Rebooting the Economy in 2016 Needs a Correction in Priorities

This first year has been fairly mitigated in terms of achievements and left the population more or less disappointed

As the year comes to a close and the government is about to complete its first year in office, a lot has been written and said about its social and economic performance over that period of time. We do not intend to come back over this again here. Suffice it to say that there have probably been three distinct episodes which have marked the defining moments of the government’s actions.

First was the flying start with the immediate implementation of the increase in Universal Pensions to Rs 5000 as promised during the electoral campaign, followed by the increase of Rs 600 across the board for all salary and wage earners in the country. These actions, added to the public denunciation of some of the worst excesses of the outgoing regime, created a most palpable feel-good factor among the population at large. The voters felt rightfully vindicated in their rather astounding choice for total change.

The second act was the eruption of the BAI affair which had the immediate effect of dampening sentiments by creating panic among a large number of employees as well as investors including the insurance policy holders of the company. It was not so much the actual merits of the case as the general handling which caused the most commotion. There was a general feeling that things were getting out of hand and beyond control with, among other things, the controversies regarding the appointment of Administrators and the apparent discrimination in treatment meted out to various categories of investors.

Finally during the last months came the debates over the introduction of the Good Governance and Integrity Reporting Bill. This was a classic illustration of all that can go wrong when there is poor communications and over-confidence in the righteousness of one’s actions. All hell seemed to break loose as the opponents to the Bill, many of them with genuine concerns and the rest with unspeakable motives, hit the roads of protest about the potential risks to individual liberties contained in the initial version of the Bill which went for First Reading in Parliament.

The salutary effects of these protests stand testimony to the vitality of the press and public opinion in the Republic of Mauritius. The Minister, one must admit, also rose to the occasion by recognizing that there were real causes for concern and accommodated quite a few suggestions made by the opposition. As our readers would certainly remember, the position in this column, which at the time seemed to reflect the general consensus in the country, was “Amend but stay the course” and it is indeed a matter of satisfaction that this is exactly what actually occurred.

The government has too often looked awkward and indecisive in its actions and on other occasions it has left itself open to accusations of “nepotism” in its appointments. All in all, this first year has been fairly mitigated in terms of achievements and left the population more or less disappointed. Many Ministers acknowledge this in their public statements when they blame the “impatience” of people for this state of affairs.

What Next?

On the political front the beginning of the year 2016 promises to be as eventful as the one that will have just ended. In a sense it is fortunate that the judgement of the Supreme Court in the Pravind Jugnauth case will be coming up early in January because it will contribute in dissipating one major uncertainty which is weighing heavily on the political and decision-making process in the country.

No one can prejudge the decision of the Court but it would be disingenuous to suggest that a negative outcome for the leader of the MSM would not result in a considerable destabilisation in his party and the government. On the other hand, if the judgment goes in favour of Pravind Jugnauth, that would certainly put him in a strong position from which he will reap the full benefits of “moral high ground” for having resigned at the time of his initial conviction.

Be that as it may, the expectation is clearly that the government should be changing tack as from next year. It will have to align its anti-corruption efforts with economic policies that are favourable to growth and employment creation. If not, then in the best of cases, Mauritius risks finding itself as indeed a corruption free but economically stagnant country bedevilled by social strife.

Improving the policy environment becomes imperative if the government wishes to dispel the all-pervasive impression of government by “crisis-management”. In line with our development strategy of attaining the status of a “high income economy”, it needs to establish a clear and predictable environment favourable to a productivity and investment led transformation that will ensure accelerated growth, employment creation and overall prosperity.

Sometime before formally meeting with the private sector at the beginning of this week senior members of the government were publicly stating that they were unhappy with the performance of the former, especially in terms of employment creation, over the past year. While the private sector is certainly not beyond reproach, it is nevertheless the ultimate responsibility of government to use the policy instruments at its disposal — carrot and stick – in order to get economic operators to take their share of responsibility in a give-and-take process that mobilizes the strengths of each partner.

The almost 20% fall in market capitalization at the Stock Exchange of Mauritius is definitely due to the trend among global institutional investors to exit the emerging and frontier markets. This does not exclude the fact that some of the standard bearers of the SEMDEX have also been hit by policy measures. It is a well-known fact that such drastic falls in stock capitalization has an inhibiting effect, through the “wealth effect” on the inclination of the affected operators to take new risks. This is aggravated when such falls are directly attributed to discretionary decisions by government.

The structured public-private sector dialogue that the government has initiated with the presentation of the Prime Minister’s Vision 2030 Economic Statement provides the platform. A meaningful conversation can lead to the articulation of a coherent and realistic economic strategy to arrest the decline in certain sectors of the economy, put it on a proper course of recovery and chart a future course of action for boosting stability and prosperity.

To be “realistic and meaningful” along with its long term vision, an action plan must be designed to include some “low hanging fruits” among its objectives with a time horizon of December 2016 at latest for achieving measurable results.

 

* Published in print edition on 18 December 2015

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