Mal­dives

Dream­ing a Car­bon-free World

Southasia - - CONTENTS - By Muhammad Omar Iftikhar Muhammad Omar Iftikhar is a for­mer As­sis­tant Edi­tor at South Asia mag­a­zine. He writes on re­gional is­sues and so­cial ac­tivism.

The Mal­dives re­cently held its first In­ter­na­tional Re­new­able En­ergy In­vestors Con­fer­ence in as­so­ci­a­tion with the En­vi­ron­ment Min­istry and var­i­ous banks. At­tend­ing the con­fer­ence were of­fi­cial dig­ni­taries from the en­ergy sec­tor, who high­lighted how the con­fer­ence brought to­gether in­ter­na­tional in­vestors, pro­ject de­vel­op­ers and en­ergy com­pa­nies to ex­plore in­vest­ment op­por­tu­ni­ties in the coun­try’s re­new­able en­ergy sec­tor. More­over, the con­fer­ence dis­cussed the le­gal frame­work and the reg­u­la­tory process in line with cre­at­ing a long-term part­ner­ship with var­i­ous stake­hold­ers who could fi­nance and man­age re­new­able en­ergy projects in the Mal­dives.

The en­ergy cri­sis con­tin­ues to loom over the is­land na­tion and Pres­i­dent Mo­hammed Wa­heed Manik is mak­ing ef­forts to im­ple­ment re­new­able en­ergy projects across the coun­try to solve this dilemma. More­over, the Mal­di­vian govern­ment is am­bi­tious about de­vel­op­ing its re­new­able en­ergy sec­tor which will even­tu­ally fa­cil­i­tate the coun­try’s long-term plan to be­come a car­bon neu­tral coun­try by 2020.

In Novem­ber 2012, the coun­try launched the Sus­tain­able Re­new­able En­ergy In­vest­ment Plan to tackle the en­ergy cri­sis by find­ing av­enues to gen­er­ate al­ter­nate en­ergy and to con­serve the en­ergy that it was pro­duc­ing through con­ven­tional means. As one of the com­po­nents to pro­duce en­ergy was biomass, the pro­ject stake­hold­ers didn’t agree to the con­di­tions. Af­ter re­vis­ing the pro­ject and re­plac­ing the biomass com­po­nent with so­lar en­ergy, the coun­try re­launched the pro­ject as the Mal­dives Scal­ing Up Re­new­able En­ergy Pro­gram (SREP).

The Mal­dives in­tends to use the In­vest­ment Plan to trans­form and up­grade its en­ergy sec­tor by re­duc­ing its de­pen­dence on costly fos­sil fu­els for power gen­er­a­tion and to boost in­vest­ment from the pri­vate sec­tor. Al­though the coun­try has iden­ti­fied key projects to counter the en­ergy cri­sis, it seems as if ex­ter­nal and in­ter­nal fac­tors are hin­der­ing the Mal­dives in pur­su­ing its re­new­able en­ergy projects. An­a­lysts be­lieve that the on­go­ing po­lit­i­cal in­sta­bil­ity has dis­tanced for­eign in­vestors from the coun­try. The Mal­dives’ po­lit­i­cal cri­sis, which reached its cli­max with the res­ig­na­tion of for­mer presi- dent Mo­hammed Nasheed in 2012, has led the in­ter­na­tional com­mu­nity to lose con­fi­dence in the var­i­ous sec­tors of the is­land coun­try. Al­though the in­ter­na­tional com­mu­nity views the Mal­dives as mak­ing ef­forts to build its re­new­able en­ergy sec­tor un­der the cur­rent Pres­i­dent Mo­hammed Wa­heed’s govern­ment, the er­ratic na­ture of the coun­try’s pol­i­tics is hin­der­ing the Mal­dives’ longterm goals.

En­vi­ron­ment Min­is­ter of the Mal­dives, Dr. Mariyam Sha­keela, views that the need of the hour is to be­come less de­pen­dent on fos­sil fuel be­cause it leads to a cli­mate cri­sis. Is­lands com­pris­ing the Mal­dives have am­ple but un­der­used re­new­able en­ergy po­ten­tial, which the govern­ment should use to be­come a fos­sil fuel in­de­pen­dent coun­try. How­ever, present or past gov­ern­ments have not ex­plored the coun­try’s nat­u­ral re­sources, which sig­nal the govern­ment’s vac­il­la­tion to­wards curb­ing the en­ergy cri­sis.

The World Bank (WB) and the Asian De­vel­op­ment Bank (ADB) have pledged their sup­port to at­tract in­vest­ment in the Mal­dives’ re­new­able en­ergy sec­tor. In Oc­to­ber 2012, the En­ergy Au­thor­ity of the Mal­dives in­au­gu­rated the $138 mil­lion re­new­able en­ergy pro­ject to gen­er­ate 26 MW of elec­tric­ity. The World Bank, the Asian De­vel­op­ment Bank and banks from Ja­pan and Ger­many have funded the pro­ject, which is set to be com­pleted in five years. As planned, the pro­ject will reach nearly 50 is­lands of the Mal­dives. The Mal­di­vian govern­ment en­vi­sions run­ning ten is­lands solely on re­new­able en­ergy in the pro­ject’s ini­tial stages. Al­though the WB has been ex­tend­ing its sup­port, the Mal­di­vian govern­ment must re­al­ize that any as­sis­tance from the WB comes with strict reper­cus­sions and fail­ure to meet the WB’s de­mands might jeop­ar­dize the Mal­dives’ eco­nomic se­cu­rity.

A ma­jor rea­son pre­vent­ing for­eign in­vest­ment from en­ter­ing into the Mal­dives is the prob­lem of pay­ment guar­an­tees and the ques­tion of re­turns on in­vest­ment (ROI). An un­der­de­vel­oped coun­try, the Mal­dives is a risky busi­ness for for­eign in­vestors. Ac­cord­ing to sources, the govern­ment of Mal­dives has al­lo­cated US$5 mil­lion from the In­ter- national De­vel­op­ment As­so­ci­a­tion (IDA), which the WB will fi­nance and the amount will be lever­aged up to US$25 mil­lion. More­over, the World Bank will is­sue a se­cu­rity for this amount to pro­vide guar­an­tees to the in­vestors, guar­an­tee­ing fi­nances un­der the SREP in­vest­ment plan.

Al­though the guar­an­tee fa­cil­i­ties have re­duced the in­vestor’s con­cerns to some ex­tent, it will take time to com­pletely restore the con­fi­dence of in­ter­na­tional in­vestors. The Mal­dives needs the help of fi­nan­cial in­sti­tu­tions to de­velop its re­new­able en­ergy sec­tor and it seems as if the lo­cal banks are not will­ing to ren­der their sup­port. The coun­try can change this at­ti­tude by bring­ing po­lit­i­cal sta­bil­ity af­ter the Septem­ber 2013 elec­tions. Fur­ther­more, the re­cent po­lit­i­cal chaos be­tween the Mal­dives and In­dia over the GMR In­fra­struc­ture row is prob­a­bly why in­ter­na­tional in­vestors are find­ing it dif­fi­cult to trust the Mal­di­vian govern­ment. Pres­i­dent Mo­ham­mad Wa­heed’s govern­ment ter­mi­nated the $500 mil­lion con­tract awarded to In­dia’s GMR In­fra­struc­ture to build the Male In­ter­na­tional Air­port. In­dia is now seek­ing a com­pen­sa­tion of $1.4 bil­lion. With the Mal­dives be­com­ing con­tro­ver­sial in the eyes of In­dia, it seems as if the for­eign in­vestors will be­come ex­tra cau­tious be­fore mak­ing any deal with the is­land na­tion.

The Di­rec­tor of ADB, Yong­ping Zhai is ex­pected to fol­low an ex­ten­sive in­vest­ment strat­egy to trans­form the Mal­dives into a re­new­able en­ergy de­pen­dent coun­try and has ad­vised the Mal­di­vian govern­ment to pre­pare a work­able busi­ness model for the re­new­able en­ergy sec­tor. How­ever, the En­vi­ron­ment Min­istry of the Mal­dives op­poses this no­tion and wants to make the Mal­dives an oil de­pen­dent coun­try. This tus­sle, to the fear of many, might be­come a bur­den over the Mal­dives’ en­ergy plans and will pro­long the cri­sis.

It is also ex­pected that if Pres­i­dent Mo­ham­mad Wa­heed Has­san, from the Gaumee It­thi­haad Party is re-elected, then he might im­ple­ment strate­gies as­sist­ing the growth of the re­new­able en­ergy sec­tor, as much of the po­lit­i­cal tus­sle will also fade away by then. How the coun­try fol­lows a re­new­able en­ergy plan and cre­ates a fa­vor­able en­vi­ron­ment for in­ter­na­tional in­vest­ment is yet to be seen.

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