Business Diplomacy Opinion Politics

Maldives walks into China’s embrace


The most significant development during the recent visit of Maldivian President Abdulla Yameen Abdul Gayoom to China was the signing of a Free Trade Agreement between the two nations. Though this development does not give any special strategic advantage to China in the immediate future, it reinforces the theory that Maldives is on its way to becoming China’s strategic asset in the Indian Ocean Region (IOR). It left many people wondering, why a small country like the Maldives, with a small economy, has given such an unfair advantage to a global economic powerhouse.

Maldives has, however, tried to justify its FTA with China, asserting that it is purely commercial and has no political element to it. It claims that unlike Sri Lanka, which had taken loans from China to buy weapons to fight Tamil insurgency on the island, Maldives has taken loans to develop vital infrastructure needed for its economic development. This, it argues, will develop the capacity of the state to repay the loans. Moreover, these loans have been obtained with a reasonable grace period and at low interest rate. Hence, the Maldivian government argues that it is unlikely to meet the same fate as Sri Lanka.

The optimism of the Maldivian government may well prove to be wrong. When Sri Lanka opted for a loan for the Hambantota port project and to build the airport there, it, too, thought the projects would bring economic prosperity. Sri Lanka fell into a debt trap, and Hambantota port into Chinese hands.

Some other explanations have also been offered for Maldives’s FTA with China. Mohammed Shainee, the Maldivian fisheries and agriculture minister, argues that Male had to look to China because the European Union stopped its GSP Plus concessional duty facility to it when Male became a middle-income country. The EU diplomats, however, are of the view that the facility was not extended to Maldivian fish exports because the country failed to comply with international conventions on freedom of religion.

It has also been suggested that Maldives made the FTA decision after India changed its policy towards it and started openly engaging with the Maldivian opposition and former president Mohammed Nasheed.

Neither explanation is true. Maldives had changed its foreign policy very early under Yameen. Yameen knows that he is virtually leading an illegal government on the archipelago as his alliance partners are no longer with him, and he does not enjoy the support of a majority of the Maldivian people. Hence, to get international political and economic support, he has decisively tilted in favour of China and Saudi Arabia. To please the latter, he has joined a Saudi-led military coalition. To please the Chinese, he has signed the free trade agreement, while giving lip service to the cause of regional security.

Maldivian opposition parties also refuse to buy the government’s argument and think that the deal was signed in undue haste, without sufficient parliamentary scrutiny. They fear that it would take the country further into a Chinese debt trap and bring about increasing instability in the Indian Ocean Region. Former president Mohammed Nasheed says that more than 70% of the Maldivian foreign debt is owed to China and nearly the 20% of the island nation’s budget goes towards paying interest on this debt. This gives Beijing leverage over the Maldives, undermining its sovereignty and independence.

While Yameen claims that he follows a ‘India first’ foreign policy, his actions indicate just the opposite. After assuming power, the first thing he did was to cancel the GMR contract for the Male airport. That contract subsequently went to a Chinese company. The most important decision taken by him was to sell some uninhabited Maldivian islands. When the Maldivian opposition criticised him for it, he claimed that it was for the economic development of the country. But the conditions attached to the decision made it clear that it was only to favour the Chinese.

The China-Maldives FTA is not an overnight development. Actually, Maldives had agreed to it when Chinese President Xi Jinping visited the archipelago in 2014. That was the first visit of a Chinese president to the country and its purpose was to garner Maldivian support for China’s 21st century Maritime Silk Road (MSR), which is part of the Chinese Belt and Road Initiative. Xi Jinping’s visit was completely successful in that effort and the Maldives not only fully embraced Maritime Silk Road, it also announced that it was negotiating a free trade deal with China. Maldives has now delivered on its promise by signing the FTA, despite the concerns that it would push Maldives into a Chinese debt trap. Probably, Maldives like some other South Asian nations, also thinks that it is a small price to pay for balancing against India.

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