By Namita Hardowar
The world economy is caught up in an atypical period, characterised by slow growth and rising inflation, and the post-Covid recovery has been blurred by additional difficulties following the conflict between Russia and Ukraine. In the face of these unprecedented challenges, there is more than ever a heightened need to reposition the Mauritian industries and respond to these challenges in the most effective way. To this end, the need to create a more conducive environment for the local industries and the need to focus on new emerging sectors and activities are essential for Mauritius to maintain a resilient and sustainable economy. This remains a key priority. It is primordial to reinforce the dialogue and collaboration between the private sector and the government to address ongoing challenges facing the Mauritian economy.
Ease of doing business
Several measures announced in the 2022-23 national budget are being implemented.
As far as business facilitation is concerned, the array of structural reforms, notably the regulatory review exercise in the tourism, logistics, healthcare and construction sectors, as announced in the Budget have started. We are conscious of the benefits that measures such as reducing delays in opening bank account and waiving incorporation fees will bring to the business climate and how they will improve the attractiveness of the country.
Boosting investor confidence through strong economic and financial fundamentals, clearly articulated and well communicated long term strategic visions, and continued compliance to international norms and standards will be key to further position Mauritius as a destination of choice for doing business in the region.
Discipline and rigour in the implementation of measures will pave our path to success. For instance, measures such as the 8-year tax holiday granted to newly set up freeport operators or private freeport developers with an investment of at least Rs 50 million, premium visa schemes and global minimum tax will better position the country on the international front.
Measures for SMEs
With a strong mandate to revitalise and restructure local businesses, the 2022-23 national budget announced grants and preferential loans, assistance to small and medium enterprises (SMEs) and to exporting companies. The budget made provision for the creation of a category of SMEs qualified as ‘Mid-Market Enterprises’, whose turnover is between Rs 100 million and Rs 250 million. Some 142,000 companies in this new category can access the various support plans following their registration with SME Mauritius Ltd. The initiatives put forward by the government in support of SMEs are favourably acknowledged.
SMEs accounted for 40% of GDP in 2021 with exports accounting for a total of 3% and contributing to 55% of national employment. SMEs have been described as the engine of economic growth and creation of jobs, which prompt the government to extend its continued commitment to support SMEs such as the Freight Rebate Scheme and SME International Fairs Refund Scheme.
Access to finance is still and remains a key issue for SMEs, and the administrative burden need to be further alleviated.
Port efficiency and trade
The government announced a series of measures to maintain the momentum in exports. For instance, the Freight Rebate Scheme (FRS) and the Trade Promotion and Marketing Scheme (TPMS) have been extended up to June 2023, and this will benefit the export-oriented sector. The 50% reduction in port charges on exports has also been maintained, which is a relief amidst the high freight and logistics costs.
There is no doubt that the Covid-19 pandemic and the Ukraine crisis have significantly exposed and magnified challenges in the port sector, both on the international front and locally. Although the container shipping industry is gradually coming back to normal after two years of destabilization caused by the pandemic, port efficiency is still subject to numerous hurdles.
The port congestion, the sky-high fuel prices, the lockdowns in China and the war in Ukraine are just some of the factors that are still hindering normal operations. The implementation of two regional feeder vessels to support industries exporting to the South Asian region and Eastern African region are meant to improve Mauritius’ connectivity to the African and Asian continent as well as facilitate exports to the regional markets.
The Mauritian port should aim at boosting its facilities and improving its services.
Finally, ensuring that efficiency of the port to cope with the transformation in global supply chains is paramount to sustaining the competitiveness of locally manufactured products in export markets. Against this backdrop, the Mauritian port should aim at boosting its facilities and improving its services in various spheres, including freight and cargo handling, bulk shipping, bunkering, vessel maintenance towing and other port services.
There is therefore the need for the adoption of a low-carbon and environment-friendly approach for sustainable port development, which could involve harnessing advanced technologies to enhance port operational efficiency, energy efficiency and environmental sustainability. A Port Reform Plan to accompany the above is deemed essential.
Productivity enhancement is key to improving the country’s living standards. The issue of skills shortages or skills gap are proving to be a key challenge for the industry right now. Today, Mauritius faces a high number of unemployed graduates, skills gaps when it comes to specialised sectors such as ICT and financial services, and a talent crunch across all major sectors. Additionally, vocational and technical fields are seen as inferior where Mauritians are less willing to undertake manual jobs or blue-collar jobs. Consequently, enterprises have to resort to foreign labour which are often more costly.
The situation is further exacerbated by the issue of ‘brain drain’ where a vast majority of our highly educated and talented professionals are leaving the country for better opportunities in terms of improved career development, higher salaries, dynamic working environment, and a wider range of advancement opportunities in academic and research sectors. Eventually, it warrants the need to prioritise programmes that are consistent with the country’s medium-term and long-term development needs and broader social goals – with focus on increasing labour force participation, and implement re-skilling and upskilling measures at all levels through a better education system reform in alignment with the economic and human capital needs of the country.
Overcoming these challenges therefore requires a structural reform with a clear vision, a comprehensive human capital strategy, strong leadership, bold and timely decisions, and focused action to steer the country forward in the development of its human capital.
Capacity building remains key for Mauritius. On this note, the increase in the course fees for approval of non-award courses by the Mauritius Qualifications Authority was subject to a 500% increase – rising from Rs 600 to Rs 3,000. This needs to be reviewed.
Local production, energy and food security issues
For the economy to regain traction, the primary orientation should be towards self-sufficiency by fostering locally produced goods and curbing the use of fossil fuels in the manufacturing process. Boosting self-sufficiency locally not only translates into more food security, at the same time it implies attracting more investment, creating higher number of jobs and stimulating economic expansion.
Productivity enhancement is key to improving the country’s living standards.
Mauritius is structurally vulnerable to external shocks. With a small domestic market unable to promote or sustain production growth by itself and a high dependence on raw materials, food and energy imports, the country is necessarily tied to developments in the world economy. An overarching challenge for Mauritius to achieve the envisaged transformation towards a higher value-added economy and sustain economic growth is to reduce its import dependence by producing locally. Improving the competitiveness of Mauritian products and enhancing our commercial strategy remain key to exploit opportunities regionally and internationally.
Gas and fuel prices in recent months have soared dramatically beyond control amid geopolitical tensions with Russia. The transition to greener energy sources should be accelerated to reduce dependency on non-renewable energy sources. The private sector and households should be allowed to produce their own electricity with the possibility to sell any excess production to the Central Electricity Board.
Following the provision on National Exhaustion of Rights in the Industrial Property Act 2019, the Mauritius Chamber of Commerce and Industry is fully supportive of the Industrial Property Act and believes that it would enable the development of Mauritius as an innovation-led economy. The MCCI would like to strongly re-iterate its position in favour of the current ‘national exhaustion of rights’ provisions in the existing legislation. A change in legislation from national to international exhaustion of rights in relation to trademarks must be carefully assessed prior to any change in policy as it will have major repercussions on various sectors of the economy, particularly commerce and distribution, local manufacturing, pharmaceutical, and import of motor vehicles industries.
A change from the current regime on exhaustion of rights from national to international regarding trademarks should be viewed from a long-term perspective and goes much beyond a price perspective only. A comprehensive Regulatory Impact Assessment must be undertaken to assess the overall impact on various sectors of the economy prior to any change in policy.
There is a need to carefully regulate and navigate through the situations diligently and identify the most appropriate policy mix to suit the needs of the Mauritian economy, with a strong emphasis on supporting the local businesses and boosting exports while maintaining our sustainability and competitiveness.
This requires some policy shifts. We need to re-evaluate some fundamental policies and decisions in order to ensure that resources are allocated appropriately to meet shifting needs.