Monday, February 23, 2009

Economic Tsunami & The sPackage

When it comes to stimulating an economy, commonsense would suggest that we need to put more money in the hands of our public. By doing this, the public would start spending or is more likely to keep spending so that we have strong demand in the economy for the general goods and services. More demand or strong demand would mean that shops and service centres around the nation would have products that gets sold in a reasonable timeframe and hence, these same places would have a reason to keep current employment levels or perhaps create new vacancies. However, with all these cash injections it is no guarantee for any government that their plans would bear fruit. Key questions become, what if the nation start saving? What if the nation start paying its debt rather than create any new demand for goods and services? Last but not least, what if from every dollar they inject to the economy, a significant majority leaves the economy in the benefit of some foreign country?

Maldives once again couldn’t resist the temptation that all westerners, yeap you heard me right, all westerners that had the likes of iPhones and ePassports have finally started talking about the sPackage! So why not we right?

My opinions might largely differ from yours and I obviously respect that fact. But I do hope that someone out there would start realizing that these are times in which our country needs real experts to mastermind a rescue package to our nation. The likes of Movie Stars, ex Football Players, Activists, Businessmen (by default), or perhaps men with loud voices might not have the capability nor the economic awareness to think outside the box and create a meaningful package that a country like ours would be able to swallow!

Maldives is a country that would never be talked about in the international arena if not for its natural beauty. I think we have a large tendency to overly rely on our fame and mistake our true identity when it comes to devising sustainable strategies. I say this because we have this massive “copy cat” attitude and never once would think for its own on creating a set of ideology that’s truly maldivian in nature. Be it fashion, politics and now economics, we always do start following the big guns! Ofcourse sometimes we will look good (when it comes to fashion), sometimes its nice to read statements in the media with the words “political freedom” (when it comes to politics), but mind you, there could be times when it becomes rather outloud “ridiculous” and “silly” to follow such nations in devising economic rescue packages to counter the economic tsunami the world is in.

On a positive note, it is rather comforting news that our parliamentarians have “finally” begun talking about our rather unique and fragile economy (Minivan News, 19.02.09, Majilis Considers Stimulus Package). However positive it may sound, I just could not help but wonder why we even have the slightest of desires to sit down and talk about creating an sPackage just like how the US, or UK or AUS have done. Why on earth would we even spend precious minutes discussing this? Are we still “assuming” consciously or unconsciously that Maldives is a strong economy? Do we have the necessary economic fundamentals to create the much needed hype in re-igniting local demand? Oh yes, those economies that we so love to mimic have got their basics and perhaps more so strongly their attitudes right! They don’t have citizens that would think about flying away for medicals, higher education or even perhaps leisure. Stimulus packages are designed with the belief that those very injections would be utilized to penetrate the demand “within” an economy. One could always tolerate a slight leakage (money moving away from the economy), but what a country cannot tolerate nor afford is significant holes in its economy that would not just leak money bit by bit, or drop by drop, but overflow in gallons!

Of course I agree with the state minister of finance Ahmed Assad in saying “we need some way to stimulate the economy”. Also do note honourable state minister, what we cannot do is plan a stimulus package with the wrong ingredients!

I am no expert in Maldivian economics, but I do follow our economy and contrast it to what’s taking place globally. Me being a critique on this subject matter does not also mean that I am overly pessimistic about the whole set of ideas or intended strategies. I know given the right mindset, the right ingredients, we can devise a strategy that can see us through this tsunami.

One crucial element or shall we call ingredient in any such strategy must be building demand and ensuring that whatever money we have, gets rolled within our economy. Greater thought to this area makes me strongly believe that there is no better way to start than lending a hand to the backbone of our economy – the tourism sector. Question is how?

Look at the facts. World in recession. Governments promoting spending “within” an economy and consumers spending money while their handbrakes are on. These are just a few facts that must create panic in the minds of every resort operator in the Maldives. All these resorts would have significant levels of fixed costs, and their main intentions would be to minimize their variable costs. Probably less demand for resort supplies (once again this could lead to panic in the supply business platform), an eye on redundancies (which will lead to families getting hurt) and perhaps a desire to lower its rates in the hope of penetrating just someone out there (thus translating into lost revenues). Given these and much more, I say our government partner with these resort operators and try building local traffic to these resorts. I know even right now it is possible for us locals to visit these resorts, but guys, I am talking about systematic manners or perhaps large scale! Opening doors to locals can have damaging impacts (guess from the eyes of the operators). But what’s important is any amounts of money that could help reduce their fixed expenditures. If governments gets involved, it could help create new industries such as local tour operators, more choice for that individual who so loves in going to Sri Lanka. Well fingers crossed, hope we Maldivians still be disciplined enough.

Above is just an idea. Creating economic activities within a given economy would be the most important thing any government should do if they were to stimulate the economy. Borrowing more money could do this, but it sure might not be the best of options. What our country needs is a shift in mindset. People who could think outside the box and I guess the bottomline is, leave that economic shit to the ones with real know-how! Then again, I trust there will be plenty out there who would have creative solutions! -AE-


  1. I guess the economy is already over-stimulated by the over spending of the government and the deficit that has been finance through MMA.

  2. the resort owners will just close for renovation rather than promote the island for locals.

  3. I don't understand why maldivians are deprived of enjoying the natural beauty of the country, while europeans and many others can enjoy it.

  4. I just hope they don't do a stimulus package ala USA.

  5. I remember reading a blogpost abt internal tourism from Dr Waheed's blog couple of months back.

    We defenitely need a shift in mindset. I agree with anon: 10:59 PM. i often ask these questions. What one earth is wrong with us. We are so busy immitating some indian song, american economic plans, arabian religions etc, while the paradise is right here. We are inviting rest of the human kind to enjoy the beauty of our land, but sadly, very very sadly, we can't even begin to think of the beauty and the pleasure of this paradise islands.
    Maldivians would laugh at a fellow country men, who would holiday in a resort. I don't understand at all. We are so fucked up in mind!

    Tourism is our lifeline, but if you have a local passport your entrance is denied from the resorts. How discriminating. Even if you are ready to pay, NO, if you are Maldivian then no. WTF. honestly, i've bin through this. there might be couple of resorts that occassionally accepted Maldivians, but largley our tourism is banned for us. bloody hell.
    Talk about economics. Yea! stimulate the economy. reduce the cost of living and give civil cervants skyhigh wages. then wat, they go for medicals to lanka, vacation lanka, to drink lanka. where is the lubricants??

  6. The entire economy depends upon tourism and fisheries. Tourism sector has been developed by the lobbyist and fisheries sector had been ignored and used as apolitical tool until now. A few rich tycoons for their hobby do agriculture in few uninhabited islands and also few islanders have their own small farms as well as greens grown in their backyard for living. We heavily rely on imports therefore in the equation leakage is inevitable but careful spending in this hard time will bring a positive effect. If we have a will and if present government provide incentives to develop agriculture seriously and to feed 300,000 people is not something that we cannot achieve. One good example is that after world war the first president had a campaign in male' and in the islands to grow fruits and vegetables. This programme was a success until scarce of land and fuel became as an energy to run bietheli and dhonies.