Going beyond barriers and uncertainty

Mauritius has scope to restructure and transform its economy to face new challenges. It can upgrade itself, innovate, make the economy take fresh directions, open
up new markets and stay relevant to the world
despite the uncertainties

Mauritius is a member of the World Trade Organisation (WTO) and certain regional trade associations (COMESA, SADC, IOC). It reflects the emphasis we’ve placed on the growth of our international trade as an enabler of our economic development. The principal objective of our trade policy has been to open up our economic potential by engaging in as much international trade as possible. We can turn inward only to our detriment.

Recent decisions to improve the international standing of our harbour in Port Louis to international maritime traffic going through the region – or using airline connections to promote Mauritius as part of an Africa-Asia corridor — simply assert the same objective to increase our interaction with the rest of the world.

The intensity of our engagement on the trade front is brought out by the fact that the ratio of our total foreign trade (imports + exports) to GDP was 120% in 2011 and 2012, that is, total trade was higher than our GDP.  The ratio increased from the time our EPZ exports went into full swing in the 1980s and 1990s. Had it not been for the export thrust, partly based on imported inputs, our economic condition would have stagnated at the erratic sugarcane level of colonial days.

It is a bit disquieting that the trade to GDP ratio came down to 109% in 2015, due to falling levels of both our imports and exports. We have to work it up again. This basically means we will need to increase our both our exports of goods and services.

Falling imports is partly due to fall in the international oil price. It is a windfall gain. But our total imports are nevertheless twice the amount of our exports of goods. Our exports have stagnated or marginally declined in recent years, possibly due to tougher international competitive conditions as well as a slowdown of international economic growth. Data show that even our export of services which were at $3.2 billion and $3.4 billion in 2011 and 2012, respectively, fell to $2.7 billion in 2015.

Given our dependency on foreign trade, this latest export decline is not a good sign. Our main trade partners on the export side are the UK (13.1%), France (11.9%), the United states (10.6%) and South Africa (8.6%). Other than the UAE (12.4%), basically involving re-exports, there are several other countries which account for 5% or less of our exports. On the import side, the main ones are: China (18.2%), India (18.1%), France (7.2%) and South Africa (6.5%). A lot of concentration there on both sides of the balance sheet!

Challenging international environment

Recognising no doubt the weakening stance of our international trade, efforts are being made since some time to create new opportunities. For example, it is being sought to breathe life into a Comprehensive Economic Cooperation and Partnership Agreement with India which has remained dormant for more than a decade now. Trade tariffs have been reduced to as low levels as possible since several years already.

There’s nothing wrong to deal with individual issues such as these which come up for consideration from time to time. But countries which make it despite contemporaneous difficulties are those which take a comprehensive view of their overall orientation in the face of constraints and changes. Never has the need for coordinated public and private sector action been as much a priority for Mauritius as it is today.

Instead of floundering in front of signs of international difficulty, Mauritius would do better to adapt and ride over constraints. Logically, one would expect that at a time of uncertainty, the authorities would provide certainty by appropriate tax and non-tax incentives to those who make new breakthroughs in business. It is totally unproductive to lose one’s way in futile discussions “pour la forme”. There’s no point going on digging up from the past as if this were the agenda forward for the country.

When we look at problems confronting Mauritius today, they are about its future orientation. A digital workplace is coming up all over the place. Jobs are getting redefined in the process. Redundancies are and will be created in the wake of such changes.  New jobs and skills will be the need of the day. New future growth industries will be established by those who successfully adapt to this situation.

Without losing our bearings, we should forge on

All of this puts so much on our plate that we can hardly afford to waste time over trivialities. Transforming jobs and industries into industries of the future is key in the face of the current challenges. If we manage to create a large enough pool of digital-ready talent, for example,  that would signal  to international investors that we have a tangible offer for them to set down here and do business from. Local learning should have been oriented to this purpose for long.

If we build industries which can cluster together to provide enough diversity of innovative sectors of activity, we’ll be doing ourselves the same favour we did to us in the 1970s and 1980s by creating a conducive environment for textiles and garments to set up in Mauritius. It was all about putting in place the right tax and other incentives, elimination of wasteful bureaucracies, establishing useful links with appropriate markets for products and keeping pace with international dynamism.

If, from naught, we gave investors a human capital advantage at that time, what is it that prevents us doing the same all over again? So much time has been devoted to personal quarrels that we have hardly given enough energy and resources to look at our plight comprehensively, at the risk of being overtaken by developments elsewhere which threaten the great reliance we must perforce place on our international trade and investment capacities.

We should have embarked on a massive work of innovating the platform on which we engage economically with the rest of the world. This cannot be done, one piece at a time. It has to be part of a well thought-out comprehensive and integrated long-term strategy tying up all the loose strings into one common knot to strengthen the entire edifice. The first step in this direction is to make an inventory of what we have on hand and, based on it, identify and implement all which can be improved and taken up for further action.

Even if the new American administration succeeds to unleash an international trade war and uncertainty – it has rejected the Trans-Pacific Partnership; it says Chinese exports to the US will face a still import tariff,  it has threatened Mexico’s exports to the US with a 20% tariff unless Mexico builds up at its own cost a 3,200 km wall to protect the US against intrusive Mexicans, it has put on hold the North American Free Trade Agreement for not being in ‘America First’ ’s favour, it has felicitated Britain for parting company from rule-making Europe – we cannot blame all of this for our difficulties and wait for things to happen to get us out of the stranglehold.

Fortunately, Mauritius has scope to restructure and transform its economy to face new challenges. It can upgrade itself, innovate, make the economy take fresh directions, open up new markets and stay relevant to the world despite the uncertainties and fundamental changes affecting the production platform across the board. Not only Mauritius must look business-friendly, pulling together all its industries in one common effort to rise above constraints. It must be positively business friendly whichever quarters the business comes from, different parts in perfect sync with each other. The country must look welcoming, stable and well integrated, rather than torn apart by diverse private interests.

Anil Gujadhur

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