Sustainability vs. mega projects
The Maldives could do well with reading the fine print on all projects carried out through grant, and loan, financing — and perhaps even add some fine print of her own.
The Maldives could do well with reading the fine print on all projects carried out through grant, and loan, financing — and perhaps even add some fine print of her own.
Whenever there is news about the Maldives being the lucky recipient of a grant to finance yet another grand infrastructure project, with promises to improve the standard of living for the common people, there feels much to rejoice about. However, time and time again, there seems to be an apparent lack of followup on these projects — with hugely detrimental consequences.
Today, there are numerous tools used in diplomacy, and all nations are involved in the game of geopolitics. The Maldives is no exception, with being situated in one of the most strategically enviable positions in the world from both a militaristic and economic standpoint. For this reason, this little island nation spanning a meagre territory just over 96,000 square kilometres of ocean, constantly finds itself in the middle of a myriad diplomatic machinations, which are thankfully, mostly economical rather than military.
Some of the economic elements of diplomacy includes two very household phrases of late; grants and loans. The difference between the two is simple: grants are basically ‘gifts,' money that doesn’t need to be paid back, while loans are borrowed finances that are paid back according to pre-determined payment schemes. However, there are further layers to the two that complicate matters. Since grants and loans are usually for development of either human capacity or infrastructure, passing the finances alone is not the smartest way to go about it.
Historically, the Maldives received multiple grants, mainly from countries such as Japan, for a multitude of projects. This is sometimes described as Foreign Aid, which essentially translates to the same thing. One such major project would be the building of the sea wall around the capital city. Another historic grant would be the Indira Gandhi Memorial Hospital, gifted by the government of India in the 90s. However, there have been an unspoken facet at play in such projects. It is established that even after the projects were completed and operations started, there needed to be discussions with the donor country’s administration on the usage of these infrastructure, such as structural adjustments and even discontinuation. This meant that control of the project by the recipient is not as wide as would be expected. This adds a layer to an already complicated situation.
Within the last decade, foreign involvement in Maldivian infrastructure development has increased multiple fold. In years past, grants were the way to go, given how the economy was not seen as strong enough to be able to repay loans, but now loans are the preferred method of foreign aid. The China-Maldives Friendship Bridge is a key project that cemented this point, as the project was financed through a combination of a grant and a loan.
A grant of USD100 million was allocated for the project, with the balance taken as a loan from the EXIM Bank of China. This meant China dictated the usage of the funds to such a high degree that no Maldivian entity was allowed to even touch the money lent; instead, all of the funds were circled back to pre-determined Chinese private companies that were to complete the construction work. While this ensured China could guarantee the completion of the project to their standards, a cursory glance would tell any keen observer that there was barely any Maldivian involvement in the building and even the maintenance of the project.
While training Maldivians to operate the helicopters gifted by the Indian government is broadly discussed, the fruition of this endeavour has been a long time coming, and there have been questions as to the wisdom of this move. Why not train Maldivian pilots in India in the first place, then bring them alongside the two helicopters later? Another hand dealt from the diplomatic deck of tools.
There are multiple reasons why Maldivians are barely involved in such major projects, which include all projects run by India as well. There seems to be a sense of urgency to these projects, obvious by the rushed completion of the bridge as well as some of the atoll airport facilities, and this can be traced back to the vicious Maldivian political cycle.
Each administration acts on the five-year deadline, and sustainability is not held at the forefront. While discussions were held to include a training component in the handing process of the bridge, it appears that this has not materialized. With nearly three years passing since the bridge become operational, even basic maintenance is still being done by foreign nationals who are based here. Beyond political reasoning and from an economic viewpoint, we need to accept that the largest drawback in the Maldives is the lack of human capital.
The nation lacks experienced civil engineers, workers, managers and other professionals to not only take over the continuation of the project once complete, but also to be involved from initial stages. This is experience that could have been gained had more been deeply seconded to these projects. To draw a comparison, countries like Sri Lanka dictates the terms of such agreements to ensure that there is a quota of locals involved; that most of the raw materials as well as specialised equipment are sourced from local companies. This makes sure that there is a flow of income from that grant into the country, while at the same time ensuring the continued and sustainable use of the infrastructure by the government. While the Maldives cannot, in the long-run, match the raw materials or the specialised equipment used, the nation does have a highly educated pool of talent in human resources that remains under-utilised.
There are many dangers and disadvantages faced by the recipient nation when proper handover procedures of such projects are not seen through. The government, or the relevant authority, would be forced to hire foreign nationals to operate the projects almost in perpetuity, and they would decide the expenditure on maintenance as well. Involving further foreign entities as well as foreign currencies creates the dangers of over inflated billing, and thus in the long run, makes the project all the more expensive.
To alleviate this, the main aim of any administration should be to built upon utilizing the existing pool of Maldivian human resources. There needs to be proper training programs, skill transfers, or sponsors for studying abroad, to develop technical capital. The civil service sector needs to invest more on developing soft and hard technical skills, to open the opportunities for more to be involved in infrastructure works to ensure the nation is not blind-sided and chewed up by the this double-edged tool of diplomacy. No nation would give grants or loans without ulterior motives, whether malicious or generous. Grants and loans, as well as projects, need to be evaluated with a capacity building lens, rather than being rushed to completion at all costs.
Administrations come and go and it is the Maldivian people who are left holding the bill.