Business Magazine - no 969 • 9 – 15 mars 2011

1968 – 2011

However, for the major chunk of thepopulation, the miracle has become areminiscence of tangible economic

prosperity coupled with mass income redistri-bution. But the scant probability of a remakedespite political promises and rhetoric’s sinceearly 90s has contributed to increasing despairand disillusion.

This article attempts to analyse the factorswhich have evaporated the miracle and led toa socioeconomic debacle ravaging our econo-my and shattering our dream to transformMauritius into a more advanced economy likeSingapore. An anecdote fits well the context ofthis paper.

Recently, I asked my PhD supervisor atta-ched to the Department of Economics since1991 about his assessment of the Mauritianeconomy. He rightly remarked that when hecame to Mauritius, there was the big hope tomake Mauritius a tiger in the Indian Ocean andto emulate Singapore. Nowadays, hardly anyo-ne talks about this transformation and his view

is that our institutions and blatant econo-mic mismanagement have been themajor factors killing all the hope for aMauritius à la Singapore.

I will dare to raise a number of issuescontaining a high dose of realism in myanalysis of the Mauritian economy. Anunderstanding of those issues is pertinentfor diagnosing the past mistakes, craftingfuture strategies and avoids repeating thesame mistakes. Those issues cover eco-nomic, social as well as political econo-my dimensions. I hope my articlemotivates a fruitful debate. The usualcaveat is some economic and social pro-gress have been made but I claim thatwe have wasted more than twenty yearswith delayed and wrong economic deci-

sions which have prevented the much neededtransformation of our country and jeopardized

the social fabric. Have decisions been too littleand too late?

First of all, we start by analysing our eco-nomy in terms of the aspirations of the popula-tion which forms the basis for a social contractbetween policy makers and population.

The two boom periods, first the short livedSugar boom in the mid1970s and next the tex-tile boom from 1983 to early 1990s was in linewith the aspirations of population. The benefitsfrom rising sugar price were distributed to theall sections of the population either directly orindirectly through consolidation of the welfarestate. The civil service became a vehicle foremployment creation and social mobility.There were lots of opportunities for all sectionsof the population either locally or abroad withemigration as a good alternative. The secondwave of happiness came after a few gloomyyears from 1979 to 1983. The textile sectorbecame the engine of economic and socialdevelopment with its creation of mass employ-ment, visible redistribution of wealth, emanci-pation of women, improved quality of life andmost importantly, participatory development.This period marked the economic history ofMauritius and later made Sir AneroodJugnauth, the father of economic development.

The early 1990s was an economic turningpoint which our policymakers refused to seebecause they were caught in euphoria andexpectations that boom will continue. With anew Finance Minister in office and given therich economic legacy of recent growth, thiswas the right time to question our model ofdevelopment and initiate both institutional andeconomic reforms in order in terms to takeMauritius to the next level of economic deve-lopment. This was not done.

Unfortunately, with the exception of somepalliative and populist measures, the focus andrigour of the 1980s in terms of economic andsocial governance were lost in the chorus ofMauritian miracle mantra.

Outlook

“Our institutions and blatant economicmismanagement have

been the major factors killing all

the hope for aMauritius à la

Singapore”

Dr Chandan Jankee

Member of Union for

socioeconomic and Democratic

Rights. Associate professor in

Banking and Finance

University of Mauritius

c.jankee@uom.ac.mu

USDR77@gmail.com

uFrom economic miracle

to socioeconomic debacleThe Mauritian economic miracle to use a cliché has become a highlycited reference for consultants, eminent visitors, politicians both inlocal and in international fora.

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Business Magazine - no 969 • 9 – 15 mars 2011

1968 – 2011

First, the social contract and econo-mic strategy in line with the aspirations of

the population were discontinued. Theaverage Mauritian dreams of a securedjob, social mobility, a fair society that isequity, corruption free and representationand national unity. Anyone can argue thatthe rise of world competition in ourexports markets in particular textile, loss ofour preferential markets, fall in price ofsugar and slowdown in economic expan-sion vindicated the rationale for a neweconomic and social model. Focus waslaid more on economic prosperityrather than human welfare. There werelots of talks about economic diversifica-tion with new pillars of economicgrowth such as financial services,fishing and medical hub and recently,IRS amongst others. The policy mea-sures adopted were not enough torefuel the engine of growth but moreimportantly, a confluence of other fac-tors undermine the prospects for highergrowth and social development in linewith the Mauritian dream. Let me high-light them.

Economic liberalism

After the first wave of economicdevelopment led by textile sector, eco-nomic liberalism became the mantrafor our policy makers under the pressu-re of changing world economic order andinternational institutions like IMF andWorld Bank sharing paternalism of thesuccess. The relaxation of state controls oneconomic activities to become a facilitatorunplanned and was guided by peer pres-sure.

Our economic miracle was only partlyexplained by the role of the private sector.Other factors like preferential markets andpolitical stability played an important role.The success of economic liberalismdepends on a performing, adaptive andinnovative private sector capable to com-pete not only locally but internationally, ina world without preferential markets.Unfortunately, we had a private sector his-

torically controlled by a selected group ofinvestors who logically benefited from thefortunes of Sugar quota agreement, growthof the textile industry, booming tourismindustry and the fast growing services sec-tor. The interlocking nature of capital andmonopolistic nature of the markets in theprivate sector led to further concentrationof wealth. The institutionalization of thestock exchange with the objective of sha-reholding democratization was attainedbut wealth in terms of shares rocketed thusincreasing access to finance.

Another two important vehicles led tofurther skewness in wealth and this iswhere policymakers had other interestsrather than public welfare. First, thecontract of electricity production to IPPSand more recently the Illovo deal coupledwith one-off IRS projects. There are manyeconomic and social distortions emanatedfrom speculative transactions on land.Instead of facilitator, the governmentshould have been major partners in allstrategic vehicles of development underPPP or BOT schemes. For more than adecade now, the population is at a lossbecause there is no evidence that the ultra-liberal strategy has contributed to higherwelfare. On the contrary, the spectre ofunemployment coupled with poverty is

haunting the population. Other problemshave aggravated such as insecurity, com-munalism and inequity. What has happe-ned to economic democratization?

An interesting point is the emergenceof supertechno Ministers and adviserswho give little role to qualified civil ser-vants thus forceably creating a “YESMinister” civil service.

2. Economic vampires

References have often been made tothe emergence of economic vampires suc-

king the fruits of any unprece-dented growth in developingcountries. This hypothesis canbe tested positively in the caseof Mauritius. Reaching theearly 1990s, there is historicalevidence that the parliamentwas infested by businessmennegotiating contracts either forthemselves or their cronies.The mushrooming of pressuregroups under the cover of reli-gion and brotherhood dictatedor positioned their friends whoin turn return for favours. Thepolitical clientele and top civilservants have to be broughtinto the equation which pro-ved counterproductive . The

practice of appointing retired top civil ser-vants, influence of political agents, thesaga of crown lands, privatization, politi-cal nominations and obscure finance topolitical parties triggered a negative dyna-mism which undermined economic andsocial development. There are all ingre-dients for corruption. There are manyexamples today that our parliamentariansare more businessmen than politicians. Acommon practice which seemed to havegained acceptability by our voters. Bottomline, the emergence of a selective range ofnouveau riche due to political and familyconnections, pressure of lobbies, transac-tions in crown land, laxity in procurementof government contracts amongst othershave overpowered the positive forces of

The early 90s was an economic turning point

Outlook

“The spectre of unemployment

coupled with poverty is

haunting the population. Other

problems have aggravated such

as insecurity, communalism

and inequity. What has

happened to Economic

democratization?”

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Business Magazine - no 969 • 9 – 15 mars 2011

1968 – 2011Outlook

growth and caused a loss of motivation.Who will work for equity?

3. Economic irrationality

The basis for our economic develop-ment has been low cost of labour andhigher productivity given our export ledgrowth strategy. Given our high propensityof imports given our lack of economicresources and limitations of local industry,maintaining a low real effective exchangerate coupled with low cost and sources ofimports should have been the first bestformula. From hindsight, we find thatthe wage policy and pervasive increa-se in prices of public utilities as wellprivatization of health (private doctors)and education (tuition) contributed toreduce the real income of the popula-tion. The puzzle remains that a higherwage and compensation imperativefor survival undermines the exportcompetitiveness. The inflationaryeffects of rising prices of importedgoods, inefficient welfare system,mega construction (rising costs), landspeculation amongst other factors ledto higher minimal real wage whichdeteriorates the terms of trade andworse when there is no increase inproductivity. A recent fashion is the useof international consultants or prophetsin high positions with little contributionbut higher costs and frustration forMauritians. How to reverse this situation?

3. Soft budget constraints

With liberalization and effective priva-tization, the implicit bail out creates amoral hazard problem and many publicinstitutions and the private ones which aretoo big to fail enjoy a soft budgetconstraints. This nurtures inefficiency,political interference and abuse at the costof tax payers money and public debt.Allocation of funds to mismanaged publicinstitutions, unjustified rise in prices of

public utilities and recently, the stimuluspackage par excellence are all examplesof giving a soft budget which wouldencourage failures and bad governance.Classic examples are Air Mauritius andSTC. Another interesting issue is the poli-tical appointment of Executive managersand chairman where competency is deci-ded by one occult group or big brotherwith a smile. Political backing and net-working either through caste, religion oroccult group, media support amongst

others are used to bargainlucrative salaries and perks with boardmembers appointed mostly as per samecriteria. Who will stop this perverse prac-tice?

4. National unity

After more than 42 years of indepen-dence, it is a matter of concern that broad-casting a range of channels by our nationalTV for each ethnic group has been applau-ded. Worse is the quality of those channelswhich is a blatant plagia which does not fitthe Mauritian population. We have goneastray in terms of national building andnational unity. Instead of nationalism,Mauritians are going more and more totheir roots in terms of dress and celebra-

tions, a new phenomenon to isolate them-selves as a pressure group in order tobenefit from government favours. Thecreation and promotion of cultural housesalthough a good idea but has failed to pro-mote national unity, instead it has precipi-tated competition and lobbying. Is it anecessary evil for political clientele today?

5. Equal opportunities

Access to land, finance, education,health care and more importantly, political

power and representation are mainingredients for a fair society. I fear tosay that everything is now controlledby a group. Who will correct this dis-tortion? How to create more opportu-nities? This is the role of anygovernment and policy makers. Forpolitical democratization, I suggestthat the change of constitution to allowany Mauritian to be member ofParliament and PM only two terms asin America. Who will do this?

In terms of job selection in privateand public sectors, who will publishthe choice of candidates and their qua-lifications supported by video clip ofthe interviews in case of any query?

Conclusion

I have raised a number of debatableissues and wish to conclude on a positivenote to copy our leaders and consultants.Mauritius is better compared to manycountries in the African region. My ques-tion is who will make us dream again of afairer Mauritius? Do you think migration,lotto lottery, lobbying, IRS amongst otherswill help? I feel that we need some freshair, a new set of institutions and Mauritianpeople with new ideas to transform oureconomy for effective social and econo-mic development. We have stated theissues and promise to come up with somesolutions and free consultancies in thenext article in line. u

Cost of labour and higher productivity were instrumental to our economic development

“We need some freshair, a new set of institutions and

Mauritian people with new ideas to transform

our economy for effective social and

economic development”

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