“Mauritius at another inflection point” An Introduction by Nikhil Treebhoohun Hennessy Park Hotel, Jan 16,2015 Website: .

OIM DIALOGUEOxford International Mauritius“Mauritius at another inflection

point”

An Introduction by

Nikhil TreebhoohunHennessy Park Hotel,

Jan 16,2015

Website: www.oxfordmu.com

What is OIM?

Set up in 2011

Link between Africa and Asia

Association with Oxford International Associates

Consultancy, Advisory, Research, Training

OIM Recent Assignments I

Facilitated a brainstorming session for the Financial Services Commission (Mauritius) on the future of the financial services in Mauritius. Subsequently published a book – ‘ A Roadmap for the Mauritian Financial Services Industry’

Contributed to the Overseas Development Institute(ODI)-led report: European Report on Development 2014: Financing and other means of implementation in the post-2015 context - Mauritius Country Illustration

Prepared a feasibility report on Social Housing for the Mauritius Chamber of Commerce and Industry

OIM Recent Assignments II

Reviewed a report for the International Organization for Migration (IOM) on the Migration Profile for Mauritius

Facilitated a brainstorming workshop for the IOM on the development of a Migration policy for Mauritius

Produced a report for the IOM: Towards the Development of a National Migration and Development Policy for Mauritius

OIM Recent Assignments III

Resource Persons:

ODI workshop in February 2014 in Bangladesh on Economic transformation of Mauritius and on the Restructuring of the Textile Industry in Mauritius

UNDP at a workshop in October 2014 in Malawi organised by the Economic Association of Malawi

SASPEN and FES international conference on Social Protection for Migrants in the SADC – spoke on the movement of business people within the African sub-region.

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Forecasting the future through:

LINEAR EXTRAPOLATION

OR

FORESIGHT (Mind of the Fox –Clem Sunter)

Competitiveness Foresight or Dialogue

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Linear extrapolation cannot be the sole method for policy making

Anticipating the future based on collective knowledge/intelligence of key stakeholders was the basis for Competitiveness Foresight (CF)

3 day structured discussions with an independent facilitator who challenges conventional and politically correct thinking

CF

OIM

Selected Strategy DocumentsSome documents involving OIM personnel:Quo Vadis? (1997) by Percy Mistry originally

written for Industry Focus, EPZDA’s magazineCompetitiveness Foresight (2004) led by Nikhil

Treebhoohun and facilitated for NPCC by Percy Mistry

Exports of tradeable services in Mauritius(2008) by Percy Mistry and Nikhil Treebhoohun for Commonwealth Secretariat

Roadmap for the Mauritian financial services industry (2014) by Percy Mistry following a brainstorming for the FSC

NIS QUESTIONS (2004) National Innovation Summit (NIS) organised by NPCC to discuss

how Mauritius could move on a higher growth curve

Have we reached the limits of our production possibilities?

What type of innovation is required to take us on a high-growth path?

Do we have enough competencies to identify the new sources of growth?

Do we have enough resources to support new sources of growth?

How do we make Mauritius more attractive to the outside world in the new environment?

What are we willing to trade-off to have higher growth?

KEY CHALLENGE (2004) which formed the basis for the CF

With Mauritius’ future as a sugar producer looking bleak, powerful competitive pressures being placed on textiles and garments exports, OECD placing limits on financial sector competition, and finite limits on high value tourism, what should the island’s strategy for growth and development be for the next 10 years and beyond?

What orientations for Mauritius?

GDP Trend under 2 Scenarii

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

1990 1995 2000 2005 2010 2015

Year

GD

P a

t c

on

sta

nt

19

92

pri

ce

s (

Rs

M)

GDP (1992-2004)

GDP (2005-2014)-4%growthGDP (2005-2014)-8%growth

Economic growth rate

-15

-10

-5

0

5

10

15

20

25

1970 1975 1980 1985 1990 1995 2000 2005 2010

Year

GD

P gr

owth

rate

(%)

What Happened after 2004: 19

76

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

-12.0 -11.0 -10.0

-9.0 -8.0 -7.0 -6.0 -5.0 -4.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0

10.0 11.0 12.0 13.0 14.0 15.0 16.0 17.0 18.0

Evolution of Annual Real GDP Growth, 1976 - 2013

Gro

wth

Rat

e, %

Employment by Sector

1970 1980 1990 2002 2010 20140

20

40

60

80

100

120

Employment Trends by Sector, 1970-2014

SugarcaneManufacturingEPZ/ TextilesConstructionHotel and restaurantsFinancial and insurance activitiesPublic administration and defence, etc.

Num

ber E

mpl

oyed

, '00

0

Poverty and income distribution

2001/2002 2006/2007 2012

Gini Coefficient 0.371 0.388 0.413

Percentage of total household income accruing to

Lowest 20% of households 6.4 6.1 5.4

Highest 20% of households 44.0 45.6 47.4

Poverty Line: Half median monthly income per adult equivalent

Rs 2,804 Rs 3,821 Rs 5,660

Proportion of poor households (%) 7.7 7.9 9.4

Estimated number of poor households 23,700 26,400 33,800

Source: EDR Report, 2014

GDP per capita under different scenarii of economic growth

Average Annual Growth rate (%)

3 4 5 6 7 8

Year where 2003 GDP per capita doubles(Population growth of 1% per annum)

2039 2027 2021 2018 2015 2014

WAY FORWARD I (proposed by CF)

Multidisciplinary technical teams:

Examine fully the consequences and work out the implications for opening up in terms of essential changes in policy and the administration of policy as far as the following are concerned :

- fiscal policy, monetary policy, exchange rate policy, immigration policy, urban development policy and FDI entry/exit policy, changes in government behaviour and business behaviour

WAY FORWARD II

Outline a marketing strategy for selling brand Mauritius to the world as the best platform on which to undertake globally orientated ICT/BPO business, and

To work out a roadmap for managing "the transition”.

OBJECTIVES (as identified by CF in 2004)

To attract high skilled manpower

To review the marketing strategy and branding of Mauritius

To develop competent leadership at all levels with emphasis on governance and meritocracy

To gear foreign policy towards achievement of the above objectives

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By Percy S Mistry

Oxford International Consultants (Mauritius) - OIM

Hennessy Park Hotel

16th January 2015

Mauritius at another Inflection point:Earning a Living in an Uncertain World

Oxford International Consultants (Mauritius) Ltd.

OIM

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MAURITIAN GROWTH Diagnosing Inflection Point

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Chart 1: Evolution of Annual Real GDP Growth rates (%), 2000-2013

Waning Growth

o A reduction of growth from 5% to 3.5% is a magnitude reduction of 30% and an annual 'loss' of around US$180 million in GNI in the last five years

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013+0.0

+2.0

+4.0

+6.0

+8.0

+10.0

+12.0

+10.2

+4.6

+1.6

+6.3

+4.3

+2.7

+5.6

+5.7+5.5

+3.1

+4.2

+3.6 +3.4 +3.2

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Source: Statistics Mauritius

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WHY GROWTH FALTERED?‘Exo’ v/s ‘Endo’ Factors

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1. The global crisis which affected every country

2. Slowdown in Indian growth which almost halved from 8.5% to 4.5%.

3. Slowdown in Chinese growth from 10% to below 7.5%

4. A virtual collapse of the Eurozone economy since 2011 affecting MRU directly

5. Global decline in investment and fixed capital formation -- public and private.

Exogenous FactorsI

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6. Slowdown in global tourism from 2009-2013

7. Relatively high global commodity prices until their belated collapse in 2014

8. Much slower growth of global trade and investment flows. 

9. An existential crisis for the Euro supposedly resolved only to be revived -- Grexit?  

Exogenous Factors II

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1. From 2010 onwards MRU has been running higher twin deficits (fiscal and CAD).

2. Public & Private investment in infrastructure and 'output capacity' have declined dramatically creating bottle-necking problems for the future. MRU is now seriously infrastructure and connectivity deficient in every infrastructural sub-sector. 

3. The MRU budget has become progressively imbalanced in over-supporting consumption (welfare support) and under-supporting capital investment in infrastructure and parastatals over a prolonged period of time.

Or Endogenous Factors I

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4. MRU under-investing substantially in improving the quality (and quantity) of its human, social and  institutional capital Given the changes occurring in the nature of the global economy these are more important than financial and physical capital. 

5. MRU's reliance on the Indian DTAA and Chinese capital is now becoming a liability

6. Switching focus to African and ASEAN market opportunities is too slow.

7. Domestic political developments have created uncertainties that have been inimical to growth

Or Endogenous Factors II

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8. Economic 'democratization' (reducing wealth/income disparities) remains as elusive as ever. 

9. Physical and electronic connectivity with the rest of the world remains a critical issue. 

10. MRU is too deeply connected to a sclerotic EU which will be very slow to reform and recover and not enough to the more rapidly recovering US and UK.

Or Endogenous Factors III

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Quo Vadis?

Where are we heading to now?

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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013+0.0

+1.0

+2.0

+3.0

+4.0

+5.0

+6.0

+7.0

Déjà Vu?

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Investment  2007 2008 2009 2010 2011 2012 2013

GDFCF by Type of Capital Goods  

A. Building & construction work +17.0 +13.3 +7.7 +7.0 -2.1 -1.1 -10.2

Residential building +6.8 +18.0 +8.1 +13.7 +14.1 -4.5 +3.0

Non-residential building +49.2 +12.2 -0.8 -2.1 -21.0 +2.9 -17.5

Other construction work -17.4 +8.1 +30.8 +15.8 +6.6 -0.8 -21.4

B. Machinery and equipment -6.7 -15.8 +11.4 -15.3 +9.6 -0.2 +8.6

Machinery and equipment (exc. aircraft & marine vessel)

+9.0 -9.1 +0.8 -2.3 +9.6 -0.2 +0.4

Passenger car +32.7 +5.6 -25.8 +19.3 +2.3 +12.2 -6.0

Other transport equipment -38.0 -41.1 +70.3 -58.8 +10.7 +13.9 +56.2

Other transport equipment (excluding aircraft & marine vessel)

+19.3 -5.1 -14.9 +4.1 +10.7 +13.9 -12.0

Other machinery and equipment +3.3 -12.7 +9.2 -6.7 +11.0 -4.7 3.9

Gross Domestic Fixed Capital Formation

+5.9 +1.3 +8.9 -0.7 +1.4 - 0.8 - 4.3

Source: Statistics Mauritius

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How to Get There?

Things to be considered: Global Events & Exploitable Opportunities

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(a) Export more (especially high-value services)

(b) Entrench itself in new markets

(c) Exploit marine resources more rapidly and efficiently

(d) Transforming economy to adjust more effectively to a rapidly changing, more technologically intensive, global economy. (esp. human and institutional capacities )

Objectives for 2015 to 2020

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Geopolitical developments that will influence, directly and indirectly, its destiny:

1. Acceleration of ICT continuing to transform manufacturing, services, global payments and settlement systems, transforming all human activities as well as all manufacturing and service processes, while disrupting traditional notions of employment and labour markets. 

2. The global impact and implications of China's gradual transformation over the next decade from an exporting to a domestic consumption economy

3. The global impact of oil-exporting (OPEC) countries probably becoming capital deficient instead of capital surplus thus affecting the investment capabilities of their SWFs and influencing the magnitude and direction of global portfolio capital flows.

Issues to be Anticipated I

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4. Implications of the massive (excessive?) sovereign debt build up (coupled with continuing fiscal deficits) across the developed world which will also affect aid, trade and investment flows.

5. The relative decline of the BRICS and the concomitant rise of other faster growing emerging markets; especially in Africa, Asean and Central/West Asia.

Issues to be Anticipated II

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Key geopolitical developments:

1. 'Russian problem' : Impact on the US, EU, Middle East, Asia?

2. The fractured future of the Arab world - its impact on Africa and the Mid-East. 

3. The possible political instability of the UK. The future of Scexit and Brexit.

Key Geopolitical Developments I

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4. Increasing possibility of Grexit - its impact on destabilizing the Euro: opening the door to other Euro-exits, inability of France and Italy to address their economic problems, and more pressure on keeping the Eurozone intact.

5. Decline of Brazil and Rise of Mexico; Opening up of Cuba; Collapse of Venezuela and these implications for the US and Western hemisphere. Implications for MRU?

6. Possibility of Indian revival back to a 7-9% growth rate, offset by a decline in China's growth to 5-7% with Asean growth also at 5-7%. Implications for MRU? 

Key Geopolitical Developments II

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7. The future development of South Asia under Indo-Chinese competition and cooperation. 

8. The future of the Arabian peninsula and Iran? Redrawing the post-colonial Mid-East? 

9. The future of Central Asia and of Myanmar (which presents a major opportunity for MRU that it seems completely blind to) where South Asia joins East Asia.

10. The future of Australia with China's transformation

Key Geopolitical Developments III

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Acceleration of Technology:- Continuing to transform manufacturing, services,

global payments and settlement systems, - Transforming all human activities, manufacturing and

service processes, while disrupting traditional notions of employment and labour markets. 

China's gradual transformation from Exporter to Domestic Consumption economy:

- Global impact- Implications

Discussion: Issues to be Anticipated I

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The global impact of oil-exporting (OPEC) countries :- Probably becoming capital deficient instead of capital

surplus - Maybe affecting the investment capabilities of their

SWFs and influencing the magnitude and direction of global portfolio capital flows.

Implications of the massive sovereign debt build up across the developed world (coupled with continuing fiscal deficits):

- Effect on aid, trade and investment flows.

Relative decline of the BRICS:- Concomitant rise of more faster growing emerging

markets- Specifically in Africa, Asean and Central/West Asia.

Discussion: Issues to be Anticipated II

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At the Inflection Point

Things to be done between 2015 and 2020 to stimulate growth back to 5-

7%

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1. Core government and fiscal policy shift emphasizing investment over consumption.

2. Stability of monetary policy by repressing inflation and stabilizing the MUR exchange rate vis-a-vis the Euro (which means devaluing it against the USD for the next year or so).

3. Focus on human, social and institutional capital development in public policy. What does that mean specifically. Invite interactive ideas/discussion from invitees. 

Boosting Growth: WHAT to do I

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4. Adapt MRU to cope with a more IT-intensive world; which means upgrading skills, encouraging IT entrepreneurship, improving domestic logistical and delivery systems, opening up more to foreign influences, using MRU as an incubator for IT-induced change and then replicating MRU experience in Africa.

Boosting Growth: WHAT to do II

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1. Making MRU a pioneer in applying IT to more advanced future payments systems.

2. Accelerating change in land use away from sugar to civilized urbanization. 

3. Using capital markets more efficiently to achieve economic democratization.            

4. Implementing the OIM Roadmap for transforming Financial Services

5. Create similar roadmaps for infrastructure, tourism (into higher value higher yield products) and marine resources development. 

Boosting Growth: HOW?

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