Can we successfully emulate Singapore or Dubai in the region?

Enhanced Connectivity and Economic Advancement

In his speech on the government’s Economic Mission Statement of Saturday 22nd, the Prime Minister mentioned, amongst others, the establishment of a regional airline and improved port infrastructure as part of its economic strategy.

It is important to bear in mind that Mauritius has made economic progress to this day by constantly enhancing its connectivity with the rest of the world. It stands to reason therefore that attempts to do the same in future should expand our economic scope. Economists have always brought out the lack of sufficient connectivity as one of the main causes behind the backwardness of certain landlocked countries.

Connectivity and Economic Development

Adam Smith (1723-1790), the “Father of Economics”, stated that it is much after areas around inland navigable rivers and the sea coast have opened up to every sort of industry that such improvements extend themselves to the inland part of the country. Jeffrey Sachs in his book ‘The End of Poverty’ attributes the persistence of poverty in countries like Bolivia, Ethiopia, Kyrgyzstan and Tibet, not because of a question of culture or attitude but because such landlocked and/or mountainous countries facing crushing transport costs have found the burden of economic isolation an almost insuperable hurdle. He also refers to the lack of development of other African countries due to this factor.

We have examples, on the other hand, of countries which have transformed themselves into economic prosperity by connecting themselves intensely with the rest of the world. Dubai and Singapore stand out in this context, both as regards road, port and airport connectivity and in terms of high-speed bandwidth. It may be recalled that China spurred its economic growth first by the dynamism of growth recorded in its seven coastal megacities, which proved conducive to the expansion of its trade with the world. The inland part is still to catch up with the pace of development of the well-connected coastal regions.

How our connectivity helped our economic take off

As an island outside of the world’s main economic mainstream – America-Europe-Asia – Mauritius has a lot of efforts to make to keep connecting itself to trading partners both in the region and at the global level. The 1970s and 1980s showed how well we unlocked our economic potential thanks to air and maritime connections we had.

Air Mauritius and other carriers helped airfreight speedily our manufactured exports that would otherwise have been at a disadvantage compared with countries – like Morocco, Algeria and Turkey – in the immediate proximity of our main export market, Europe. Ships calling in Port Louis harbour became the major transporters of our exports. Beyond commodities, our aviation and maritime links have kept contributing to the expansion of our tourism and services sectors.

Overcoming the constraints to further economic growth

Our passenger and goods flows with neighbouring countries have however not been as good as we would have liked. The reason for this state of affairs, it is said, is due to irregular and far too expensive connectivities. At a moment the world economic condition continues to remain in low key – with China and its difficulties also round the corner – and there are hopes that Africa might pick up, it is time to work more intensely with the immediate region to unlock our economic potential.

As we identify economic activities which are in demand on the continent next door – and for which we could muster local and international skills – we could develop them best by means of regular and intensive contacts with regional economic agents. Of course, sustained economic exchange involves a lot more than connectivity, for instance, the feasibility of contemplated projects. But, unless we have those frequent contacts, we wouldn’t feel comfortable enough to do brisk business with counterparties.

Even the intensification of contemplated air and maritime connections will sustain itself if its economics makes sense. We have had examples of pan-African aviation connectivity – Air Afrique and Afrinat International Airlines – being launched. Unfortunately, miscalculations of costs, mismanagement, corruption and undue political interference led to their eventual liquidation.

By contrast, Dubai has optimized its aviation and maritime connections to the point that not only has it become an unchallenged economic hub of substance intensely serving passenger and cargo traffic between Europe and Asia. Its airline, Emirates, wants to connect points within the United States itself. Apprehensive of the airline’s huge appetite for business and its financial strength, American aviation companies have lobbied their government against its implantation in their domestic market.

Were the proposed regional airline to gather such strength as a well-managed and efficient connector of regional economies, it could serve to make the region – situated in the lower southern hemisphere and not as active in trade as Europe-Asia – establish a regional airline with the economic and political might of Emirates. The world of airline business has changed considerably. Governments cannot protect them against competition anymore. Passengers and freighters will go to those who are the most convenient and comfortable, efficient and disciplined, and the least expensive.

Were Mauritius to form part therefore of an enduring regional aviation and maritime hub, as proposed, we stand to gain by extending our economic potential and by creating the potential also to engage more closely with our immediate region and insulating ourselves to that extent from the vicissitudes of global markets. We would thereby also be filling a gap that has been left more or less gaping for too long. But let us be warned – the economics of the proposed regional aviation and maritime hubs will have to be thrashed out in detail, as failure might make the scalded cat dread the fire in the foreseeable future. Should that project succeed on the other hand, we might be engaged in the process of transforming into prosperity a whole host of regional economies and – who knows? — creating another Singapore or Dubai in the region.

 

  • Published in print edition on 11 September 2015

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