VZCZCXRO8629
RR RUEHLMC
DE RUEHLM #1825/01 3071042
ZNR UUUUU ZZH
R 031042Z NOV 06
FM AMEMBASSY COLOMBO
TO RUEHC/SECSTATE WASHDC 4613
INFO RUEHKA/AMEMBASSY DHAKA 9540
RUEHIL/AMEMBASSY ISLAMABAD 6457
RUEHKT/AMEMBASSY KATHMANDU 4511
RUEHNE/AMEMBASSY NEW DELHI 0137
RUEHCG/AMCONSUL CHENNAI 7009
RUEHKP/AMCONSUL KARACHI 2044
RUEHLMC/MILLENNIUM CHALLENGE CORPORATION
RUCPDOC/USDOC WASHDC
RUEHGV/USMISSION GENEVA 1463
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 COLOMBO 001825 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/INS AND EB 
STATE FOR USAID 
MCC FOR F REID, D NASSIRY AND E BURKE 
GENEVA FOR USTR 
 
E.O. 12958: N/A 
TAGS: EAID ECON ETRD KMCA MV PREL
SUBJECT: MALDIVES:  INFORMATION FOR MCC NOVEMBER 8 MEETING 
 
¶1.  (U) SUMMARY:  As a candidate country that has met the 
Millennium Challenge Corporation,s (MCC,s) threshold 
requirements, post recommends that Maldives be selected for 
eligibility by the MCC Board.  Maldives, a small but 
ambitious country with an educated population, seeks to 
diversify its economy.  Further, Maldives - a nearly one 
hundred percent Islamic country - is moving toward democracy 
and is pro-US.  A successful compact could become a model for 
how to promote progress in democratization and good 
governance in a moderate Islamic nation, thereby supporting 
one of the highest-priority goals of US foreign policy.  End 
Summary. 
 
FIRST YEAR OF CANDIDACY:  MANY SCORES HAVE IMPROVED 
 
¶2.  (U) Maldives has recorded positive trends in most of the 
MCC indicators in FY 07, demonstrating the government,s 
continued commitment to improving in matters measured in the 
MCC categories of ruling justly, investing in people and 
promoting economic freedom.  Per the MCC Report Card, 
following are the specific areas in which Maldives has 
improved: 
 
-- Ruling Justly:  political rights, civil liberties 
(although both were not yet within passing score), and rule 
of law (with a significant score increase, moving from a 
negative 0.24 (fail) to a passing score of 0.71). 
 
-- Investing in People:  immunization rates, girls, primary 
education. 
 
-- Economic Freedom:  regulatory quality, cost of starting a 
business, and inflation. 
 
INCOME DISPARITY AND VULNERABILITY 
 
¶3.  (U) Of the Maldives, 1,191 islands, only 200 are 
inhabited, and 87 are resort islands.  The population of 
300,000 is scattered throughout the country, with the 
greatest concentration on the capital island, Male. 
 
¶4.  (U) Despite maintaining constantly high GDP growth rates 
and boasting the highest per capita GDP in South Asia, the 
country remains socially, economically and politically 
vulnerable.  Social vulnerability in Maldives comes about 
because of the small size and wide dispersion of the 
population across many islands.  Those islands farthest from 
the capital city remain underdeveloped.  Income disparity is 
significant, and a high level of poverty prevails in some of 
the outer atolls.  Economic vulnerability stems from the 
heavy dependence on tourism and fishing, industries which are 
subject to outside shocks.  Environmental vulnerability is 
created by the fragile ecosystem.  In addition, the UNDP 
reports that the 2004 tsunami affected Maldives more than any 
other South Asian country, disrupting 60 percent of the 
country,s GDP. 
 
¶5.  (SBU) Politically, Maldives is at a critical juncture as 
it pursues political reform and moves from being a strongly 
executive-led state toward greater democracy.  During his 
introductory calls on the President and Senior Ministers, the 
Ambassador underscored the importance of sustaining progress 
toward democratization.  The success of democratic reforms 
will depend on success in bringing greater economic and 
social opportunities to marginalized sections of society. 
 
AN AMBITIOUS GOVERNMENT WHICH WOULD LIKE TO PARTNER WITH MCC 
 
¶6.  (U) The government is committed to poverty reduction, 
seeking to reach the poorest populations in the outer islands 
and provide them with basic social and physical 
infrastructure.  Many reforms are already underway, including 
the development of pro-business laws to improve the business 
climate.  Maldives ranks 53 out of 175 countries in World 
Bank,s ease of doing business ranking for 2007; well ahead 
of all other South Asian peers. 
 
 
COLOMBO 00001825  002 OF 002 
 
 
¶7.  (U) While many international hotel operators are already 
present in Maldives, the government hopes to further open the 
economy to direct foreign investment.  It is preparing the 
country,s first Poverty Reduction Strategy Paper (PRSP) to 
be released by the end of 2006; the PRSP will build on the 
government,s Seventh National Development Plan.  On the eve 
of the new millennium, the government released a Vision 20/20 
statement spelling out a series of long-term aspirations for 
Maldives, such as: 
 
-- Becoming a top-ranking middle-income country 
-- Achieving gender equality 
-- Establishing a minimum of 10 years of formal schooling and 
good tertiary education 
-- Ensuring access to quality medical care and health 
insurance 
-- Promoting the conditions for rapid economic growth with 
Maldives serving as a hub of regional free trade. 
 
Maldives is slowly but consistently working toward meeting 
these goals. 
 
¶8.  (U)  Maldives has received economic assistance from 
development agencies and has experience in working with donor 
agencies.  This base of experience will be helpful in the 
successful design and implementation of an MCC Compact. 
 
RESOURCE SYNERGIES FOR MCC BETWEEN SRI LANKA AND MALDIVES 
 
¶9.  (U) MCC could complement its activities in Sri Lanka with 
a program in Maldives.  MCC visits to Maldives do not need to 
begin in the US.  Instead, consultations could be scheduled 
to coordinate with visits to both Sri Lanka and Maldives 
(just a one hour flight away from Sri Lanka).  Most 
government office visits could be conducted on one island - 
Male, - located just 10 minutes away from the international 
airport.  If a visitor,s available time is extremely short, 
many important meetings could even be conducted within one 
day, with flight schedules arranged for an early morning 
arrival and an evening departure, returning to the US via 
London or various other gateways in the Middle-East, Japan, 
Singapore or Europe. 
 
STRATEGIC IMPORTANCE OF THIS PRO-US MUSLIM COUNTRY 
 
¶10.  (SBU) Maldives has been, and currently remains, a 
moderate, pro-Western Muslim country.  Maldives could be 
strategic for MCC (and the US in general) as it maintains a 
pro-US stance and is moving toward increased democratic 
processes.  However, lack of economic opportunity and 
isolation threaten to fuel religious extremism in the country 
(currently being imported by its migrant workers and 
university students), especially in far-flung atolls.  It is 
in the US interest to foster greater friendship with this 
moderate Muslim nation through economic assistance that would 
undermine extremist forces by providing viable alternatives. 
 
SIZE COULD STRONGLY LEVERAGE MCC INVESTMENT 
 
¶11.  (SBU) The small size of its population and the earnest 
desire of its generally capable government to develop 
Maldives could enable MCC to leverage a Compact into 
significant economic advances.  A Compact with Maldives is 
consistent with MCC objectives and would promote development 
and democracy in an Islamic nation. 
BLAKE