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Republic of Mauritius From Mono crop to Diversification and Economic Resilience Republic of Mauritius Ministry of Finance and Economic Empowerment Outline 1. Economy at Independence 2. Development Strategies and Basis of Success 3. Economic Diversification 4. Importance of Tourism Sector 5. Mid 2000s Fundamental Reforms 6. Impact of Reforms 7. Impact of crises and Measures taken (2008 onwards) 8. Achieving Success: Mauritian Development Macroeconomic Unit / Background: At Independence Economy Income per Capita Unemployment Monocrop: Sugarcane Sugar >91% of total fob exports USD 200 High and rising unemployment ( >16%) Low School Enrollment State of Mauritius in 1968 Quality of Living Demographics labour and capital productivity Low in both Primary & Secondary Low Standard of Living Poor access to Water, electricity & Decent dwellings Growth rate of 3% Low Life Expectancy (61 male; 66 female) High Infant Mortality (64) Poor Infrastructure Infrastructure Monocrop to Diversification and Economic Resilience 2006 + : Open economy with Diversified Services Income per capita @ $8600 (2011) 1990s: Export of Services Income per Capita @ $3000 1980s: Industrialization & Tourism Development Income per Capita @ $1500 1970s: Sugar - 70% of export revenue Income per Capita @ $ 200 Macroeconomic Unit / Development Strategies Primary goals: Industrialisation, Diversification, Employment Creation Building blocks for economic independence 1st Strategy: 1960s 2nd Strategy: 1970s From middle to high income 3rd Strategy: 2006+ Mix strategy of import substituting and export led industrialisation Paradigm shift to openness and global competitiveness (Tea, Tobacco) Tourism Use of preferences (EC and US sugar quotas; Multi-Fibre Agreement quotas; African Growth and Opportunity Act) Transition to services economy and move from 4 to 8 pillars Widen Circle of Opportunities Empowerment & Solidarity Maurice Ile Durable Corporate Social Responsibility Economic diversification: From low to middle income Agriculture Tourism Labour intensive -import substituting industrialisation Population Control Rural Development Programmes Investment in road network, education and other basic infrastructure Basis of Success in 1970s Favourable Climatic Conditions specially in early 1970s Very High Sugar Prices in Both Quota and Non-quota Markets Sugar Protocol Arrangements Non-Reciprocal preferential market access under Lomé Convention Industrialisation and Consolidation of Labour Intensive EPZ Industry Fiscal and Monetary Incentives to EPZ Enterprises Government Pump Priming Policies for Infrastructure Development Successful Sectoral Specific Policies in Diversification and Consolidation of Economic Base i.e., EPZ and Tourism Political Stability Enabling Institutions Basis of Success in 1980s Successful Stabilisation Programme Stand-by Arrangements Structural Adjustment Lending Devaluation Containment of Public Recurrent Expenditures Tightening of Domestic Credit Liberalisation of Deposit and Lending Rates Removal of Restrictions on Imports Major Changes in Industrial Policies Export Led Industrialisation Recovery of World Economy By Mid 1980s Strengthening of Economic Ties with Asia and Europe Lome Convention Sound Macroeconomic Management Consensus Building and Social Safety Nets Cheap Supply of Educated Labour Force Flexibility and Adaptability of Workforce – Bilingual and high mobility of labour Strong Public/Private Sector Participation with government playing a facilitating role Commitment to Success Culture of Hard Work and Saving Political Stability Evolution of Key Sectors 1990-2011 30.0 1990 25.0 20.0 15.0 10.0 5.0 0.0 2000 2005 2011 Tourism Sector and Market Diversification No. of Hotels and Tourist Nights Tourist Earnings (Rs bn) and Tourist Arrivals (000s) 1200 45 40 35 30 25 20 15 10 5 0 1000 800 600 400 200 0 1 2 3 4 5 6 7 Tourist Earnings(Rs bn), RHS 70.0 8 9 10 11 12000 115 10000 110 8000 105 6000 100 4000 95 2000 90 0 12 85 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Tourist Arrivals (000s) No.of Hotels (RHS) Tourist Nights % of Tourist Arrival by Region 60.0 50.0 2009 40.0 2010 30.0 2011 20.0 10.0 0.0 EUROPE AFRICA Macroeconomic Unit / ASIA OCEANIA AMERICA OTHER & N.STATED With Euro Crisis Mauritius has been investing in market diversification: India, China and Russia Tourism Sector Tourism growth Earnings rate (Rsand bn)share of GDP (%) Tourism Employment (thousands) 14.0 45.0 40.0 12.0 40.0 10.0 35.0 35.0 8.0 30.0 6.0 25.0 4.0 20.0 2.0 15.0 0.0 10.0 -2.0 30.0 25.0 20.0 15.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 10.0 2011 5.0 5.0 -4.0 -6.0 0.0 -8.0 % growth rate % of GDP 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Macroeconomic Unit / 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Mid 2000s Fundamental Reforms & New Development Paradigm Maurice Ile Durable Doing Business Environment Investment facilitation Greater openness/attracting foreign capital, skills, talents, expertise, ideas Fiscal Policy Reforms Low flat income tax rates of 15% Tax expenditure reforms PFM Reforms Labour Market Reforms Reducing energy consumption Leveraging renewable sources: Solar, Wind, Ocean-based Arts & Culture Promotion & Development of artists via: grants, training, and festivals (Kreole, Film) Solidarity From job protection to worker protection Targeted social safety nets Empowerment programme Flexibility Social housing Workfare Education & Healthcare CSR Vulnerable Groups Empowerment Programme Trust Fund National Empowerment Fund(NEF) targets the highly vulnerable Operates via NGOs/Grassroot movements Building material for housing Training programmes in Literacy & Numeracy, and Life-skills Transport/Shoes/Food for K-6 Special programme for re-training of unemployed women Microcredit schemes Intergrated Social Development (Housing) Programme: Eradication of Absolute Poverty EAP & Ministry of health conducting screening of children to provide glasses, hearing aids, and provide for other disabilities Lease-to-buy over 25yrs Civic, Literacy & Numeracy training Job placement for at least one adult in household Collaborates with trust fund on educating children in K-6 Use of “green” technology: biogas, composting, solar heaters Collaborates with NEF on the integrated social development approach Widening the Circle of Opportunities Widening the Circle of Opportunities Shift in Labour Market From Manufacturing (Sugar/Textiles) to Services (Tourism/Tech) Workfare programme emphasising training & re-skilling Training programme for unemployed women Creation of better post-college institutions offering wider curricula Support for development of new entrepreneurs & SMEs Assistance for outsourcing and encouraging the virtual office Maurice Ile Durable Reducing Energy Consumption Alternative Energy Sources Incandescent bulbs replaced with CFLs (1 Million to date) Wind turbines in Mauritius & Rodrigues (almost operational) Government subsidy for solar water heaters Mini-hydropower stations Bus modernisation scheme Replacement of fleets with energy efficient and less polluting buses Street & Traffic light replacement Large scale composting for agriculture Waste to Energy Gas(Landfill) to Energy 12 Impact of Reforms Real GDP Growth Rate & Unemployment Rate (%) Unemployment rate 80 GDP Growth 70 10 Unemp falling 8 Public sector debt as a share of GDP Improved debt ratio 60 6 50 40 Rising Growth 4 30 20 2 10 0 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 0 16 Exports of goods and services (Rs bn) 14 200.0 Growth in Exports of goods and services 160.0 140.0 12 Rs bn 180.0 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 FDI (Rs bn) & Investment Rate (% of GDP) Improved FDI & Investment Rate 25 23 R a t 21 e 10 120.0 100.0 8 ( 6 80.0 27 ) 19 % 4 60.0 40.0 17 2 20.0 0 Macroeconomic Unit / 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 0.0 15 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 FDI GDFCF as a % of GDP Economic Success AFRICA • 1st. for Doing Business environment, • 1st open economy, • 1st. in paying taxes index, • 1st. in 2011 Mo Ibrahim Index, • 1st. in Global Competitiveness Index 2011-12, • 1st. in Travel & Tourism Competiveness Report 2011, • 1st. in Global Information Technology Report 2010-11, • 1st.Global Gender Gap Index 2011, • 1st. in Open Borders Index 2011, • 1st. in Democracy Index 2011) • 1st.2010 Environmental Performance Index, • 1st.in Quality of Life Index 2011, • 1st. in Political Instability Index 2009/2010, • 1st. in Women’s Economic Opportunity Index 2010, & • 1st. in Knowledge Economy Index. Macroeconomic Unit / AMONG THE TOP WORLDWIDE • 2012 Index of Economic Freedom • 2012 Doing Business Index • 2011 Democracy Index • 2011 Fraser Institute Index of Economic Freedom • 2011 Forbes Survey for Best Countries for business • 2010 Environmental Performance Index • 2009 Social Institutions and Gender Index Impact of Crisis Risk of: • Job losses in in Export Oriented Sectors & slowdown in job creation in other sectors • Slowdown in Textile, Tourism, Construction and Real Estate sectors • Drop in export volume of Textile/Apparel & non-Textile manufacturing and drop in growth of tourist arrival • Stagnation in FDI flows & drop in Private sector Investment rate • Possible deterioration in revenue buoyancy of Government, leading to a deterioration in debt ratio Managing crisis/building resilience Measures to unlock growth Opening economy for international investment flows, increased labour mobility (including circular migration) and incentive for innovation and technology transfer Maintaining a simple and investment friendly tax regime Level playing field for local and foreign economic operators Increased investment in capacity building Front loading public sector investment Reviving the micro, small & medium enterprise sector Fiscal Consolidation Reprioritizing spending to improve public sector investment Restructuring public enterprises Contingency planning Special package to address challenges arising from worsening of global economic conditions Macroeconomic Unit / Performance of the economy – Before and after the crisis 12.0 Real Growth Rate (%) 10.0 8.0 6.0 4.0 2.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 12.0 Inflation rate (%) Real GDP per capita growth rate 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 12.0 10.0 10.0 8.0 8.0 6.0 6.0 4.0 4.0 2.0 2.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Unemployment Rate (%) 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Labour Net Job Creation (000s) 25 18 Unemployment Rate (%) 16 20 14 12 15 10 8 10 6 4 5 2 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Growth in Labour productivity (%) 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Base Year: 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Male Female Total Unemployment Social Indicators Social Functions Expenditure & components as a % of GDP 6.0 13.5 13.0 5.0 12.5 4.0 12.0 3.0 11.5 2.0 11.0 1.0 10.5 0.0 10.0 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 Jul -Dec 2009 2010 Housing and community amenities Health Recreation, culture, and religion Education Social protection Social Functions Expenditure (RHS) 2011 Addressing Youth Unemployment reforms • National Youth Employment Program: building capacity and promoting/ sponsoring employable skills among the youth through intensive training for positions and provision of basic job readiness skills as well as some trade-specific abilities; assist the young person to sustain the employment throughout a period of time; build a dynamic pool of skills based on demand from industry thereby leading to a reduction in foreign /imported labour. • Encourage higher participation of women aged 16-25 years. • Huge possibilities for employment on cruise ships; dispensing training through the hotel training school (both public and private) • Developing a contractual employment program with other countries necessary training and skilling is given to secure higher-end and skilled jobs in these countries where such skills are required. Macroeconomic Unit / Government – Private Sector – Civil Society Development Partners Close Govt Private The People Consultations between Government and the Private Sector Development partners play a key role by providing financial and technical support Encouragement of Civil Society Organisations Emphasis on Corporate Social Responsibility following tax cuts Innovative CSR tax to encourage private sector to work with Civil Society on tough social issues Thank You! Macroeconomic Unit / Republic of Mauritius Ministry of Finance and Economic Empowerment Government The Legislature The National Assembly Maximum 5 year term 3 MPs elected first-past-the-post in 20 constituencies 2 MPs for Rodrigues 8 MPs elected to normalise representation of minorities The Executive The Cabinet The Prime Minister heads the Government The President of the Republic nominates the Prime Minister from coalition with majority in the National Assembly The President 5 year term Elected by the National Assembly Largely figurehead role (UK, Commonwealth and Israeli model) The Judiciary The Constitution Mix of British & French laws Nomination of Judges to the Supreme Court Chief Justice is nominated by the President after consultation with the Prime Minister Puisne Judges nominated by the President with consent Judicial and Legal services commission The Courts The UK Privy Council The Supreme Court Intermediary Courts Mauritian Rankings 2012 Index of Economic Freedom : 1st in Sub-Saharan Africa 2012 Doing Business Index : 1st in Sub-Saharan Africa Global Competitiveness Index 2011-12 : 2nd in SubSaharan Africa Travel & Competitiveness Report 2011: 1st in Sub-Saharan Africa 2011 Mo Ibrahim Index: 1st in Africa Network Readiness Index: 1st in Sub-Saharan Africa Triple Shock of 2005 1 Dismantlement of the Multi Fiber Agreement 2 End of preferential EU sugar prices 3 Soaring Energy Prices (~$30 to $60 for a Barrel) Brief History Île de France French Colony 1715 - 1810 Mauritius English Colony 1810 - 1968 Mauritius Independent 1968 - Present