The Bank of Mauritius (BoM) has gone as far as to provide a special line of credit in foreign exchange to our exporters last week in view of foreseeable drastic conditions in the Euro zone. The BoM’s Governor has stated having gone as far as possible from a central bank angle to support the sector but that a paradigm shift from different angles would be necessary to position exporters better, given the prevailing extreme economic prospects on the markets.
For all we know, Mauritius is a highly dependent economy on the external world. In fact, it has no choice but to lean on the rest of the world to carry on doing business. This fact was recognized long ago and gave rise to our closer association with Europe to develop our tourism and export manufacturing sector. On the import side, we have relied on Europe but more so on Africa and the East. The pattern did not change very much over the years.
It is in the context of the crisis challenging the Euro zone currently that we have realized the serious risk our external market concentration poses. This has caused a small amount of market diversification towards South Africa which itself remains vulnerable to any significant international market downturn. In situations like this, the think-out of countries goes in the direction of greater market and product diversification.
As the latest Governmental Program announced, we could embark towards putting the vast expanse of ocean in our exclusive economic zone to use towards this kind of objective. Even embarking on such a program cannot be successfully achieved without the quest for reliable markets to which our production from this source could be sustainably directed. Capital financing would also be needed to go for it on a meaningful scale. As we did for textiles, we may form reasonable economic alliances with other countries which have acquired a lot of experience in “ocean mining”.
This however is only one example among other economic activities we could undertake to stem the potential danger looming from our traditional markets. Other areas can be based on less than the large expanses of sea we have at our command. They involve skills that can be put into the production of goods and services which are more resilient than our traditional production to the risk of severe global economic downturn. The global economy has not reached such a low point and can still be salvaged by taking the correct decisions in the affected countries. We can still count on that.
Even if the economies on which we depend took a turn for the better on account of policies which start biting in the right direction, it would still be right for Mauritius to seek a change-over in its overall market environment. How is this done?
From the general tone of the public debate over here, the tendency is to blame whichever government is in place when things don’t work out well. This is due perhaps to the fact that governments like to attribute to themselves all the credit when the going is good. If we skipped this kind of debate, we’ll see that there are deeper veins which shift economic focus of countries.
Consider the recent years’ economic successes of India and China, for instance. This success was built upon decades of perseverance. Hundreds of thousands of engineers and science graduates helped create new sectors of activity, such as IT-enabled goods and services at such efficient cost that the countries started playing on global markets assertively. The critical mass went on increasing to make them global giants in those areas of production. The good thing about their success was that the global economy was in an expanding phase at the time they launched themselves forcefully.
The key ingredient is a constant grooming up of local skills and availabilities so that you are on board when the iron is hot. Because China had been making all the range of manufactured products for decades, it had the base for tagging on to world markets when the opportunity came. It just had to refine itself to higher standards. In the case of India, its universities had been producing a huge number of software engineers for long and it was no surprise that they set up massive centres of excellence in this field not only in their own country but went out to do the same in Silicon Valley as well.
Given the political structure of China, a lot of the impetus for economic growth and diversification was supported by explicit government action carrying on investments in target countries and finding the resources for supporting the growth momentum. In the case of India, the private sector went out at its own initiative to create scope for new and added production for local and external markets. The latter model has been at work in the past in Mauritius to extend the horizon of private enterprise. Our governments have done a lot to set up the platform for new economic activities but they have left it to the private sector to drive on.
This is a reasonable model on which to push out the frontiers of our production. Since the private sector is in contact with clients, it is best placed to identify changes in patterns of market demand. If it is proactive enough, it will quickly identify product markets that are losing scope and those that are coming up new on the horizon within our capacity of production and talent range. By so doing, the job of the government will only consist of dovetailing its policies to emerging environments of production. The more such efforts are directed towards conforming to our compulsive requirement to seek out and serve external markets, the more resilient we’ll be as an economy despite the twists and turns taken by the global economy.
There are some activities that we may not be able to undertake on our own in this perspective. That may be because we may be behind in terms of having the requisite skills. It may also be because we don’t have access to mature markets in sophisticated products. There will always be constraints of the sort. There have always been in the past. Faced with such constraints, the defining moment in the life of nations comes when, overcoming them somehow or other, they rise above them to create new productive scope. We’ve done it in the past. There is nothing against doing it again.
It should be clear that achieving objectives of the sort is not based on shifting the blame constantly on one economic agent or the other. If we are failing to get where we should have been on the line of success, it’s because the shoe is pinching in some places – and not exclusively on the exchange rate front. We have to identify such factors if the aim is to get over them and tackle them straight on. No one knows it more than the private enterprise facing the situation of client interface. Oftentimes, knowing the problem amounts to knowing the solution that will apply to it as well. The sooner this is dealt with, with one’s own resources in the best of cases, the faster one is back on track again. Short of such prompt correction, one may let complacency get on and have to eventually face situations like certain enterprises in the developed world which are finding it impossible to pull out of the rut at present.
In reality, the paradigm shift is not one major turnaround when it comes to economic matters. It has been years since information technology and its application in a wide range of products have been redefining the workplace. Companies acting in concert with this shift that has been taking place, have a good future; those which have kept on plodding along traditional patterns, ignoring it, have to face tough situations. There have been innovators of this sort in our textiles because had it not been so, they would not have been able to keep up as they have done. We need to accelerate the pace of this kind of adaptation of enterprise instead of having to face a quantum jump all at once with all the implied cost of lost markets.
Progress can be made by breaking new grounds with advance knowledge of where we want to be in time to come and why. The private entrepreneur is called entrepreneur because he goes out in search of solutions even before the problems crop up. The more of such entrepreneurs we get in our midst, the less we will be panicked were our markets to spin into downturns. This is the real paradigm shift we are in need of. A lot of active do-ers; fewer givers of blame left and right.
* Published in print edition on 22 June 2012