Mohun Kanhaya

Need for new think-Tanks

Vision 2030 is a future that begins now

 

Mohun Kanhaya

 

At a round table meeting in the last week of August at the Link, Ebene, on ‘Appropriate monetary and fiscal policies for export-led growth’, organised by Mauritius Export Association (MEXA), “les bons techniciens” of the Ministry of Finance and Economic Development (MOFED) were arguing that there were no cause for alarm and that we could continue with business as usual.in labour laws and social safety net policies. For the past five years we have been force-fed with high doses of Programme Based Budgeting, the Ease of Doing Business Index, labour and fiscal reforms to be told now by the World Economic Forum’s Global Competition Report that we are still being burdened by an inefficient government bureaucracy and an inefficient labour market.

And they are getting ready for the shallow Bretton Woods Spring Meetings and with the usual IMF prescriptions – year in year out – namely fiscal consolidation, improvement in the investment climate, changes

Le Defi Quotidien of 14 September 2011 notes that « alors qu’effectivement le climat des affaires est excellent à Maurice, dans la pratique c’est souvent une autre histoire. ». A previous issue had noted that « Cinq ans après l’entrée en opération de la fameuse ‘Business Facilitation Act’, cette loi révolutionnaire qui a soi-disant éliminé la bureaucratie, voilà que cette bureaucratie tant décriée fait son retour dans nos institutions régulatrices : municipalités, conseil de district, organismes publics, etc. Les entrepreneurs en ont marre. Les renseignements obtenus auprès des institutions publiques varient d’un officier à l’autre. Dans certains cas, l’officier n’est lui-même pas sûr de ce qu’il avance. Il y a un monde de différence entre ce qui est écrit sur les ‘Guidelines’ et ce qui se passe en réalité ». The Joint Economic Council has also remarked that « la lenteur administratif pénalise les investisseurs». On the fiscal front, there has not been much improvement either: revenue as a percentage of GDP has stagnated at 20%; current spending has increased as a proportion of GDP whereas capital spending stayed at a dismal 3% of GDP.

And now we are seeing more of the same coming; the current lot of reform proposals do not seem to be the silver bullet that will negate the impact of the slowdown in the US and Europe and fire growth. We are not surprised that some commentators are already worried about being served the same recipe once more — the ones that have not offered a more cohesive explanation for the problems or any real solutions. Mr Malenn Oodiah, in his interesting article titled ‘Pu tir leson sa fwa la’, argues : « À Maurice, en 2008, nous nous sommes contentés de la fameuse résilience de notre économie et de certaines mesures pour parer au plus pressé. Après, c’était business as usual alors qu’il aurait fallu une réflexion en profondeur par les gouvernants et les opérateurs pour repenser notre stratégie et modèle de développement. Ce qu’on constate par contre au niveau gouvernemental c’est l’incohérence avec deux orientations pas forcément compatibles : le MID et le Duty Free Shopping Island. Et au niveau des opérateurs privés, on est resté dans une stratégie de développement reposant essentiellement sur le développement de l’immobilier et l’exploitation du foncier… Dans la présente conjoncture, la priorité des priorités c’est de trouver des solutions aux nombreux problèmes économiques et sociaux auxquels se trouve confrontée la très grande majorité de la population. Comment éviter les faillites d’entreprises, qui augmenteront le taux de chômage ? Que faire pour éviter la paupérisation des classes moyennes? »

Indeed we cannot continue to do business as usual. The team at MOFED do not seem to be adequately equipped to tackle this new US and euro zone muddle that is shaking not only markets, jobs and national growth but how the world works. According to Kenneth Rogoff and Carmen Reinhart, Europe and the US are not experiencing a typical recession or even a double-dip Great Recession. Rather the West is going through something much more profound — a second Great Contraction of growth. “It is a slow — or no-growth waltz that plays out not over months but over many years.” Growth in the western part of the world will remain sluggish for many years and this is going to drag down the markets and sentiments worldwide. Short-term fixes will not do. What lies ahead is a long protracted period of turbulence and maybe a new crisis. There is a need for new thinkers on the ship to assume new responsibilities. The Middle East has just sent us a serious alarm signal. The problem is that the clock is ticking and the need for new thinkers and leadership is becoming as critical as it is urgent, especially at a time that the country is passing through its worst phase of political governance and the high inflation is hurting the pockets of ordinary citizens.

We will be sacrificing an entire generation if we do not think out of the box of IMF/WB formulas and land and real estate developments and act quickly. There is a need of urgency in policy-making and concerted action to tackle the larger predicaments of weakening growth and plunging business confidence starting with measures to boost both public and private sector investment. We need to bring in a new team that will generate greater collaboration between industry, civil society and government to transform existing governance and the economic model to find our way back to the path of rapid asset creation and our potential growth level.

Education reform: A new team that is committed to, first and most important of all, educational reform — an education system that instead of churning super rats for a rat race nurtures excellence and creativity and has the ability to provide learning to a broad cross-section of citizens, to advance national proficiency in Maths and Science and to create an adaptable labour force as well as to develop a national appreciation for discovery, entrepreneurship and the creative process. An educational system that has in-built processes to ensure a continuous striving towards the ideal of universal access to quality education.

Build skills: The contribution of most sectors to economy-wide higher value addition will eventually stagnate if the sectors do not move up the technology ladder. It is the lack of skills in the labor force that is impeding the transformation to a higher value added economy. The new thinkers and bureaucrats, believing in skills training as the essential prerequisite for greater competitiveness as well as for promoting inclusive growth in the country, will need to identify the desired skill sets of tomorrow and look at systematic ways to mobilize massive resources to develop them rapidly. They will have to ensure that our corporate leaders work closely with educators to churn out a labour force with the right skills. For short-term solutions to the skill-deficit in the workforce, both the Empowerment Foundation and the MITD will have to be shaken up to provide more robust training programmes to promote skills upgrading. A National Skills Regulation System will monitor these programmes as well as the internships and apprenticeships schemes that can go a long way at filling the gap.

Competitive markets: Our new team of policy makers will have to continue pursuing the democratization goals of government. They will need to actively challenge entrenched economic privilege in order to ensure that markets are competitive, information is transparent, and consumers have choice.

Focus on innovation: Mauritius’ future innovation-led growth must rely more on technical efficiency that requires an efficient national environment which will reinforce innovation within the business sector and encourage firms to compete on the basis of unique products or services. In restructuring our existing economic activities and in initiating new ones, innovation will have to be a key driver of this change. Our new team should encourage a new wave of industrial policies that strive to create a R&D culture and foster innovation by new instruments (competitive bidding for earmarked funds and a R&D tax credit). Given the fact that the private sector underinvests in research, government can play a key role to support growth by investing in science and technology, by increasing its funding for research needs and by creating the institutional environment that supports technological change.

We need a technology strategy to address specific needs of innovation and technology diffusion. What about a publicly funded Mauritius Industrial Technology Research Institute (MITRI)? MITRI would be patterned along the Taiwan, South Africa and Singapore technology research institutes. MITRI will scour the world for cutting technologies and use its own laboratory facilities to assess their appropriateness to local conditions and build pilot versions to demonstrate them to prospective investors. The experience of existing public research institutes grouped under MITRI will be an asset in tapping the promising research areas like sugar-based technology (for plastics, polymers and for medicinal purposes), renewable energy technologies, seafood and ocean resources.

Paul Romer contributed an approach to growth theory based on innovations in either products or production methods as the key ingredient for development, rather than capital, labour or other factors of production. Romer argues that importing ideas from abroad, through inward FDI, is an effective alternative to growing them at home. Our new think tanks will have to be selective in our choice of Foreign Direct Investment flows, by encouraging those that are important sources of managerial ability, technical personnel, technological knowledge, administrative organisation and a source of innovations in products and production techniques, all of which are in short supply in Mauritius. These well-screened FDI inflows will impact positively on the economy so far as product upgrading and increased productivity are concerned.

A productivity budget: The Achilles heel of Mauritian economic performance in recent years has been weak productivity growth. Our new team will push for a budget that reprioritizes the budget decisions, giving more weight to the kinds of investments that boost growth and innovation (e.g., research, education, infrastructure, and information technology) and less to those that have little impact. This will be accompanied by sectoral reforms to generate productivity improvements in agriculture, industry, public utilities, health, education, etc. Such a budget would thus consider that its economic priority is to bring in a new dynamism in the main productive and social sectors of the economy while ensuring that the economy becomes more inclusive, broad-based, equitable and sustainable over time, for e.g. health sector reforms that will give the poor access to high-quality care.

Export expansion and diversification: The proposal in past budgets of setting up Trading Houses in COMESA and SADC regions which “would provide a shop front, warehousing facilities, marketing services, selling bulk and breaking bulk and taking orders for Mauritian products” and the pursuit of economic diplomacy by our embassies will have to be re-examined by the new team. Export market information requires urgent attention. Given that our institutions will have to think more globally in international relations, marketing and investment options, Entreprise Mauritius and BOI could secure trade offices in key markets by being based in the Mauritian missions abroad. This will enable global knowledge acquisition, acquiring crucial market knowledge, finding the right people, firms and institutions, building the contacts for insightful information and leads. It will also influence the ways our business sells and markets our brand, builds relationships, secures resources and negotiates the best deals and partnerships for our industrial and SME sectors.

A long-term vision: Professor C. Junglee laments that « nous n’avons pas de vision ou de stratégie à long terme. Pourquoi ne pas mettre sur pied un institut monétaire et fiscal, où siégeront des experts apolitiques, qui analyseront vraiment les problèmes et formuleraient des solutions au gouvernement. Cet institut aurait permis de garantir une stratégie à long terme ». Perhaps a Planning Commission would be a better option.

In his interview in Business Mag of the 10-16 August 2011, Mr Tim Taylor notes that for years we have not had any national discussion on the main challenges facing the country and he even talks about the need for a long-term vision and plan. Indeed our corporate leaders want to see more coherence in the strategies, in the likely course of events, the main constraints and opportunities that will emerge and the key choices that have to be made including the linkages between sectors, and implementation capacities. Our new kids on the block will have to start work on a long-term strategy — a National Long-Term Perspective Study (NLTPS) — to shape a vision of Mauritius for the next 20 years.
Vision 2030 is a future that begins now. 
 

Mohun Kanhaya

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