Around the mid of the last century of the last millennium, Mauritius was a new, frail and tottering nation but at the finale of the millennium, it was celebrating its successes. It has carved out special niches in some sectors Iike sugar, textile and tourism and has made it into the group of the high middle-income countries.
There was indeed cause for celebrations as it was being showered with praises from different quarters, especially the Bretton Woods and EU institutions which never missed an opportunity to acclaim this dutiful student of their prescribed adjustment programmes. Despite some friendly cautions from well-meaning economic specialists, including Mr Michael Sarris of the World Bank, (whose incisive comments on the Mauritian economy were not well digested by our local policymakers), the once-exemplary student has grown too smug.
It was too busy exhibiting its trophies and singing paeans to the gloriole of the "Success Story" to take note. It allowed itself to be swamped and lulled by the contented present though it had the means to shape the events to its advantage and enter forcefully and confidently into the 21st Century. Buoyed up by the multitude of futile comparative reports, like the World Economic Forum report on Competitiveness and the periodic Euromoney credit ratings, it felt complacent enough to extend the rejoicings to the early hours of the new millennium.
At the dawn of the new age- a New Economy propelled by a new set of rules - we suddenly realise that we have a severe hang over. The rejoicings have lasted for too long. At first, we thought it was just the after effects of merry-making. We took the "Economy" for a thorough check-up. We had some apprehensions but we could never have guessed that the diagnoses would turn out to be so appalling.
We were told quite bluntly that if we want to make it in the new setting of a globalised, integrated and competitive world of Darwinian proportions, the "Mauritian Economy' has to be sent to the Intensive Care Unit. At any moment now on it could suffer a stroke, it is too obese, too lethargic, too politicised and uncommitted and not nimble and flexible enough to take head-on the challenges, seize the emerging opportunities and fight its way to next, more arduous, skill-intensive and technologically more advanced, phase of its development.
The economy needs a shock therapy now to arouse it from its slumber and lethargy and to rid it of the viruses that have been gnawing at its underlying fabric and endangering its competitive structure, scrupulously built over the years on the solid pillars of sound macroeconomic environment, good governance and political and social stability. The detailed diagnosis reveals a serious but not terminal case. From the desperate litany of the ills, we have picked up the following:
Private sector: While our business rivals have been testing their business acumen and sharpening their business skills on a more level playing field, our conservative local economic agents have yet to master the tricks of competitive trade and business practices as they are too well entrenched in their cocooned markets characterised by cartels, restrictive business practices, bids rigging and high tariff barriers . The import-weighted average tariff rate is still around 17.5 % and the receipts from tariff duties account for about one-third of total government revenue.
Macroeconomic environment: There are cracks all over the place- a worsening of the main macroeconomic parameters to name just a few: increasing budget deficits (excluding exceptional factors), the still high inflation rate relative to our trading partners, ballooning levels of national debt (inclusive of the FRN blunder), misalignment of the exchange rate and an inconsistent monetary policy. Interest payments have reached 20% of total government expenditure. Out of every rupee that Government collects, 21 cents go for interest debt servicing. The external debt situation has been compounded by the FRN blunder of $150 million that has cost government some Rs 1 billion over the past 4 years. A further loss of more than Rs 1
billion is expected this October on the repayment of the remaining four-fifths of the FRN.
Fiscal Viability: ".... the modalities of Budget preparation are anachronistic and are not conducive to strategic thinking and consensus building about results and objectives.....Trade-offs between different priorities are difficult to make because of a lack of open discussion, insufficient analytical foundations, and the absence of a hard budget constraint in political decision making process" (World Bank). The annual budget exercise is a big farce, the policy initiatives are taken on an ad-hoc basis, just a summing up of what line ministries do provide with some patching up here and there.
In such a situation we are thus not surprised of the poor outcomes. We should also not be surprised that for so long there have not been any efforts at (i) restraining current expenditure, (ii) scaling down the large number of tax exemptions and concessions, (iii) downsizing the civil service, (iv) improving the efficiency of welfare expenditures and meeting the needs of the genuinely disadvantaged that would help in restructuring the social maintenance programmes (thus reforming the financing, structure and delivery of social services), (v) allocating adequate resources for an extensive human resource development programme, (vi) elaborating a privatisation plan and a Charter for public enterprises (vii) looking into the efficiency, equity and sustainability of the pension system and (vi) consolidating the various off-budget government funds with the central government budget to make it more transparent.
The labour market: This is the area par excellence which will need all the necessary political will to get rid of the inveterate virus that is gradually but surely undermining the foundations of the "success story". Will we succeed in replacing the outmoded tripartite wage negotiation system and remove the rigidities in the wage determination process? Should pay be henceforth linked to performance and productivity?
Monetary policy: The recent pre-budget events bring forth again the issue of the autonomy of the Central bank to conduct monetary policy which has lately
been too inconsistent and haphazard. The introduction of the Lombard and repo facilities were preliminary steps for genuine open market operations (OMOS). By now the BOM must be having the right portfolio of eligible securities for an efficient application of OMOS!!
Educational reform: We have today an education system that has not kept pace with requirements of the country. Our educational outcomes are less than satisfactory reflecting the cumulative effect of capacity limitations and wastage over the years. The long debated and awaited paradigm shift in education has not happened. We are still stuck with PACE as opposed to CPE and the nine-year compulsory and fundamental education against the 6+5+2 and the ranking system in our efforts to have a less stringent filtering mechanism that will improve the average number of years of schooling and the level and quality of education. These crucial issues should not cloud the other equally important concerns like the development of a more balanced curricula that will encourage creativity, entrepreneurial skills and multidisciplinarity and provide the bridges to the world of work. Our Human Resource Development programme and thus our successful transition to the next phase of development will depend on what we able to achieve in the education sector and to the extent that the overall constrained fiscal environment allows the education sector to receive its due share.
Health sector reform: We would have to go beyond the ad-hoc populist measures like the savoury di-rizBasmati for in-patients or the indispensable la cloche de Monsieur Raj for a Health Action Plan that will set the base for long term policy formulation- a patients Charter, a family doctor service, decentralised operational management, a health insurance scheme and a major capital investment programme to bring the health services to modern affordable standards.
Regional co-operation: We continue to be embroiled in the multiplicity of networks of regional and sub-regional groupings that are expected to capitalise on our existing complementarities and synergies. But we have not seen any concrete results so far. The tariff reforms are too slow and too timid to produce any meaningful outcomes. We are thus everywhere without being anywhere. Despite housing the Secretariat of the IOR-ARC, which is costing us quite a sizeable sum, we do have not much to show for. Mr Kailash, le bilan,please.!!!
There are also other equally important concerns like the bottlenecks in internal transport, the privatisation of some public utilities, the diversification challenges in the manufacturing, tourism and offshore sectors, the current inadequate digital infrastructure and so on and on, that need to be addressed. These are indeed the huge backlog of issues that we have not dared or bothered to tackle so far and these are hampering our forward march today to explore the new avenues of the new millennium. There are these days puffed up shows on the bilan - the achievements. Another "success story", more rejoicings while the woodworms-the huge backlogs od problems/issues that we have swept under the mat-gnaws and gnaws.
