Maldives: ‘Currency-swap’ with India ahead of big Saudi, China deals
N Sathiya Moorthy www.orfonline.org 8 March 2017
Going on all cylinders on economic diplomacy, President Abdulla Yameen has combined an astronomically high $ 10-b agreement with Saudi Arabia even while laying the foundation work for constructing a second runway in the Male International Airport with Chinese help. Nearer home in the Indian Ocean Region, IOR, the Maldivian Government had earlier made a $ 100-m currency-swap arrangement with India in December, to cushion any possible forex crisis in the immediate future.
The Saudi agreement is for the multiple development of Faafu atoll “on the lines of French Riveria”, and is expected to be signed during the March visit of King Salman. Ruling out any sale of Maldivian territory as alleged by the Opposition MDP, Yameen said, “What is about to happen to Faafu atoll – if its result is positive – is something that would feature the Maldives on the world chart more boldly than anything else.”
The Faafu project would be undertaken under the SEZ law, and would be similar to “mixed development projects in French Riviera” – the Mediterranean coastline of France that includes the microstate of Monaco – and would involve “international sea sports, mixed development, residential high-class development, many tourist resorts, many multiple airports” and other industries”, the Maldives Independent quoted Yameen as saying.
The web journal quoted Yameen as suggesting that the “project would be awarded through the special economic zones policy, which offers regulatory and tax incentives for large-scale investments”. Moving away from the existing long-lease pattern, Parliament passed a special law in 2015, two years after Yameen came to power, facilitating freeholds for foreign investments upwards of $ 1 b. In this context, Yameen declared at “no one has to be concerned over not getting details of these projects, especially senior statesmen”.
Sop or strategy?
This is Salman’s first visit as the Saudi king and the second after the earlier one undertaken as Crown Prince not very long ago. During the current trip, aimed at investment-promotion, according to Saudi media reports, he would also be travelling to Indonesia, Malaysia, Japan – and yes, China. As is known, Maldives under Yameen has been moving closer to the two unlikely regional powers – Saudi Arabia, the seat of Islamic power, and the non-believer in communist China.
This is not also the first time that Maldives has considered freehold or long-lease for whole atolls. When MDP’s President Mohammed Nasheed was in power (2008-2012), China was known to have come up with such a proposal. In principle, the Nasheed Government was known not to be in agreement, but the early exit of him from the presidency in February 2012 ended it all.
The anticipated neighbourhood security concerns of India was said to be among the main causes for the Nasheed leadership not taking the Chinese proposal forward. Does it mean that bringing in Saudi Arabia, instead, if not ahead of China, may be Yameen’s way of silencing any pronounced criticism from India, and possibly the other, Sri Lankan, neighbour too? Criticising the Saudi entry, the MDP has cautioned, especially India, that it could facilitate the spread of Wahabbism in the region as a whole.
Just ahead of the King Salman visit, Yameen also inaugurated work on a $ 400-m second runway in the Male International Airport, after his Government had paid off Indian infrastructure major, GMR Group, $ 140-m in compensation for the cancellation of a 2010 construction-cum-concession contract. GMR was also reluctant to build a second runway. Yameen now said that unlike the GMR contract, where Maldivians’ money was given away to a foreign investor, his Government was “forming new capital for the benefit of the Maldivian people”.
As is known, China is already funding and building Maldives’ first major sea-bridge, connecting capital Male and the international airport island of Hulhule. The local media quoted Chinese Ambassador Wang Fukang that his nation looked at the sea-bridge project as a social service, and not a commercial venture. He also said that the two nations would take up other projects which were also agreed upon during Chinese President Xi Jinping’s 2014 Maldives visit.
Ironically, even while paying off GMR $ 140-m, the Yameen administration had obtained a $ 100-m from India as currency-swap facility. Technical details apart, in practical terms, it could be interpreted to mean that Maldives obtained credit or a credit-line from India, to pay an Indian creditor. Alternatively, it can be argued that Maldives needed to borrow money, Indian or others, pay creditors, and FDI of the Saudi/China kind made better economic sense, whatever be the impact on issues of sovereignty and regional security.
The last time the two nations were involved in currency-dealings of the kind, Maldives paid up public sector State Bank of India $ 50-m in credit dues at the height of the GMR row. Around the time, problems and harassment of Indian migrant workers in Maldives too blew up on the face of bilateral diplomacy – so did the domestic political problems of the atolls-nation, commencing as it had with Nasheed’s exit.
Ticking off Israel
Alongside the current developments on the economic diplomacy front, Yameen’s Maldives has also despatched Civil Service officials to Pakistan for training and skills-upgradation. Earlier, it had accepted anti-terror training for security personnel from the UK. In February 2017, the Maldivian National Defence Force (MNDF) underwent life-saving emergency medical training from the personnel of the US Pacific Command, in Male.
At the same time at the UNHRC session in Geneva, Maldivian Foreign Minister Mohammed Asim called upon Israel to withdraw from Palestine territory. It was in consistent with the Government policy under Yameen, tough earlier under Nasheed Maldives had tried taking the middle-ground, though not always successful.
Overseas, Yameen’s economic diplomacy, which was at the centre of his foreign policy that he had unveiled as President in January 2014, only two months after taking over office, has been one of reaching out in parts and holding out in parts. A lot will depend on how India reacts to his current strategy and tactic, be it in public or in private conversations with all stake-holders.
Nearer home, Yameen’s political agenda seems to be increasingly development-driven as was with his estranged half-brother and predecessor Maumoon Abdul Gayoom. His camp seems to have hoped and concluded that this alone would ensure his re-election in November 2018. A clearer picture may emerge in the nation-wide local council polls, now re-scheduled for April 2017.
(The writer is a Senior Fellow at Observer Research Foundation, Chennai Chapter)