Chinese money unsettles Marshallese politics

Marshall Islands President Hilda Heine has accused “Chinese interests” of trying to force her from office after her administration refused to back plans to establish an investment haven in the central Pacific country.

Heine survived a no-confidence motion on Monday by a solitary vote after weeks of background scheming by political opponents. Parliament was split 16-16, leaving her rivals just short of the necessary majority.

Eight senators behind the no-confidence vote cited the planned introduction of a state-backed cryptocurrency, known as the “sovereign”, that they said risked harming the country’s image and making the nation a potential hub for money laundering and terrorist financing.

The International Monetary Fund has said the cryptocurrency’s introduction puts the country in “uncharted waters” and raises the risk of losing its correspondent banking relationship with the US dollar.

The currency will now be introduced, but Heine said it wasn’t the main issue. “Really the vote of no-confidence is about the so-called Rongelap Atoll Special Administrative Region, or RASA scheme, which is an effort by certain foreign interests to take control of one of our atolls and turn it into a country within our own country,” she told Radio New Zealand.

Unveiled at the Asia World Expo in Hong Kong in April, the RASA proposal is backed by Chinese businessman Cary Yan, who is also a Marshall Islands citizen, along with former Marshall Islands leader Kessai Note and current parliamentary speaker Kenneth Kedi.

The mayor of Rongelap, James Matayoshi, also supported the plan during the Hong Kong expo event.

Rongelap, a former US nuclear test site that has twice been evacuated due to high radiation levels, would by the plan become a tax-free port and provide offshore company registrations. To attract investment it would be exempt from national financial laws and thus undermine regulatory oversight.

Kedi told a forum at the Asia World Expo that Rongelap had the potential to become a commercial hub like Dubai, Singapore or Hong Kong.

“Through the unique ‘one country, two systems’, Hong Kong has become China’s re-export base and a global financial center in opening up the economy. Hong Kong’s success model offers a good reference for the Marshall Islands,” he said at the time.

The island nation’s parliament declined to pass draft legislation for the plan after it was ruled unconstitutional by Attorney General Filimon Manoni, “given that the only form of political entity recognized under the constitution, albeit with limited law-making powers, are local governments.”

Manoni added: “The constitution does not recognize the establishment of special autonomous regions, with political autonomy, as proposed in the draft bill.”

As a compromise, Heine reportedly asked that legislation be drafted for a “special economic zone” that would give some of the same tax perks but would not be an autonomous entity, as sought by the RASA group. It was offered late last week, but the no-confidence vote went ahead regardless.

There are unconfirmed reports that Chinese authorities have given political backing to the project, but Beijing has not commented publicly. Located southwest of Hawaii, home to key US military installations, the country’s 1,200 islands are also close to key central Pacific shipping routes.

Chinese military analysts have said that China wants a base in the area. Australian media reported in April that China and Vanuatu had engaged in preliminary discussions about China building a permanent military base on the South Pacific island nation.

China has defended its push into the Pacific, which it says is driven by “friendship and cooperation” with the island nations. “No country should try to obstruct the friendship and cooperation… China has no intention to touch the cheese of any country, instead China is committed to make the pie of cooperation larger,” said Chinese Vice Minister of Foreign Affairs Zheng Zeguang, according to news reports.

He noted that 100 Chinese projects had been completed in the Pacific including power stations, telecommunications, hospitals, schools, office buildings and convention centers, and that China had helped train over 6,000 professionals and welcomed 1,200 students from the region.

Supporters of the Marshall Islands scheme are not likely to give up, as there has apparently been big investor interest in both Hong Kong and the Chinese mainland. Real estate websites claim that 1,000 homes have already been sold on Rongelap Atoll, which currently has a population of less than two dozen people.

They appear to be offering citizenship to investors, which would be illegal under Marshall Islands; law. One online advertisement says: “For [those] who have successfully ordered the houses, what you get is not only a house but to share the policy benefits of Rongelap Atoll Digital Special Administrative Region.”

John Masek, a RASA lawyer, responded: “Any other speculation about us selling passports or trying to promote passport schemes is all fake news. All we’re trying to do is make a more visitor-friendly environment.”

Still, Heine will probably face another parliamentary challenge on the issue, and the turbulent political history of the tiny island nation — population 53,000 — suggests her rivals will eventually succeed.

Elected less than three years ago, Heine came to office after toppling then president Casten Nemra, who was in the job for only two weeks, in a no-confidence motion. He now reportedly seeks his political revenge. Since 1998, there have been nine no-confidence votes in the Marshall Islands’ parliament.