In the context
of the Roundtable on the Comprehensive Development Framework being organised by
the NESC in collaboration with the World Bank, it would be an excellent
opportunity to refocus the debate on the important determinants that launched
Mauritius on a development path quite unique in the region and nurtured the
gradual emergence of the "Indian Ocean Tiger",
and also take up issue
with our Sloan Fellow of the London Business School who had asserted, with
quite some convictions that "joining the Lome Convention " -which we
have termed as market access- and the
"foray in Tourism"-
termed as export-led growth- were the crucial factors explaining our
transformation. And concurrently these developments were credited, "free
from partisan prejudices", to the Labour Party and the SGD's PMSD. The
recent economic literature dissecting Mauritius' success story transcends such
simple reductionism for a more intensive debate on initial conditions, geographic
factors, market intervention and specific domestic institutions. It will be
interesting to try to find our way in these mazes of observations, arguments
and counter arguments.
Over the last
three decades, we succeeded in chalking up an annual growth rate of over 5%.
About more than 90% of this growth was accounted for by a combination of
increases in labour and capital investment while total factor productivity
contributed to less than 10%. Thus most
of the growth pattern has been from sheer perspiration - more brawn rather
brain. The initial or climatic conditions, or geographic factors, or even
specific factors like population control and the early eradication of malaria,
equally important in the successful transformation of some other island economies
like Taiwan, Singapore and Hong Kong, could fully capture the complexities of
our growth performance. Indeed, in terms
of initial conditions, Mauritius fared far worst than many African and East
Asian economies. In this respect at
least, Professor Meade was on target in his diagnosis of the unfavourable
inheritance of an economy fragmented on all lines - ethnic, economic and
political - vulnerable to terms of trade shocks and impending exploding
population and its remoteness from main markets and epicentres of growth.
But it is
rather on openness and outward orientation strategy that there continue to be
increasing debates on whether Mauritius had market-led or intervention-led
strategies. While some have continued to
post Mauritius as the poster boy of the so-called Washington Consensus - a
diligent and dutiful student painstakingly adjusting relative prices to free
trade levels and allowing specialisation to be driven by relative factors
endowments, others have classified Mauritius among the likes of the high
performing Asian economies that adopted a distinctive approach to openness - a
dirigiste trade liberalisation policy that effectively segmented the export
sectors and the local import competing sectors.
But in the case of Mauritius, the outlier in terms of the unconventional
determinants of the country's performance, it was market access and the
domestic export subsidies that compensated for some of the inefficiencies of
the anti-export bias of the restrictive import regime and ensured the profitability
of the export sector that explains a large part of the country's success
story. The resulting rents on sugar for
example amounted to some 5.4% of GDP on the average for the last two decades.
Many other countries had
started their economic transformation with better initial conditions. They were
also monocrop economies, enjoyed preferential access to exports markets, and
had free trade zones. But they had
failed where Mauritius succeeded. There
must be other explanations besides openness and market access. Some economic analysts claim that Mauritius's
openness to FDI brought us the much-needed technical expertise and the initial
capital for investment. Moreover, the
spread and diffusion of the technical know-how, marketing talents and world class
management capacity through either joint ventures, strategic alliances or mere
local entrepreneurship and adaptation helped to boost the economy to a higher
level of growth. But this seems to be
only part of the story for the ongoing bidding wars to attract FDI do not seem
to be yielding the desired results.
Against a backdrop of secured access to preferential trading
arrangements, Mauritius was perhaps an exceptional case that benefited from the
Hong Kong syndrome.
This
seems to be essential fodder for those who claim the primacy of a particular
set of institutions for FDI inflows, local entrepreneurship, and
innovation. The functioning democratic
traditions and institutions helped to develop a social consensus without which
the continuous and consistent programme of economic liberalisation would not
have been possible. The quality of the
country's institutions of conflict management, especially in building the necessary consensus among the
majority of the population to accommodate the economic elite - the 14
families - has ensured that the quota rents from the EU and US markets were
properly utilised into productive sectors and in building up the social
infrastructure to meet the developmental, social insurance and social
assistance goals. This important determinant of growth, that is, the ability of
our domestic institutions to manage the distributional conflicts triggered by
local and external shocks, stands out markedly in the case of Mauritius. The quality of our domestic institutions
seems to override the other primordial factors affecting growth. But the debate goes on
optional
(But the specific set of institutions of conflict management that has served us well in a particular setting is being reconfigured in response to the opportunities and challenges of a more uncertain, dynamic and connected economy ; it will have to embrace the new business dictates and governing principles grounded in markets, a rule- based framework, openness, the synergies and efficiencies generated by public private partnership schemes and effective governance through a participatory approach.
Whatever the temptations of the Zimbabwean model or la lutte des classes or des fils à papa, to the regular blanc-bashing, our domestic institutions continue to play its distinctive role of conflict management, via the new corporate governance framework, by resolutely driving the small group of family-owned companies to evolve towards new and more competitive business model, - "a model that jettisons obsolete practices and is instead driven by wider share ownership and broader stakeholder participation in order to efficiently manage the performance-centered workplace of the knowledge age")
