Further
to the article on the Mozambique-Mauritius-Madagascar Growth Triangle that
explores the trade potential of an effective regional strategy consistent with our economic strategy, this article tries to point out to the need to give substance to our goal of gradually
moving the economy’s centre of gravity towards services and positioning the
country as a leading provider of business and financial services for the region.
Now that we are at a strategic cross-roads in our national economic policy
formulation and we are engaged in a review of policies in several sectors of
the economy, an important input to
sharpen the policy re-thinking process is to examine the possibility of capitalising
on our numerous strengths to exploit niches in regional markets and attract
additional FDI into business and financing and developing the country into a
regional finance and operations centre.
At
the cusp of this millennium, there were already unmistakable warning signs of
an intensification of the process of economic globalization - heralding a
period of historical transition characterised by the greater integration of
national economies into the international economy through trade, foreign direct
investment, short-term capital flows, international flows of workers and
humanity generally, and technological diffusion. We took these signs and trends
seriously and moved quickly to confront the challenges by adjusting our economy
to embrace this technological revolution of our times, plug into the production
networks that now drive global supply chains and be part and parcel of the
trade and investment networks that are being so intricately traced out
worldwide.
Many of us are convinced that success
in achieving sustained growth depends critically on expanding access to the
opportunities of globalisation.
Countries that have achieved higher growth are those that have
successfully integrated into the global economy and attracted FDI. We have taken meaningful measures to open up
the economy to attract foreign talents, know how, ideas, technology and
capital.
We are enlarging the economic space at
an unprecedented pace with more diversified economic activities, and improved
key infrastructure such as port, airport and road network. Besides consolidating our traditional
sectors, we are putting in place the necessary framework for the development of
new pillars of growth, namely ICT and BPO, the land based oceanic industry, the
seafood hub, the knowledge and medical hub, aquaculture and light engineering. Our objective is to move up the value chain
and continue diversifying into high value added activities that can provide us
the required sources of competitive advantage.
At the same time, the greater
integration of financial centres that has been accompanied by highly mobile
global capital from multi-polar sources offer immense possibilities for our
financial sector. The world’s savings
are increasingly being mobilised into a global capital pool with myriad of
supplier routes connected to financial markets, new industries and major
development projects. These networks are
criss-crossing the globe, using sophisticated financial instruments and
techniques. These new financial flows
compel us to think anew our traditional and individual ways of raising and
channelling funds. Our roadmap to
economic prosperity remains the close integration of Mauritius in the global
economy and the development of Mauritius as a business and financial hub
serving the region and beyond. We have put in place some of the building blocks
for our financial system to plug into this network of financial and investment
flows to benefit from direct access to the portfolio funds and foreign direct
investment that brings with it the transfer of advanced technology and managerial
expertise. By increasing the range of financial instruments available to savers
and investors, our financial system can contribute to increase competition and
bring the costs of capital more in line with those in world markets. Moreover, returns on investment are also
optimised given the greater accessibility to liquidity and enhanced
opportunities for further diversification of portfolio risks.
The global and regional developments
portend to the need for clear-cut regional trade and investment strategy. Mauritius is convinced that the regional
arrangements via the trade protocols leading to FTAs will be extremely
beneficial in terms of improvements in economic efficiency associated with
increased specialisation, exploitation of scale economies and the greater
geographical concentration of individual economic activities that are likely to
be driven by inter and intra-regional local and external investment. Besides
intensifying competitive pressures, these investment flows are expected to
encourage local producers to adopt efficiency-enhancing strategies and
stimulate technology transfer and diffusion, both directly and through
spill-overs to other firms in the region. The larger market will also allow our
firms to be more flexible and stronger than would have been possible in
individual national markets. It may also motivate firms to seek strategic
alliances or merge with former competitors, invest in R&D and build
networks of operations in the region to match the more competitive environment
that is created by the dismantling/lowering of the trade barriers. The whole environment for investment will be
strengthened in at least two ways: first, it gives greater credibility to our
willingness or ability to pursue sound policies and second, it locks in trade
and investment liberalisation policies.
Regional integration agreements tend
to give more importance to the more attractive option of trade treaties and
protocols and lesser weight to the harmonisation of investment incentives and
regulations of member states. But FDI from outside the regional bloc may
increase as outsiders seek to exploit new investment opportunities and to use
one member as a platform for serving the whole bloc. This is our understanding
of the other role we have to play in terms of FDI for the region. Moreover, we
do not want to forego the role that geography has destined us to play, and
history has proven we can assume, in the region. Being ideally placed to become
the ideal conduit for African and Asian trade, Mauritius could also act as a
service node linked to a huge network of investment ventures stretching all
through East Asia, the Indian sub-continent , and Africa, imposing itself as a
packager of investment. There are indeed immense possibilities to encourage
outsiders to exploit new investment opportunities and to use other states as
platforms for serving the whole bloc. The range and scope of our financial
strategies is important for innovations in investment strategies and the utilization
of the country as a base for investment projects in the region.
Our financial services sector will
have to continue to evolve by extending the product range, strengthening the
regulatory structure, offering innovative products and adapting to service
client needs, develop new niches for onshore institutions to access the
international capital market. There are already some funds that are not only
adding depth to our financial market but are also giving us access to a greater
panoply of financial vehicles to tap the global and regional business and trade
networks. The financial sector will have to carve out a comprehensive strategy
that will identify the opportunities over the next five years and beyond and
prepare it to service domestic, regional and global markets. At the regional
level, in addition to the reforms being
carried out in many countries for good governance, macroeconomic convergence,
political and social stability, acceleration of trade policies to meet the FTA
targets, we will have (1) to move to rules-based means of attracting FDI – that
is national and international rules that maintain and strengthen environmental
and labour standards and create stability, predictability and transparency for
policy makers and investors alike, (2) to accelerate the process of
harmonisation of fiscal incentives and the regulatory frameworks in individual
countries to finally offer an integrated regional investment orientation. The SADC efforts on Macroeconomic
Convergence, Investment and Taxation are the right steps towards this end.
Thus, our whole legal and judiciary systems, investment incentives and tax
regulations, exchange rate policies and support institutions need an overhaul
to reflect our regional commitments for enhancing FDI flows, (3) to continue
efforts at providing cover for the whole spectrum of risks as perceived by
investors that will help to remove some of the hiccups about investing in the
region, (4) to standardise Government procurement practices and tendering
procedures across the region to enhance transparency in the acquisition of
goods and services for government projects, (5) to restore credit worthiness to
facilitate fresh lending from international banks and export credit agencies
and improve the national investment profile; credit rating by institutional
agencies can serve as an important benchmark. Local and global credit rating
agencies can work together for more targeted Credit ratings for the region
which will help in providing a good indication to investors and creditors and
(6) to develop new vehicles to boost
private investment, particularly for the financing of public infrastructure and
other major capital projects and a
regional strategy on Public Private Partnerships that will attract
greater flows of foreign direct investment.
Besides relieving Government from the rising pressure of providing funds
for new infrastructural projects, such schemes can also help to enhance the
quality and quantity of basic infrastructure and other public services, and to
ensure value for money in public spending.
We need to have proper standardised legislation and institutions to
encourage the different variants of the PPP scheme in different countries in
the region.
These will go a long way towards
enhancing trade and investment flows in the wake of the new opportunities in
global business and will allow us to slice a fair share of regional investment.
