MALDIVES: SMALL BUT STRATEGIC REAL ESTATE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00287R000700600001-0
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 7
• Document Creation Date: December 22, 2016
• Document Release Date: August 12, 2010
• Sequence Number: 1
• Publication Date: February 16, 1983
• Content Type: MEMO

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L_U,N ' 1LLi`J l I~AL
Central Intelligence A`encv
16 February 1983
MALDIVES: SMALL BUT STRATEGIC REAL ESTATE
00
There are no major areas of contention between the US and
the Maldives. The visit of Foreign Minister Jameel to the US
appears to be part of an advertising campaign by Maldivian
officials to gain higher visibility for their country's needs and
interests. The most likely topic of conversation will be the
Maldives' need for developmental assistance and trade. More
specifically, the Maldivian diplomats will probably touch on the
recent, US-imposed textile quotas. F-1
The Government of the Republic of Maldives (GORM) maintains
an international bargaining power denied to most small and
poverty-stricken states. Astride major shipping lanes, this
island nation offers natural sites for air bases and naval
facilities in the protected anchorages of its atolls. The former
military airfield on its southernmost island, Gan (about 300
miles from the US military facility on Diego Garcia), could
provide a military airbase and deep sea harbors to any power
hoping to dominate the Indian Ocean. F__1
This memorandum was prepared by South Asia
Division, Office of Near East/South Asia Analysis. Information
as of 15 February 1983 was used in preparation of this paper.
Comments and questions are welcome and should be addressed to
Chief, South Asia Division,
NESA M 83-10039
-F}~~FIDENTIAL
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~. val 1/Liv 11tL
President Gayoom is trying to nudge his island republic into
the modern world with new economic and social development
programs. With such reforms, the economy has prospered but still
depends on foreign financing for major projects. The Maldives
has a generally neutral foreign policy but tends to tilt westward
when seeking aid.
Foreign Relations
The Maldives has gained acceptance as a sovereign country
and maintains an important moderate position as a member of the
Non-Aligned Movement and the Islamic Conference. It uses its
membership as a method of gaining outside contacts and,
hopefully, financial contributions.
Since independence, India and Sri Lanka have played key
roles in the Maldives' economy and foreign relations. Until
recently, all transportation links to the outside world were
through Sri Lanka, and Colombo was Male's major trading
partner. Since the early 1970s, the Maldives have considerably
broadened its trading relationships. India undoubtedly would
object to any outside power gaining a foothold in the Maldives,
even though it has expressed no designs of its own on Gan,
because in New Delhi's view the islands lie within the Indian
security perimeter.
Financial assistance for the Maldives (estimated at US $5.8
million in 1979 by the Asian Development Bank) also has been
offered by other, mostly Middle Eastern countries. Foreign
investment in textiles and tourism is attracted by the tax free
status of its capital, Male, the absence of foreign exchange
controls, and freedom to transfer profits abroad. Foreign
assistance has included the establishment of an Institute of
Islamic Studies by the Saudis and an impressive new airport and
terminal building in the Male atoll at Hulele financed by eight
countries and international agencies including Kuwait, Saudi
Arabia, and India. Financial help has also come from West
Germany, Japan, and Australia. FI
The Libyans have freely offered aid to the Maldivians as
their Islamic brothers. Given the close religious bond, the
Maldivians have not considered acceptance of Libyan aid as a
threat to maintaining their own nonaligned policy. According to
the US Embassy in Colombo, such aid has included the donation of
a secondary school in Male, two floating hospitals, and training
for the National Security Service (NSS) which is responsible for
'
the Maldives
internal and national security.
The Soviets also have tried to enhance their profile in the
Maldives. The GORM signed a scientific and cultural agreement
with the USSR in 1980, and the Soviet Union is also active in
health assistance for the Maldives. Additionally, a Maldivian
Government official has reported a Soviet/Maldivian agreement to
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initiate civil air service between Moscow and the Maldives on a
regular basis. The agreement, signed in February 1983, calls for
one Aeroflot flight per week from Moscow to Male. F_~
The Maldives has been careful to maintain its nonaligned
status. Like Sri Lanka, it has sought to balance the visits of
foreign naval combatants, such as those of the US, the USSR, and
Indian Ocean littoral nations. This policy provides credibility
in nonalignment-while providing a valuable source of foreign
exchange.
Gan Island Developments
Strict adherence to nonalignment precludes Male from using
the former British air base at Gan Island as a bargaining chip,
despite the Maldives' interest in economic assistance.
Development of Gan's airbase and anchorages could allow a
superpower gaining their control to assume a pre-eminent position
in and over the Indian Ocean. Gan was used by the British during
World War II and again between the mid-1950s and 1976. At its
height of activity, the base employed 1,200 island workers, many
of them skilled or semiskilled. 7
Following the British withdrawal, the GORM reported the
Soviets made an offer to lease the island for one million dollars
a year for use of its anchorages and the former military
airfield. Despite the persistent Maldivian refusals, the Soviets
reportedly have made two additional offers in 1982 for use of Gan
as a fishing base.
In July 1981 Gayoom announced plans to develop Gan Island as
a free-trade industrial zone and tourist center. To date, Gan
has attracted only two garment factories established by Hong
Kong-based firms which produce clothing to be marketed in the US,
and the island is under consideration for a refinery and oil
storage complex. The tourist industry on Gan is only in early
stages of development. F-1
Outlook for President Gayoom
President Maumoon Abdul Gayoom took office in November 1978
after winning 98% of the vote. In order to bring about a
decentralization of the administration of the Maldives and give
greater autonomy to the 19 atolls, the President appointed a
committee to revise the Maldives' constitution. The
recommendations of the committee took effect in December 1982.
Even with these changes, Gayoom appears to rule with near
absolute authority, exercising wide-ranging executive,
legislative and judicial powers. F-1
Gayoom has committed his Government to economic reforms,
such as developing the tourist industry and modernizing
fishing. While the small island economy has recently prospered,
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it is still very vulnerable to outside pressures, and there is
evidence of growing pains (such as increased rate of crime) in
this predominantly Moslem society. The efforts at modernization
have not had sufficient time to yield great financial benefits
for the islands, but their slow success has not darkened Gayoom's
political standing.
Although there is increasing talk of corruption in high
places, Gayoom remains untouched by scandal and there is no
evidence of serious internal dissatisfaction with the current
government. The principal domestic event in the Maldives in
recent years was an aborted coup in 1980. Gayoom suspects that
former President Ibrahim Nasir was the ringleader and is
constantly on the alert for any indications of a recurrence.
Nasir now lives in exile, but he has rich and influential friends
still on the islands anw~ believe he could pose a threat to
Gayoom if so inclined.
The lack of ready communication between the Maldivian
islands and atolls could prevent Male from learning of coup
preparations--an upheaval started on some of the lesser
inhabitated islands could go virtually unnoticed until it had
reached a dangerous level. The NSS, responsible for the islands'
internal and national security, concentrates its efforts on
preventing poaching and intrusion into the Maldivian waters and
on maintaining civil law and order. The total manpower strength
of the NSS is approximately 700 poorly equipped men.
The next presidential election is scheduled for the fall of
1983. The selection of Majlis members, from whom the
presidential nomination will come, occurred in November 1982.
While former President Nasir is a possible contender, President
Gayoom will most likely win the nomination and subsequent
nationwide referendum.
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 1.._:___. LI II
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Maldives: A Profile
The Republic of the Maldives includes nearly 1,200 tiny
islands in a long, narrow chain over an area of 41,500 square
miles of the Indian Ocean (the total land area is about 115
square miles). The 157,000 Maldivians are scattered over 202
islands; only 19 of which have more than 1,000 inhabitants.
Male, the capital, has 29,000 crowded into one square mile. C
Nearly all the Maldivians are of Sinhalese, Dravidian,
Arabic, or Negroid stocks. Their language, Dhivehi, is based on
Sinhalese, Arabic and Hindustani. Almost 99 percent of the
people are Muslims, a requirement of Maldivian citizenship.
Koranic schools provide the only formal education for most
children. The adult literacy level in Dhivehi is a high 82
percent. F7
The fishing industry has traditionally dominated the
Maldives' economy, but tourism (German, Italian and French) is
rapidly becoming the single most important source of foreign
exchange. The successful government-owned shipping industry
which operates out of Bombay and Singapore, is another important
source of foreign exchange. The per capita income, US $418,
generally is well distributed, although residents of Male atoll
and tourist resort owners as a group receive a disproportionate
share of income.
The Maldives obtained independence from Britain in 1965.
The existing Sultanate was replaced in 1968 by a Republican
Constitution. The Government is now headed by a President which
is nominated by the Citizens' Majlis (parliament) and confirmed
by a nationwide referendum for a renewable five-year term.
The Citizens' Majlis has 48 members, eight appointed by the
President, two members elected from Male, and two from each
atoll. Its members hold office for five years with three
sessions held each year. In the Majlis, factions are based on
personal alliances and political parties, though technically
legal, do not exist.
Wool Sweaters From The Tropics
The principal issue between GORM and US concerns US
willingness to purchase wool sweaters manufactured by the
Maldives' two garment factories on Gan. These factories were
intended to solve the unemployment problem that the Abbu atoll
residents faced following the withdrawal of the British Royal Air
Force in 1977 leaving an excess of 1200 people without jobs. The
small garment industry, financed by two Hong Kong-based
companies, is also intended to give a boost to the Maldivian
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economy as a whole. If successful, President Gayoom planned to
implement similar programs on other atolls. F
Maldivian officials deem the recent imposition of US textile
quotas on the goods from these garment factories as disfavor
towards their exports and a continued show of apathy towards
their country. Gayoom has made tough statements to the press and
to a recent conference of the Commonwealth leaders reminding the
US that GORM has other options--probably referring to the Soviet
offers to lease Gan--if Gan's textile industry is damaged by
textile quotas.
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SUBJECT: Maldives: Small but Strategic Real Estate
- Addressee
- D/NESA
- NIO/NESA
- PDB Staff
- OCPAS/Foreign
- OCPAS/IMD/CB
- DC/SO
- NESA/PS
- OCPAS/IMD/CB
DDI/NESA/SO/
(No Further Dissem)
(16 Feb 83)
External Distribution:
Victor Tomseth, India Country Director, Department of State
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