China-India Brief #124

Guest Column

Maldives Election 2018: A Victory for India?

By Byron Chong   

Photo by Dying Regime on flickr.com

The Maldivian Presidential Elections on September 23, 2018, saw opposition candidate, Ibrahim Mohamed Solih – viewed as an ally of India - emerge victorious over the pro-China incumbent, Abdullah Yameen. New Delhi, which had been increasingly sidelined by the Yameen administration, wasted no time in congratulating Solih (with a personal call from Prime Minister Narendra Modi no less) and hailing his victory as the “triumph of democratic forces”.[1]   Beijing’s response came days later and had a more guarded tone. With the future of multiple Chinese-funded projects now in question, it called on the new Maldivian government to maintain “consistency and stability” in its policies and to ensure a conducive environment for Chinese businesses.[2] 

Media outlets have presented the election as a victory not just for Solih over Yameen, but also for India over China. Certainly, the contrast in responses from New Delhi and Beijing say as much. With the inauguration of a pro-India president in Male, many expect that India would seize this opportunity to regain its lost influence over the archipelago. China, correspondingly, would be increasingly overshadowed, and lose the diplomatic and economic clout it currently enjoys in the Maldives. While such an outcome is certainly possible, it is by no means set in stone. India will find that it is not so easy to pry its neighbour free of China’s grasp.

For one, China has acquired a huge presence in the Maldivian economy. Under the Yameen administration, China successfully made inroads into important sectors such as infrastructure, trade and energy. Beijing also signed a free trade agreement with Male, and in late 2016, acquired the island of Feydhoo Finolhu on a 50-year lease for just USD 4 million.[3] Chinese companies were awarded several large-scale infrastructure projects, such as the upgrading of the Velena International Airport (USD 830 million), construction of the Sinamale Bridge (USD 200 million) and the Hulhumale Phase II housing project (USD 434 milllion).[4]  It has been estimated that China’s loans to the Maldives total at least USD 1.3 billion and cost the island nation USD 92 million a year in repayments - roughly 10% of its gross domestic product (GDP).[5]  Failure to make these payments will inevitably lead the Maldives to start handing over land as equity. In a February 2018 report, former Maldivian President Mohamed Nasheed described this as a “land grab” and claimed that China had taken over “16 islands already”.[6]

Given their immense strain on the local economy, suspending these projects would surely be a tempting option for the incoming government. After all, Mahathir Mohamad did exactly that - halting over USD 23 billion worth of China-backed infrastructure projects - shortly after he was elected to replace Najib Razak as the Malaysian Prime Minister. However, suspending or cancelling these projects would result in heavy penalty fees that the island nation can ill afford. The Malaysian government is already facing USD 10.1 million in suspension fees for halting a high-speed rail link project to Singapore.[7]   Moreover, while mega-projects hog most of the limelight, there are also scores of lesser-known projects signed with smaller companies, some of which, have connections to Chinese state-owned companies. Some experts have questioned whether the new government will have the capacity or even the political will to renegotiate them all. [8]

The example of Sri Lanka will also stand as a reminder that a change of government may not be sufficient to break the dependency on China. Like the Maldives, Beijing had invested heavily in Sri Lanka during the Rajapaksa administration. After Maithripala Sirisena won the presidency, he ordered a halt on Chinese construction projects in an attempt to stop the country from sinking further into China’s debt trap. However, unable to repay the existing loans, he was eventually forced to accept Beijing’s demands, which included handing over the strategic port at Hambantota on a 99-year lease and restarting all suspended projects.[9]

Another aspect of China’s economic influence over the Maldives is tourism. The Maldivian economy is heavily dependent on tourism which accounts for nearly 40% of its GDP.[10] China is its largest source of tourists, contributing more than 300,000 visitors annually – roughly a quarter of all arrivals to the archipelago.[11]  Beijing’s ability to politicize tourism should not be underestimated. In March 2017, the Chinese government launched an unofficial boycott of South Korea after the Seoul government decided to install a U.S.-designed Terminal High Altitude Area Defense anti-missile system (THAAD). For the next nine months, South Korea saw its Chinese tourist arrivals fall by nearly half which resulted in an estimated USD 6.5 billion in lost revenue.[12]  A tourism-driven economy like that of the Maldives, will be especially susceptible to such tactics if it ever dared to go against China’s demands.

Beijing will also make full use of the huge resources at its disposal to get its way. It has been alleged that Najib, Yameen and Rajapaksa have all received Chinese funds for their re-election campaigns.[13]  Rajapaksa in particular, was said to have received USD 7.6 million through the state-run China Harbour Engineering Company.[14]  Even if there are changes in government, China will simply woo the new administration to its side. In July 2018, Sirisena revealed that he had received a “gift” of USD 295 million “for any project of [his] wish” from Beijing. The Chinese government had also funded the construction of a kidney hospital in his home district – reportedly the largest in South Asia.[15]  China will undoubtedly attempt to court Solih and sway him to its side, if it hasn’t already.

In addition, although Solih has advocated closer ties with India, not all segments of his new government may share this view. During the four years of the Yameen administration, there was a perception that New Delhi seemed more eager to please the increasingly authoritarian government than work with democratic forces. An Indian diplomat described how no one from the Indian foreign ministry was willing to meet with senior members of the opposition when they visited New Delhi. This view became worse after it was reported that India had promised China it would not intervene during the Maldives crisis in June 2018.[16]

India faces an uphill task if it wants to stop its neighbour from drifting further into China’s orbit. Besides helping to strengthen the newly restored democratic institutions, New Delhi should also assist the new government in its infrastructure development and meet its debt obligations, which may include providing low-interest loans. Escaping China’s debt trap is the only way for the Maldives to maintain its national sovereignty and autonomy.[17]  China will inevitably take steps to ensure the continued dependency of the new government, which India would have to look out for and try to counter. While the election results dealt China a temporary setback, it is far from a ‘victory’ for India. At most, it has just levelled the playing field somewhat. The competition for the Maldives has only just begun.


Byron Chong is a Research Assistant at the Centre on Asia and Globalisation (CAG). He holds a Masters in Strategic Studies from the S. Rajaratnam School of International Studies. His research interests include China-India relations and international security.

[1] Jayanth Jacob, “India hails ‘triumph of democracy’ in Maldives election result,” Hindustan Times, September 25, 2018, https://www.hindustantimes.com/india-news/india-hails-triumph-of-democracy-in-maldives-election-result/story-TXLpF6EThwRvpCoJa2uBjI.html

[2] “China cautiously welcomes election of Solih as Maldives’ new president,” The Times of India, September 25, 2018, https://timesofindia.indiatimes.com/world/rest-of-world/china-cautiously-welcomes-election-of-solih-as-maldives-new-president/articleshow/65952509.cms

[3] Dipanjan Roy Chaudhury, “Bumpy road ahead awaits China as Maldives ousts Yameen,” September 24, 2018, https://economictimes.indiatimes.com/news/defence/bumpy-road-ahead-awaits-china-as-maldives-ousts-yameen/articleshow/65937102.cms

[4] Jayesh Khatu, “The Maldives Election: A Renewed Chance for India?” The Diplomat, September 26, 2018, https://thediplomat.com/2018/09/the-maldives-election-a-renewed-chance-for-india/

[5] Ravi Joshi, “Maldives Election: All is Not Lost for India But China Moving Fast,” The Quint, September 26, 2018, https://www.thequint.com/voices/opinion/maldives-presidential-election-2018-india-implications; Emily Schmall, “Asian victors may find anti-China campaign vows hard to keep,” The Washington Post, September 26, 2018,  https://www.washingtonpost.com/world/asia_pacific/south-asia-opposition-candidates-win-on-anti-china-message/2018/09/26/8d82b37c-c15a-11e8-9f4f-a1b7af255aa5_story.html?utm_term=.4ec54b11a475

[6] Yuji Kuronuma, “Maldives faces Chinese 'land grab' over unpayable debts, ex-leader warns,” Nikkei Asian Review, February 13, 2018, https://asia.nikkei.com/Politics/International-Relations/Maldives-faces-Chinese-land-grab-over-unpayable-debts-ex-leader-warns

[7] Stefania Palma, “Malaysian rethink on projects risks contagion in the region,” Financial Times, September 26, https://www.ft.com/content/8fe2f122-9649-11e8-95f8-8640db9060a7

[8] Brahma Chellaney, “Beijing loses a battle in the Maldives - but the fight for influence goes on,” Nikkei Asian Review, September 25, 2018, https://asia.nikkei.com/Opinion/Beijing-loses-a-battle-in-the-Maldives-but-the-fight-for-influence-goes-on 

[9] Ibid.

[10] World Travel Tourism Council, Travel & Tourism Economic Impact 2018: Maldives, March 2018, p.3-4, https://www.wttc.org/-/media/files/reports/economic-impact-research/countries-2018/maldives2018.pdf

[11] Ministry of Tourism Republic of Maldives, Tourism Yearbook 2017, p.9, http://www.tourism.gov.mv/pubs/Tourism_Yearbook_2017.pdf

[12] Haejin Choi and Pei Li, “China partly lifts ban on group tours to South Korea, online curbs stay,” Reuters, November 28, 2017, https://www.reuters.com/article/us-sourthkorea-china-tour/china-partly-lifts-ban-on-group-tours-to-south-korea-online-curbs-stay-idUSKBN1DS0BD    

[13] Chellaney, “Beijing loses a battle in the Maldives - but the fight for influence goes on,” September 25, 2018. 

[14] Maria Abi-Habib, “How China Got Sri Lanka to Cough Up a Port,” The New York Times, June 25, 2018, https://www.nytimes.com/2018/06/25/world/asia/china-sri-lanka-port.html 

[15] Ranga Sirilal and Shihar Aneez, “China's Xi offers fresh $295 million grant to Sri Lanka,” Reuters, July 22, 2018, https://www.reuters.com/article/us-sri-lanka-china-grant/chinas-xi-offers-fresh-295-million-grant-to-sri-lanka-idUSKBN1KC0D8 

[16] Joshi, “Maldives Election: All is Not Lost for India But China Moving Fast,” September 26, 2018. 

[17] Chellaney, “Beijing loses a battle in the Maldives - but the fight for influence goes on,” September 25, 2018.

The views expressed in the article are solely those of the author and do not necessarily reflect the position or policy of the Lee Kuan Yew School of Public Policy or the National University of Singapore.

News Reports

Bilateral relations

Chinese Embassy in India holds gala events to mark 69th Chinese National Day
Xinhua, September 30
The Chinese Embassy in India organised functions in the Indian capital over the past two days to celebrate the 69th anniversary of the founding of the People's Republic of China which falls on Oct.1. They were attended by a host of diplomats, former envoys, academicians, foreign dignitaries, journalists and people from varied fields in India.

Significant progress in Sino-India relation this year: Chinese Ambassador
Business Standard, September 28
There has been a significant progress in the relation between India and China this year and both the countries should work together to make the world a better place, Chinese Ambassador to India Luo Zhaohui said here Friday (September 28).

Important to keep peace at border, India tells China
Hindustan Times, September 28
India and China on Thursday (September 27) reviewed progress in maintaining tranquillity along the disputed boundary following the informal summit between Prime Minister Narendra Modi and President Xi Jinping in April, when the leaders decided to give strategic guidance to border troops to keep the peace at the border.

India, China military exchanges grew rapidly after Wuhan summit: Envoy
The Economic Times, September 25, 2018
Sino-Indian military exchanges grew rapidly after this year's informal summit between Prime Minister Narendra Modi and President Xi Jinping at Wuhan, Indian envoy to China Gautam Bambawale said on Tuesday (September 25).

News Reports

China and India in the Regions

Fearing debt trap, Pakistan rethinks Chinese 'Silk Road' projects
Reuters, September 30
After lengthy delays, an $8.2 billion revamp of a colonial-era rail line snaking from the Arabian Sea to the foothills of the Hindu Kush has become a test of Pakistan’s ability to rethink signature Chinese “Silk Road” projects due to debt concerns.

Wang emphasizes cooperation at UN
China Daily, September 29
All parties should make joint efforts to build a Korean Peninsula of peace and stability, complete denuclearization and mutually beneficial cooperation, State Councilor and Foreign Minister Wang Yi said on Thursday (September 27).

India on edge over influx of Chinese cash to neighbours
Financial Times, September 26
Of all the Chinese investments under the Belt and Road Initiative, those in south Asia threaten to cause the most geopolitical tension, as India becomes encircled by countries receiving billions of dollars from its richest regional rival.

Maldives Boots Out Pro-China President in Election Surprise
Bloomberg, September 24
A tiny island nation caught between India and China has elected an opposition candidate as its next president, a surprise result after years of authoritarian rule.

Bhutan elections watched closely by India, China
The Straits Times, September 21
The defeat of the ruling People's Democratic Party (PDP) of Prime Minister Tshering Tobgay in Bhutan is seen as a major upset in an election being closely watched by India and China.

Joint collaboration: India, China to train Afghan diplomats from mid-October
The Indian Express, September 20
In a first on joint collaboration in Afghanistan, India and China will train Afghan diplomats from mid-October this year, government sources said. This was one of the major concrete takeaways after the bilateral meeting between Prime Minister Narendra Modi and visiting Afghan President Ashraf Ghani Wednesday (September 19).

News Reports

Trade and Economy

Trade war will help India emerge as bigger trading, manufacturing base: Arun Jaitley
The Times of India, September 28
Finance Minister Arun Jaitley on Friday (September 28) said the ongoing global trade war may have created “initial instability”, but will gradually open up opportunities for India as a bigger trading and manufacturing base.

India to ship first consignment of common grade rice to China
Reuters, September 27
India will send its first consignment of common grade rice to China on Friday, the government said, following intense lobbying by New Delhi after relations thawed between the two countries.

ADB: Growth holding up in Asia, Pacific region
China Daily, September 27
Growth across developing Asia has so far held up against external headwinds mainly due to robust domestic demand and buoyant oil and gas prices, said a new Asian Development Bank (ADB) report released on Wednesday (September 26).

India urges China to lift ban on rapeseed imports amid US trade war
South China Morning Post, September 20
India has urged China to drop a years-long ban on rapeseed meal imports from the South Asian nation as it aims to boost sales of critical farm goods amid growing US-China trade tensions.

News Reports

Energy and Environment

China's environment watchdog warns polluters not to flout winter smog plan
Reuters, September 29
China’s environment ministry issued a stern warning on Saturday to companies across heavy industry not to flout the nation’s tough emission rules — a move seen as quashing speculation that the 2018 winter anti-smog campaign will be more lenient.

Massive capital flow needed to boost India's transition to renewable energy
ET Energy World, September 26
Conditions have to be created for the infusion of capital needed to accelerate the transition to renewable sources of energy, according to a panel of experts. Ajay Mathur, the Director General of TERI and Co-Chair of the Energy Transitions Commission (ETC) who chaired the panel on Tuesday (September 25), said: "You need private capital as well as public capital and public capital needs to be more risk-taking, while risks have to be reduced for private capital."

China and India lead the surge to solar energy
Financial Times, September 25
This year, emerging markets will overtake developed nations in terms of the amount of renewable wind and solar power they have installed, according to Moody’s, the credit rating agency.

Europe Hopes Oil Demand From China, India and Turkey Will Keep Iran in Nuclear Deal
The Wall Street Journal, September 24
With European companies abandoning Iran in the face of growing U.S. pressure, European politicians backing Iran are counting on oil demand from China, India and Turkey to keep the 2015 nuclear deal alive.

UN Secretary General to visit India with focus on renewable energy
The Quint, September 21
UN Secretary General Antonio Guterres will embark on a four-day visit to India from October 1 at the invitation of External Affairs Minister Sushma Swaraj during which he will attend a series of events on renewable energy and sanitation, it was announced on Friday (September 21).

Analyses

US-China trade battles to impact India, world
Observer Research Foundation, September 26
By Sanjeev Ahluwalia, Adviser, Observer Research Foundation

America’s President Donald Trump is nearly halfway through his four-year term. This is when most occupants of the White House get edgy about their “legacy” — how would America remember them? His goals are clear. First, get a peace deal from North Korea — the last of the present-day dragons to be slayed — leading to a possible Nobel Prize! After all, President Obama got his rather easily.

How Russia-China ties affect India
WION, September 25
By Harsh V. Pant, Professor of International Relations, Defence Studies Department & the India Institute at King's College, London.

Earlier this month, north-eastern Asia and northern Pacific Ocean drew global attention as Russian forces geared up for their biggest war games – Vostok 18 - since the end of the Cold War. This exercise took place from September 11 to September 17 at five ground testing areas and four aerial testing areas over the Sea of Japan and the Bering and Okhotsk seas.

Beijing loses a battle in the Maldives -- but the fight for influence goes on
Nikkei Asian Review, September 25
By Brahma Chellaney, Geostrategist and author of "Water, Peace, and War."

The Indian Ocean nation of the Maldives, comprising 1,190 coral atolls, has been roiled by a deepening national crisis since its first democratically-elected president was forced to resign at gunpoint in 2012. This week's surprise defeat of authoritarian President Abdulla Yameen in a national election opens the path to stability and reconciliation under the leadership of the winning opposition candidate Ibrahim Mohamed Solih.

Air traffic control: China and India compete
The Interpreter, September 25
By David Brewster, Visiting Fellow, Strategic and Defence Studies Centre, Australia National University.

Previously obscure Indian Ocean fishing villages such as Hambantota, Gwadar and Kyaukpyu have suddenly been transported into the glare of international media attention as China, India and others compete for control over ports across the region. But competition over critical infrastructure isn’t just confined to the maritime realm. In fact, access to airfields is just as essential to allow military aircraft to cover the vast distances across the Indian Ocean. This is why China and its competitors are paying ever more attention to securing access to airfields and to deny access to others.

Do the China-Pakistan ties offer India an opportunity?
Money Control, September 21
By Jabin T. Jacob, China analyst at the National Maritime Foundation, New Delhi.

Imran Khan’s taking over as Prime Minister of Pakistan introduces several degrees of uncertainty in the China-Pakistan relationship given his past record of statements on the China-Pakistan Economic Corridor (CPEC).

Books and Journals

The South China Sea and U.S.‐China Rivalry
Political Science Quarterly, Volume133, Issue2, Summer 2018, pp. 199-224

By Andrew Scobell, Senior Political Scientist at the RAND Corporation and Adjunct Professor of Asian Studies at Georgetown University.

Is the South China Sea a key flash point for U.S.-China rivalry or a tempest in a teacup? This article examines the body of water from a geopolitical perspective and concludes that it is a significant flash point in U.S.-China rivalry. By “rivalry,” I mean an antagonistic relationship between two states embroiled in “long-term hostility” and competition manifested in “multiple disputes, continuing [policy] disagreements and the threat of the use of force.” Although the United States and China are not adversaries and there are significant and numerous dimensions and manifestations of cooperation between Washington and Beijing, according to this definition, a U.S.-China rivalry exists.