1. Republic of Mauritius INDUSTRIALISATION THE MAURITIAN EXPERIENCE By Sen Narrainen Ministry of Finance

2.  Challenges at independence in 1968  Achievements: 1968 to 2012  Main drivers behind the Mauritian industrialisation and development success  The Mauritian Development Model  The industrialisation strategies  The three waves of diversification  Conclusion OUTLINE

3. “ Today, both our countries are hailed as economic miracles, perhaps because conventional wisdom had doomed us to failure after independence”. S. R. Nathan, President of the Republic of Singapore in his address to the National Assembly in Mauritius in June 2011

4.  Poor prospects for industrialisation  James Meade 1961: little scope for industrialization because of lack of skills.  V.S. Naipaul 1972: problems defy solutions  Fragile mono-crop economy.  No other natural resources but land/sea and people  Low per capita income : USD 200  Gini coefficient:.50  Poor infrastructure The challenges at independence 1968

5.  Most indicators were off the norm  High and rising unemployment: 16 %  Low adult literacy  Poor housing quality: > 50% prone to damage by cyclones  Infant mortality rate: 58 per 10,000 births  Low enrolment ratio at secondary schools: 31.4 The challenges at independence 1968

6.  Annual average GDP growth: 5.3 percent  Only one recession (1980) – may be the longest streak of positive growth in the world.  Rise in per capita income: from USD 200 to USD 8000.  Successful industrialisation policies.  Well diversified economy: more than 10 sectors. The achievements: 1968 to 2012

7.  Major improvements in all social and economic indicators.  Absolute poverty: less than one percent of population  Recently showed great resilience to external shocks  Free education/health care/transportation for students and elderly The achievements: 1968 to 2012

8. WHAT ARE THE MAIN DRIVERS OF THE MAURITIAN INDUSTRIALISATION AND DEVELOPMENT SUCCESS?

9. Diagram 1. The Mauritian model 1968 to 1972 Import substituting industrialisation 1972 to 2006 Mix of import substituting and Export oriented industrialisation 2006 + Globally competitive Model Fabian socialism Adaptive structural policies Education & Health care Economic diplomacy Institutions Ethnic Diversity Class of indigenous entrepreneurs Well structured Private sector Public infrastructure Diversification Developmental state

10.  Followed the prevailing orthodoxy  Limited outcomes due to:  Highly protected markets in the DCs  Exiguous domestic market  High costs leading to high protective tariffs  Not as labour intensive as was expected  Needed to be more outward looking ISI Strategy: 1968 to 1972

11.  Outward-looking/export markets  The Export Processing Zone  Incentive schemes  Choosing winners/ Priority sectors  From a labour-intensive to a capital- intensive phase ISI-EOI: Main features

12.  Encouraging outbound investment so as to shift to high end production  Economic liberalisation/adapting to global influences  Building institutional capacity  Diversification  Transfer of knowledge, technology and ideas ISI-EOI: Main features

13.  Get rid of reliance on trade preferences  Ease of doing business  Further opening up the economy  Income tax policy – flat tax rate of 15 percent  Labour market reforms/protecting workers and not jobs  Shifting labour to higher productivity activities  Massive investment in public infrastructure  Further diversification  Since 2010: rebalancing the economy GLOBALLY COMPETITIVE MODEL: CENTRAL FEATURES

14.  Striking a greater balance between economic and social development  CSR as a statutory requirement  Stays committed to a strong welfare state  Economic democratisation  Maurice Ile Durable vision  The 5Es: Education/Equity/Environment/Energy/Employmen t GLOBALLY COMPETITIVE MODEL: CENTRAL FEATURES

15.  Surging FDIs  Resilient economy: passed the test of external shocks  Surging petroleum and food prices  Financial mayhem  World wide great recession  Euro crisis  Political upheaval in North Africa  Upgrade by Moody’s from Baa2 to Baa1 - Dynamic and reasonably diversified economy - Stable and investment-friendly environment - Pragmatic and competent policy-making Outcomes of the Globally Competitive Model

16. Macroeconomic Unit / Diagram 2. Three Waves of Diversification 1970s: Mono-crop Sugar - 70% of export revenue 1970s and1980s: First Wave Tourism, Textiles, Financial Services 1990s: Second Wave Offshore centre, freeport, ICT/BPO, Seafood hub. 2006 + : Third Wave Luxury villas, Real Estate, Knowledge and Health Centres of Excellence, Renewable energy, Creative Industry, OCEAN STATE

17.  Develop a services economy  Transform Mauritius into an Ocean State  Eradicate absolute poverty  Take Mauritius to the league of high income economies  Invest in people Conclusion: Going Forward

18. Republic of Mauritius Ministry of Finance and Economic EmpowermentMacroeconomic Unit / Thank You!