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NS4301 Summer 2015
Mauritius Economy
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Overview
• Jeff Frankel, “Mauritius: The Little Economy that Could,” Foreign Policy February 2, 2012
• Mauritius is considered an African success story
• One of the top economic performers in the region
• Income per person exceeds $15,000 – more than Turkey or Brazil
• Article contends
• there has not been one unique ingredient to the country’s success,
• but a number of lessons as to what can propel economic development
• Few people predicted success for the country
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Mauritius I
• In the 1960s, British economist James Meade concluded “outlook for peaceful development poor” because:
• High population density, reliance on a single crop (sugar cane), ethnic conflict.
• Also country isolated far from markets for its exports or tourism
• Instead Mauritius’ economic success built on a steady pace that spread the wealth.
• Between 1970 and 2010 GDP grew at an average annual rate of 5.4% compared with the African average of about 1%.
• Mauritius ranks second in Africa (after Seychelles) on the UN’s Human Development Index
• Mauritius’ commitment to open trade and rule of law do correlate well with growth.
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Mauritius WEF I
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Mauritius II• What made Mauritius choose the virtuous path?
• Mauritius’s human history did not start promisingly
• Original Dutch occupiers stripped island of its valuable ebony trees in the early 17th century
• French then imported African slaves to grow sugar cane.
• But with British rule (beginning in 1814) island began to enjoy “good globalization..
• Slavery was abolished
• Sugar plantations learned to make do with indentured servants – 500,000 imported from India
• During next century British gradually extended political rights to all literate adults
• Sugar production rose steadily
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Mauritius III
• Underlying the economic success of Mauritius since independence (1968) are two key factors
• First unlike other African countries, the country rapidly developed a manufacturing sector (specializing in textiles and clothing
• Second Mauritius has successfully navigated the global economy upon which it is so dependent
• It managed to contain the damage from the oil price shocks of the 1970s and
• It took in stride the successive losses of preferred access to rich country markets for sugar and apparel
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Mauritius IV
• Mauritius success did not demand novel policies
• Country focused on export growth
• Maintained a business friendly climate
• Pursued effective diplomacy to sustain access to critical global markets
• Took care to prevent its currency from becoming overvalued and
• Spent enough on education to create a productive labor force
• Standard policies advocated by World Bank/IMF
• However if the policies don’t mesh with local politics and institutions they are unlikely to take root.
• In Mauritius a powerful synergy between democracy and economic growth.
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Mauritius V
• Unlike most newly independent African countries, Mauritius created political institutions that:
• Gave a voice to rural poor and
• Ethnic minorities
• Also important, Mauritius chose not to establish a standing army
• Likely saved it from military coups
• Saved a lot of money which was spent of education and infrastructure
• Clearly good institutions can lead to prosperity
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Mauritius VI
• Country offers three major lessons in what would sustain growth in other African countries
• First, trade is the key to growth
• Openness forces economic interests to compete in global markets and
• Deters rent-seeking – that is creating pockets of economic privilege and hanging on to them
• Second the economic consequences of deep ethnic divisions can be moderated
• by a political structure that is truly inclusive and prevents winner take all outcomes
• Third, even in relatively underdeveloped countries, democracies an manage painful economic reforms
• a sense of inclusiveness makes it easier to impose collective sacrifice 9
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Voice and Accountability
1996 2000 2003 2005 2007 2009 2011 201335
40
45
50
55
60
65
70
75
80
Perc
en
tile
: V
oic
e a
nd
Acco
un
tab
ilit
y
Country/GroupMAURITIUSMOZAMBIQUENAMIBIASOUTH AFRICAAverage
Source: World Bank, Worldwide Governance Indicators, 2014
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Political Stability/Absence of Violence
1996 2000 2003 2005 2007 2009 2011 201320
30
40
50
60
70
80
90
100
Per
cen
tile
: P
olit
ical
Sta
bili
ty/A
bse
nce
of
Vio
len
ce
Country/GroupMAURITIUSMOZAMBIQUENAMIBIASOUTH AFRICAAverage
Source: World Bank, Worldwide Governance Indicators, 2014
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Government Effectiveness
1996 2000 2003 2005 2007 2009 2011 201325
30
35
40
45
50
55
60
65
70
75
80
Perc
en
tile
: G
ov
ern
me
nt
Eff
ec
tiv
en
ess
Country/GroupMAURITIUSMOZAMBIQUENAMIBIASOUTH AFRICAAverage
Source: World Bank, Worldwide Governance Indicators, 2014
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Regulatory Quality
1996 2000 2003 2005 2007 2009 2011 201320
30
40
50
60
70
80
Pe
rce
nti
le:
Re
gu
lato
ry Q
ua
lity
Country/GroupMAURITIUSMOZAMBIQUENAMIBIASOUTH AFRICAAverage
Source: World Bank, Worldwide Governance Indicators, 2014
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Rule of Law
1996 2000 2003 2005 2007 2009 2011 201320
30
40
50
60
70
80
90
Pe
rce
nti
le:
Ru
le o
f L
aw
Country/GroupMAURITIUSMOZAMBIQUENAMIBIASOUTH AFRICAAverage
Source: World Bank, Worldwide Governance Indicators, 2014
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Control of Corruption
1996 2000 2003 2005 2007 2009 2011 201325
30
35
40
45
50
55
60
65
70
75
80
Per
cen
tile
: C
on
tro
l of
Co
rru
pti
on
Country/GroupMAURITIUSMOZAMBIQUENAMIBIASOUTH AFRICAAverage
Source: World Bank, Worldwide Governance Indicators, 2014
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Future TFP I
Considerations for the future
•IMF, “Namibia: Selected Issues, February 2014 Policies that can raise potential growth in small middle-income countries of SSA
•Want to look at long term declining rates of growth
•Find TFP total factor productivity is the key
•Look for ways to increase TFP
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Future TFP II
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Future TFP III
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Future TFP IV
• Past actions taken by government that improve TFP
• Addressed the infrastructure gap in 1980s by ensuring country-wide coverage of basic infrastructure services
• Electricity,
• Water and
• Telecommunications network
• Country’s strong legal and institutional framework attracted massive inflows of FDI during late 1980s and early 1990s
• More recently government has sought public-private partnerships with foreign investors to invest in
• Electricity generation and
• Port infrastructure19
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Future TFP V
• Country has benefitted from investment, expertise and technical know-how of Hong Kong and Chinese businessman
• These entrepreneurs developed textile and apparel industry
• Initiated the country’s export-processing zone (EPZ) industrialization phase
• Still many challenges remain
• Although economy relatively diversified, still reliance on European markets for trade and tourism
• Structural labor problems including youth unemployment
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Future TFP VI
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Future TFP VII
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Mauritius: Economic Freedom I
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Mauritius: Economic Freedom II
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Mozambique: Economic Freedom II
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South Africa/Mauritius Overall Economic Freedom Trends
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Mauritius: WEF II
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Mauritius WEF III
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