Maldives : Underwater cabinet sends shock waves in tourism sector

The Maldives’ underwater cabinet may have successfully told the story of its environmental vulnerability to the world, but on the flip side, the publicity stunt has apparently backfired, with insurance premium on resorts now being jacked up, a Parliamentarian warned.

The fact that Maldives is in danger of being submerged has always been a reality there.

Yet the October 17 underwater cabinet by President Mohamed Nasheed, urging the world to curb rising temperatures and save the Maldives from going underwater, is now going to take a heavy toll on its tourism sector, according to Independent Parliamentarian and legal expert Mohamed Nasheed.

• “It is not at all adequate, and at times even quite disastrous, to run a country on sensational headlines alone,” warns Parliamentarian

“Some insurance companies have already started reacting to the news of a sinking paradise,” Nasheed wrote in his blogpost.

“A resort which I know of has been paying an insurance premium at the rate of 0.27 of its value of US$ 60 million. That comes to US$ 162,000/- annually. However, its insurers have now demanded to renegotiate the premium to 0.995 percent,” Nasheed wrote without citing the name of the resort.

He noted: “The revised premium is going to be something like US$ 597,000/- annually. That is a considerable difference of US$ 435,000/-. That is a jump of three times and more.”

Most resorts in the Maldives pay insurance premiums on a percentage of the value of their properties.

And the valuations are often carried out by reputed specialist consultancies like HVS International or Knight Frank.

Citing the reason for the premium hike Nasheed wrote: “They responded by narrating the gloomy picture that is being painted of this country in the international media and the world stage by highly credible sources – meaning to say – government officials.”

“For them, the negative predictions about the Maldives have apparently increased the insurable risk by many folds and that is the reason for the increase in premium,” he added.
The Maldives is known for its up market resorts, and the tourism sector the lifeline of its economy.

The tourism contributes to over 35% of the GDP directly, and nearly 70% of the GDP indirectly through support industries.

• The tourism contributes to over 35% of GDP directly, and nearly 70% of GDP indirectly through support industries

“It is estimated that the Maldives tourism industry today would consist of private investments worth US$ 2 billion,” Parliamentarian Nasheed said adding the “billion dollar turnover each year undoubtedly makes tourism industry the backbone of our economy.”

He also cited an instance where a reputed international finance institution that was in town recently to assess opportunities to lend or invest in the private sector finally declined to offer syndicated loans.

“When the international financial institution asked some banks to partner with them in the instant venture, they politely declined to do invest in the Maldives due to environmental concerns expressed by the country. The proposed syndication failed to materialize,” Nasheed noted.

Nasheed also warned the dangers of what he called “running a country on sensational headlines alone.”

“It is not at all adequate, and at times even quite disastrous, to run a country on sensational headlines alone.”

“A country needs more. It needs its economy to be kept in shape, and its economic players to be kept in good health,” he argued.

However, Parliamentarian Nasheed has given President Nasheed due credit for his publicity stunt, that attracted world attention to the sinking nation but noted that his danger signals should not lead to immediate negative effects on the tourism sector.

Nasheed wrote: “Environment is a serious issue – I agree. It is not being highlighted for earning international acclaim or perhaps a Nobel peace prize – I agree.”

“But the survival of our economy is also important until the dreadful submerge happens – if that remains inevitable,” Nasheed added.

Summing up the Maldives’ predicament he said: “The country is quite frankly placed between a rock and a hard place.”

The UN Inter Governmental Panel on Climate Change has already predicted rising sea levels of up to 58cm by 2100. It would see many of the Maldives coral islands standing on average 1.5 meters from the sea level, submerged.

Nasheed urged politicians making statements on environmental vulnerability also to take into account their comments may have on revenue sources, financing opportunities …and quite simply the cost of keeping our economy afloat.”

- Asian Tribune -