Current Affairs and Issues
By K.N. Bunjun
2 August 2011
• “Fundamentally, man is the key to all problems,
not money. Funds are valuable only when used by
trained, experienced and devoted men and
women. Such people, on the other hand, can
work miracles even with small resources and
draw wealth out of barren land”
Dag Hammarskjöld
• Some background definitions
• International scene The Euro crisis
• The Local context
•
• “the economic future of Mauritius is dominated
by its population problem. …. unless resolute
measures are taken to solve it. Mauritius will be
faced with a catastrophic situation."
• “…It is going to be a great achievement if
Mauritius can find productive employment for its
population without a serious reduction in the
existing standard of living.... The outlook for
peaceful economic development is poor…”
• J. E. Meade, 1961.
A Rich Economic History
PREFERENCES-based economic paradigm
Mauritius
A Challenging Future (Economic Shocks)
• Dismantling of Multi fibre Arrangement (End of Textile quotas)
• EU Sugar Reform (36% decrease in Sugar Price)
• Oil and commodity price uncertainties
• Global Economic slowdown (Economic Crisis)
Global Competitiveness
Decline in Competitiveness:
External Trade Shocks and Domestic Policies
External
• Erosion of preferences
• End of Multi Fibre Agreement
• Sharp Cuts in the Price of Sugar
• High and volatile Energy prices
Domestic
• Structural Rigidities: obstacles to investment/business
• Incentive system work at cross purposes
• Low Productivity in Protected and Preference-dependent
sectors
6
In June 2006, Government launched a program of
accelerated reforms aimed at …
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Fiscal Consolidation
and Discipline
Improving Investment
Climate
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Restructuring and
Diversifying Industry
Broadening the Circle
of Opportunities
Program to improve Trade Competitiveness and put the
Economy back on High Growth Path
7
Highlights of Reforms
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Facilitating Business and Investment[ Inv climate]
Opening the Economy
Removing Trade Barriers
Reforming the Tax System
Focusing Public Spending
Promoting Markets and Competition Upholding
Good Governance
• Setting up of Economic Empowerment
Program/Accompanying Social Measures for
Managing the Transition
8
Facilitating Business and Investment
• Target: Be among the TOP TEN countries in the WB Doing
Business Index
• Business Facilitation Act passed
Put an end to suffocating bureaucracy
Shift from prior approval to ex-post control
Set comprehensive and clear guidelines
Streamline administrative procedures
• Investment certificates requiring prior approval abolished except
for IRS & Freeport
• The EPZ and non-EPZ sectors integrated
9
Opening The Economy
• Attract Foreign Investment, Talent and Know-how
– 3-year “Occupation Permit” (combined Residence and Work
permits) for
I.
II.
III.
investors with annual turnover of over Rs 3 million,
professionals with monthly salary over Rs 30,000,
self employed with annual income over Rs 600,000.
– Application processing with 3 working days
 Infrastructure Development [port, airport, inland
transport , alternative energy - PPP projects
 Human Capital
• Encourage return of diaspora; circular migration
10
Removing Trade Barriers
•
Accelerated Tariff liberalisation
No of bands
July 2004
8
July 2005
7
July 2006
3
Top Rate
80%
65%
30%
• Local Industry must restructure to become more efficient
and competitive
• Tariff revenue less than 1% of GDP
• Moving to Duty-Free Island by FY 2009 - not achieved
11
New Income Tax System
• At June 2005, top tax rates were:
– Personal income: 30%
– Corporate income: 25%
• As from 1st July 2007, flat tax rate of 15% on both
personal and corporate income
• Broadening of tax base by removing tax breaks
• Levelling the playing field across sectors by removing
sector-specific tax incentives
• Extension of Tax Deduction at Source
Everyone pays his fair share at lower rate
12
Focusing Government Spending
• Impose Expenditure Rules and promote fiscal discipline
• Modernise budget management, improve budget resource
allocation and support operational efficiency of public services
• Undertake a Public Financial Management assessment based on
Public Expenditure Financial Audit
• Accelerate move to PBB, embedded in a MTEF
• Review role/functions of public sector bodies
• PSIP
13
Promoting Markets and Competition
• Labour Market Reform
- move to one single labor market
-
link pay to performance and productivity
Shift protection from jobs to workers
• Price Policy
- Move away from direct price control and State
intervention
Competition Policy [Competition Commission and
Observatoire des prix]
14
Economic Empowerment Program
 Developing entrepreneurship spirit (women also)
 Reinforcing the support framework for new
entrepreneurs and SMES
Training,
financing instruments
business guidance
infrastructure and business facilities
 Increasing export capacity to regional markets
(COMESA & SADC)
 Rs 5 billion program
15
..tourism is the new main growth driver
US $ m.
Tourism (net)
Other services (net)
Source: Bank of Mauritius
Tourism development
• Air access policy: adaptability to the
seasonality of European holiday schedules
• Opening of new routes: Dubai, Hong Kong,
new areas in India
• Calls for regular and increased consultations
between the hotel industry and airline
operators
• Democratisation of the IRS scheme
Pension reform
• Ensure the financial sustainability of the basic
retirement pension scheme and the Civil
Service Pension Scheme
• Improve the governance and the returns to
assets of the National Pension Fund
• Consolidate the regulatory framework of the
third tier (voluntary occupational pension
schemes).
Corporate governance
• Trustworthy and credible base for doing
business
• High-value added business activities
• Improve/promote corporate image of
Mauritius
• Inculcate responsible and ethical behaviour,
and
• bring about more dynamism and higher level
of professionalism in the conduct of business
Economic Strategies
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Diversification Process Continues
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Consolidation of traditional sectors
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ICT and BPO: Knowledge-based Economy
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Sea Food Hub
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Land-based Oceanic Industry
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SME Development
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Improving Investment Climate
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Fiscal consolidation
•
Medium Term Expenditure Framework and PBB (MTEF)
•
Pension Reform
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Aid for Trade Strategy
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Energy Management (MID Fund)
Organisational change
• To eliminate overlapping functions between
Economic Development and Finance.
• In the 21st Century the Civil Service is called upon
to act as a ‘model employer’ in society. E.g
– Optimizing conditions for staff to develop
– Preserving the dignity of employees, particularly their
rights to participate in decisions that affect them, and
– Ensuring that the talents of all groups from which the
public workforce is drawn, both women and men, are
effectively harnessed.
• Rising expectations for value for money, quality
and timely services
PMS
• The Performance Management System (PMS) measures and
rewards individual initiative towards delivering the agreed
outputs of the agency.
• The PMS measures individual initiative by benchmarking it to
individual tasks derived from the agreed outputs of the
agency concerned.
• Thus in a manner similar to PBB assigning outputs at the
agency level, the PMS breaks these outputs into tasks that are
assigned to different individuals for the purpose of measuring
and subsequently rewarding their performance.
PBB PMS
Both systems aim at improving performance by
•Building on the agreed mission and strategic
direction of ministries and departments;
•Spelling out in clear and measurable terms what
Government ministries need to achieve through
the efforts and commitment of their staff;
•Measuring the actual progress made towards
those required objectives; and
• Reporting back on the results of progress so far,
analyzing where more needs to be done, and
trying again
PBB PMS
•Both PBB and PMS should ensure achievement of
overall goals by identifying meaningful and
measurable outcomes and specific objectives
•Aim is to ‘align’ the two so that arrangements
required and developed for PBB are consistent with
the arrangements that are required and developed
for PMS so that there is no duplication or waste of
efforts
• Systems are consistent, and easy to understand.
PBB and PMS are both pushing (and pulling) in the
same direction
Mauritius Development Path
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Beyond
2005
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1995
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1985
Sugar
Textile/
garments
Tourism
Financial
Services
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Cane Cluster
Fashion Cluster
Hospitality Cluster
Business Services Cluster
ICT Cluster
Property Development
Seafood & marine
resources Cluster
Knowledge Cluster
Land based oceanic
industry
Sugar
Garments
Tourism
1975  Sugar
Monocrop
Economy
1st Wave of
Diversification
Four-Pillar
Economy
Business and
Services
Platform27
Knowledge Hub
A knowledge-based economy is
• one in which all sectors are knowledge
intensive, are responsive to new ideas and
technological change, are innovative, and
employ highly skilled personnel engaged in
on-going learning.
• In short, knowledge and skills have to be
useable and used in the production of all
manner of goods and services.
Three major functions (1&2)
• generate new basic knowledge of relevance to
industries, both old and new
• In addition, they also generate applied
knowledge that is directly and immediately
relevant to local industries
• Secondly, knowledge hubs capture (and
participate in creating) knowledge generated
elsewhere, nationally or internationally, and
develop this further to meet specific local
needs
Three major functions ()
• National or international knowledge is
translated, applied or transferred into locally
useful knowledge
• Support existing industries, generatesnew
industries, informes public policies and meets
other kinds of community needs such as
health, urban planning, environmental
control, education, and aged care
Three major functions (3 ii)
• The transmission function of a knowledge hub
takes place through educational
institutions,firms, community based
institutions and a variety of government
agencies and services including hospitals,
clinics and professional associations
MID
• In 2008, P M announced the vision of making
Mauritius a sustainable island M I D
• Record-breaking oil prices of mid-2008 did
more than enough to allow the MID project to
take off.
• Budget 2008 was a key milestone. MID Fund
budget of Rs 1.3 billion. TORs: energy
efficiency and renewables
MID2
• Most successful measures
• Subsidy of Rs 10 000 - solar water heaters
• Distribution of 1 million Compact Fluorescent
Lamps (CFL) at reduced prices.
• The summer-time pilot project was to be a
non-starter.
MID3
• Long term future of Mauritius based on the
common ‘engagement’ of public, para-public
and private sectors as well as NGOs.
• Fighting poverty and climate-change are
highlighted as foremost challenges, both
locally and globally.
MID 4
• Development in a large variety of fields from
transport to tourism through textiles, all
intrinsically linked together in a sustainable
manner.
• A set of clear targets specified for the 60th
Anniversary of the Independence in 2028
• Prof Odendaal’s green paper endorsed by
Government April 2011
• National Consultations launched Feb 2011
• Six working groups for four one day
workshops on 5E’s: Energy, Environment,
Education, Employment and Equity
WG 1
Energy: Energy conservation and climate change
• Energy
• Buildings
• Transport
• Housing
• Lands
WG 2 Environment
Preservation of biodiversity and nat resources
• Marine and terrestrial biodiversity
• Forest
• Agriculture
• Fisheries
• Water
• Tourism
WG 3 Environment II: Pollution etc
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Air quality
Noise
Wastewater
Solid waste
Recycling
Environmental health
Embellishment of the environment
WG 4 Employment: Promotion of
green economy
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Tourism
Industry
IT and Communications
Greening of existing and new jobs
Sustainable consumption and production
WG5 Education: Informed trained
and responsible citizens
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Empowerment of citizens
Environmental education
Education for sustainable growth
Public health education
WG 6 Equity
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Governance
Institutions
Poverty alleviation
Gender equality
Regional capacity building
• Purpose of RMCE - build capacity to formulate
and implement regional economic
development strategy and policy within
COMESA, the East African Community (EAC),
IOC, the Inter Governmental Authority on
Development (IGAD) and the SADC.
• RMCE incorporated as a not-for-profit
company limited by guarantee.
• The focus would be on improving Member
States’ professional capacity for addressing
issues of REI in five core areas of common
regional concern: macroeconomic
management, trade and transit cross-border
finance, business development and
investment, common sectoral policies
• Technical Assistance Centre for Southern
Africa (AFRITAC South), following Mauritius’
offer to host the Centre. Will SADC region (13
countries) and offer Technical Assistance (TA)
to assist in implementing reforms in
macroeconomic and financial management.
• Local expertise and on-the-ground capacity
building with strategic advice from IMF
Headquarters. Delivery modes include
resident advisors, short-term experts and
workshops and seminars
Rebalance growth
Strategic Less Euro centric
priorities
Higher value activities
Promote SME
Cleaner, Greener, and safer
(environment)
Inclusion and equality
Climate Change/Maurice
Ile Durable
Regional Integration
Increase food self-security
ratio
Promoting the Creative
Industry
ICT hub
Seafood hub
Medical hub
Leisure and Cruise Hub
Service hub
Industrial sector
Promote exports
Improve
Productivity
Consolidate Social Justice
Quality and accessible
education
Eradicate absolute poverty
Global competitiveness Empower the vulnerable
groups
Efficient and effective Dignity for elders
Public service
Improve the tourism
Social and cultural integration
product portfolio
Improving the Doing
Consumer protection
Business Environment
Economic
Safety and security
Efficiency/productivity
enhancement
Promote intellectual
Overhaul of the justice system
property development
Promote Research and Capacity building of NGOs
development
Fostering a culture of
More accessibility to leisure
sport
facilities
Promoting duty free
Human rights
shopping
Improving Health
Standards
Good governance
Utility/infrastructure
efficiency
Sustainable land use