The Economy

Much has been said about the state of the Maldivian economy of late, and many are asking for Presidential candidates’ economic policies. Unfortunately, most candidates have not put forward a comprehensive set of policies aimed at improving the economy.

Those who have dared to enter into this testy area have proceeded very cautiously. There are reasons for this. One only has to examine the way the economy has been structured, and the nexus between the economy and politics to understand why. Generally speaking everyone has been very careful to present an image that the applecart will not be upset under his rule. This is because the economy is controlled by a privileged few, and politicians understand very well that upsetting them, or posing as a threat to their zone of comfort could mean taking on a challenge that may be insurmountable.

In short, the cozy relationship between big business and the government over many years has meant that there is a very clear understanding between the business sector and the politicians. You-leave-us-alone-and-we-will-leave-you-alone kind of understanding. Even the well meaning and “reform-minded” business people are only too aware that a breach of this understanding could result in million dollar investments being lost. In this setup, there has been a natural evolution of monopolies. Those who had the means have grabbed everything and built their own empires. Success in one area meant that one diversified very quickly, and you have situations like Villa Shipping, Villa Gas, Villa Oil, Villa Fishing, Villa Resorts, Villa College, Villa Cement, Villa Cable TV, Villa TV, Villa whatever….and now it looks like Villa Maldives may be the next step. There are a few more situations I could quote.

It is not a coincidence that there is no room for small and medium businesses to grow in the Maldivian economy. Newcomers on the business scene cannot find any financial institutions to help them; any market that they create will quickly be undercut from them. It is therefore not surprising that over 80% of loans given out by the Bank of Maldives (where the savings of ordinary Maldivians reside) are given under the guarantee of only 3 individuals.  Any person trying to make a mark on the business sector would have to beg or borrow from these few individuals. It is almost like the Big Boys will borrow from the bank and the Little Fellas will have to borrow or share business with the Big Boys. Nice setup.

The relationship of the corporate sector with the government has ensured that no direct tax on profits are levied. No laws governing labour relations have been put into place until recently, and the government still has not declared the minimum wage which is stipulated by law. These are not oversights. These are deliberate measures to reduce the distribution of wealth. The perfect system to promote patronage and subjugation.

The DRP, the MDP, Hassan Saeed or Qasim are not suggesting a restructuring of the economy. Therefore it is not surprising that these candidates are being backed to the hilt by the super rich. MDP talks about a corporate tax, but says the tourism industry is “just fine” as it is. Hassan Saeed is yet to talk about taxation of any kind. Hassan claimed on TV that his campaign is being funded by the “common people” and that he has placed limits on how much a single entity can contribute. But he has bought airtime on DhiTV alone for 30 days at Rf 36,000 an hour! That is close to a million rufiyaa just for that activity alone! He must know a lot of “common people” who have a lot of money! I wish I had those kinds of “common people” to support me.

I announced that I would bring in an anti-trust law to address these issues and I would introduce corporate taxation, and seek to abolish indirect taxes such as import duties. (Two days later, Qayyoom also announced he would do the same!)

Without going into details of all the changes that I seek to bring into each individual sector, let me outline briefly the crux of the kind of policies I would bring in.

I believe that an entire restructuring of the economy is necessary to make national wealth accessible to the people at large. At the vanguard of economic reform has to be an anti-trust law which will allow us to provide opportunities to all and make the platform level. This law will prevent a few individuals from gaining control of the entire business sector. A legal framework which allows for fair competition is necessary to open up the economy to newcomers, small businesses and medium businesses. 

A proper system of progressive taxation  in the corporate sector is now absolutely necessary to ensure an equitable distribution of wealth in the country. Along with this should be put in place a wage structure which is fair for employees and employers alike.

Sustainable and progressive ways for exploiting our marine resources, and maximizing earning capacity and exploring agricultural potential along with development of ways to get into niche markets should be explored in order to diversify the economy. 

Proper regulation of banks to make them more service oriented, and to ensure their fair contribution to the business community and assistance to investors is necessary, and the legal framework to ensure the protection of banks as well as to end the tyranny of banks is essential to facilitate risk taking by entrepreneurs and vibrancy of the economy. 

Proper monetary regulation including responsive regulation of interest and exchange rates has become critical. Further, a portion of generated national wealth has to be held in reserve to soften shocks

I believe someone has to be bold enough to take these stands if our economy is to survive. Anni’s stands on the economy is puzzling. They say they are now a “centre-right” party, but they propose things like handouts for the elderly and the poor without proposing how revenue will be generated. Hassan Saeed also talks about socialist policies in service sectors, but veers off from taxation. Qasim and Qayyoom are very silent on policy issues but are more focused on specific activities. Both are silent on revenue.

One has to realize that proper reform cannot happen without economic reform. The general idea that the economic structure is generally alright except for a few aberrations is not acceptable anymore. If we genuinely want reform in the country, let us tackle it head on.