Interview: Mrinal Roy —
… except for those who bury their heads in the sand. Let us not undermine it by divisive PR’
‘The post of the Prime Minister is too sensitive a post to be bequeathed as a family heirloom’
‘Rodrigues has basically been used by the local witchdoctors of PR as a guinea pig’
Our guest today is Mrinal Roy, who is a keen observer of the economic and political scene. He has wide national and international exposure to the major developmental issues as he was a cadre at the Mauritius Sugar Syndicate, besides his interest in politics as his father was an active politician and political commentator in his lifetime.
He gives his informed views on several issues which are of great concern, such as the slowdown in implementation of national projects, the expectations from the private business sector, the issue of change of Prime Minister, the intended electoral reforms in Rodrigues among others.
Mauritius Times: There seems to be a general feeling of slack in the country, interrupted from time to time by intermittent controversies chasing one another – Heritage City, Stree Consulting and the debate regarding the threat posed by Bagatelle Dam, the proposed ‘passage de témoin’ to Pravind Jugnauth… and the latest being the Omega Ark discomfiture. What’s most bothering you these days – the things that are happening or those not happening?
Mrinal Roy: Both. The agonising truth is that all this unending mess was scripted. The management of the affairs of the country requires intrinsic competence, transparency and accountability. For decades now these essential elements have faded from the government decision-making process. While the salary packages of both Ministers and their top executives and advisors have increased substantially during that period, the quality of both has not improved. This is sadly a lose-lose situation. In contrast, the Prime Minister and President of India earn INR 160,000 (MU Rs 85,900) and INR 150,000 (MU Rs 80,535) respectively per month, a fraction of the monthly salaries of our Ministers, MPs and the civil service top brass.
The generation of bright Mauritians who joined the civil service after independence to serve the country and who climbed the various echelons of the Establishment hierarchy on merit to become top cadres have for the most retired or left the service. As the last of the Mohicans, some still remain in service. They have for years provided judicious advice to frame government policies, have been a robust bulwark against vested lobbies and an unswerving guardian of public interest. In so many ministries now, this is no longer the case. Government interference and nepotism instead of a merit based system of recruitment and promotion have taken a heavy toll. The upshot is that both Ministers and the senior officials manning too many ministries seem to be out of their depths when making policy choices. Too often they bend to the diktats of vested lobbies, to the detriment of the public interest and other stakeholders. This is evident in the repeatedly daft and ill-thought out decisions taken in respect of say the sugar sector, the smart city scheme, the tertiary education sector, the continuous looting of dwindling public beaches for the benefit of hotel promoters, the land policy etc.
In the current strapped conditions of public finance, the key question to be asked by government before embarking on any major project is whether it is a priority. The second condition is that all major projects must first be validated by a rigorous method of evaluation through diligent feasibility studies, independent professional advice from established experts in the field, due diligence reports, project financing arrangements etc. This basic exercise of validation before any major project is approved seems sorely missing. Ministers must realise that they are far from being experts.
The Heritage City saga with its wanton largesse in consulting fees financed by public funds and the doubling of the costs of the Bagatelle Dam and the Terre Rouge Verdun Road or the Omega Ark fiasco epitomize the systemic shortcomings of a fundamentally flawed and opaque system of managing the affairs of the State without the scrutiny of strict accountability. Unless fundamentally reformed and anchored strictly on merit, expertise, transparency and accountability, such a system will continue to spawn other costly blunders.
As regards the Bagatelle Dam, it is vital in the light of risks purportedly inherent to its construction that independent experts urgently establish a reliable health check certificate regarding its long term safety and integrity before it becomes operational.
The government was voted with a specific mandate. Its level of ambition reflected in the 4.1% growth rate forecasted for 2016/17 says it all. Their priority should be to get on with it to deliver on the promises made and certainly not further test the people’s patience with unwarranted changes at the head of the government without the legitimacy of a plebiscite at the polls.
* Consider the rigmarole about the attempts to sell off the Apollo Bramwell Hospital. Here’s a foreign bidder with connections in the UK and Singapore, who has allegedly already stepped in and apparently running the hospital for a number of months now without having placed a single dollar on the table. Now we are told that there are questions raised about the financial standing of Omega Ark. What does this tell you about the handling of the aftermath of the BAI breakup?
It does get any worse than this. Every rule of elementary prudence and due diligence required to dispose and maximise the value of a prime asset seems to have been violated. Why on earth was Omega Ark allowed to occupy and operate the Apollo Bramwell Hospital before they paid the full amount due? Has an audit been carried out to ensure that there has been no damage to the equipment and assets of the Hospital on taking it back from Omega Ark?
The botched process of disposing of the assets of Apollo Bramwell Hospital has ended in shambles. It is public knowledge that the post BAI situation has left a huge deficit in resources to compensate hapless savers. Government was therefore duty bound to endeavour to optimize revenue from the sale of the BAI assets. Against such a backdrop, would it not be logical and more judicious to call for a new international tender among the many private hospital operators in the world after a diligent desk work to identify them, instead of limiting offers to the two other companies who participated in the last bidding exercise? The tender documents should detail the incentives provided by government to make Mauritius into a high-tech medical hub.
* The ‘architects’ of the break-up are lying low, and it’s the taxpayer that’s footing the bill despite the earlier assurances given that public funds would not be injected. Moreover we have yet to be informed, in spite of the redacted version of the nTan Corporate Advisory Pte Ltd Report on the BAI Group (commissioned by the Bank of Mauritius) whether the measures that had been undertaken in 2015 – for whatever reasons, political or otherwise – speeded up the collapse of the BAI Group or whether this could have been averted and the Group saved. What’s your take on that?
It is time for the forensic accounting evidence provided in their report by reputable experts in the field, to put an end to the shameful rhetoric and conspiracy theories used by the opposition and others aimed at seeking political mileage by feeding on the distress of hapless investors. The findings of the forensic accounting experts nTan Corporate Advisory Pte Ltd report are damning. They reveal a picture of systemic deceit, contrived with the help of financial window dressing and other accounting hocus-pocus, to mask the tens of billions of Rupees siphoned from investors’ funds during years until the eve of the last general elections to offshore companies, related entities or in unproductive assets. Such deceptive practices also masked the huge losses and insolvency of the BAI group since December 2013. The report is also an unequivocal indictment of the BAI group, the financial regulators and the auditors caught napping during their watch.
The upshot of all this was that behind an illusory facade the BAI group was a fragile shell. The report concludes that the unsustainable business model of canvassing and raising fresh funds from investors under the nose of regulators to cover ongoing and growing commitments to existing investors was scripted to implode and cause the conglomerate to crumble.
The uncovering of the scandal in April 2015 exposed the feet of clay and un-sustainability of the whole group systematically undermined by substantial haemorrhage of funds placed by investors, inadequate revenue to meet above market rate returns promised to savers and investors, toxic investments and questionable financial practices. It left tens of thousands of hapless investors from all walks of Mauritian life high and dry, profoundly anguished for more than 15 months by the fear of losing their hard-earned savings.
Going forward, it is vital that the Bank of Mauritius and regulators allay the fears and end any doubts prevailing in the public and assure the people and economic operators that every step has been taken to prevent the recurrence of such major crises in the banking and financial sector.
* The issue of private sector investments hogged the headlines recently in the wake of the comments of the former Secretary to Cabinet and Head of the Civil Service, S. Seebaluck, about the dearth of such investments. If it is indeed a case of “chronique attente” afflicting the private sector, what’s the wait for?
In the week this remark attracted the outraged reactions of the piqued representatives of the private sector institutional Establishment, the Compagnie Mauricienne de Textile Ltée (CMT) committed an investment of half a billion Rupees in the enlargement of their aquaculture farm at Pointe-aux-Feuilles in the south-east of the country. Is there a material difference in approach towards investment among the diverse sections of the private sector?
From modest beginnings with limited resources in 1986 and 30 employees, CMT has grown to become the largest jersey wear manufacturer in Mauritius and the Sub-Saharan region. It employs around 10,000 people and ranks among the top ten largest companies in Mauritius. Textile is its core business, yet it has after careful assessment of the business prospects and the incentives provided by government for the development of the blue economy as a pillar of development and employment, invested substantially in aquaculture farms. This is what entrepreneurship is all about. There is both calculated risk taking but also a commitment towards employment and growth of one’s country. This is what helped engender CMT’s phenomenal success.
It is not the role of government to be the main provider of employment. Government employs some 95,000 persons in its services whereas about 219,000 persons are employed in the private sector. The onus of investing to boost growth and create employment rests squarely with the private sector. Growth has hovered disappointingly between 3.4% and 3.9% between 2012 and 2016 despite diverse incentive schemes provided by government to open up new pillars of the economy and various support and trade facilitation measures. It is evident that initiating business ventures and operating in a more sophisticated services-based and competitive market place as opposed to the comfort zone of preferential market access conditions and guaranteed quotas is a different ball game.
World trade liberalisation has fundamentally changed the market conditions under which the local private sector thrived for decades and grew into major players of the economy. Textile groups have delocalised to Madagascar, India and Bangladesh so as to remain competitive and profitable. Similarly, corporate entities in the sugar, tourism or sea food hub sectors have invested and replicated their activities abroad and exported their expertise in Africa and elsewhere in the Indian Ocean. The government’s Africa strategy is also encouraging this strategy. However, delocalisation or investing abroad is a different cup of tea. It has its own challenges and pitfalls. Whilst the strategy of these corporations is rational; it begs the obvious question of what is its real benefit for Mauritius?
As a country, Mauritius has emerged as a model of success thanks to its enabling institutional environment, the package of incentives provided by government to develop new pillars of the economy and our savviness to negotiate and take full advantage of favourable international trading agreements. Developing countries from across the world use Mauritius as a template for their own development model. It is therefore a shame that the Ministry of Foreign Affairs, Regional Integration and International Trade manned by its seasoned cadres and career diplomats is no longer spearheading, as has been traditionally the case, our economic diplomacy at a crucial time when we face numerous challenges in the EU, with Brexit and are broadening our trading arrangements with India and a host of counties in the region and across the world.
All things being equal, it is much safer to invest and do business in Mauritius on home turf than in Africa. The increasing number of companies using Mauritius to domicile their offshore companies attests to this. In contrast, those who have invested in Mozambique or Cote d’Ivoire have had to compose with unexpected risks and operating conditions.
In the light of the new pattern of investment flows, what is therefore important for Mauritius is to attract substantial investments in the country from abroad to boost growth and create employment especially in the services based new pillars of the economy such as the multifaceted activities planned in the Port, the Information and Communications Technology (ICT) sector, the financial services sector, the Ocean economy or the high-tech medical sector. It is more and more evident that these sectors require expertise to go up the value chain and generate more revenue through a more sophisticated product offer that we do not have.
Investments in and development of these sectors would necessarily require strategic partnerships with foreign operators specialised in these diverse fields. The sooner the authorities gear their strategy to this new reality, the sooner the country will emerge from the period of stunted growth which has plumbed our development prospects for too long. These sectors would create job opportunities, which would be more in line with the object of creating a high-income economy. This is in contrast to the major private sector investments, which are heavily weighted towards principally smart city and real estate developments.
* In fact the slower pace of growth of private sector credit at commercial banks in recent years (2013-14: +3.6%; 2014-15: +2.7%; 2015-16: +3.1%) as compared with its pace of growth in earlier years (2012-13: +8.0%; 2011-12: +10.7%; 2010-11: +8.3%), reflects a situation of slow pace of growth of real investment in the economy. We are instead going for the Smart Cities, the IRS, ERS – not so much for the production of goods and services. Why is that so? It can’t be about the ease of doing business, isn’t it?
The private sector is profit motivated. They also strategically invest in businesses they master and are comfortable with. The smart cities, the IRS and ERS are potential cash cows. There are people who are prepared to buy a piece of paradise for some Euro 2- 5 million. What better business facilitation than the extremely generous exceptions of land transfer tax at the rate of Rs 3.5 million per hectare, registration duty, morcellement tax, VAT, customs duty, income tax for a period of 8 years and accelerated allowance of 50% on costs of listed items, granted by government to promote the smart city scheme?
It should be underlined that only the large sugar landowners who have the sizeable land assets in strategic locations required for such large and mixed bag of projects allowed under the scheme that can benefit from the scheme. The permits granted so far under the scheme are evidence of this. Who can do better in terms of ease of doing business than this? The pervasive impression in the country is that the government is bending over backwards in a desperate bid to spur investment and that there is no real and fair balance of benefits
For the population, the key question is how do these massive investments benefit the employment aspirations of the unemployed or the qualified young in fields other than the construction, real estate or housekeeping businesses? It is therefore important that the deliverables such as impact on growth, permanent employment creation or linkages with economic actors in the region, etc., are monitored and measured. The private sector cannot invest in a plethora of campuses producing hundreds of diplomates and degree holders every year without having a moral responsibility towards their employment. Corporate social responsibility goes beyond investing in social housing.
The World Bank report on ease of doing business issued this week shows that Mauritius has slipped by 7 places when last year’s ranking is adjusted on the basis of the new criteria used in this year’s ranking. Mauritius ranks 47th among 190 countries ahead of Israel, Luxemboug, Kuwait or the Bahamas. Some of the findings on criteria where we do not fare well such as getting electricity when electricity is not a problem in the country, registering property, getting credit or trading across border do not really tally. Do these criteria apply to the private sector across the board or specific subsets of it? In any case Mauritius must take in conjunction with the World Bank the necessary steps to improve its standing on the various criteria used so as to improve our ranking.
* We know there is a causal relationship between political stability and economic growth. There is indeed some uncertainty about when and how the transition, as announced by Sir Anerood Jugnauth himself, to the leader of the MSM taking over the prime ministership from the current Prime Minister will take place, but that does not make the government and the country any less stable, does it?
Absolutely not. Mauritius is a democratic country. Changes of government do not change the general approach to business. Why on earth would an economic actor feel at risk in his business decisions if the incumbent Minister of Finance of the ruling government is to be the Prime Minister? This is just baseless scaremongering. In any case the post of the Prime Minister is too sensitive a post to be bequeathed as a family heirloom. The sacrosanct rule is that he can only be legitimately chosen by the people at the polls.
The latest call of the Leader of the Opposition who heads a minority group of 6 Members of the National Assembly out of 70, to the legitimately elected Prime Minister to step down to allow the nomination of an interim government and the organisation of fresh general elections is therefore nothing less than preposterous.
* The rules governing who becomes Prime Minister in Mauritius are not any different from what obtains in the UK, for example, the rule being that the Head of State will appoint the person who can command a majority in the House. That’s also what our Constitution prescribes, and Pravind Jugnauth would in all likelihood fit the bill. Isn’t that sufficient, or de we have to look beyond the constitutional prescription?
Mauritius is not the United Kingdom. There are fundamental and profound differences in the ethos which underpins our democracy. There is party democracy in the UK whereas the main political parties in Mauritius have an entrenched dynastic culture where the party is considered a tightly guarded family heirloom to be bequeathed to the next generation. Of the three elected Prime Ministers in Mauritius during the 48 years since independence, two are father and son. Dynastic politics are contrary to fundamental principles of democracy and carry no legitimacy in the minds of the multitude.
Ask anyone in the street what they think of a nominated PM and the invariable and spontaneous reply is ‘We did not vote for this’. In all circumstances, the people of the country want to solely keep their prerogative to decide who they will trust to elect as Prime Minister at the polls. This cardinal rule of our democracy is paramount and must be fully honoured and adhered to.
* Speaking of prime ministership, an “observateur politique” recently tied up the issue of political control with economic control: to the much maligned 1970s “five-families-controlling-the-economy” rallying cry has been grafted since some time now the 3 or 4 families who hold sway over the political establishment since Independence. What’s your take on that? Any breakthrough in sight?
From independence, the private sector has suffered from the syndrome of wanting to sit on the high table as a pressure group to discuss issues with government on a regular basis. Their institutions have been structured for this key object. In line with established international practice, not all governments have humoured them, preferring to have ad hoc meetings when required and grooming them to discuss any burning issues with relevant ministries. In practice, sectoral problems or individual company issues have to be discussed with relevant ministries. However, old habits and hangovers die hard. The obvious intent for engaging the government on a bilateral basis is to lobby and influence it on key policy issues, not necessarily in the public interest. All the hullaballoo about ranking on ease of doing business or never-ending check lists on trade facilitation are all part of this strategy.
There are so many instances where public interests have been ill-served by such vested lobbying. Since 2000, intense lobbying by the private sector has basically ring-fenced the lucrative production of energy from bagasse-coal power plants in IPP contracts. Bagasse, a renewable energy source was used as a Trojan Horse for the use of increasing tonnages of coal despite the fact that to produce the same amount of energy, coal releases much more carbon dioxide (about 1.45 times more) in the atmosphere than gasoline. Burning coal is also a leading cause of toxic air pollution and acid rain, etc.
In the context of COP21, some 40% of the energy produced in Mauritius is from coal. The contribution of bagasse to energy production is reduced to some 17% and is a fraction of the quantum of coal used. Replacing bagasse by cane straw does not mask the highly polluting side effects of increasing amounts of coal being used to make good falling bagasse output. In order to meet our COP 21 commitments of producing 35% of our energy requirements from renewable energy sources by 2025, steps must therefore be urgently taken to significantly bring down in priority energy production from more polluting coal and replacing fuel oil by less polluting gas.
Lobbies to depreciate the Rupee in the wake of the adverse fundamentals weakening the Euro or the Pound Sterling in the wake of the Brexit vote to shore export revenue in the teeth of public interest are other cases in point.
Judicious reform is the answer for such high concentration of resources. It is one of key factors of widening inequality in the country. For starters, is it not high time, as has been the case elsewhere, for a substantive land reform policy and the setting up of a sizeable land bank for current and future national needs? There is also an urgent need to really establish a level playing field in terms access to resources, finance and accompanying measures for start-ups and business incubators to assist the emergence of entrepreneurs from mainstream Mauritius.
However, in all circumstances, political power must stand paramount as the government must remain and competently exercise its key role as the arbiter of public interest. Not to do so is to stoke unrest.
* How do you react to the electoral reform propositions that are being, this week, put to the Rodriguans with a view to ensuring better political stability in the island? Are there lessons for Mauritius from the Rodriguan experience with PR?
Both the process and content of the proposals are fundamentally flawed. The anti-defection provisions are contrary to the fundamental democratic principle of freedom of opinion and unalienable individual rights. Furthermore, the exercise of constitutional amendments are the preserve of seasoned and renowned constitutional jurists and not a new version of Pokemon. Each PR based electoral reform conjures the disquieting image of Gaston Lagaffe blithely experimenting by trial and error and esoteric mumbo-jumbo to arrive at the latest proposed dose of PR until the next hiccup.
The process being proposed is akin to a shotgun marriage and could alienate our fellow countrymen from Rodrigues with whom we have built a pally rapport. What makes it even more questionable is that it gives the impression of pandering to the wishes of the main political parties of Rodrigues at the expense of democracy. Just as in Mauritius, the old guard in politics want to tweak the game in their favour. The bottom line is that it is for the people of Rodrigues in their collective wisdom to decide on the electoral system they wish to have in consultation with the authorities.
It must be said that Rodrigues has basically been used by the local witchdoctors of proportional representation (PR) as a guinea pig to introduce an untested hybrid system of election comprising a dose of PR. No wonder the contested proposals have been glibly endorsed by the Leader of the Opposition because PR has been maintained despite calls to the Prime Minister by the main political parties in Rodrigues for its abolition. Nothing else matters.
It must be recalled that the call for the abolition of PR to the Prime Minister stemmed from the fact that the application of the PR provisions of the electoral system in Rodrigues had shaved the comfortable majority of four votes obtained by L’Organisation du Peuple de Rodrigues OPR at the 2012 regional elections on the basis of the First Past The Post (FPTP) system of voting to just one vote. This slim majority significantly strapped the management of the affairs of Rodrigues by OPR which earlier in the year was even saved from a vote of no confidence by the casting vote of the President of the Regional Assembly.
The current proposals aim at correcting the distortions caused by PR at the 2012 regional elections. However simulations show that the proposed allocation of three additional seats to the party that has obtained the majority of elected members in the FPTP system can result in the party having won the popular vote not being chosen to form the government. This is grossly undemocratic and iniquitous. The upshot of these proposals is that the Regional Assembly could result in an assembly of between 17 and 23 members. The new proposals cum the PR provisions would thus result in even higher running costs for the Exchequer.
Rodrigues with 28,797 electors is the third smallest constituency after two smaller ones in Port Louis. It has less than half the number of electors than the two largest constituencies of Pamplemousses-Triolet and Savanne-Riviere Noire. The Regional Assembly has basically an administrative role. Rodrigues’ focus should first and foremost be to elect the best managerial talents of the country to administer the island irrespective of party. Why on earth was PR introduced there to complicate their lives? PR sows seeds of fracture. There are already signs of this happening.
Thus, post election FPTP, if need be, a coalition could be negotiated with the common object of uniting the best talents elected by the people of Rodrigues to manage the affairs of the island as efficiently as possible in the interest of Rodriguans. The country faces too many challenges to be distracted by futile politicking. These challenges include putting animal breeding in the wake of the foot and mouth disease back on track, developing tourism, the SME’s and agriculture.
The Rodrigues case vividly exposes the pitfalls of PR. Furthermore, no electoral reform should be introduced without the prior approval of the people by a referendum. The scathing backlash of the 2014 general elections results is a stark reminder of this truism.
* Do you mean to say that the reasons which condemned the introduction of PR in our electoral system in the 1960s are still valid 50 years down the line? Haven’t the context and the circumstances changed?
In the constitutional debates prior to independence PR was used to divide the nation in order to rule. The same insidious forces continue to have the same decried agenda. In the absence of PR, the same agenda has been pursued through the scientific balkanisation of the people into its socio-ethnic diversity as evidenced by the matrix of candidates fielded at each election in the various constituencies and the electoral socio-ethnic composition of each constituency circulating at the time of elections.
PR basically nurtures and thrives on division. The arguments advanced by the Labour Party to firmly oppose PR that it would inter alia prevent the normal development of a Mauritian identity, ‘aggravate and perpetuate divisions among Mauritians on racial and religious lines’, which the Labour Party considered its duty to prevent, are even more valid today. Despite divisive forces, the bonds of unity and nationhood among the people at the work place and in all walks of life have consolidated and strengthened over the years. Except for those who bury their heads in the sand, we are a nation since long. Let us not undermine it by divisive PR.
Any electoral system must first and foremost be easy to understand by the people and predict. They certainly do not want to be bamboozled by an obtuse, convoluted and unpredictable system. It is above all not the politicians who decide on the electoral system but the people. It is an intrinsic element of their paramount prerogatives. Above all other considerations, the people must be comfortable with it and find it easily predictable. Older and more established democracies have steadfastly stuck to and thrived under the FPTP electoral system and consistently shied away from the pitfalls of PR. It would be foolhardy to be plus royaliste que le roi.