Download Mauritius

NS4301
Summer 2015
Mauritius Economy
Overview
• Jeff Frankel, “Mauritius: The Little Economy that Could,”
Foreign Policy February 2, 2012
• Mauritius is considered an African success story
• One of the top economic performers in the region
• Income per person exceeds $15,000 – more than Turkey
or Brazil
• Article contends
• there has not been one unique ingredient to the country’s
success,
• but a number of lessons as to what can propel economic
development
• Few people predicted success for the country
2
Mauritius I
• In the 1960s, British economist James Meade concluded
“outlook for peaceful development poor” because:
• High population density, reliance on a single crop (sugar cane),
ethnic conflict.
• Also country isolated far from markets for its exports or tourism
• Instead Mauritius’ economic success built on a steady
pace that spread the wealth.
• Between 1970 and 2010 GDP grew at an average annual rate of
5.4% compared with the African average of about 1%.
• Mauritius ranks second in Africa (after Seychelles) on the
UN’s Human Development Index
• Mauritius’ commitment to open trade and rule of law do
correlate well with growth.
3
Mauritius WEF I
4
Mauritius II
• What made Mauritius choose the virtuous path?
• Mauritius’s human history did not start promisingly
• Original Dutch occupiers stripped island of its valuable
ebony trees in the early 17th century
• French then imported African slaves to grow sugar cane.
• But with British rule (beginning in 1814) island began to
enjoy “good globalization..
• Slavery was abolished
• Sugar plantations learned to make do with indentured servants –
500,000 imported from India
• During next century British gradually extended political
rights to all literate adults
• Sugar production rose steadily
5
Mauritius III
• Underlying the economic success of Mauritius since
independence (1968) are two key factors
• First unlike other African countries, the country rapidly
developed a manufacturing sector (specializing in textiles
and clothing
• Second Mauritius has successfully navigated the global
economy upon which it is so dependent
• It managed to contain the damage from the oil price shocks of
the 1970s and
• It took in stride the successive losses of preferred access to rich
country markets for sugar and apparel
6
Mauritius IV
• Mauritius success did not demand novel policies
• Country focused on export growth
• Maintained a business friendly climate
• Pursued effective diplomacy to sustain access to critical global
markets
• Took care to prevent its currency from becoming overvalued and
• Spent enough on education to create a productive labor force
• Standard policies advocated by World Bank/IMF
• However if the policies don’t mesh with local politics and
institutions they are unlikely to take root.
• In Mauritius a powerful synergy between democracy and
economic growth.
7
Mauritius V
• Unlike most newly independent African countries,
Mauritius created political institutions that:
• Gave a voice to rural poor and
• Ethnic minorities
• Also important, Mauritius chose not to establish a
standing army
• Likely saved it from military coups
• Saved a lot of money which was spent of education and
infrastructure
• Clearly good institutions can lead to prosperity
8
Mauritius VI
• Country offers three major lessons in what would sustain
growth in other African countries
• First, trade is the key to growth
• Openness forces economic interests to compete in global
markets and
• Deters rent-seeking – that is creating pockets of economic
privilege and hanging on to them
• Second the economic consequences of deep ethnic
divisions can be moderated
• by a political structure that is truly inclusive and prevents winner
take all outcomes
• Third, even in relatively underdeveloped countries,
democracies an manage painful economic reforms
• a sense of inclusiveness makes it easier to impose collective
sacrifice
9
Voice and Accountability
Percentile: Voice and Accountability
80
75
70
65
60
55
50
45
40
35
1996
2000
2003
2005
2007
2009
Source: World Bank, Worldwide Governance Indicators, 2014
2011
2013
Country/Group
MAURITIUS
MOZAMBIQUE
NAMIBIA
SOUTH AFRICA
Average
10
Percentile: Political Stability/Absence of Violence
Political Stability/Absence of Violence
100
90
80
70
60
50
40
30
20
1996
2000
2003
2005
2007
2009
Source: World Bank, Worldwide Governance Indicators, 2014
2011
2013
Country/Group
MAURITIUS
MOZAMBIQUE
NAMIBIA
SOUTH AFRICA
Average
11
Percentile: Government Effectiveness
Government Effectiveness
80
75
70
65
60
55
50
45
40
35
30
25
1996
2000
2003
2005
2007
2009
Source: World Bank, Worldwide Governance Indicators, 2014
2011
2013
Country/Group
M AURITIUS
M OZAMBIQUE
NAM IBIA
SOUTH AFRICA
Average
12
Regulatory Quality
Percentile: Regulatory Quality
80
70
60
50
40
30
20
1996
2000
2003
2005
2007
2009
Source: World Bank, Worldwide Governance Indicators, 2014
2011
2013
Country/Group
M AURITIUS
M OZAM BIQUE
NAM IBIA
SOUTH AFRICA
Average
13
Rule of Law
90
Percentile: Rule of Law
80
70
60
50
40
30
20
1996
2000
2003
2005
2007
2009
Source: World Bank, Worldwide Governance Indicators, 2014
2011
2013
Country/Group
M AURITIUS
M OZAM BIQUE
NAMIBIA
SOUTH AFRICA
Average
14
Control of Corruption
Percentile: Control of Corruption
80
75
70
65
60
55
50
45
40
35
30
25
1996
2000
2003
2005
2007
2009
Source: World Bank, Worldwide Governance Indicators, 2014
2011
2013
Country/Group
MAURITIUS
MOZAMBIQUE
NAMIBIA
SOUTH AFRICA
Average
15
Future TFP I
Considerations for the future
• IMF, “Namibia: Selected Issues, February 2014 Policies
that can raise potential growth in small middle-income
countries of SSA
• Want to look at long term declining rates of growth
• Find TFP total factor productivity is the key
• Look for ways to increase TFP
16
Future TFP II
17
Future TFP III
18
Future TFP IV
• Past actions taken by government that improve TFP
• Addressed the infrastructure gap in 1980s by ensuring
country-wide coverage of basic infrastructure services
• Electricity,
• Water and
• Telecommunications network
• Country’s strong legal and institutional framework
attracted massive inflows of FDI during late 1980s and
early 1990s
• More recently government has sought public-private
partnerships with foreign investors to invest in
• Electricity generation and
• Port infrastructure
19
Future TFP V
• Country has benefitted from investment, expertise and
technical know-how of Hong Kong and Chinese
businessman
• These entrepreneurs developed textile and apparel
industry
• Initiated the country’s export-processing zone (EPZ)
industrialization phase
• Still many challenges remain
• Although economy relatively diversified, still reliance on
European markets for trade and tourism
• Structural labor problems including youth unemployment
20
Future TFP VI
21
Future TFP VII
22
Mauritius: Economic Freedom I
23
Mauritius: Economic Freedom II
24
Mozambique: Economic Freedom II
25
South Africa/Mauritius Overall Economic Freedom Trends
26
Mauritius: WEF II
27
Mauritius WEF III
28