Debt dog ‘Maldives’ ‘bridge of prosperity’

Debt dog 'Maldives' 'bridge of prosperity'

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Umberson Ethirajan / BBC

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

For years, Aminat Waheeda drove her taxi through the narrow streets and congested streets of the Maldivian capital in search of passengers. The most affordable fares – airport arrivals – were out of reach.

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

In 2018, that all changed, like Mrs. Waheeda’s life. And China is to thank the only mother of two teenagers.

A 2.1-kilometer (1.3-mile), four-lane bridge built 200 8 (148m) from Beijing means male taxi drivers can now pick up passengers at the airport entrance.

“Once the bridge was built, transportation became easier for everyone,” she says. “[It] Taxi drivers like me have helped make more money. ”

In fact, his income has doubled.

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Umberson Ethirajan / BBC

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Amina Waheeda and other taxi drivers were unable to collect fares at the airport.

Built between any of the islands in the Maldivian island, the bridge is making it easier for crowds in the capital to replace new property and commercial development on the site of the island where the airport is located.

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

However, the current Maldivian government does not see it that way. It is worrying how much money this small, tourism-dependent country now owes to China.

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

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Chinese President Xi Jinping (left) poses with former Maldivian President Abdulla Yameen

At the time, Chinese President Xi Jinping was pursuing his ambitious “Belt and Road Initiative” to build road, rail and sea links between China and the rest of Asia, and beyond.

Mr Yamin’s tenure has been marred by allegations of human rights abuses, which he denies. Several opposition politicians, including former President Mohammad Nasheed, were jailed.

But in September 2018, weeks after the bridge opened, Mr. Yamin His opponents suffered a sudden election defeat, Becoming the president of the Maldivian Democratic Party, MDP’s Ibrahim Solih.

The change of guard enabled Mr. Nasheed to re-enter and re-enter politics.

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Umberson Ethirajan / BBC

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The Chinese currency has accelerated new property and business growth in the country

The new government soon began to look at the country’s finances. They were amazed at what they found.

“The [Chinese debt] The bill was $ 3.1bn, “Mr. Nasheed, now Speaker of Parliament, told me. These figures include government-to-government loans, money given to state-owned enterprises, and private sector loans guaranteed by the Maldivian government.

He is worried that his country has fallen into a debt trap.

“Can these assets generate enough income to repay the loan? There is no indication in any of these project business plans that he will be able to repay the loan.”

He argued that the cost of the projects had skyrocketed and that the debt on paper far exceeded the amount actually received – which he says was only 1. 1.1 billion, although he has not released documents to recover his money.

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Mohammad Nasheed is worried that the country has borrowed too much money

Former Maldivian officials and Chinese officials point to his lack of detailed accounting. He found men’s China outstanding between 1.1bn and 4 1.4bn – a huge amount still for the islands.

The Maldives’ GDP is around 4.9bn and if you look at Mr. Nasheed’s figures, the debt is more than half of the country’s annual economic output. If government revenues fall, it could struggle to repay the debt by 2022-23.

If the Maldives defaults, Mr Nasheed worries that his country could face a situation similar to that of nearby Sri Lanka – with billions of dollars owed by China after years of borrowing to rebuild after years of civil war. .

Among the projects, the Sri Lankan government has spent about 1.5 1.5 billion on building a port in Hambantota. But within a few years, the port proved financially incapacitated and Colombo rejected its debt commitment.

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After debt restructuring, a Chinese state-run enterprise Achieved 70% stake in the port on a 99-year lease in 2017. In addition, Sri Lanka agreed to give 15,000 acres around the port to China to build an economic zone.

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

For China, the port is a valuable strategic asset in view of the busiest ships in the Indian Ocean. The port is also a few hundred kilometers off the south coast of anti-China India.

Last year, the US Secretary of State Mike Pompeo invades China He described it as a “corrupt infrastructure deal in exchange for political influence” and used “diplomacy in the debt trap of bribery”.

Beijing called his comments “irresponsible.”

A rare BBC interview. In May, Zhang Lijong, China’s ambassador to Male, also dismissed allegations that the Maldives was facing a debt trap as “a myth”.

“China never imposes additional requirements on the Maldives or any other developing country, which they do not want to accept or do against their will.”

Mr Zhang called Nasheed’s 3 billion debt “too exaggerated”.

The Maldives is known as a picture-perfect tourist destination – but the island is also strategically located, along the islands across the North Indian Ocean. Thousands of oil tankers and ships cross the road.

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The Maldivian economy is heavily dependent on the tourism industry

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

Some argue that some big-ticket infrastructure projects, such as the expansion of the airport built with Chinese loans when Yamin came to power, have helped boost passenger arrivals in the Maldives. He said it was difficult to get money from other international players for projects.

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

He points to other countries in the region as well as far-flung ones [countries] They were reluctant to lend to the government as the institutions controlling the whole process were slowly coming to terms.

The projects have boosted tourist arrivals in the country – reaching a record 1.7 million last year, earning more than 2 2 billion.

One of the main reasons for the increase in tourism is the successive governments of the Maldives have encouraged investment in new islands.

Foreign investment regulations were amended to build more resorts and hotels. Hundreds of millions of dollars were raised by Indian, Thai and Chinese investors.

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Umberson Ethirajan / BBC

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Zhang Lijong says claims of a “debt trap” are baseless

Mr Nasheed says he is concerned about Chinese investment in several islands where resorts and hotels are being built with both Maldivian and Chinese partners.

“It is easy to see that the Maldivian partners do not have the necessary funds to become partners in such an initiative, so the Chinese participants will buy it out in no time. I can see these islands moving towards them. Quickly, “says Mr. Nasheed.

But Ambassador Zhang dismisses this, arguing that investments are purely commercial.

“Mr. Speaker probably didn’t get the right information,” he says. “We don’t set any preconditions for loans. It doesn’t happen and it won’t happen.”

Former President Abdullah Yameen’s People’s National Congress has also condemned Nasheed’s allegations, calling them “baseless intimidation.” Is saying.

“The Chinese were not given a single island,” said Mohammad Hussain Sharif, the party’s vice president.

Late last year, Yamin was sentenced to five years in prison for money laundering. His party has called it political vendetta.

Fear of debt is not limited to the Maldives. Other Asian countries are also reviewing mega projects funded under China’s Belt and Road Initiative.

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

In 2018, Myanmar reviewed a multi-billion dollar deep-sea port project funded by a Chinese fund and reduced it to three-quarters of the actual cost, fearing that the debt would not be repaid.

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

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It relies heavily on tourism, which is greatly affected by the coronavirus outbreak. By the end of June, foreign tourist arrivals were down 55%. Estimates suggest the country could lose more than a third of its tourism revenue to more than 700 700 million this year if the epidemic continues.

Male officials say Beijing has agreed to partially suspend debt repayments due to the epidemic.

But despite this it is a vague financial sector for the Maldives which should expect its lending not to mortgage its future.

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Muhammad

About the author: Muhammad

Wayne Ma is a reporter who covers everything from oil trading to China's biggest conglomerates and technology companies. Originally from Chicago, he is a graduate of New York University's business and economic reporting program.

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