A Sovereign Wealth Fund of Maldives?

Many countries seem to be climbing on the bandwagon of Sovereign Wealth Funds (SWFs). Just before Christmas Singapore Temasek took a chunk of Merrill Lynch with an injection of $4.4 billion while the Government of Singapore Investment Corporation (GIC) put in $9.75 billion into the banking giant UBS earlier in the month in the aftermath of the US subprime crisis.

Earlier this year Abu Dhabi’s SWF pumped in $7.5 billion into Citigroup while China’s Investment Corporation took up 9.9 percent of the stakes of Merrill Lynch for a cool $5 billion.
The assets of SWFs today are estimated at $2-3 trillion and Morgan Stanley projects that these funds could reach an incredible $17.5 trillion within just ten years. Among the SWFs what strikes me most are the great strides made by Singapore’s Temasek and GIC. Some pundits put the assets of the two SWFs of this former post-colonial backwater, with no natural resources, in the vicinity of a whopping half a trillion dollars.

A few years ago a cabinet minister mentioned to me that our government was considering the creation of an SWF. I also remember another senior government official telling me that the possibility of investing Dhiraagu’s excess liquidity in the then burgeoning Indian telecom sector was discussed in the cabinet some ten years ago. Had we put in just $10 million - an amount that we could have easily afforded - it would have grown to $100 million today.

I cannot help wonder why Singapore excels at what it does so well while we lag behind grappling with rhetoric such as Islaahee agenda and Unity government. The few times we got adventurous (aviation, at first with PLO and then with Malaysian Helicopters; tea estate buyout by STO in Sri Lanka; Maldives National Oil Company etc) the experiences were so bitter that we prefer to talk about them only in hush-hush. Was there ever a time in independent Singapore’s history when human rights, democracy, and islahee agenda hampered their progress? (for record – I’m not against democracy or human rights)

Who will benefit from Rf 100 million subsidy?

The Rf 100 million fuel subsidy is not going to make any difference in the lives of our poor fishermen who our Majlis has supposedly intended to help with it.

An IMF working paper based on empirical evidence from five countries (Bolivia, Ghana, Jordan, Mali, and Sri Lanka) concludes that energy subsidies are badly targeted in most developing countries that resort to it ostensibly to protect the poor from the sky high oil prices. Instead of helping the poor, all that energy subsidies do are, according to the study, absorb an increasing share of scarce public resources. IMF’s paper goes on to say that ‘the most efficient and effective way to protect the poor is to allocate some of the budgetary savings from the elimination of fuel subsidies to a well-targeted social safety net that has high coverage of poor households and little leakage to nonpoor households’.

It doesn’t take a doctorate in economics to understand what the Rf 100 million fuel subsidy is going to do to Maldives.

· A huge fiscal drain on an agonizingly overstretched budget
· Badly targeted (its not going to benefit low- and very-low-income households as there will be huge leakages - there’s no way government can prevent the already rich Odiverin and big fishing companies from getting the lions share)
· Crowd-out priority expenditures

If only those bags of wind you and I elected to represent us in Majlis would do a bit of their homework…

How to make loads of Money in Dhivehiraajje

If you are a Majlis member from the ‘opposition’.

• You can sell your ‘budget’ and other big-ticket item votes to Sarukaaru for at least six figures each time. If you play it smart you can be a millionaire even before you are half way through your term.
• Get on the stage of opposition rallies a few times and shout as much filth as you can to Gayoom. All that you’ve got to do is to master the vocabulary of Auguraanu. Rest assured, DRP would want to buy you in no time. If you play it a little hard to get and act like a real firebrand, they’ll surely buy you for seven figures plus perks such as a top job in the government and a few memberships in boards of Government companies.

If you are a Majlis member from DRP.

• Threaten to resign from the government and join MDP. You are sure to leapfrog to at least a deputy minister’s rank and get an ‘Atholhu fihaara’ or a ‘Cresent fihaara’ for just a few thousand Rufiyaa which you can then rent out to an Addu businessman for a whopping 60,000 a month. You might also get your hospital lease extended for another 15 years without having to for a public tender.
• Make DRP Zaeem feel that you are among the elite few that have the balls to take the opposition rabblerousers head-on. Zaeem will soon offer you a cabinet portfolio and you’ll have a lovely seven figure bank balance before you even realize it.

If you are a resort owner or a businessman

• Wriggle your way to a majlis seat of an atoll through trickery and bribe. Those island folks will sell their vote for Rf 50 and to get elected you need an investment of a few hundred thousand. But once you have a seat you’d soon learn of ways to coerce government through the use of judiciary to give you a resort for a small nominal fee or award lucrative contracts that will pay off your investment in a matter of weeks.
• Become a protégé of a half-brother of the president. He will then create lots of business opportunities for you such as opportunities to become JV partners of state owned enterprises.

If you are an unemployed, half-literate, wannabe rags-to-riches type

• Start paddling drugs - there’s a ready market and if you play your cards right - c’mon you know how your friends do it - you can be in business with virtual impunity. Before you realize you will be on your way to making loads of money.
• Get those grade something dropouts around your neighborhood to form a ‘gang’. You can use this gang to lend a hand to the Izzaiytherin in the government and the opposition to run those little ploys that they need from time to time. Pays very handsomely.

Maldives - World Number One!

Maldives is ranked number one in a list of 178 countries ranked by the World Bank in its list ‘who makes paying taxes easy and who does not’. We have even beaten Singapore (number 2 on the list).

It also says that “the Maldives levies only one small tax on domestic business in the manufacturing sector (the property transfer tax) and only hotels and banks are taxed on their profits.”

In spite of my innate patriotic urge to take pride in World Bank’s conclusions, I have serious reservations as to the accuracy of the World Bank’s assessment and the veracity of the statement above. I think our small country has one of the most ambiguous and haphazard tax regimes anywhere in the world (correct me if I’m wrong). Have a look at MEDT’s Royalty charges on foreign investments and see if you could make any sense out of it. To me this is clearly an attempt to drape a grim reality with misleading nomenclature – a royalty = a tax? Of course NO! If it was, we wouldn’t be telling the world that we have zero corporate profit taxes (with the exception of the banks, of course).

Regarding the World Banks’ statement above on profit taxes, I don’t know of any hotel in the Maldives that is taxed on its profit (again, correct me if I’m wrong).

Incidentally, not too long ago, we were on an OECD’s list of uncooperative tax jurisdictions. But OECD subsequently removed us from their list without us having to do anything to our tax regime. Thanks to yet another important act that we as a nation have perfected during the last couple of years – the art of hoodwinking the white men!