Today the economy stands at a crucial crossroads. As crucial as in 2006, when a new team of policy makers, known as the TINAs (There Is No Alternative) set out to craft a new socio-economic model - a model based mostly on the reports of the Bretton Woods institutions, namely the IMF Report "Fiscal Adjustment Strategy and Measures to Protect Low-Income Households"and "Mauritius: From Preferences to Global Competitiveness" , an unpublished World Bank Report .
In these
reports both the IMF and the World Bank warned that we would be facing years of
below par growth and cautioned that our growth performance was likely to
average 2 to 2.5 percentage points less than seen before. The TINAs set down to
implement the recommendations of the report which prescribed, among others, an
austerity package and painful restructuring plans that involved improving
competitiveness and ensuring cost-effectiveness in education, health care, the
public sector, social security and pensions. With the help of IMF and the World
Bank, some ex-finance ministers from reforming
countries-who had the policy credibility with clear communication of
realistic policy goals and a track record of achieving them-were called in to
sell and support this austerity cum reform programme.
The TINAs did not have the mettle to drive forward the ambitious reform programme. They were not willing to bite the bullet. At the first outbreak of outcries, the TINAs backed down. They preferred the easy way out-some few touches to the tax rates and some improvement to the investment climate framework. Since then the TINAsand remnants have been kicking the can down the road, ducking major decisions and it has just been plain old statist thinking -a series of spineless decisions in a climate of policy paralysis- for the past seven years. We did not really go through the pains of restructuring. They did not set any key foundation for speeding up growth as the world economy transitions toward a new configuration of growth drivers.
We were told that
we will have to accept short term pains for long term gains as the IMF/WB
prescriptions of the broad-based reforms would ultimately generate the
necessary productivity improvements and ensure long-term public investments in
education, in building skills, in research and innovation, in export expansion
and diversification and in boosting the overall growth rate of the economy to
levels of 7 to 9 % annually. These big changes were necessary to get the economy
going again - Hard decisions that hurt immediately but yield handsome
dividends.
Over
the years, we have developed the habit of having recourse to foreign expertise
for every mammal task and we tend to rely very little on our own policy making
capabilities. Thus by mid 2007, the policies to attract FDI laid down by the
previous regime appeared to be regaining
its verve and was boosting growth contrary to the predictions of the Bretton
Woods institutions. At the same time the austerity measures started biting and
we had a series of outcries from the population. The TINAwallahs and remnants
were so carried away by the exuberance of the reform programme scripted by the multilateral agencies that
they were not even aware and prepared for
the reality that came knocking at their door. The mood of the nation had
become hostile thanks partly to the uncontrolled inflation and a rise in
inequalities.
The TINAs did not have the mettle to drive forward the ambitious reform programme. They were not willing to bite the bullet. At the first outbreak of outcries, the TINAs backed down. They preferred the easy way out-some few touches to the tax rates and some improvement to the investment climate framework. Since then the TINAsand remnants have been kicking the can down the road, ducking major decisions and it has just been plain old statist thinking -a series of spineless decisions in a climate of policy paralysis- for the past seven years. We did not really go through the pains of restructuring. They did not set any key foundation for speeding up growth as the world economy transitions toward a new configuration of growth drivers.
We have lost a
histrionic opportunity. Our policy makers have delivered more of continuity
than the change we were expecting. We are now worried about the future. The
economy is stuck in low gear and set on an unsustainable course.The policies
that rely on the speculative and unproductive use of the our country’s
strategic land assets by selling them to foreigners (which has accounted so far
for around 80% of the FDI inflows during the past six years) will surely continue to generate wealth and some further
periods of reasonable growth but it will neither be sustainable nor inclusive
in the long run.
Some of the
forthcoming policy prescriptions should not resemble the preceding ones in the
sense that we continue up with a series of decisions to help turn around
investor sentiment by making processes better but these measures do not go much
further than that. The focus should not be
merely on measures that yield
quick political dividends. They should portend to a clear break from the past.
Some improvement to the business climate, some touches at reengineering of
sectors or some mild efforts at the diversification of our markets and products
are mere crutches that do not add much strength to the body. We have to be
bold,more enterprising, more innovative. We have to think "en dehors de
la boite "(sic ) to bring new life, new vigor and vitality to the
economy.
Fundamental changes
are needed to get us back on track. For example, If we want to create 75,000
jobs, we cannot continue with the same unproductive overseas roadshows where
efforts are made to woo foreign investors to invest in sectors listed
generally. We need a more strategic and targeted approach which may produce
better results. In Gujarat, for example, some 25 teams of officers coupled with
more than 100 industrial houses have been scouting 34 identified countries for
further investments in selected sectors. Malta is another example of those
countries where they have aggressively targeted firms/new sectors specifically
involving telephone calls, presentations, provision of research, visits, wining
and dining and building trust and long term relationship. Today 30% of Malta’s
GDP comes from manufacturing of microchips, generic pharmaceuticals, medical
devices, car brakes, switch gears and a free zone container port among others.
It is now aiming to be a preferred destination for industries such as
biotechnology, logistics and transport, maritime and aviation services.
Similarly, we
should see our policies towards FDI as part of our development strategy to
achieve pre-defined objectives. Budget 2015 demands such audacity , a genuine
intent to reform and a willingness not to succumb to the priorities of the day
but to the initiation of long term reforms and expenditure
prioritisation.Mauritius is longing forward for a grand vision and actions to
go with it. We need actions that show that we have someone at the helm of the
economy. who has the conviction and is
not afraid of taking bold decisions to chart a new path for Mauritius to shape
a great future for our children.Having missed the train already , we cannot
afford now to squabble at the bus stop
and miss the last bus as well ?
