Maldivian Govt justifies fast tracking FTA with China in the face opposition flak

Maldivian Govt justifies fast tracking FTA with China in the face opposition flak

Colombo, November 30 ( The Maldivian government has justified fast tracking a Free Trade Agreement (FTA) with China in the face of heavy flak from the opposition Maldives Democratic Party (MDP).

Economic Development Minister Mohamed Saeed told the media on Wednesday after the FTA was approved by parliament, that the pact has opened the world’s biggest market for Maldivian fish and fish products at zero duty and described the pact as “historic”.

The country’s principal exports are fish and fish products. In 2016, the grand total value of fish exports was US$ 121,544, 413.

Saeed insisted that the FTA has been designed to favor the Maldives more than China. Over 400 Maldivian products will stand to benefit, he added.

While details are not available, as the opposition has alleged, the Maldives had submitted two main points for the deal. The first was exemption of tax from all food and seafood products exported from the archipelago to China, while the second called for tax exemption for fish and seafood containing products that are prepared using 30 to 40 percent resources from the Maldives.

As an example of the latter, Minister Saeed cited the shrimp brought in from India and Sri Lanka and prepared in the Maldives to be exported to China.

“The reason for all this work is that with the change of the Maldives’ development status to a middle income nation, we don’t receive the allowances we used to get before for the GSP (Gross State Product). And so, President Abdulla Yameen gave special priority to looking into ways to sell fish caught by local fishermen to foreign markets with more ease,” Saeed explained in an earlier interaction with the media.

Noting that China exports electronics and materials for construction and resorts to the Maldives, the Minister stated that the FTA will boost those fields in the Maldives’ economy.

But according to MDP leader Mohamed Nasheed,  the pact will only lead to an increase in the already yawning trade gap between the Maldives and China.

In 2016, China exported to the Maldives, goods valued at US$ 285, 640,637. But  the Maldives’ total exports to the world was only US$ 139, 592, 790.

According to Nasheed, 70 percent of Maldives’ foreign debt is owed to China, on which  interest alone “is more than 20% of the Maldivian budget.”

China’s Leads in FDI in Maldives

However, the fact that China is the biggest investor in the Maldives makes up for this trade deficit. Chinese investments in the Maldives account for US$ 2.37 billion in a grand total FDI of US$ 3.22 billion.

Dr. Abdulla Khaleel, a ruling Progressive Party of the Maldives (PPM) MP, said in article in Avas that criticism of China’s investment in the Maldives and other Third World countries  is not well founded as it is based on the belief that Chinese investments are, by  definition bad, in sharp contrast to Western  investments. Criticism of Chinese aid or investment is part of the general anti-Chinese rhetoric, he contends.

“This scare mongering has found fertile ground amongst conspiracy theorists who see Chinese investments in the Maldives as a rebuke to India. This is deeply simplistic. India has always been the primary partner of the Maldives.”

“The India-Maldives bilateral relationship, ranging from security to health to trade, was reaffirmed this year. President Abdulla Yameen travelled to India in April followed by the Foreign Minister’s visit in August. Relations remain open, cordial and fruitful. Cooperation on security, intelligence and trade continues.  Brand new roads are being built on Hulhumale’ by an Indian construction company, “ Khaleel points out.

India’s exports to the Maldives are just a wee bit lower than China’s. In 2016,  Indian exports to the Maldives were valued at US$ 275,665, 477, while China’s were valued at US$ 285, 640, 637.

“There has never been any nefarious activity related to the increase in Chinese investment in the Maldives. Yes, Male’ is a key port in China’s Maritime Silk Road project. But if their interest in the strategic location of the Maldives leads to much-needed infrastructure investment, why is this negative for the Maldives?,” Khaleel wonders.

“It is essential that the Maldives improves its infrastructure, especially in the tourist sector. Tourism is the biggest contributor to the Maldivian economy. Much of the required infrastructure is indeed being built or financed by Chinese companies. As an example one can give the project to build a bridge to connect Male’ and its international airport. China’s EXIM bank has also provided financing for other key projects,” he says.

Opposition’s Criticism   

However, the opposition MDP’s grouse is that the FTA was rushed through parliament without given enough time for the MPs to read and analyze the 1000 page tome.

“The Speaker of parliament had called for an emergency sitting, to pass the FTA with China. The Agreement was sent to the Parliamentary Oversight Committee on National Security Affairs within 3 minutes of submission to the floor. The committee vetting the agreement took less than 10 minutes to give its approval,” the MDP said in a press release on Wednesday.

“The committee was conducted against parliamentary norms, with deliberations closed off for the public and to the media. Despite requests, the MPs were not given access to the document in order to review it before passing. The government allowed for less than an hour for the entire parliamentary process to approve the 1000 plus page document.”

“The agreement contained a number of technical details that should have been thoroughly reviewed, and required consultation with the business community.”

“Furthermore , it  was approved with just 30 votes, in another late evening session of  parliament. The Constitution requires 43 MPs to be attending to pass legislation on this. The government thus does not have the required votes,” the MDP said.

The opposition party called upon the government to suspend the implementation of the FTA until a proper feasibility study is conducted to ensure that it is in the best interest of the Maldives economically “and also to ensure that the agreement does not place Maldives in a geo-politically vulnerable position.”