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Generational Dynamics World View
*** 24-Nov-18 World View -- Maldives can't determine how much money it owes to China

This morning's key headlines from GenerationalDynamics.com
  • Maldives can't determine how much money it owes to China
  • Constitutional crisis continues in Sri Lanka over China-India competition

****
**** Maldives can't determine how much money it owes to China
****


[Image: g180206b.gif]
Map showing strategic location of Maldives and Sri Lanka in the Indian Ocean

Shortly after Ibrahim Mohamed Solih shocked the Maldives by winning
the presidential election on September 23 decisively by 58-41% of the
vote, he met with the Chinese ambassador to the Maldives, Zhang
Lizhong, to ask how much money the Maldives owed to China. According
to Solih, Zhang handed him an invoice for $3.2 billion. This was
money owed for Chinese-funded infrastructure projects for China's Belt
and Road Initiative (BRI).

Solih's election victory was a surprise because it had been expected
that the election would go to he incumbent president Abdulla Yameen Abdul Gayoom, who had never hesitated to use vote-rigging or jailings
or violence to win elections, had been expected to win. However,
Solih's election margin of victory was so large that Yameen was forced
to concede. Solih's victory is also major victory for India and a
major loss for China, since Yameen had close relations with China and
Solih promised to balance Indian and Chinese influence.

So then there was another shock, when Solih received the "invoice"
from ambassador Zhang saying that Maldives owed China $3.2 billion.
With annual revenues of $1.5 billion and an annual gross domestic
product of around $3.9 billion, Maldives would be unable to service
the debt, and it appeared that Maldives had been the victim of a huge
Chinese debt trap.

Solih took office a week ago, and said that the country's finances are
worse than expected, and that it will take weeks or months to untangle
details of all the deals struck with Chinese firms. According
to his assistant, Mohamed Nasheed:

<QUOTE>"We are at a loss to understand how much we really owe
to China. Direct debt, or direct bilateral
government-to-government debt is one thing, but there is on top of
that sovereign guarantees for the private sector. And there is
also on top of that our state owned enterprises who have gone into
debt."<END QUOTE>


However, the Maldives central bank contradicts the $3.2 billion
figure, estimating the country’s liabilities to China at $1.5 billion.

And now China is denying that the Zhang ever gave Solih a $3.2
billion figure, also saying that the correct figure is
closer to $1.5 billion.

So the Maldives is sending its foreign minister Abdulla Shahid to
China next month, to renegotiate deals and to finally figure out how
much Maldives owes to China.

China has negotiated many infrastructure debt deals with numerous
countries. These deals are all secret, and are usually considered to
be Chinese "debt traps" imposed on small countries. The situation
with the Maldives is that, for the first time, one of these top secret
deals may become public, and we'll be able to see what the terms are
and whether there was corruption involved on the part of the Yameen
administration.

What we've seen so far in the Maldives case is that the financial
relationship with China is a total mess. If and when deals with
other countries become public, we can expect a similar mess.

The Maldives envoy Abdulla Shahid will be discussing another subject
when he visits China next month -- the joint Free Trade Agreement
(FTA) that the two countries signed a year ago. According to the
Maldives government, the FTA was rushed through parliament by the
Yameen administration, but the Solih administration plans to cancel
it, because it's too one sided.

Between January to August this year, the Maldives’ imports from China
were $342 million, while its exports to China were just $265,270. The
FTA specifies that there would be no tariffs on imports by either side
from the other, but since China imports almost nothing from Maldives,
the FTA is of benefit only to China. Canceling the FTA would be one
more setback to China, which is facing an increasing chorus of
accusations of "debt trap diplomacy" in many countries across the
Pacific and Indian oceans. Avas (Maldives) and Reuters and Maldives Independent (30-Nov-2017) and Reuters (19-Nov) and Xinhua

****
**** Constitutional crisis continues in Sri Lanka over China-India competition
****


Sri Lanka is another country that has been harshly victimized by
China's debt trap diplomacy. Sri Lanka, under former president
Mahinda Rajapaksa, signed a huge finance deal with China to build the
Hambantota seaport. But Sri Lanka was unable to service the
debt, and Rajapaksa's successor was forced to hand control
of the seaport over to China. So now China has control of an
important strategic seaport on the Indian Ocean, and an enclave
of thousands of Chinese workers and their families on Sri Lanka
soil.

So it was a great shock on October 26 when Mahinda Rajapaksa, the
mastermind of the Hambantota project, was appointed prime minister by
the current president, Maithripala Sirisena, after firing the existing
prime minister Ranil Wickremesinghe. Sirisena has never explained the
reason for his decision, but it's believed that Wickremesinghe is
close to India, while Rajapaksa is close to China.
Wickremesinghe has refused to leave the prime minister's residence,
so for the last month Sri Lanka has had two prime ministers.

Sirisena also dissolved the parliament, but the parliament refused to
be dissolved and remained in session. Last week, a vote was held to
select the actual prime minister from the two choices, pandemonium
broke out in the assembly when Rajapaksa's supporters threw books,
chairs and chili paste at Wickremesinghe's supporters, in an attempt
to keep from losing the vote.

On Friday, the parliament held another vote, this time to decide
control of a crucial committee that sets the parliamentary agenda.
When Wickremesinghe's supporters won the vote, Rajapaksa's supporters
staged a walkout. Wickremesinghe argues that he still commands
majority support within parliament and, despite being fired, he
continues to occupy his official residence. On the other hand,
Rajapaksa has lost two no-confidence votes in the parliament but has
refused to stand down.

Despite having been forced to give up its Hambantota seaport
to China, Sri Lanka still owes more than $50 billion to foreign
lenders. Next year it has to pay more than $4 billion in
debt servicing. The current constitutional crisis is causing
the value of the Sri Lanka rupee to plummet, which means that
the $4 billion will be much harder to pay.

Both Sri Lanka and the Maldives are very important strategic locations
in the India Ocean, and seaports in those countries would be among
China's "String of Pearls" seaports in the Indian Ocean, giving China
a major strategic advantage. However, pro-Indian governments in both
island countries would hand significant setbacks to China. Al Jazeera and Reuters and Al Jazeera and South China Morning Post (29-Oct)

Related Articles:



KEYS: Generational Dynamics, Sri Lanka, Maithripala Sirisena,
Ranil Wickremesinghe, Mahinda Rajapaksa, India, Hambantota port,
China, Zhang Lizhong, Belt and Road Initiative, BRI,
Maldives, Abdulla Yameen Abdul Gayoom, Ibrahim Mohamed Solih,
Mohamed Nasheed, Abdulla Shahid

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24-Nov-18 World View -- Maldives can't determine how much money it owes to China - by John J. Xenakis - 11-23-2018, 11:35 PM
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