Maldives hopeful of securing financing from Chinese-led bank

The Maldivian government is hopeful of securing financing for “mega projects” from the Chinese-led Asian Infrastructure Investment Bank, Housing Minister Dr Mohamed Muiz said yesterday.

Speaking to reporters after returning from an official visit to attend the AIIB’s inaugural board of governors meeting in Beijing, Muiz said the bank’s president, Jin Liquin, assured him of funding for large-scale infrastructure projects during an official meeting.

Jin – a former vice president of the Asian Development Bank – is “a friend of the Maldives,” Muiz said, as he had worked in the country after the 2004 tsunami.

The government will first seek loans to build a sports complex in Malé and develop infrastructure in the capital’s suburb Hulhumalé, he said.

Detailed information has been submitted to the bank, he added.

The Maldives was also offered the opportunity to nominate an official to serve as an executive director, Muiz said, calling Economic Development Minister Mohamed Saeed’s appointment to the AIIB board “a historic success.”

“So far a Maldivian has never had the opportunity to be part of the board of directors of a multilateral development bank,” he noted.

After an annual meeting in June, Muiz said Saeed is expected to be appointed for a two-year term and the Maldives will also be able to designate an advisor to the bank.

“So this is major progress for a country like the Maldives,” he said.

The Maldives became one of 57 founding members of the AIIB in June last year.

The bank was created in October 2014 with a capital of US$100 billion to fund Asian energy, transport and infrastructure projects and rival the World Bank and the Asian Development Bank, dominated respectively by the US and Japan.

The US had reportedly questioned standards at the new institution and tried to dissuade allies from joining, but the UK, France, Germany, Australia, South Korea, Saudi Arabia, and India are among AIIB founding members.

With 30.4 percent, China is the largest shareholder, followed by India (15 percent) and Russia (6.5 percent). China also has effective veto power over the bank’s decisions with a voting share of more than 25 percent. A supermajority of 75 percent is needed to approve important decisions.

The bank is planning to lend some US$1.5 billion this year. According to the Wall Street Journal, the bank will start out by co-financing existing World Bank and ADB projects in order to avoid “reputational damage from early missteps”.

Analysts say the bank will need to show that it can function both independently of Beijing and “without employing some of the practices that have undercut China’s reputation at home—including corruption, environmental blight, forcible relocations and top-down decision-making that disregards local interests,” reports the WSJ.

Since President Abdulla Yameen assumed office in November 2013, China has become a key development partner for the Maldives.

China is presently financing the construction of a US$200 million bridge connecting Malé and Hulhumalé with grant aid and concessionary loans. In December, the government also secured a US$373 million concessionary loan from the Chinese EXIM Bank to upgrade and develop the Ibrahim Nasir International Airport.

Both projects were awarded to Chinese corporations.

A visiting mission from the International Monetary Fund meanwhile said this week that the ambitious infrastructure projects could transform the Maldives’ economy in the long-run, but poses financing risks due to persisting fiscal deficits and high levels of public debt.

China is also funding the construction of a 15km asphalt road between the interlinked islands of Gan and Funadhoo in Laamu atoll. China’s Jiangsu Provincial Transport Engineering Group is undertaking the project.

In November, the ministry of housing and infrastructure signed a contract with the China Machinery Engineering Corporation for the construction of 1,500 medium-end housing units in Hulhumalé.

CMEC – which had also built 1,000 units in Hulhumalé under phase one of the urban development project – was also awarded a project for the installation of 1.5 megawatts of solar photovoltaic systems in the reclaimed artificial island.

Following the historic visit of Chinese President Xi Jinping in September 2014, the Maldives also agreed to become a partner in China’s maritime silk route.

Negotiations are meanwhile underway for a China-Maldives free trade agreement.

Amidst growing criticism of the current administration’s human rights record over the imprisonment of opposition leaders in early 2015, Yameen had declared in June that Sino-Maldives relations are at an “all-time high” with the establishment of a cooperative partnership between the countries.

Yameen had previously said that his administration is “looking east” for development partners as economic cooperation with China does not involve the same challenges to remaining an Islamic state posed by “Western colonial powers.”