war. We think it is important that do that and we encourage the government to do that.

JJ: There is the possibility that an internationally-sponsored investigation would require backing from the Human Rights Council. Does this place Maldives in a difficult position if it comes to a vote?

MG: There are a number processes in train in Sri Lanka, such as the lessons learned reconciliation report due in November. I think the world is watching in terms of what these processes will produce. At that point, we able to see whether other options are necessary. We encourage the government to look at these issues.

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Osama bin Laden killed in Pakistan by US forces, says Obama

US President Barack Obama has declared the death of Osama bin Laden at the hands of US forces.

In a live broadcast to the US on Sunday night, Obama claimed that an intelligence lead in August 2010 had culminated in the tracking of bin Laden to Abbottabad, a town north of Islamabad in Pakistan far from the tribal belt where the US has been searching for the fugitive.

“It was far from certain, and it took many months to run this thread to ground. I met repeatedly with my national security team as we developed more information about the possibility that we had located bin Laden hiding within a compound deep inside of Pakistan. And finally, last week, I determined that we had enough intelligence to take action, and authorised an operation to get Osama bin Laden and bring him to justice,” Obama said.

“A small team of Americans” engaged bin Laden in a firefight, killing him. No US or civilian casualties were reported, and bin Laden’s body was recovered.

A US official told Associated Press that “We are assuring [his body] is handled in accordance with Islamic practice and tradition.”

Counter-terrorism cooperation with Pakistan “help lead us to bin Laden and the compound where he was hiding,” Obama said.

“We must also reaffirm that the United States is not – and never will be – at war with Islam,” he added. “Bin Laden was not a Muslim leader; he was a mass murderer of Muslims.  Indeed, al Qaeda has slaughtered scores of Muslims in many countries, including our own.  His demise should be welcomed by all who believe in peace and human dignity.”

Reaction

Crowds immediately gathered outside the gates of the White House singing the country’s national anthem, while news networks reported a “party atmosphere” spreading throughout the country.

British Prime Minister David Cameron said that confirmation of bin Laden’s death should  “bring great relief to people across the world”.

“Osama Bin Laden was responsible for the worst terrorist atrocities the world has seen – for 9/11 and for so many attacks, which have cost thousands of lives, many of them British,” the PM said.

A Western diplomat based in Islamabad told the UK’s Guardian newspaper that bin Laden’s death was a “game changer” for US foreign policy in Afghanistan and Pakistan.

“I’m overjoyed, but what this exactly means is really not clear,” the diplomat said.

A number of analysts speculated that while bin Laden’s death was a significant symbolic victory for the US, it was unlikely to hamper al Qaeda’s operations as bin Laden was no longer involved in the day-to-day functioning of the terrorist organisation.

The US State Department meanwhile issued a travel alert to all US citizens warning of an outbreak of anti-American violence in the wake of bin Laden’s death.

“Given the uncertainty and volatility of the current situation, US citizens in areas where recent events could cause anti-American violence are strongly urged to limit their travel outside of their homes and hotels and avoid mass gatherings and demonstrations,” the State Department said.

US Assistant Secretary of State for South Asia, Robert Blake, is currently in Male’ for meetings with political leaders and civil society.

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Tourist arrivals climb on strength of Asia Pacific demand

New tourist statistics show there were 246,606 arrivals to the Maldives over the first three months of 2011, a figure up 12.3 percent over the same time last year on the back of strong interest from the Asia Pacific and Eastern Europe, according to the Ministry of Tourism, Arts and Culture.

Between January and March 2011, the Asia Pacific region in particular posted significant growth in tourist numbers, which were up by 36 percent compared to the same period last year, amounting to 69,024 arrivals to the Maldives – 28 percent of the total number of visitors recorded over the quarter. China was the region’s key tourist market for the Maldives, with 52,345 recorded visitors over the first three months of the year representing an increase of 53.2 percent compared to back in 2010. Arrivals from South Asia were also up by 41 percent to reach 9,913 visitors, a figure helped primarily by increased interest from India. Indian arrivals between January and March compared to the same period last year rose by 46 percent to 6,891 people.

The total tourism figures for the South Asia region, which includes nations like Sri Lanka, Bangladesh and Pakistan, accounted for just four percent of the total number of arrivals to the Maldives between January and March this year. Visitors from Europe, who accounted for 68.2 percent of total arrivals to the Maldives during the quarter, rose by 4.7 percent to 168,307 over the same period of time the previous year.

The statistics show that the increase was driven primarily by demand from Western European nations such as France, Austria and Belgium, as well as 27,324 visitors from Central and Eastern Europe, a figure up by 22.2 percent during the quarter when compared to 2010.

Western Europe, which accounted for 27.1 percent of the total number of visitors to the Maldives during the first three months of 2011, saw 66,755 people travelling to the Maldives over the period, up 8.8 percent from the 61,341 visitors recorded the previous year.

However, despite the overall increase in arrivals, visitor numbers from northern and Southern Europe declined over the three months by 4.1 percent and 3.3 percent respectively, particularly within key markets like the UK and Italy.

The number of travellers from the UK, which represented 11.2 percent of all tourist visitors to the Maldives between January and March this year, fell by 8.2 percent to 27,728 when compared to last year. Similarly the number of Italians travelling to the country, 14.8 percent of total visitors between Janaury and March, fell by 2.6 percent to 36,468 people over the same period of time.

In other international regions, the figures recorded that tourist arrivals from the Middle East were up by 10.5 percent to 2,428 over the quarter compared to last year, while arrivals from Africa increased by 10.1 percent amounting to 1,269 people.

Visitor numbers from the Americas increased by 18.8 percent over the three month period to 5,578, according to the figures.

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Comment: It’s the economy stupid!

There is only one thing on everyone’s mind – the dollar-rufiyaa exchange rate. In a country that imports everything from salt to the accountants that run its businesses, it is no wonder that everyone from the construction worker to the Maldives’ answer to Donald Trump (I’ll leave you to guess whom) is trying their hand at being an economist with a specialty in foreign exchange.

Whether you agree with the politics of it or not, the devaluation was needed. If anything it should have come sooner. The Maldives has been growing its rufiyaa-based economy at break-neck speed. Salary rises across the board, increased government spending and ever increasing infrastructure projects have become the norm over the past decade. By and large this ‘growth’ in the domestic economy has been driven by the public sector (government policy & the civil service) and paid for by printing Maldivian rufiyaa and clever manoeuvres with T-Bills (which the government has used since 2009 to be able conveniently sidestep the charge of printing money). In simple terms: successive governments printed/created money to drive domestic economic growth.

What it didn’t manage to do was increase it’s dollar receipts at the same speed (actually all foreign currency, but I’ll use dollar interchangeably in this article). Yes growth in the tourism industry increased the dollar receipts but nearly not enough to fund the increase of rufiyaa in circulation. The previous government had a spade of one-off dollar incomes by selling resorts, but by neglecting to make sure that these so called developers had the capacity to develop the properties and provide the country with a constant source of dollars, they missed a trick. The consequence: an imbalance in the amount of dollars the country has the capacity of earning and the amount of rufiyaa it is printing/creating and spending. If you increase the supply of rufiyaa without the corresponding increase in dollar receipts, it is inevitable that Maldivian rufiyaa will be worth less. It is simple demand and supply.

So the question is, where to from here? By creating a ceiling at Rf15.42, the government has effectively stopped a steep depreciation in the currency and has minimised the crippling effects of a severe shock to the economy – and it should be praised for that. There is however a cost. This will erode purchasing power in the short term and will hit people’s pockets (albeit tempered by the fact that the dollar was already trading at around Rf 14 in the black market despite the best efforts of the authorities). As always, it is the common ‘Mohanma’ on the street who will bear the highest burden. Prices will inevitably creep up and the inflation will put pressure on wages. Any subsequent wage increases which will lead to further effective devaluations. Let us not sugar coat this – it will be painful.

What the government needs to do is to come up with a credible plan to redress this imbalance and reassure the people that the pain is worth it. There are two fundamental way of doing this: i) reducing the rufiyaa in circulation, or ii) increasing the dollar revenue the country earns. In my mind there is no doubt the answer lies in a fiscal solution to get the economy back on an even keel. The dollar crisis is simply a symptom of deeper economic woes – not the problem itself.

Reducing rufiyaa in circulation

The main levers of doing this are a) reduce government spending – reducing wages and cutting unfunded government projects and/or b) increasing rufiyaa-based taxes.

Reducing government spending is an essential plank of what needs to be done to rebalance the books. This is the path that the UK and the EU (driven by Germany) are already following, and all indications are that the US will announce similar austerity measures after its Quantitative Easing splurge. Cutting too quick and too deep may the tip the economy into recession and that would be very painful – but not doing anything is simply not an option. The consequences are even graver.

The government also needs to ensure that it adopts a progressive taxation system on rufiyaa-based incomes. We need to ensure that the rich share ‘equitably’ in the pain of rebalancing our books. Equitably here means that they pay a much higher proportion of the cleanup costs – in practice this should be a combination of no taxes for the low income earners, close to 50 percent taxes for the ultra high income earners and a corporation tax system which exempts small local businesses.

Increase the dollar revenue

The most appealing of all options as it means no painful cuts. The catch is that this is largely out of the government’s control, at least in the short term. The only two significant sources of dollar income are through fisheries and tourism – and there are challenges in growing both sectors. Investment in fisheries is long over due, but ultimately the sector does not have the scale to solve the problem in the short to medium term – it is simply too small today.

Tourism, the great gold rush of this generation, is a much bigger challenge. Government types tell wonderful stories of 20 percent equity returns and 60 resorts waiting to be developed. The simple truth is that this represents close to US$3 billion of investment in a country where the nominal GDP is around £1.5 billion – an improbability to put it mildly. It is simply not realistic to pin our hopes on some sort of tourism growth bonanza in the short term – we might as well play the Euro lottery every week if this is the only plan.

The long term rebalance

In the long term, the structural solutions are through growth of our industries that translate into real economic growth underpinned by increases in our foreign currency receipts. The government needs to:

  1. Foster an environment where real growth can be achieved for our innovative companies in the fisheries sector (the next Big Fish, Horizon et al), and also create opportunities for Maldivian corporations and SMEs in other sectors to grow into the world market. Investing in revenue growth is more important that building airports on every island. Real growth in the economy driven by the private sector is the road to prosperity – not government spending based on printing money and clever manoeuvres with T-Bills.
  2. Move now to ensure a quick solution to all the tourism development projects stopped because they were awarded to parties with no money or track record. It is bizarre that they have been allowed to hang on to ‘their’ assets without fulfilling their obligations by cajoling the government and the banks. Moratoriums on lease payments or debt repayments may look innocuous enough, but they rob the country of vital growth opportunities and hence ultimately rob the people. We should not stand for it.
  3. Implement an equitable progressive taxation system. It is not fair that the low income people pay the same taxes as the highest earning group – through the flat import duty this means that the poor actually pay a larger percentage of their income as tax than the rich. And it is criminal that the resort owners are sitting in parliament legislating that they should not pay their fair share of taxes on the very substantial amounts they earn. This is a clear conflict of interest and something that needs to be addressed at a national level. The constitutional stipulation that Majlis members shall not vote on issues in which they have a personal vested interest must become more than just a nice idea on paper. The 3 percent tourism GST is simply not equitable enough!

The country’s economic troubles require a bold government that can show leadership and is honest with the Maldivian people about the tough choices ahead. Equally it needs a responsible opposition which accepts the reality of the problem and challenges the government on the merits of its economic policies by proposing viable alternatives. For their trials and tribulations, the Maldivian people deserve it. Whether they are lucky enough to have either, only time will tell.

Ali Imraan is the Director of Structured Finance at the Royal Bank of Scotland. The views expressed here are his own personal views and opinions and do not represent those of the Royal Bank of Scotland and should not be construed to do so in any way, shape or form.

All comment pieces are the sole view of the author and do not reflect the editorial policy of Minivan News. If you would like to write an opinion piece, please send proposals to [email protected]

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“Tolerance and passive acceptance of others is not enough”: UK High Commissioner Rankin

British High Commissioner to Sri Lanka and the Maldives, John Rankin, has said that yesterday’s International Day for the Elimination of Racial Discrimination marked an “opportunity for all of us to re-commit to defending and promoting fundamental equality.”

“We live in an age of diversity, where societies grow ever more complex each day. Diversity is not a choice – it is a reality that we live; a reality that makes it imperative that the prejudice and injustice of racial discrimination is purged from society,” Rankin said.

“Tolerance and passive acceptance of others is not enough. Racial discrimination is a breeding ground for tension and mistrust that can lead to conflict – a phenomenon we have witnessed, time and again, in history. Overcoming racism will lead to the evolution of a strong, dynamic and healthy society – the foundation for sustainable peace and development in the twenty-first century.”

He added that the first article of the Universal Declaration of Human Rights affirms that “all human beings are born free and equal in dignity and rights. The International Day for the Elimination of Racial Discrimination reminds us of our collective responsibility for promoting and protecting this ideal.”

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