- All small nations face the challenge of trying to please their larger neighbors, an ex-president of the Maldives told CNBC.
- Both China and India made their presence felt during recent political crisis in Maldives.
- The Maldives' overall debt is estimated at roughly two-thirds of gross domestic product (GDP).
Small states in the eastern hemisphere are at risk of being dragged into the orbit of either China or India, a former Asian president said Friday.
But Mohamed Waheed Hassan, who led the Maldives in 2012 and 2013, added that there's an area the region's superpowers and its smaller nations could easily work together on.
"Emerging markets are caught between big powers," he told CNBC. "All small states, whether they are developed or underdeveloped, are going through this experience," he said, citing Singapore and Sri Lanka as fellow Asian nations facing the same challenge of appeasing both their Chinese and Indian neighbors.
But, according to Waheed, an area that all countries could collaborate on is security.
The Maldives has traditionally relied on India, and by proxy its historical ally the U.S., for regional security. However, "if China can contribute to that kind of collective security arrangement it should be welcome," Waheed said. "Why would they have separate exercises?"
China and India were both present on the sidelines during a political crisis in the Maldives in February. The nation's current president, Abdulla Yameen, imposed a state of emergency following a disagreement with the supreme court over the release of political prisoners.
India moved aircraft and ships to its southern bases to potentially intervene, according to Reuters' sources. A Chinese naval combat force was also present in the Indian Ocean for the first time in four years.
While Indian Prime Minister Narendra Modi ultimately abstained from intervention, China’s defense ministry told Reuters that its presence in the area was “not aimed at any third party.”
The Maldives, a tiny nation located on a cluster of islands in the Indian Ocean and best known as a tropical holiday destination, has close ties to India given both its proximity and cultural heritage. But, the dynamic of its relationships in Asia has changed in recent years.
"China was very distant from us but over the last few years we've gotten closer to China purely for economic reasons," Waheed said.
China had been "very helpful" in providing loans for the infrastructure the Maldives badly needs, he said. The state's coffers are heavily reliant on tourism but outside of the capital any incoming wealth is not felt. During Waheed's 2012-2013 tenure as president, he announced $500 million in loans from China, a significant portion of which was dedicated to infrastructure and housing projects.
As part of China's Belt and Road Initiative, a multi-billion dollar spending plan to revive ancient trading routes, it is "heavily involved" in a $830 million plan to upgrade the Maldives' international airport in the capital Male. China is also financing the building of a new population center and bridge nearby costing $400 million, according to a March report by Washington-based think tank the Center for Global Development.
"India can provide assistance, but it's more complicated. Not that it doesn't have the resources, but the procedures are more complicated," Waheed said. China is an easier friend to maintain "for economic reasons," but he added that the Maldives was closer to India on security issues.
The Maldives' relationship with both China and India has met difficulties.
In May, Indian navy chief Sunil Lanba said that the Maldives presented a "challenge." "The present government in Maldives is more inclined towards China. The constitution has been tweaked and some islands have been given to the Chinese for development," he said, as reported by local media.
"The Maldives wants to be close to India but both the local opposition in the country and also the press in India has not made it easy," Waheed said. "Speculation within the media that the Maldives is getting closer and closer to China doesn't make it any easier."
China has created a "debt trap" that it will use as a "disciplining agent" on the Maldives, former President Mohamed Nasheed, who lives in exile in Sri Lanka after being ousted in 2012, told Reuters in an interview earlier this week. "We would have to renegotiate. It is a big cheat," Nasheed said, as he attempts to campaign ahead of an expected election in September.
But China has hit back on similar claims made by Nasheed earlier this year. Responding in February to an article by the former leader, Chinese Foreign Ministry spokesperson Geng Shuang said that Beijing never attached any political conditions to loans to the Maldives, dismissing Nasheed's view as "nonsense."
Regardless, the Maldives financial situation is precarious. In October 2017, the World Bank estimated the Maldives' overall debt to rise to 66.2 percent of gross domestic product (GDP). "The vulnerability of the overall debt portfolio remains elevated," the institution said. Despite the government's intention to expand tourism, it is also battling vulnerability to rising sea levels.
"I think it's time for the traditional Western countries to begin to see how they could support developing countries more, so that developing countries are not forced into just relying entirely on China's assistance," Waheed said.
Nonetheless, adopting a balanced approach when dealing with Asia's superpowers China and India — no matter how pressured a smaller state's government may be — is advisable, he added. "We have to manage that in such a way that we don't upset any one of them."