The Mauritius economy
has been struggling over the last year.
What is the Government doing to encourage growth?
1999 has been an exceptional year. Overall economic growth is estimated at 2.7%,
almost half the average registered over the past two decades. There are two major factors explaining this
slackening in economic growth. First,
Mauritius was hit by one of the worst droughts which caused agricultural
production to drop by 25% and sugarcane output by 41%. Second, the rupee appreciated by almost 11%
vis-à-vis euro and euro-zone currencies affecting EPZ and sugar receipts. Moreover, lower growths registered in our major
European markets have affected our exports potential. However, the economy remained resilient as
other sectors, such as construction, tourism and financial services, recorded
sustained growth. Overall growth,
excluding the sugar sector, is estimated at 5.5%.
Mauritius has to
withstand the upcoming challenges of the new international economic environment
and stay competitive. Notwithstanding
the positive economic outlook, some fundamental policy reforms are required to
tackle underlying problems cropping up both on the international and domestic
fronts.
On the international
front, Mauritius has to face the challenges of a global economy characterised
by fierce competition for higher global market share in terms of goods,
services and capital resources. While
the WTO offers tremendous opportunities for trade expansion and economic
growth, it puts developing countries like Mauritius under severe pressure and
constraints in the adjustment process.
While the country is gradually adapting to changes in the external
economic environment, it has yet to further enhance productivity to enable it
to compete with low-cost producers.
Thus, our international competitiveness needs to be stepped up through
greater productivity gains. A new
institutional framework on Productivity will be set up to give the concept a
new dimension. We also need to
concentrate efforts on such aspects as quality and quick response and develop
new niches for our products.
On the local front,
the following sensitive issues need to be urgently addressed:
(i) Education and Training: There is an
urgent need to step up our human capital base.
Human resource development would be instrumental to drive the economy
into the next millennium and both the government and the private sector are
spending a lot in training and education.
(ii) Labour market: The labour market needs
to be more flexible allowing workers to shift from one job to another more
easily. Pay should also be linked to
performance and productivity. This would
trigger incentives for higher human capital investment and better on-the-job
performance.
(iii) Civil Service Reform- Reforms should be
oriented to support the productive sectors of the economy. The Civil Service should be more
output-driven rather than process-driven.
Some streamlining of functions and activities is required to reduce
pressure on the total wage bill which constitutes a large chunk of the current
budget.
(iv) Infrastructure- Improvement in the
country’s international trading status through “new quick response” strategies
and development of a sea/air regional transport hub in the freeport remain
vital. Bottlenecks in internal transport
need to be addressed urgently. The
telecommunications sector needs to be opened to greater competition and
world-class technical know-how.
(v) Environment- Effective treatment of
waste from industrial and tourism sectors is required. Environmental degradation cropping from
inappropriately planned urban growth should also be checked.
(vi) Fiscal viability - Civil service and
welfare state reforms, privatisation of certain activities and promotion of
greater private sector participation and competition in the provision of
infrastructure, utilities and core services can further help to promote fiscal
viability. Improving the efficiency of welfare expenditures and meeting the
needs of the genuinely disadvantaged would also help in restructuring the
social maintenance programmes. The
implementation of projects under the Build Operate Transfer scheme may improve
fiscal position and, at the same time, promote private sector participation in
economic activities.
Key Sectors: Future Growth
Our next phase of
economic development will be characterised by a shift towards a high
information-based system. The three
traditional cylinders of growth namely agriculture, manufacturing and tourism
will receive renewed dynamism while the international services, the fastest
growing sector will gradually assert itself as the fourth cylinder in the
engine of development.
Sugar cane, which has
dominated the economic landscape for many years, will continue to play a vital
role in the primary sector and in the overall economic development of the
country. Optimum exploitation of the
various by-products of sugar cane such as energy (bagasse) and special sugars
will contribute to higher value added.
Perspectives for development in crop diversification, biotechnology,
agro-industries, livestock and fisheries and aquaculture will be bright. High-tech research and exploration services
for the exploitation of mineral and energy resources of our Economic Exclusive
Zone (EEZ) offer additional means for the country to boost growth prospects.
The core of the
textile industry, which characterises the industrial set-up in Mauritius, will
be reoriented with increased delocalisation of low-end tasks overseas while the
production of higher value-added items will be encouraged. Developments in such sectors like
electronics, printing and publishing, light engineering and jewellery will be
intensive, generating high value added and promoting industrial
diversification.
The tourism industry,
which is today the third foreign exchange earner, will be called to play an
even more critical and dynamic sector in the future. It will have to maximise its existing
competitive advantages and create new ones.
Selective, quality and environment-friendly tourism will be promoted to
hoist Mauritius as a high class resort tourist destination. Mauritius, with its infrastructure and
natural beauties, will increasingly appeal to the following segments, namely conference,
sporting, honeymoon and wedding market.
In around two decades, Mauritius is expected to receive one million
tourists, thus adding to bright prospects for revenue-generating and employment
creation capacity for the economy.
Mauritius cannot,
however, put its eggs in a limited basket.
It has to diversify and consolidate its economic structures to cope with
growing challenges looming ahead. The
quaternary sector is a new area, which offers the potential for Mauritius to
become the regional hub and scope to drive the economy forward into the next
century. Financial services are
burgeoning and are witnessing leap-frog developments in terms of technology and
new business horizons. They are also
going offshore. Our young capital market
is knowing unprecedented change with the recent introduction of a new modern
clearing system. The number of companies
operating in Offshore business activities (over 7000), with wide ranging
services like fund management to aircraft leasing and operators in the freeport
sector (300) illustrates the momentum the financial business services are
gaining.
The wide application
of new information-based system generating various kinds of computer services
such as data processing, Computer-Aided Design (CAD), software services,
publishing and voice operations is gaining momentum. It is expected that with the new dimension IT
is receiving, the possibility of export of computer services exists, generating
higher foreign exchange earnings and employment.
These developments
would not be possible if the economy is not equipped with a sound regulatory
and macroeconomic framework, an efficient services sector, an appropriate
institutional support, a modern infrastructure, a skilled manpower and good
governance.
