Fate of Maldives-China FTA uncertain as Male loosens ties with Beijing

Fate of Maldives-China FTA uncertain as Male loosens ties with Beijing

by Editor February 8, 2019 

By P.K.Balachandran/South Asian Monitor

The Maldives-China Free Trade Agreement (MCFTA) which was signed amidst great controversy on December 8, 2017, is today in limbo as the new Maldivian government headed by Ibrahim Mohamed Solih is looking into all deals, including the MCFTA, entered into by the previous regime headed by strongman Abdulla Yameen.

Hamid Abdul Ghafoor of the ruling Maldivian Democratic Party (MDP) told the South Asian Monitor that the MCFTA, running into 1,000 pages, was pushed through parliament in 10 minutes, giving no time for the MPs to read, understand and comment on it.

“We are going into the MCFTA’s provisions and their implications for Maldives. What we suspect in all the deals made by the Yameen regime is a high level of corruption. The sovereign guarantees given to some of the big-ticket projects were two to three times the cost of the projects. We are investigating all that,” Ghafoor said.

Maldives begin installing surveillance radars by India

“The accounts of Yameen have been frozen but we suspect that much of his funds were stashed away abroad,” Ghafoor added.

MDP leader and former Maldivian President Mohamed Nasheed had told Reuters in November last year that Maldives could cancel the FTA with China.

“The trade imbalance between China and the Maldives is so huge that nobody would think of an FTA between such parties. China is not buying anything from us. It is a one-way treaty,” Nasheed said.

As per Maldives’ customs data, between January to August 2018, the country imported from China $342-million worth of products, while its exports were just $265,270.

In contrast to India, Maldives imported $194-million worth of goods and exported $1.8-million worth of products, including scrap metal such as copper, aluminum and steel.

India recently increased its aid to the Maldives four-fold. In India’s annual budget for 2019-2020, MVR 5.5 billion ($361 million) has been allocated as aid for the Maldives. This is 460 percent more than what was allotted in 2018. The allocation was MVR 1.2 billion ($78.8 million) in 2018.

When the MCFTA was signed in 2017, the Abdulla Yameen government said that it would help diversify the $3.9 billion Maldivian economy and boost fisheries exports.

Read Also: Maldives asks China to reduce debt repayments linked to scandals

The Maldivian fisheries sector was in a critical state following the European Union’s refusal to renew a tax concession on them in 2014. The opening up of the huge Chinese fish market was touted as a cure for the sickness of the sector.

But critics said that an increase in fish exports to China would not significantly help narrow the huge trade gap. The FTA would also have opened up services such as finance, healthcare and tourism to China and driven out local professionals and entrepreneurs.

Reciprocity enjoined in the deal would be only on paper, the critics pointed out.

Debt and corruption main issues

However, the ruling MDP is looking at the MCFTA and other deals from the perspective of corruption which was said be rampant under Yameen.

Ghafoor said that the new administration would not cancel any on-going China-funded project but would nevertheless go into the deals to see if there were under-the-counter payments that Chinese companies might have made to Yameen and his cronies.

When he assumed office in November 2018, Ibrahim Mohamed Solih had declared that the Maldives’ coffers had been “looted” and warned that the country was in financial difficulty after taking huge loans from China.

“It is presently believed that the debt to China is in the region of $3 billion. The question is how would Maldives repay?” Ghafoor asked.

“Further, the real extent of the debt to China is not known because many projects were not officially accounted for by the Yameen government. This indicates that at the root of the huge debt is another equally important problem, corruption. This is being investigated,” Ghafoor said.

He gave some examples of projects in the private sector which were mysteriously abandoned after Yameen went out of power in November 2018.

Politics delays investigations

However, progress in investigations into the Sino-Maldivian FTA and other projects are not proceeding as quickly and as desired because of the upcoming parliamentary elections on April 6, 2019.

“We are not even discussing China any more. Our politicians and the people are discussing political prospects of the coming elections,” Ghafoor said.

The coalition which ousted Yameen from power in the September 2018 presidential election has virtually broken up. The MDP has put up candidates for all the 87 seats in parliament called majlis.

“Coalitions have not worked in the Maldives. They have always broken up. We are contesting all the seats in the hope of getting a comfortable majority,” Ghafoor said.

India trying to replace China

The Chinese big-ticket projects are proceeding without hitch, despite the investigations, but the Solih-led government’s relations with Beijing is lukewarm at best.

The Solih government has, to date, said nothing against China. But it is wooing, and is being wooed by, India. Apart from attending Solih’s inauguration, Indian Prime Minister Narendra Modi invited him to visit India. Solih’s first ever visit as president was to New Delhi.

Further, Maldivian Defence Minister Mariya Ahmed Didi and defence forces chief, Maj Gen Abdulla Shamaal had talks with Indian Defence Minister Nirmala Sitharaman in New Delhi.

Maj Gen Shamaal told the Indian media that 10 radars would be installed in the Indian Ocean archipelago.

“When the radars are installed and connected via a network, the monitoring of the Maldivian economic zone would become more effective”, Gen Shamaal said.

Mariya Didi told the Indian media that India has the military power to take over the Maldives but it would not do so because “India is there to help us. We share the same interests”.

Earlier, when Yameen was in power, the issue of stationing two Indian navy helicopters with Indian crew ruffled feathers in both the countries.

The Yameen government felt that the choppers and their crew were indulging in espionage in a country seen by New Delhi as being a base for China.

The Indians maintained that the choppers were there following a government-to-government agreement and were playing a useful humanitarian role by rescuing those stranded in mid-sea and ferrying patients in medical emergency.

Since the change of government in Male, the choppers’ issue has died out. Mariya Didi appreciated the work of the choppers during her media interactions.

It appears from Didi’s remarks that the Solih government is not taking up with India Yameen’s demand to replace the choppers with a fixed wing Dornier surveillance aircraft, which, according to Yameen, would be more useful given the treacherous weather conditions over the Maldivian seas. India was cold when Yameen made a pitch for a Dornier and is perhaps not keen on it even now.

Yameen camp’s views

A top former Maldivian official close to Yameen said that the Solih government will, within the next five or six months, be forced to mend fences with China due to economic compulsions.

“If matters do not improve and if the Maldivian regime is seen to be dancing to India’s tune, Beijing could ask its citizens not to visit the Maldives as tourists. In a country like China, no Chinese would dare defy such a diktat. And if the Chinese do not come in the numbers they are doing now, the Maldivian tourism industry will crash. The bulk of tourists are Chinese. Although there has been no fall in the arrival of Western tourists, there has been no increase either. Our tourism industry is heavily dependent on arrivals from China and will continue to be so in the coming years. China could well exploit the chink in the Maldivian armor,” the official, who preferred anonymity, said.(The featured image at the top shows the Maldivian Foreign Minister Abdulla Shahid witht the Indian and Chinese envoys in Male after assuming charge).

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