Update Country Report Maldives 12 Jun 2019

Event

The newly re-elected prime minister of India, Narendra Modi, visited Malé, the capital of the Maldives, on June 8th-9th on his first official overseas trip after being sworn in as prime minister for a second term on May 30th.

Analysis

Mr Modi's visit to the Maldives highlights his administration's focus on India's "neighbourhood first" policy and the country's keen interest in strengthening diplomatic relations with the Maldives, a country India has traditionally considered part of its sphere of influence. During the visit, the two countries signed agreements on enhancing co-operation in areas such as defence, health, cargo and passenger transport by sea, customs services and training of Maldivian civil servants.

Mr Modi held one-to-one meetings with Maldivian president Ibrahim Mohamed Solih, vice-president Faisal Naseem, speaker of the People's Majlis (the legislature) and former president Mohamed Nasheed, and another former president, Maumoon Abdul Gayoom. He also addressed a sitting of the recently constituted Maldivian parliament, during which he spoke about the importance of peace and stability in the Indo-Pacific region. The Indian prime minister stressed that state-sponsored terrorism posed a major threat to world peace and called for international co-operation to combat this threat.

Diplomatic ties with India have warmed since the current Maldivian president, Mr Solih, took office in November 2018. Under the previous administration, relations between China and the Maldives had prospered, before souring under the current government. Mr Solih is concerned about the amount of debt owed to China, the precise level of which remains unclear. The recent developments reinforce our view that the Maldives' ties with India will continue to strengthen in 2019-20, bolstered by Indian financial support, which will partly offset the much-reduced role of China in financing construction in the Maldives.

Impact on the forecast

We expect the Maldivian administration to continue to exploit its strategically important location to extract concessions and economic assistance from both India and China. However, the disposition of the current administrations in the Maldives and India suggests that a strong bilateral partnership will remain in place, leaving China disgruntled.