Opening up our economic space
I have often argued in the past that Mauritius would do well economically – and at an even broader level – by being part of a larger group of countries. We must persevere in this direction. We need to snatch away decisions which open up economic space for us. In this regard, we have painstakingly developed ties with two regional groups since decades.
These are the 15-member Southern African Development Community (Angola, Botswana, Democratic Republic of Congo (DRC), Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, United Republic of Tanzania, Zambia and Zimbabwe), and the 19-member COMESA (Burundi, Comoros, D.R. Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, and Zimbabwe).
Our association with these two regional groupings was initially aimed at building up close trade ties, in order to reduce our dependency on far-away markets. So, a lot of initial work was done at governmental level to reduce, if not to altogether eliminate, trade tariffs among member countries. Other areas involving deeper levels of economic cooperation such as giving support to intra-member country investments, setting up a common central banking system, or even the idea of fostering a common currency union, have been added on with time. All to give us a united economic roadmap.
While a lot of work has been done and trade exchange enhanced, dependency on outside markets has still remained a significant factor for most member countries of both regional blocs. The reason for this want of closer economic integration has been both the differential sizes of the individual economies forming part of the blocs (and hence their reduced ability to trade with each other on a meaningful scale) and the absence of complementarity as regards the goods and services they produce.
For example, the mineral exports from South Africa would be more in keeping with their imports by China or India than with a small place like Mauritius which has neither the processing power nor the skill base, nor the domestic market. If we had had vision enough, we would long before have imported some of those from the regional groupings we belong to and transformed them to semi-finished form for exports to third markets, by cultivating comparative advantage in selected areas.
We appear to have had other infighting priorities instead and a reluctance to engage at the edge of what a fast evolving international market has been demanding since long. More engagement with regional economies by value adding. We could have engaged more closely in an input-output activity with Madagascar, for example, with Mauritius in the centre. Other regional countries could have twinned up more extensively with us in the provision of international services to the region, supported by existing regional agreements.
I don’t have data for our regional trade in services and I suspect it won’t be a staggering figure. Merchandize trade data show that 13% of our goods exports went to the SADC and 8% to COMESA in the first half this year. Corresponding imports were 9% and 3%, respectively, of our total imports during this period. The problem is not only the relatively limited level of our regional engagement as these figures show; it is the absence of sustained progression with the region in our trade exchange. We haven’t diversified too much despite the setbacks we suffered due to the consequences of low economic growth in our traditional external markets in the West.
More efforts are needed to develop that familiarity with new markets which promotes and supports trade exchange. The more the people know us for having engaged directly with us, the more mutual trust builds up. This element of trust opens up greater vistas for mutual beneficial exchange. The scope to grow is greater in newer markets.
Some will recall there was a time when not only did we sell our stock of sugar processing machinery to countries such as Lesotho and Swaziland. We even sent our technicians to them to run the equipment and to foster their sugar industry. Despite our narrow market outlook at the time, we used to make quite some spare parts for our sugar industry ourselves. We exported this know-how.
We have strayed so much from this state of affairs today that, for years, we’ve been unable to control a disease affecting local tomatoes, making them rot very fast after harvest. Recently, there was a press report that our banana cultivation would have fallen prey to some fungus for quite some time without the concerned research department being able to tackle the problem. We cannot shine out to others on the basis of such incapacity to deal with relatively basic things for a country on the lookout of food self-sufficiency. The direction is to build up on what we know already.
We could just as well engage seriously in trade in services with regional partners if we applied our mind in earnest to all we are doing over here since years, learn from it and package it efficiently for export to the other regional partners. No doubt this may be happening to some extent.
But it’s difficult to make inroads deep enough on external markets when we are publicly posting the near-failure of so many of our financial institutions all at once. We can’t be shooting ourselves in the foot and encouraging simultaneously our principal economic agents to go out and sell to outside markets the fruits of our engagement in services. We can’t sit here; we’ve got to go out.
Yet, when you look at it, Mauritius was perceived by many in the region as a role model at least in the field of provision of financial and allied services. It may still be. This is the kind of strength on which we stand to build up a solid outward oriented activity, directed preferably to our neighbours.
Significant mutations in trade arrangements are taking place among the world’s most promising economies. We don’t form part of those blocs they are part of. The world trade system is coming to a point when tariff elimination will matter less than the rules permitting additional trade exchange, e.g., are you part of our mutual agreement to protect intellectual property rights? If not, we can’t play the game with you.
Like them, we need to fence ourselves and stand as an intermediate within a homogeneous regional group which speaks with one voice and looks to expanding its scope. We need to study profoundly the direction this group will take or influence it in a certain direction and be part of the equation. This will involve deep understanding of what can and cannot be done as a basis of our future economic orientation, as part of the group.
If you are little convinced about the necessity for a much stronger intimate link-up to a larger group, just read through the current debate in the UK surrounding the referendum it proposes to hold in 2017 as to whether it should stay in the EU or not. There are not too many dispassionate economists who aren’t predicting the economic disaster the UK will be heading for by isolating itself from the EU, even splintering the word ‘Great’ from Great Britain with the prospective loss of Scotland if it were to go alone. In the face of such evidence, can we afford to focus on so many useless things we’ve been going for of late?
- Published in print edition on 6 November 2015