Mauritius at another Inflection point

Report
“Mauritius at another inf lection point”
An Introduction
by
Nikhil Treebhoohun
Hennessy Park Hotel,
Jan 16,2015
Website: www.oxfordmu.com
 Set up in 2011
 Link between Africa and Asia
 Association with Oxford International Associates
 Consultancy, Advisory, Research, Training
 Facilitated a brainstorming session for the Financial Services
Commission (Mauritius) on the future of the financial services in
Mauritius. Subsequently published a book – ‘ A Roadmap for the
Mauritian Financial Services Industry’
 Contributed to the Overseas Development Institute(ODI)-led
report: European Report on Development 2014: Financing
and other means of implementation in the post-2015 context
- Mauritius Country Illustration
 Prepared a feasibility report on Social Housing for the Mauritius
Chamber of Commerce and Industry
 Reviewed a report for the International Organization for
Migration (IOM) on the Migration Profile for Mauritius
 Facilitated a brainstorming workshop for the IOM on the
development of a Migration policy for Mauritius
 Produced a report for the IOM: Towards the Development of a
National Migration and Development Policy for Mauritius
 Resource Persons:
 ODI workshop in February 2014 in Bangladesh on Economic
transformation of Mauritius and on the Restructuring of the
Textile Industry in Mauritius
 UNDP at a workshop in October 2014 in Malawi organised by the
Economic Association of Malawi
 SASPEN and FES international conference on Social Protection
for Migrants in the SADC – spoke on the movement of business
people within the African sub-region.
 Forecasting the future through:
 LINEAR EXTRAPOLATION
 OR
 FORESIGHT (Mind of the Fox –Clem Sunter)
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 Linear extrapolation cannot be the sole method for
policy making
 Anticipating the future based on collective
knowledge/intelligence of key stakeholders was the
basis for Competitiveness Foresight (CF)
 3 day structured discussions with an independent
facilitator who challenges conventional and politically
correct thinking
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 Some documents involving OIM personnel:
 Quo Vadis? (1997) by Percy Mistry originally written for
Industry Focus, EPZDA’s magazine
 Competitiveness Foresight (2004) led by Nikhil
Treebhoohun and facilitated for NPCC by Percy Mistry
 Exports of tradeable services in Mauritius(2008) by Percy
Mistry and Nikhil Treebhoohun for Commonwealth
Secretariat
 Roadmap for the Mauritian financial services industry
(2014) by Percy Mistry following a brainstorming for the FSC
OIM

National Innovation Summit (NIS) organised by NPCC to discuss how
Mauritius could move on a higher growth curve

Have we reached the limits of our production possibilities?

What type of innovation is required to take us on a high-growth
path?

Do we have enough competencies to identify the new sources of
growth?

Do we have enough resources to support new sources of
growth?

How do we make Mauritius more attractive to the outside world
in the new environment?

What are we willing to trade-off to have higher growth?
 With Mauritius’ future as a sugar producer looking
bleak, powerful competitive pressures being placed on
textiles and garments exports, OECD placing limits on
financial sector competition, and finite limits on high
value tourism, what should the island’s strategy for growth
and development be for the next 10 years and beyond?
GDP Trend under 2 Scenarii
GDP at constant 1992 prices (Rs M)
180000
160000
140000
120000
100000
GDP (19922004)
80000
GDP (20052014)-4%
growth
GDP (20052014)-8%
growth
60000
40000
20000
0
1990
1995
2000
2005
Year
2010
2015
Economic growth rate
25
20
GDP growth rate (%)
15
10
5
0
1970
1975
1980
1985
1990
-5
-10
-15
Year
1995
2000
2005
2010
Growth Rate, %
18.0
17.0
16.0
15.0
14.0
13.0
12.0
11.0
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
-1.0
-2.0
-3.0
-4.0
-5.0
-6.0
-7.0
-8.0
-9.0
-10.0
-11.0
-12.0
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
Evolution of Annual Real GDP Growth, 1976 - 2013
Employment Trends by Sector, 1970-2014
120
Number Employed, '000
100
80
Sugarcane
Manufacturing
EPZ/ Textiles
60
Construction
Hotel and restaurants
Financial and insurance activities
40
Public administration and defence, etc.
20
0
1970
1980
1990
2002
2010
2014
2001/2002
2006/2007
2012
0.371
0.388
0.413
Lowest 20% of households
6.4
6.1
5.4
Highest 20% of households
44.0
45.6
47.4
Rs 3,821
Rs 5,660
Gini Coefficient
Percentage of total household income accruing to
Poverty Line: Half median monthly income per Rs 2,804
adult equivalent
Proportion of poor households (%)
7.7
7.9
9.4
Estimated number of poor households
23,700
26,400
33,800
Source: EDR Report, 2014
GDP per capita under different scenarii of
economic growth
Average Annual 3
Growth rate (%)
Year where 2003
GDP per capita
doubles
2039
(Population
growth of 1% per
annum)
4
5
6
7
8
2027
2021
2018
2015
2014
 Multidisciplinary technical teams:
 Examine fully the consequences and work out the
implications for opening up in terms of essential changes in
policy and the administration of policy as far as the following
are concerned :
- fiscal policy, monetary policy, exchange rate policy,
immigration policy, urban development policy and FDI
entry/exit policy, changes in government behaviour and
business behaviour
 Outline a marketing strategy for selling brand Mauritius to
the world as the best platform on which to undertake globally
orientated ICT/BPO business, and
 To work out a roadmap for managing "the transition”.
 To attract high skilled manpower
 To review the marketing strategy and branding of Mauritius
 To develop competent leadership at all levels with emphasis
on governance and meritocracy
 To gear foreign policy towards achievement of the above
objectives
By Percy S Mistry
Oxford International Consultants
(Mauritius) - OIM
Hennessy Park Hotel
16 th January 2015
Oxford International Consultants (Mauritius) Ltd.
OIM
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Diagnosing Inflection Point
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22
Chart 1: Evolution of Annual Real GDP Growth rates (%), 2000-2013
+12.0
+10.0
+10.2
+8.0
+6.3
+6.0
+5.7
+5.6
+4.6
+4.0
+5.5
+4.2
+4.3
+2.0
+3.6
+3.1
+2.7
+3.4
+3.2
+1.6
+0.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Source: Statistics Mauritius
o A reduction of growth from 5% to 3.5% is a magnitude reduction of 30% and an
annual 'loss' of around US$180 million in GNI in the last five years
23
OIM
‘Exo’ v/s ‘Endo’
Factors
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1.
The global crisis which affected every country
2. Slowdown in Indian growth which almost halved
from 8.5% to 4.5%.
3. Slowdown in Chinese growth from 10% to below
7.5%
4. A virtual collapse of the Eurozone economy since
2011 affecting MRU directly
5. Global decline in investment and fixed capital
formation -- public and private.
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6. Slowdown in global tourism from 2009-2013
7. Relatively high global commodity prices until
their belated collapse in 2014
8. Much slower growth of global trade and
investment flows.
9. An existential crisis for the Euro supposedly
resolved only to be revived -- Grexit?
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1.
From 2010 onwards MRU has been running higher twin deficits
(fiscal and CAD).
2.
Public & Private investment in infrastructure and 'output
capacity' have declined dramatically creating bottle-necking
problems for the future. MRU is now seriously infrastructure
and connectivity deficient in every infrastructural sub-sector.
3.
The MRU budget has become progressively imbalanced in
over-supporting consumption (welfare support) and undersupporting capital investment in infrastructure and parastatals
over a prolonged period of time.
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4.
MRU under-investing substantially in improving the quality
(and quantity) of its human, social and institutional capital
Given the changes occurring in the nature of the global
economy these are more important than financial and
physical capital.
5.
MRU's reliance on the Indian DTAA and Chinese capital is
now becoming a liability
6.
Switching focus to African and ASEAN market opportunities
is too slow.
7.
Domestic political developments have created uncertainties
that have been inimical to growth
28
OIM
8.
Economic 'democratization' (reducing wealth/income
disparities) remains as elusive as ever.
9.
Physical and electronic connectivity with the rest of the
world remains a critical issue.
10. MRU is too deeply connected to a sclerotic EU which will
be very slow to reform and recover and not enough to the
more rapidly recovering US and UK.
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Where are we heading to now?
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+7.0
+6.0
+5.0
+4.0
+3.0
+2.0
+1.0
+0.0
OIM
2003 2004 2005 2006 2007 2008OIM
2009 2010
2011
2012
2013
31
2007
2008
2009
2010
2011
2012
2013
A. Building & construction work
+17.0
+13.3
+7.7
+7.0
-2.1
-1.1
-10.2
Residential building
+6.8
+18.0
+8.1
+13.7
+14.1
-4.5
+3.0
Non-residential building
+49.2
+12.2
-0.8
-2.1
-21.0
+2.9
-17.5
Other construction work
-17.4
+8.1
+30.8
+15.8
+6.6
-0.8
-21.4
B. Machinery and equipment
-6.7
-15.8
+11.4
-15.3
+9.6
-0.2
+8.6
Machinery and equipment
(exc. aircraft & marine vessel)
+9.0
-9.1
+0.8
-2.3
+9.6
-0.2
+0.4
Passenger car
+32.7
+5.6
-25.8
+19.3
+2.3
+12.2
-6.0
Other transport equipment
-38.0
-41.1
+70.3
-58.8
+10.7
+13.9
+56.2
Other transport equipment
(excluding aircraft & marine vessel)
+19.3
-5.1
-14.9
+4.1
+10.7
+13.9
-12.0
Other machinery and equipment
+3.3
-12.7
+9.2
-6.7
+11.0
-4.7
3.9
+5.9
+1.3
+8.9
-0.7
+1.4
- 0.8
- 4.3
GDFCF by Type of Capital Goods
Gross Domestic Fixed Capital Formation
Source: Statistics Mauritius
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Things to be considered: Global Events &
Exploitable Opportunities
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(a) Export more (especially high-value services)
(b) Entrench itself in new markets
(c) Exploit marine resources more rapidly and efficiently
(d) Transforming economy to adjust more effectively to a
rapidly changing, more technologically intensive, global
economy. (esp. human and institutional capacities )
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 Geopolitical developments that will influence, directly and indirectly, its
destiny:
1.
Acceleration of ICT continuing to transform manufacturing, services, global
payments and settlement systems, transforming all human activities as well
as all manufacturing and service processes, while disrupting traditional
notions of employment and labour markets.
2.
The global impact and implications of China's gradual transformation over
the next decade from an exporting to a domestic consumption economy
3.
The global impact of oil-exporting (OPEC) countries probably becoming
capital deficient instead of capital surplus thus affecting the investment
capabilities of their SWFs and influencing the magnitude and direction of
global portfolio capital flows.
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4. Implications of the massive (excessive?)
sovereign debt build up (coupled with
continuing fiscal deficits) across the developed
world which will also affect aid, trade and
investment flows.
5. The relative decline of the BRICS and the
concomitant rise of other faster growing
emerging markets; especially in Africa, Asean
and Central/West Asia.
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 Key geopolitical developments:
1.
'Russian problem' : Impact on the US, EU, Middle East,
Asia?
2.
The fractured future of the Arab world - its impact on Africa
and the Mid-East.
3.
The possible political instability of the UK. The future of
Scexit and Brexit.
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4.
Increasing possibility of Grexit - its impact on destabilizing
the Euro: opening the door to other Euro-exits, inability of
France and Italy to address their economic problems, and
more pressure on keeping the Eurozone intact.
5.
Decline of Brazil and Rise of Mexico; Opening up of Cuba;
Collapse of Venezuela and these implications for the US
and Western hemisphere. Implications for MRU?
6.
Possibility of Indian revival back to a 7-9% growth rate,
offset by a decline in China's growth to 5-7% with Asean
growth also at 5-7%. Implications for MRU?
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7.
The future development of South Asia under IndoChinese competition and cooperation.
8.
The future of the Arabian peninsula and Iran? Redrawing
the post-colonial Mid-East?
9.
The future of Central Asia and of Myanmar (which
presents a major opportunity for MRU that it seems
completely blind to) where South Asia joins East Asia.
10. The future of Australia with China's transformation
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 Acceleration of Technology:
- Continuing to transform manufacturing, services, global
payments and settlement systems,
- Transforming all human activities, manufacturing and service
processes, while disrupting traditional notions of employment
and labour markets.
 China's gradual transformation from Exporter to Domestic
Consumption economy:
- Global impact
- Implications
OIM
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 The global impact of oil-exporting (OPEC) countries :
- Probably becoming capital deficient instead of capital surplus
- Maybe affecting the investment capabilities of their SWFs and
influencing the magnitude and direction of global portfolio
capital flows.
 Implications of the massive sovereign debt build up across the
developed world (coupled with continuing fiscal deficits):
- Effect on aid, trade and investment flows.
 Relative decline of the BRICS:
- Concomitant rise of more faster growing emerging markets
- Specifically in Africa, Asean and Central/West Asia.
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Things to be done between 2015 and 2020 to
stimulate growth back to 5-7%
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1.
Core government and fiscal policy shift emphasizing
investment over consumption.
2.
Stability of monetary policy by repressing inflation and
stabilizing the MUR exchange rate vis-a-vis the Euro (which
means devaluing it against the USD for the next year or so).
3.
Focus on human, social and institutional capital
development in public policy. What does that mean
specifically. Invite interactive ideas/discussion from invitees.
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4. Adapt MRU to cope with a more IT-intensive
world; which means upgrading skills,
encouraging IT entrepreneurship, improving
domestic logistical and delivery systems, opening
up more to foreign influences, using MRU as an
incubator for IT-induced change and then
replicating MRU experience in Africa.
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1.
Making MRU a pioneer in applying IT to more advanced future
payments systems.
2.
Accelerating change in land use away from sugar to civilized
urbanization.
3.
Using capital markets more efficiently to achieve economic
democratization.
4.
Implementing the OIM Roadmap for transforming Financial
Services
5.
Create similar roadmaps for infrastructure, tourism (into higher
value higher yield products) and marine resources
45
development.
OIM

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