RECLAIMING THE LOST DECADES

Yesterday and last night, following the death of the former president Ibrahim Nasir, a number of reports appeared on Maldivian media. I have learnt a lot of new information and historical facts that I wasn’t aware of before. Black and white photos and videos from Nasir’s period were shown on TVM. Historical researchers were interviewed about Nasir’s years of ruling and his achievements. All those things made me wonder why they couldn’t do it before.

Why couldn’t TVM show those reports and videos before or during last 3 decades that has passed after Nasir’s era. Now only they are acknowledging that Nasir was the real founder of the modern Maldives. Three decades has passed and many younger generations of Maldivians has finished their official education without even learning a single fact mentioned on those reports or by the analysts who were interviewed yesterday. It’s my belief that two or three decades in our history were purposely ignored by the government that succeeded after Nasir.

According to the limited literature and information available on the public domain regarding Ibrahim Nasir and his years or ruling, one can truly understand that he laid the foundation of the modern Maldives. He was the head of the government when we gained independence in 1965. He undertook the construction of Hulhule’ airport, under those challenging circumstances. We had the number one shipping line in Asia when he was the president. As per my knowledge atoll councils and atoll chiefs were elected democratically during a particular period in his years as a president. Though I can’t mention all those things, the list goes so long and indicates that he initiated most of the things or developments we see today including tourism. He laid the foundation and started those things even though they were further developed by the government that came after him.

So we should give credit to him for these good things he had done for us. We should learn about this period in our history. It’s not when he is dead we have to talk about it. We should have been learning about these things in our social studies when we were in grade 6 and 7.

May Allah bless his soul with eternal paradise and grant patience and strength to his family.

ARE WE IMMUNE FROM THE CURRENT FINANCIAL CRISIS?

For the past few months, international media has been following the developments in the global financial market and their effects on the “credit crunch” or the current financial crisis. However it’s only very recently that our media got aware of the crisis and started paying attention on the twists of the crisis. In the past week and in this week I had seen some reports on the crisis and its effects on our country, published on some news papers. They even went on quoting some prominent business people in Maldives, about what they think of the crisis and its effects on our country. Cabinet has also discussed about the issue in its last sitting.

Background of the crisis:

According to some financial analysts, the build up to the crisis rooted back to late 90s and early 2000s. The risky mortgages (usually referred as subprime mortgages in financial contexts) that made by US lenders in late 90s and mostly in early 2000s, and the subsequent securitization of those loans led to the crisis.

For various reasons, lenders were encouraged to make high volume of subprime or risky loans to individuals without sound proofs of credit worthiness. These individuals were only delighted to take up those offers with their unstable employment and income flows. Unfortunately the economic conditions in US got worsened, and through mid-2004 to mid-2006, US Federal Reserve increased the interest rate repeatedly causing those borrowers to default on their loan repayments.

When those borrowers defaulted on their loans, it wasn’t only the initial lenders who got in trouble. Through securitization, the initial lenders transferred those loans to other investors in the first place. Investment banks, hedge funds, wealthy individuals etc invested heavily in those loans (actually they invested in asset backed securities issued through securitization process but the return on those securities depend on the repayment of the loans). Some financial institutions invested a relatively large proportion of their funds in those securities. So the default of the borrowers put those investors on the verge of collapse.

Ultimately in August 2007, the crisis broke up with the collapse of a major US investment bank. From then we have been seeing the crisis continuing with surprising twists. In recent weeks it got worse than before and resulted many large financial institutions and hedge funds being bankrupt in various countries. Merely a financial crisis at the start has turned into a real economic crisis posing concerns over economic growth, employment etc. It’s for this reason we can’t shut our eyes on the crisis saying it’s a problem to be dealt with developed countries and international community.

Implications of the crisis for our country:

Unlike the developed countries, financial institutions in developing countries don’t seem to have a significant exposure to those “bad” securities. Hence our local bank and overseas banks in Maldives are safe to some extent. However the crisis has made it really difficult to get credit or funds in the international financial markets. So the banks in our country may suffer because of the limited or no funding from overseas to finance their lending activities. Apart from this I can’t see a direct impact of the crisis on our banks.

However we may have some serious indirect consequences which can send our economy into a slump. As I said before the crisis has taken a new twist causing real danger for economic growth and jobs in developed countries. Any slowdown or problems in the economies of our major tourist markets will be a problem for us. Europe and Japan being our major tourist markets can’t continue sending tourists to our country if their economies keep on deteriorating. So the current financial crisis can have potential negative effects on our tourism sector. Any Maldivian can imagine what will happen if the tourism sector performs badly or its income goes down.

Secondly any negative impact on our main donors like Japan will reduce the amount of foreign aids we get in the future. More than those foreign aids, the foreign direct investments (FDI flows) into our country may get reduced. This will be very harmful to our economy, especially in a time when we are badly in need of those FDI flows to undertake large projects which can potentially create many jobs. These FDIs are also important to maintain our foreign exchange reserves.

These are the main implications I can think of now, but as the crisis continues it may pose new threats and concerns to our economy. I think it’s high time that the government and tourism sector start thinking about this and plan how to tackle the problems. And this again highlights the danger of not having a diversified industrial base in our economy and depending too heavily on tourism sector.

A quick analysis of the election results and recommendations

[ This post has been sent to me by an anonymous reader.]

First round is almost over, and we have nearly taken the Maldives back. If we view the election as a vote of no-confidence, clearly Gayoom has lost. But we all must remember he needs about 12% or 25,000-35,000 votes to win in the second round (based on figures announced around 10 am). MDP should not be overconfident of a win in the second round. Such a confidence depends on these assumptions:

1. How many who supported Gasim Ibrahim actually would have supported Gayoom? (This question is relevant because in terms of economic favours to individual voters Gasim and Gayoom are more favourable than Hassan Saeed)

2. How many who voted Hassan Saeed would have voted Gayoom? (In terms of capability -- education -- and experience)

3. How many who voted Hassan Saeed and Gasim think Anni is the better candidate than Gayoom? Or alternatively, how many of them think Anni is the lesser evil? (Here questions like misconception about MDP's connections with foreign elements and 'churches' apply too.)

I want to be optimistic and suggest that most who voted Hassan Saeed and Gasim were united by their dislike towards Gayoom than their dislike towards Anni. But we cannot be too optimistic because Gayoom needs about 12% to win, while Anni needs about 25%.

Difficulties:

Hassan Saeed might not endorse MDP. One possible reason is he may be looking forward to the next presidential election. He might be pessimistic about an MDP-led government. He might be neutral between Gayoom and MDP. Remember he is the most centrist candidate.

Some recommendations:

Since we cannot automatically assume the 25% votes more Anni needs, the best that remains is to join forces against Gayoom. MDP must not be too confident not to do their best to bring at least Hassan Saeed to their side.

MDP should make some compromises. Ideally, if the laws allow, MDP should consider replacing Dr Mohamed Waheed Hassan Manik with Hassan Saeed as Anni’s running mate.

To bring in Hassan Saeed and his voters, MDP must consider repackaging their manifesto and policies taking the appealing policies from Hassan Saeed’s manifesto and policies such as the idea of bringing capable people to form a unity government.

In my opinion Gasim must be their last option, mainly because Gasim does not appeal to the reform oriented, change oriented, young people. He is seen as an uneducated, greedy rich person, without democratic credibility because of his business empire and influence in the society. However, MDP should look for Adhaalath’s support.

Finally, even if Ibrahim Ismail did the worst in this election, he still could bring political moral credibility and weight to Anni.

CALL FOR A NATIONAL UNITY GOVERNMENT

When Hassan Saeed called for a unity government and made it the number one promise of his presidential bid, we are seeing divided opinions on the matter from bloggers, journalists and politicians as well. From what I have seen, many have either misunderstood Hassan’s concept or they are purposely trying to misguide others.

First of all, his call for a unity government while being an independent candidate is not an indication that he doesn’t favor a multi-party system. He is simply arguing that we are lacking capable personals to run and manage six or ten political parties, and hence any individual party can not be trusted to govern the country all by themselves. It hasn’t been long since these political parties were formed. In this short period we have seen many unsettled politicians shifting parties and their loyalty. In my opinion these so called politicians have a lot to learn yet and parties have a lot to achieve. Almost all of these parties are formed and run around one strong figure. These parties don’t have enough capable people to manage even the intra-party affairs. So how can we form a competent cabinet from a single party?

Before we saw a strong MDP capable of governing the country alone, but today we are seeing a lot of strong figures leaving MDP and the party is not like what it used to be. While acknowledging Anni’s great sacrifices and hard work to bring reform and democracy to our beloved nation, I also note that he has not been able to show us a team of politicians in whom we can trust to govern our country alone. Even Anni might have thought the same thing, when he declared that he was even ready to become a running mate of someone who is not from MDP.

Therefore Hassan’s proposal is not destructive to a multi-party system, but rather it will help to enhance the multi-party system. A unity government will give the much needed time for political parties to become politically and intellectually more mature and to identify real leaders. We need unity among all pro reform parties to deliver the Maldivians a smooth and happy transition period. Let us give more time to our political parties and potential leaders to emerge fully and stand on their own feet. The last thing we need now is rumors and lies that can damage a potential alliance between Anni and Hassan to form a national unity government.

HIGHLIGHTS OF THE REPORT ON MTDC & ITS IMPLICATIONS

Everyone may not find it interesting or useful to read the whole report on MTDC published by the Auditor General’s office. So I thought it’s good to try to highlight the important points of the report and discuss its implications.

• MTDC’s capital structure was designed in a way that government would contribute 45% of the share capital while the remaining 55% was for the general public. However government currently controls 57% of the company’s share capital. Like in the case of other public limited companies in Maldives, government is not yet ready to surrender their majority stake in MTDC. It seems that government doesn’t really appreciate the importance of fully privatised public limited companies for the development and smooth running of a stock market in our country.

• Without the usual procedure of bidding, government has awarded 10 islands to the company at a very low rate of rent and additional islands are expected to be offered. This can be a kind of indirect subsidy which gives an unfair benefit to the shareholders of the company. This is against the spirit of a free and competitive market. However this is justified as long as the company is owned by a diverse base of shareholders from the general public and the benefits and the profitability of the company flows to a large proportion of the population. As the report revealed this is not what’s happening in the company. The company is largely controlled by a bunch of business tycoons like Villa Group and Champa who has already made huge investments in tourism sector and exploits millions of dollars as profit every year. Instead of ordinary people these rich people are exploiting the benefits of the tax cuts and other concessions to the company at the expense of the income flows for the government budget. So it’s the poor who loose eventually and the rich gets richer.

• Shareholders from the general public had to pay the full amount of the share price but the government deferred a part of the payment under a special arrangement. This discrimination is a clear violation of the regulations and common principles of running a public limited company. This shows the government’s disregard for the common law principles.

• As observed by the auditor there is no full time managing director or CEO in this company which is completely unacceptable for a public limited company of that size. Without a full time managing director such a company can’t be properly managed and we can see mismanagement in various areas of the company. The board of directors and the government who controls the majority stake in the company should be responsible for this.

• The company has decided to distribute a surprisingly large amount as the first year’s dividend while the net profit and reserves were too low to support for such a lavish distribution. From a business point of view, a company in its early stages of development and growth should reinvest a relatively large proportion of their profit. So making such a lavish distribution, especially when the profit was so low and deplete its reserves is completely against sound business policies and ethics. Perhaps the government and few business tycoons who control the company were badly in the need of urgent liquidity for which MTDC was the perfect source. This can be further argued as the report suggests that government demanded some extra payments in advance from the company which were not obligatory under any agreement.

• Report has identified some unrealistic forecasts in the initial share prospectus issued by the company, which should never have been allowed to happen or the regulator should take proper actions against those who are responsible for this.

• Management has violated the rights of the shareholders by failing to act responsibly and by failing to observe the principles of good governance. For example; materials were purchased and contracts were awarded without a competitive bidding process. Some large payments or transactions made by the company were not supported by proper documents or evidence. Managers of a public company are acting as the agents of shareholders so their primary concern should be to maximize the wealth of shareholders and to protect the interests of the shareholders. It’s very clear that the management of the company has failed in this task so far.

Based on these factors, I think it is right to say that the company has failed to fulfill the very objectives for which it was created. The company is no longer run to provide the opportunity to the general public for investing in tourism sector and to share in the profits. With their many resorts those rich resort owners are not yet satisfied to leave the ordinary folks to share even a loa laari in the profits generated from the tourism sector. Otherwise they would not have sabotaged the attempts to create a public company which could open the opportunity for ordinary households to involve in the tourism sector investments. May be they enjoy keeping us in the need to go to them, basically for everything in our life. People, it’s up to us to decide whether they really mean it when they say they are committed to bring the “change we need” if elected as the president. What I know is, it’s not the change I need when they deprive us of every opportunity to become self sufficient.