Economy needing to cruise at a higher level

Nearly everybody is convinced that the economy is not doing the best it could. The government has been making efforts to get the private sector to make breakthroughs.

From the government’s first budget to its Vision 2030, the appeal is to make additional activities emerge. In other words, the scope of the economy should be enhanced.

While traditional sectors such as real estate development, export manufacturing, tourism, financial services, SMEs, etc., have been keeping themselves active enough, the feeling is that it is not enough. For example, real estate activity will not in itself be the stimulating factor for other needed growth sectors to emerge. It has its limits.

We saw the limits even in export manufacturing recently. Production units can relocate to other countries if Mauritius doesn’t give them the scope to competitively maintain their production here. UK-centric garments exporters are faced with uncertainty after the ‘Brexit’ vote. Financial services are hit by an excess of quasi unemployable surpluses of liquidity, in the absence of viable projects to finance. Even their operating space as regards provision of their international services has been severely narrowed down by the recent renegotiation of the India-Mauritius DTAA. But thanks to changing international perceptions of security, tourism on its part has been doing well.

Ups and downs are normal in business. But countries which anticipate such changes and proactively bring up ever newer activities to replace whatever is being lost, manage to keep the economic system going. Real estate development, which the local private sector and even the government have been focussing on, will not really create the much needed additional economic scope of the country. For increasing economic scope substantively, we will have to do much more than one-off economic engagements.

It is also not enough to enunciate possible new sectors of activity such as the ocean economy and development of a maritime hub around Port Louis harbour to get off the ground. One has to create the conditions for the emergence and maintenance of the activities from Mauritius in a cost competitive manner. Required resources have to be clearly identified and put in place. Strategic advantages have to be created locally and internationally. It is because we have not identified special advantages we can confer on producers for developing those activities that all of these have been merely spoken of since a number of years without concretely translating them into reality.

Establishing clear links and appropriate environments for undertaking profitable multiple business in new areas is a precondition for augmenting the required economic scope. This means activities undertaken in the new context must complement and supplement each other sustainably. Standalones like real estate development will do up to a point, but no more.

Government does not have the resources to bring up all the relevant investment towards this kind of multiple expansion of mutually supporting activities in Mauritius. It has fast reached the limits of its public indebtedness.

Over the past 18 months, the private sector has not been forthcoming enough in terms of raising the required level of productive investment in promising new sectors with adequate enough marginal productivity of investment to justify bringing into place a self-supporting higher growth process. Nor has this been the case the past four years before the new government came to power.

Remaining stuck in this situation of gridlock on the economic front is not an option for a country such as Mauritius. We have to break away. If we can’t manage to break away on our own, we need support for so doing from the international private sector in quest of opportunities to do profitable international business based in Mauritius.

The latter have to be convinced that we have identified the avenues for them to do business confidently from Mauritius, that they can have access to all the materials they need to undertake activity, that connectivity is seamless and highly cost-efficient between us and the external markets they target for their products, that we will not rashly undermine business confidence, that logistics and operating space are available, etc.

It may appear surprising to some. But governments which manage to send their economies into successive higher orbits, do a lot of prior homework. They put themselves in the place of potential investors into new lines of economic activity sought to be canvassed and have an answer for all possible questions the investors may raise to convince themselves before setting up their enterprises. A good networking of mutually dependent businesses (e.g., reliable supplier of raw material inputs, chemical processing labs, producers of the pharmaceuticals, target export markets for finished production, efficient shipping lines from source of inputs to export supply locations) in an economy is yet one more reason why investors will be drawn to do business over here. So, a government needs develop a comprehensive slate of mutually supporting business linkages, do its own bit as a facilitator and ensure social justice as well, to lift the economy from its current slack.

Yes, one can tinker at the edges to set right some inefficiencies which have already set in. But the real job to do is to raise the critical mass of business in the country in the first place. And, importantly enough, stop giving a negative image of Mauritius as a place for doing business.

* Published in print edition on 15 July 2016