Transcript Category 2 sub-sectors - Association of Mauritian Manufacturers

DOE Manufacturing Industry
Executive Summary
Date: 07 – December - 2011
Copyright DCDM RESEARCH
Presentation of the report
1.
2.
3.
4.
Socio-economic weight of the DOE sector
Expertise, experience and evolution of the DOE sector with economic history
Challenges faced by the DOE sector
Policy and recommendations
2
1. Socio-economic weight of the
DOE sector
28
DOE manufacturing Industry
Food
processing
Meat
Dairy
Fish prep.
Fruits/ Vegs.
Animal feed
Condiments
Bakery
Beverages
Nonalcoholic
Alcoholic
Chemicals
Soaps
Detergents
Paints
Agro
Energy
Plastic
Rubber
printing
editing
Paper
Printing
Publishing
Editing
Metal
Furniture
Basic
Wood
Fabricated
Furniture
Jewellery
Shipping
Leather
Conversion
of gold,
diamond,
pearls in
finished
products
Ship
manufactu
ring
Dyeing and
tanning of
leather
products
Employment
Gross Output
Intermediate
products
Value –added
Product
Compensation
of employees
53,123
emp.
Rs 91.5
bn
Rs 60.1
bn
Rs 31.4
bn
Rs 11.2
bn
12.6% of GDP
Sub-sectors
Pharmac
euticals
Prod. of
medicines
Gross operating
surplus
Rs 20.1
bn
Source: CSO & DCDM estimates
DOE – vital component of the manufacturing
industry
o
Manufacturing sector
Contribution to GDP (Rs Billion): 2010
Rs 48.7 B
Manufacturing
Finanical intermediation
32.3
Wholesale and retail trade
31.6
Real estate, renting and business activities
31.5
Transport, storage and communications
27.2
Hotels and restaurants
18.9
Construction
18.3
Public administration and defence
17.3
Activities and private households with
employed persons
12
Education
12
Agriculture, hunting, forestry and fishing
10.3
Health and social work
9.9
Electricity, gas and water supply
6.5
Mining and quarrying
0.092
o The DOE sector has an important
weight in the manufacturing sector
- 64% of total output.
% Share of GDP (2009)
Sugar
milling
3%
EOE
33%
DOE
64%
5
Source: CSO & DCDM estimates
Diversified economy through the DOEs
o
Government support, with a set of accompanying measures, enabled the EOE sector to take-off in
the 1980’s. The DOE sector was left, a bit in the shadow of the EOE sector.
Sugar/GDP
EOE/GDP
DOE/GDP
14
12
11.6
10.9
11.4
11.6
7.5
7.5
7.5
12.8
12.6
6.8
6.5
6.2
10.6
10.5
10
11.3
11.6
12.7
8.6
10.8
8
6
4
2
1.2
1.0
1.0
1.1
1.0
0.9
0.7
0.6
0.59
0.55
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
0
o
The truth – it was the DOE sector during the last decade that was expanding – the sugar and
textile sector was contracting.
6
Source: CSO & DCDM estimates
Investment to total local invesment (%) [1/4]
DOE investment
Sugar invesment
EOE invesment
IPP investment
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
DOE investment
6.5
8.1
7.6
9.5
7.3
7.0
7.3
4.2
6.4
6.0
5.0
4.9
6.6
Sugar invesment
1.9
0.8
0.3
0.3
0.3
0.5
0.8
1.1
0.5
1.2
2.9
0.8
0.2
EOE invesment
6.0
6.1
5.8
4.7
4.1
6.6
6.1
4.6
7.3
3.2
1.5
1.2
0.9
IPP investment
2.6
1.3
0.4
0.1
0.1
1.0
1.4
4.4
1.9
0.1
0.1
0.1
0.2
o
It averaged 5.8% during the last four years and has been the predominant investment magnet
during the last decade – above the sugar, EOE and IPP sector.
Note: 2008 to 2011 are estimates made by the CSO
7
Source: CSO & DCDM estimates
% DOE inv/ total manufacturing inv [3/4]
DOE investment (%)
84
65
50
70
62
57
54
46
47
53
40
38
30
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
o
DOE investment in total manufacturing seemed to have assumed greater
importance since 2006.
o
CSO has estimated its share of total manufacturing investment at 53%, 70% and 84%
in 2009, 2010 & 2011 consecutively.
2011
8
Source: CSO & DCDM estimates
Investment by type [4/4]
o
From 2001 to 2010, DOE has invested Rs 4.9 billion in building and construction
works, which corresponds to an average of Rs 490 million per annum.
o
In 2011, DOE investment in the building and construction segment will rocket to Rs
1.5 billion as estimated by CSO. This figure confirmed the important catalysing role
of the DOE sector in the Mauritian economy.
o
On another note, DOE investment in machinery and transport equipment
cumulated during the last decade amounted to Rs 26.2 billion, representing an
average of Rs 2.6 billion per annum.
9
Source: CSO & DCDM estimates
2. Experience, Expertise and
Evolution of the DOE sector
Main highlights [1/2]
o
Decades of experience and expertise in their respective domains – some 25 sub-sectors explored in
the report with respect to output, employment, import , duties and challenges.
o
Judged on the basis of gross output, intermediate products, value-added, compensation of
employees, gross operating surplus and employment, nearly all sub-sectors (with the exception of
shoe and leather) have been registering good performance for the period 2005 to 2010.
o
Import duties for all sub-sectors have been constantly reduced.
o In a majority of cases, it has been from 30 - 80% in 1996 to zero % (2010):
• Chicken, bovine, swine, goat, lamb, sheep, fruits and vegetables, dairy products,
leather, animal feed, flour, paper products, jewellery, shipping, leather,
essential oils.
o In some other cases, a minimal duty (15 – 30%)has been maintained:
• Soaps and detergents, plastic and rubber, paints and varnishes,
furniture, alcoholic beverages, non-alcoholic beverages, paper products.
11
Main highlights [2/2]
% import duty to be paid
1996
1998
1999
2000
2001
2002
2004
2006
2007
2009
2010
100%
4,103
4,082
4,082
2,172
2,134
2,110
2,107
722
692
323
323
0%
914
928
928
2815
2832
2949
2954
4217
4081
4531
4531
TOTAL
5,112
5,112
5,112
5,110
5,112
5,223
5,223
5,223
5,051
5,051
5,051
90.0
80.0
80.3 79.9 79.9
From 80.3% in 1996, percentage of products
gradually phasing out of import duties declined
progressively to 6.4% .
70.0
60.0
50.0
40.0
42.5 41.7 40.4 40.3
30.0
20.0
10.0
13.8 13.7
6.4
6.4
0.0
1996 1998 1999 2000 2001 2002 2004 2006 2007 2009 2010
Source: WTO
12
3. Challenges
Challenges
o
The DOE sector has successfully coped with competition during the last decade and has
survived crises of various origins, rise in fuel prices and global recessions.
o
Support from Government, investment in innovation, technology and training and an
average performing Mauritian market have all combined together to ensure a positive
performance.
o
The future of the DOE sector does not lie in its past performance, because during this
performance , certain key structural challenges (domestic and global) have been masked.
o
Those structural challenges presently require special attention.
14
Challenges – Policy
No enhanced
Market
Access
-ve
economies
of scale
Globalisation
Factors of
production - global
Negative impact on the
DOEs due to foreign
competition
Reduction in
tariffs
Large market
Economies of scale
Rising
imports
Increased
competitiveness
15
Source: CSO & DCDM estimates
Challenges- Global
LEADING TOP 10 IN TERMS
OF MANUFACTURING COMPETITIVENESS
2010
Rank
2015
Countries
Index
Score
Rank
Index
Score
Countries
1
China
10
1
China
10
2
India
8.15
2
India
9.01
3
Republic of Korea
6.79
3
Republic of Korea
6.53
4
USA
5.84
4
Brazil
6.32
5
Brazil
5.41
5
USA
5.38
ENABLING TRADE INDEX 2010
Market Access
Country
Border administration
Business
Transport & communication
INF
Environment
Rank
Score
Rank
Score
Rank
Score
Rank
Score
Mauritius
8
5.36
39
4.69
58
3.83
36
4.87
China
79
3.87
48
4.53
43
4.13
41
4.74
South Africa
87
3.78
53
4.25
65
3.64
79
4.11
India
115
3.42
68
3.98
81
3.34
58
4.48
16
Domestic/ Global challenges
Domestic challenges
Global challenges
Industrial policy based on global competitiveness
Global manufacturing competitiveness
Withdrawal of duties
Protectionism
Exchange rate fluctuations
Global economic environment
Relatively lower competitiveness compared to
other exporting countries (China, India, S.Africa)
Traditional economic pillars affected by recurrent
economic crises affecting overall demand
Food security
Finding niche markets for Mauritian products
17
4. Policies and recommendations
Diversified economy through the DOE sector
o
The policies and recommendations have made taking into account the domestic and the
global challenges and the current context of the DOE sub-sectors.
o
The DOE sector represents the future of the manufacturing sector as the two forerunners
(textile and sugar) are contracting.
o
Maintaining a diversified economy, with DOE industry holding a position of choice at the
core of its economic focus, will be the right option for Mauritius.
o
Government policy, through the creating of a ‘growth flourishing environment’ will be vital
for a second industrial take-off and for the country as a whole.
19
Growth-flourishing environment
Macro-level growth
trajectory
Growth flourishing
environment
Addressing cross
-sector issues
Improve sector
competitiveness
Addressing sector
-specific issues
20
Macro-level growth trajectory
o
permanent dialogue-based platform which promotes the alignment of both public and
private sector efforts.
o
necessary macro-economic and institutional framework to continuously improve
competitiveness of the DOE industry.
o
identifying and addressing the cross-cutting and sector-specific constraints.
o
identifying upcoming opportunities.
o
reviewing international trade policy and exercise caution in the further lowering of
industrial tariffs that could refrain domestic production and consumption.
o
special focus to promote DOE goods abroad.
21
Addressing cross-sector issues
o
A ‘growth flourishing environment’ will, in the present economic context, comprise a
framework of support measures that will:
o establish a level playing field between exporting countries and Mauritius
o provide access to finance at concessionary rates of interest and non-financial resources
(land)
o develop a clear-cut foreign direct investment policy channelling investment in ‘scarcity
areas’’ rather in zones where DOE has already acquired expertise
o monitor dumping practices
o reducing the 35% value added with regards to export to the SADC and COMESA
Markets through diplomatic efforts
22
Addressing sector-specific issues
o
Category 1 sub-sectors
o Sub-sectors where import duties are already zero but are able to cope with competition and
can further expand but lack of other resources such as land resources, training etc (agrobased sectors). Such sectors must also be in tandem be protected by non-tariff measures
(legislations) – Category one sub - sectors
o
Category 2 sub-sectors
o Sub-sectors that are struggling to survive with foreign competition and if left unsupported
could face serious difficulties (shoes, leather). Consideration be given to revisit the tariff lines
upward and non-tariff measures – category 2 sub- sectors
o
Category 3 sub-sectors
o Sub-sectors that could be given an impetus to exports (furniture, jewellery etc) – category 3
sub-sectors
23
Category 1 sub-sector
o
The Category 1 sub-sectors are mainly products of the agro-industry and are
related to food safety and security.
o
Critical in their further development is land resources and accompanying measures
such as finance, veterinary services, technology and skill development.
o
Other products of the category 1 are intermediate products – wood, wheat for flour
production, feed materials for the production of animal feed. As per Government
policy, they are already at zero % import duty.
o
Policy would comprise devising means and accompanying measures for local
production. Government can also through diplomatic efforts in SADC and COMESA
negotiate for land to be put at the disposal of local entrepreneurs for the
production of the required intermediate products thus boosting local DOEs
production.
24
Poultry (example)
Sub-sectors
Recommendations
o
Leasing of land to farmers to enable expansion of industrial production of chicken
to meet the growing per capita consumption
o
Stringent quality control measures to ensure that inferior quality chicken and
chicken-related products do not cross border.
o
Diplomatic efforts to enable Mauritius investors to invest in the SADC, COMESA
and IOC region – production of maize and soja , therefore, reducing dependency on
Poultry sub-sector
far away countries (Argentina and USA)
o
Leasing of land to producers of animal feed so that more feed are produced
locally
o
Laboratory facilities available at the Division of the Veterinary Services need to be
reinforced.
o
Monitor dumping and report matters to WTO as this is considered as illegal in
international trade
25
Other Category 1 sub-sectors
o
The following are the other sub-sectors in the Category 1 sub-sectors where a set
of recommendations has been proposed:
o
o
o
o
o
o
o
Dairy products
Fruits and vegetables
Beef
Pork
Venison
Goat, sheep & lamb
Printing and publishing
26
Category 2 sub-sectors
o
The Category 2 sub-sectors refers to those sub-sectors having to cope with intense
foreign competition in spite of some of them having a minimal residual protection.
o
Consideration to revise tariff lines upward in products competing directly with
locally produced ones is vital.
o
The implementation of non-tariff barriers to safeguard part of local market is
equally important.
o
Strategies to maintain a level playing field for the Category 2 sub-sectors should be
the main line of defence.
27
Paints and varnishes (example)
Sub-sectors
Recommendations
o
Maintaining the import duty at its current level of 15% is vital for the future
of the sector.
o
In addition to the 15% duty, establishing a level playing field with regards to
labour, metrology and environmental legislations is also a requirement of the
utmost importance.
Paint & varnishes subsector
o
It is also recommended that prior to authorising the importation of paints,
the potential importer must obtain a certificate issued by an accredited
independent authority which confirms that the consignment of paints to be
imported is free from those dangerous substances listed in our Dangerous
Chemicals and Dangerous Drugs Acts.
o
Random samples be taken from imported consignments of paints and be
forwarded to an accredited independent laboratory for testing.
28
Other Category 2 sub-sectors
o
The following are the other sub-sectors in the Category 2 sub-sectors where a set of
recommendations has been proposed:
o
o
o
o
o
o
Shoe
Plastic and rubber
Cosmetic
Furniture
Leather
Paper and paper-related products
29
Category 3 sub-sectors
o
Category 3 refers to products which have export potential but are experiencing
difficulties in penetrating new markets. A big challenge for the Category 3 subsectors is to increase export activity.
o
A favourable climate for the Category 3 sub-sectors should consist of:
o state-backed trade promotional activities - It is essential that Government
provide international trade services to their exporters in order to help them to
access new market.
o export finance for risky international trade transactions. This would comprise
among others:
• trade credit insurance which guarantees open lines of credit
• letters of credit which guarantee payment on production of the correct
documents at a bank
• export working capital so as to enable companies to mitigate the risks
associated with exporting activities.
30
Alcoholic beverages (example)
Sub-sectors
Recommendations
o
Consideration must be also be given to reduction of other logistic costs linked
to export – freights, cargos etc and the escalating cost of other inputs used in
the production process (electricity, fuel etc).
Alcoholic beverages
o
Targeted export promotion strategies should be envisaged to further exploit
the export potential of this sector. Our economic diplomacy with SADC and
COMESA must also be deepened for better market access.
o
Other products forming part of the Category 3 sub-sectors with recommendations
are:
o Soaps and detergents
o Alcoholic beverages
o Pharmaceutical products
o Jewellery
o Shipping and repair
31
www.dcdmresearch.com
•
We invite you to visit our website to have further insights about our products and services.
www.dcdmresearch.com
32
32