Mauritius drops three ranks in the World Bank’s Ease of Doing Business (EoDB) 2012 index and this has suddenly awakened our private sector to the fact that we have been lagging behind on reforms. Now they have something to exhibit for the morosity in domestic and foreign investment. (The assumed positive correlation between the EoDB index and FDI is doubtful; China (91th), India (132th),South Africa(35th) have no dearth of foreign investment.) The private sector lobby is already at work to get rid of the capital gains tax and other taxes introduced by the previous Minster of Finance.
“The
capital gains tax is killing the construction industry” is the private
sector outcry. But the clamour on our side is that we have had enough of the
ultra-liberal model of development based on IRS and shopping malls and all types
of real estate speculations (including MedPoint, Jin Fei, Les Salines Project,
etc.,) that is turning Mauritius into a concrete jungle. Should we be surprised
that there is a slowdown in tourist arrivals? After more than a ten-hour long
distance flight, our tourist expects to land in a lush green Mauritius, which
is supposed to be “un plaisir”, but is met by a “Mauritius bétonné” especially
the imposing old “boîte saumon” structure that sticks out as he/she passes by our
cyber city.
The private sector approach
has boiled down to one idea. “They want to cut taxes permanently to revive
the economy and slash government spending to end the need for taxation. It’s an
argument they have peddled and largely implemented for 30 years with poor and
worsening results,” argues Jeffrey Sachs. “They claim without evidence
that taxes and regulations are killing job creation, though many countries with
much higher taxes and much stiffer corporate regulations have much higher
employment than us.”
The truth is that it will
take more spending – not in the form of haphazard stimulus packages -- but in
smart long-term public investments in education, infrastructure, productive
sectors and human capital to get us out of our present mess.
The
Budget: Effets d’annonce
Before we tackle the new
budget, it is worth it to go back to some of the past budgets. In his interview
to Business Magazine of 26 October 2011, the Minister of Finance
commented that « qu’il y a trop d’effets d’annonce dans le budget. 60% des mesures annoncées n’ont pas encore été mises en
application et peut-être ne le seront jamais ». And that has been going on for the past five
budgets. « Un budget
n’est pas simplement un discours de bonnes intentions mais ce sont des projets
qui peuvent être mis en œuvre » .
Yes Minister, only if the
economic analysts in your ministry are allowed to play their role as economists
in properly analysing the programmes embedded in a sectoral plan and linked to
the priorities of a medium-to long term national plan. Pre -2006, there were less than 15 people
working on the Budget and on the Medium-Term Expenditure Framework/Programme
Based Budgeting (MTEF/PBB). With the merger of two ministries and the ex-Managemant
Audit Bureau, there are some 55 economists, analysts and accountants working on
the budget to produce “wish-lists”. Have we been allocating taxpayers’ money to
budget officers for overtime, budget and responsibility allowances to generate
fictional programmes and projects?
What is more serious is that
some of these projects are being introduced in the budget without any analysis,
discussions and proper evaluation and which, after a few years, turn out to be
white elephants! Example: the “Village touristique” that the state is now begging for takers. We
have thrown away the baby together with the bathtub, the reason being that the
function of planning and analysis has totally disappeared with the merger. The
budget exercise has become a mere number crunching exercise.
And now everything has gone
haywire ! – incoherent bits and pieces that that fail to provide the bigger
picture- the strategic plans from which the programmes included in the budget
are supposed to have been derived are missing, the 3-year PBB indicators which
are also supposed to be derived from the Medium term targets of the strategic
plans of line ministries are no more reliable and are not owned by the ministries,
the budget ceilings are not based on a proper costing of our policies and
programmes, the macroeconomic forecasts of a trillion economy based on a annual
real growth rate of 7 % as well the the targets for the diversification of our
tourism base and the tourism forecasts
for the emerging markets, are too far-fetched and unrealistic..
The PBB, again and again
The Program-Based Budget
(PBB) is turning out to be another wish-list. It has remained a theoretical
tool and does not provide concrete and practical policies and programmes
conducive to making Mauritius a growth-enhancing economy. The reason is that
the PBB has been reduced to a mere arithmetical instrument over-focusing
on expenditure control.
One of our local experienced
top economist , well-versed in PBB (see
below) has these incisive comments on the present implementation of the PBB: “I
believe we have had the wrong approach to the PBB, from a strategic point of
view and, consequently, its implementation has suffered. We have looked at PBB
as a tool for efficiency and effectiveness of the budget, but only through
indicators. The preparation of the PBB doc is seen as a stand-alone document,
unrelated to the priorities of the country and the operations of the
organization. The PBB is the publication of information on organizational
policies and their implementation (deliverables of the organization), presented
at a level of interest to Parliament (i.e. how the deliverables of the organisations
will help us achieve our national outcomes). To culminate to this level, there
are sub-levels. For e.g., the first step is the way work is done within the
organization. Good policies and their implementation only result from proper
analysis. Yet, there is low level analysis/no analysis in the public
sector. How many of us are output-oriented? Unless this is rectified, no PBB
will be successful.
Presentation of information in the
form of PBB is the top level of the pyramid. Below this, there are the various
levels of the organization at which planning and implementation should take
place and also (very important) planning and implementation across
organisations. The highest level of planning is to define the national
outcomes. It is on these that we should report to Parliament. The next step is then
to break these outcomes into sub-outcomes or outputs at the organizational
level, and further down (as in a factor tree), until we reach the individual
level. These linkages are missing. Until and unless we recognize these linkages
and work on them consciously, PBB will not be effective. Moreover, monitoring
and evaluation are important e.g. Public Expenditure Reviews. The sad thing is
that in the public sector we have very few thinkers but a lot of loud speakers.
And the few thinkers that remain will either stop thinking out of frustration
or just leave for greener pastures where they can be recognized.”
Our local consultant seems to have more to
say about the PBB than the plethora of foreign consultants recruited by the Ministry
of Finance.
Monitoring and Evaluation
In his examination of the Supplementary Appropriation Bill (2010) and the Estimates of Supplementary Expenditure in the National Assembly, Mr Pravind Jugnauth regrets “de n’avoir pas été en mesure d’introduire une monitoring unit au sein du ministère des Finances afin d’assurer que le gouvernement obtient value for money.”
The incumbent minister of Finance is proposing to
have a budget implementation Unit « pour assurer
la mise en œuvre et le suivi du budget ». We have often argued that the
introduction of planning and analysis in strengthened sectoral teams would have
allowed a more meaningful contribution to the budget exercise and a better follow-up with regard to budgetary
measures, including the implementation of capital projects.
Indeed it would have
given meaning to the merger and ensured that the Ministry of Finance is more
than a pure accounting short-term number-crunching ministry.
Integration of Budget
and Planning
A stand-alone Planning unit was set up timidly without proper staffing at MOFED. It was doomed to fail, which then begs the question: Do they genuinely believe in the need for a re-actualisation of a National Long Term Perspective Study(NLTPS) for the country ? It is no surprise that the overall macro-economic framework including properly designed strategies to unlock growth potential, the sectoral needs in line with national priorities -- food security, water and energy issues, economic diversification, the development of new economic pillars and the much-boasted economic diplomacy turned out to be purely amateurish and lacked in-depth analysis and planning that are captured in a long-term approach to transform Mauritius into a high productivity, high efficiency and high income economy.
It is our hope that the new Minister
who wants action on the policy front will recognise that excessive
preoccupation with short term issues had led to the neglect of measures
essential for sustainable long-term improvements in national welfare and will take
action to reactivate the planning and policy function. There is at present a
general consensus to take stock and prepare a new National Long Term
Perspective Study (NLTPS) for a better future-a NLTPS that will shape a vision
of Mauritius for the next 20 years, the likely course of events, the main
constraints and opportunities that will emerge, the linkages between sectors, resource
availability and the key choices that have to be made. That
will be a surer way of of engaging all
stakeholders and ensuring that the strategies and policy reforms envisaged are
technically realistic, economically feasible and politically viable. There is no short –cut if the vision of
“Mauritius 2030” is to be materialised.
