ECONOMY-MAURITIUS: Globalisation “Gobbles Up the Plankton”

By IPS Correspondents Reprint | | Print |

Nasseem Ackbarally

PORT LOUIS, Jan 24 2007 (IPS) - ‘‘How much do you open, at what pace, and what measures do you take as a government to help local enterprises to restructure?’’

This is the question that arises for Amedée Darga, a trade consultant, when confronted with the ‘‘somewhat controversial’’ eighth goal of the United Nations’ Millennium Development Goals (MDGs). The goal includes the further development of an ‘‘open’’ world economic system.

Similarly, Indur Fagoonee, vice-chancellor at the University of Mauritius, feels that ‘‘globalisation gobbles up the plankton’’. He is referring to small island developing states that struggle to adjust to the frenzy of a global market.

For some countries, the shunning of national boundaries—the integration and interlocking of systems of production, of finance and capital and liberalising markets—have produced remarkable wealth and economic growth.

But small island states such as Mauritius are facing threats on a number of fronts. While they are in a race to boost economic and social development, social and economic vulnerability and environmental sustainability continue to be problems.

Little wonder that someone like Fagoonee feels there is ‘an ominous ring to the word globalisation’.

This ‘ominous ring’ is caused, for example, by developed states’ continuing pressure on developing states in the World Trade Organisation (WTO) to not only open their markets to foreign companies but to treat foreign companies on an equal footing with local ones.

Mauritius has an open economy aimed at attracting foreign investment. The government took steps in September 2006 to further liberalise the economy. But Darga argues that more action is needed to boost competitiveness and to fight the dumping of goods in the Mauritian market.

The eighth MDG also includes addressing ‘‘the special needs’’ of small island developing states like Mauritius. While the country has been more successful at development than its Southern African counterparts, it struggles with problems which are specific to island states.

Mauritius does not enjoy a rich endowment of natural resources and faces constraints resulting from its natural and geographical characteristics. These include its small size, remoteness from major trading markets as well as having struggled to diversify its economy in a sustainable way.

These challenges have been compounded by the dismantlement of the Multi-fibre Agreement on clothing and textiles which gave Mauritian items preferential access to the EU and US markets.

The island state used to be the top producer of pullover exports but finds it difficult to compete with China, India and Bangladesh after the Multi-fibre agreement ended two years ago.

Another blow has been the recent reform of the EU sugar regime which cut sugar prices by 36 percent. The escalation in the price of oil has also not helped.

These developments have been a ‘‘triple shock’’ to Mauritius’ economy, foreign affairs and international trade minister Madan Dulloo told IPS.

‘‘Both sugar and textiles are pillars of our economy. We rely on these industries for employment and foreign exchange earnings,’’ he said.

‘‘In response we have instituted a comprehensive trade and economic reform programme that focuses on restructuring the cane and textiles industries and introducing a seafood production hub and a land-based oceanic industry.

The government is also encouraging the development of an information and communications technology sector. The reform programme’s target date for completion is 2015.

To address the problem of increasing unemployment as a result of the three abovementioned shocks, the government is encouraging people, especially the youth, to launch small and medium enterprises (SMEs) in the agricultural sector.

The government is offering funds and expertise in the processing of fruit and vegetables for both local and foreign markets. About 6,000 such enterprises have been launched during the second quarter of 2006.

Mauritius is also striving to maintain fiscal and monetary discipline by containing the national budget deficit and managing the high level of public debt.

But the government is still lobbying the developed countries for special and preferential treatment in trade relations. It is also seeking resources—‘‘aid for trade’’—to support industries which have to restructure, such as clothing and textiles.

‘‘Without such assistance, no development and diversification will be possible in Mauritius. Foreign investors will move to low-cost countries or regions, thus limiting the island’s scope to participate actively in the trade liberalisation process,’’ Dulloo emphasised.

Assad Bhuglah, trade coordinator at the Ministry, told IPS that the elimination of trade tariffs is not enough. Mauritius cannot ‘‘manufacture and export if we have no production capacity, no technology and no raw material. We need assistance in order to succeed,’’ he observed.

It has been difficult to make headway with these demands. Mauritius has, ironically, become a victim of its own success. According to Dulloo, quota-free and duty-free access is mostly provided to least developed countries (LDCs).

The developed countries ‘have forgotten about us. Or they say we are rich and Mauritius therefore does not qualify for special treatment,’’ he said. This is due to Mauritius having acquired the status of a middle-income country.

While pushing for more assistance, Mauritius has also been strengthening its trade and economic relations in the region. It has just concluded a preferential trade agreement with Pakistan which enables trade on preferential terms.

Mauritius is also developing a comprehensive economic partnership agreement with India, China and Southern African Development Community states, and is planning one with the US.

These agreements take cognisance of the fact that the country has concentrated for too long on exporting sugar and textiles to the EU and US markets. It is aiming to target new markets in India and Pakistan where the purchasing power of middle-class people has grown.

‘‘These countries are not far from us. We are also looking at potential markets in the Gulf in the fields of services and tourism,’’ Bhuglah said.