Our best minds - barking up the wrong tree?

What are more than 2,500 of the World’s finest brains – top policy makers, academics and CEOs, doing in the Swiss ski-resort of Davos for five days? Soul-searching and deal making – that’s what they are doing. They are there to discuss a problem of biblical proportions. What began with the US sub-prime crisis morphed into something that the world has never seen since the Wall Street crash of 1929. The world’s finest brains - the likes of Joseph Stiglitz, George Soros and Rupert Murdoch, are still unable to fully fathom the depths of the recession the world is headed into.

The biggest economies in the world - US, Japan and Europe are in their first simultaneous recession since World War II. In spite of the trillions of dollars Governments around the world have pledged to pump into their economies to prevent more colossal failures like that of Lehman Bros and Bear Sterns, the problems seem more insurmountable with each passing day.

How about us Maldivians? Are we insulated from the Worlds problems? There is no reason for me, as an average Maldivian, to believe that the situation at home is any better, if not worse. With our gross reserves at less than 2 months of imports the rufiyaa is literally on the ventilator, silently praying for the USD 100 million life support pledged by the Indians to arrive before that final fatal beep.

While the world’s finest men and women are giving their best shot at helping the world’s economy recuperate to health, our best brains - our crème de la crème - seem to be embroiled in something this average Maldivian saw as a petty budget squabble between two agencies within the Maldives’ judiciary! God help this country!

Maldives is World Number ONE!

Maldives is ranked World number ONE on a list of 181 countries, ranked by the World Bank/IFC in terms of ease of "paying taxes" (ahem, looks like the folks at World Bank forgot that we in Maldives hardly pay any taxes).

On the overall "Ease of Doing Business" we slid one notch to 69th place – making us still the most ‘business friendly’ country in South Asia. It is, however, disheartening to see that our performance in some of the most important indicators for business friendliness is still way below that of a number of developing countries – Maldives is ranked (177) in registering property; (145) in getting credit; (70) in protecting investors; (90) in enforcing contracts; (121) in trading across borders; and (123) for closing a business. Among our major trading partners, Singapore topped the list at World number 1 for a fourth consecutive year. Malaysia was ranked number 20, UAE 46, India 122, and Sri Lanka 102.

Default, insolvency and bankruptcy - Maldives style?

‘Default’, ‘insolvency’, ‘bankruptcy’ – these words may sound familiar to you. But if you are to ask your Majlis member or a policy maker in the present or the previous government, chances are not many people would even bother to raise an eyebrow. Proof? It’s on BML’s audit report and Finance Ministry’s website – the delinquent borrowers of BML and the list of willful defaulters of Treasury loans. Among them are former ministers, members of our parliament, senior members of former and current government and a lot of other ‘honourable’ people in this country. We gave them millions as ‘loans’ – sorry, ‘gifts’ --- a loan, by definition, is something you have to pay back.

If I understand correctly, ‘default’ is a debt that a debtor is required to pay but has not paid and “insolvency” generally means that the debtor is unable to pay the debt. Although there are variations in the way insolvency and bankruptcy are treated in different countries, usually in most countries, following a petition for insolvency or bankruptcy, a court makes a ‘bankruptcy order’ or a ‘winding-up order’. The assets of the debtor are then seized and auctioned off and in the case of commercial entities bankruptcy proceedings are begun. Doing this is invariably linked to the very survival of the banking system.

If my childhood memory serves me right Itha Naseer, Finance Minister Ali Hashim’s late father D.I.K, Bangi Adam Fulhu, Onoda Zahir and several others were among the many ill-fated Maldivian businessmen whose assets were seized and forced into liquidation to settle off their debts. A few years ago, on a tour of northern and central atolls, I met a number of small borrowers of BML who were forced into liquidation by the bank. Back then, I saw it as perfectly normal as BML was only doing what all banks are supposed to do. But today, I’m utterly saddened to know that those fishermen and smalltime backyard farmers, desperately trying to eke out a living under very difficult circumstances, were forced into liquidation only to feed the insatiable credit appetite of 12 of our oligarchs – at a whopping direct cost of over a third of our GDP!

I’m not advocating for liquidating Fonaddoo, Sultans of the Seas or Villa Group for their non-performing BML loans; and I’m not campaigning for locking up Adam Zahir, Umar Zahir and others for their willful defaults of Treasury loans. I know that our legal system, fraught with problems, is inadequately equipped to deal with financial crime and I also know that the new government is still in the reconciliation mode. But, to me, that’s not an excuse to give a free reign to these unscrupulous people. If we are to extirpate this crookedness from our financial sector and if our banking industry and the economy are to survive, timely punitive action on ‘default’ is imperative. Inability to do so is tantamount to a free bequest of whatever little resources still remaining with the 99 percent of the people, to the obscenely rich less than 1 percent.

The country that doesnt feel the pain of the financial meltdown

Ali and his new girlfriend just returned from a holiday in Malaysia. A few months before he left Male he spent his entire savings of Rf 10,000 to get the 'nice number plate' that he had wanted for over two years. Recession? Economic virtues? Well, Ali doesn't need to worry too much. He financed his Malaysia trip from a pay-if-you-can loan from his friend and the expenses of his two children, aged 12 and 9 from his previous marriage, whose expenses for the last five years have been taken care of by their grandfather, a Sarudhaaru at a government school are his last worry - at least for the time being.

Azoo, a twenty something job-hopping graduate who normally earns about Rf 8000, continues to shop, shop, and shop until she drops dead. It’s been six months since she quit her last job. But her insatiable appetite for her favourite DKNY fragrances, L'Oreal cosmetics and that occasional Jimmy Choo shoe continues unabated. Credit card debt? Well, that's not her worry. Her father regularly pays off – along with a good doze of scolding - the mountains of debt she accumulates on her credit card from advance rentals he collects from the two room apartment rented at their house.

Half way around the world, perhaps unbeknownst to both Ali and Azoo, the governments of US, UK and other industrialized countries and the corporate giants that seemed virtually infallible until recently, are struggling with their finances as the financial crisis gets deeper and murkier. For them there is still no turn around in sight. Consumers in those countries whose pockets are hundreds of times deeper than our Alis and Azoos are tightening their belts like they never did in the last thirty years. They are ditching their iPhones, flat-panel HD TVs and their gas-guzzling SUVs.

Ali and Azoo are among a growing group of hundreds of epicurean youth who live a Paris Hilton inspired live-in-the-moment life. I of course don't blame them for their spend-thrift mentality. Consumption is something so deeply embedded in us; it is so much hard-wired in our psyche now. What I sometimes have difficulty in understanding, though, is why our people continue to spend like as if there is no tomorrow while people in most parts of the industrialized world are bracing for the unhappy days with the homespun virtues of increased cost-cutting and parsimony. I'm sure if they had a choice, most people in the industrialized world too would continue to spend like our Alis and Azoos do. Choice – that's what differentiates our there's-no-tomorrow spendthrifts. Unlike the people from the industrialized world who are compelled to become financially independent by the time they reach their twenties, most of us have created the opportunity for us to continue to leech on our families or someone close to us, well beyond our thirtieth or even fortieth birthday. While the people in the industrialized countries literally feel the pain of the global financial meltdown, we continue our there's-no-tomorrow lifestyle; either blithely ignorant of what's happening in the outside world or willfully passing our pain to those unsuspecting victims around us who are inured to pain.

Yes, the healthcare for over-65s did get my knickers into a twist!

My good friend, someone very well-versed in economic and financial matters, in an anonymous comment to a post on this blog said “this will get your knickers into more of a twist”. Fortunately, I don’t wear knickers literally, but this news item in fact did, as the Brits would say, get my knickers into a twist. My friend who posted the comment was referring to the new health insurance plan of Maldives for the over-65s.

Where in the world do you get a health insurance plan that is not ‘means tested’, has no exclusion of ailments such as dental cover, and assumes the public to be “honest”, when filling out the forms because the prospective recipients of cover are “law-abiding and honest”? An insurance professional I talked to says that he is yet to hear about any country that is foolhardy enough to provide such coverage free of charge. The bit of googling I did to find anything comparable to this was also entirely abortive.

Don’t get me wrong. I’m all for President Nasheed’s initiative to provide a relief to the large number of people who are out on our streets literally begging for their life-saving prescription drugs. Providing health cover and a safety-net for our elderly folks is long overdue in this country. I have absolutely no doubt about that.

The health insurance cover, I understand, would be provided in addition to the Rf2,000 monthly retirement income that the government plans to give to our over 65s. With 13,000 people eligible today, this universal retirement pension scheme alone would cost our taxpayers a whopping Rf 300million annually. And in 20 years time this will spiral out of control to Rf900 million annually. As the health insurance scheme is not means tested and relies on the ‘honesty’ of those seeking the cover, I have no way of commenting on the cost of this scheme. But as an average man observing developments in my country, I can’t help being wary of how well the health insurance scheme and the pension plan were studied for their long-term fiscal sustainability. And in a country where almost three out of four people are below 35 years of age, I certainly wouldn’t be surprised to find a vast majority of people skeptical on such a wholesale free transfer of resources from the current working population to the retired.

Is something still very wrong?

The calls for freedom, rights and democracy that resonated throughout the country still linger on in my ears. The calls were not in vain. The elusive freedom that we sought for years did finally come to this country. And so did democracy and a lot of our fundamental rights. We have a democratically elected president in office. The government machinery and the institutions, albeit slowly, are being forced to wakeup to the new realities. And today, we are probably one of the freest people among the developing countries.

One thing that struck me over the last week or so is that in practicing our new found freedoms and rights, our people seem to be going a little overboard, a little too early. While people from Maduvvaree , Maaivadhoo, vashafaru , Madaveli , Fiyori and a whole lot of other islands were exercising their ‘freedoms’ in their islands, presumably in an attempt to vent out their pent-up frustrations over lack of public infrastructure, two of our state ministers State Minister Shafeeg and State Minister Shahid had to change gear to riot control mode in Male. Just two week ago our new housing Minister Aslam had a taste of public outrage when he visited his native island Faresmadhoda.

As an average Maldivian who has for so long yearned for freedom, rights and democracy, I can’t help asking where our new found democracy and freedoms are taking us. I don’t know any more than the Yahuya Average of this country does about freedom and democracy but I think these virtues are by no means an end in themselves, but a means to an end; and that end, I presume, is the collective happiness and well-being of the society. And I have serious doubts on whether we are heading towards this end. Just as when the country, for the first time in the living memory of 80 percent of its people, gave the power to individual people to influence the political direction of this country through the virtue of democracy, there seem to be quite a lot of things not quite alright. After all it has only been less than 60 days since President Nasheed assumed office. Any reasonable person in this country would agree that it would be grossly unfair to blame Nasheed’s government for the things done and not done before the new government took over the reins of power. So, the big question is why the protests? And why are they happening in so many places?

My contention is that there must be something very wrong for all these protests to precipitate so prematurely in so many places. The only possible responses that I can think of are we were either barking up the wrong tree, or we put the cart before the horse.