MALDIVES: MAJOR ECONOMIC CHANGES ON THE HORIZON?

UNCLAS SECTION 01 OF 02 COLOMBO 000933

SIPDIS

SENSITIVE

STATE FOR SA/INS, EB, DRL, INL, OES
TREASURY FOR OTA
COMMERCE FOR ITA:ABENAISSA

E.O. 12958: N/A
TAGS: BEXP EAIR ECON EFIN ETRD MV PREL SNAR ECONOMICS
SUBJECT: MALDIVES: MAJOR ECONOMIC CHANGES ON THE HORIZON?

REF: 03 COLOMBO 1674

SENSITIVE BUT UNCLASSIFIED. PLEASE PRTOECT ACCORDINGLY.


1. (U) Econoff traveled to Male, and Gan May 17-20 and
learned about the following economic activities:

-- New Legislation
-- Major Construction Opportunities
-- Garment Factories Closing
-- New International Airport
-- Customs Cooperation and Agreement
-- Terrorist Financing
-- GLOBE

New Legislation
--------------

2. (U) Dr. Hassan Saeed, the new Attorney General said he
planned a complete review and update of civil and criminal
laws over the next five years. On the economic front, there
will be new Bills on Audit, Treasury, Public Enterprises,
Securities and Companies. Some aspects of the Land Law have
already been reformed. Saeed also said that Labor issues had
been neglected and that a Labor Bill will be presented to
Parliament by the end of the year, outlining the rights and
responsibilities of government, labor and management. (Note:
Labor reform is an area in which the USG has been urging
action in meetings with the previous AGs. Maldives does not
have GSP privileges based on its current labor stance.)

Major Construction Opportunities
--------------

3. (U) Maldives has numerous major construction projects
underway or in planning. Eleven new islands have been
offered for resort development. Construction and reclamation
continues on Hulhumale, a large island that will ultimately
provide housing and services for 90,000 people, as well as
warehousing and commercial activities. A tender notice for a
bridge linking the airport island to the capital island is
now published. Work on a yacht port in the north and a
container port in the south is in progress. Two new
canneries will be built in the north as well. There is
minimal local expertise in construction, so these projects
are designed and built by foreign firms, though there is
little US participation.

Garment Factories Closing
--------------

4. (U) Just over 2,000 workers, primarily Sri Lankan, work in
four Sri Lankan-owned garment factories on the southern
island of Gan (see reftel). All factories will close by
early 2005, as the Maldivian quotas under the Multi Fiber
Arrangement expire. The factory operations and, owners hope,
the experienced staff will move to Sri Lanka, where costs are
considerably lower. The closure will affect GoRM through
loss of revenue from the 4-5 flights each week servicing the
factories, diminished demand for fresh foods and loss of
royalties paid for the use of land.

New International Airport
--------------

5. (U) Econoff met with Ahmed Naseer, Manager of Regional
Airports for the Ministry of Transport and Civil Aviation at
Gan airport. Construction of a new international airport,
using the old RAF runway in the southern island of Gan (50
miles south of the equator and 400 miles north of Diego
Garcia) should finish in October with the official opening
early in 2005. Built to ICAO standards, the airport will be
able to handle up to a fully loaded Boeing 767 aircraft, or
Airbus A300 with minimum load. The airport,s main clients
are expected to be tourists at the new Shangri-La resort
(under construction),and the four other islands nearby that
were just offered for tourism development. One or two
flights a week are expected in the beginning, originating in
Europe, China and/or Japan. There is still interest in
establishing a regional flight school at the airport.

Customs
--------------

6. (SBU) Ibrahim Zuhair, Managing Director of Customs noted
that the Agreements for bilateral Customs Cooperation and
Maldives, issuance of electronic garment visas (ELVIS) were
with the Ministry of Foreign Affairs, and he expected their
approval soon. He said that fighting illegal drug
importation and use is a high priority for the government,
and requested assistance in the form of a consultant to study
the GoRM needs to enhance its drug interdiction capacity. US
DEA will conduct anti-narcotics law enforcement training in
Maldives this month through the Colombo Plan. (Note: Illegal
drug use was also raised as a significant problem by the
Chief of Addu Atoll in the south.)

Terrorist Financing
--------------

7. (SBU) The Maldives Monetary Authority (MMA) acts as the
Central Bank for GoRM. Abdul Ghaffor, the Assistant Director
confirmed that the MMA acts immediately upon the information
sent by the embassy on terrorist organizations, but has not
found any assets in Maldivian banks. Ghafoor will attend the
FINCEN anti-money laundering conference in Abu Dhabi and said
the GoRM looks forward to the upcoming visit by US Treasury
Anti-Money Laundering Team the week of June 14. He mentioned
the need for assistance on drafting legislation on terrorism
and money laundering.

GLOBE Program
--------------

8. (U) Dr. Mohammed Ali of the Environmental Research Center
(ERC) said that ten schools have been selected for the GLOBE
program. Organizers were looking for ways to include schools
in the outer atolls and are contemplating using roving
trainers to train teachers on the distant islands. Dr. Ali
showed Econoff the new SAARC Coastal Management Office, also
located at the ERC, which will open in June or July.

Comment
--------------

9. (SBU) In comparison with previous visits, there was a
noticeable increase in activity in economic sectors. Opening
eleven new islands and a second international airport for
development signals GoRM confidence in the growing demand for
the Maldives' luxury brand of tourism, and is a reflection of
successful efforts to attract visitors from new markets,
including Russia and China. Since all inputs (including
sand) must be imported, this development offers huge
opportunities for construction, management, equipment,
transport, and related suppliers. The Econ/Comm section will
continue to publicize these opportunities for US firms.


10. (SBU) Comment continued: Action on the list of new
economic legislation by Attorney General would modernize and
open the economy significantly. Though all GoRM
interlocutors referred to major changes in the legislation,
regulations and the Constitution, private sector
representatives had lower expectations, saying they didn't
expect the President to loosen his tight hold on government
or society by very much.
LUNSTEAD