The Key to Mauritius’ Prosperous Future
|Harnessing Efficient Governance and Free Market Capitalism
By Sameer Sharma
Free market capitalism, when combined with lean and good governance is the best path to economic prosperity. Governments that maintain tight fiscal discipline focus on targeted spending, and that as well allow free markets to work well tend to have more successful outcomes than those that do not. Governments that focus on fiscal policies that penalize rent seeking whilst having tax policies that encourage competition, innovation and investments tend to achieve superior economic outcomes v/s those that do not.
There has for long been a disconnect between what politicians across the political spectrum want to give to Mauritians v/s what most Mauritians truly want. “Change” has often revolved around changing people rather than in engaging in meaningful structural reforms. While the majority of Mauritians seek greater freedom, including economic freedom, equal opportunity, and empowerment, politicians appear intent on offering only a diluted version of economic freedom.
Politicians have historically wanted to maintain a system of political spoils which enhances their power and influence on our daily lives while large players in the private sector have sought to preserve their economic dominance, which often borders on oligopolistic control over the economy. At the same time, too many politicians in Mauritius still seem to believe that governments are good at running businesses or that badly performing state owned enterprises can be reformed by having the right political nominees at the right places despite countless and increasingly expensive failures from unproductive ports to state-owned banks, bankrupt casinos to yet again insolvent airlines. Granted, some appointees may perform moderately better than others, but over time and across regimes, mediocrity remains the norm through a relentless mean reversion. We fail repeatedly, yet persist in the misguided belief that politicians know how to run businesses or that simply changing faces can yield lasting positive outcomes.
Competition and rivalry among firms are crucial drivers of a country’s economic growth, innovation, and productive investment. The decisions businesses make about where to allocate their resources and capital significantly influence sectoral growth, employment, and the expansion of various industries. The level of market rivalry determines whether firms compete on price or through non-price strategies such as innovation. In highly competitive markets, firms are incentivized to innovate and improve efficiency to gain an edge. Conversely, in markets where competition is weak, firms may exploit their market power, extracting rents without being disciplined by competitive forces. This lack of competition can stifle innovation and hinder overall economic progress.
According to the World Bank’s report entitled “Through the Eye of a Perfect Storm – Coming back stronger from the Covid crisis”, close to 70% of all economic sectors in Mauritius can be considered as being highly concentrated using conventional measures. When it comes to players involved in the import of goods, close to 60% of the value of imports could be categorized under the “high concentration” bucket. While having monopolies and oligopolies does not necessarily equate to an abuse of market power, the World Bank report notes that more scrutiny may be needed when assessing competition risks, especially in the import linked sectors.Read More… Become a Subscriber
Mauritius Times ePaper Friday 17 January 2025
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