Moving from Gloom to Boom (and back?)

Mauritian Economy 1968-2015:

Breaking out of decision paralysis and reinforcing the policy space are essential preconditions for economic growth, employment creation and a fairer and more equitable development path

This short review of the Mauritian economy since independence in 1968 to the present brings to light some surprising figures about the economic performance of the country during the Sir Seewoosagur Ramgoolam/Sir Veerasamy Ringadoo era (1968-1982) and which goes against the grain of popular beliefs. Yet it only serves to illustrate the fact that aligning statistical growth and achieving actual socio-economic progress are two different things altogether. As regards the second phase known as that of the “economic miracle”, all that one can say is that it is true to form in all respects.

Finally, the problems posed by the globalized and volatile economic order since the turn of this century have stretched the capacity of our tried and tested approaches as well as the ability of our traditional political elites to beyond their capacity to cope. The detrimental consequence has been decision paralysis, futile rhetoric and institutional breakdown. The need for the new inspiring leadership which will put in place the transformational reforms needed for the country to thrive and prosper in this new global environment are seemingly not yet in sight…

The model of economic success

Until the end of the last century, the economic success story of Mauritius since independence was often quoted and commended in international forums as “the” model of economic success in Africa. Indeed between 1973 and 1999 real GDP growth grew on average by 5.9% annually compared to 2.4% in Africa. A measure of this success was that in the late 1980s the country was enjoying full employment and started to have recourse to imported labour.

Since 2000 to date, however, the country has witnessed a marked deceleration in average growth rates which are paining to cross the 4% range over the past few years. On the occasion of the 48th anniversary of independence, this brief economic history is quite revealing and confirms at least one important lesson for the future: breaking out of decision paralysis and reinforcing the policy space are essential preconditions for economic growth, employment creation and a fairer and more equitable development path.

1968-82: Growth, Diversification and Repression

A cursory glance at the economic statistics for the period from 1968 to 1982 reveals some rather surprising facts in view of the poor reputation for economic performance attributed to SSR and Sir Veerasamy Ringadoo (as Minister of Finance) during that era.

In spite of the pre-independence gloom and doom predicted by the likes of Titmuss and Meade and VS Naipaul (‘The Overcrowded Barracoon’, 1972) the overall economic achievement over the period was quite remarkable by any standards. In 1968 sugar represented 97% of exports, employing 35% of the labour force with the largest fraction of the rest employed in government or quasi-government services.

By 1982 the Export Processing Zone (EPZ) and the Tourism Industry had become major pillars of a diversified economy. The EPZ contributed 31% of total visible exports and employed 26,000 people. Between 1972 and 1982, the number of tourist arrivals more than doubled from 48,800 to 118,360 as the number of rooms available increased from 800 in 1971 to nearly 5000 in 1982.

The above begs the question: why was the SSR-led government so unpopular in 1982 in spite of what was after all a notable economic performance? The answer to this question lies broadly in five causes:

(1) political repression following the Labour-PMSD coalition (1969) and the cancellation of general elections due in 1973;

(2) economic repression or severe economic austerity under the aegis of the World Bank and IMF-led Structural Adjustments programmes following the mismanagement of the Sugar Boom of the early 1970s and the ensuing massive devaluationof the Mauritius rupee;

(3) poor governance and communications by a set of people who had unwittingly managed to cut themselves from ground realities in a very short span of time;

(4) the coming on the labour market of the post-War baby boomers — the unemployed graduates and youth in general whose aspirations and concerns found no resonance in the erstwhile government; and

(5) finally, the five “wasted” years from 1976 to 1982 when a hapless SSR led the weakest government ever, undermined by internecine divisions and rivalry.

1982-2000 Economic Miracle: Leadership, Pragmatism and Luck

When the MSM-Labour-PMSD alliance took power in August 1983, the contrast in style and substance could not be more striking. The Senior Ministers – Gaetan Duval, Satcam Boolell, Kader Bhayat, Kadress Pillay, Anil Gayan, Harish Boodhoo and Vishnu Lutchmeenaraidoo — under the leadership of Anerood Jugnauth projected a perception that they really meant business. The unbending pragmatism (which so used to annoy the ‘militants’ of his former party) of Anerood Jugnauth as a leader determined to “put the economy first” was a critical factor under the circumstances.

What one could call the element of “luck” was the announcement that Hong Kong would be handed back to the People’s Republic of China in 1997. But then leadership is all about seizing the moment and making the most of it. The government was indeed quick to seize the opportunity and created an appropriate package of incentives which would attract the foot-loose and worried textiles and garments industrialists to the island.

The results were immediately perceptible and there is no contesting the fact that the “economic miracle” was driven essentially by the stellar performance of the EPZ over the decade 1982-92. As from 1982, its total output grew by 19% annually on average, employment by 24% and exports by about 11%. From 0 in 1971 the EPZ accounted for 26% of GDP, 36% of employment, 19% of capital stock and 66% of exports.

Tourism, under the impulse of Gaetan Duval, continued to grow into a significant economic player. Revenue from tourism increased constantly over the period from 11.8% in 1982 to 33.1% in 84-85 and 50% in 1996-97. In 1990 gross contribution of the industry to the national economy amounted to Rs 3.5 billion as against Rs 500 million in 1982.

All in all the burgeoning diversification the economy initiated by the former regime (1968-82) went through an acceleration phase and by the early 1990s the economy was firing on the three cylinders of Agriculture, the EPZ and the Tourism sector. Over the last decade of the 20th century, the Financial Services Sector was added to the panoply of new pillars.

2000-2015: Challenging Global Environment and Decision Paralysis

In the absence of political leadership, the policy space has by default been taken over by the liberal credo of a purported “market-driven” policy framework. In truth, decision paralysis has meant that the country has gone through a period of forced adjustments to the new hostile global economic environment, driven by vested interests and policy-makers unable to design suitably responsive economic policies and innovative initiatives – two essential components of the hitherto celebrated growth trajectory.

The result is here to see with the latest World Bank report denouncing the development of an iniquitous system of distribution of income, increased poverty and the decline of the middle-class… a prelude to gloom again unless decisive actions and a coherent vision are put in place urgently.

*  Published in print edition on 18 March 2016

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