Beyond “Honte”: Achieving 5 to 6% growth rate!
“We would rather espouse a model with such programmes and strategies that secure a more inclusive and resource-efficient economy and where the rising tide of economic growth lifts all boats, not just the super yachts…”
By Rattan Khushiram
On the occasion of the 170th Annual General Meeting of the Mauritius Chamber of Commerce and Industry, the President of the Chamber in its ‘State of the Economy Address’ transcended the puerile issue of having “honte” (shame) of our 3.8% to 4% growth rate for a more important debate on how Mauritius can achieve 5-6% economic growth. “How can we raise the standard of living of each and everyone? How can Mauritius attain full employment? These are the debates which we should have!”
That’s rather surprising coming from the private sector. They control the whole armada of policy-making in Mauritius. They have taken over the Economic Development Board (which includes ex-Board of Investment and the Financial Services Promotion Agency) which is responsible for advising Government on appropriate policies and strategies for socio-economic development, trade development, export and investment promotion, infrastructure development, labour market improvement and business facilitation. Their memorandum which is submitted to the Finance minister in the context of pre-budget consultations is adopted more or less in toto with very little modification. And during the past few years the private sector’s stand on successive budgets have been more than positive. It has been a categorical endorsement of the policies, which have included a large part of their own, covering the doing business investor-friendly ones, support to the export sector, concessions to the real estate sector… you name it, it’s there.
Its comment on the 2018/19 budget summarises it all:
“Throughout its Budgetary consultations, the MCCI advocated for ‘Enabling Economic Development through business expansion’ with a three-pronged agenda namely resolute demand-inducing measures, sectoral fiscal stimulus as well as structural reforms for the transformation of the country’s economic model. The MCCI is pleased to note that the Budget indeed addresses the above with a particular focus on improving the quality and standard of life of citizens to bring Mauritius towards an inclusive model of economic development – and a ‘Growth for All’ agenda.”
That’s it. The development initiatives announced in successive budgets are part and parcel of the private sector model of development that has been given the stamp of approval in its totality by Government. Now that these policies have failed to improve the growth profile which has remained unimpressive at anaemic rates, they are trying to surreptitiously “tweet” the scene leaving the feckless Government and its “inefficient” public sector and SOEs to face public reprobation that returns have not matched its promises.
What are we to debate for? It is a model of development that has been imposed upon us and which we do not subscribe to. It is a model that cannot extricate us from our current low-growth trap because it encourages private sector connivance with the public sector resulting in rent-seeking activities, restrictive markets and crony capitalism.
How can we talk about self-sufficiency in food when our strategic land assets are being sold to foreigners when they should have been put to productive use? There is also no coherence in our policies for a more optimal utilization and sustainable use of land and other natural resources, the development of our coastal regions and protection of marine life, agro-industrial production for food security and a thriving fishing industry.
Another characteristic of this model is the ‘growth coalition’ between the family-dominated political elite and the island’s few families-dominated economic elite whose policies have remained too Eurocentric, and have thus been hampering our diversification strategies in markets and products. The tourism sector, our Africa and IT strategies are paying the price today. We are still trapped within the box of the old policy and the old way of thinking.
Digital technology is moving at a fast rate, leading to doing things in new ways: more bottom-up, more plugged into outside networks and with a greater willingness to accept the risk of failure. But here our private sector is slow to move up a gear. Where are the new emerging local and global services industries? Is our family-dominated private sector too conservative, too claustrophobic to open up to top IT firms from India, Korea, China and other Asian economies?
The growth coalition is also reflected in the alacrity with which government rushes to the rescue of the private sector in terms of stimulus packages, subsidies, exchange rate support schemes in the face of any external shocks. This government’s assistance even extends to interest rates and exchange rate policies. And we are paying a heavy price for that. The low real interest rates are leading to low savings, less productive investments in the construction and real estate sectors and unsustainable current account deficits and the diversion of our scarce resources to unproductive projects. Should we be surprised then that the private sector is not forthcoming with investment in new sectors? Why? Because this model of growth is providing them with a more than a reasonable rate of return on the low-hanging fruits.
Table Consumption Expenditure 2
Our real source of competitive advantage should lie in the resilience of our private operators, on their nimbleness and flexibility, their internal capacity to withstand shocks, not in rupee depreciation. Rather than rupee depreciation, we would prefer policies that incentivise investments, expand the industrial base and help producers tap into foreign markets and access new skills and technologies.
Another issue where the growth coalition fails us again is on the protection of our environment. Yes, it is true, as pointed out in a recent study of the World Bank, that a 1% increase in temperature lowers growth in the same year itself by 0.9 percentage points. But there seems to be some double standards on these climate change concerns. If I am not mistaken, it is our very private sector which is trying to negotiate a 20-year contract with its growth coalition partner, the Government, for electricity generation from coal, as it is aware that bagasse may not be around for long. Who has been encroaching on our wetlands and public beaches and sending hooligans to tame down protestors?
The President of the MCCI concluded his address by saying a few words on inclusive growth. This is exactly where we agree to disagree. It is a crying shame that a greater proportion of our population is still struggling to make ends meet, inequality has continued to rise, youth unemployment stays high, women remain significantly less active in the labour market and economic growth is flowing disproportionately to the wealthy. We would rather espouse a model with such programmes and strategies that secure a more inclusive and resource-efficient economy and where the rising tide of economic growth lifts all boats, not just the super yachts…
* Published in print edition on 5 April 2019
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