Saudi Arabia's growing role in the Maldives
- 24 March 2014
- From the section Business
Foreign holidaymakers in the Maldives, one of the world's most popular luxury honeymoon destination, were not happy earlier this year when their hotel bookings were cancelled at short notice.
The reason was that Crown Prince of Saudi Arabia, Salman bin Abdulaziz al-Saud, had booked out three whole islands for nearly a month.
It is just one example of the growing role of Saudi investment in the archipelago, a factor which may make the Maldives' government unwilling to ruffle the feathers of Saudi Arabia's rulers.
"The well-being of our guests is always our primary concern," a spokeswoman for the Anantara resorts told the British newspaper, the Daily Mail, which reported that some tourists were angry at being moved to make way for the Saudi prince.
Prince Salman, who is also Saudi Arabia's defence minister, was on an official business visit at the invitation of Maldives President Abdulla Yameen, who was elected in November after two years of political turmoil.
This reflects growing co-operation between the two countries. Saudi Arabia has already promised the Maldives a five-year soft loan facility of $300m (£181m), pledged last year when the country's previous president visited Riyadh.
The Maldives currently has a yawning fiscal deficit averaging 14% of GDP over the past five years, according to the Asian Development Bank.
Air links are opening, with Maldivian carriers set to fly to Saudi Arabia for the first time - and 14 flights a week are envisaged.
At the same time, the Saudi property company Best Choice says it is building a family holiday resort worth $100m in the Maldives, which it says will have "world-class facilities".
The country is also seeking Saudi partnerships in energy and transport, but the biggest co-operation sector is Islamic affairs.
The Saudi prince has pledged to build 10 "world-class" mosques in the archipelago, seven of them this year, while visiting Saudi scholars recently pledged a grant of $100,000 for Islamic education.
They also announced 50 scholarships for students to study in Saudi Arabia, though the response is said to be sluggish.
Like Saudi Arabia, the Maldives is dominated by Sunni Islam. And Mr Yameen, the half-brother of the former autocratic president Maumoon Abdul Gayoom, has laid stress on religious conservatism.
Yet the country has also come under criticism internationally for other issues.
"Nationalisation of large foreign investments, human rights concerns such as continued flogging of under-age rape victims for extramarital sex," says J J Robinson, a British journalist and expert on the country.
"And widespread abuse of the expatriate workers who make up a third of the country's population."
No such criticism comes from Riyadh, whose cash is being sought to sustain the large civil service.
Mr Yameen's government has tightened up laws against permitting other religions and is considering a ban on importing kosher food.
In seeking Saudi investments, however, the Maldives cannot afford to alienate too many tourists as tourism remains by far the archipelago's biggest earner.
A few years ago the Maldives Monetary Authority estimated the sector was indirectly responsible for 70% of the economy and 90% of foreign exchange receipts. Last year 1.2 million tourists visited the country, which has a population of just 330,000.
While the top resorts are owned or managed by international brands such as the US-based Hyatt or the French Club Med, it is China that is delivering more and more of the tourists.
Last year 44% more Chinese tourists came to the Maldives than in 2012. One in four visitors is now Chinese, although they spend far less than European holidaymakers do.
Despite the numbers, China's diplomatic stake in Maldives is often overplayed.
"China already has substantial influence in neighbouring Sri Lanka and Maldives is small fry in comparison," says JJ Robinson.
However, there was widespread dismay in India at one development when, in 2012, the Maldives cancelled the Indian firm GMR's 25-year $500m contract to redevelop the international airport at the capital, Male.
It reflected a growing mood of nationalism after the former pro-western president, Mohamed Nasheed, was forced from office. He called the decision a blow to foreign investment and tourism, and trade between India and the Maldives fell almost 10% the following year.
Delhi is now reportedly pressing for a bilateral agreement to protect Indian investments in Maldives. Meanwhile it will be uneasy at the country's growing defence ties with its rival Pakistan - the Maldives' military chief recently visited Islamabad.
Fisheries is the Maldives' second industry, employing some 20% of the workforce, but there is now a search for new markets after the European Union removed its duty-free status for the country's fish.
In response the Maldives attacked the EU's policy and said it would certify its fish as halal and find new markets - such as Saudi Arabia.
But tourism still reigns supreme as investors know they will get a good return in this high-end sector and they are likely to keep coming as more islands are opened up for hotels.
A visiting official from the International Monetary Fund recently suggested Maldives should raise its tourism tax given its huge deficit.
The government shows no sign of wanting to deter international investment. But ever-watchful for signs of Islamic radicalism, some of the Maldives' Western backers may be looking nervously at Saudi Arabia's influence.