Mauritius Africa's best place to do business

This shouldn't come as a surprise, Mauritius has the most sophisticated legal system in Africa and a relatively mature banking system along with a flexible workforce. What's more important to us is that we have moved up to 27 previously we were at 32 . The most significant improvement was in the ease of starting a business, this probably down to the 3 days it now takes to start up, that's our highest world ranking. Dealing with licenses somewhat improved however it should be better. Employing of workers, look for this to improve once the new labor legislation is passed.

Registration of property, Mauritius is ranked at 153, this is absurd, the government should move to digitize the whole regsitry system and make everything publicly available online. With the new property tax systems this could possibly happen. [The gov should move from just provide access to information on its portal, it needs to move to using the internet as tool for people to streamline their interaction with government, eg license application and status updates should be viewable online, property taxes should be payable online]

Another area where Mauritius is ranked quite low is the area of access to credit. First and foremost there needs to be serious review of the local banking sector, anyone in Mauritius can smell corruption and collusion from them, ofcourse their thuggery has been well documented. Two major issues off the top of my head, not sure how microfinance would work b/c the economy is pretty well developed and few people have a farm or small shop. More importantly people don't understand how to use credit and the tools available to them. Legislation should also be introduced to curtail the behavior of lenders, they should provide much more disclosure to their clients. As I have suggested before the government and policymakers needs to focus on the micro economy not just macro factors, they are taking some small steps in the competition bill.

Trading across borders not bad for such a small country, but there certainly is an improvement to be made with SADC, especially with regard to food. The price of food in Mauritius is astronomically high!

Enforcing Contracts/Closing a business: These are two areas where Mauritius should be ranked much higher, instead of 66. Mauritius has a sophisticated legal system, however efficiency needs to be improved in the legal system, hopefully the Privy Council sitting in Mauritius for the September term as of next year will be a catalyst. As for closing a business the insolvency laws need to be updated, as well as improving the administrative bottlenecks, the same way it's easy to start up a business it needs become easier to close a business.

Mauritius Africa's best governed country

Mauritius does look like the best governed country in Africa if you've traveled throughout Africa. What keeps the government in check? A highly literate and engaging public compared to other African countries. In addition Mauritius has a vibrant democracy which I haven't seen having lived and traveled throughout Africa. However, Mauritian's will tell you that there appears to be an alarmingly increasing level of corruption from little guys such as custom officials to the bigwigs such as ministers and politicians. One reason for this is that the social fabric and values of Mauritians has weakened considerably from that of our forefathers. From a structural point of view, many Mauritians complain about the merry go round of the political elite - it's as if they just agree to take turns in government.

Sithanen has done a courageous job at reducing bureaucracy and getting rid of the largesse of many government institutions, however in a country where nearly 60% of employment is through the government there remains a long a way to go. Secondly those in government, throughout the whole system need to be held to higher standard of professionalism and competence.

Mauritius the Hong Kong of Africa

"Mauritius is the new rising economic freedom star, not only in the African region, but also in the world. Mauritius is rated at 7.5 and ranked 22nd – up from 7.0 and 39th. This island state is likely to move even higher up the rankings as it is in the process of introducing further reforms such as reducing tax rates, removing price controls, cutting back tariffs, improving the ease of doing business, and relaxing regulations. Mauritius appears set to become Africa’s Hong Kong. Hong Kong has been first in the economic freedom rankings for many years. In order to make its citizens more prosperous, the government of Mauritius is intent on attracting to its shores people with capital, skills and spending money. With the declared intention of being in the top 10 of the World Bank’s Ease of Doing Business index, Mauritius is creating an attractive business, working and consumer environment."

According to Eustace Davie Freemarket Foundation SA

Lee Kuan Yew

Modern Singapore’s Creator Is Alert to Perils
By SETH MYDANS and WAYNE ARNOLD

SINGAPORE, Sept. 1 — Lee Kuan Yew, who turned a malarial island into a modern financial center with a first-world skyline, is peering ahead again into this city-state’s future, this time with an idea to seal it off with dikes against the rising tides of global warming.

“Let’s start thinking about it now,” he said during an interview in late August, in what could be the motto for a lifetime of nation building. Ever since Singapore’s difficult birth in 1965, when it was expelled from Malaysia, he said, the country has struggled to stay alive in a sea of economic and political forces beyond its control.

“If the water goes up by three, four, five meters, what will happen to us?” he said, laughing. “Half of Singapore will disappear.”

For all his success, Mr. Lee, 83, remains on the alert for perils that may exist only on the distant horizon: the rising role of China in the region as the United States looks the other way, the buffeting of the world economy, even climate change.

A British-educated lawyer who led Singapore for 31 years, Mr. Lee is one of Asia’s remarkable personalities, a world figure whose guest book is filled with the names of international political and financial leaders.

His creation, modern Singapore, is an economic powerhouse with one of the world’s highest per capita incomes and high-quality schools, health care and public services that have made it a magnet for global labor. Foreigners make up roughly a fifth of its 4.5 million residents.

In his office in the former headquarters of the island’s British colonial rulers, Mr. Lee sat back in a zippered blue jacket, sipping small cups of hot water and laughing often, seemingly as different as could be from the bare-knuckled political infighter he has described himself as.

“I’ve done my bit,” said Mr. Lee, who stepped down as prime minister in 1990 and now watches over the country — and occasionally takes part in political disputes — with a seat in the cabinet and the title of minister mentor. His eldest son, Lee Hsien Loong, is prime minister.

“To understand Singapore,” he said, “you’ve got to start off with an improbable story: It should not exist.”

It is a nation with almost no natural resources, without a common culture — a fractured mix of Chinese, Malays and Indians, relying on wits to stay afloat and prosper.

“We have survived so far, 42 years,” he said. “Will we survive for another 42? It depends upon world conditions. It doesn’t depend on us alone.”

This sense of vulnerability is Mr. Lee’s answer to all his critics, to those who say Singapore is too tightly controlled, that it leashes the press, suppresses free speech, curtails democracy, tramples on dissidents and stunts entrepreneurship and creativity in its citizens.

“The answer lies in our genesis,” he said. “To survive, we have to do these things. And although what you see today — the superstructure of a modern city — the base is a very narrow one and could easily disintegrate.”

Asked whether, looking back, he felt he might have gone too far in crushing his opponents, sometimes with ruinous lawsuits, sometimes with long jail terms, he answered: “No, I don’t think so. I never killed them. I never destroyed them. Politically, they destroyed themselves.”

One of his concerns now, Mr. Lee said, is that the United States has become so preoccupied with the Middle East that it is failing to look ahead and plan in this part of the world.

“I think it’s a real drag slowing down adjusting to the new situation,” he said, describing what he called a lapse that worries Southeast Asian countries that count on Washington to balance the rising economic and diplomatic power of China.

“Without this draining of energy, attention and resources for Iraq, Iran, Lebanon, Israel, Palestine, there would have been deep thinking about the long-term trends — working out possible options that the U.S. could exercise to change the direction of long-term trends more in its favor,” Mr. Lee said.

As the United States focuses on the Middle East, Mr. Lee said, the Chinese are busy refining their policies and building the foundations of more cooperative long-term relationships in Asia. “They are making strategic decisions on their relations with the region,” he said.

And this is where tiny Singapore sees itself as a model for China, the world’s most-populous country. “They’ve got to be like us,” Mr. Lee said, “with a very keen sense of what is possible, and what is not.”

Every year, he said, Chinese ministers meet twice with Singaporean ministers to learn from their experience. Fifty mayors of Chinese cities visit every three months for courses in city management.

Singapore’s secret, Mr. Lee said, is that it is “ideology free.” It possesses an unsentimental pragmatism that infuses the workings of the country as if it were in itself an ideology, he said. When considering an approach to an issue, he says, the question is: “Does it work? Let’s try it, and if it does work, fine, let’s continue it. If it doesn’t work, toss it out, try another one.”

The yardstick, he said, is: “Is this necessary for survival and progress? If it is, let’s do it.”

Hoping to attract more tourists, for example, Singapore is building two huge casinos, despite Mr. Lee’s expressed distaste for them.

“I don’t like casinos,” he said, “but the world has changed and if we don’t have an integrated resort like the ones in Las Vegas — Las Vegas Sands — we’ll lose.

“So, let’s go,” he said. “Let’s try and still keep it safe and mafia-free and prostitution-free and money-laundering-free. Can we do it? I’m not sure, but we’re going to give it a good try.”

Even on social issues on which he has tended to seem inflexible, Mr. Lee sounded almost mellow.

“I think we have to go in whatever direction world conditions dictate if we are to survive and to be part of this modern world,” he said. “If we are not connected to this modern world, we are dead. We’ll go back to the fishing village we once were.”

For example, on the issue of homosexuality, he said, “we take an ambiguous position. We say, O.K., leave them alone, but let’s leave the law as it is for the time being, and let’s have no gay parades.”

Although gay sex remains technically illegal in Singapore, the government has indicated it will not actively enforce the law.

China, Hong Kong and Taiwan already have more liberal policies regarding gays, he noted. “It’s a matter of time,” he said. “But we have a part Muslim population, another part conservative older Chinese and Indians. So, let’s go slowly. It’s a pragmatic approach to maintain social cohesion.”

As for people’s adherence to the “Asian values” — hierarchy, respect and order — that Singapore is founded on, he said: “It’s already diluted, and we can see it in the difference between the generations. It’s inevitable.”

In his own family, generational values are changing. From father to children to grandchildren, he said, command of the Chinese language has weakened, along with the culture it embodies.

“They had a basic set of traditional Confucian values,” he said of his children, two sons and a daughter. “Not my grandchildren.”

One grandson has just begun studies at M.I.T., he said; the other is heading to the Wharton School of the University of Pennsylvania.

This well-educated younger generation reflects the social dichotomy of Singapore, Mr. Lee said, in which the top 20 percent of the population is as cosmopolitan as any, surfing the Internet and traveling the world without constraint. “This is not a closed society,” he insisted.

But at the same time, he said, the government must protect the less affluent, less educated people from information that might upset or confuse them. These are people “who are not finding it so comfortable to suddenly find the world changed, their world, their sense of place, their sense of position in society.”

They are the ones who he said had to be pulled into the future as he seeks to make Singapore “a first-world oasis in a third-world region.”

“We built up the infrastructure,” he said. “The difficult part was getting the people to change their habits so that they behaved more like first-world citizens, not like third-world citizens spitting and littering all over the place.”

So Singapore embarked on what Mr. Lee called “campaigns to do this, campaigns to do that.”

Do not chew gum. Do not throw garbage from rooftops. Speak good English. Smile. Perform spontaneous acts of kindness.

Paradoxically, he said, if Singapore had not been so poor it might never have transformed itself and prospered as it has. His warnings about vulnerability and collapse are a constant theme to persuade his people to accept limits on their freedoms.

“Supposing we had oil and gas, do you think I could get the people to do this?” Mr. Lee said. “No. If I had oil and gas, I’d have a different people, with different motivations and expectations.

“It’s because we don’t have oil and gas and they know that we don’t have, and they know that this progress comes from their efforts,” he said. “So please do it and do it well.”

Copyright The New York Times Company

Financial Globalization & Emerging Markets | Prof. Mishkin

Why is financial globalization so important for emerging market economies?

It’s critical for emerging market countries to have an institutional framework that allows their financial systems to work well. For an economy to grow, you need money channeled to productive investments. [Mauritius has low productivity] If that doesn’t happen, a country will never make it. One of the serious problems in emerging market countries is their financial systems don’t work well: they don’t have good property rights, and they don’t have a legal system that allows enforcement of contracts — things that we take for granted in places like the United States. As a result, businesses and households often can’t get the funds they need.

Mauritius does have a good legal system and respect for property rights - however it's access to those which are somewhat out of reach to the participants that need it the most. The bigger question is does Mauritius have an innovation problem? Since access to capital either from the government through it's various lending schemes for small entrepreneurs and businesses seems to suggest the financial system is working. Although there are complaints though from those working in the banking industry that the system of loans [non transparence, onerous terms, lack of financial knowledge by those getting loans] has stunted the growth of SME's. The legal and financial system appear on the face of it to work from a institutional sense - all the institutions are there, the laws are on the books - numerous banks - government programs, yet it doesn't seem to working that well.

Financial globalization is an important part of helping financial systems develop. First, there is the direct effect: access to foreign capital, which lowers the cost of capital and makes it easier to do investment. Then there are all of the secondary benefits for a country’s institutional framework. Financial globalization, like globalization in general, increases competition. If you bring in foreign capital, domestic financial institutions have to do a better job in order to survive. And with competition, these institutions will realize that they have to have a better legal system, with property rights and so forth.

What are the risks of this influx of foreign capital?

Frequently, when a country begins to open up to financial globalization, it is done in a way that benefits the same elites that have been repressing the financial system. And this can be dangerous for their countries.

Precisely what is happening en Maurice!

For example, when Mexico privatized its banks and opened its financial system to the outside world, the business elites took over the banks, putting very little money of their own into them. In addition, they made sure the system allowed the banks to take on huge risk. If the banks got in trouble, the taxpayers would bail them out. The result was the banks blew up and the financial system faced a devastating crisis. Similar problems happened in Korea. Banking institutions were essentially lending machines for the businesses that owned them.

This pattern is a very common one. Although financial globalization is critical to growth, it’s frequently mismanaged. There are many examples where it has been successful and many examples of when it has been a disaster.

How is Mauritius managing this transition - economically and more importantly also socially?

What about income inequality? Some say that globalization will increase the gap between the rich and the poor.

There’s always been a concern that globalization might increase income inequality. But for poor countries, globalization tends to be one of the most important ways of eradicating poverty. Look at what’s happened in India and China. They entered the global trading system, and as a result a huge number of people have been lifted out of extreme poverty.

In advanced countries like the United States, globalization may have led to increased income inequality in recent years. There’s a lot of debate about this, and there is no clear-cut answer. It’s one reason why some people are opposed to globalization, because they feel that some elements of society may not do as well.

How can these countries get it right?

One of the key issues is that a country must supervise its financial sector to make sure it doesn’t take on excessive risk. This is something that is done very actively in advanced countries, though not always well. We’ve had our crises too. The United States had a savings-and-loan crisis because regulators weren’t doing a good job. But when an advanced country makes a mistake, it usually fixes it.

Another important issue is what’s called currency mismatch. Frequently, businesses in emerging market countries borrow money in foreign-denominated currencies because it’s easier. But their revenue and the value of their assets are denominated in domestic currency. If the value of the domestic currency declines, it blows up the value of their debt and blows up the companies, and that blows up the country. So one issue is how to limit currency mismatch.

Also, trade liberalization actually helps prevent financial crises. If an economy is open to trade, many companies are exporting and a lot of their revenue will be in foreign currency. When they then borrow in foreign currency, it doesn’t create a problem.

Frederic Mishkin is the Alfred Lerner Professor of Banking and Financial Institutions at Columbia Business School. His new book, The Next Globalization, will be published by Princeton University Press in September 2006

Ideas at Work

Mauritius Qatar discuss Investment | Landing rights

Ministers from both countries were in discussion over the past few days on several issues. Qatar appears to be interested in investing in Mauritius especially in an IRS most likely through its investment arm the Qatar Investment Authority which has just invested a sizable stake in J. Sainsbury's. As we feel the pinch at the pumps we know the member of the GCC's coffers are overflowing at the moment. Qatar the highest GDP per capita in the world at around $50k (7xMauritius). Hopefully the discussions haven't just been about tourism, there are many other sectors in which Mauritius could serve Qatar as gateway to Africa for. On the tourism front Qatar has been knocking on the door for several years, they already land in Seychelles. However Air Mauritius' monopoly (as usual :S) - codeshare with Emirates wouldn't allow. When Qatar's new world class International Airport opens up it will be serving all of Asia, Europe, Africa, and the North America. Not to mention something the MPTA has really neglected is the Middle Eastern tourism market. ME tourists spend tons of money on tourism, many have pads in London or Switzerland and they travel extensively especially during the summer months. Qatar Airways, not to mention they are a 5 star airline, is a necessary addition to Mauritian skies.

Mauritius clearly needs more flights and higher quality flights. For flights which a major part of tourist's budget - a tourist has the option of going to South East Asia or other Indian Ocean Islands for much cheaper because there are more airlines going there. The quality of airlines needs to also be better. Currently the only quality airline serving Mauritius is Emirates, Virgin Atlantic's arrival in October will add to that especially with it's upper class service. Tourism is the sector which creates the most related jobs in the economy more than any other sector. Mauritius seriously needs to exploit the tourism industry. Tourists in Mauritius need to move around more, this is starting to happen with the increase in eco tourism activities. But Mauritius needs more other forms of entertainment, much better shopping, cultural attractions, and entertainment options. By moving around high net worth tourists who come to Mauritius will be able to engage with our offshore services and businesses.

PL: 77th most livable city

According to Mercer Human Resource Consulting, which provides advice to multinational companies on international assignments, PL has been ranked as the 77th most livable city in the world based on 39 key quality-of-life issues. They include political stability, currency-exchange regulations, political and media censorship, school quality, housing, the environment and public safety. Mercer collected the data between September and November of 2006 and considered 215 cities around the globe. Switzerland's main commercial and cultural center, Zurich, topped the list this year, followed by Geneva, and Vancouver and Vienna, which tied for third.

Apparently the biggest factors were stunning physical beauty hence the large number of Australian and New Zealand cities, and the safe streets and excellent public transportation found in Japanese cities such as Tokyo, Yokohama, and Osaka make these highly desirable places to live.

PL definitely has the beauty factor especially if it can develop high density luxury properties to the north and south of the waterfront (like in Miami). The streets are relatively safe although a better police presence would help. The transport system in PL is atrocious and needs to be dramatically improved. Other major factors in addition to infrastructure and property are good restaurants, shopping, and entertainment which in Mauritius is spread out all over the place.

If anything Dubai has showed build it and they will come. Look at Anahita sold out almost instantaneously; people are obsessed with Mauritius. Many of the people who bought at Anahita have never even been to that part of the island before.

Mauritius metro rail

Mauritius has approached DMRC for assistance in its maiden metro project to connect the cities of Curepipe and Port Louis.

Harsh but True: The Economy of Mauritius "Ti La Tete"

L'Express INTERVIEW WITH PERCY MISTRY, ECONOMIST “No society that trades off excellence for equity, ever succeeds” ● l I’d like to start with an unorthodox question – what is the nature of your interest in Mauritius? (Laughs…) I have no idea. There is something that happened to me. It would be ridiculous to say that I am in love with the people or in love with the place. In fact, Mauritians are extremely frustrating to deal with. There’s just something about this place. A tremendous spiritual affinity with the land. And I know it’s irrational… I have very rarely come across a place which had so much potential and so much disinclination to realise it. As an economist who has been to 150 countries out of the 212 countries there are on earth, you begin to develop an instinct for what works and what doesn’t. Mauritius has unlimited potential with a very low propensity to realise any of it! ● You have been quoted as saying you thought Mauritians had some kind of a psychological problem in that they didn’t like to compete with outsiders and foreigners for what they believe is their own space. Why do you say that? No, it’s not like that – I think Mauritians are one of the most gracious, charming, adorable and kind people on earth. But I believe that one does get the feeling that if you’re here for a week or two, that’s fine. But when you live in paradise, it’s perfectly natural not to want to share it with others. But the world of preference is gone. Mauritius has to make the psychological shift from arguing for itself as a small island with limited means and limited economic opportunities to a microdot in the Indian Ocean that must now make its way in the big wild world. In the last few years, Mauritius has begun to realise that it didn’t actually need to ask for preferences because there were loads of opportunities out there. But a closed mind will not let you do this successfully. And that’s the thrust of the message; you have to deal with the world on the world’s term and not on your own. And you cannot say to the world: “We want to exploit all the opportunities you have to offer but you cannot come here.” That kind of asymmetry is no longer possible. ● Easier said than done! How does one overcome that natural fear of losing what we believe is ours, to foreigners? It is equally natural when your economic interests are threatened, to adjust. So it’s one natural impulse overcoming another natural impulse. I don’t think Mauritians are consciously discussing setting up barriers to keep people out. I believe that they would essentially like the world to leave Mauritius alone and yet provide it with an income of 50 000 dollars. (Laughs…) That is what is unreal. So the question is; what’s your next best thing? And if you want to make your own way in the world, what is it you want to be ? It’s in your own interest to operate at the highest possible spectrum of human value-added that you can. ● Could it be that maybe we feel we can’t? If that is the problem, then why? If it’s an innate feeling, an emotional reaction, then it is wrong. You have proven every time that whenever there has been a challenge or a crisis thrown at you, you have met that challenge and overcome the crisis. Then why should you still have this complex that the world is too complicated for you to deal with? You can cope with cyclones; you can cope with the world! That, to me, is an irrational response, which is to make yourself believe that because you’re small, because you were colonized, because you have a whole range of legacy issues, that you cannot cope. In fact I have reached the opposite conclusion; I think you have a better capacity to cope than most. It’s just a question of wanting to do it. “The whole story of human progress is based on unhappiness and dissatisfaction. When you have a society that is happy with the status quo and wants to protect it, you know it is a society that won’t be along for very long.” ● Mauritians are not used to being competitive; can you blame this reluctance to competition? But you’re going to have competition anyway! The point I am trying to make is that for 40 years, you got away with saying: “I’m scared of competition so I am going to produce sugar at a ridiculous price and have the European Union (EU) support me. I am going to produce textile goods at uncompetitive prices and I am going to have the EU protect me by giving me quotas.” I think that’s what, in a sense, has helped this ridiculous mindset that the world owes you a living. Once you accept that it does not and you have to go out and make a living, then those inhibitions drop. ● Again this sounds good on paper but the fear of the Mauritian is very real; he has seen expatriates being treated better and getting paid better than he does. Can you blame him for thinking that if they all come to his country, he will lose out? Then this means that you still have a deep-rooted colonial inferiority complex. Who will treat the expatriate better? The Mauritian himself? The government? Society? Then you have to ask yourselves why this is happening, if you are just as qualified as the expatriate, just as experienced, knowledgeable and effective. The funny thing in India is that we used to have that inferiority complex until 1995 – until we stopped imprisoning ourselves with the stupidity of our repressive economic policies. It would, today, be hard to find an Indian with an inferiority complex. That’s just in the space of 15 years. In fact, I worry about the opposite. I worry about India developing a superiority complex, an arrogance much too quickly. So if India, that large gigantic mass, has been able to change in 12 to 15 years, I see no reason why Mauritius can’t change. Success breeds success. The more Mauritians open themselves up to the outside world and succeed outside their country; the more they will find that this inferiority complex will disappear, if not overnight, then certainly over a generation. ● How can you be so confident? Every time we took an Indian out of India with the same qualifications, the same knowledge and experience – you took him out of that swamp and put him in a swimming pool, he discovered he could swim faster than everybody else. And since Mauritians have an enormous affinity with India, Europe, China, with Africa, I have absolutely no doubt whatsoever that if you were made to compete in the world, you would compete and you would win. There is nothing in your attributes that tells me that you won’t, except for the fact that you have grown very slow, lazy, inertial and complacent as a result of the fact that you have been enjoying the benefits of preferences for very long. I don’t think you need to compromise paradise – you simply have to deal with it in different terms. Again India used to be exactly like this ten or 15 years ago. Today you find that most Indians are being paid more than expatriates in their own industries. My advice would be: don’t focus on the economics of envy. The system that Mauritius has – European socialism – makes me think that Mauritians haven’t learnt that the formula of making everybody into equals does not work. Mauritians should tolerate the possibility of people being unequally rich as long as the bottom also shares the fruits of those riches. You see, the problem is this European mindset and it’s a foolish one. That somehow there is some “natural” ratio that should govern the lowest and the highest. And to me, anybody who’s actually tried to apply that ratio has built the foundations of a society about to destroy itself. No society that trades off excellence for equity ever succeeds. The whole story of human progress is based on unhappiness and dissatisfaction. When you have a society that is happy with the status quo and wants to protect it, you know it is a society that won’t be along for very long. ● And equity is a faulty notion? That’s too simplistic a notion. I didn’t say that and I think it’s a wrong conclusion. Too much emphasis on equity, which then destroys the pursuit of excellence, is what is bad. I have no problem with equity being part and parcel of a consideration but not the only consideration in driving the structure, nature and process of a society. It is important that the poor are not marginalised, it is important that opportunities are equalised. I believe in complete equity, complete equality of access to opportunities, but I do not believe in the equality of wealth or ability. There is no natural law on earth that says that somebody who sweeps the road should be paid exactly the same and has exactly the same wealth as Bill Gates. ● As long as what he has enables him to live a decent life? Exactly. To make sure that whatever he does, his child has the same opportunity as Bill Gate’s child. What he makes of that opportunity is up to him but one thing that society must not deny is that the child of everybody has the same equality of access to equal opportunity. If Bill Gates can afford to send his child to the best university in the world and there is a very poor child who has the same ability, it is incumbent on the state and society to make sure that he has access to that university. But there is no requirement on the part of the state to ensure that that person then has equality of income or wealth. That’s where societies fall out. ● Equal opportunity is a nice theory but how do you make it happen? It’s not just a nice theory. Basically Europe is sclerotic whereas America has managed to remain competitive because of that difference in attitude and approach. Europe really believes in trying to equalise everything and rips you off in taxation to provide universalism in the name of equity. This, as far as I am concerned, in a globalized world, is passé. Countries that are going to succeed will be India, China and America because they allow for competition and they do not go so overboard on equity that they destroy the quest for excellence. ● Yes but how do we do this? You get rid of this notion that everything should be universalised for everybody. That everybody should have free education, free health, free transport. ● A complete dismantling of the welfare state for better equity?! Yes because the welfare state is not feasible and it’s not affordable. I think what you have to get down to is helping where the hurt is. There is no point giving rich people free education and free transport – they’re not going to use it anyway. When you universalise, lowering the price of bread for everybody, the common Mauritian ends up subsidising the bread that a tourist eats in a hotel. Does that make sense? You have to target. Governments will always have limited resources unless they overtax people. If they do that, society and economy die. When you have limited resources, use them well. Don’t universalise everything – it is just plain stupid! Make sure that people who are really hurting are helped. When you spend a lot of money helping people who are not hurting, you’re wasting it. And this whole notion that the rich can be taxed indefinitely in order to be able to finance that is absurd. Because in a globally mobile world, the rich will tell you: “if you are going to overtax me, I’m going to Dubai and I’ll still enjoy my sugar plantations in Mauritius and you won’t be able to tax me.” I think that Mauritius needs to break out of what I call the absurdities of the past. These beliefs are no longer useful nor valuable nor functional. ● But we do know this! The minister of Finance constantly talks about it; so does the Prime minister, if less often. We just can’t seem to put out nice theories into practice! I think Mauritius doesn’t realize how lucky it is to have a minister of Finance like Rama Sithanen. By the way, I am not getting a commission and I have no ulterior motives but I think Sithanen is a genuine professional and one of the best Finance ministers in the world. And for the Mauritians to beat up on him for all the wrong reasons, tells you how crazy the Mauritians are and how they cannot differentiate fantasy from reality. This shows you that they don’t understand how basic economics work. That they don’t understand that the government doesn’t have any money of its own, that to get this money, it has to tax somebody somewhere. “There is no question in my mind that Mauritius will not succeed in competing in the world if it has second-rate public institutions providing third-rate services at ridiculous prices.” ● Maybe they don’t understand this because the message government is sending is not that clear, because government is sending mixed signals? No, I think they don’t understand it because they don’t want to and they don’t make the effort to learn. And because economics is not taught the way it should be. You see, Mauritians don’t know what’s good for them! You know what you want – you want an easy life, you want an infinite capacity to consume without working – that’s what you want. But that’s not real. It is not real to want your consumption proclivities and not to want to work for it. Not want to work harder than other people. ● But if you tell people you believe in targeting and then don’t target and keep on subsidising everything, will you be surprised if nobody takes you seriously? First of all, what is targeting? People need to start coping with the fact that price subsidies on bread, on fuel are a very bad way to run an economy in order to deliver equity. Why does a rich Franco-Mauritian family need to have its fuel subsidized? They don’t need it; neither does the upper middle class. Neither does the middle class. There may be a case now for saying that the lower middle class needs to be helped. You’re wasting so much on subsidy that goes to the wrong places. Income support is a much more sensible way of helping the poor. ● It doesn’t seem to have done us much good so far! We’re doing it – partly. No you haven’t tried it at all. You haven’t reached a societal agreement that price subsidies are plain bad. See, the price of fuel in itself should have induced a voluntary rationing of usage in the people. If the price of fuel is very high, you might decide to drive less. But to the extent that the price of fuel is highly subsidised, you drive far more than you need to! You waste fuel, you damage the environment, you’re hurting your pocket and you’re hurting the exchequer! It’s bad on all counts. Now if you give the poor people that oney so they make theirown choices, then they are free to decide how much they’ll spend on food, fuel etc. ● How about if I told you that here people get income support and subsidies? In a sense you have the worse of both worlds. You’re not getting income support because you’re wasting so much on price subsidies. To really support income, you’d be much more effective in delivering equity. Today you’re failing on both counts. It’s not that Rama Sithanen doesn’t know it, it’s that the foolish people in his own coalition don’t let him do it. ● This is what I meant when I was talking about mixed signals sent by the government! I don’t see anything mixed in the signals that Rama gave in his interview the other day. He is saying exactly the same thing I am saying today. ● But what’s the point of saying something and doing the opposite? But I think that is something due to the contradictions of working in a coalition as unwieldy as this. There is no unity of purpose and leadership at the top. No cabinet, no government can succeed in delivering the goods if it is as divided in its views. When you’re in the middle of a transition and a transformation, you don’t keep bargaining and you don’t keep pulling back. That’s the best way of losing credibility. You stick to what you believe in and speak to every Mauritian you need to, to effect this change. What you do not do is have internal dissent to the extent it is publicly expressed in a cabinet. When you have a government, you cannot be at odds with each other. Today there is more opposition within the ruling coalition than there is without. It is the government that needs to get its act together. You can’t put yourself into election mode two years before the elections. That’s a very bad way of doing business. You don’t need to do that. What you need is another five years of reform because you have the first stage of the reform with the opening up of the market – government was very brave, they were very bold – and the reforms are working. Left to themselves, they’ll work even better because nothing happens overnight. The second stage of reform is moving from wasteful public expenditure to productive public expenditure, which means reducing wasteful subsidies and going for income support and really helping people who need money. The third phase is reducing the size of debt. Because from a productive point of view, government is an extremely inefficient way of getting things done. ● What do you mean? I do not believe that government should run businesses. You have to reduce the size of government and privatise the parastatals. There is no question in my mind that Mauritius will not succeed in competing in the world if it has second-rate public institutions providing third-rate services at ridiculous prices. In a competitive world, the one thing Mauritius needs, given its geography, is connectivity. You cannot afford to have substandard corporations running your airlines, your airports and your telephone system. They have to push the frontiers of competitiveness and cost. They have to offer the best technologies in the world at the lowest possible cost. They have to ally themselves with people who can deliver that. Now public institutions in a democracy like Mauritius with its own political code of conduct – which is not of the highest standard – need to say, like India has done, that we have to delink politics and economics. Let’s focus on what the role of government should be. It should be minimal, it should be to deliver justice, fairness and to make sure that competition is properly regulated. It should not go beyond that – to maintain a good defence policy, a sound foreign policy, a stable and solvent currency. That’s the job of the market and of the private sector. ● And you think we will go through these three phases? Of course. It is a question of survival – you don’t compete, you don’t survive and it’s as simple as that. For forty years, you have been spoilt – you’ve said: “I’m a child, I need protection.” All that has stopped. Nobody in the world feels any guilt for you or feels the inclination to support you and your lifestyle – you have to do it on your own. Now those are your decisions. When I argue like this, I am not saying this is something that has to be forced on Mauritius. What I am saying is that Mauritians live intelligently – and they are an intelligent people – look at reality in the face and make those decisions that will make your lives better. Even if temporary pain is involved. Now why don’t you put the burden of adjustment on those who can afford to bear it even if they will complain rather than put the burden of adjustment on the poorest? And that’s what these transformations enable you to do. When you remove universal price subsidies and go for income support, you enhance the ability of the weakest to cope.

Deepa BHOOKHUN