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Maldives needs to be wary of the Chinese debt trap

Beijing will try its level best to lure Maldives more into its debt trap and wean it away from India, writes Lt Gen P. C. Katoch (retd) for South Asia Monitor

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Foreign Affairs of China, Wang Yi has arrived in the Maldives on an official visit (Photo: PSMnews)

On July 16, 2021, Chinese President Xi Jinping telephoned Maldivian President Ibrahim Mohamed Solih and offered to provide more Covid-19 vaccines besides pushing forward the Belt and Road Initiative (BRI) cooperation. Xi said China is ready to push forward its relations with the Maldives as 2022 would mark the 50th anniversary of the establishment of diplomatic ties between the two countries. 

China debt-trapped Maldives during the presidency of Abdulla Yameen (2013-18) in whose tenure Xi made an official visit to the atoll nation in 2014 to formalize Maldives joining the BRI. During this period, the Maldives borrowed heavily from China to fund infrastructure projects.  

According to previous estimates, the Maldives debt to China then stood at $3.4 billion, raising concerns over its ability to pay back. However, Solih, who replaced Yameen in 2019, pursued closer ties with India, much to the consternation of Beijing. 

In February 2019, Yameen was charged with theft, money laundering and giving false statements to the police after $6.5 million in assets were seized from him in December 2018. In November 2019, the Criminal Court sentenced him to five years in prison with an additional fine of $5 million dollars owed to the state. However, in January 2021, the Supreme Court ruled in favour of his appeal (purportedly on technical grounds) freeing him after spending two years and two days in jail. 

China man Yameen 

On behalf of China, Yameen rallied the opposition to launch the ‘India Out’ campaign, accusing the Solih government of selling the Maldives to New Delhi. After being released from jail, though many more cases are pending against him, Yameen has re-energized this campaign However, the Solih government has stated it would not tolerate the ‘India Out’ campaign. All four partners of the ruling coalition are against Yameen. 

Chinese Foreign Minister Wang Yi visited the Maldives on January 7-8, 2021 to commemorate the 50th anniversary of the establishment of Maldives-China diplomatic relations. Yi met President Solih and Foreign Minister Abdulla Shahid, also the President of the 76th session of the UN General Assembly (UNGA).  

The five China-Maldives agreements inked during Yi’s visit include Mutual Visa Exemption allowing Maldivians to visit China on a 30-day visa-free once pandemic restrictions are lifted;  economic and technical cooperation focusing on the development of key areas like social, livelihood and infrastructure projects; feasibility study of management and maintenance of the China-Maldives Friendship Bridge; supplementary contract to the Implementation Contract for China Aided Micro-Grid Sea-water Desalination Project in the Maldives; and establishing a Hospital Assistance and Cooperation Programme. 

PLA fronts for China 

Most significantly, Yi pledged $63 million in grants to the Maldives for infrastructure projects. The agreements and investments in infrastructure projects will increase Chinese presence in that country. Chinese development projects the world over are executed by firms owned or supported by China’s People’s Liberation Army (PLA). This enables the placement of PLA personnel in the garb of advisers, technicians and workers disguised as civilians in the concerned country. 

One day before Wang Yi’s visit to the Maldives, India released money for eight High Impact Community Development projects for the Maldives. These projects cover the construction of buildings, an ice factory and a cultural center. Maldivian media reported these would directly impact local people as these include procurement of ambulances, providing education as well as the installation of street lights. A report in the Strait Times said that the Maldives owes over $1 billion debt to Beijing while its total debt stands at $5.6 billion, according to the World Bank. 

Xi Jinping is on a world domination spree, buoyed not only by America’s debacle in Afghanistan but also, while the US is sanctioning it, American investments in China during the Trump administration increased by $780 billion. This has persisted under President Joe Biden. According to the US Department of the Treasury, American spending on Chinese stocks and bonds reached a gargantuan $1.15 trillion by end of 2020 while at the end of 2016 this figure was only $368 billion. 

Learn from Sri Lanka 

Interestingly, former Sri Lankan Education Minister and ruling party member MP Wijeyadasa Rajapakshe wrote a letter to Xi Jinping on January 3, 2022 accusing China of making Colombo bankrupt by providing huge loans at a commercial rate of over 6 percent interest compared to loans available from international entities at 0.01 to 1 percent interest. 

The Maldives will need to be careful about Chinese investments and the loans being taken that may have ‘hidden debt’ clauses. It will need to guard against being debt trapped more by China, especially since it already owes a huge amount to it. Its tourism industry has major earnings through a large number of Chinese tourists. With the next presidential elections due in the Maldives in 2023, China can be expected to try every possible trick to install the next government that is subservient to Beijing. 

(The author is an Indian Army veteran. The views expressed are personal.)

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