REQUEST FOR TIFA WITH MALDIVES

UNCLAS COLOMBO 001406 SIPDIS SENSITIVE SIPDIS DEPT PLS PASS TO USTR DEPT FOR SCA AND EEB E.O. 12958: N/A TAGS: ETRD ECON ECIN EINV KISL CE SUBJECT: REQUEST FOR TIFA WITH MALDIVES REF: A. 1. COLOMBO 289 ¶B. 2. BLAKE-HARTWICK-GABOR EMAILS (AUG/SEPT 07) ¶1. (U) This is an action request for USTR. Please see para two. ¶2. (SBU) Summary and action request: Post recommends, and seeks USTR guidance on, the start of Trade and Investment Framework Agreement (TIFA) talks with the Government of the Republic of Maldives (GoRM). Post supports the negotiation of a TIFA to enhance current trade and investment between the U.S. and Maldives, to explore new initiatives to increase trade in products and services, to have a forum to discuss implementation of WTO commitments, and to serve as a positive, bilateral engagement forum with this pro-Western, 100% Islamic country. End summary and action request. Good for Trade and Investment -------------- ¶3. (SBU) Although U.S. trade and investment in Maldives is small when compared with the remainder of South Asia, it continues to grow. U.S. exports have increased 18% to date this year and are expected to reach USD 20 million (out of a total of USD 800 million of imports) by year's end. Well-known U.S. brands Hilton, IBM, and Coca-Cola, among others, operate in the local market. Maldivian laws and attitudes on investment by foreign entities are favorable, including: no income, corporate, or property taxes (companies pay royalties -- at most -- of 15% of net profits or 3% gross turnover); right to 100% foreign ownership; exemption of import duties on raw materials; legally-backed investment guarantee; freedom to repatriate profits and capital proceeds; long-term lease of land for large scale projects; freedom to use foreign managerial, technical and unskilled workers; and overseas arbitration of disputes. Nevertheless, trade and investment lags when compared with European and regional players. ¶4. (SBU) Despite a positive investment climate, U.S. engagement in various sectors, such as insurance and banks, ports and aviation, and telecommunications, as well as regulatory areas such as IPR, the environment, and labor, would lead to a more favorable atmosphere for U.S. companies operating or hoping to operate in Maldives. ¶5. (SBU) Maldives joined the WTO in 1995. However, it continues to work towards fulfillment of its WTO membership commitments. A TIFA would serve as a forum to discuss Maldives implementation of WTO commitments and foster faster implementation of these commitments. For example, increased U.S. engagement within the TIFA context would likely encourage Maldives to finalize its WTO IPR commitments in advance of the 2013 deadline. Not Just for TIFA's Sake -------------- ¶5. (SBU) A TIFA would also add value as a basis for positive bilateral engagement with the GORM to build on the goodwill engendered by U.S. assistance for tsunami reconstruction. As highlighted in ref a, Maldives is a moderate, pro-American Islamic country that is responsive to U.S. advice and supportive of U.S. diplomatic and military objectives. It is currently as a crossroads as it determines the future and pace of its pro-Western evolution towards democracy. As the September 29, 2007 first-ever terrorist bombing in Maldives demonstrates, if this process stalls or fails, Islamic extremism will be the likely beneficiary. A TIFA forum will not only help U.S. companies interested in taking advantage of investment opportunities and increasing trade opportunities, but will also serve as a forum to demonstrate positive U.S. engagement with senior government leaders. ¶6. (SBU) Comment: Post maintains good relations with senior Maldivian officials, but our bilateral relationship nevertheless suffers from a lack of daily on-the-ground presence. Officials are generally positive about trade and investment with U.S. companies, and welcome the opportunity to discuss both public and private-sector opportunities with investors. Based on our interactions with senior Maldivian officials, post believes Maldives would welcome the opportunity to sit down with senior Washington officials regularly via the TIFA format to discuss the entire range of trade, investment, and economic issues that concern our two countries. End Comment. BLAKE