Mohun Kanhaya

TINA policies: a re-assessment

– Mohun Kanhaya

We were overwhelmed by the avalanche of carefully picked achievements – an exalted list compiled very technocratically and in minute details.

It took us some time to recover from the aggressive reaction of the TINA’s (There Is No Alternative) shouting brigade. Since the decapitation of the TINA movement, the tinawallahs have been running helter-skelter like headless chickens. This is reflected in their reaction, typical of cheerleaders not living up to the expectations of their august model – the TINA-boss – and badly in need of that sophisticated anchor. Their job is to create chaos when things are getting difficult. This distracts attention from what is centre stage. The idea is that if you make a lot of noise the key issues might get lost in the commotion such that we lose sight of the macro-picture.

 

 

What are the outcomes, the reforms and key issues on which they are answerable and accountable? We are not talking about fragments, about publicity gimmicks, about flotsam and jetsam, without any notion of how they are translated into improved outcomes on the ground. We are talking about the vision we had for the country, about reforms that would have ushered in a new socio-economic model centred on global competitiveness to return the economy to higher growth paths and full employment. That was the promise to the nation – securing the transition from trade preferences to global competition. They have failed miserably.

We would fail in giving our readers a balanced account of the management of the economy if we were to sum it up as “successful stewardship of the economy through a series of cumulative crises”. The TINA policies did not succeed in diversifying the economy and in developing other pillars of growth that would have rendered it more resilient to external shocks. The few touches to the tax rates and the improvement in the investment climate framework were not the broad-based and inclusive reforms that would have generated sustainable growth. The absence of substantive reforms and investment in the economic infrastructure during these past four and a half years, as shown by the underperformance in capital expenditure, has affected the growth rates of the productive sectors. (From their ivory tower, they are claiming that the Road Decongestion Programme is delivering results.) Sector reforms were not undertaken to generate productivity improvements in agriculture, industry, public utilities (CWA, CEB), health, education, etc.; the long-run growth potential will thus be insufficient to absorb the unemployed.

We should not fool ourselves with carefully orchestrated performances like the ‘Ease of Doing Business Index’, which has been mainly instrumental in attracting massive resources into real estate activities, and whose contribution to the economy is questionable. Land prices have risen beyond the reach of most Mauritian households, while sugar barons extracted huge profits on their large property holdings, but contributed marginally to taxation. The replacement of a progressive income tax system by a regressive one allowed the rich and the corporate sector to capture all the gains of our generous taxation policies The middle classes were made to pay higher property taxes – the infamous NPRT — while corporate tax was slashed and huge promotion budgets were given to the tourism sector, and most importantly, the EU compensation money for the restructuring of the sugar industry went to the sugar barons, instead of supporting those who had shed their sweat and toiled for decades in the fields. The TINAs also pressed in favour of the depreciation of the rupee to boost sugar and other export revenues of the oligarchy, while the population, especially the poor, had to bear a rather high inflation burden.

Moreover, there had been no spending on the retraining of workers in the declining industries such that they could acquire the required skills to become employable in new sectors. All these years the Empowerment Programme has not delivered in addressing skill-gaps and labour market mismatches. It had just remained a front for the private sector, ensuring that their labour search costs are minimized and that their short-term labour needs were subsided by government. Our active labour market policies — the job search and training to get people back into work quickly and spending on them — have not developed at all during the period. Our training institutions do not seem to get the measure of the immense task ahead to provide quality human capital formation for the economy to succeed in its transition to a new plateau of growth. As Mr V. Bhardwaj in his article ‘Why the Economic Restructuring and Competitiveness Programme?’ (MT 27 August 2010) has extensively written on the TINA’s dismal performance on growth, saving and investment, the current account balance, fiscal consolidation, unemployment, export growth and purchasing power, we will thus restrict ourselves in this article to two crucial TINA reforms – the Merger and Programme Based Budgeting.

A theoretical Programme Based Budgeting: The Programme Based Budgeting, which was implemented with a big-bang approach in 2007, against sound advice to proceed sequentially and gradually, recently received some damning criticism from the Collaborative Africa Budget Reform Initiative (CABRI) and the IMF’s Fiscal Affairs Department (FAD) – both are authorities on budget reform. The Big-Bang approach, not anchored in local realities, is running the risk of remaining a pure administrative exercise and has remained theoretical without any usefulness to solve practical issues. CABRI and IMF-FAD noted with concern that the programmes of some ministries were not aligned with their main objectives or functions. Ministries did not have strategic plans and they cannot use the PBB as a strategic policy-based tool. There is no proper baseline budgeting methodology for the costing of programmes and sub-programmes.

There is still a long way to go up the learning curve in fine-tuning our PBB especially in ensuring that we are carrying out “real” performance budgeting – a PBB that secures delivery of government’s major domestic policy priorities. This means not just including performance information in budget documentation but linking expenditure to targeted results, reporting performance against these targets and using the information to make decisions on future resource allocation. Successful reform does not only require published targets but clear, specific definitions of success. Under the TINAs, the PBB has remained very theoretical, a mere textbook exercise failing to deliver on, for example, improving the performance of elementary schools, reducing wait times in our hospitals, bringing about major reductions in crime and ensuring punctuality and fluidity of our transport system. These are important to our citizens and would benefit most from a more intensive focus and drive for implementation. It is here that the PBB needs to deliver.

Failure of the Merger: One minor reform was to operationalize the merger of the Ministry of Finance and the Ministry of planning and Economic Development (MEPD) to ensure a better coordination and enhanced efficiency in the economic management of the country. The New MOFED was to be redesigned with an avant-gardiste structure driving the reforms to realise our new socio-economic model. It was to be redesigned to effectively coordinate and implement the Medium Term Expenditure Framework/Programme Based budgeting (MTEF/PBB), review sectoral policies and formulate three-year strategic plans that are used as planning and management tools while ensuring that proper economic analysis of programmes and projects lead to the prioritization and the costing of programmes. Five years down the road, MOFED is still groping with a meaningful structure that will do justice to its ambitions and ensure that the skills and energies of former MPED, MOF and MAB are harnessed to the task at hand. For five years management has underplayed the capacity and traditional role of the former MPED which had a greater leadership role in economic growth strategy, ensuring sector policies are supportive, intervening at the sector level if there are policy inconsistencies, and generally riding shotgun on policies, programs and projects.

MEPD also helped relate Mauritius’ development strategy to global economic conditions. Well beyond 1992/93, MEPD had continued conducting periodic reviews to assess economic performance and drawing up development strategies to further the socio-economic objectives of government. To name just a few:
a) For the first time in the annals of our short economic history, a World Bank team worked jointly with a Mauritian counterpart team led by Mr R. Bheenick, the then Director of MEPD to produce in 1995 the
‘Country Economic Memorandum: Sharpening the Competitive Edge’,
b) a Development strategy document ‘Into the Third Millennium: National Strategy for Sustainable Development, 1999-2005’ (INM) instead of a new National Development Plan was released in 2000, and
c) ‘An Economic Agenda For The New Millennium’ document which was included in the 2000-01 budget.

Some of the recommendations of the latter document were: the need to adopt a medium-term expenditure framework for the budget, the setting up of a Revenue Authority, the need for the Monetary Policy Committee to render public its policy decisions, publishing the minutes of its meetings and the voting records of its members as well as a quarterly inflation report; the establishment of the Financial Services Commission (FSC), which will be the apex organisation overseeing all non-bank financial activities in the country; creation of an SME Development Fund, establishment of an Export Development Fund to promote SME export and an Export Credit Guarantee Insurance Scheme to facilitate export to SADC and COMESA markets; the setting up of a Mutual Guarantee Fund and an Equity Participation Fund, a new educational reform strategy and so on. If we also include MEPD’s role in institution-building, namely the setting up of the BOI, NPCC, IVTB, FSPA, NEDC, Enterprise Mauritius, IOR-ARC, etc., it will be viciously unfair and biased against our planners to conclude that their recommendations were left at idea stage only or that they were confining themselves to unimplementable abstract plans or to traditional planning waiting to be delivered by the excel-proficient TINA experts.

Mohun Kanhaya

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