Transcript The challenges at independence 1968

Republic of Mauritius
INDUSTRIALISATION
THE MAURITIAN EXPERIENCE
By
Sen Narrainen
Ministry of Finance
OUTLINE
 Challenges at independence in 1968
 Achievements: 1968 to 2012
 Main drivers behind the Mauritian
industrialisation and development success
The
Mauritian Development Model
The industrialisation strategies
The three waves of diversification
 Conclusion
“Today, both
our countries are hailed as
economic miracles, perhaps because
conventional wisdom had doomed us to
failure after independence”.
S. R. Nathan, President of the Republic of Singapore in his
address to the National Assembly in Mauritius in June 2011
The challenges at independence 1968
 Poor
prospects for industrialisation
James Meade 1961: little scope for
industrialization because of lack of skills.
 V.S. Naipaul 1972: problems defy solutions

 Fragile
mono-crop economy.
 No other natural resources but land/sea
and people
 Low per capita income : USD 200
 Gini coefficient: .50
 Poor infrastructure
The challenges at independence 1968
 Most indicators were off the norm
High and rising unemployment: 16 %
Low adult literacy
Poor housing quality: > 50% prone to
damage by cyclones
Infant mortality rate: 58 per 10,000 births
Low enrolment ratio at secondary schools:
31.4
The achievements: 1968 to 2012
Annual average GDP growth: 5.3 percent
 Only one recession (1980) – may be the
longest streak of positive growth in the world.
 Rise in per capita income: from USD 200 to
USD 8000.
 Successful industrialisation policies.
 Well diversified economy: more than 10
sectors.

The achievements: 1968 to 2012
Major improvements in all social and economic
indicators.
 Absolute poverty: less than one percent of
population
 Recently showed great resilience to external
shocks
 Free education/health care/transportation for
students and elderly

WHAT ARE THE MAIN DRIVERS
OF
THE MAURITIAN
INDUSTRIALISATION
AND
DEVELOPMENT SUCCESS?
Diagram 1. The Mauritian model
Developmental
state
Economic
diplomacy
Fabian
socialism
Institutions
Education &
Health care
Ethnic
Diversity
Class of
Well structured
indigenous
Private
entrepreneurs
sector
Public
infrastructure
Diversification
2006 +
Globally competitive
Model
Adaptive
structural
policies
1972 to 2006
Mix of import substituting and
Export oriented industrialisation
1968 to 1972
Import substituting
industrialisation
ISI Strategy: 1968 to 1972
Followed the prevailing orthodoxy
 Limited outcomes due to:
 Highly protected markets in the DCs
 Exiguous domestic market
 High costs leading to high protective tariffs
 Not as labour intensive as was expected
 Needed to be more outward looking

ISI-EOI: Main features
 Outward-looking/export
markets
 The Export Processing Zone
 Incentive schemes
 Choosing winners/ Priority sectors
 From a labour-intensive to a capitalintensive phase
ISI-EOI: Main features
 Encouraging
outbound investment so as
to shift to high end production
 Economic liberalisation/adapting to global
influences
 Building institutional capacity
 Diversification
 Transfer of knowledge, technology and
ideas
GLOBALLY COMPETITIVE MODEL:
CENTRAL FEATURES
Get rid of reliance on trade preferences
 Ease of doing business
 Further opening up the economy
 Income tax policy – flat tax rate of 15 percent
 Labour market reforms/protecting workers
and not jobs
 Shifting labour to higher productivity activities
 Massive investment in public infrastructure
 Further diversification
 Since 2010: rebalancing the economy

GLOBALLY COMPETITIVE MODEL:
CENTRAL FEATURES
Striking a greater balance between economic
and social development
 CSR as a statutory requirement
 Stays committed to a strong welfare state
 Economic democratisation
 Maurice Ile Durable vision

 The
5Es:
Education/Equity/Environment/Energy/Employment
Outcomes of the Globally Competitive
Model



Surging FDIs
Resilient economy: passed the test of external shocks
 Surging petroleum and food prices
 Financial mayhem
 World wide great recession
 Euro crisis
 Political upheaval in North Africa
Upgrade by Moody’s from Baa2 to Baa1
- Dynamic and reasonably diversified economy
- Stable and investment-friendly environment
- Pragmatic and competent policy-making
Diagram 2.
Three Waves of Diversification
2006 + : Third Wave
Luxury villas, Real Estate,
Knowledge and Health Centres of
Excellence, Renewable energy,
Creative Industry, OCEAN STATE
1990s: Second Wave
Offshore centre, freeport, ICT/BPO,
Seafood hub.
1970s and1980s: First Wave
Tourism, Textiles, Financial Services
1970s: Mono-crop
Sugar - 70% of export revenue
Macroeconomic Unit /
Conclusion: Going Forward





Develop a services economy
Transform Mauritius into an Ocean State
Eradicate absolute poverty
Take Mauritius to the league of high income economies
Invest in people
Thank You!
Macroeconomic Unit /
Republic of Mauritius Ministry of Finance and Economic Empowerment