Think Mauritius

According to the Sugar Protocol, which is one of the components of the Lomé Convention signed in 1975 between the European Union and the ACP countries, each year the EU can import 1.3 million tons of sugar from the ACP countries at a relatively high price. While the Lomé Convention itself was set to expire in the year 2000, the Sugar Protocol contained terms and conditions that allowed price re-negotiation during this term.

The General Agreement on Tariffs and Trade (GATT) talks of 1992-1994, known as the Uruguay Round, established a 10-year phase-out of quotas for all categories of textiles and apparel.

For many, the only surprise about the changes to the sugar and textile trade agreements is that the government reaction appears to be… surprise. Instead of the current firefighting situation, Mauritius would be in a position to compete in the global economy at the same level as other countries had appropriate measures been taken by the government in preparation to such changes.

In a bid to recover from the economic crisis that the country faces, the government is adopting several policies. In the last budget, Rs 500m were allocated to the improvement of sugar production by small sugar cane planters. Simple economics dictates that to achieve this objective, productivity must be increased and costs of production lowered by producing larger quantities. But, it is one thing to theorise and another to practise. In contrast to other major sugar producers, such as Brazil, Mauritius is a very small country with only so much cultivable land. The most viable option appears to be the introduction of new varieties of sugar cane that give better extraction rates. Other avenues, such as offshore production in nearby African countries, are also being studied, but the incentives required to make these successful fail to convince.

Measures are also being adopted in the manufacturing sector. There also, Mauritius faces hardship, for many countries have become more competitive. As the cost of living increases, and hence, the cost of labour, Mauritius struggles to stay on par. Meanwhile, other countries, such as China, have larger supplies of cheap labour which allow them to keep their costs of production low and, thus, retain a clear advantage in exports.

Is Mauritius doomed? Not yet.

The tourism industry is still alive and bringing money into the country. But, tourism is also a very volatile industry. There are too many factors that can impact it. For example, in recent years, the risk posed by terrorism and diseases has negatively affected the performance of that sector. The dilemma faced by the government is whether to make the market more accessible and thus increase the number of arrivals or maintain the statu quo and instead strive to improve the quality of service in order to attract the higher end of the market.

The Information Technology sector could also be another saviour for the economy, but returns on investments are few and far apart. This is mostly because Mauritius has one major obstacle to overcome to boost this sector: its educational system is unable to produce the large number of skilled workers required to drive this sector forward. There are already measures put in place: partnerships have been established between Mauritian and Indian companies, amongst other incentives to attract foreign investment. But, the government should also try to retain the qualified IT labour force in Mauritius. One big problem IT consulting firms are facing in China, for example, is employee turnover. If Mauritius can demonstrate that it has the motivation and resources, investors will come.

If Mauritius survives this economic crisis, it will enjoy a revival not too unlike what it witnessed two decades ago with the boost of its manufacturing industry. Perhaps, it will also be a lesson learnt the hard way by the government. If not, only new preferential trade agreements will take it out of this gloomy period.