The Maldives’ new government is going to pull out of a free-trade agreement (FTA) with China because it was a mistake for the tiny nation to strike such a pact with the world’s second-biggest economy, the head of the largest party in the ruling alliance said.
It is the latest sign of a backlash against China in the Maldives, best-known for its luxury resorts on palm-fringed coral islands.
“The trade imbalance between China and the Maldives is so huge that nobody would think of an FTA between such parties,” said Mohamed Nasheed, head of the Maldivian Democratic Party, which leads the ruling alliance. “China is not buying anything from us. It is a one-way treaty.”
As he took office on Saturday, Maldivian President Ibrahim Mohamed Solih declared that the state coffers had been “looted” and warned that the country was in financial difficulty after racking up debt with Chinese lenders.
Former Maldivian president Abdullah Yameen, who lost the September election, signed the FTA during a visit to Beijing in December last year, and the same month his parliament ratified the treaty despite opposition protests that he had rushed through the 1,000-page document in less than an hour without any debate.
Nasheed, a former president and now an advisor to Solih, said parliament would not pass the law changes required for the zero tariffs agreement to come into force.
“It was ratified by parliament, but fortunately it calls for different sets of legislation. We are not going to have this further legislation. We can’t go with that,” Nasheed said in an interview in the capital, Male.
China’s embassy in Male did not respond to a request for a comment on the pact.
However, the Chinese Ministry of Foreign Affairs said in a statement that Chinese Culture and Tourism Minister Luo Shugang (雒樹剛), President Xi Jinping’s (習近平) special envoy to the inauguration, told Solih that Beijing paid great attention to developing relations with the Maldives.
China was willing to work with the Maldives to consolidate their traditional friendship, plan their practical cooperation and promote Belt and Road to inject “new impetus” into their future relationship, the ministry cited Luo as saying during a meeting on Sunday with Solih.
The statement cited Solih as expressing appreciation for China’s long-term support of the Maldives and that he was willing to further deepen cooperation under the Belt and Road framework.
Critics in the Maldives say a China-led infrastructure boom has left the tiny country of a little more than 400,000 people debt-ridden, and a free-trade pact would only make the situation worse given the lopsided nature of the relationship.
Between January to August this year, the Maldives’ imports from China were US$342 million, while its exports to China were US$265,270, according to Maldivian customs data.
It bought meat, agricultural produce, flowers, plants, electronics and toys from China among many other items.
It imported US$194 million worth of goods from India, its traditional partner, during the same period, while exporting US$1.8 million of products including scrap metal such as copper, aluminium and steel.
The Yameen administration said at the time that the FTA with China would help diversify the US$3.9 billion economy and boost fisheries exports from the Maldives, crucial since the EU declined in 2014 to renew a tax concession on them.
A member of Solih’s transition team also said the administration was thinking of canceling the pact.
“It makes no business sense,” the official said, requesting anonymity because of the sensitivity of the matter. “This is not something we are going to pursue, we expect the cabinet to meet and take a formal decision on this.”
The new administration plans an audit of the deals signed by the Yameen administration, but it said it had no plans to suspend or cancel any of the projects, such as airport expansion and housing contracts, given to Chinese firms.
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