Republic of Mauritius

INDUSTRIALISATION THE MAURITIAN EXPERIENCE

By Sen Narrainen

Ministry of Finance

Challenges at independence in 1968Achievements: 1968 to 2012Main drivers behind the Mauritian industrialisation and development successThe Mauritian Development ModelThe industrialisation strategiesThe three waves of diversification

Conclusion

OUTLINE

“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

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: .50Poor infrastructure

The challenges at independence 1968

Most indicators were off the normHigh and rising unemployment: 16 %Low adult literacyPoor housing quality: > 50% prone to

damage by cyclonesInfant mortality rate: 58 per 10,000

birthsLow enrolment ratio at secondary

schools: 31.4

The challenges at independence 1968

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

The achievements: 1968 to 2012

WHAT ARE THE MAIN DRIVERS OF

THE MAURITIAN INDUSTRIALISATION

AND DEVELOPMENT SUCCESS?

Diagram 1. The Mauritian model

1968 to 1972Import substituting

industrialisation

1972 to 2006Mix of import substituting and

Export oriented industrialisation

2006 +Globally competitive

Model

InstitutionsEthnic

Diversity

Class of indigenous

entrepreneurs

Well structured Private sector

Public infrastructure

Diversification

Developmental state

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 Strategy: 1968 to 1972

Outward-looking/export marketsThe Export Processing Zone Incentive schemes Choosing winners/ Priority sectorsFrom a labour-intensive to a capital-intensive phase

ISI-EOI: Main features

Encouraging outbound investment so as to shift to high end production

Economic liberalisation/adapting to global influences

Building institutional capacityDiversification Transfer of knowledge, technology and ideas

ISI-EOI: Main 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

GLOBALLY COMPETITIVE MODEL:CENTRAL FEATURES

Surging FDIs Resilient economy: passed the test of external

shocksSurging petroleum and food pricesFinancial mayhemWorld wide great recessionEuro crisisPolitical 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

Outcomes of the Globally Competitive Model

Macroeconomic Unit /

Diagram 2. Three Waves of Diversification

1970s: Mono-cropSugar - 70% of export revenue

1970s and1980s: First WaveTourism, Textiles, Financial Services

1990s: Second WaveOffshore centre, freeport, ICT/BPO,Seafood hub.

2006 + : Third WaveLuxury villas, Real Estate, Knowledge and Health Centres of Excellence, Renewable energy, Creative Industry, OCEAN STATE

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

Conclusion: Going Forward

Republic of Mauritius Ministry of Finance and Economic EmpowermentMacroeconomic Unit /

Thank You!