It is now
clear that the rupee is finally depreciating. During the last week, the US
dollar weakened somewhat against the euro following the Spanish bank bailout
and the Greek elections, but the US dollar has continued to strengthen vis à
vis the rupee.
Since the position of the Governor of the Bank of Mauritius (BOM) on preserving
the rupee's value is well known, the possibility that the decision to
depreciate has been forced upon the Bank by the appointees of the Ministry of
Finance on the Monetary Policy Committee (MPC) cannot be ruled out.
If
confirmed, this would vitiate a key objective of the monetary policy committee
which is to provide full transparency and clarity in monetary policy decisions.
The BOM may have been compelled to
this change of course and to justify the purchase of euros and dollars under a
Reserves Restitution Operation, by claiming that it needs to build up foreign
exchange reserves as per the SADC criterion of an equivalent of 6 months's
imports. The internationally accepted short term liquidity criterion is only 3
months. And the BOM is making a show of resistance by insisting to pass on the
costs of sterilizing the reserves build-up to the Ministry of Finance. To offset the injection of additional rupees,
required to buy euros and dollars, in the monetary system, the BOM has to
remove the same amount of rupees from the monetary system by selling BOM or
government securities, which means it loses more interest that it gains on the
additional foreign currency reserves, since the domestic rate of interest is
much higher than the very low interest rate on foreign currencies. The BOM
wants the Ministry of Finance to compensate for the net interest foregone,
threatening that it might run a loss this year as a consequence.
The market's sentiment is that the Central Bank is deliberately
exaggerating the need for sterilization, as current economic conditions might
well be consistent with monetary easing, i.e., more rather than less rupees in
the monetary system. The MPC is pressing for depreciation, since it openly
recognizes an increasing misalignment of the rupee, but there is much unease
about the way it is being done. The wider public is not at all clear whether
nominal rupee stability is still being pursued, or that the weakening rupee now
signals a change in exchange rate policy. Added to the recent controversial MPC
appointments, this obfuscating approach to exchange rate adjustment poses a
serious threat to the credibility of monetary management. It is necessary to
restore market confidence by demonstrating that BOM exchange market
interventions, other than for smoothing volatility, are guided by clear
economic objectives, with proper reference to key indicators such as the real
effective exchange rate (REER). The conduct of exchange rate policy is too
important to be seen as an ad hoc process.
While the BOM
may have obsessively focused on maintaining interest rates and stabilising the
rupee to contain inflation, it has also alerted to the dangers of relying
unduly on a falling rupee to stimulate economic activity. Improving the rupee's external
competitiveness in markets beset by a severe crisis and dampening global growth
will offer scarce prospects of reviving demand, and provide limited relief to
exporters' bottom lines. As the Mauritian economy retreats from a real estate
and construction boom, some of its fundamental weaknesses are being exposed,
including the insufficient levels of capital to support heavy debt
burdens. Under-capitalization is a
characteristic trait of family businesses, and our private sector will have to
face hard choices if the looming crisis deepens. Lowering interest rates and
weakening the rupee will be partial palliatives to address the inevitable need
of enterprises for buttressing their capital base.
A faltering tourism sector
Tourist arrivals for the first
three months of 2012 decreased by 0.2% relative to the first quarter of 2011
and the forecast for 2012 is estimated to be a mere 1.6 increase over 2011. Some
of the reasons put forward for this below-trend performance are the
unfavourable economic conditions prevailing in the Euro zone, the sporting
events in Europe and the presidential elections in France.
%
|
2008
|
2009
|
2010
|
2011
|
2012
|
Real annual growth rate
|
1.3
|
-6.0
|
6.0
|
3.1
|
1.6
|
Indeed
Seychelles experienced a growth of 8.8% in tourist arrivals in the first
semester of 2012 and registered an increase of 5.3 % in the number of arrivals
from Europe whereas our figures show
a 2.7% decrease and an equivalent 2.7%
fall in arrivals from France, our leading market. What’s wrong with our tourist
industry ?
The World
Economic Forum’s 2011 Travel & Tourism Competitiveness Report shows, in its
rankings for sub-Saharan Africa, that Mauritius remains the highest-ranked
country in this region at 53rd overall, but dropping 13 places in the rankings
since the last assessment in 2009. The drop in rank is attributable to declines
across most areas measured by the Index, and particularly those measuring the
quality of infrastructure, including transport, tourism, and ICT
infrastructures. Surprisingly, we are ranked 110th in cultural
resources. Is it not timely now to reassess the potential of our tourism sector
?.
Mr Malenn D. Oodiah argues that “ qu’il faudra repenser notre modèle
touristique pour qu’il puisse donner les résultats escomptés. Le tourisme
mauricien subit actuellement un télescopage de
plusieurs dynamiques/facteurs : un déséquilibre structurel, une image
brouillée de la destination, un glissement vers le bas de gamme et la braderie,
l’attractivité et la compétitivité de la destination, la réorientation
stratégique et la diversification des marchés.”. Mr Christian Lefèvre in
the Business Mag of the 6-12 June 2012 seems to share this view especially on
tourism promotion–“ Le marketing
touristique doit faire sa révolution pour mieux répondre aux changements et effectuer une surveillance concurrentielle
et stratégique, ce qui plus que nécessaire-…Le MTPA aujourd’hui set dépassée et
obsolète… » It
will not be the bungled slogan «
Mauritius : c’est un plaisir » or the shopping fiesta that will give our
promotion campaign a coherent and effective strategy !!! Many have joined the bandwagon of tourism
promotion without a clear understanding
of what promotion is. The industry is set to
indulge in some heavy-duty soul-searching !!
New forms of tourism are emerging in the place of
traditional tourism, more innovative, specialized, “greener”, customized and
experience-oriented forms. A new type of tourist is driving it: more educated,
experienced, independent, conservation-minded, respectful of cultures, and
insistent on value for money. To remain competitive, tourism destinations and industry
players alike must adapt. For many, the challenge is to “reinvent” tourism, to
accelerate the segmentation of tourism products and the creation of new types
of tourism products. Cultural tourism, for example, is also a significant and
growing sector, attracting relatively affluent and educated visitors. Several
countries have undertaken a repositioning of their cultural services and are
developing innovations aiming to valorise culture, diversify tourism in the
country and increase the length of stays through, for example, better packaging
and promotion of available cultural experiences and events. We have enormous
untapped possibilities of offering unique cultural experiences through innovative
tourist villages that can be made to reflect the essence, beliefs, and way of
life of the Mauritian cocktail of cultures.
Innovation is the
key element to survive and compete in a dynamic and radically changing
environment. Copycats would not do ; We
have to provide the right kind of
experience with that essence of authenticity, We need people to innovate and
build on the unique cultural strengths we have to hand. It is not possible to
consider innovation in tourism without acknowledging the need to mobilise the
local population. The industry must develop these innovative strategies for
employing its comparative advantages to achieve competitive advantages . It is long overdue for a new
roadmap to be created based on the new realities and new business models based
on long-term sustainability.
To
address some of the obstacles of the lengthy recruitment process and skill
shortages in the civil service, the Service to Mauritius and the Capacity
Building programs were developed and managed by the Ministry of Finance (MOF).
The Service to Mauritius Programme (STM) was devised by MOF to recruit
researchers, outstanding university students and skilled professionals with
hands-on experience in the scarcity areas relevant to Mauritius. The STM
Programme covers a period of 6 months to one year and may be extended for
another year. Interns are paid a stipend equivalent to the starting point of
graduates in the public service, plus travel expenses, but are not be entitled
to an end of year bonus and are not guaranteed any employment in the public
service .
The
Capacity Building programme for providing services in different areas of
scarcity was announced in the Budget Speech 2008/2009 in an attempt to improve
the functioning of government organizations in the context of the new PBB and
the problems with recruitment delays. The programme aims to build capacity
across the public sector through the use of consultancy services to reinforce
capacity constraints at the implementation level for specified periods of time,
where the lack of technical expertise has been recognized and needs to be
filled in urgently. Some Rs 200 million has already been spent on these
programmes over the past three years and no mid-term review has yet been
carried out. It will interesting to have an idea of the exact cost to the
economy up to now of the implementation of STM and Capacity Building programmes
- the number of foreign consultants recruited so far, their nationality, their salary and qualifications and
experience , conditions of contract and details of
assignment. It seems that there were
some loopholes in the bidding documents/recruitment process such that the Public
Procurement Office had to rescind its
decision and advised that henceforth all procurements under the Capacity Building
programme should be under Consultancy Services ( performance bonds, validity
period, evaluation and interim reports).
Has there been any performance evaluation of the consultants’ work ? Has
the objective of the capacity building programme been met, namely in building
capacity in ministries? There is an
urgent need for a proper assessment of both the STM and Capacity Building
programmes and their impact in terms of results achieved and opportunity cost
to the economy. In the present context
of increasing unemployment among highly qualified Mauritian graduates, these
schemes should be re-examined as well the schemes to provide short-term
placements/ attachments to foreign students.
