Mauritius: Negotiating a New Turning Point

Published on 20th March 2018

Mauritius has made much progress compared with where it stood before independence. The break from the past came in the 1970s and the 1980s, when the economic scope of the country was much enhanced. The setting up on an extensive scale of textile and garment manufacturing activity for exports laid down the foundation for a much-improved economic reorientation which has been at the basis of our socio-economic success over past decades.

There is a feeling at present that this model of economic development on which the socioeconomic well-being of the population has been raised during all these years has been slowly losing steam. External factors such as the emergence of more competitive producers in other countries (for example, Vietnam, Bangladesh) have eroded Mauritius’ competitive edge on international markets. Internal factors – such as the insufficient grooming up of alternative new lines of production to drive on external markets with an edge – have also contributed to the country’s slowing momentum of growth. This is reflected in a slowed-down pace of investment growth for quite some years now.

An international unpredictable situation

The time has come to overcome the inertia which has prevented the economy from picking up as it should have done. The loss of our customary markets was largely anticipated for certain of our products, such as sugar and textiles. It was also foreseeable that other countries would gain a cutting edge over us if they adopt new technology when we don’t. We did not pursue with the same vigour the constant renewal of our machinery of production towards more and diversified goods and services with an expanding market outreach, as it happened after the onset of textiles and garments in the country. We joined an intermediate position in an international supply chain for specific goods and services to start with. However, we didn’t elaborate well enough on the initial efforts to be able to forge ahead as we should have done.

For example, we gained preferential access to regional markets of the COMESA and SADC regions in the 1990s. Although we engage with these markets to an extent, we did not create sustaining economic space for us in both COMESA and SADC for the simple reason that we did not involve ourselves more deeply in these newer markets, such as by seeking to invest in noncustomary areas of sustained demand in those places. We appeared to be content to go on dealing with our traditional markets in Europe and America, not paying enough attention to our more proximate regional market.

Recent international upsets indicate clearly that volatile politics and trading are a fact of life. Those who manage to anchor themselves firmly on outside markets they trade with can withstand the volatility coming up in the shape of international trade parochialisms. We have to realise that the international benevolence that once looked with compassion on smaller countries’ inability to compete successfully against larger ones, has of late been fading away in the name of power politics. A new chapter in international relations is pressing even successful countries to look for newer avenues of growth.

Taking a fresh look at opportunities

We have to face this emerging situation with poise and balance, with a well laid-down strategy to overcome any unexpected upsets that the prevailing international volatility may throw up. We may profitably recall and apply the lessons we learnt during the 1970s-1980s phase of industrialisation.

What were they? The most important lesson was that if we want to grow new sectors of activity for which there is demand on international markets, we must have the resources to produce them. Resources are inputs – imported from other countries if need be – as well as appropriate labour and investments. Moreover, the stronger the local consensus and cooperation across the board, the greater the chance of breaking off from past stagnation.

In the case of textiles and garments, we did not have a prior experience; so we relied initially on expertise and market contacts of the first wave of foreign investors in the sector and went on building upon it, with the help of diverse tax and other incentives. The same was true in the case of international financial services, where imported international expertise grafted on beautifully with existing local financial infrastructure and skills to expand our scope for offshore finance. Similarly, enhanced connectivity favoured the development of our hospitality sector despite the remoteness of our catchment markets.

Our problem has resided in the fact that we did not relentlessly pursue new openings in the economy to insulate ourselves adequately in the face of changing patterns of demand for goods and services the world over. Insufficient efforts on the part of investors – content with what they had achieved already – could partly explain why we didn’t pursue the adventure further. But it was gradually becoming clear that some of our public institutions which had spearheaded the new phase of development had become inefficient due to excessive political interference in their working over an extended number of years. That was the case despite increasing evidence that the going was becoming tougher for us with growing international competition on markets.

The situation is as it is. Progress has stalled because of various factors impeding fresh thinking and consequent weak implementations of private initiatives and public policies. Complaining about this state of affairs will not take us too far. The situation calls for a series of coordinated actions in both the public and private sectors so that hurdles are overcome and newer activities are created which hinge upon each other through multiplier effects.

Countries which have limited resources like us have broken barriers by becoming successful intermediaries on the international markets for goods and services. Thus, Dubai became a successful global maritime and aviation hub and, from here, it developed itself into a commercial and services centre of global renown. Mauritius is not doing that kind of service for regional markets in Africa, but it has the potential to do so under a well-pondered longer term strategy to serve this market with efficient cost-benefit calculations towards the populations it could serve.

Given the precarious situation in which global politics is putting small countries like Mauritius, do we have an alternative than to multiply hedged incursions on third markets by bringing comparative advantage to ourselves in newer activities? Can we make inroads on markets if we scorn import of talents which could launch modern activities in the country? The way forward is to do all we can with all kinds of resources we could garner to give depth to the economy’s scope.

As we saw in the course of our first manufacturing diversification, new initiatives need not be on a large scale at the very start. If the governance structure is reliable and the vision profound, the economic base will keep growing. Once a new activity becomes economically viable, catch-on effects will expand the scope automatically. The answer to our current situation is once again a great drive at economic diversification on international markets, based on a well-calculated targeting of locally-based viable global modern activities.

By Anil Gujadhur

First Deputy Governor of the Bank of Mauritius.

Courtesy: Conjoncture

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