Those who live in glasshouses… 


PNQ on Neotown

It is said that those who live in glasshouses should not throw stones. The MMM opposition went on the rampage when the Neotown project caught the headlines. It claimed that the allocation of a long-term lease to the Indian property developer, Patel Engineering, for a 58 Arpents project in the port area was riddled with inconsistencies. It stated that the rental which the government had agreed to for the state property was extremely low. This, it said, was calculated to allow the developer to eke out enormous profits through staggered asset sales without the need for it to inject any significant capital of its own into the project. It stressed that the light regime of rental applicable to the project over a long stretch of time amounted to a significant manque-à-gagner for the country. It also claimed that this give-away to the property developer needed to be looked into again and that the government should proceed more transparently by inviting international bids into the project.

The flamboyant and hyperbolic presentation that the Managing Director of the Patel Group had made in November last year to the Group shareholders, lauding the feats of the negotiators in persuading the Mauritian government to make exceptional concessions and giving a free hand to the group and the very low price at which the deal to lease out the property had been struck for 99 years, tended to suggest that we had failed to strike the best deal in favour of the country. Building up on all this, the Leader of the Opposition, Paul Bérenger, fielded a Private Notice Question (PNQ) Tuesday last on the Neotown project. He questioned the government, amongst others, as to why it had not had recourse to a bidding process instead of allocating the whole plot of land in the Les Salines area to this specific property developer.

It must be acknowledged that Minister Abu Kasenally did not mince words replying the PNQ. In particular, he referred to the 17 cases when state property in the vicinity of the port had been allocated in the period 2002-05 by the government led by Paul Bérenger himself without recourse to any bidding, let alone international bidding, for the same. He went on to represent that the present government had done nothing different from the established practice of the then MMM-MSM government barely a few years ago by not inviting bids. Mr Bérenger was left speechless when this fact of his own doing was brought up before him by the Minister. How could he ask the present government to have recourse to bids in the case of Les Salines when he himself had deemed it unnecessary to do so in all those cases when he was at the helm of government a few years back?

It is stunning how Mr Bérenger can forget so easily that he is living in glass houses. Let’s leave aside these 17 cases cited by the Minister as not having followed the procedure of inviting bids under the MMM government. Let’s focus for a moment on what happened in 2003-04 under the selfsame MMM-MSM government led by Paul Bérenger.

Navin Ramgoolam, the then Leader of the Opposition, raised a PNQ in March 2004 about the MMM-MSM government’s decision to allocate at the time two plots of land of 25 Arpents and 87 Arpents, respectively, in Agalega to the Ireland Blyth Group (IBL) for a chalet-hotel project development together with exclusive fishing rights on the islands and an IBL-owned private jet service linking the Agalega islands to other destinations. For the private jet service to be financially viable, Air Mauritius would have had to cede its existing rights in certain destinations and thus accommodate the IBL Company’s private commercial interests. The Letter of Intent approving this deal with IBL was granted by the government on 19 December 2003 pursuant to a Cabinet decision to this effect. Never had the government led by Mr Bérenger at the time had recourse to any bidding before issuing the Letter of Intent to IBL which, by the way and in contrast to the Patel Engineering which is involved in construction since 1969, had no experience in the hotel sector. 

One would expect that, knowing full well how much he is exposed in the matter, as illustrated by the IBL case, Mr Bérenger might have refrained from even raising the question of inviting bids in the case of Patel Engineering. There must be a good reason why he was prepared to take the risk of doing so nevertheless. Was the concern really about the annual rent charged to the Patel Engineering being too much on the low side? About the real market value of the government property being understated to make the rent amount more palatable? About giving too much of a free hand to the property developer with the attendant risk of a wild project coming through without due respect for environmental concerns? If Mr Bérenger was really convinced about all these, he should have applied the same principle across the board to all investors, especially when he was holding the reins of power. But he knows quite well that Mauritius being what it is and where it is located, we are not favoured by hordes of foreign investors queuing up at our gates and vying against each other to catch up a bit of the local investment game. All these niceties about the need for transparency, getting a fair return for the government and holding the property developer to account, are mere decoys.

There is more than meets the eye. The real aim appears to be to frustrate any other than certain specific traditional local investors from getting a foothold in the economy. For, if those foreign investors were to come in by sufficient numbers, they might threaten certain highly profitable areas of activity that people like IBL have so far managed to corner off to themselves to the exclusion of everybody else. It is this opening up to outside investors of certain key sectors that the MMM seems in principle to be opposed to. This narrow stand of going out to protect certain local investors from being overtaken by foreign investors is in sharp contrast to what good governance rules, such as invitation for bids, fair pricing, controlled development, etc., are expected to convey. Insistence on those great principles is just a screen to hide this ulterior motive to protect a particular class of local investors.

This kind of approach is unlikely to take us too far in Mauritius’ economic adventure. We’ve grown whenever we’ve allowed foreign investors to come in. Indeed, the Taiwanese, Indian, Singaporean, Hong Kong investors who contributed to the upcoming boom of textile manufacturing in the 1980s expanded our horizons. We learnt just as well about offshore financing from foreign investors who brought us the tricks of the trade from Jersey, Guernsey, Switzerland, etc, as well as international bankers who took up employment over here and passed on their skills to our practitioners. We caught up with ICT from well-known international outsourcers of business who set up shop over here. That is how the ICT sector has emerged.

The next wave of economic diversification will come via the same route of import of technology and know-how; local investors can catch up, build and sustain such activities when the foreign investors leave our shores to make money in other places. We only need to be careful not to inadvertently introduce fly-by-night investors who add nothing to the superstructure of our production, only to disappear after making potfuls of money with no production legacy behind. Worse, the latter may make it extremely difficult for us  should they leave an irreparable mess behind; that is why it is important to put their credentials to an acid test before embarking them. Let us therefore not stick to an unproductive entrepreneurial atavism which concentrates on closing doors to everybody except to our traditional private sector and using politics to support such an agenda. Let us remain alive to the real motivations behind certain public interventions. 

* Published in print edition on 13 May 2011

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