‘Most of our best students dream of a life beyond Mauritius. Why?’

Interview: Dr Vinaye Ancharaz, Economist & Consultant

“Voters will choose to break away from the past”

‘We need good people — honest, determined and altruistic — to rebuild the future’

‘Moving to the high-income category will not chase away our economic problems. Pockets of poverty will remain. Inequality will still persist’

 

 


Dr Vinaye Ancharaz has opted to come back to the country after serving as a Principal Economist at the African Development Bank in Tunis before moving to ICTSD, a think-tank based in Geneva, as a Program Manager. In spite of the difficult economic situation, he still has hope for the future of the country but believes that it cannot be ‘business as usual’ if we want to turn things around. He feels that the country has had enough of the politics of dynasty and the younger generation is yearning for a new leadership which will have a more holistic view of the country and be prepared to break away from traditional modes of thinking to face the challenges ahead.


Mauritius Times: The fact that you have chosen to come back home after your stint at the African Development Bank and the International Centre for Trade and Sustainable Development (ICTSD) is a testimony to your faith in the future of this country, isn’t it?

Dr Vinaye Ancharaz: I have been a senior lecturer at the University of Mauritius for over ten years when I decided that it was time to seek some international experience to advance my career. I spent two years as a Principal Economist at the African Development Bank in Tunis before moving to ICTSD, a think-tank based in Geneva, as a Program Manager. After four years there, during which time I missed my family, friends and my home in Mauritius sorely, I finally answered the call of the Motherland. My decision to return to Mauritius has puzzled many. To these people, I always say: “The grass is not always greener on the other side of the fence.”

In my case, when I left Mauritius, it was with a clear goal in mind, and I knew that I would come back to the country to share my knowledge and experience. So, to answer your question, yes, I have faith in the future of my country. But we need good people — honest, determined and altruistic — to rebuild this future. We need such people specially to restore trust in our youth and to create the momentum for Mauritians living abroad to return to Mauritius and contribute to the country’s development.

* Wouldn’t you convey the same faith to the younger generation who might wish to look elsewhere?

Ask any young Mauritian, and he will tell you that he will leave the country if he gets the chance. Ask any parent who has sent her child to study abroad, and she will tell you that she prefers that he finds a job, and settles down, there. Most of our best students dream of a life beyond Mauritius. Why? There are several reasons, but a prime one is that competent people don’t believe that the system in Mauritius will give them their due.

They see the system as biased and corrupt, working to reward those who are politically connected rather than those who deserve. But then, if we keep losing our very best, who can we trust to bring about change in the country? My message to the youth of today is to believe that change can happen and, more importantly, that they can be part of the change they wish to see.

* What about the future of the Mauritian economy? Things should not be that bad, at least as far as the medium-term and even long-term are concerned. One would otherwise have seen oversight agencies like the IMF raising the red flag, isn’t it?

Mauritius boasts a strong and resilient economy that has fought off recurring headwinds over its 50-year history since Independence. This resilience derives from the diversified industrial base of the country, to the ingenuity and fighting spirit of its people, and to effective policy response in times of adversity. However, things have changed. We are living in an increasingly globalized economy characterized by cut-throat competition for markets, resources and influence. Our traditional sectors are withering. We are all too aware of the plight of the sugar industry and of manufacturing. Even the tourism industry has not been spared. On the other hand, new growth poles, such as the global business sector, are under constant threat while the ICT sector has not lived up to its promise.

International agencies such as the IMF and the World Bank have not raised any red flags but they have toned down their global growth forecasts. Along with Brexit, and the uncertainty created by elections in the US and other major European countries next year, and geopolitical tensions elsewhere, growth in Mauritius is likely to remain subdued — unless major steps are taken to reverse course.

* What’s your objective assessment as an economist of the Mauritian economy three or five years down the line if corrective measures are not taken at the earliest?

If corrective measures are not taken urgently, Mauritius will face the brunt of the looming global economic slowdown. In 2008, when the financial crisis hit the global economy, Mauritius managed to maintain a respectable economic performance thanks to a combination of timely economic measures and robust productive sectors. But, as I said earlier, the economic base of the country has weakened and economic growth in the past few years has been driven by consumption rather than by investment. Clearly, such growth cannot be sustained over the long term.

There is therefore urgent need to switch to investment-based growth and, for this, it is crucial that the government creates the right incentives for the private sector to flourish. The government cannot substitute for the private sector but, unfortunately, this is precisely what we have been seeing since 2015. This must stop.

* Besides the challenges facing the challenges in different sectors – energy, sugar, global business sectors, there are also the problems relating to public debt, slowing growth, widening inequality gap, the ageing population and its broad implications… Are there alternative solutions to what have been applied traditionally within the framework of the present economic model?

Einstein once said that problems cannot be solved by thinking within the framework in which they were created. Unfortunately, many of the advisers in this government are part of the problem, and we cannot expect them to find effective solutions to our economic woes.

We need to rethink our economic model. Instead of pursuing growth based on mass production across all sectors, it is high time that we focused on higher value addition. This seems to be the strategy underpinning the shift from the traditional sugar industry to the modern sugar cane industry. But we failed to replicate the model in the other sectors. Textile-based manufacturing is faltering for this reason.

In tourism, we are still fixated on getting our hotels filled rather than extracting more value from each tourist. We are bogged down in low value-creating SMEs, many with an uncertain future, because we refuse to see that the main problem facing SMEs is not a lack of financing but a lack of ideas to produce goods and services of higher added value. And, for some reason, while the economy is highly services-oriented, we still think of our SMEs in terms of goods-producing workshops.

In the meantime, some economic policies have distorted the structure of incentives, favouring some sectors at the expense of others. This is clearly the case with measures such as the IRS, RES and PDS, which have caused massive amounts of investment, including foreign investment, to flow into the real estate sector — at the expense of other sectors. In an alternative economic model, incentives need to be rebalanced and the potential of traditional sectors to re-invent themselves reassessed. For example, have we given much thought to agriculture outside of sugar — other than growing vegetables in green houses?

Last, but not least, at a time when much of the world is moving towards the green economy and contemplating new, environment-friendly products and services, we seem to be stuck in the old ‘brown’ economy. Worse, we have blackened the economy with the plague of drugs and diluted it by adding all kinds of colours — blue, silver and what not — the meaning of which are ill-understood.

 * One comment that has been made by a political analyst in response to criticisms expressed in different political quarters, and by a number of economists, about the present economic situation and the ballooning of the budget deficit, is that the alternative to the present high budget deficit would have been much worse for the country in terms of growth and job creation given falling private sector investments. How do you react to that?

I think I answered part of this question earlier when I argued that the government cannot substitute for the private sector. If private sector investment is falling, it is important to understand why and try to address the problem with the right economic policies than to borrow to fill the investment gap left by the private sector. And to keep borrowing at a time when the national debt has reached dangerously high levels is to jeopardise the economic outlook of the future generation.

I believe the main cause of the current gloom engulfing the private sector is a blatant lack of confidence, poor leadership and vision, and utter disregard for the key institutions of the country. For this to change, we need a new government that promotes transparency and fairness, and allows the institutions to operate without interference of any kind. We need a government that can think outside the box and consider an alternative economic model — for what got us here won’t take us there!

* The Government’s intention to draw on the Bank of Mauritius’ reserves to pay off part of the national debt may have sent the wrong signal, but it has at the same time made publicly known its vision to draw Mauritius out of the middle-income trap and move the country into the high-income category. Does this sound pretentious to you?

First, it is worth pointing out that, with a gross national income (GNI) per capita of US$12,050, we narrowly missed the high-income category in 2018 when the threshold was US$12,055! This means that, barring any calamity, Mauritius is set to graduate to high-income status by the end of this year, if not in 2020. And when it does happen, how will it change the life of the average Mauritian?

Moving to the high-income category is nothing more than earning a label. It will not chase away all of our economic problems. Pockets of poverty will remain. Inequality will still persist, and the island will remain ever vulnerable to climate change and external shocks.

Second, digging into the Bank of Mauritius’ reserves to pay off part of the national debt so that the government could continue its borrowing spree is an ill-inspired measure that creates a dangerous precedent.

The government justified the move, saying that it would help save the country about Rs 400 million in interest payment, and that, in any case, the central bank’s reserves have reached unprecedented levels, signalling the extremely good health of the economy. Many critics — from both sides of the table — have given their views on this, so allow me to provide an alternative perspective, cutting away from the technicality of the issue. And let me do that by taking a real-life example.

Suppose I have Rs 1 million in a savings account, earning 2% interest. Yet I take out a loan of Rs 1 million at 7% interest to buy a car. Does that ring a bell with you? I bet it does, or approximately so. I could simply have used my savings to pay for the car and that would have saved me Rs 50,000 in interest charges. But I don’t do that. Why? I want to hold my hard-earned savings intact in case I may need cash for a future emergency. The same reasoning goes for the Bank of Mauritius’ reserves. And to be clear, the Rs 18 billion for the early debt repayment will not be coming from the Rs 240 billion of reserves, but from a much smaller — and rather unknown — ‘undistributed surplus’.

If the government is indeed ploughing into the central bank’s coffers to maintain the public investment momentum, then any growth coming out of it will be at a heavy price to the population, and it sends a bad signal to international observers. To Mauritians, it signals a measure of utter despair.

* We started off talking about faith in the country’s future, and politics will as always play a great role shaping that future. What political conditions will therefore be necessary for real change to happen in a country like ours?

The country is crying out for new leadership. We need a government that puts the private sector into the driver’s seat of the economy, and defines development in ways other than accession to high-income status. The current regime has, over the past four-and-a-half years, taken a series of populist economic measures that have consumed significant amounts of financial resources but have not delivered the promised results.

Unemployment remains a major problem, especially for the youth, with one out of every four unemployed. Moreover, there is a significant degree of underemployment, with close to 40,000 workers with tertiary education engaged in lesser jobs. SMEs, touted as an engine of future economic growth, are struggling to take off. Traditional sectors are wilting and the new growth poles are yet to assert themselves. The economic situation can get worse with a looming global recession.

At such times, a responsible government will dare take courageous measures rather than continue to feed a population that has come to expect more and more from the government. The future government should be less, not more. It should be more effective, leaner and more efficient. And it should endorse an alternative development model based on a holistic view of the economy and a focus on value addition. Finally, it should promote sustainable development — that is, development which is inclusive and in harmony with the environment — in the true sense of the term rather than pay lip service to it.

But no change is possible if the people does not press for, and support, it. I have faith in the country’s youth. At the recent Indian Ocean Island Games, they exhibited a sense of patriotism that rose above party and ethnic lines to engulf the entire nation behind a common cause. I trust that this patriotism will lead them to demand the change they want to see.

* Your views in favour of a new government suggests that you do not place much expectations on the current government’s capacity to rebound and do the right things for the country. Who else do you find capable and willing to do those right things?

Yes, I don’t believe this government has the capacity to do things right or do the right things. First, let us not forget the circumstances that led to the current regime as we know it today. We have a Prime Minister who is incapable of showing the leadership needed at this critical juncture.

And as if the Prime Minister’s Office were not enough, he took up the extra burden of the Ministry of Finance when he has absolutely no knowledge of the most fundamental economic concepts. And to make up for that, he has surrounded himself with dozens of advisers, gobbling up millions of our tax contributions, who are dictating policies that have created an artificial feel-good atmosphere by distributing perks across the entire population. They fail to understand a basic economic fact: to distribute wealth, you must create it first.

Moreover, the government is mired in scandals of all sorts, and its actions are clearly directed at benefiting an inner circle of friends and cronies. The rest of the population are feeding on crumbs thrown at them. The previous regime did not do any better.

We need a new government, with strong leadership. We need a leader who is not afraid of breaking away from business as usual, a leader who is capable of taking the right decisions to re-engineer the economy even if such decisions may entail short-term costs. We need a leader who is not subservient to any interest group and who is above crony politics.

We need a leader with a clean sheet, a leader who personifies integrity, transparency and meritocracy. Such a leader is a rare breed in politics, but anyone who can read this interview knows that he is out there. He just needs to be given a chance to prove his might.

* But you would have noticed that it has been mostly the so-called “small parties” – rarely by the mainstream parties — that have been raising the serious issues affecting the well-being of the people. When you pause and reflect on what the mainstream parties stand for, what do you come up with in terms of answers that would confirm your faith as well as of that of other young professionals/intellectuals in the future of this country?

Indeed, some so-called ‘small parties’ have been in the spotlight, leading the debate on certain issues of national interest. This, however, does not mean that the mainstream parties are indifferent to these issues. Rather, their time and energy tend to be consumed by issues arising from deliberations in the Parliament, which are no less important.

The small parties play a key role in the political landscape of the country but they often lack the critical mass of manpower that would allow them to stand neck to neck with the bigger parties in general elections. Perhaps for this reason, Mauritians tend to shy away from them. In other words, people support parties that they believe stand a fair chance of forming a government.

* Isn’t the root of the problem the influence of money – big money – in our politics, and which leads to the incestuous relationship between big business and the mainstream parties that ensures the latter’s silence?

The influence of money in Mauritian politics cannot be denied. However, I don’t think it is fair to take a blanket approach to this issue and put all parties in the same basket. Even among the mainstream parties, the influence of money varies greatly, and this influence is clearly evidenced by what I call ‘monuments of shame’ — be it a high-rise building on Edith Cavell Street or coffers spitting out millions of rupees and dollars in cash.

All the major political parties receive money from the private sector for campaign financing. Some receive more than others. The private sector’s contributions usually have ulterior motives. The recent Political Financing Bill tried to cut at the roots of the problem. However, it was poorly conceived and, not surprisingly, was rejected by the Opposition. Perhaps, this was the very intent of the Lepep government, which can now spend its billions in the upcoming elections without limit or regulation. The government has spared no effort blaming the Opposition parties for killing the bill.

* It’s not clear at this point in time as to which party/alliance stands a better chance to make it at the forthcoming polls, but do you have apprehensions that we might land up with much of the same?

I believe the next general elections will be a unique opportunity for voters to show that they have had enough of the two dynasties that have ruled the country since Independence. The transfer of power from father to son is meant to serve personal interests over and above the national interest. This cannot continue anymore in a modern democracy where aspirations, especially among the youth, run high.

It is time to look for a viable alternative. I am confident that voters will choose to break away from the past, and entrust the future of the country into the hands of a party that epitomizes many of the values they hold dear — transparency, integrity, fairness, meritocracy and economic opportunity for all.


* Published in print edition on 9 August 2019

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