It has been a busy month for the Maldives. The US Secretary of State, Mike Pompeo, paid a visit and announced that America is finally opening an embassy in the country after over a half-century of diplomatic ties. Shortly after, the Indian Foreign Secretary, Harsh Shringla, visited to sign a $100 million top-up grant for a $500m infrastructure project to link the capital to surrounding islands. The close timing of these trips is not a coincidence.
It reflects a shared Indian and American determination to compete with China’s deep pockets as it tries to establish firm footholds across the Indian Ocean. For a country like the Maldives, with limited resources and vulnerable to climate change, peaceful attention from the great powers is potentially advantageous. But it can also bring pitfalls. There are no signs of existing US and Indian military tensions with China abating, from the Himalayas to the Taiwan Straits and the South China Sea. The Maldives is only likely to remain grateful as long as this competition remains confined to aid and investment.
The high stakes make sense as soon as you look at the sea lanes. The Indian Ocean has always been the maritime equivalent of the Silk Road, connecting East and West, with its many legacies of trade and travel. Historically, this has made it strategically vital for the West.
Indian Prime Minister Narendra Modi, centre left, congratulates Maldives President Ibrahim Mohamed Solih after his swearing-in ceremony in Male, Maldives, in 2018. AP Photo
Trincomalee in Sri Lanka became the Royal Navy’s East Indies headquarters in 1813, guarding the passage between Suez and Singapore for 150 years. As independent Sri Lanka’s politics grew more non-aligned, Britain shifted to RAF Gan in the Maldives and later to Diego Garcia in the disputed Chagos Archipelago, just south of the Maldives. Britain remained the pre-eminent power in the region until its withdrawal in 1971, leaving a vacuum filled by the US, and by the 1980s, India.
The seamless transition meant that the Maldives was largely untroubled by the Cold War, leaving it a free hand to manage its difficult but remarkably rapid economic and social change. At the time of its independence in 1965 it was a scattered grouping of traditional fishing villages. It is now an upper-middle-income economy driven by high-end international tourism. It has also evolved from a sultanate, to an authoritarian republic, to a now flourishing democracy. Altogether, it is one of the unsung success stories of South Asia and the Muslim world.
The last decade has, however, been a time of profound geopolitical change that this time around refuses to bypass the region. China's ambitious Belt and Road Initiative seeks to integrate the economies of nations across the Eurasian land-mass and Indian Ocean with its own in order to realise the "Chinese Dream". The result, especially during the 2013-2018 rule of the Maldives' former president, Abdulla Yameen, was an influx of billions of dollars in loans and investment. During the Yameen years, unfortunately, negotiations on many of these deals were largely opaque. Critics say the results were not always in the public interest.
The same period also saw a more assertive Chinese foreign policy, intended to definitively end a period that China calls the “Century of Humiliation” at the hands of colonial powers. The key objective of this policy is restoring China to what it sees as its rightful place in the global order.
It is fair to say that the US has reacted strongly, perceiving this as a direct threat to its economic, technological and military dominance in the world. Former president Barack Obama’s toughening stance saw a doubling down under his successor, Donald Trump. All signs point to this continuing under the incoming Biden administration.
India, although initially keen to develop its economy in tandem with China's, now also shares American concerns, as do traditional US allies in the region, such as Australia and Japan. One of the uppermost priorities for this bloc is working together to keep as many Indian Ocean states aligned with them as possible. An unmistakable signal for this policy is the renaming of the US military's Pacific Command to "Indo-Pacific Command" in May 2018.
Michael Pompeo, US Secretary of State, left, speaks to Toshimitsu Motegi, Japan's Foreign Minister, right, during a meeting of the 'Quad' in Tokyo in October. Bloomberg
The Maldives, with its strategic location and heavy Chinese investments, is naturally at the top of the list of countries that the US and India want to keep on their side. Relations with India have always been good, but New Delhi's generosity is now reaching new heights. This could not have come at a better time. The Maldives' tourism-driven economy has shrunk by 30 per cent due to the coronavirus pandemic. Even though India is itself struggling with the economic consequences of Covid-19, it has agreed to give $250m in economic support to the Maldives. Meanwhile the $500m Greater Male Connectivity Project will provide much-needed jobs in the short term and, more importantly, ease serious land shortages in the capital where most of the Maldives' population lives.
These investments boost both the political stability of the Maldives and the goodwill of the Maldivian public. It is not at all clear that this kind of assistance would have been offered if the strategic stakes had not been raised. But the benefit to the Maldives from great-power rivalry hinges on two factors.
One is the continuing health of the country's governance. If this were to deteriorate, the enormous quantities of aid given to the country could actually prove politically and financially destabilising. Second, the worrying possibility that the region becomes the site of a military build-up. Not only would this damage tourism, but with such high stakes, the impulse for great powers to interfere in Maldivian politics is likely to sharply increase.
All this would distract from the Maldives’ existential enemy, climate change. The country helped found the Alliance of Small Island States in 1990 to co-ordinate action and Mohammed Nasheed, who served as president from 2008-2012 and who currently heads the ruling Maldivian Democratic Party, famously held a 2009 cabinet meeting underwater in scuba gear to raise awareness of the threat from rising sea levels.
However Sino-American competition in the region might play out, the Maldives must hold its course in the oncoming storm.
Johann Chacko is a writer and South Asia analyst
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
SMEs in the UAE are defined by the number of employees, annual turnover and sector. For example, a “small company” in the services industry has six to 50 employees with a turnover of more than Dh2 million up to Dh20m, while in the manufacturing industry the requirements are 10 to 100 employees with a turnover of more than Dh3m up to Dh50m, according to Dubai SME, an agency of the Department of Economic Development.
A “medium-sized company” can either have staff of 51 to 200 employees or 101 to 250 employees, and a turnover less than or equal to Dh200m or Dh250m, again depending on whether the business is in the trading, manufacturing or services sectors.
Checks continue
A High Court judge issued an interim order on Friday suspending a decision by Agriculture Minister Edwin Poots to direct a stop to Brexit agri-food checks at Northern Ireland ports.
Mr Justice Colton said he was making the temporary direction until a judicial review of the minister's unilateral action this week to order a halt to port checks that are required under the Northern Ireland Protocol.
Civil servants have yet to implement the instruction, pending legal clarity on their obligations, and checks are continuing.
Earth under attack: Cosmic impacts throughout history
- 4.5 billion years ago: Mars-sized object smashes into the newly-formed Earth, creating debris that coalesces to form the Moon
- 66 million years ago: 10km-wide asteroid crashes into the Gulf of Mexico, wiping out over 70 per cent of living species – including the dinosaurs.
- 50,000 years ago: 50m-wide iron meteor crashes in Arizona with the violence of 10 megatonne hydrogen bomb, creating the famous 1.2km-wide Barringer Crater
- 1490: Meteor storm over Shansi Province, north-east China when large stones “fell like rain”, reportedly leading to thousands of deaths.
- 1908: 100-metre meteor from the Taurid Complex explodes near the Tunguska river in Siberia with the force of 1,000 Hiroshima-type bombs, devastating 2,000 square kilometres of forest.
- 1998: Comet Shoemaker-Levy 9 breaks apart and crashes into Jupiter in series of impacts that would have annihilated life on Earth.
-2013: 10,000-tonne meteor burns up over the southern Urals region of Russia, releasing a pressure blast and flash that left over 1600 people injured.
