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The Maldives-India Relationship: From Frying Pan to Fire?

Background

The surprise winner of the Maldives’s recent general election, President-elect Ibrahim Mohamed Solih, was sworn into office on 17 November. Soon after that, he declared that the country’s coffers had been looted under the previous administration and added that it was in dire financial straits. He said: ‘As I take over the presidency, the state’s financial situation is precarious. The damage was done due to projects conducted only for political reasons, and at a loss, [is] huge.’

Mr Solih appeared to be in no doubt that the country’s financial crisis was brought about by the previous administration’s overly-close relationship with China. The implication is that China, as it has done in Sri Lanka, has used financial loans to manipulate the Maldives into a position of indebtedness to Beijing.

Mr Solih elaborated on that point, noting: ‘The state coffers have lost several billions of rufiyaa due to embezzlement and corruption conducted at different levels of the government.’ He claimed that it was because of that corruption that he could not be clear just how much the state had lost. His transition team declared that it would conduct a forensic audit of the agreements with Chines state firms for infrastructure projects entered into by the previous Yameen Administration. Those projects included: the expansion of the country’s international airport, a mile-long sea bridge connecting the airport to the capital and massive housing projects on reclaimed islands; none of which this country of only around 400 thousand citizens, could afford.

Comment

The source of the confusion stems, according to Mohamed Nasheed, a former president who now serves as an advisor to President Solih, from an invoice that the Chinese ambassador, Zhang Lizhong, handed to the government. As Mr Nasheed put it, ‘It was an invoice. It just had a figure, $3.2 billion. It was shocking. … [It] was a written note handed over, it was clear, you owe us this much.’ If the figure of US$3.2 billion ($4.35 billion) is correct, it would mean that every Maldivian citizen now owes China around eight thousand US dollars (around $10,870).

China, unsurprisingly, claimed that the figure of US$3.2 billion was “deeply exaggerated” and said that the debt is closer to US$1.5 billion. Ex-President Yameen himself was unavailable for comment but had previously noted during the election campaign that: ‘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.’

India, which had seen its relationship with the Maldives nose-dive under the Yameen presidency, lost no time in trying to restore the relationship. Prime Minister Modi attended Mr Solih’s swearing-in ceremony. It was reported soon after his visit that India had agreed to provide the Maldives with up to US$1 billion ($1.35 billion) in low-interest loans, but, significantly, only if Malé agreed to distance itself from China. India has reportedly made its soft-loan offer to Malé: “in exchange for stronger security ties, including the permanent deployment of Indian military personnel”. It is difficult to see China standing back and allowing that to happen, however.

The Maldives, which consist of nearly 1200 islands spread over an area of more than 90,000 square kilometres, span critical shipping lanes over which India and China both seek tacit control. These shipping lanes convey energy products to both countries from the Middle East and Africa and manufactured goods and other products from their factories to markets in the Middle East, Africa and points beyond. Control over those sea lanes could provide either country with a decided advantage over the other in times of conflict, or even peace. Establishing a good relationship with the Maldives, therefore, would allow either country to establish a base from which it could launch its attempts to control those lanes.

The Maldives denied that India had placed any conditions on extending the loan. Denying that the Maldives would permit the establishment of foreign military bases, the Minister for Foreign Affairs, Abdulla Shahid, tweeted:

Categorically refute media reports alleging that government is planning to allow the establishment of an Indian military base in the Maldives in exchange for financial assistance or other material benefits. It is baseless and aimed at discrediting the government as it starts to rebuild good relations with its neighbours and the rest of the international community.

Whether India did place conditions on its loan to the Maldives or not, one thing is certain: having learned its lesson from becoming overly-indebted to one country, Malé must now ask, can it allow itself to fall into the same trap as it did before? India does not normally use China’s “predatory economics” entrapment policy, but Mr Solih can ill afford to take that risk. There is more than his reputation or success in office at stake. He will need to be absolutely sure, therefore, that there are no strings attached to New Delhi’s loan.

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Source URL: Google News

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