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What Does Democratic Reversal in the Maldives Mean for the Arab Uprisings?

By Gabriele Köhler, Aniruddha Bonnerjee | International Development Economics Associates (IDEAs) | March 2, 2012

CREDIT: Presidency Maldives (CC).

The recent democratic upheaval in the Maldives has some commentators worried that it portends ill for the uprisings of the Arab Spring. The 2008 election that ushered in President Mohamed Nasheed was widely seen as a human rights triumph in a formerly autocratic Muslim-majority country.

Other authors have been puzzled by the rapidity with which the international community acknowledged the new president, and then abandoned him. Nasheed enjoyed substantial political support from Prime Minister Cameron's UK Conservatives and had been likened to Presidents Mandela and Obama.

While analysis of the political disarray and violence in the Maldives is best left to impartial observers on the ground, a closer look at the political economy of the islands can help us understand the deeper dynamics that are unfolding today.

The Politics: A Fresh Yet Fragile Democracy

The burning turmoil in the Maldives comes as a shock for those who equate the small country with beaches, sun, and high-end tourism. Climate change activists had also aligned themselves with Nasheed's visible and vocal action to address global warming: The ex-president led the movement of small island states and other sea-level countries for meaningful action at the climate summits, and he even hosted a dramatic underwater cabinet session to raise awareness. Nasheed also received the Anna Lindh Award for bringing democracy to the Maldives.

Brought to office in the country's first multiparty elections after 30 years of autocratic rule, Nasheed cobbled together a coalition government including an Islamist party and a National Unity party whose leader, Mohammed Waheed Hassan, was elected vice-president. Hassan went on to become president when Nasheed resigned involuntarily on February 7, 2012 following weeks of protest by police dissidents over Nasheed's tendentious decision to arrest a chief justice on corruption charges. Proponents claim it was a legal and smooth handover as per the Maldivian constitution. Nasheed and his supporters have declared it a police-backed coup d'état, and have refused to acknowledge the legitimacy of the new government that is now comprised of loyalists from the autocratic era of Maumoon Abdul Gayoom.

The Economics: A Country Divided in Three

Economically and socially, there are three Maldives. Maldives 1 is that world of the sparkling, mostly top-of-the-league resorts on coral islands reserved for tourism. These are nominally government property, leased out on long terms and at low prices to a section of the country's elite. Tourism is the largest industry, forming the basis of the country's $5,250 average per capita income. Much of the revenue is deposited directly in offshore banks and is not taxed appropriately—a flat rate of $8 per bed irrespective of the room rate—thus depriving the government of crucial foreign exchange and fiscal revenues.

Migrant workers from Sri Lanka, India, and Nepal supply most of the valuable labor in these resorts, as they have no restrictions about serving alcohol or seeing tourists in bathing attire. Maldivians occupy the more menial positions, and until the Nasheed regime, were banned from even visiting the tourist islands.* The resort leasers represent a substantial and powerful economic interest group in the country.

Maldives 2 and 3 are local economies. Maldives 2, comprising the 1,192 islands of the archipelago (of which approximately 200 are inhabited) spread across 90,000 square kilometers, is home to some 205,000 Maldivians who make a living from coastal fishing and related occupations. It is one of the most geographically dispersed places in the world. High-value-added fish catches such as skipjack tuna are marketed for domestic consumption, and for export from Malé island. The offshore fishing in the 200-mile zone is leased out to foreign fleets, notably from Japan. Combined local and foreign fishing is the economy's second largest sector and accounts for the lion's share of product exports.

Amid economic uncertainty and changing coalitions, Nasheed's policy initiatives may have alienated a range of interest groups.

The third economy is the capital island of Malé. An estimated 103,000 people live on the 1.2 square km island, making it one of the most densely populated locations in the world. Construction and government administration are the main sources of income. Jobs such as construction, hotel services, and garbage collection are undertaken by migrant workers from Bangladesh, India, Nepal, and the Philippines. They earn more than they would in their home countries, but a fraction of Maldivian wages. Employment in construction is frowned upon locally, and the 35,000 Maldivian youth (between 20–24) who enter the labor market every year have few alternative prospects apart from scattered jobs in retail, or in the creative industries such as bespoke yacht building and the fledgling cinema and music industry.

Geographic dispersion and remoteness combined with the fact that some islands have fewer than 50–100 people living on them translates to high unit costs of delivering public services such as education, hospitals, clinics, and local administration. Under the Gayoom regime, a majority of the islands, despite their geographical remoteness, were successful in achieving high rates of literacy and good health outcomes—perhaps the best in the South Asian region. The early years of the millennium were also years of rapid growth, in the Maldives as well as in South Asia. Maldives had already achieved universal primary and lower secondary education for both boys and girls. This was accompanied by progress in reducing child and maternal mortality and virtually eliminating communicable diseases.

The central challenge for the newly elected president in 2008 was to keep this good performance going as the country inherited titanic budget deficits and monumental government indebtedness. At the same time a severe global contraction literally cut the wings off the tourism sector. Consequently, existing problems were magnified and new ones such as child abuse, drug addiction, HIV/AIDS, joblessness and youth disaffection arose.

Nasheed's government focused on raising connectivity by expanding the water transport network, universalizing health insurance while protecting the social sectors (health, education, and child and family welfare), and attempting to trim the public sector and the wage bill. At the same time, the government sought investment resources through a program of public-private partnerships for key sectors. Plans for atoll self-governance and fiscal federalism were detailed in the government's new development plan.

With scant fiscal leverage, the financial strategy evolved around monetizing the deficit, seeking grant (or loan) inflows from donors, and rescheduling medium- and long-term debt obligations. Combined with rising international prices for food and energy this strategy fueled inflation, especially in Malé, the major hub of exchange. Nasheed's more elaborate reforms—such as replacing universal subsidies for some items (e.g., electricity) with targeted subsidies, introducing a business tax for the non-banking sector, replacing the flat tourist bed tax of $8 with an ad valorem tax—have yet to be implemented, due to political opposition as well as capacity limitations.

In the midst of continued economic uncertainty and rapid changes in political power coalitions, these policy and reform initiatives may have alienated a wide range of interest groups: the average household confronted with rising costs of living and increasing joblessness; former public sector staff who had been laid off; business lobbies opposing taxation; former coalition party members frustrated at not getting special subsidies and concessions for their constituencies; and opposition groups opposing the reduction in public sector spending or wanting other laws passed (banning of alcohol for instance).

Parallels with the Arab Uprisings

Are there parallels with the Arab world and the Arab spring? Yes and no. The Arab spring uprisings in the Middle East protested against absolute monarchy and autocracy, excessive concentration of wealth and power, government corruption and inefficiency, and economic decline—factors closely linked to political sentiment. These were amplified by structural demographic factors such as the presence of an increasingly large, educated youth base unable to find decent work.

Compared to the Arab world, democracy has had more traction, at least nominally, in South Asia. Nevertheless, democracy in South Asia, as elsewhere in the world, when brokered by coalitions, does tend to be fragile. Like its neighboring countries in South Asia, Maldives currently finds itself enmeshed in the complex waters of pluralist coalition politics and deeply divisive socioeconomic undercurrents. The recent coup attempt in Bangladesh, the continued political stalemate in Nepal, the recent interference by the Supreme Court in Pakistan against an elected albeit ineffective government, and continued civil strife problems in Sri Lanka suggest that genuine democracy remains under threat in at least five South Asian countries, including the Maldives.

In 2008, the newly introduced multiparty system in the Maldives enabled free opinion and constructive dissent in parliament and in the media. Imprisonment and torture of political opponents—a feature of the Gayoom regime—were said to have been abolished, although the recent violence suggests a different picture. The Nasheed presidency also ushered in, for the first time in the Maldives, a separation of powers between the executive, legislative, and judicial branches of government, and heralded the promise of local governance in atolls.

The vibrant promises of this nascent democracy teetered within a year of the new presidency: The coalition collapsed in 2009 from fractious internal politics while at the same time the global food, fuel, and economic crises of 2008–2009 reversed the rapid post-tsunami gains and ravaged the tourism and import base of the Maldivian economy. A breakaway coalition altered the distribution of power yet again within the space of a few years. In June 2010, all cabinet ministers resigned en masse, citing an inability to perform their duties due to the opposition-dominated parliament "hijacking" executive powers—each member of the cabinet had been threatened with a no-confidence motion by the parliament.

With regard to efforts at establishing democratic procedures, the Maldives is ahead of the Arab spring. Economically and politically, on the other hand, there are several parallels to factors that triggered change in the Arab world. These include:

  • A split economy, very similar to those of the Gulf States, with highly segmented labor markets. Locals are banned from some employment and occupations—such as lucrative work as staff in resorts—and shun other activities such as construction. Such workplaces are filled by exploited and socially excluded migrant workers. The younger generation also are said to want to move away from fishing. Youth unemployment and a lack of creative leisure opportunities on the tiny islands are leading to increasingly intense youth disaffection; substance abuse and youth gangs are becoming a frequent outlet.

  • Drastically rising food and energy price costs. Just as it was recovering from the tsunami, the food, fuel and financial crises unfolding through 2008–2011 took its toll on the Maldivian balance of payments as well as on overall growth. Critical sectors such as tourism, fisheries, and construction all suffered. Rising food prices are a result of the volatility in global prices as well as the devaluation of the currency. Apart from fish, vegetables, and fruit, all other staples—notably rice—need to be imported, and prices have risen substantially over the last few years, reaching double digit consumer price inflation recently. High costs of energy stem from rising international prices and the reduction in electricity subsidies. The impact of inflation, as is well known, is the hardest on poorer households, women and children, and especially those living on the most remote islands. Given the current euro-zone crises coupled with the recent devaluation of the rufiyaa, and expansionary monetary interventions of the Maldives Monetary Authority, the economy may face serious troubles in the year ahead.

  • The rise of fundamentalist Islam. The 2004 tsunami damaged 69 of the country's 200 inhabited islands and displaced nearly 13,000 Maldivians. Apart from the devastation, the tsunami had another nefarious effect: the import of fundamentalist Islam. The Gulf States and notably Saudi Arabia offered help in the form of reconstruction funds, and capacity building such as the education of imams and teacher training. This was coupled with the imposition of the Wahhabi and Salafist interpretations of Islam—a version of Islam instilling fear of damnation if one does not comply with oppressive dictums. The tsunami was cast as a punishment for the earlier liberal Islamic practice of the Maldives. Some imams preach oppression of women and anti-Semitism. Flogging was reintroduced, and there are reports of Maldivian Taliban in Afghanistan. As a more superficial indication, most women and even girls now wear tight headscarves and ankle-length skirts or trousers not seen in the country ten years ago. The Islamic party in the Maldives parliament, for instance, introduced a law banning massage and alcohol on the tourist islands. This decision was however quickly repealed as it was not in the interest of the resort-leaser faction of the elite, but similar agitations have resumed under the new government. This reading of Islam does not comport with youth aspirations and the democratic trajectory, leading to severe and explosive tensions.

These many currents—the economic fissures, inflationary pressures, and the conflicting political positions, juxtaposed with efforts to establish democratic practice and to focus on the global issue of climate change—illustrate that there is no easy solution for the Maldives. Political parties are divided in terms of the interests they represent and strategies they propose, but many workable proposals are available. One can only hope that there will be a rapid return to a democratic, participatory, and nonviolent procedure to work things out for the "many Maldives."

A version of this article first appeared on the IDEAs network. Gabriele Koehler is a visiting fellow in the Vulnerability and Poverty Reduction Team, IDS Sussex, and earlier worked in South Asia as a regional advisor on economic and social policy for UNICEF. Dr Aniruddha Bonnerjee is an independent consultant and macroeconomist and earlier worked on the Maldives development strategy with UNICEF and UNDP.

* CORRECTION: This article was updated to clarify the division of labor between migrants and Maldivians on the resort islands.

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