DEVELOPMENT GOALS FOR MALDIVES

UNCLAS SECTION 01 OF 03 COLOMBO 002132

SIPDIS

SENSITIVE

SIPDIS

STATE FOR SA/INS

MCC FOR D NASSIRY AND E BURKE

GENEVA PASS USTR

E.O 12958: N/A
TAGS: ECON EAIR ENRG EWWT SENV EINV ETRD MV

SUBJECT: DEVELOPMENT GOALS FOR MALDIVES


1. (U) Summary: The importance of creating a stable economy before
Maldives' 2011 LDC graduation, diversification beyond the fisheries
and tourist industries, and promoting environmental protectionism
were the main topics of Assistant U.S. Trade Representative (USTR)
to South and Southwest Asia, Ambassador Douglas A. Ambassador
Hartwick's visit to Maldives.


2. (U) In a series of meetings held in Male', Maldives on December
5-6, 2006, Ambassador Hartwick and USTR Special Assistant Manpreet
Anand, accompanied by Econoff and Econ specialist, met with
President Maumoon Gayoom, the Ministers of Tourism and Civil
Aviation, Finance and Treasury, Economic Development and Trade,
Atolls Development, and Foreign Affairs, and the Attorney General's
Office to discuss the USTR's interest in promoting and strengthening
bilateral economic links and trade opportunities between the U.S.
and Maldives. The Ambassador also consulted with U.N. and World
Bank country representatives to follow-up on the tsunami-recovery
programs related to the Bush-Clinton Fund. End Summary.

Economic Expansion
--------------


3. (U) Ambassador Hartwick articulated the USG's support of the
Government of the Republic Maldives' (GORM's) goals of global
economic expansion and the USG's interest in assisting the GORM to
create a market-friendly environment that would increase trade
between the two countries. GORM officials responded favorably,
noting that these ideas aligned with the GORM's national goal of
becoming a top-ranking middle-income country by 2011, the year
Maldives graduates from LDC status. Driving forward its Reform
Roadmap to achieve their "Vision 20/20" national goals, the GORM is
proposing a plethora of new legislation to further their political
and economic reform agenda.


4. (U) The GORM faces multiple economic challenges, including its
attempt at simultaneous political (see septel) and economic reform,
its disparate topography, its lack of specialized and vocational
training, and its two-sector economy based on tourism and fishing.
Nevertheless, some progress is being made in drafting economic
legislation, establishing schools of higher education, and exploring
ways to diversify its economy.

Preparations for Graduation from LDC Status
--------------


5. (SBU) In late November 2006, the GORM participated in a workshop
sponsored by the IMF, ITC, UNCATD, UNDP, World Bank and the WTO to
develop an Integrated Framework to guide the GORM's graduation from
LDC status. Based on workshop recommendations, the GORM seeks to
diversify its economic portfolio with its neighbors. The GORM does
not plan to pursue the recommendation of the workshop to peg the
Maldives ruffiya against the euro. Currently, it is pegged against
the dollar.

U.S. - Maldives Economic Links; a Mission in DC
-------------- --


6. (U) Ambassador Hartwick noted that few of the 600-700,000
tourists coming to Maldives each year are US citizens. The GORM
wants to develop a strategy to increase interest in Maldives for
both the American tourist and investor. Riding the wave of free
publicity generated by Katie Holmes and Tom Cruise's recent
honeymoon to Maldives, the Ministry of Tourism and Civil Aviation
plans a Maldivian promotion night at the Four Seasons Hotel in
Hollywood. Further, the GORM plans to participate in more trade
fairs in major cities across the U.S. which they have neglected in
previous years. Other areas of promotion Ambassador Hartwick
suggested included media engagements, airline promotions, travel
agents and the internet.


7. (U) To further enhance engagement with the U.S., Ambassador
Hartwick was told that the GORM is establishing a mission with a
trade office in Washington D.C. in January 2007. The GORM also

COLOMBO 00002132 002 OF 003


plans to open missions in Japan and Switzerland in 2007. Ambassador
Hartwick praised this initiative, stressing that a physical presence
in the U.S. capital city will greatly enhance both political and
economic ties between the countries.

American Investments and Opportunities
--------------


8. (U) Following are current or potential investment opportunities
for US businesses:

-- HOTELS: Three major U.S. hotel chains are planning to build in
Maldives in the next 3 to 5 years: Sheraton/Westin, Ritz-Carlton
(with Sri Lanka's Ceylinco managing the construction) and Holiday
Inn. Ambassador Hartwick stressed that the Maldives should focus on
promoting to the longer-term tourists instead of the single or
double night stop-over business executive.

-- BANKS: Qasim Ibrahim, Minister of Finance and Treasury,
requested Ambassador's Hartwick's assistance in organizing American
investors from the financial sector to visit the Maldives. A
visibly excited Ibrahim described the opportunity to establish
full-fledged banking services in the Maldives as a "golden
opportunity" since international banks in-country "have yet to lose
1 USD since arrival." He specifically requested the U.S. Embassy to
ask the Mumbai-based Bank of America to establish a full-scale
branch in Male'. (Post is working on this.)

-- OPPORTUNITIES "FOR ALL:" The Minister of Atolls Development,
Mohamed Deen, said that there are opportunities for U.S. products in
all sectors. He said that his own company, Orchid Group, uses many
U.S. based products such as generators and water plants. These
products, however, are brokered through another foreign national
agent (usually from Singapore),instead of directly from the U.S.
Additionally, Deen noted that both local and tourist consumers are
demanding higher-quality products than before; especially from
Australia, U.S. and the E.U.

Possible Leadership in Environmental Concerns
--------------


9. (SBU) Ambassador Hartwick stressed to President Gayoom the
opportunity for Maldives to become a leader in environmental
protectionism, emphasizing that the tourism industry is based on its
unique and pristine environment. Maldives can be the spokesman in
leading the region to promote eco-friendly tourism. Ambassador
Hartwick suggested that Maldives join regional cooperative efforts
and organizations that focus on regulating environmental
protectionism requirements. The Minister of Tourism expressed
interest in pursuing this topic and asked for additional guidance
from Ambassador Hartwick.


10. (SBU) Ambassador Hartwick was informed that the GORM has
drafted environmental regulations as a part of its reform roadmap.
These regulations would institute heavier fines for littering the
sea, establish a professionally-designed dumping area for each
atoll, reclaim Garbage Island (informally named this since garbage
has been used to significantly increase its size),research viable
alternative energy and sewage treatment plans, set height
restrictions for buildings, and initiate a reef conservation
project. The regulations have met with some resistance due to
correspondingly higher investment costs. To help mitigate this
impact, Ambassador Hartwick suggested that the GORM create economic
incentives such as duty-free importation of viable technology and
environmental-friendly goods that would ensure support and
effectiveness of the programs.

Transportation Development Goals
--------------


11. (U) International and national transportation issues continue
to challenge Maldives as it seeks to unify the country by easing
travel for locals and tourists. The government hopes that the

COLOMBO 00002132 003 OF 003


expansion of Male' International Airport and the newly-constructed
airport in Gaan Adu Atoll (to be open for chartered planes in 2007)
will significantly increase the number of tourists. The GORM is
investigating the establishment of a national airline and more
direct flights from New Delhi, Beijing, Kuwait, and Dubai. Resorts
have proposed five new regional airports with private aviation and
have offered to subsidize their development. The Ministry of Atoll
Administration also plans to build 5-10 public airports to provide
nighttime as well as daytime connections between the atolls. The
GORM plans to send students to the U.S. for pilot training to
support these efforts.


12. (U) The GORM also plans to expand Male' port and construct one
or two new transshipment ports in the North. As Maldives is
strategically located on major oil shipping lanes, China and India
have expressed interest in the construction of a transshipment port.
Currently only 40,000 containers pass through Male' port. The cost
of constructing a new port, according to the World Bank, could be as
high as half of Maldives' GDP, making private investment essential.


Tsunami- Reconstruction

SIPDIS
--------------


13. (U) Ambassador Hartwick consulted with the UNDP on the status
of Dhiggaru Island, adopted by the Bush-Clinton Fund.
Reconstruction delays are blamed on the high cost of materials and
transportation, island capacity constraints, and a shortfall in
funding. The UNDP considers Dhiggaru Island a model island because
it exemplifies UNDP best practices in integrating the community into
the reconstruction process, empowering the community to take
responsibility, installing a system of peer-pressure and reducing
dependency on donors. Reconstruction and rehabilitation programs
were prioritized in the following order: shelter, livelihood
(fisheries, vegetation); and infrastructure (harbor, soil erosion,
sea protection). Almost all of the 161 damaged or destroyed houses
on the island are completed. The Dhiggaru harbor rehabilitation
project, managed by the MT Hojgaart firm, is completed with a new
quay wall and breakwater. Construction of a fish market and
community training to boost production of alternative, value-added
fish products is underway.


14. (U) COMMENT: Ambassador Hartwick's meetings further confirmed
the intensity with which the GORM seeks to develop economically. As
a small island nation, Maldives has utilized its most obvious assets
for economic development: its sand and palm trees (tourism) and its
blue waters (its fishing industry). Embassy will continue seeking
ways to assist Maldives in its economic diversification and
development, while identifying opportunities for US business and
investment.


15. (U) Ambassador Hartwick did not have the opportunity to clear
this cable.

BLAKE