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China’s debt dogs Maldives ” bridge to prosperity ”



Airport bridge in Male, built with Chinese investmentImage copyright
Anbarasan Ethirajan / BBC

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Before the bridge, people had to travel to the capital by boat

For years, Aminat Waheeda drove his taxi along the narrow lanes and congested roads of the capital of the Maldives looking for passengers. The most lucrative prices ̵

1; arrival at the airport – were out of reach.

The airport serving Male is on another island and a speedboat was needed to get between the two.

In 2018, it all changed, just like Mrs. Waheeda’s life. And the single mother of two teenagers has China to thank.

A 2.1 km long four-lane bridge built with $ 200 million. From £ Beijing means that Male’s taxi drivers can now pick up passengers right from the airport entrance.

“After the bridge was built, transportation became easy for everyone,” she says. “[It] has helped taxi drivers like me make more money. ”

In fact, her income doubles.

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Anbarasan Ethirajan / BBC

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Amina Waheeda and other taxi drivers were unable to pick up fares at the airport

The bridge, the first built between any islands in the Maldivian archipelago, has also led to a boom in new real estate and commercial developments on the island of Hulumale, where the airport is located, easing the traffic congestion in the capital for its 140,000 inhabitants.

Chinese infrastructure projects in developing countries have been criticized, but the Sinamale Bridge – or China-Maldives Friendship Bridge as it is also known – could be seen as a real success.

However, the current Maldives government does not see it that way. It is concerned about how much money this small, tourist-dependent nation now owes China.

The bridge was one of several major projects built under Abdullah Yameen, a pro-China president elected in 2013. He wanted to kickstart the economy and borrowed hundreds of millions of dollars from China to do so.

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Getty Images

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Chinese President Xi Jinping (left) pictured with former Maldives President Abdulla Yameen

At the time, Chinese President Xi Jinping was embarking on his magnificent “Belt and Road Initiative” to build road, rail and sea connections between China and the rest of Asia and far beyond.

Yameen’s term was also marked by accusations of human rights violations, which he denies. Many opposition politicians, including former President Mohamed Nasheed, were imprisoned.

But in September 2018, weeks after the bridge opened, Yameen suffered a surprise election defeat for his rivals, the Maldivian Democratic Party, with MDP Ibrahim Solih as president.

The change of guard also enabled Mr Nasheed to return and resume politics.

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Anbarasan Ethirajan / BBC

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Chinese money has led to a boom in new real estate and commercial developments in Hulumale

The new government soon began to examine the nation’s economy. What they found shocked them.

“That [Chinese debt] bill was 3.1 billion. dollars, “said Mr Nasheed, now Speaker of Parliament. The speech included government loans, money given to state-owned enterprises and private sector loans guaranteed by the Maldivian government.

He is worried that his country went into a debt trap.

“Can these assets generate sufficient revenue to repay the debt? The business plan for none of these projects has any indication that it will be able to repay the loan.”

He claims that the cost of projects was inflated and the debt on paper is far greater than the money actually received – which he says was only $ 1.1 billion, although he has not released documents to back up his sums.

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Getty Images

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Mohamed Nasheed is worried that the country borrowed too much money

Former Maldivian officials and Chinese officials point to his lack of detailed accounts. They put the figure Male owes China between $ 1.1 billion. And $ 1.4 billion. – still a huge sum for the islands.

The Maldives’ GDP is around $ 4.9 billion, and if you look at Mr Nashed’s figures, the debt is more than half of the country’s annual economic output. If government revenues fall, it may be difficult to repay the loan by 2022-23.

If the Maldives default, Mr Nasheed is worried that his country could suffer the same fate as nearby Sri Lanka – it owes billions of dollars to China on loans for reconstruction after years of civil war.

Among the projects, the Sri Lankan government spent almost $ 1.5 billion. On building a port in Hambantota. But within a few years, the port proved financially useless, and Colombo defaulted on its loan commitment.

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After the debt was restructured, a Chinese state-owned company acquired a 70% stake in the port on a 99-year lease in 2017. In addition, Sri Lanka also agreed to give 15,000 hectares around the port to China to build an economic zone.

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The port of Hambantota in Sri Lanka was financed by Chinese money

For China, the port is a valuable strategic asset overlooking one of the busiest shipping routes in the Indian Ocean. The port is also located a few hundred kilometers off the south coast of China’s rival, India.

Last year, US Secretary of State Mike Pompeo slammed China for what he described as “corrupt infrastructure deals in exchange for political influence” and the use of “bribery-driven diplomacy with debt traps”.

Beijing dismissed its comments as “irresponsible”.

In a rare BBC interview, Chinese Ambassador to Male Zhang Lizhong also dismissed allegations that the Maldives faced a debt trap as “a fiction”.

“China never makes further demands on the Maldivian side or any other developing country that they do not want to accept or against their will.”

Sir. Zhang says Mr Nashed’s $ 3 billion debt Debt is “very exaggerated”.

The Maldives is famous as a picture-perfect tourist destination – but the archipelago is also strategically located with islands scattered across the northern Indian Ocean. Tens of thousands of oil tankers and ships cross the route.

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Getty Images

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The Maldives’ economy is heavily dependent on the tourism industry

India and China have been fighting for influence in the region for years.

Some argue that some of the major ticketing projects, such as the expansion of the airport built with Chinese loans during Mr Yameen’s tenure, have helped increase tourist arrivals to the Maldives. They point out that it was difficult to get the money for the projects from other international actors.

“I think at the time there was no other option,” said Ali Hashim, governor of the Maldivian monetary authority, the islands’ central bank that regulates its financial sector.

He points out “other countries in the region as well as distant countries [countries] was very reluctant to lend to the government because the institutions that controlled the whole process were slowly compromised “.

The projects have increased tourist revenues in the country – last year they reached a record 1.7 million and earned more than $ 2 billion.

One of the main reasons for growing tourism is that successive Maldivian governments have encouraged investment in new islands.

The rules for foreign investment were relaxed to build more resorts and hotels. Hundreds of millions of dollars flowed in from Indian, Thai and Chinese investors.

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Anbarasan Ethirajan / BBC

Caption

Zhang Lizhong says claims of a “debt trap” are unfounded

Sir. Nasheed says he is concerned about Chinese investment in several islands, where resorts and hotels are being built that have both Maldivian and Chinese partners.

“It is very easy to see that these Maldivian partners do not have the necessary funding to be able to be a partner in such a venture. So the Chinese partners would buy it out in no time. I can see the islands go to them very quickly, ”says Mr Nasheed.

But Ambassador Zhang denies this, arguing that the investment is purely commercial.

“Sir. Speaker may not get the right information, ”he says. “We do not make any preconditions for the loans. It does not happen and will not happen.”

Former President Abdullah Yameen’s People’s National Congress is also intimidating Mr Nashed’s accusations, calling them “unfounded fearlessness”.

“Not a single island was given to the Chinese,” said party vice president Mohammad Hussain Shareef.

Late last year, Yameen was sentenced to five years in prison for money laundering. His party described it as a political vendetta.

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The fear of debt is not limited to the Maldives. Other countries in Asia have also reviewed mega projects funded under China’s Belt and Road Initiative.

Last year, following a change of government, Malaysia renegotiated a Chinese-funded railway project, lowering costs by a third to $ 11 billion.

In 2018, Myanmar underwent a multi-billion-dollar Chinese-funded port project and scaled it down to three-quarters of its original cost, fearing the loan could not be repaid.

The Maldives is not Malaysia or Myanmar and its bargaining power is limited.

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Media textWhat is China’s one belt, a road?

It is heavily dependent on tourism, which has been hit hard by the coronavirus outbreak. Foreign tourist arrivals were down 55% at the end of June. Estimates suggest the country could lose more than $ 700 million, more than a third of its tourist revenue, this year if the pandemic continues.

Male officials say Beijing has agreed to partially suspend debt repayment due to the pandemic.

Yet it is unknown economic territory for the Maldives, who must hope that its borrowing has not pledged its future.


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