A New Dawn: Fantasy or Reality

Titbits

As we time travel to 2050 and beyond, the “big” small island unravels itself “as a model of sustainable growth that is equitably shared and with a high score in the Human Development Index. …. Relative poverty has disappeared. The country that outshines all others on the world map stands out in terms of facilities” — whether it is “public transport” or the “Light Rail Transit“, IT connectivity, trained workers and specialists, innovation and research. It also has a vibrant cultural nightlife in world-class cities that exhibit its wealth of diversity, its soulful art and trendy architecture, high urban living, choicest gastronomic offers and varied landscapes. (Extracts from “Born in 2013” in L’Express – 50 ans avec le Pays — 27 April 2013” )

But the TINAwallahs (There Is No Alternatives team) or what’s left of them promise us much more, that we can reach this fantasy world – this new Mauritian dawn — much earlier. In some ways, they say, we are already there as many of the required policies are already in place. They seem to have the whole set of the right policies already laid down on the table — in the Economic and Social Transformation Plan (ESTP) perhaps. We just have to pick up the few remaining ones and implement them, and the whole 2050 fantasy world will open up for all Mauritians. The TINAwallahs and remnants are so carried away by the exuberance of their vision-cum-fantasy world scripted by the multilateral agencies in Washington that they are not even aware of the reality that comes knocking at their doors.

« Ce futur a déjà pointé le bout de son nez dans notre présent. » It is reflected in the latest results of the Household Budget Survey 2013 – the rising income inequality, the increasing share of total income that goes to the higher income range while the share of the lower strata keep on declining. The proportion of poor persons increased from 8.5% in 2006/07 to 9.8% in 2012; what this means is that the number of poor persons rose from 104,200 to 122,400. The ghettos of poverty have become as conspicuous as the glitz of the gated communities; our lofty poor still lies orphaned outside the lofty schemes sustained by government subsidies and transfers and the initiatives of the National Empowerment Foundation. But the TINAs are reminding us that the policies are already in place for an equitable Mauritius!

Which ones? The very policies that showed extensive largesse to the private sector in terms of reduced corporate taxation and the huge promotion budgets to the tourism sector? The policies that directed the EU compensation money for the restructuring of the sugar industry to the sugar barons? The policies that replaced a progressive tax system by a regressive flat tax? Or is it those policies that allowed sugar barons to extract huge profits on their large property holdings but contributing marginally to taxation whilst, as if to add insult to injury, the middle classes were made to pay higher property taxes – the infamous NPRT?

The recent NESC report on the impact of the global financial crisis on the Mauritian economy got it all wrong in their recommendations, in particular that we embark on TINA-style major economic reengineering reforms. Which ones? We cannot call the few touches made to the tax system and the business facilitation reforms, which boosted private investments only for a few years, as the restructuring reforms that would have lifted our young from the limbo we have left them in, deprived of any chance to acquire skills in their formative years. Can we?

Which policies then? Those policies that rely on the speculative and unproductive use of the our country’s strategic land assets by selling them to foreigners (which has accounted so far for around 80% of the FDI inflows during the past five years) which will ensure that we realize the TINAs dream world of 2050 with “… plenty of spaces around the island that offer an alternative to the hectic urban regions…”?(extract from the above referred article)

We cannot solve our problems with the same thinking we adopted when we created them. Education is one of the most poignant examples of this. The TINAwallahs are visualizing schools run by PTAs which will also decide on the curriculum besides evaluating and rewarding teachers. They are missing the woods for the trees. The education system needs to be not just reformed but transformed for real education that challenges the intellect and questions paradigms, not one of rote memorisation and conformity.

Similarly, as regards poverty, TINAwallahs have failed miserably. The poor are not zombies. We design the policies sitting in government offices with the assistance of IMF experts but we never try things out; it is all about policies that will actually work on the ground. As rightly pointed out by A. Banerjee, Professor, MIT, “polices need to be understood in their proper context. We need to lay them, fail, redesign, succeed. Think of policy as a live object, a domain to engage all stakeholders in.”

Our growth has plunged, the savings rate has slipped to 15% from a high 27-28%; a growing share of our domestic saving is bypassing our financial system altogether, seeking returns in dubious companies running Ponzi schemes; even the below potential growth is neither solid nor sustainable, and is not in the least in green developments. Are the pro-growth, pro-green policies already in place? Let’s leave it to a sober commentator who seeks to convince through facts and arguments rather than the bludgeon of fantasies – Dr Khalil Elahee, Chaiperson of the Energy Efficiency Management Office, who confides that “”certains décideurs au ministère des Finances n’ont toujours pas compris ce qu’est le projet MID. Ils sont toujours dans le business as usual et réfléchissent en termes de least cost. On leur demande un coup de main et en retour, ils nous demandent de faire cent choses beaucoup plus difficiles. Le coup de main qu’on leur demande consiste simplement à aider les gens à changer de mindset de manière à aller vers un autre modèle de développement. Il y a des gens qui appartiennent à un autre siècle, qui ont une vision du développement fondée sur la domination du système néo-libéral. Ils n’appliquent pas la même exigence partout. Ils approuvent certains projets sans se poser de grandes questions alors que sur d’autres projets qui ont besoin d’un coup de main comme les énergies et l’efficacité énergétique, on les voit tiquer. ”

To those who pretend that they have already laid down the required policies, we would like to remind them that the green revolution does not happen with a big bang; it usually starts with a number of small steps. The positive outcomes of these small steps become evident when you get the younger generation talking about pollution and the need to preserve the environment. These hopeful signs will be the precursors of a revolution that Mauritius cannot miss.

We will conclude on that choicest scorn that Nicholas Taleb reserves for people he calls “fragilistas” or “Soviet-Harvard” or people who thinks they know what is going on, what is going to happen and what to do about it: “They often confuse the noise for signal and overfit the data…” from his recent book ‘Antifragile: How to live in a world we do not understand’. These fragilistas end up with their cup neither full or half full but fully empty.

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Ministry of Finance: A Gradual Demerger

We have been witnessing over the years a gradual retrenchment in the responsibilities of the Ministry of Finance that are being taken over by other institutions. We had, first of all, the policy arm of the Debt Management Unit that was transferred to the Bank of Mauritius; then we had the implementation and monitoring of priority projects which moved to the Prime Minister’s Office. The Project Plan Committee under the Ministry of Public Infrastructure was given more authority to decide on the Public Sector Investment Programme. As regards the environment and the tourism sectors, MID and MTPA/MTA were made the main drivers respectively. The Board of Investment is looking after the business climate, and for the reform of State Owned Enterpises it is the Office of Public Sector Governance. On energy it is the new Energy Commission. And of course, on remaining issues, it is the Bretton Woods institutions.

Moreover the recent PRB: Errors, Omissions & Anomalies Committee Report of Mr D. Manraj (we join all his well-wishers to wish him a rapid recovery) seems to have dealt a near-lethal blow to that mega-ministry that was the Ministry of Finance (MOF). The ex-Management Audit Bureau (MAB) cadre will be having the possibility of joining the Public Sector Re-engineering Bureau, under the Ministry of Civil Service, which will be carrying out most of the functions of the ex-MAB while the economists of the ex-Ministry of Planning (MEPD) can join the Strategic Policy Unit. There are lots of expectations about this Unit, which should be allowed to carry out some of the functions of the earlier MEPD like charting out a consensual vision of the country – that is a forward-looking, dynamic vision of the country that will respond to the aspirations of its people. For these units to function effectively, it should be properly staffed.

As for the Strategic Policy Unit, we do not understand the logic behind this useless gimmick of allowing, in the first instance, a handful of officers to move in as torch-bearers; it will only provide ammunitions in some quarters to hinder its rapid transition to a full-fledged effective Planning Unit. We do not want it to suffer the same fate as the Strategic Transformation Commission, which has now become a mere Council. We believe that the transfer of teams of well-motivated, dynamic and experienced Finance and Management Analysts and sector specialists to these respective units will help to remove much of the present confusion and apprehensions about the future prospects and autonomy of these units, their staffing requirements and their capacity to deliver the goods.

Such demergers or splitting of the Finance ministries are common practice worldwide. In such situations, the MOF goes back to its earlier core functions – macro-fiscal management, budget preparation & execution, revenue administration, Cash, debt and asset management operations and accounting operations and fiscal reporting. Our MOF is suitably equipped to carry out these functions; it has just recruited and trained some 40 multi-disciplinary analysts who can now replace the financial analysts and economists for the budget exercise. The Strategic Policy Unit and the Public Sector Re-engineering Bureau, properly staffed by specialists, old and new, could not have come at a better time now that our underlying challenges are demanding more coherent and holistic approaches for reforms, policy analysis and for the development of strategic plans within a consistent macroeconomic framework and a medium- to long-term perspective.

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The Underground Economy

The one thing that the massive financial scams have revealed is that the size of the underground economy that operates outside of the official radar is quite sizeable. It is surprising that they have been able to generate that amount of cash and stash it without leaving behind some sort of trail for investigators to sniff out.

We believe that there is scope for the Mauritius Revenue Authority (MRA) to intensify its efforts for a 360 profiling exercise of high net worth individuals and big spenders. It can investigate whether their incomes are commensurate with their expenditures, for example, on real estates, credit cards purchases, extravagant spending in five-star hotels and their foreign jaunts.

What about the maze of companies through which entities often evade taxes? One tax expert working for these very people confided that many well-heeled independent professionals such as accountants, doctors, lawyers, big shopkeepers and wholesale traders make up the category that escapes the tax net or contributes virtually next to nothing to the Treasury.

The effective tax base of the country is a meagre 78,000 taxpayers comprising the corporate and salaried class. While for the salaried it is extremely difficult to completely escape the tax authorities, the family-owned businesses, the doctors, lawyers and some teachers and small traders operate largely in cash economies that enable them to hide most of their income. It is this thriving shadow economy that explains in some measure how the real estate sector is still maintaining its head above the troubled waters and is resisting the bursting of the bubble.

It also explains why consumers keep spending despite the slackening of growth. The authorities should be concerned as the shadow economy may be poised to get even bigger. Whatever its size, it is a sign of how bad things are and how urgently we have to build up the momentum of the real economy.

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The Socio-Cultural Rogues

It all happened because we surrendered to their bullying and threats; it all happened because we let it be and because we were on the defensive. We surrendered too easily by allowing them to take centrestage, to trample all over us. We did not realize that, by allowing them to call the shots, we have given them too much space to encroach on our freedom. It is a battle for the freedom of the mind.

While most of our intellectuals are crawling when they need not even stoop, they were effortlessly hijacking the public platforms, these narrow-minded socio-cultural thugs, indulging in cultural terrorism. They and their ilk are nothing but hirelings of politicians that are bent on shrewdly maintaining control over carefully nurtured vote banks. They parade this cultural terrorism as moral policing, expecting us to toe the line and wear our ethnic affiliations on our sleeves. In this present prevailing ‘rodeur-boute’ culture that defines political life, they have somewhat succeeded in cowing down a few. But there is still hope.

A few have realized that this is a fight for the freedom of our mind and the vibrant expression of all that is diverse in our complex society. We will fight for it and we shall have it.


* Published in print edition on 24 May 2013

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