Let’s move forward
The elections are over. Cabinet has been constituted. There is government business to do. The country may prosper, based on the scope given to government business. It would be in the interest of the country to set targets which meet the expectations of the population at large. It would also be in the interest of the country to sustain and expand vital sectors of activity. Whichever be the targets and policies formulated in this context, the best course would be to translate them into action. The Executive arm should therefore be sufficiently strong and capable to understand what is at stake and, in the light of that understanding, undertake the required action harmoniously and with proper coordination so as not to waste precious resources. Mauritius already has a strong economic base. It is the result of decades of painstaking work done under various governments to provide for the processes of decision-taking and the unimpeded execution of those decisions in a market framework. The machine may appear to be clogged up or imbalances appear from time to time and reforms will be required to set things back on course in such events. This is normal. But the basic groundwork for smooth operation has been firmly laid down. It needs to be adjusted from time to time to make things flow easily or take new directions. We are certain that such shortcomings will be fixed by the government as and when they surface up.
The real task is to identify clearly the way forward. This is where ideas come in as principal inputs towards the next overhaul. They go beyond routine repair. In the latter category, we have things like keeping the budget deficit within manageable limits. It involves increasing taxes where the potential exists for tapping additional revenue by a fair tax system. It also concerns distribution of welfare benefits and services of the government which are in the nature of ‘public goods’ to correct distortions caused by a perfectly legal but aggressive market system. Political parties may consider it vital to balance the raising of taxes and spending on welfare distribution for their own survival. However, beyond the survival of individual political parties, tax and welfare systems have the capacity to inspire a variegated structure of non-antagonistic wider-based entrepreneurship in a country. We are in need of such a framework. In it, citizens across the spectrum will feel ‘empowered’ to thrust forward with more ambition than before.
Consider the financial sector of Mauritius. It has been here from 1810 at least in its present form. It has added on many new activities over the past two centuries, but there has taken place a quantum jump in terms of the variety of services provided from 1989 onwards. Offshore was grafted on to the sector as from this latter period, procuring it an international dimension which gave it the necessary breathing space to break away from the confines of a narrow local market. It was policy-making that made it possible for the sector which was employing around a thousand persons at the time to employ more than 12,000 today at much higher levels of income than before the policy breakthrough made it possible to reach the higher level. As we professionalize and raise the confidence of doing business with the sector further, there is even greater scope for adding value and creating more jobs. Had the same kind of policy twist been given to the agricultural sector, the sugar cane sector and vegetable/horticultural production would not have seen the number of employees in the sector decline from around 55,000 in the 1970s to less than 20,000 today. There is plenty of evidence from the canned tomatoes (amongst several other products of agricultural origin) that we have been importing from Spain, Italy and others to show that agriculture has undergone a well supported re-orientation even in rich countries towards diversified exports. Good policy-making and aligning the human and other resources efficiently can expand the scope in our case as well. It has to be part of an overall plan with quantitative and time targets that must be seen to be met.
Most of our export efforts are directed to the West. There is nothing wrong in so doing; in fact, access to those markets has forced us to keep standards up. We have however yet to employ the nimbleness so gained to get another wave of foreign and new investors from other parts of the world to expand our overall production possibilities. We are not referring to the one-off IRS type of FDI here. Yet, the recent economic crisis has amply illustrated that if a fringe only of our total economic activity were affected due to a crisis, we can still plod at it with the rest. But we have been unable to enter the regional market even in a respectable manner to achieve the required diversification of the production base, let alone China and India where competition will be really tougher. We can go to those newer markets just like France and South Africa have penetrated our internal wholesale/retail and telecommunications market with pots of dividends to take back home. Policy initiatives favouring venturing out can be of assistance to support a drive in this direction.
If we cannot go out to invest in those outside markets, we could still invite their shoppers to our place. The range, quality and prices of our products could achieve this to an extent but that will require growing out of the poor culture of excessive mark-ups in local commerce. Ultimately, we have to associate ourselves with those who are stronger than ourselves if we cannot compete with them successfully. Like the offshore, the trick is to work on the “missing platform” that will make this kind of association possible. Entrepreneurs need to be given the enabling push to make the sort of external inroads needed. Giving monopoly profits to local entrepreneurs acts to inhibit external ventures by locals; if that was not so, why are our IPPs not going out to capture outside markets? True competition has to set in. If entrepreneurs remain content to go on milking the local cow, they will be ill-prepared to face external competition.
The government’s program should reflect how it is intended to expand this economic space in practical terms. We have concentrated enough on creating fiscal space. It is the public that became the casualty of this kind of creating of fiscal space. Still, the public debt did not cease to grow. As a consequence, there is an attendant problem of debt servicing. Despite this, one expects new tax and re-distribution policies to be fairer towards the public than it has been the case, realizing that trade taxes are no longer a significant contributor to government revenues. There is a delicate balance to strike in this respect because we also have to give the cutting edge to our enterprises in foreign markets. The trade-off has to be skilfully balanced so that social welfare spending does not have to throw government finances out of kilter.
Going forward calls therefore for a sober but pragmatic approach to development. Although we do not expect the government to strike gold at first shot, its program should reflect some degree of re-orientation of policies towards a more balanced sharing of burdens both from the tax and non-tax angles. At one level, the government is expected to act to smooth the rough ends that have made it more difficult for those at the lower end of the pyramid; in fact, the main job in this case is not to allow the situation of the worse-off to deteriorate. At another level, the government would be expected to throw in sufficient numbers of new projects and their accompanying policies to create a bigger and more fairly distributed economic space. In the middle, we have the so-called middle class that has seen its aspirations to better living frustrated during the past years; this group needs to be given sufficient means to spearhead its evolution preferably into promising new activities, especially by equipping it with state-of-the-art knowledge and skills in as many fields as possible. It has to be borne in mind that giving a cutting edge to a part of the population that can help increase our economic opportunities is not necessarily at the cost of other components of the social set-up. The successful transformation of the current situation depends on an approach which combines a comprehensive and fair vision of all of the above in a non-conflicting mode. We know that it is difficult to deliver all of this at one go. But governments are elected precisely because they have to tackle difficulties of the sort. Let’s be constructive.