China credit dogs ‘Maldives’ ‘bridge to prosperity’

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Anbarasan Ethirajan / BBC

For many years, Aminat Waqeedah used his taxi to search for passengers on the narrow lanes and congested roads of the Maldives capital. The most lucrative fares – airport visits – are unattainable.

The airport serving the male is on a different island and needed a speedboat to go between the two.

In 2018, it changed just like Ms. Wagita’s life. China is there to thank the single mother of two young men.

Built at a distance of 200m (8148m) from Beijing, the 2.1km (1.3-mile) four-lane bridge is where male taxi drivers can now pick up passengers from the airport entrance.

“Once the bridge is built, transportation is easy for everyone,” he says. “[It] Helped taxi drivers like me make more money. ”

In fact, his income doubled.

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Anbarasan Ethirajan / BBC

The bridge, the first to be built between any of the islands in the Maldives, has seen a boom in new property and business development on Hulamale Island, where the airport is located, easing congestion for its 140,000 residents in the capital.

Chinese infrastructure projects in developing countries have been criticized, but the Sinamale Bridge – also known as the China-Maldives Friendship Bridge – has been hailed as a real success.

However the current Maldivian government does not see it that way. This small, tourist-oriented country is now worried about how much to pay China.

The bridge is one of several major projects built under pro-Chinese President Abdullah Yameen, who was elected in 2013. He wanted to kickstart the economy, borrowing hundreds of millions of dollars from China to do so.

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At the time, Chinese President Xi Jinping undertook his massive “Belt and Road Initiative” to build road, rail and sea links between China and other parts of Asia.

Mr Yameen’s tenure was marked by allegations of human rights abuses, which he denies. Several opposition politicians have been jailed, including former President Mohamed Nasheed.

But in September 2018, just weeks after the bridge opened, Mr. Yameen His rivals suffered a surprise election defeatIbrahim Solih is the president of the Democratic Party of the Maldives, MDP.

The security change helped Mr Nasheed return to politics.

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The new government soon began to examine the country’s finances. What they saw shocked them.

“The [Chinese debt] The bill was $ 3.1 billion, “Mr. Mr Nasheed, now the speaker of parliament, told me.

He worries, his country is trapped in a debt trap.

“Can these assets earn enough income to repay the loan? There is no indication that the loan can be repaid in a business plan that does not have any of these plans.”

He argues that the cost of the projects was inflated and that the debt on paper was much larger than the money actually received – only $ 1.1 billion, although he did not release the documents to back up his money.

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Former Maldivian officials and Chinese representatives point out that he lacks detailed accounting. They have the amount to pay to male China between $ 1.1 billion and $ 1.4 billion – an even larger sum for the islands.

The GDP of the Maldives is about 9 4.9 billion, and if you go by Mr. Nasheed’s figures, debt is more than half of the country’s annual economic output. If government revenue falls, it may struggle to repay the debt by 2022-23.

Mr Nasheed worries that his country could face the same fate as neighboring Sri Lanka if the Maldives defaults – it owes billions of dollars to China after borrowing money to rebuild after years of civil war.

Among the projects, the Sri Lankan government has spent nearly $ 1.5 billion to build a port in Hambantota. But in a few years the port proved economically viable and Colombo failed in its credit commitment.

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After the debt was restructured, a Chinese state-run company In 2017 it bought a 70% stake in the port for a 99-year lease. In addition, Sri Lanka agreed to provide China with 15,000 acres around the port to create an economic zone.

For China, the port is a valuable strategic asset that has never seen one of the busiest shipping lanes in the Indian Ocean. The port is a few hundred kilometers from the southern coast of India, a rival to China.

Secretary of State of the United States last year Mike Pompeo scored in China He described it as “corrupt infrastructure deals in exchange for political influence” and the use of “bribe fuel fuel-trap diplomacy”.

Beijing dismissed his comments as “irresponsible”.

In a rare BBC interview, Chinese Ambassador to the Maldives Zhang Lizong also dismissed allegations that the Maldives was facing a debt trap as “a myth”.

“China has never imposed additional requirements on the Maldivian side or any other developing country, and they do not want to be accepted or against their will.”

Mr Zhang said Mr Nasheed’s $ 3 billion debt was “exaggerated”.

The Maldives is known as a picture-perfect tourist destination – but the archipelago is strategically located, with islands in the North Indian Ocean. Tens of thousands of oil tankers and ships pass through.

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

Some argue that some major ticket infrastructure projects, such as the airport expansion, built with Chinese loans during Mr Yameen’s rule, have helped boost tourist arrivals in the Maldives. They point out that it is difficult to get money for projects from other international players.

“I think there was no other way at the time,” said Ali Hashim, governor of the Monetary Authority of the Maldives, which regulates its finance department, the island’s central bank.

He points out “other countries in the region and far [countries] The companies controlling the whole process were very reluctant to lend to the government as it was slowly being compromised.

These projects have boosted tourist arrivals in the country – last year they reached 1.7 million, earning more than $ 2 billion.

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

Rules on foreign investment to build more resorts and hotels have been relaxed. Hundreds of millions of dollars were poured in from Indian, Thai and Chinese investors.

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Anbarasan Ethirajan / BBC

Mr Nasheed said he was concerned about Chinese investment in the Maldives and on several islands where resorts and hotels are being built with Chinese partners.

“It is very easy to see that these Maldivian partners do not have the necessary funds to be partners in such an endeavor, so the Chinese partners will not buy it at any time. As soon as I can see the islands going to them,” Mr Nasheed says.

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

“Mr Speaker should not get the right information,” he says. “We have not attached any preconditions for the loans. It will not happen, it will not happen.”

Former President Abdullah Yameen’s People’s National Congress has also spoken out strongly against Mr Nasheed’s allegations, calling them “unsubstantiated fears.”

“Not a single island was given to the Chinese,” said Mohammed Hussein Sharif, the party’s vice president.

Late last year Mr Yameen was sentenced to five years in prison on money laundering charges. His party described it as a political ploy.

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Debt fears are not limited to the Maldives. Other countries in Asia are also reviewing mega projects funded under China’s Belt and Road initiative.

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

In 2018, Myanmar reviewed a multi-billion dollar deep-sea port project funded by China and cut three-quarters of the original cost in fear of not being able to repay the debt.

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

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It relies heavily on tourism, which has been hit hard by the corona virus outbreak. By the end of June, foreign tourist arrivals had dropped by 55%. Estimates suggest that if the epidemic continues, the country could lose more than a third of its tourism revenue this year, more than $ 700 million.

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

But it is an unnamed financial area for the Maldives to believe that its debt does not mortgage its future.