Higgling and haggling against a weakened government?

The government made numerous promises during the last electoral campaign. One of these was that it would bring about an ‘economic miracle’ and create a 100,000 additional jobs in the process.

A recent opinion poll taken by a press group indicates that the government’s popularity would have dived sharply. It also seems to state that specific leaders on the government side have been losing points while some from the opposition side have climbed up in popular esteem.

It must be realized that, for whatever such opinion polls are worth, depicting the slide in popular acceptance of the government a year after its accession to power, puts pressure on it to “do something” about it. After having ridden on the crest of a wave of popularity on increasing basic retirement pension extremely liberally and granting an across-the-board wage increase of Rs 600, the government is thus finding its popularity rating sliding down from its earlier peak just after it assumed office.

The signal the government should be getting from all this is that it may not improve its public image and appeal, going too far in this direction. Popular measures come at a cost: they should not be pursued too far by governments, according to the private sector logic. The latter feel that “give-aways” deprive the private sector’s pockets of the amount of compensations paid to workers – twice, the initial Rs.600 and the latest Rs. 250 per month.

The private sector likes to send a kind of warning also that adopting Landell-Mills’ recommendation to adjust payment for bagasse to planters at ten times the price previously conceded by the private sector, may defeat part of decades of ultra-liberal public policies in favour of the top rich. So, they take it for granted if the government keeps showering on them the benefits of the already decade-long flat corporate tax rate of 15% but they mind it very much if they have to pay up small little things to workers from time to time.

To the discharge of the new government, it is important to bring certain facts on the table. It has accorded over-generous tax concessions to the private sector almost immediately upon coming to power. The comparison has been made in some quarters with the significant concessions that were given during the “Illovo Deal”: it is claimed that the Illovo concessions are nothing compared with the ones currently conceded by the government to the private sector (over Rs 33 billion on land tax and registration dues concessions alone) in the context of “smart cities” and other real estate projects. Others claim that the government would have even accorded tax concessions which will keep providing massive reliefs to the private sector decades after.

Since the beginning, the government is conscious that it will be able to fulfil its electoral promises by working together with the private sector. So, unlike in the past when governments claimed to be keeping the private sector under a tight leash, the present government has chosen not to adopt a daggers’ drawn position vis-à-vis the big corporate private sector. After making his Economic Mission Statement, the Prime Minister announced a joint Government-Business Mauritius steering committee to ensure the implementation of mutually agreed projects.

The second of these meetings chaired by the Prime Minister himself was held on Tuesday last to take stock of the situation. It appeared that the Prime Minister made a desperate call for urgent action on the job creation front. He feared that should job creation not start happening fairly quickly now, people will start making abusive remarks against him. In other words, the big corporate private sector was not engaging firmly and quickly enough to yield the expected results on the employment front.

On its part, the big corporate private sector appeared to have argued that administrative delays were to blame for the situation, to which the PM would have reacted by stating that if government officials were causing such undue delays, the project developers in the private sector can go straight to the concerned Ministers who were tasked to come out of their slothfulness and put pressure on officials to deliver. Tensions appear therefore to be building up.

The absence of expected outcomes in terms of additional jobs created has become a cause of serious concern to the government. After getting into the huge tax concessions, the big corporate private sector, on its part, is shifting the blame for non-doing on the slackness of government officials dealing with its applications. It is perhaps the context in which SAJ would have declared, in another place, that there were some incompetent officials appointed politically by the previous government in institutions of the public sector who were unable to deliver and that he would be merciless towards them.

There are two possible explanations for this situation: one, that the big corporate private sector is finding itself in a position of not being able to implement its projects in the context of the Economic Mission Statement pronounced this year by the PM; second, the big corporate private sector having conceded two wage compensations so far wants to arrest the hand going too far into its pockets and/or it is looking for yet more concessions from the government to get going.

The pressure exerted on the government, as it appears from its falling popular esteem in the public eye at the lack of concrete positive results for the economy, looks like the big corporate private sector would be bargaining its possible contribution to the objectives of the Economic Mission Statement of the PM.

For, it is well known that a business-oriented private sector worth its name, will not miss the least opportunity to appropriate profits wherever such profits are potentially available. It will not higgle or haggle. Rather, it will go straight to cash on the opportunity if it exists. It will itself arm-twist bureaucrats standing in the way of such profits by all manner of lobbying, well before joint private-public sector meetings are scheduled. It will not allow its potential profits to wait for a formal meeting in the course of which it will bring bureaucratic hurdles to politicians’ attention.

Seen from this angle, both factors may be at work. Opportunities to open up enduring job-creating profitable businesses may be lacking, beyond getting quick bucks out of the classic real estate development. On the other hand, projecting the government in a publicly weak position may help to extract further concessions and, why not, ensure that business-irrelevant things like the Good Governance and Integrity Reporting Act, do not stand in the way of the big corporate private sector.

We have to know for certain whether the government and the big corporate private sector are actually involved in a game involving fulfilling electoral promises such as massive job creation, as far as the government is concerned, or extracting as many advantages as possible from a weakened government, as far as the big corporate private sector is concerned.

Mauritius’ internal market is too small. This means business expansion in the scale contemplated, notably by the creation of 100,000 additional jobs in the next 4 years and an ‘economic miracle’ to boot, will depend on our ability to push the implied large scale supply by us in such a context on to external markets. It will require exceptional skills to make inroads on the external market, given that conditions over there are not particularly rosy at the moment.

* Published in print edition on 18 December 2015

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