Why is our export performance not picking up? What would make more investments materialize in Mauritius than what we have?
Can we take some apt policies which could turn the
situation to our advantage?
On 10th July, Cabinet took the decision to pass a Bill for establishing an Economic Development Board (EDB) for Mauritius. Accordingly, it is intended that the EDB will be a corporate body with the objective to, amongst others, provide “institutional support for strategic economic planning and ensure greater coherence and effectiveness in economic policy formulation”. The objective is also to regroup in the EDB certain existing public bodies with a view to adopting a coordinated and streamlined approach to promote a conducive and competitive business environment for added investments into the economy.
Such an initiative was long overdue, if only because the world outside with which Mauritius transacts has become increasingly unpredictable. This situation made it imperative to keep challenging and re-orienting approaches adopted by us in the past to move the economy forward. We have seen several of the advantages we had on the trade front disappear, the latest having been the double tax avoidance treaty with India.
Other external initiatives have been crowding in, such as compliance with the US FATCA, calling for disclosures to the US authorities about Americans dealing in our centre. Lately, the OECD has come up with the requirement for common reporting of data for tax purposes pertaining to non-nationals, multi-national companies in particular, having a presence in Mauritius. They are intended to neutralize any tax advantages that may be keeping those businesses operating here.
Beyond these specific actions, uncertainties about the future shape of international trade abound after Brexit, the fragilized EU and America’s not-so-uplifting reactions to the international free trade regime. Reactions international investors will have to all of these events needed to be followed up by a highly disciplined, internationally competent and non-partisan local think-tank in order to protect our interests. This means there was a need for dynamic policy redesign to match the changing circumstances to give the necessary assurances to investors that we will not swerve from a rational and positive approach to business development.
It may be expected that the proposed EDB will fill this important gap in policy-making which has been with us now for numerous years. While unification of the public decision-making process should be welcome – to do away with unproductive bureaucratic tangles and often belated one-off decision-making in the face of immediate challenges already upon us – EDB’s proposed mixing up strategic decision-making with promotional activities may not be ideal. Dedicated teams of specialists sometimes deliver better outcomes.
Taking a longer-term perspective
Irrespective of such considerations, Mauritius has been facing an economic situation calling for fundamental redress since a number of years. Without taking the blaming route, we see data showing that domestic investment hasn’t been picking up for a long time.
Instead of being in the up-20s range, our ratio of investment to GDP has stayed more or less stagnant in the 18% range in recent years, a good part of it in real estate development. Thus, this ratio was 18.9% in 2014 and 17.3% in 2016. We ought to have analysed the whys and whats for the structural gap which has been persistent between the desired higher level and the actual lower outturn. This would have dictated the structural remedial action to take instead of being content flourishing out a single year’s marginal up-performance over the preceding one.
For a country so dependent on exports, we haven’t been performing as well as we should have. In 2016, our total exports of goods and services amounted to Rs 193.2 billion against imports of goods and services of Rs 234.1 billion. Thus, net exports of goods and services showed a deficit of Rs 40.9 billion in that year. In 2017, Statistics Mauritius estimates that this deficit may go up to Rs 48 billion. Exports of goods are not doing too well for some time now.
Situations like this raise questions: is the situation sustainable? Why is our export performance not picking up? What would make more investments materialize in Mauritius than what we have? Can we take some apt policies which could turn the situation to our advantage? What exactly are the domestic parameters requiring to be improved to help us face the increasingly uncertain global situation, nevertheless? How does one implement incremental changes likely to give us an edge?
The unified perspective
If one thing has been lacking in Mauritius, it is unity of purpose. It is not only at the political level that piecemeal contradictory actions taken by individuals has been sending the wrong messages. The impression one also gets is that certain institutions find themselves pitched against each other or are mis-governed from within. Unnecessary such tensions keep the focus away from where it should have been. This is certainly not the best way for getting to concrete progressive results where most it matters for the economic well-being of the country.
Both the government and the private sector would perhaps agree that the economy needs to perform better, free from all the unnecessary contradictions. What is it then which has cut the private sector’s appetite for risk-taking by undertaking additional investments? Despite an Ease-of-Doing-business index highly favourable over a long number of years?
The proposed EDB will possibly identify, on the basis of concrete hard data, factors impeding greater investor activism for uplifting the economy, that should be capable of further diversifying the economy. It will also possibly take the necessary pragmatic action to do away with the flaws in the system, nay, introduce better business facilitation, without, once more, being bogged down in conflicting bureaucracy.
Having yet another institution is not a panacea against economic underperformance. The institution should have the necessary implementing authority to take all rightful actions as necessary to both increase our economic scope and to overcome the numerous hurdles coming up from the international economy. It should be made workable.
Unless Mauritius stands out as an out-of-ordinary performing economy, based on its own internal strengths, it will not be able to attract the investments we need to rise above the stagnation we’ve seen over numerous years.