The MAU-MOZ-MAD Growth Triangle

Some 13 000 hectares of land in Madagascar are being put at the disposal of Mauritian entrepreneurs and it seems to be a non-event;  we are still stuck up with the nasty hangover from the 2000 hectares tussle that continue to inflame passions and cut loose not only the Dultamans but  also more sober ones from their moorings ;
Surprisingly the latest to join the fray, fresh from hibernation, adding to the muddled thinking, is the NESC  while the country awaits  a consistent pro-active regional strategy to continue progressing from “blinkered regionalism” to “additive regionalism”- a strategy of  negotiating a network of trade  arrangements that  progressively reduce trade diversion costs, lower the effective average tariff, and provide considerably improved market access.

Mauritius has little time for trite ideological posturing or vacuous generalities if it is to continue confronting the challenges of an economic and trading environment which has been in a continuous state of flux for more than one decade now. The barest contours of the two main major international trends, that are of immediate concern to us today, are very discernible and identifiable and have become so pervasive and irreversible. First,it is the increasing globalisation of economic activities, especially in production, evolution of technology and mobilisation of capital resources. This is a direct consequence of the growth of world trade at a faster pace than of world output and the growth and integration of world capital markets. Second, as an important corollary and anti-dote to globalisation, it is the emergence of regional alliances or blocs and the trend towards regional cooperation and integration. Regional cooperation has indeed gained momentum as countries, both developed and less developed find it a useful means of shielding themselves from the increasing vagaries of the uncertain external environment.

 

To the first major challenge, we have been learning how to live with this uncertain external environment, to be constantly vigilant of emerging trends and continuously endeavouring to respond flexibly, imaginatively and speedily to take advantage of the various emerging opportunities and challenges. We have been prompt in taking the lead over events by continuously reengineering and restructuring our economy  in response to emerging technological improvements and changing trade agreements and preferences and thus gearing ourselves to be a full participant of the new trade exchanges that are more open and more competitive.

To the other major challenge that some believe was threatening the evolution of  the open trading system and undaunted by the  failed South-South agreements that were part of the import substitution policies that member countries were then following, we opted to be a meaningful regional player .   Our leitmotif is that "the nation-state solution assumes a zero sum game for limited resources.  The region-state model, opened to the global economy, is plus sum as prosperity is brought in from without." Kenichi Ohmae –The End of the Nation State. What was formerly an inward-looking, zero sum type of cooperation has been replaced by an outwardoriented, competitive, positive sum type of cooperation.

Thus we set ourselves to the task of broadening our economic space beyond our frontiers.  As early as 1982 , the policy framework for regional cooperation was set up with the creation of the IOC.  Our adherence to regional organisations like the OAU,COMESA,SADC,IOR-ARC and more recently ESA was part of that strategy to enhance our comparative advantage and know-how by being present in the region and in  a number of key sectors, such as textile manufacturing, agro-industries, tourism, airline services, ICT/ telecommunications and banking and building networks of operations throughout the region.  Our move to economic regional integration, pursued in a spirit of mutual benefit, has stimulated our trade by freeing it from restrictions and barriers, promoted growth through economies of scale, improved our institutional environment, strengthened the external discipline that sustains appropriate policies, and allowed us to respond timely to changing circumstances.

We believe that, whatever the partnership agreement we finally opt for with our EU partner, the regional integration initiative will have to be given a new dynamism  towards a well developed and consistent trade and regional strategy which is consistent  with our economic  strategy of gradually moving the economy’s center of gravity towards services and positioning the country as a leading provider of business, financial and IT services for the region.

Can the Mauritius-Mozambique–Madagascar Growth Triangle (The MAU-MOZ –MAD GT) be grafted to the  regional ESA-EU EPA ? The Growth Triangle(GT) concept draws on the underlying notion that geographically contiguous regions, characterized by significant differences in factor endowments can, by creating a strategic alliance, achieve complementation and synergism in the allocation of land, labor, capital, technology, management expertise, and essential natural resources, yielding sustainable comparative advantages in export promotion. The Growth Triangles have been attracting attention particularly because of its market-driven, peripheral-oriented, and private sector-led regional cooperation which differ from formal integration efforts such as the European Union (EU) and the North American Free Trade Agreement (NAFTA). The mostly investment-driven and export oriented growth triangles are inward-looking with respect to production and technology networking, but outward-looking in terms of exports.

The primary comparative advantage of the MAU-MOZ–MAD GT  is an abundance of unskilled, low-wage labor, cheap land and natural resources. Although low value-added countries today, they have extraordinary potential for rapid economic development and can gradually gravitate to higher value-added activities with the  increased opportunities for vertical divisions of labor in manufacturing and technology, and the potential to achieve greater economies of scale and complementation that the larger, integrated markets will provide. The growth triangle concept would appear to be a classic application of Michael Porter's thinking with respect to achieving national competitive advantage. “Growth triangles are designed to help geographically proximate sub-regions of countries more effectively deploy factor endowments. They create demand conditions that drive firms located within the triangle to be "world class". They promote the development of centers of excellence where collaboration among firms can be more effectively leveraged. And they provide a "behavioural climate" whereby public and private sector collaboration can be brought to bear in creating high value-added goods for export.”

A study carried out by A. Hurree “The Development of a Madagascar-Mauritius- Seychelles Triangle”- Fletcher School, March 2007- argues the case for a shared interest in the development of such a Growth Triangle which enhances the attractiveness of the region to local and foreign investors by exploiting economies of scale through the provision of access to complementary factors of production and most importantly improving the investment climate for business. The study identifies the areas of investment and trade that could be significant in the development of the proposed Growth Triangle, namely the seafood and marine industry, the Information, Communication and Technology sector, agro-industry and agro-processing, energy production and hospitality and property development sectors. Such in-depth studies will need to be carried out for the  MAU-MOZ –MAD GT that can explore its potential as a strategy for regional economic development and identify areas to creating a successful growth triangle. These will provide the basis for formulating and implementing a development and administrative plan that matches private investment with the triangle resource base and leverages the different factor endowments more effectively and in a mutually beneficial manner through collaboration and strategic alliances.

Some preliminary studies have already identified the following areas  for investment and cooperation in Madagascar: sugar production, cotton production, fishing (tuna fishing and prawn breeding), tourism. Possibilities also exist for triangular investment projects involving other enterprises from other countries like India, China or EU, in the field agro-industries, Information and Communications Technology, spinning and processing of canning of sea food. As for Mozambique the investment opportunities are in financial Services, agriculture ( particularly poultry and pig production, and in the supply of feedstock to these industries) and sugar production, fishing and aquaculture, tourism and manufacturing (a  market of some 18 million which is currently under-served and consumer goods industries should blossom.).

 The regional clubs, whether it is IOC, ESA or Growth Triangles, are the launching pad to the outer world market. It the testing ground or better a training ground for admittance to a more competitive environment. We have to adapt our regional policies to the exigencies of the global market. While increasing economic space, our regional policies will have to continue building strategic complementarities in the region and within regional groups and GTs together with harmonisation of national policies and the rapid accumulation of human and physical capital. This is our one and only way to firm up our comparative advantage  at the regional level and within our EPA while we explore other forms of regional co-operation or any meaningful fast-track framework, that can exploit the complementary assets of regional economies for mutual benefit, for competitive advantages and for gaining entry into the globalised market.