After build­ing spree, just how much does the Mal­dives owe China?

Stabroek News Sunday - - WORLD NEWS -

MALE, (Reuters) - One week after tak­ing power, the new govern­ment of the Mal­dives says it has no idea how much it owes China, which has led a con­struc­tion spree in the tiny In­dian Ocean na­tion, but fears the debts run up in the past five years could be un­sus­tain­able.

Mo­hamed Nasheed, a for­mer pres­i­dent now serv­ing as ad­vi­sor to new Pres­i­dent Mo­hamed Ibrahim Solih, said that the Chi­nese am­bas­sador to the Mal­dives, Zhang Lizhong, handed the govern­ment an in­voice for $3.2 bil­lion - equiv­a­lent to around $8,000 for ev­ery in­hab­i­tant of the ar­chi­pel­ago. China de­nies that, how­ever, and says the num­ber is closer to $1.5 bil­lion.

“It was an in­voice. It just had a fig­ure, $3.2 bil­lion. It was shock­ing,” said Nasheed. “It wasn’t just a con­ver­sa­tion, it was a writ­ten note handed over, it was clear, you owe us this much.”

Nasheed said Zhang gave Solih the note at a meet­ing on Oct. 6, days after his stun­ning elec­tion vic­tory over for­mer Pres­i­dent Ab­dulla Yameen. He did not give fur­ther de­tails of ex­actly how the note was worded.

Asked about Nasheed’s com­ments, China’s For­eign Min­istry said that its am­bas­sador in the Mal­dives had re­jected “this un­truth” in state­ments to lo­cal me­dia, re­fer­ring to an in­ter­view with news web­site Avas in which Zhang was quoted as say­ing re­ports of debt of around $3 bil­lion were “deeply ex­ag­ger­ated”.

China has un­der­writ­ten mil­lions of dol­lars in loans for in­fra­struc­ture in the Mal­dives, lo­cated along its busy ship­ping route to the Mid­dle East.

But the un­prece­dented build­ing boom in the is­land chain of around 400,000 peo­ple - known for its white sand beaches and lu­mi­nous cyan wa­ter - stoked fears it was load­ing up on debt and prompted a stri­dent op­po­si­tion cam­paign that helped Solih de­feat Yameen in an elec­tion in Septem­ber.

CON­FLICT­ING FIG­URES

After tak­ing of­fice at the week­end, Solih’s ad­min­is­tra­tion has said the coun­try’s fi­nances are in worse shape than ex­pected, and that it will take weeks or months to un­tan­gle de­tails of all the deals struck with Chi­nese firms.

“We are at a loss to un­der­stand how much we re­ally owe to China,” said Nasheed.

“Di­rect debt, or di­rect bi­lat­eral govern­ment-to-govern­ment debt is one thing, but there is on top of that sov­er­eign guar­an­tees for the pri­vate sec­tor. And there is also on top of that our state owned en­ter­prises who have gone into debt.”

Yameen could not be reached for com­ment. But he said dur­ing the cam­paign that more work had oc­curred over the last few years than at any point in the past, and for that he had taken on debt.

“Years of de­vel­op­ment have come dur­ing a short pe­riod of four or five years. But if we didn’t take on debt as I said, and waited to do it with the in­come the Mal­dives earns this wouldn’t have been pos­si­ble,” he said.

In the Avas in­ter­view, Zhang said the Mal­dives’ debt to China was $600 mil­lion to con­struct a sea bridge link­ing the cap­i­tal Male with the air­port, ex­pand the air­port, and build res­i­den­tial tower blocks on land re­claimed from the sea. An­other $900 mil­lion had been ear­marked as com­mer­cial loans to some state owned com­pa­nies to fund projects from power to hous­ing, the am­bas­sador said, but much of that had not yet been is­sued.

That was broadly sup­ported by the gover­nor of the Mal­dives cen­tral bank in tes­ti­mony be­fore the par­lia­ment’s pub­lic finance com­mit­tee on Wed­nes­day, in which he es­ti­mated the coun­try’s li­a­bil­i­ties to China at $1.5 bil­lion.

Mal­dives Mon­e­tary Au­thor­ity’ Gover­nor Ahmed Naseer, who was ap­pointed by the pre­vi­ous govern­ment, said he be­lieved to­tal of govern­ment-to-govern­ment debt from China amounted to $600 mil­lion. The re­main­ing $900 mil­lion was an es­ti­mate of loans fi­nanced by Chi­nese banks with sov­er­eign guar­an­tees from the Mal­dives govern­ment, he said.

Nasheed said the Chi­nese am­bas­sador’s pub­lic state­ments were at vari­ance with what the Chi­nese side had con­veyed to Solih. The am­bas­sador had since re­quested a meet­ing with him, he said.

Mal­dives’ For­eign Min­is­ter Ab­dul­lah Shahid said on Thurs­day he planned to visit China soon to dis­cuss bi­lat­eral is­sues.

SOV­ER­EIGN GUAR­AN­TEES

An of­fi­cial who was in Solih’s tran­si­tion team and who joined the govern­ment this week said he too had been told about the Chi­nese note sub­mit­ted last month, and that the fig­ure may have swelled be­cause of sov­er­eign guar­an­tees that were given.

“We are try­ing to un­ravel this. It looks like lots of IOUs were is­sued, pieces of pa­per. We are try­ing to find out, how many and to whom,” the of­fi­cial said, re­quest­ing anonymity be­cause of the sen­si­tiv­ity of the mat­ter.

With an­nual rev­enues of $1.5 bil­lion and an an­nual gross do­mes­tic prod­uct of around $3.9 bil­lion, it would be hard for the Mal­dives to ser­vice such a high debt, an­other in­com­ing of­fi­cial, who is re­view­ing the li­a­bil­i­ties of staterun en­ter­prises, said.

“We can­not go into de­fault. We will face a de­fault sit­u­a­tion if we agree the debt to be what the sov­er­eign guar­an­tees are say­ing,” the of­fi­cial said, ask­ing not to be named be­cause he was not au­tho­rised to speak to re­porters.

Signs of the in­fra­struc­ture boom are every­where in Male, from where tourists are whisked off in high speed boats to lux­ury re­sorts built on atolls.

Yameen also leased Chi­nese de­vel­op­ers an un­spec­i­fied num­ber of is­lands to build re­sorts for tourists, a fifth of whom are Chi­nese, in a dra­matic ex­pan­sion of ties since Bei­jing opened its em­bassy in the Mal­dives eight years ago.

“We would like to re­it­er­ate, mu­tu­ally ben­e­fi­cial co­op­er­a­tion be­tween China and the Mal­dives takes place on the ba­sis of equal­ity and mu­tual ben­e­fit, and has al­ready achieved re­sults that are plain for all to see, and has been wel­comed by the peo­ple of the Mal­dives,” the For­eign Min­istry said in a state­ment sent to Reuters.

“We be­lieve that un­der the lead­er­ship of the new Mal­dives govern­ment, China-Mal­dives friendly co­op­er­a­tion will con­tinue to ad­vance, and will keep mak­ing new achieve­ments.”

Mo­hamed Nasheed

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