China projects worth more than 40% of Maldives GDP

The three largest Chinese projects in the Maldives are worth more than 40 percent of the country’s GDP, according to major new analysis, amid warnings about repayment problems and debt levels.

Gateway House, a think-tank in Mumbai, says Chinese investments and aid to the Maldives have surged since 2012, supporting multiple housing projects, a power plant, a bridge, water and sewage treatment plants, hotels and airlines.

The research says that the three largest Chinese projects are together worth $1.5 billion.

“This will inevitably cause repayment problems, as visible in Sri Lanka, another country deep in debt to China.”

It points out that high-end tourism is dependent on China, with significant numbers of visitors coming from there.

“The international airport where they arrive is being developed by a Chinese company. The seaplane operator that takes them to island resorts is owned by a Chinese firm.”

It also says the Maldives’ political crisis shows that large-scale Chinese investments can undermine democratic institutions.

“For India, this is a warning that Chinese investments in South Asian nations can alter India’s geopolitics by manipulating latent, unresolved hostilities,” the analysis says.

A political crisis was triggered last month in the Maldives by a Supreme Court ruling and a state of emergency.

Weeks of unrest followed, as President Abdulla Yameen alleged there was a plot to overthrow his government. There were mass arrests, the suspension of around 20 constitutional rights, a crackdown on the media as well as anti-government rallies across the country.

China made no direct comment on the crisis itself, although it issued travel warnings to its citizens. Instead it urged the international community to respect the Maldives’ sovereignty and to refrain from interfering.

India was supportive of the Supreme Court ruling, which ordered the release and retrial of key prisoners, and criticised the state of emergency. The Maldives has been particularly pugnacious towards its neighbour, telling it on several occasions to stay away.

“Even if it wants to,” says Gateway House, “the Maldives cannot now move completely beyond China’s reach.”

It lists the implications for India, such as the Maldives providing China with military facilities or access to seabeds for mineral exploration.

“China’s playbook is clear: It first enters as a military supplier, then cultivates and partners with local elites, provides modern infrastructure with deferred payments, and entrenches itself,” says the think-tank.

Graphic: Gateway House