Diplomatic Enclave: Free Trade
Maldive’s free trade arrangement with China would serve to reduce India’s economic presence in the strategically important island nation

Maldives President Abdulla Yameen’s ongoing visit to China (his third in three years) has got a boost with the Maldives-China Free Trade Agreement that is likely to be signed during the visit. The Free Trade Agreement was hastily rushed through the Majlis, the Maldivian Parliament last week in an emergency session. It was introduced in the Majlis, referred to the committee on national security and speedily approved in a matter of minutes by the 30 members present in the 85-member Majlis. Though the opposition has vociferously criticized the agreement and its passage through the Majlis, the document was ready for signature before the China visit.

Maldives that once had the image of a honeymooner’s paradise is now also known for its fractious politics. Yameen has been criticized by the US and the EU for his handling of the political dissonance. Prime Minister Narendra Modi has visited all South Asian neighbours in the past three years with the sole exception of the Maldives. A tour planned in March 2015 had to be put off due to the political upheaval in Male, the capital. 

As international criticism politically isolated Yameen, he turned to building bilateral relations with China and Saudi Arabia. The China-Maldives engagement gathered pace with the visit of Chinese President Xi Jinping to the Maldives in September 2014 when the Yameen government pledged support to the maritime silk road segment of China’s Belt Road Initiative.

Since then, the Maldives has become an attractive destination for Chinese investment. China is an important source of tourists for the Maldives, and the government expects to increase tourism after the Chinese funded new runway is ready in mid-2018. Chinese companies are involved in the Maldives plan to build more tourist resorts (50 more by 2018) to take tourist arrivals to 1.5 million annually, as well as upgrading the international airport, constructing roads and houses on reclaimed land.


Opposition leaders have claimed that details of the FTA have not been released. It is said that Maldives would benefit from duty free exports of fish and fish products to China while it waives 90 per cent of its tariffs for imports from China. Former President of Maldives Mohammad Nasheed, currently in exile in London, criticised the FTA, saying: “It will deepen the debt trap to China. Already more than 70 per cent of our foreign debt is owed to Beijing, which gives it huge leverage over us, undermining Maldivian sovereignty and independence.” The Maldives Trade Union has warned of Chinese companies monopolizing the Maldivian market and driving out local enterprises. The Maldives was recently downgraded to a “fragile state” category by the IMF over the state finances and the political turmoil.

Yameen has ridden roughshod on the opposition, with leaders of three main opposition parties disqualified from contesting elections through being sentenced to prison terms on various charges. The Maldives was ruled by President Maumoon Abdul Gayoom for 30 years till a pro-democracy movement led by Nasheed resulted in an election in 2008 when Nasheed’s Maldivian Democratic Party won the popular vote. However, Nasheed was ousted in an armed action in 2012. Presidential elections were held in 2013 when Abdulla Yameen, half-brother of Gayoom was elected. After the election, Nasheed was convicted for terrorism for actions taken while he was president.  Following appeals from several countries, Nasheed was allowed to go to London for medical treatment where he sought political asylum.

In an ugly turn to the ongoing political drama, in July this year the government ordered troops to storm the Majlis and prevent opposition members from entering the House to vote on a no-confidence motion against the Spea-ker Abdulla Maseeh Muhammed. A vote would have exposed Yameen’s support after a series of defections from the ruling party. Yameen lost support within his party as his half-brother, former President Gayoom broke away and supported Nasheed, whom he had once jailed as a political activist.


In another rushed legislative action, the Yameen government had amended the constitution to allow leasing reclaimed land to foreigners for a 99 year lease’ a move seen as favouring Chinese business interests. Yameen has sought to assuage Indian feelings over increasing Chinese influence in the Maldives during his state visit to India in 2016 by outlining his ‘India-first policy’. The FTA had been in discussion for some months but the speed with which it was rushed through caught New Delhi by surprise.

Maldives officials have tried to play down the impact of the FTA on India, saying “enhanced trade relations with China will not affect Maldives relations with its neighbours.” China has been increasing its economic influence in South Asian countries, from Nepal, Bangladesh and Sri Lanka, together with its CPEC with Pakistan.  The free trade arrangement with China would serve to reduce India’s economic presence in the strategically important island nation.

Shubha Singh