Himeyningilaab is wrong about 50 years resort lease extension

Himeyn-ingilaab calls our Maldivian business community a group of outmoded thieves - a group of people that have run business evading taxes - shameless thieves committing acts of piracy! I have great admiration for the work Himeyn did during the run up to the election. But this time I’m totally clueless as to the basis for all this ignominious name calling and recrimination.

Sometimes to prove a point we become unreasonable and resort to baseless attacks. We forget to take stock of the actual ground realities. Is there any government, anywhere in the world, that is able to stay away from the influence of the powerful oligarchs? The businesses in the industrialized countries pay taxes to their governments, not because they are any more God-fearing, or have higher moral standards than we Maldivians do. They pay taxes only because their countries have the appropriate legislative and regulatory frameworks to compel them to do so. Even after having these systems in place for over a hundred years, most of them are always on the look out for any avenue that would give them legitimacy to pay even one less dollars in taxes. We in the Maldives haven’t been able to develop the legislative framework and the enforcement mechanism for taxes. So, I don’t see any way we can squarely put the blame on the business community for not paying or developing a tax regime. The government, business community, the civil society, the Rayyithun - all of us together are responsible for this.

As for the extension of resort leases, I don’t see much of a problem with that. On the contrary, I think, this is a must if we are to remain competitive both as a lucrative investment destination and as an attractive tourist destination. Let’s face the facts – we have to understand that we are far from being an attractive investment destination even by developing country standards. The only thing we need to do, while we work on the extension of the resort leases is to make sure that when we give the resort owners a deal, we give them a deal that’s fair to even to the most destitute single mother living in the most dilapidated household in the most remote island in the Maldives (sorry, just borrowing a phrase from Himeyn). The fairness of this deal could be ensured by increasing the lease rentals or by implementing a bed tax, a GST on tourism sales or a corporate profit tax. I recently read an article somewhere that says that over 80 out of the 89 odd resorts currently in operation, still have USD4000 or less as annual lease rentals when the going market rate at the more recent rounds of bidding are over USD20,000 per bed per year. These are the things that we need to be working on instead of vilifying our business community and calling them a bunch of unprincipled pirates filching money out of our destitute people. After all it is only natural that any profit-maximizing business should try and lay hands to every extra dollar possible.

Our government - the biggest spender in the world

Finance Minister Ali Hashim has determined our budget for the next year to be Rf13 billion. In spite of axing Rf9billion from the budget planned under Gayoom for 2009, our government is still the biggest spender in the world in relation to the size of the economy – even the highest spending governments like that of Iraq and Cuba have government expenditures at around 80 percent of their GDP.

While most of us fully understand the reasons why the new government, at least over the short term, is unable to make good on the pre-election promises to reduce government expenditure, I could not help doing a quick search on what the ideal size of government spending should be. Economist Gerald Scully’s research shows that government spending beyond the ‘optimum’ level of about 23 percent of GDP, generally results in government becoming a net drain on the economy. Empirical evidence shows that up to this ‘optimum’ level, every dollar government spends provides more than a dollar's worth of economic growth. I know it would be inappropriate to generalize this ‘optimum’ level to countries such as the Maldives. But if we are to go by Scully’s ‘optimum’ level of budget, our budget should be less than Rf300million –that’s only a fourth of the current budget. This is, ostensibly, a little too ambitions, but on close scrutiny, if countries like Mauritius, Cape Verde and Aruba are able to run their governments with only less than a third of their GDP, there is little reason to believe that we cant do the same. But given some of the structural and policy issues within the institutional and organizational structure of the government, and the pressing public finance issues below, this appear to be out of question, at least for the time being.

1. Low budget revenue and inadequate tax receipts - The revenue base is far too narrow and comprises mainly of import duties, tourism taxes, resort lease rents and profits from SoEs.
   

2. Wasteful public expenditures - Government expenditures, particularly the current expenditures have increased steadily over the years owing largely to our disproportionately large public sector.
   

3. Burgeoning deficits - Although the government has presented, over the years, what it calls ‘balanced budgets’ to the parliament, the budget deficits have ballooned to unsustainable levels, leaving a huge stock of domestic debt of about RF2 billion.

4. Inappropriate means of deficit Financing – our budget deficits are financed either through monetization (a fancy term for printing money!) or from external sources – mostly through borrowings. This has not only created a huge domestic debt (because MMA prints money and lends to Finance Ministry) but an increasingly burdensome external debt position. More worrying is the fact the government, in the recent years, has resorted increasingly to commercial borrowings as a means to finance budget deficits.

We are yet to know how the new government plans to finance the budget. With our stock of external borrowings reaching over a half of GDP coupled with the financial meltdown and the global economic downturn, it looks like the new government is left with few options. So, the big question now is how our new government is going to finance the costs of providing health insurance to 100,000 people and waiving off import duties on essential foods, drugs and diesel.

It’s the economy, stupid!

Some of you guys out there are going to ridicule at me, again - call me George Soros and other funny names, but that doesn’t change a thing about the fundamentals of our economy. I don’t claim to be George Soros and I of course don’t own Berkshire Hathaway. But this mediocre man with perhaps below very average intelligence also knows when all the telltale signs point to only one thing: without a substantial injection of hard currency into our economy, rufiyaa will have to be devalued. Our dollar crisis this year, is very much of an anomaly from the seasonal highs and lows that has become a characteristic feature of our economy. Here’s why.

1. Our gross reserves are at just a little over 2 months of imports - almost a 15 year low. As far as I can see there’s no way reserves are going to increase to US$380.8 million or 3.2 months of imports by the end of the year, as has been predicted by MMA (see 4.2 of Monthly Economic review, Oct 08).
2. The strong dollar coupled with the recession in EU region will substantially reduce our inflow of hard currency. So far, we haven’t seen this happening because of the 2-3 quarters’ lag that’s involved in the cycle. Last year we were saved from a devaluation by the unprecedented advance lease rentals we collected from the resort leases which increased our reserves to USD300million.
3. We are in the midst of hajj season, school holidays and bodu-eid. Our people are traveling overseas in large numbers (how they finance it would make another good blog post). Our hajj travelers, holiday makers and expat teachers are going to drain, within the next month or two, whatever little stock of hard currency we have within our banking system now.
4. With oil below USD50 now, the dollar isn’t going to fall anytime soon. Over the last five years, with greenback on the ventilator, we automatically offset any pressure on the Rufiyaa resulting from the expansionary policies of Gasim (kudos to Ali Hashim for trying to reign in the pressure, but this could be too little too late). We did the last devaluation under Mohamed Jaleel in July 2001. Ever since, the Euro has generally appreciated against the dollar thus making Maldives cheaper for our tourists from the EU region - but this is a thing of the past now.

Laila Ali, our new First Lady - how are we going to see her?

It’s a little too early to say the role our new first lady Laila Ali is going to play in our ‘aneh dhivehiraajje’. So far, I must say, she has done and outstanding job successfully staying out of the limelight – that’s in spite of the continuous barrage of criticisms and vituperative remarks (what’s the English equivalent of Auguraanu?) that were so much a part of her husband’s life throughout the last three months of the intense campaign period. I’m sure the young mother of two must have been so relieved. But now, as the new first lady of the country, she has been catapulted, albeit involuntarily, into public life, and I, for one person, expect her to assume an important role in serving her people alongside her husband. I have to admit I have never met or talked to Laila Ali, but the people I have talked to all say that she has the intelligence, wit, and of course, the looks (was President Mohamed Ameen ever married to Baarashu Ramla? ask your grandpa), to outshine all our former first ladies. So, the question that begs to be asked is, are we going to see her, in her public life, as someone like our ex-first ladies Nasreena or Naseema? Or are we going to see her as our answer to Jordan’s Queen Rania?

Nasreena, our first lady for the last 30 years, although seemingly introvert in character, is believed to have wielded great influence in the corridors of power. In public life, the seemingly unassuming, bambi-eyed first lady is known more through her association with SHE and the NGOs work in the health sector, particularly in Thalasemia and Women's Health.

The first lady that most of us knew during President Nasir’s govt was Naseema Mohamed. The soft-spoken, petite and beautiful lady is still in public service - long after President Nasir is gone. Although a nurse by training, she is known more for the work she has done in the area of linguistic and historical research. Mariyam Saeed, the senior wife of President Nasir, also left her mark quite successfully in the Maldivian literary scene as one of the most accomplished poets of her time.

I googled up for interesting first ladies and here’s my picks - among international scene and the Arab-Islamic world (for the simple reason that we group ourselves with them, mostly).

Hillary Clinton – obviously, one of the first that comes to mind - but I don’t know if the world now remembers her as an American first lady, Barrack Obama’s opponent in the recent democratic race, Senator Clinton or the lady who forced the most powerful man in the world to sleep in the garage in the aftermath of Lewinsky affair. She is powerful, elegant, confident and unyielding in all the different roles we saw her in. Looks like, Michelle Obama, as the US first lady in waiting, has a tough act to follow. (I conveniently forgot that primate W’s wife!)

Queen Rania of Jordan, counted by Forbes Magazine among the 100 most powerful women in the world is a rare combination of sheer beauty, intelligence and political power. Born to Palestinian parents and educated at American University in Cairo, she is known for her role in philanthropy, advocacy for women’s rights and in clarifying misconceptions about Islam.

Carla Bruni, the first First Lady to have nude pictures posted on the Internet who is said to have said she easily gets “bored with monogamy”, is arguably the sexiest of them all but she hasn’t so far been seen as too keen on assuming any of the traditional roles of first ladies.

Asma al-Assad of Syria is beautiful, quick-witted, and intelligent. Married in 2000, to Bashar al-Assad, she has worked and supported programs designed to improve rural development including capacity building of communities and promoting local culture and heritage.

Are we starting off on the wrong foot?

It’s only been two weeks since President’s special envoy Zaki talked about inviting Aung San Suu Kyi to the swearing-in ceremony of President Nasheed. Just yesterday our newspapers carried an article that said our government wants to democratize the Great Socialist People’s Libyan Arab Jamahiriyya under the ‘Brother Leader’ of the Great Al- Fatah Revolution!

President Nasheed, in his first interview to the international media after assuming office, said his government is planning to establish an investment fund with earnings from tourism, to buy land from another country, should rising sea levels threaten the existence of our country.

I’m not against promoting democracy, but to me, this rather neo-Reaganite championing of democracy seems a far too grandiose proclamation for a country of our size and resources. I wonder why our mighty neighbor India, in spite of being the world’s largest democracy, with its vast arsenal of hard power and formidable base of soft power, hasn’t dared to venture into such foreign policy adventures even at a regional level. I know it’s a little too early to be commenting on the policies of the new government. But if the above developments offer any clue to how our foreign policy is going to be shaped under our new government, it looks like Dr. Ahmed Shaheed and his team should be prepared for one hell of a crusade.

They are waiting …but President Nasheed isn’t Harry Houdini!

Mariyam is 34. Her husband, a heroin addict, has had intermittent interactions with her during his time away from the prison sentences to father 8 children from the marriage. She lives along with her 8 children, 4 siblings and mother, in two match box sized slum-like rooms. Her family has been living on the generosity of her distant relatives ever since her father died of heart failure a year ago.

Aishath, still a year short of 30, was married eight times to seven men. Their only remnant in her life is six children whose whereabouts today remain somewhat a mystery to her. I know she is not demented but the last time I heard of her she was in Guraidhoo - her mother has found a clever way of putting her under Govt ‘care’!

Rashid, 43 a Director General in the Government and father of 3 children isn’t the kind of person you would think could end up with a Bank of Maldives ‘lui loan’. He earns slightly over USD2,000 a month from his job and through rental income. But his regular ‘medico-sexual’ trips to Bangkok, weekend ‘masdhathuru’ and daily ‘coffees’ with his friends have now left him with a mounting credit card debt and an outstanding ‘lui loan’ and is now contemplating on running for Majlis!

Rashfa, a 26-year-old graduate in marketing doesn’t find anything wrong with credit card debt and borrowings from her parents. It’s a must for her. That’s because her monthly salary of Rf 6,000 doesn’t even cover half of the expenses she has to incur on her favourite DKNY fragrances and L'Oreal cosmetics and regular shopping sprees on bags and shoes.

Ahmed 23, is voluntarily unemployed for the last 8 months. Being a bright student he got good grades at school but has shied way from a job for his mother finances, from her two-bedroom rented apartment, his daily packet of Marboro and Lavazzas with his friends. A few months ago Dhiraagu disconnected his mother’s phone line after he accumulated a whopping Rf10,000 bill from his overseas calls to his girlfriend in Malaysia.

My brother, a hard working man employed at a private company is living with his school teacher wife, three lovely kids and their maid in a 10x8 sq ft room, at age 38. Not a single flat/goathi round from Hulhumale or Vilingili over the last 10 years have gone without an application from him and his wife.

In spite of former health Minister Ahmed Abdulla’s repeated calls, Shakeeba 27, from Sh. Narudhoo and her 3 children aged between 3-8 do not eat the occasional bunch of banana they get from the ‘keyo feeni’ in their backyard. The good loins from the tuna her cousin Adam brings home also do not form a part of their diet. Only the fish head, badaidhoo, kashifathi and other parts of the fish that has zero commercial value goes into their pot of garudhiya. The good bunch of banana and the loins, sent to Male on board a Kulhudhuffushi boat are the only means to buy the main staples.

I don’t know how many times Haleema was married and how many children she has had. Today, she is in her early 60s and living with her current husband and three generations of her 8 children in a 10x10 sq ft room which is her bedroom, bathroom, living room, kitchen - all in one.

These people aren't fictitious characters. They are true stories of real people (names changed) I know and have blogged about on earlier occasions. There are hundreds of more people out there whose stories aren’t very different from theirs. All of them have hopes and dreams. Expectations are sky high. President Nasheed has just been sworn in and I know he is no Harry Houdini but I just can’t help thinking about what he is going to come up with to meet the expectations from his people.

Obama, Ann Nixon Cooper, Nasheed and my grandmother

I don’t know if my grandmother Hiyaladaitha, just a year short of 100, living in an impoverished island in the north of Maldives, voted in the Presidential elections in Maldives like Barack Obama’s Ann Nixon Cooper did in Atlanta.

Hiyaladhaitha did not stand for the buses in Montgomery or the hoses in Birmingham, but she was there to witness a generation of fishermen eke out an existence when their fishing boats were torpedoed by the Japanese imperialists. She along with her family and friends endured the hardships of the ‘magoofaiy’ era and saw her island’s population decimated by cholera and chigella three times. She was there to see five generations of her children overcome a myriad of challenges and multiply to 72 today. She was there when a constitution was torn down, a president was brutally beaten to death by a mob and another president who witnessed the Independence of her country derided by state sponsored public protests.

Meanwhile unbeknownst to Hiyaladhaitha, as Barack Obama said in his victory speech in Illinois, a man touched down on the moon, a wall came down in Berlin, and lot of other changes happened in the world. But in her small world of less than 800 people, little has changed. Those lucky few among her 72 offspring had long migrated in search of greener pastures.

Mohamed Nasheed, elected by her second, third and fourth generation children will take his oath as the fourth President of this small country, tomorrow. One thing Hiyaladhaitha, who after a century, through the best of times and the darkest of hours, unlike Ann Nixon Cooper, does not know is if her small country can change. And as Mohamed Nasheed prepares to take charge of the highest office in the country, this third generation son of Hiyaladhaitha, who migrated from that impoverished island 29 years ago as a child, is sitting thousands of miles away from where he was born thinking about how the new President is going to shape this small country for the generations to come.