China, Maldives clash over mounting Chinese debt as India warms up to Male

New Delhi/Male (IANS) Former Maldivian President Mohammed Nasheed has clashed with his country's Chinese envoy over Male's "alarming levels" of Chinese debt, which stands at $3.4 billion, even as India has regained ground in the strategically important Indian Ocean atoll nation with the exit of pro-Beijing former president Abdulla Yameen.

In a story being played out in other countries too, including African nations, where China has a massive presence in the infrastructure sector, Nasheed, who is now Parliament speaker and is close to India, said that Maldives owes China $3.4 billion as repayment for loans for projects undertaken during Yameen's rule.

Speaking at a think tank meeting last week, Nasheed said that the cost of Chinese projects was extremely high and that from 2020 onwards 15 per cent of Male's budget will have to be spent on paying back the debt owed to various Chinese companies.

"They came in; they did the work and sent us the bill. So it's not the loan interest rates as such but the costing itself. They over-invoiced us and charged us for that and now we have to repay the interest rate and the principal amount," Nasheed was quoted as saying. 

He said the present Ibrahim Solih government was working on paying back the cost as well as the interest, according to Maldivian media reports.

"I can't see how our development can be rapid enough to have the amount of savings to re-pay China," he said, adding that as a solution, Maldives would renegotiate the payment structure with China.

Nasheed also said that India's GMR Group had proposed to finance the Sinamale' Bridge project (China-Maldives Friendship bridge) for $77 million, while the China Communication and Contracting Company (CCCC) presented a higher price. He said Yameen's government gave the contract to the Chinese company, due to which Maldives now owes $300 million to CCCC.

Responding to Nasheed on Saturday, the Chinese Ambassador Zhang Lizhong in a series of Twitter posts said that the cost of the bridge project was $200 million, of which 57.5 per cent was funded by a Chinese grant aid. 

He said that the Maldivian government had to pay back $100 million only, which was half of the project cost, spread over a 20 year period after completing a five-year grace period. Zhang said the total amount owed by Maldives to China was $1.529 billion, which included $872 million in concessional loans and $657 million in preferential loans up to November last year.

In response, Nasheed tweeted: "Maldives total foreign debt includes the active sovereign guaranteed debt and not just government to government loans. The extent of Maldives sovereign guarantees to Chinese banks are at potentially alarming levels. We must all be mindful for the future. @AmbassadorZhang."

Retorting to Nasheed's tweet, Zhang asked him to refrain from spreading "continuous unverified and misleading information to the public", which could harm bilateral ties.

Before President Solih took office in November last year, most of the infrastructure projects had been given to China by the Yameen government, leaving the nation in massive debt.

Maldivian Finance Minister Ibrahim Ameer had earlier said: "We believe that most of these projects are at inflated prices, and so we are looking at them."

One of the projects awarded to China was a hospital in Male that had run up a cost of $140 million, much more than a rival offer of $54 million, that had been originally made, Ameer said.

As part of its string of pearls encirclement of India, which China pitched as the Belt and Road connectivity corridor project, Beijing has built ports, bridges and highways in India's neighbours, including Bangladesh, Nepal, Sri Lanka and Pakistan.

After Yameen's ouster, Prime Minister Narendra Modi had attended President Solih's inauguration and said that India stood ready to help Maldives tide over its financial problems.

Modi visited Maldives in June - his first trip to a foreign country after taking over as prime minister for the second term - signalling the close cooperation between the two nations.

During the visit, the two countries agreed to start a regular passenger-cum-cargo ferry service between Kochi in Kerala and Kulhudhuffushi and Male in the Maldives.

Maldives is also reported to be planning to scrap an agreement with China to build an Indian Ocean observatory in Makunudhoo, which would have given Beijing access to a critical space in the Indian Ocean both from the commercial shipping and strategic point of view.

President Solih had also made India his first official stop abroad.

Signalling Male's strategic importance, India has allocated Rs 576 crore to Maldives for development aid in the 2019-20 budget, higher than the Rs 440 crore allocated in the last budget.

In Sri Lanka too, where Beijing has expanded its presence, Colombo handed over its southern port of Hambantota to the Chinese on a 99-year lease, after it failed to repay its debts.

According to former diplomat Sheel Kant Sharma: "China's policies are very different from what we normally understand by economic cooperation and trade relations, in the sense that when we (India) do these things, there is no strategic component. But in the case of China, these things are very integral to their strategic vision, and even the Chinese companies are part of the government, or are very closely connected with the government."

Sharma, who was former Secretary General of the South Asian Association for Regional Cooperation (SAARC), told IANS: "In bilateral economic relations, China's whole attitude is to buy influence, and it is not because of altruistic reasons. They have never been like that ever. And this is natural when they come to Maldives, where the speciality is they have hundreds of small islands spread into the Indian Ocean.

"And if China can buy off some of the islands, they don't have to create artificial islands like they are doing in the South China Sea. So they have a strategic interest in the Indian Ocean, as some of the trade sea routes straddle this area. So Chinese are doing everything in the manner of an imperial power, and it is very difficult to segregate them from their normal economic activity," he said.