the economy of mauritius file copy copy a basic economyic...

Report No. 1509-MAS Copy

The Economy of Mauritius FILE COPYA Basic Economyic ReportMain Report

February 22, 1978

Country Programs Department IIEastern Africa Region

FOR OFFICIAL USE ONLY

Document of the World Bank

This document has a restricted distribution and may be used by recipientsonly in the performance of their official dL ties. Its contents may nototherwise be disclosed without World Bank authorization.

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Exchange Rate

1 Rupee 1 US$= US$ = Rupee

Average 1972 0.1873 5.3385Average 1973 0.1838 5.4422Average 1974 0.1753 5.7031Average 1975 0.1659 6.0268Average 1976 0.1497 6.6824

AverageJan.-Sept. 1977 0.1505 6.6429

Fiscal Year

July 1 - June 30

Weights and Measures

1 Kilometer 0.62 mile1 Square Kilometer = 0.3861 mile

1 hectare 2.47 acresI metric ton 1.102 short ton-1 metric ton 0.984 long ton1 Kilogram 2.205 pounds

FOR OFFICIAL USE ONLY

Except for Annex II, this report is based on the findings of an economicmission in April/May 1976, composed of Messrs. Roger Key (Chief), PierreLandell-Mills, Arif Zulfigar, Ezriel Brook, August Schumacher, John Nairm(IMF) and Miss Adriana de Leva, and on the findings of a rollow-up mission inJuly/August 1977, composed. of Messrs. Willem Maane (Chief), Orville McDiarmid(Consultant) and Miss Kazuko Hashimoto.

Annex II: "The Power Sector", is based on the findings of a mission consistingof Messrs. Tuncay and Heitner, which visited Mauritius in kpril 1976, and ofa short updating visit in January 1977.

This document has a restricted diuribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

TABLE OF CONTENTS

Page No.

VOLUME I: THE MAIN REPORT

ECONOMIC INDICATORS

MAP

SUMMARY AND CONCLUSIONS

CHAPTER I - Introduction .................... ... 1

CHAPTER II - Che Agrarian Sector ..... .................. 5

CHAPTER III - TChe Manufacturing Sector ................. 22

CHAPTER IV - lHuman Resources, Employment andIncome Distribution .. .................. 39

CHAPTER V - External Trade and Payments .............. 53

CHAPTER VI - Dlomestic Finance ......................... 65

CHAPTER VII - Economic Growth, Investment, an6 Savings . 90

CHAPTER VIII - Elevelopment Strategy and Needs, 1975-80 .. 101

VOLUME II: Annexes

ANNEX I: THE SUGAR INDUSTRY IN MAURITIUS

ANNEX II: THE POWER SECTOR

ANNEX III: THE MANUFACTURING SECTOR

ANNEX IV: THE DEVELOPMENT OF HUMAN RESOURCES

ANNEX V: SAVINGS MOBILIZATION AND FINANCIAL INTERMEI)IATION

STATISTICAL ANNEX

of 4

TAILE 3ALAN4 AREASMUIIITIUS - OCIAL INDICATORS OATA SHEET

LaAND AREA .OU Kt> …-------- ----- -- - ---- - -- - - -------MAURITIUS REFERENCE COUNTRIES 11970)

TOTAL 2.0 MOST RECENTAORIC. 1.1 1900 1970 ESTIMATE NOJEOUAAS**** Fljl**** SINGAPORE****

(NP PER CAPITA fUSS) 2S0.O* 250.0* 680.0*/a 2W0.* 620.0* 1240.0*

POPULATION AND VItAL STATISTICS____________________.__________

POPULATION IMID-YR. MILLION) 0.7 0.e o.s9/a 2.5 0.5 2.1

POPULAt.ON DENSITYPER SOUARE KM. 324.0 406.0 450.0/a 22.0 26.0 3571.0PER so. *v. AGRICULTURAL LANO 681.0 746.0 818.0 S9.0 "9.0 10373.0

VITAL STATI5TICSCRuDE BIRTH RATE I/THOU. AV) 4:1.6 35.9 25.1 51.5 35.7 29.5CRUDE DEAfH RATE /THOUAVI IJ:l.S 8.9 7.8 19.1 6.0 6.4INFANT MORTALITY RATE I/THOU) il'.5/a s7.0 46.6 621.6 21.0LIFE EXPECTANCY AT BlRTH (YRS) 6(0.3 63.2 65.5 49.4 1.t 68.0GROSS REPRODUCTION RAtE :!.9 1.9 1.6 3.4 2.4 2.2

POPULATION GROWTH RATE (8)TOTV( 2i.3 2.4** 1.1 2.7/a 3.0 2.3URBAN 2.4 S.1 2.9 7.9 9.7/a 4.7

URBAN POPULATION IX OF TOTAL) 34.6 45.3 48.2 27.3/b 33.4/b 86.3

AGE StRUCTURE (PERCENT)0 TO 94 YEARS 44.3 4t.9 40.4/b 46.7 46.7/b 39.015 TO 84 YEARS 52.6 54.5 es.97F SO.9 so. 7W 56.06s YEARS AND Ov'R 3. 3.6 3.77W 2.4 2.47W 3.0

AGE DEPENDENCY RATIO 0.9 0.8 o.0/b t.o 1.0/b 0.7ECONOmIC DEPENDENCY RATIO 1.7/b 1.6/t 1.475 I.5/eC 129W 1.2

FAMILY PLANNINGACCEPTORS (CUMULATIVE. THOU) . 49.6 97.1 20.7 .. 175.5USERS (I Of MARRIED wOMEN) . .. 55.2 .. .. 41.0

EMPLOYMENT

TOTAL LABOR FORCE ITHOUSAND) 190.0/b 230.0 274 .0/a 700.0/e 126.o/b 730.0

LABOR FORCE IN AGRICULTuQE (8) 3a.o7F 31.s 30.37i e:s.3 7e Sr.: s7 c 3.0UNEMPLOYED (S ot LABOR FORCE) S.6/b 17.3 o.0o7a 8.0 4-l.' 7.0/a

INCOME olsTRIBurToN___________________

U OF P4IVA,E INCOME REC D BY-HIGHEST SX OF HOUSEHOLDS 28.0) . 31.0 28.0/d is.3/dHIGHEST 20X OF HOUSEHOLDS 51.0 *- 55.0 60.Go < aThLOWEST 20X Of HOUSEHOLDS 4.5 .. 4.5 2.gmS 4.91LOWEST 40X OF HOUSEHOLDS 14.1t .. 14.0 0.47 14.

0IsIRI8uT ON Of LANO OWNERSHIP

X OWNED Y ;TOP OX OF OWNERS '5. 1 76.0 a0.o * -X OWNED BY SMALLEST 90% OWNERS 2.II*AA 2.0*** 2.0***

HEALTH ANO NUTRITION

POPULtTION PER PHYSICIAN 5470.0/b 4220.0 2010.0 3710.0/f 21200 o 520.0/POPULATION PER NURSING PERSON t720.c7W 710.0 520.0 9120.0 640.0/e 460.0POPULATION PER HOS.ITA4 BED 230.0 ^ 260.0 27050 570.0 340. 0- 270.0

PER CAPITA SUPPLV OF -CALORIES I( OF REQUIREMeNTS) 103.0 106.0 10.0 906.0 .. 103.PROTEIN IGRAMS PER DAY) 47.0 50.0 55 56.0 .. .

-OF WHICH ANIMAL AND PULSE 19.0 19.0 _1 8 25.0 .. 34.07c

DEATH RATE I/THOUI AES 1-4 t.0 .. 4.s/b 10.0 . 0.5

EDUCATION

AD.JUS1ED ENaOLLMENT R4ArOPRIMARrY SCHOOL B8.0 03.0 80.0 .. 99.0 t05.0SECONDARY SCHOOL 25.0 35.0 43.0 12.0 34.0 47.0

YEARS OF SCHOOLING PROvIDED(FIRST AND SECONO LEVEL) 44.0 14.0 14.0 12.0 14.u 12.0

VOCATIONAL ENROLLMENt(I OF SECONDARY) 2.0 .. 2.0 I6.0 o.0 9.0

ADULt LITERACY RATE (Xl .. .. so.e/d .. 72.0 75.0

HOUSING

PERSO_NS PER ROOMt (URBAN) ' . . .. .. 2gdeOCCUPIED L.aELLINGS WITHOUT 85 73 n/d,73.. de 20. qLd..fiPIPED MATER IYIACCESS TO ELECTRICITY

IX o' AL DWIELLINGS) 47.01b 70.0/d .. .. 67.0/dRURAL DWELLINGS CONNECTED

TO ELECTRICITY (8) 29.0/b 2- ..

CONSuMP I I ci

RADIO RECEIVERts IPER THOU POP) 61.0 t02.0 IZS.Q 57.0 ".0 134.0PASSEENGER CARS (PER THOU POP) 14.0 tS.0 1o.U 5.0 23.0 7t.0ELECTRICI. (KWH/YR PER CAP) 227.0 263.0 37J.L 127.0 304.0 1065.0NEWSPRINT (NG/YR PER CAP) 0.5 0.7 1.1 1.1 1.5 11.4

SEE NotES ANO DEFINITIONS ON REvERSt

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COUNTRY DATA - MAURITIUS_

ARtEA 2 POPULATION DENSITY 2

2.0 thou. Lm 867.9 thou. (mid-1976) 434 r km2

Rate of Growth: 132 (from 1970 to 1976) 789 per km or arabie land

POPITLQTTON C1!A&iACTtR2sTICS (1976) HL%LTH (1973-75)

Crude BirLh late (p2r l,uuD) 25.6 Population per physician 2,010

Crude Death Rate (per 1,000) 7.8 Population per hospital bed 270

Infant Yortality (per 1,000 live births) 40.4

INCOME DIS2TBAUT,lOS (1?75) DISTRI UTION OF LWAD 0'EsI!IP (1974)1/

2 of national income, nighest quincile 55.0 I ovnmd hv topI in of ownera 40.0

lowest quintile 5.0 2 owned by smallest 10% of owners 2.0

ACCESS TO PIPED UATER (1972-73) ACCESS TO ELECTRICITY (1972)

Z of population - urba.i ) Z of population - urban 70

- rural )27 - rural 7

RUTRITIO' (19?4) EDtCATION

Caloric intake as 2 of requiremants 108.0 Adult literacy rate Z 80 (1972)

Par capita protein intake 55.8 Frinry school enrollment Z 80 (1975)

GNP PER CAPTTA in 19761/ US$680

CROSS NATIONAL PRODDCT IN 1976 ANNUAL RATE OF GRO4tH (Z. 1970 Prices)

US Mln. Z 1966-71 971-76 1976

CNP at Market Prices 572.4 100.0 1.3 9.0 15.5

Cross Dcmestic Investmeat 2!2.2 38.8 6.8 23.0 20.3

Cross National Saving 169.8 29.7 -0.9 23.0 15.4

Current Account 3alance -.44.9 -7.8Exports of Goods, NFS 349.4 61.0 2.3 9.5 2.2Imports of Goods. bFS 405.5 70.8 3.0 14.8 1.4

CDIPuT, LW OR FORCE ALD?EOOUCTIVITY IN 1976

Value Added Labor Force V.A. Per WorkerUSI;I n. Z Thou. 2 US$ Z

AgfictlDture - KF9 28.8 83 30.3 1,757.8 95.2Industry 137.0 27.1 71 25.9 1.929.6 104.5

Services 223.0 "4.1 106 38.7 2,103.8 113.9

IhaU1ocated 14 5.1

botallAverage -55.9 1600 07 4 100.0 1,846.4 100.0

Cv OVRMTT FLANCE

Central Covermzenctl jUnz ) : of CDP

1975/76 1975/76 1970/71

Current Receipts 1,075.7 29.8 23.5

Current Expenditure 991.0 27.4 22.7Current Surplus 'i1Y 2.4 0 8

Capital Expenditures 423.4 11.7 7.6

External Assistanee (net) 28.1 1.1 1.9

1I Sugar land onlyI The Per Capita GNP estimate Ls at 1974-76 market prices, calculated by the same conversion

technique as the 1977 World Atlas. All other conversions to dollars in this table areat the averaqe exchange rate prevailing during the period covered.

31 Total labor force; unemployed are allocated to sctcor of their normal occupation. "Unallocated'cooslats mainly of unemployed workers seeking their fir-t job.

. t *vailable

.*t applicable

COLUTRY DA1A - AUIUTTUS Page 4 of

September

t 0NEY, CI.EDIT nnd rRICES 1972 IsiJ jq74 1975 1970 1977(Million Rs. outstanding cnd period)

Money and Quasi hSoney 677.5 880.5 1,585.7 1,946.6 2,033.9 2,214.4

Sank Credit to Puiblic Sector 26.4 79.7 400.9 364.0 580.6 933.8

Bank Credit to Privatc Scctor 356.5 545.4 594.3 746.6 f,157.2 1,349.2

(Percentages or Index Numbers)

Woney and Quasi money as 1 of CDP 47.3 47.5 49.3 57.0 54.6

General Price Index (1962 * 100) 125.3 142.2 183.6 :10.6 238.7Annnual pereentage chances in:

Ceneral Price Index 5.4 13.5 29.1 14.7 13.3

lank credit to Public Sector -39.6 201.9 403.0 -9.2 59.5

lank credit to Private Sector 14.6 53.0 9.0 25.6 55.0

UUJ1fCE OF PAY.ET`S 35ERCILANDTSZ E0XTPtS (AVEPACF 1972-76)

1972 1973 1974 1975 US$S M1n

-(m ions liSS) -

Esports of Goods, NFS 142.2 182.1 372.4 376.5 Sugar 209.7 78.7

Irportz of Goods, NTS 135.3 190.5 333.5 369.5 Mtolasses 5.9 2.2

Resource Gap (deficit 6.9 -8.4 38.9 7.0 Tea 3.5 1.3Clothing 16.9 6.3

Interest Payments (net) 1.5 3.2 -1.6 -Workers' Ke=ittances 0.6 1.6 4.5 - All other commodities 30.6 11.5

Other Factor Pavyents (net) -1.7 -1.9 -1.8 - Total .26u.6 100.0Net Transfers 8.8 7.2 14.6 11.6

Balance on Current Account 15.5 0.4 54.5 21.1 EXTERNAL DEBT. DECE2f3ER 31. 1976

Uirecr Foreign Investment 4.5 2.6 3.9 4.8 uSS Hln

Not FLT borrowingDisbursement 1.3 3.5 2.0 9.3 Public Debt, incl. guaranteed 46.;

Anortization - 1.5 1.0 1.7 Fon-Guaranteed Private Debt 7.1

Subtotal 1.3 2.0 6.0 7.6 Total outstznding & Disbursed 53.4

Capital Grants - - - -

Otber Capiral (net) 1.1 -7.2 -8.6 27.2 DEBt SERVICE RATIO for 19761/

Otter items n.e.i 0.8 -1.7 8.2 -2.6

Increas, in Reserve (+) -Z3.2 3.9 -64.0 -58.1 .

Cross Reserves (end 3.ar) 70.1 66.8 131.1 166.0 Public Debt, incl. guaranteed 1.0

Petroleum Inports 9.1 11.7 28.3 32.0 Won-Guaranteed Private Debt, 0.3

Petroleum Exports - - - - Total outstanding & Disbursed 1.3

RArE OF EXCHANGE (A&nual Averages) fTlD/IDA LENDING, OCTOBER 31, l477 (Million UtS-

1973 1974 1975 1976 IBRD TDAOutstanding & Disbursed 14.8 14.8

US$1.00 * Rs. S.442 5.703 6.027 6.750 Vndisbursed 25.1 5.7

Ra.1.00 - USS 18.37 17.53 16.59 14.81 Outstanding incl. Undisbursed 39.9 20.5

21 latio of Debt Service to Exports of Goode and Non-Factor Services.

.ot availablenot applicable

Deember 8, 1977

IBRD 3209R

Febrw,ry 1978

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91 D18ODIOT81 MAHEOU RG

Summary and Conclusions

General

i. Mauritius is an island community of about 881,UUIJ 1/ persons whoreside within an area of 720 square miles, about one-third of which is for-ested. Thus with a population density of more than 1,800 per square mile ofarable land, it is one of the most densely populated countries in the world.The per capita income is relatively high, estimated at about US$680 per capitain 1976. In real terms per capita income had increased about 20 percent sincethe 1960s. Although nearly 40 percent of the people live in urban communities,until recently manufacturing has been of minor importance. Sugar cultivationoccupies about 93 percent of the arable land and sugar conztitutes about 85percent of exports. On the other hand, the sugar industry has only absorbedabout 30 percent of the employed labor force.

ii. The recent economic history of Mauritius has had two distinctperiods and may now be entering a third. In the 1960s, alongside the poli-tical development marked by independence from Britain in )Q68, the economy waslargely stagnant, with a real growth rate of less than one percent amnually.This slow growth largely reflected the almost total relian.e of the economy onsugar. Although the growth4 of the labor force was relatively modest: at lessthan 2 percent a year, it was faster than that of jobs anc unemployment roseto about 16 percent by 1972. It is not surpr'sing therefo,'e that full employ-ment was made the primary goal of the First and Second Development EPlans thatterminate in 1980.

iii. The second period was characterized by the boom in sugar prices thatstarted in 1971 and reached its peak in 1974 and 1975. Though supported by asmall tea industry and by export processing plants attracted to Mauritiusby relatively low cost labor and tax, and other incentives, it was sugar thatsparked the rapid growth of the economy from 1970 to 1976, attaining over 8percent a year in that period.

iv. In 1975 Mauritius was subjected to a particularly devastat:ingcyclone that wiped out nearly a third of the sugar crop. This was nearlysimultaneous with the end of the sugar price boom. Sugar earnings were stillhigh in 1975, but fell sharply in 1976. In that year Maurttius sustained atrade deficit of Rs 563 mi:Llion. The Bank expects sugar prices to remain wellabove their 1970 levels but: Mauritius has probably entered another phase, witha somewhat slower growth than in the recent past, and a greater need forcredit restraint and a prudent use of resources.

Agriculture and Manufactur:2Bi

v. Mauritius has enjoyed advantageous price and quota arrangementsfor sugar, first under the Commonwealth and, starting in 1975, under the

1/ A number of other smaller islands in the Indian Ocean, includingRodrigues, St. Brandon,Tromelin and the Agalega group, also are partsof Mauritius. About 27,000 people inhabit the island of Rodrigues.

- ii -

European Economic Community Sugar Agreements. She, along with some 46 otherdeveloping countries in Africa and elsewhere, enjoys associate membership inthe EEC. Her new export processing industries also enjoy a preference onentry to the EEC. Mauritius thus has an advantage over such export-orientedeconomies as Taiwan and South Korea, which she has sought to emulate by givingvery generous tax and import concessions to plants that will export all theirproducts. There are now 66 "export-zone" plants and further rapid growth isexpected.

vi. Expansion of sugar production in Mauritius is limited to technicalimprovements in cultivation and inputs, since the use of more land for thatcrop can scarcely be justified. One attractive form of import substitutionis food production, either along with cane or in the small areas not suitedfor sugar. While most of the island is well-watered, there are portions inthe west and south that require more irrigation. Agricultural diversificationis also desirable to help meet an important objective of national policy,namely an improved distribution of income which, though similar to that inmany developing countries, is more skewed than in most. This arises largelyfrom the way in which sugar lands are divided with less than one percent ofthe holders harvesting nearly 70 percent of the sugar area. The possibilitythat the large holders use their land and labor resources more efficientlythan the small ones, and may thus save a larger proportion of their incomes,is an economic but not a social justification for the present pattern ofland ownership. This is true even if the wage labor on the 21 large sugarestates is at present better off economically than the very small holders,although even the latter do not constitute a real peasant agriculture.

vii. Despite rather stagnant prices until 1974, average acreage in teaincreased 50 percent from 1970 to 1974. However, tea was only about onepercent as important as sugar in the export list despite its favored positionin the South African market. Foodcrop production grew less rapidly than therest of the economy during the first half of this decade. Constraints on thenon-sugar portion of agriculture are lack of adequate credit, inadequateextension services and poor marketing arrangements. The retail prices of riceand wheat flour are subsidized by Government, and 35 other consumer items aresubject to price control. It is unlikely that Mauritius can or should seekfood self-sufficiency. Her fish catch provides about 60 percent of domesticrequirements exclusive of pelagic fishing conducted largely for export byforeign vessels.

viii. Besides the Export Processing Zone incentives which providetax holidays of up to 10 years for both distributed and undistributed net in-come (as well as the personal income tax on dividends from the enterprisesconcerned), Mauritius has an earlier (1964) Development Certificate Schemewhich provides benefits for import-substitution plants that are somewhatless favorable than those given for exclusively export processing plants.Investors in the older industries are mostly local, while 70 to 80 percentof the equity in the export processing plants is foreign-owned. Thisdifferential treatment under the two schemes may no longer be justified.Twice as many firms were under the Export Processing (EPZ) as under theDevelopment Certificate Scheme in 1975. However, the high wave of the EPZapplicants has now subsided.

Human Resources

ix. Mauritius, by a combination of late marriages and birth control,has achieved one of the fastest rates of decline in fertility of any develop-ing country. However, life expectancy has also increased. The high literacyof the population and some emigration have been other favorable factors.

x. Unemployment, the virtual elimination of which is a prime targetof the present 1975-80 Plan, has fallen from 16 percent of the labor force in1972 to around 11 percent three years later. Some labor scarcities areappearing, encouraging partial mechanization in sugar, but a make-work programis still maintained by the Government. Location planning of new enterprisesto meet employment needs would be desirable because, while the country issmall, transportation is still only partially developed.

xi. While Mauritius is a private enterprise economy, the wage struc-ture is influenced by the Government's policy of promoting less skcewness inincome distribution. Minimum wages are used for this purpose, as are consumersubsidies. The Development Works Corporation, which is the public employmentagency, has a wage scale that appears to attract labor when combined with theless demanding nature of the work. It seems to have outbid some parts of theprivate sector for labor. Steps that could be taken to improve the employ-ment situation further include: better credit facilities for small-scaleindustry, improved vocational training for the poor, and better publictransport to get workers to jobs.

Foreign Trade Prospects

xii. With exports accounting for over 60 percent of the domestic product,Mauritius, terms of trade are vitally important, particuLarly to domesticsavings. It is estimated that the marginal rate of savings of income fromimproved terms of trade is about 75 percent. In the five years ending in 1975the terms of trade improved by over 80 percent, but they fell by 25 percentin 1976. In December of that year the EEC price of sugar was 43 percent ofits 1975 peak. Mauritius with an EEC quota of 487,000 tons is assured of morethan a third of that mar]cet. Mauritius Sugar production was about. 685,000tons in 1976 and was projected by the Mauritius 5-Year 1975-80 Plan to be800,000 tons at the end of the period, a target which is probably too high.In this report real imports are estimated to increase over 7.2 percent a yearor slightly faster than real GDP, after taking into account the high importcontent of manufactured exports and some restraint on other imports throughtaxation. Some tax measures along this line were already taken in the 1977/78budget. All considered, the mission projects a current account deficit ofRs400 million by 1980, a figure that may approximately the same up to 1985.

Domestic Finance

xiii. The absence of any public savings during the tirst three years ofthe Plan seems to confourLd the Plan forecast of Rs 830 million of publicsavings at 1974 prices over the Plan period. The two factors involved are the

- iv -

insufficient progressivity of taxes, particularly on sugar incomes and thegrowth of current outlays from 1970/71 to 1976/75 from 22 to 31 percent ofGDP. An important constraint on the receipts side is the use of specificrather than ad valorem tax rates which, of course, fail to respond revenue-wise to higher prices. Some changes of this nature have been made. On theexpenditure side transfer payments, particularly food subsidies, have in-creased. The latter constitute about 21 percent of the current budget. Alltransfer payments increased from 24 percent of the current budget in 1973 to40 percent in 1976. Without consumer subsidies it is estimated that consumerprices might have risen over 30 percent higher than they did.

xiv. Because of fourfold increase in the rupee value of Mauritius' netforeign assets and a 4.7 fold expansion in domestic credit from 1970 to 1975,monetary expansion was about 1.7 times faster than the growth in real GDP.The money supply continued to increase by about 11 percent in 1976; theincrease accompanied a large adverse trade balance and a decline in foreignexchange reserves. The consumer price index more than doubled between 1971and 1976. The monetary authorities have increased reserve requirements andimposed some direct credit controls, but the interest rate structure isunrealistic still (most rates are negative). Some increases have been madebut further action is needed. The Government is continuing to examine theproblem. Mauritius is well supplied with financial intermediaries.

Economic Performance

xv. As noted above, in the 1960s Mauritius' economic growth was slowand erratic, averaging less than one percent a year. The price of sugar fellby 9 percent over that decade. With a labor force growing by 2.8 percentannually, unemployment grew to unacceptable levels.

xvi. In contrast the first half of this decade has been marked by suc-cess on several fronts. The average rate of gross capital formation grew inthe 1970s, (estimates are from 17 percent of GDP in the 1960s to 26 percentand also the efficiency of investment did rise, resulting in a real growth ofGDP of more than 8 percent year between 1970 and 1976. The improvement interms of trade also played a major role. A considerably higher proportion ofinvestment went into directly productive sectors than was true of the 1960s.Barring the cyclone of 1975, the growth probably would have averaged 10percent. 52,000 new jobs came into being during the first Plan period. Theshortcomings were the fact that public investment fell about 30 percent shortof the goal and public savings were quite small. However, total domesticsavings in real terms increased from about 13 percent of GDP in 1970 to 25percent in 1976.

xvii. 1976 was a turning point in the economy. Prices continued to riseby 10 percent under the pressure of some increased liquidity. The continuedexpansion of credit to the private sector more than offset the contractionaryeffect of the sharp fall in foreign exchange reserves. Money supply rose by 7percent, comparatively little as compared to the 22.8 percent rise during theprevious year. The terms of trade fell by 25 percent.

Development Strategy and INeeds, 1975-80

xviii. In 1976 the Government issued a new Five Year Plan to run to mid-1980. The most significant goals of the Plan are a real growth rate of 6.5percent per annum and the creation of 76,000 jobs. The labor force is esti-mated to grow by 34 percernt between 1972 and 1980. The gross investment andsavings targets were 27 percent and 24 percent, respectively. Assuming apopulation growth of 1.8 percent, the growth in per capita GDP is to be 4.7percent a year.

xix. 1974 was the base reference year of the new Plan. rianned grosscapital formation at 1974 prices was to be Rs 4,865 million: Rs 2,390 millionin the public, and Rs 2,475 million in the private sector. The mission exam-ined two main points, namely employment generation and financial resourcemobilization. The new employment goal itself calls for 54 jobs per millionRupees of investment. In the first Plan 58 jobs per million Rupees wasachieved. Using other tests and assuming the investment target were met, themacro analysis would indicate the employment target is feasible. However,since, as noted below, the investment target cannot be fully met and sector-by-sector analysis also indicates a somewhat lower employment figure (becauseof the composition of inve3tment) new employment generation may fall about10,000 short of the goal. However, this would mean a reduction in unemploy-ment from about 10-11 percent to less than 5 percent of the labor force overthe Plan period. In respect to an ancillary but important point, the missionbelieves that there may be some trade-off between wage policy and employment,as well as wage policy and economic growth. Therefore, the Government maywish to consider this matter in the light of the desire to :hange the struc-ture of the economy.

xx. In respect to the mobilization of resources, the Plan envisagesthat Rs 4,435 million out of Rs 4,865 million needed for financing investment(over 90 percent) will be generated by domestic savings. The mission feelsthat this savings target is too high and has estimated it to be about Rs 3,800million, of which Rs 200 million would be public savings. whereas the Planenvisaged Rs 830 million of public savings during the Plan period, hardly anypublic savings were generated in the first three years.

xxi. If the total impact of this expected shortfall in savings is not toreduce Plan investment, the buildup of foreign exchange reserves of Rs 730million contemplated for the Plan period should be reduced by Rs 300 millionto Rs 430 million. Also that the foreign aid disbursements of Rs 900 millionshould be increased to Rs 1 OO million by securing about Rs 500 million ofadditional foreign aid commitments. Nevetheless, some lowering of the origin-ally contemplated public investment target might be unavoidable.

xxii. The future development and growth of Mauritius depends on success-ful pursuance of the course she is already following in the field of exportprocessing and, to a lesser extent, agricultural diversification. Despiteher preference in the EEC market, exporting will not be easy in view of the

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competition from Far Eastern countries and perhaps later from Africa. It isimportant that government procedures be simplified and consolidated in feweragencies and labor, with government support, does not price itself out of themarket. At present there is considerable complaint by employer organizationsthat once workers have achieved their desired income level, further wage hikesproduce absenteeism, thus reducing the attractiveness of Mauritius for foreigninvestors.

Creditworthiness

xxiii. Mauritius is creditworthy for the amount of foreign borrowing en-visaged in the second Plan. In 1976 foreign debt service was only about onepercent of export earnings. If all presently committed borrowings were dis-bursed and 1976 export earnings were to fall by 25 percent, the debt ser-vice ratio would still be less than 4 percent. Thus a substantial increasein foreign borrowing could be easily managed. If Mauritius does not drasti-cally depart from the lines indicated in the current Plan, the public debtservice ratio should remain well below 8 percent up to 1985.

Chapter I

INTRODUCTION

1. The Island of Mauritius lies in the Indian ucean aDout 500 mileseast of Madagascar. 1/ Its area is about 720 square miles, about 38 mileslong and at maximum 29 miles wide. The land is of volcanic origin whichaccounts for its general fertility and suitability for sugar cane produc-tion. Low mountains rising to 2,000 feet are in the central and southernparts. The country has no significant mineral resources and about one-thirdof the area is forested and scrub land. The climate is tropical to sub-tropical. Rainfall varies from about 200 inches a year in fthe highlands tobelow 35 inches in the western coastal region, where irrigation :Ls practised.Cyclones have been striking the country at about 15-year intervals in recentdecades and can severely damage the sugar crop, as occurred in 1975.

2. The island was first visited by European traaers plying betweenEurope and the East Indies. Then during the 17th century, the Dutch andlater the French formed permanent settlements, gaining their livelihoodby exporting exotic pro,luce to the metropolitan country. The French alsoestablished sugar plantations which came to dominate the local economy.Sovereignty was transferred to Britain in 1810 as a result of the Napoleonicwars but French settlements and institutions were not much disturbed.

3. As sugar production expanded, the demand for labor was first metby the importation of sLaves from Madagascar until slavery was abolished in1830. The British then sought new sources of labor in India through thesystem of indenture. Indians, who eventually came to outnumber t:he Frenchand Africans, were joined by other waves of immigrants from Pakistan andChina.

4. Today, one half the population of Mauritius of about 908,000, 2/are Hindu; 30 percent comprises what is called the "General Population",i.e., mainly "Franco-Mauritians", Africans and persons of mixed decent("Creoles"); 17 percent are Indo-Pakistani Moslems and 3 percent are ofChinese origin. Although 45 percent of the population of the island wasclassified as urban in t:he 1972 census, the boundaries between the urbanand the rural areas are not very sharp in many localities and have fre-quently been redefined.

5. The colonial history of Mauritius, which ended with the grant ofindependence from Britain in 1968, shaped many of the social, politicaland economic features that persist today. The labor-intensive sugar industrydivided society into the owners, mostly French, and the laborers, usuallyAfrican or Asian. Much of the arable land was secured by the early planters,and with it a political influence that the industry still retains, thoughrecent emphasis has been placed, inter alia, upon income redistribution.

1/ A number of other smaller islands in the Indian ocean, includingRodrigues, St. Brarndon, Tromelin and the Agalega group, also areparts of Mauritius.

2/ Including 27,000 people living on the island of Rodrigues.

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A labor movement of the plantation workers began to develop in the nine-teenth century and has gradually consolidated its strength, especially inrecent years, until today it has become an important force in Mauritianpolitics. The diversity of Mauritius' ethnic and religious communitiesis also a major influence in the country's political and economic life.Despite the emergence of a distinctive Mauritian culture, each ethnic groupholds to its language, religion and customs, and in many cases particularoccupations or economic activities have come to be associated with differ-ent communities or sub-communities. In these circumstances Government hasattempted with considerable success to reconcile the interests of the variousgroups.

6. The system of government is a parliamentary democracy. Mauritiusremains a member of the Commonwealth. Since Independence, the country hasbeen ruled by the Independence Party, a coalition of the Labor Party, theMuslim Action Committee and, at one stage, the Parti Mauricien Social-Demo-crate (PMSD). There are a considerable number of small political groups.The Prime Minister, Sir Seewoosagur Ramgoolam, has steered Governmentaccording to a moderate and pragmatic rather than doctrinal approach. Whilethe Government has recently emphasized the redistribution of income, at thesame time it has encouraged private enterprise to play the major role in theMauritian economy. The main opposition party today is the Mouvement MilitantMauricien which has adopted a socialist program.

7. Compared with many other developing countries in Africa or Asia,the people of Mauritius enjoy a relatively high standard of living. Percapita GNP was around US$250 throughout the 1960s, and US$680 in 1976, anincrease of about 20 percent in real terms. There are few, if any, sub-sistence farmers. The literacy rate exceeds 80 percent and primary andsecondary education is free. Almost all areas of the island have access toelectricity and water supplies, and health standards are relatively good.

8. The most striking characteristic of the mainly agriculturaleconomy is its great dependence on sugar. About 93 percent of arableland is under sugar cane, and in a normal year sugar is about 30 percentof GDP, 85 percent of exports and provides 30 percent of employment. Noother sector contributes more than a tenth to either GDP or employment.The efficiency of the sugar industry has been an important factor inhelping Mauritius to achieve its present favorable per capita income, butthe economy is also very exposed to the considerable risks inherent inmonoculture. In any year, up to a third of the crop can be lost throughcyclone damage, though such severe loss occurs only infrequently. Worldsugar prices are of course also critical to economic welfare, thoughMauritius has been successful in partly shielding itself from drasticchanges in income by special quota and price agreements, first mainly withthe United Kingdom, and since 1975 with the European Economic Community.

9. As is characteristic of monoculture, particularly sugar, theisland has a very uneven distribution of land-ownership. Twenty-onesugar estates, each with its own mill, cultivate about 55 percent ofthe land. The remainder is cultivated by around 30,000 small and

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medium-sized planters. The skewness in sugar production snares is even morepronounced than that of land ownership because most small planters are unableto match the yields on the estates, yields which are comparable with the bestachieved anywhere in the world. Although most estates are corporately ownedtoday, ownership of shares is still largely confined to the descendants ofthe original French settlers.

10. During the 1960s, two disturbing features pervaded tne nauritianeconomy: a rapidly growing population and a period of economic stagnation.Following the eradication of malaria and other improvements in public health,mortality rates dropped sharply in the early 1950s, especially among infants,and birth rates remained high. The result was a fast growth of the popula-tion which was translated into a rapid growth of the labor force in the1960s, when children born, in the post-war baby boom reached working age.Not till the 1970s was the labor market able to absorb this growth in laborsupply.

11. Aware of the sccial and economic pressures that result from risingunemployment, Government turned to a three-point strategy to deal with theproblem. Recognizing that in the long-term unemployment could best beeliminated if the population growth were stemmed, Government encouragedfamily planning as part of a population control program. At the same time,Government embarked on a program of industrialization to create new jobsand promote some growth and diversification of the economy. The main targetwas manufacturing for the domestic market, where it was felt the potentialwas greater. Entrepreneurs were offered generous tax incentives, as well assome tariff protection, to produce import-substituting consumer goods, whichhad the added, though at the time minor, attraction of saving some foreignexchange. Diversification of agriculture was also encouraged. Lastly, andsupposedly for the short-term, a large number of the unemployed were absorbedinto marginally productive public sector activities through the Relief WorkerScheme, where they undertook tasks such as simple road maintenance, upkeep ofpublic buildings, and husbandry of forests on Crown land.

12. The various elements of the strategy met with differing degrees ofsuccess. The major success unquestionably was the program to limit popula-tion growth. Two private family planning schemes were set up in 1963 and metwith remarkable success. Whereas the crude birth rate was 40 per thousand in1963, it had dropped to 2.7 by 1970. This achievement was aided by Mauritius'small size, easy communications, largely literate and educated population, andthe prevalence of wage employment rather than smallholder agriculture. Butthe readiness with which family planning was accepted suggests that perhapssocial or other factors favored a change in the old pattern of early marriagesand large families. Of course, the success of this program had no immediateeffect on the size of the labor force. Because of the failure of the economyto expand, the unemployment rate had risen by the end of the 1960s to 15percent, despite the employment of relief workers, and job creation replacedpopulation growth as the prime preoccupation of Government.

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13. Acknowledging the failure of the long-run employment-creatingaspects of its program for the past decade, Government adopted in its 1971-75 Plan for Social and Economic Development a modified strategy designedto achieve full employment by 1980. The main focus of the new strategywas an outward oriented economic growth as a vehicle for employment creation.Export markets for manufactured goods were perceived to hold better growthpotential than the local market. To ensure a high degree of labor intensity,promotional efforts centered on manufacturing activities that are usuallylabor-intensive in developing economies, such as garment manufacture and lightassembly work. Rising wages in such places as Hong Kong and Singapore would,it was hoped, attract export-oriented industry to Mauritius. Governmentanticipated that entrepreneurs from these places would be able to bring withthem some capital, but more imiportantly, a knowledge of the appropriatetechnology and markets - two factors lacking in Mauritius.

Chapter 2

The Agrarian Sector

14. The earliest Dutch settlers in Mauritius came in the 17th Century.They were few in number (about 300) and devoted themselves to cattle raising,hunting and fishing, and producing small amounts of foodcrops and sometobacco. Their most important activity was the exploitation of the island'sebony forests, apparently resulting in the extinction of the Dodo, a birdoften mentioned by early travellers. However, the Dutch did start the cropupon which the future economy of the country was to be based, sugar cane.Slaves were brought to Mauritius from Madagascar. After the withdrawal ofthe Dutch in 1710, and the serious move to settle and exploit the island bythe French in 1722, the population and agricultural economy grew rapidly.Most of the arable land was divided into concessions (a quarter mile by amile). Coffee, manioc, maize, fruit, spices and, most significant, sugarwere grown. Governor Mathe de Labourdonnais is credited with giving sugar astrong impetus around 1745. Except for brief intervals of storm devastation,it has dominated the economy and influenced its social structure in thesubsequent periods of colonial government and independence. The reasons forthe near monocultural feature of Mauritian agriculture are principally thesmall arable land area of the island, the available surplus labor to meet theseasonally labor-intensive requirements of the sugar crop, and the favorablemarketing arrangements under the Commonwealth (later the EEC) and Interna-tional Sugar Agreements. In recent years sugar has constituted an increasingportion of GNP, growing to over 50 percent in good years, as compared with 9percent for the non-sugar portion of the agricultural sector.

Sugar Production

15. Development of the sugar industry was slow at first but by1825, 15 years after Britain took possession of the island, 10,000 metrictons were being produced. This had increased over fivefold to 55,000 in1850 and to 450,000 a hundred years later in 1950.

16. After 1950, incentive for further development ot the crop inMauritius came with the Commonwealth Sugar Agreement, wnich was signed in1951 between Britain and the Commonwealth Sugar Exporting Countries. TheAgreement provided a guaranteed price, regarded as remunerative, and importquotas in which Mauritius received a share of 380,000 metric tons. As aresult of the price stability thus guaranteed to Mauritius' sugar producers,the industry expanded and in 1973 production exceeded the 700,000 metric tonmark. With the expiration of the Commonwealth Sugar Agreement at the end of1974, Mauritius was granted an even larger quota of 487,200 metric tons forits sugar exports to the European Economic Community under the Loine Convention.

17. The sugar industry's share in GDP has varied widely between 32 and

53 percent in the last ten years. Shares in the upper end of this range werereached in recent years when the price of sugar in export markets improved

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substantially as compared with the 1960s, when shares towards the lower endof the range were more typical. The sugar industry's share in total employ-ment is smaller than its share in GDP. The industry provides employment toabout 70,000 - 75,000 people, which constitutes about 30 percent of the laborforce. In a normal year sugar contributes about 85 percent of exports, aportion likely to decrease somewhat with greater diversification in agricul-ture and the growth of export processing industries.

18. The current Five Year Plan (1975-80) for Social and Economic Devel-opment contemplates a further expansion of sugar production from the 680,000tons a year achieved on average in 1971-74 to 800,000 tons by 1980. However,according to the Plan document, the proposed increase will have to comemainly through improvement in cane yields of 3 percent per annum during thePlan period. Nine hundred thousand might be achieved under optimal weatherconditions. Technical factors such as improved varieties, pest control,etc., plus irrigation especially in the Northern Plain Irrigation Scheme,rather than acreage expansion, will be relied upon to achieve the productiontarget. Modernization of the sugar mills will also be required.

19. The reliance on technology and irrigation for further growth isnecessary because, with over 93 percent of the cultivated land now under sugarcane (86,500 out of about 93,000 hectares), new land can be brought undercane only with rapidly increasing marginal costs. There are perhaps alsosocio-economic constraints to a rapid further expansion of sugar production.As will be elaborated below, the structure of the industry is one of greatinequalities in land ownership and income distribution, as well as massseasonal labor-intensity during the cutting season. The opportunitiesfor providing off-season employment in sugar are severely limited. Thecountry is emphasizing alternative lines of endeavor to meet the needs ofwhat is still a labor-surplus economy. Aside from this seasonal factor,the crop's vulnerability to cyclonic storms is illustrated by the factthat its contribution to GDP fell sharply in 1975. By coincidence suchstorms have been experienced at about 15-year intervals since 1931.

20. These considerations do not gainsay the major contribution thatsugar makes to the Mauritian economy. It provides employment to about 70,000people or 30 percent of the labor force and, as mentioned above, over 85percent of the island's export earnings. Also it is the mainstay of publicrevenues in the form of a special export tax, the ordinary income tax, aspecial duty on milling, and customs duties on imports of supplies andmachinery. Estate sugar production has also been the principal generator ofcapital for the other parts of the private sector. Part of the undistributedprofits were of course plowed back into capital goods replacement, irrigationexpansion and improving transportation on the estates themselves. However,a considerable amount - estimated at around Rs 120 million in 1974 - was usedin diversification activities, such as hotel construction, direct or indirectequity participation in manufacturing firms of the Export Processing Zone,or new housing for rental. Public sector institutions or organizations alsoderive the bulk of their income from the sugar industry. Through such orga-nizations, funds are channeled into housing projects, community activities,research, and numerous other purposes.

21. There are also some linkages between sugar and the rest of theeconomy, though in general the sugar industry has tried to restrict itsactivities to those fairly close to sugar production. The fairly well-developed nature of financiial intermediaries is perhaps the most importantsingle backward linkage, as without suitable financing the continuing devel-opment of the industry wou]ld not have been possible. In other sectors theimpact of sugar in fostering new activities has been relatively limited.Estates produce some of their own machinery, and undertake most of their ownmaintenance, but this has not led to a major domestic machinery-producingindustry, mainly because oi the limited demand. Construction work is alsoundertaken by the estates, and may have had some role in the developmentof a domestic contracting :Lndustry, but has certainly not been a drivingforce. The vehicle supply and maintenance trades have also developed inpartial response to the needs of the sugar planters and millers.

22. There can be litt:le doubt that, for reason of comparative advantageas well as its long and successful marketing capability, the sugar industrywill remain dominant in the economy for the foreseeable future. However,the limitations for further growth as well as the vulnerability of a nearmonoculture economy behove the Government to consider well-conceived andfeasible diversification investments.

Structure and Ownership

23. As the following table makes clear the distribution of landholdingsin sugar is sharply skewed..

Table 1: DISTRIBlJTION OF SUGAR LAND OWNERSHIP, 1974

Size of Holding Percentage Percentage(arpents) 1/ of Landholders of Land

0 - 5 90.8 19.75 - 10 6.2 6.7

10 - 25 2.1 5.125 - 500 0.8 11.0

500 + 0.1 57.5

1/ The arpent is the commaon measure of land area in Mauritius. Onearpent equals about 1.043 acres or 0.422 hectares.

Source: Chamber of Agricu:Lture.

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24. Sugar growers may be classified as owner-planters and tenant-planters, with the former being subdivided between planters without mill-ing facilities and those with mills connected with the estates. Tenancy orownership does not appear to be mainly a function of size of landholding.For example, in the below-one-arpent range, where of course the concentrationof nonmiller planters is greatest, there are between 12,000 and 13,000 owner-planters and about 400 tenant-planters. The number of planters in thislower range constitutes about 40 percent of the total, whereas the area whichthey harvested in 1974 is only about 8 percent of the total. On the otherhand, planters of 25 arpents and over, excluding millers, constitute approxi-mately 0.8 percent of planters, yet they harvest about 30 percent of thenonmillers' area under sugar cane. The largest 0.9 percent of growers har-vested 69 percent of the cane areas. In 1976, 57 percent of the sugar landwas cultivated by 21 miller-planters. Historical heritage is an importantfactor explaining this concentration. Many of the large landholdings wereestablished early in the island's history, and there have been no majorchanges capable of altering the pattern of landholding thus established. Thedistribution of cane area between miller-planters and others indicates thathistorically there is a slow but distinct trend toward greater concentrationof land ownership. During the period 1951-53, about 47 percent of the totalcane area harvested was cultivated by miller-planters. Since then the propor-tion of the harvested area accounted for by miller-planters increased to 57percent.

Production and Yields

25. The production of cane has increased from about 4.2 million metrictons in the early 1950s to about 5.9 million metric tons in the early 1970s,representing an average growth rate of about 1.9 percent annually. However,year-to-year fluctuations reduce the significance of this average. Avariance of 30 percent below trend has occurred in severe cyclone years.Even when there is not a severe cyclone, yields can fluctuate by severaltons per hectare from one year to the next. For example, the cane yieldincreased from 65.9 tons per hectare in 1971 to 78.7 tons in 1972.

26. Until the early 1960s, most of the increased production resultedfrom increases in the area harvested, while yields were practically constant.Since then, the area under cane has not increased at all, and the increasein production is attributable mainly to increased yields. (The extractionrate has been practically unchanged.) The striking contrast in growth ratesof production and yield between the decades ending in 1962 and 1972 is shownin the following table.

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Table 2: SUGAR PRODUCTION AND YIELDS

Year Area Cultivated Cane Production Yield Sugar Production(arpents) ---------------- (metric tons)------------------

1952 174,303 4,097,000 24.8 468,2381962 204,974 4,624,000 23.9 532,8171972 205,218 6,315,000 33.2 t86,3661973 207,029 6,243,000 32.5 718,4641974 205,432 5,964,000 31.5 696,7861975 204,700 4,316,000 22.8 468,2561976 206,500 6,402,000 33.4 689,932

Growth Rates

1952-62 1.7 1.2 -0.4 1.31962-72 - 3.1 3.9 2.61952-74 0.8 1.9 1.2 2.0

Source: Statistical Annex, Table 9.2

27. Examination of the yield by size of landholding shows that the largerproducers generally do much better than the smaller ones! This applies evenmore to tenant-planters t:han to owner-planters. This isishown in Table 3.

Tcble 3: CANE YIELDS, 1966-70(metric tons per hectare)

Plantation Size Owner-Planters Tenant-Planters(arpents)

0 - 1 50.2 37.41 - 5 51.4 39.05 - 20 52.6 42.9

20 - 100 56.2 46.7Over 100 65.4 52.6

Average 55.4 43.4

Source: The Mauritius Chamber of Agriculture, President's Report,1974-75.

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28. As might be surmised, the plantations with milling facilities enjoyon average much higher yields that owner-planters and very much higher thantenant-planters, the margin for the miller-planters being 43.4 percent overthe owner-planters and 73 percent over the tenant-planters. The large sizeof miller-planter holdings probably means better cultivation practicesincluding inputs such as fertilizer and pest controls. Sugar production,including preparing and irrigating the land, is more capital-intensive thanmost economic activities in Mauritius. As increased production becomes moreand more dependent on extending irrigation, the advantage of the large holdermay be expected to become greater. There are also transport and labor eco-nomies in large-scale production. It is clear that the gap in yields ispartly self-perpetuating. As the smaller planters earn relatively smallerprofits they are not able to extend their operations and acquire new land totake advantage of returns to scale 1/.

29. Taking the country as a whole, Mauritius ranked fifth in yield peracre among the 22 major sugar-producing countries during 1972-74 and secondonly to South Africa in Africa. Elsewhere, only the US and Australia weresignificantly, and Indonesia marginally, ahead of Mauritius. Consideringalternatives for resource use on the island, there can be no doubt ofMauritius' comparative advantage in sugar.

Employment

30. About 30 percent of the Mauritian labor force is employed in sugarproduction. The general impact of the industry on the country's human re-source problems are discussed in Chapter 4. Only a few issues peculiar toemployment in the subsector will be mentioned here. First, about 40 percent(31,000 out of 75,000) of the people working in the industry were self-employed owner- or tenant-planters. These in turn engaged about 8,000 or10.2 percent of the sugar labor force, leaving 36,000 or a little less thanhalf of the total as hired labor on the larger estates.

31. Employment in sugar is, of course, rather seasonal although perhapsnot to the degree one might expect. Total employment of hired labor increasedbetween the first and second half of 1974 from about 40,000 to almost 50,000workers, which implies that about 80 percent of the labor force engaged inthe sugar industry during the critical period of harvesting found employmentyear-round, while the remaining 20 percent had to look elsewhere but be avail-able on a standby basis in order for the industry to complete the season suc-cessfully. Also, perhaps contrary to expectations, the seasonality of employ-ment appears to be greater on the smaller plantations, but this is becauseof the greater stability in the milling operations on the larger estates.Thus to a degree, unlike entities are being compared. Again, as in thecase of productivity, we find that the very large estates evidence greater

1/ Annex I points out that there may also be some diseconomies of scaleon the very largest estates.

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employment variation than the somewhat smaller miller-owner establishments.This may be because the latter are able to use a larger proportion of theirwork force in off-season repair and maintenance work.

32. A feature of the labor force in the sugar indust:y is its gradualaging. This reflects partly the reluctance of young people to be employedin the sugar industry, but in addition, many older workers stay in employ-ment longer to take greater advantage of the pension scheme. While therehave been some complaints by management of loss of productivity, this is notmanifest inasmuch as a growth in production of almost 2 percent a year hasbeen achieved without increasing the labor force. Of course mechanization,prompted in part by temporary labor shortages at the peak harvesting season,has contributed to increasing labor productivity.

33. Labor legislation in recent years has attempted to increase thestability of employment in the sugar industry. The main features of theemployment laws' provisions imply that a worker employed on a daily basisduring at least 80 percent of the harvesting season is alsu entitled toemployment during the off-season. Furthermore, a worker who has been em-ployed for at least three years is entitled to benefits under the pensionscheme. Other improvements in conditions of employment havre included costof living adjustments (about twice a year for the last three years), sickleave payments, public holLday payments, end-of-year bonus, attendance bonus,maternity allowance (both Ln cash and in kind, such as milk), boots andclothing allowances, housing allowances, and pension fund participationby the employer. As a result of these measures, there has been a sharpincrease in labor cost, particularly in the last three years. Theseimprovements have not been achieved without considerable worker unionpressure.

Supporting Institutions

34. The larger units have probably derived greater benetit from theinstitutions which have grown up in support of the sugar industry. Bothprivate interests and Government are active in their functioning. The Develop-ment Bank of Mauritius (established in 1964 and which took over the businessof the Mauritius Agricultural Bank), the Mauritius Co-operative AgriculturalFederation Limited, the Sugar Producers and Cane Growers Associations, theSugar Planters Mechanical Plool and the Mauritius Sugar Industry ResearchInstitute, aside from the Government itself, are important institutionsaffecting the sector. The improvement in industry earnings in the 1970s wasaccompanied by greater interest within the Chamber of Agriculture and theGovernment in improving the services to small planters. The most importantprevious step was the setting up of the Mechanical Pool to try to increase theyields of the small planters.

35. Together the institutions serving the sub-sector provide a com-prehensive array of services to those in the industry and offer a forumfor making the industry's views known on almost every point. To a large

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extent the continuity of the institutions, spanning both the pre-Independenceand post-Independence periods, has enabled the sugar industry to make the tran-sition between the two eras without any disruption of production or marketing.

36. There are nonetheless-weaknesses in the institutional structure,of which the industry is itself aware and which it is now endeavoring toeliminate. Some of the institutions dealing with the small planters are infact only partially effective. This stems partly from the difficulty ofadequately serving a very large number of individuals. For example, theMechanical Pool lacks resources to meet the demands of all the small plant-ers for land clearing services. However, it has recently received moreequipment. Much the same constraint applies to the Research Institute. Whileit has developed high yielding cane varieties suitable for smallholder cul-tivation conditions, it relies on the extension services to pass this infor-mation on to the small planter, and to ensure that the new varieties are cor-rectly tended. Government's extension services, on which the formal respons-ibility rests for this aspect, however, are inadequately staffed. Otherinstitutions too, lack the resources to meet all the demands that are placedon the small planters. A more aggressive approach towards institutionsserving the needs of small planters could assist considerably in narrowing thegap betwen estates' and planters' yields. In part the bias in the institu-tions towards the larger estates dates back to the 1960s when little develop-ment of institutions was possible because of the straitened financial condi-tion of the industry.

Prices, Costs, and Profitability

37. The foreign trade and marketing aspects of the sugar industry arediscussed in Chapter 5. Details on this subject as well as its earnings andcost structure are in Annex 1.

38. The incentives to produce sugar were particularly great duringthe last five years. In 1970 the producer price for sugar (called the ex-Syndicate price, as all sugar is marketed through the Mauritius Sugar Syn-dicate) was Rs 472 per ton. Until 1975, the average price realized forexports rose substantially each year, and this was immediately reflectedin ex-Syndicate prices. By 1973 these averaged Rs 790 per ton, then in-creased to Rs 1,872 per ton the following year. In 1975 a further substan-tial increase was recorded to Rs 2,256, and althoug'n a reversal to around Rs1,670 occurred in 1976, it is clear that the real earnings of sugar producersrose rapidly over time. The profit per ton of cane and also per ton of sugarremained fairly stable from 1966 to 1970 but increased nearly fivefold by 1973and again five times between that and the following year. The formula forsharing revenues between millers and planters was also modified over recentyears, as was the system of taxation, which was graduated to bear more heavilyon the millers and large planters. The resulting pricing system is complex,being based on historically evolved relationships and shares rather than anyparticular economic design. In general the small producers receive a priceabout 11-12 percent higher for their sugar than the millers, thus partlycompensating for their lower average yields. Millers generally receive enoughrevenue to cover the cost of their operations including a reasonable profitmargin.

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39. The cost of sugar production on estates approximately doubled be-tween the late 1960s and 1974. Since then costs have risen further mainlybecause of higher wages, which increased as a percentage of totaL costsfrom 56.8 percent in 19,56 to 58.7 percent in 1974. In manufacturing thelabor element in costs remained fairly stable at around 40 percent up to1973 but increased by over 7 percent of total manufacturing costs in 1974.The supplies element in costs appears to have shown a slight downward trendon the estates but not In manufacturing. The share of capital expenses -interest and depreciation - was only 9 percent in cane cultivation as com-pared with 40 percent in manufacturing.

40. Since, as noted above, prices rose even faster than cost overthis period, profit margins increased, though the downturn in prices in1976 is worrisome since it is likely that domestic labor costs will proveless flexible on the dowmside compared with world sugar prices.

Prospects and Conclusion on Sugar

41. The high profits of the 1970s so far have resulted only in a rela-tively small increase irn production. Firstly, substantially higher productionon estates would require heavy investment on land or water development whichwould take a considerable time to mature, even if the high cost could bejustified. Secondly, the small planters could not adequately utilize thefacilities offered by institutions, and for this reason, were unable to expandcane production in response to higher prices. Thirdly, although higher yield-ing cane varieties can raise production, cane is only replanted every 8 to10 years, and hence the price elasticity of supply is very limited in theshort-run. Finally, cyclones in early 1975 caused 35 percent of that year'scrop to be lost. Whether the high profits will eventually be reflected inlong-run production trends depends very much on the permanence of highprofits, Government's sugar taxation policies, and factors such as laborsupply and costs, and the extent to which the sugar industry sees betterinvestment opportunities in other sectors.

42. The Five Year Plan (1975-80) aims at achieving production of800,000 tons in 1980 (barring exceptional circumstances in that year suchas cyclones). This compares with 697,000 tons produced in 1974. Thiswould be an increase of 14.8 percent or about 2.8 percent a year or onepercent higher than the growth trend of 1961-74.

43. Since Mauritius is a very minor factor in the world sugar market(supplying about one percent of world production) and has a guaranteed marketfor nearly 500,000 tons in the EEC, there can be little question of themarketability of this increase in production. Also price prospects forMauritius sugar appear reasonably good in the longer-run, though the peakquota prices of 1975/76 or its free market prices of late 1974 are unlikelyto be repeated. The IBRJ) official projection of the free market price is16.3 US cents per lb by L980 in current prices. This compares with a peak ofabout 25 US cents in 1974.

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44. The principal constraints to achieving the Plan target thereforeare on the supply rather than the demand side. The mission's estimate, devel-oped in some detail in Annex I, is that the 800,000 tons is a maximum figureand about 770,000 tons is much more likely. The principal reasons are that.hc irrigation projects necessary to achieve the Lrget are likely to becompleted during the 1980s rather than by 1980, and the impact of thescientific research aimed at increasing production is probably overstated.Lack of organization to improve the cane yields of the smallholders, par-ticularly by improvement in the transmittal of the benefits of research tothe growers through the extension service, is a shortcoming that will requiretime to remove.

45. The other major conclusion has to do with labor and employment. Themission feels that, regardless of the increase in production, the number em-ployed in cane production may decrease. Shortages of workers for harvestinghave already occurred as alternative employment opportunities without the dis-advantage of off-seasonal unemployment have attracted younger workers away,even while a situation of overall labor surplus continues to prevail. Lack ofeffective collective bargaining and what amounts to compulsory arbitration ofdisputes have added to the problem. The mission estimates that within 5 to10 years mechanization of harvesting and loading, if carried out at its fullpotential, may take the place of 12,500 of the present seasonal work force.

Other Agriculture

46. The preeminence of sugar has presented Government with many policychoices, including whether diversification of agriculture should be encouragedat all. Moreover, policies have been guided by a wide variety of objectivesat different times such as employment creation, and import substitution -with the result that policies', projects, and institutions have been super-imposed piecemeal. Fertilizer subsidies and irrigation have been providedbut much of the production potential remains unexploited. In particular,provision of services, and guidance as to marketing possibilities, needimprovement.

47. The report of the National Food Production Committee in 1974, whichconcentrated mainly on the larger sugar producers, estimated that almost 20,000arpents of virgin and fallow lands, and 47,713 arpents of ratoon (sugar) inter-rows could be made available eventually for foodcrop production. About halfthis acreage was selected as "suitable" land in terms of availability ofregular water supply and the limitations imposed by the nature of the soilsand by the sugar cane harvesting season. The report estimated that, for 14selected crops, production needed to increase by over 50 percent of the 1973level to meet domestic consumption requirements.

48. With the exception of sugar and tea, the other agricultural 1/products of Mauritius are consumed domestically and in fact are the island's

1/ The use of the term "agriculture" in this section embraces such activi-ties as fishing, forestry, livestock and poultry production.

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principal element of import substitution. They include rice, potatoes,ginger, exotic fruits, ground nuts, maize, coarse fibres, flowers and beef.Fish products include tuna and oysters. Their contribution to GDP in 1974was about Rs 115 million or about 4 percent of GDP at factor cost. However,adjusting for the inflation of sugar prices which overstated the relativeimportance of that sub-sector in that year, the share of the non-sugar agri-cultural sector at 1970 prices was about 8 percent in 1974 as compared to 12.8percent for manufacturing other than sugar and ten processing. In 1975, thecyclone also caused some production losses in non-sugar agriculture, but in1976 there was reported to be a strong recovery. Over the Plan period 1970-74foodcrop production grew about 5 percent a year.

Table 4: GROWTH OF PRODUCTION IN NON-SUGAR AGRICULTUREAT CONSTANT 1970 PRICES

Item 1970 1971 1972 1973 1974 1975

Gross value added in non-sugaragriculture (Rs million) 83 89 103 108 109 94

Annual growth rate (%) - 7.2 15.7 4.9 0.9 -13.7

Non-sugar agriculture aspercent of total GDP (%) 9.1 9.3 9.7 9.L 8.3 7.3

Source: Central Statistical Office.

The value of agricultural production in Mauritius exclusive of sugar isroughly estimated at 25 to 30 percent of total food expenditures. Thereis plenty of room for expansion, however, since food items average about40 percent of total Mauritian imports and are growing rapidly. In 1975,the non-sugar agricultural sector contributed 5 percent of total employ-ment and 2 percent of the total value of exports.

49. Since monoculture is presumably to be avoided grounds of therisk involved in an "all the eggs in one basket" economy, and since thereare socio-political advantages in smallholder farming that foodcrops en-courage, the only reason for questioning the value of the foodcrop sub-sec-tor is that it might be tco competitive with sugar for land, labor or otherscarce resources. Since many of the products are grown between the cane rows,or, as in the case of rice and tea, on land or at altitudes not suitable forsugar, the question of competition for land does not arise, except in thecase of rice in some areas. Some land is rented from the sugar estates forfood production for the estate workers. In the mission's study of sugar,

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labor shortages in the harvesting season were noted. However, it does notseem probable that the younger workers who are repelled from working in canewould be attracted to smallholder food production as a more desirablealternative. Since lack of finance to procure necessary inputs, shortageof irrigation water and of extension activities, are cited as handicaps ofnon-sugar agriculture, it does not seem likely that it competes with sugarfor these resources, particularly when one bears in mind the many institu-tions, cooperative, financial and other, that cater to the needs of thesugar sub-sector. The Meade Mission 1/ noted the contrast between thehighly organized outlets for sugar products and "the totally unorganizedand uncertain marketing of other crops," and recommended considerable expan-sion of research and strengthening of extension services for agriculturalproducts other than sugar. The situation has improved but more remains tobe done.

Tea

50. Except for tuna fish, tea is rather unique among non-sugar agri-cultural products since it is an export crop. Government efforts to encour-age non-sugar agricultural production have focused largely on tea production,though in the last three years the growing food import bill has led it toreconsider the potential for increased production of foodcrops and beef.The area under tea increased 50 percent from 1970 to 1976, though produc-tion has been fairly stable at 20,000 to 23,000 metric tons (green leaf) ayear. Clearly the new plantings have not produced much so far. Until onlya few years ago, it was expected that the acreage under tea would continueto increase to around 30,000 arpents (about 14,000 in 1976), since there wassufficient suitable land for its cultivation and it offered the advantagesof labor-intensity and a source of foreign exchange. Government activelyencouraged and assisted tea planting, with the result that the acreage undertea expanded steadily, virtually all of it in smallholdings. The Tea Devel-opment Authority was established in December 1970 as part of a smallholdertea project supported by the World Bank, which aimed at increasing acreageby 5,600 arpents over three years, and setting up two tea factories.

51. More recently, however, several factors have intervened to throwthe whole tea planting program into question. The boom in sugar prices andsoftness in world tea prices, the steep rise in costs of inputs (includinglabor and fertilizer) and lower than expected yields have caused real netreturns in tea cultivation to fall, relative to sugarcane and other activi-ties. In addition, the supply of labor is declining in the rural areas asnoted above. The conditions of employment have been made more attractive

1/ An economic mission, led by Professor James Meade, which visitedMauritius in 1960 and conducted the first major study of "The Eco-nomic and Social Structure of Mauritius."

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in sugarcane cultivation in recent years, and alternative employment oppor-tunities have become available in industry and the Development Works Corpo-ration. These factors, coupled with the need of tea plants for constant careand the long work hours, have turned the labor-intensity of tea cultivationfrom an advantage into a disadvantage. As a result, despite continued sub-sidization by the Government, increasing difficulty is being experienced inrecruiting new smallholders for the-Tea Development Authority's scheme and,indeed, even in keeping those who are already in it. In 1974 South Africatook 87.3 percent of Mauritian tea exports. Of critical importance is con-tinued access to the South African market at a premium negotiatecd price.High input costs and low average yields raise questions about the abilityof Mauritian tea to compete in the world market.

52. Overall control and regulatory powers over the industry are exer-cised by the Tea Board, whose functions have been expanded to include allmarketing activities, including the coordination of export sales, whichhave so far been handled by the manufacturers themselves. There are 8 fac-tories currently in operation, with a total annual capacity of 5,550 metrictons. The Board determines prices paid to planters by the manufacturers.The Mauritius Cooperative Central Bank is the principal source of creditfor the credit and marketing cooperatives established by the small tea plan-ters. The Tea Developme!nt Authority provides some extension services whileothers are provided by the Ministry of Agriculture. The authority alsooperates tea estates on its own. In addition to labor and price problemsthere has been a lack of adequate and coordinated researcn into such sub-jects as clonal selection and fertilizer application. On the administra-tive side, there appears to be an overlap between the Tea Board and theTea Development Authority.

53. A special study group on tea has proposed that, owing to the com-paratively low yields obtained by smallholders (about one-third of thoseof the factory-owned plantations), Mauritius should consolidate its tea area.The study group felt that the average yield on the Tea Development Authority'splantations could be more than doubled by 1980 (to nearly 3 metric tonsper arpent).

54. On the basis of these assumptions, the 1976-80 Plan for Socialand Economic Development projects that green leaf production will rise fromabout 20,000 metric tons in 1974 to around 35,000 metric tons in 1980. Theproduction of black tea is correspondingly projected to increase Erom nearly4,000 metric tons to 7,000 metric tons over the same period. This meansthat the processing capacity of the eight factories now in operat:Lon, whichis currently underutilized, would have to be supplemented by a new factorynow under construction.

55. The Plan's target may be achieved if sufficient labor is avail-able. However, the Tea Development Authority has made insufficient progressin attracting new smallholders or in adoption of improved practices. Thenumber employed by the Development Authority and by otbpr lArge hcolders

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declined about a third (to 5,455) between March of 1972 and 1975. A brightspot is that the international tea quotas could easily permit a major expan-sion in Mauritius' exports and recent price trends have been favorable. Overthe longer-term the growth of world demand for tea is projected at 2 to 2.5percent a year.

56. The mission concludes that the shortcomings in services to thesmallholder mentioned above should be rectified; but, if the growth of moreremunerative employment opportunities elsewhere continues, consolidation ofsmall holdings into more economically operable units might become a necessity.

Foodcrops

57. Although rice has long been the staple food in Mauritius, localproduction has averaged less than one percent of consumption in recent years.As a result, over the period 1971-76, rice imports averaged more than a thirdof all food imports and almost 10 percent of the total value of all importsinto Mauritius. Although rice has been grown in very small amounts almostcontinuously through this century, interest in rice production has fluctuatedfrom year to year with changes in world rice prices and the relative profita-bility of sugar. In the late 1960s, there was a renewed emphasis on localrice cultivation as part of the policy of agricultural diversification.Several varieties were introduced from abroad, and seed was distributedat subsidized prices. Consequently, the area planted under rice increasedfrom about 75 arpents in 1967-68 to around 625 arpents in 1972. Averagepaddy yields also rose markedly with more fertilizer usage and applicationof better field technology. However, plantings have again fallen consider-ably in recent years.

Table 5: RICE PRODUCTION AND DIPORTS

Year Production Imports(metric tons) (metric tons) (Rs million c.i.f.)

1970 906 58,800 38.21971 1,084 54,100 31.31972 1,149 72,300 42.61973 883 58,100 70.91974 668 87,500 227.01975 496 67,000 133.01976 465 79,200 130.5

Source: Bi-annual Digest of Statistics.

58. Most of the expansion in rice cultivation in the late 1960s andearly 1970s was in marshy regions where no suitable alternative crop couldbe grown. Smaller acreages have been planted under rainfed conditions onthe central plateau, and some under artificially flooded conditions inthe lowlands. The lack of a suitable variety, problems with weeds andunfavorable climatic conditions are major obstacles to an expansion of

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rice cultivation in the uplands. The warmer climate on the lowlands offersbetter prospects, but cuLtivation is constrained by a lack of irrigationwater.

59. The 1975-80 Plan proposes a production level of 1,500 tons of riceby 1980. Production was already 1,200 tons in 1972 but it had fallen to lessthan 500 tons by 1976, presumably because of the attraction of sugar. In1975 the floor price prorided by the Government was raised from Rs 1,000 to Rs1,500 per ton of paddy (the import cost in that year was Rs 1.985 per ton ofrice).

60. There seems lit:tle hope that local production of rice will evermeet more than a minor part of domestic needs. However, there seems noreason for abandoning the crop entirely, particularly in rainfed areas. Moreresearch in the control of disease and experimentation with high-yieldingvarieties is being pursued.

61. Government is most interested in foodcrop cultivation in sugarcaneinterrows, as there are limitations on the total land thac can be devotedexclusively to non-sugarcane crops, and intensive interline cultivationoffers the best way to increase food production on any significant scale.In interlines, vegetables will thrive on well-drained, fertile land up to1,400 feet above sea level, with an annual rainfall of less than 100 inches.However, there are often problems with weeding in interlines, and land prep-aration and irrigation fcr sugarcane are generally inadequate for Eoodcrops.Moreover, the period that sugarcane land is available for the cultivationof other crops through intercropping is limited by the timing of cane cul-tivation and the pre-planting work to be carried out. However the sugarestates have begun to take part in the food production effort. Most of themhave set up vegetable gardens, aggregating a total of about 250 arpents forMauritius, and many are experimenting with interline cultivation of suchcrops as potatoes, maize and groundnuts. In fact, virtually the entireproduction of potatoes in Mauritius is now grown in sugarcane interlines,and the total area under interline cultivation has more than tripled since1970. Most of the foodcrop cultivation on the sugar estates is in the inter-rows of virgin cane plantations, and on lands on which sugarcane has beenuprooted and not yet replanted.

62. Foodcrop production in Mauritius increased about 20 percent from1970 to 1974 but, because of weather conditions, declined in 1975 to belowthe 1970 level. In 1976, there was again a recovery. There have been consi-derable year-to-year fluctuations chiefly because of weather conditions. Sucha diverse and fragmented sub-sector (apart from production on the sugarestates) naturally has problems of finance, marketing and storage. Producers'organizations are rudimentary, and storage facilities need further expansionand, together with better transport, would seem to have the highest priority.Freezing and canning faci:Lities are also needed. Some start was made on thisin 1975. As noted above, the Government has been fixing floor prices forrice. The same has been done for maize, potatoes, onions and garlic, and theGovernment intends to extend the practice. Floor prices are generally higherthan import prices. Imports, which are controlled by the Marketing Board, arepermitted only in the event of shortages.

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Livestock

63. Livestock production offers considerable potential, as there is

a growing local market for meat and animal feed can be produced from cane

by-products. This activity has attracted attention only in the last few

years. At present, apart from a few milk herds on some of the sugar estates,

some beef herds, a few commercial pig breeders and a recently established

broiler industry, livestock production in Mauritius is essentially a part-

time occupation pursued by hundreds of small farmers, each owning one or

two animals. In the general absence of any organization of production,

slaughter and distribution, most livestock products that currently come to

the market are of poor quality and too highly priced for domestic consumers,

with uneven availability all over the island. The existing potential seems

to justify a much more determined effort at developing an efficient livestock

sector to meet the growing demand for livestock products as consumer incomes

continue to rise. Livestock raising offers the further advantage that it can

be carried on in small units, thus benefiting a wide cross section of the

population. Government has undertaken, with UNDP support, a project to

demonstrate the feasibility of livestock production using cane tops and

molasses as feed. The project has generally been successful and some estates

are now investing in cattle herds. The project, however, needs to be followedup by Government to ensure that the benefits of the project are extended to

the small farmers.

Fish

64. Fish products in Mauritius derive primarily from three main sources:

(a) the inshore (lagoon fishery): fresh fish caught in the lagoons and on

the narrow continental shelf beyond the reefs; (b) the offshore fishery:

iced or frozen white fish landed by the five local fishing companies oper-

ating on the banks of outlying islands; and (c) domestic salted fish and

dried octopus. In addition, there is also a small supply of local fresh-

water fish, oysters and lobsters, as well as frozen tuna. Mauritius has,

since 1964, been the main base for the pelagic fisheries (mostly tuna) in

the western Indian Ocean, which have been exploited largely by South Korean,

Japanese and Taiwanese vessels.

65. Fish production over the last few years has been fairly stable at

5,000 to 6,000 tons a year of local production. Imports have ranged from

3,000 to 4,000 tons. The prospects for increasing fish consumption in

Mauritius appear quite favorable. The National Food Production Committee

estimated that, to achieve a per capita consumption of 15 kg per annum, about

double the present level of production would be needed. The 1975-80 Plan's

objective is 10,500 tons but this seems overly optimistic. The depletion of

the lagoons partly due to illegal tactics, such as dynamiting and night-fishing, is a serious problem. Lack of more credit facilities has hampered

the legitimate fishermen, who are among the poorest groups in the country.

They have generally been at the mercy of the fishmongers. Cooperative market-

ing arrangements are now being set up.

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66. Bank and deep sea fishing has been more successful, judging bythe catch recorded in recent years. Although the companies complain of acost squeeze, their expansion plans suggest that the situation is fairlygood. The Government might provide more efficient docking facilities.

Conclusion

67. There are a wide range of agricultural activities besides sugarthat can be carried on in Mauritius in a small way and ouly part of thepotential has been tapped. To recap the constraints, they are: (i) lackof access to credit, (ii) poor marketing arrangements, ana (iii) 'Lack ofproper extension services and research trials. Government's approach tothese constraints should depend very much on its objective for the sector.If growth is the main goal, then policies should favor tne efforts of thelarge estates which have already, in many instances, diversified theiractivities to embrace food production or livestock herding, and can moreeasily overcome the consitraints by virtue of their scale, long standing,and superior access to services. If, on the other hand, Government is moreinterested in providing production opportunities for the poor segments ofthe population, it would have to adopt vigorous policies to assist: theproducer who has greatesi: difficulty. As an improved income distribution.linked with better economic opportunities in the rural a-eas is a funda-mental objective of Government, it would be logical that Government shouldprovide more positive assistance through a well-balanced mix of servicesto producers coupled with modest price incentives. Such an approach neednot seriously impede the diversification efforts of the estates.

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Chapter 3

The Manufacturing Sector

68. In 1975, the manufacturing sector, excluding sugar mills and teafactories, contributed about 9 percent of Mauritius' GDP at factor cost (cur-rent prices), 11 percent of exports, and 14 percent of total employ-ment inthe larger establishments. Sugar prices were of course exceptionally high inthat year and deflating sugar mill output to 1970 prices tended to increasethe relative real importance of the rest of the manufacturing sector. Thus

at 1970 prices, manufacturing other than sugar and tea processing amountedto about 12.8 percent of GDP. However, exports of non-sugar and non-teaexports of manufactured goods amounted to nearly 18 percent of exports in

1976. Since Mauritius had no important non-agricultural natural resources,such as minerals, and since her comparative advantage in manufacturing ap-peared limited, investment capital, and managerial and technical personnel

concentrated on the sugar industry. The smallness of the domestic market andthe distance of the island from sources of external raw materials and marketswere additional constraints on industrial investment.

69. Duryng the nineteenth century, the secondary industries that

developed and flourished tended to be those which serviced the sugar industry- including machinery, metal work, lime burning, printing and sack manufac-

ture. A number of other industries, mainly linked to agriculture, also sprangup, and manufactured such commodities as aerated beverages, bakery products,basket and wicker work, bricks, cigarettes, engineering products, footwearand salt. But their scale of operations was small and the variety of lineslimited.

70. Following the report of the Meade Mission in 1960, which wasimpressed with the lack of diversification of the island's economy and theneed to find employment for the rapidly expanding population, in 1963 theGovernment declared a policy of encouragement to new industries. In 1964 theDevelopment Bank was established for long-term institutional financing, theIncbme Tax Ordinance gave more favorable treatment to new industries, thecustoms tariff was amended to provide full or partial exemption for machineryand materials needed in local industries and the Development CertificateScheme (see below) was adopted. Infrastructural public investments were also

made for the benefit of the manufacturing sector. However, these measuresproved insufficient and the growth in value added in the sector only keptpace with the rise in prices. Most of the developments during the 1960s werein import-substituing industries, with domestic resources financing virtuallyall the capital requirements. Since the economy generally was stagnating inthe 1960s, the lack of growth of manufacturing is not surprising. However,it was generally concluded that, with the small size of the domestic market,the possibilities for much expansion in import-substitution industries wasexhausted by 1970. It should be borne in mind that Mauritius has not usedhigh tariffs or quotas for protection of domestically-oriented industries,except under the special incentive programs.

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71. Since, at that: stage of development, Mauritius had a serious surpluslabor problem, it was natural that she should endeavour to emulate Taiwan andSouth Korea by, in effect, selling this relatively cheap labor abroad throughthe attraction of export processing industries. The incentives, which corres-pond to those already used in such countries as Malaysia and Indonesia arediscussed in para 89 et seq. below. The strategy was successful. The fiveyears from 1970 to 1975 witnessed a remarkable spurt in the manufacturingsector, with the annual growth rate averaging 19 percent in value added atconstant prices, 16 percent in employment and over 100 percent in the valueof exports. This growth rate was more than 2 times that of the economy as awhole. As a result the sector's share in total GDP at factor cost rose from 8to about 13 percent in real terms, its share in total employment [n largeestablishments doubled, and its share in the value of total exports alsodoubled. However, the labor market in Mauritius is still characterized by arelatively high degree of unemployment and underemployment, especially amongrecent school leavers. The Government views the industrial sector as thecritical element in meeting this problem. The progress of the 1970s isshown in the following table. In 1975 manufacturing employed about 37,500workers or about 22 percent of the total labor force employed in largerestablishments.

Table 6: GROWTH OF PRODUCTION AT 197u PKLCuS

Item 1970 1971 1972 1973 1974 1975

Gross Value Added inManufacturing (Rs million) 73 72 83 96 149 164

Total GDP at Factor Cost(Rs million) 912 957 1,058 1,181 1,319 1,316

Manufacturing as Percentageof Total (Z) 8.0 7.5 7.8 8.1 11.3 12.5

Growth in Manufacturing <x) - -1.4 15.3 15.7 55.2 10.1

Manufacturing Output Deflator 100 108 141 L56 147 165


72. Despite the growth in manufacturing for export, however, over90 percent of the industrial output in Mauritius is still sold domestically.In 1974 over half of value added in the larger establishments was in food,beverages and tobacco, wearing apparel, and printing and publishing.

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Therefore although exported manufactures grew rapidly during the 1970-74period, the impetus to domestic consumption from the sugar boom must alsohave played an important role in the growth of this sector.

Growth of Investment, Employment and Exports.

73. In 1970 prices, gross fixed capital formation in all manufacturingactivities increased at a 41 percent average annual rate from Rs 16 million in1970 to Rs 115 million in 1976. Since real investment in the economy as awhole increased at just over 22 percent per annum on average, the share ofmanufacturing in total gross fixed capital formation grew from 11 percent tonearly 25 percent. In 1976, there was a distinct deceleration in investmentactivity, probably related to the world-wide recession.

Table 7: GROSS FIXED CAPITAL FORMATION IN 1970 PRICES

Item 1970 1971 1972 1973 1974 1975 1976--------------- (in millions of Rupees)…----------…--

Manufacturing 16 24 30 48 88 114 115

Total 145 172 194 303 359 445 490

Manufacturing asPercentage of 11.0 14.0 15.5 15.8 24.5 25.6 23.5Total (%)

Annual Growth inManufacturing (%) - 50.0 25.0 60.0 83.3 29.5 0.9

Source: Statistical Annex, Table 3.8.

74. Because of inadequate data, it is not possible to entirely sepa-rate out sugar milling from investment in other manufacturing activities.However, statistics supplied by the Mauritius Sugar Producers Associationindicate that, for miller-planters alone, 35 percent of total investment ofsugar earnings between 1972 and 1974 was in non-sugar activities, and 70percent of this again was in non-trade investments. When this is combinedwith other investments by foreign and domestic enterpreneurs, the totalmagnitudes in non-sugar manufacturing appear to have been substantial.

75. There was a similar increase in this sector's share of totalemployment. Between 1970 and 1976, employment in large manufacturingestablishments (employing 10 or more persons) grew at an average rate of25 percent per annum, as compared to a 6 percent average growth rate ofall sectors combined.

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76. Some idea of the directions of growth within the manufacturingsector itself can be obtained from analysis of available data on employmentin large establishments by various sub-sectors. Electrical machinery(including components), wearing apparel, furniture and tood have been thehighest growth sectors, while the increase in employment has been much slowerin printing and publishing, and textile manufacture. It is significant thatemployment in consumer ;oods industries as a whole increased at an averageannual rate of 26.6 percent, and more than tripled over the period 1970-1975.In contrast to this, employment in intermediate and capital goods industriesgrew on the average at only 14.8 percent per annum, and approximately doubledover the same period. As a result, the share of consumer goods industriesincreased from about 56 percent to 68 percent of all manufacturing employment.

77. Starting from a very low base in 1970, when manufactured goodswere only 1.6 percent of total exports, the growth over the next six yearswas extremely fast as Table 8 shows.

Table 8: EXPORTS OF MANUFACTURED GOODS AT CURRENT PRICES

Item 1970 1971 1972 1973 1974 1975 1976-------- (FOB value, in millions of Rupees)-------

Processed Diamonds and Stones 1.0 2.4 5.3 19.7 22.5 9.3 8.4

Electronic Components forMachines - - - 5.3 48.6 62.1 61.7.

Clothing 0.2 1.7 6.1 20.6 60.8 118.2 204.9

Other 4.7 7.1 7.4 7.4 11.1 13.2 37.1

Total Manufacturing 5.9 11.2 18.8 53.0 143.0 202.8 312.1

Annual Growth inManufactured Exports (%) - 89.8 67.9 181.9 169.8 41.8 53.9

Total Domestic Exports 375.1 355.7 566.1 737.7 1,771.0 1,818.0 1,736.6

Manufacturing as Percentageof Total (%) 1.6 3.1 3.3 7.2 8.1 11.6 18.0

Source: Annual Reports, Customs and Excise Department.

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78. Most of the growth in exports occurred in 1973 and 1974, whensome of the earliest units set up in the Export Processing Zone were cominginto full production and demand in the industrialized countries was booming.

Ownership and Structure of the Sector

79. There is hardly any public sector direct investment in Mauritianmanufacturing. A few exceptions are a sack factory, a livestock feed factoryand the mill on the publicly owned sugar estate. Even the Development Bankgenerally comes in with equity investment only where private entrepreneurialinterest is lacking or where the enterprise is deemed very important buttoo large for private interest to handle.

80. Enterprises producing primarily for the domestic market are almostentirely Mauritian-owned. On the other hand, about 70 to 80 percent ofthe equity in most export enterprises is held by foreign investors. In thepast, these have come mainly from France and Hong Kong, with significantinvestments also from India, South Africa, West Germany and the UnitedKingdom. Foreign private investment is actively sought by the Governmentthrough such incentives as easily available residence permits for expatriatestaff, repatriation of profits, and guarantees against nationalization.Local equity ownership is fairly well-dispersed for the small-scale enter-prises employing fewer than 10 workers and with an investment smaller thanRs 15,000. On the other hand, local ownership and management of the largermanufacturing enterprises is largely concentrated in the hands of a fewpowerful groups, all of which also have substantial interests in the sugarindustry or in trading activities. This relatively small but active group ofentrepreneurs continues to provide most of the resources and the major thrustfor further industrial development.

81. Establishments (employing 10 or more workers) number nearly 400and are responsible for over 90 percent of gross value added and 60 percentof total employment in the sector. Consumer goods industries as a wholeprovide nearly two thirds of total employment and 60 percent of value addedin large industrial establishments. Value added per worker is about Rs 10,000on average but varies widely among industries, with chemicals, leather pro-ducts and food processing being almost twice the average, and textiles,wearing apparel and electronic components standing relatively low on thelist. For intermediate and capital goods industries as a whole, value addedper worker is about 25 percent higher than it is for consumer goods. Wagesand salaries generally constitute about half of total value added in industry.They are most often a function of age, sex, skill, length of service andtype of work performed. Female industrial workers are generally paid lessthan men for the same work. They are largely concentrated in garment manufac-ture and the assembly of electronic components.

82. Current data on small-scale manufacturing enterprises kemployingfewer than 10 workers) is not available, since there has been no comprehensiveindustrial census since 1968. Table 9 shows the role of small industriesin certain manufacturing sectors in 1968.

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Table 9: THE ROLE OF SMALL ENTERPRISES IN SELECTED INDUSTRIES, 1968

% of Total % of TotalEmployment Gross Gross

Number of in Output Output inSector Enterprises Employment Subsector (Rs Millions) Subsector

Wearing Apparel 1,689 3,185 90 7.2 55

Food Processing 111 603 36 6.1 26

Furniture 316 700 80 1.7 53

Printing 47 173 20 0.4 7

Metal Products 164 437 58 1.2 30

Non-Metallic Products 35 159 22 0.6 6

Transport Equipment 346 917 38 1.2 8

Total 3,459 7,458 42 26.9 15

Source: Census of Industrial Production, 1968.

83. The philosophy underlying the Government's policies so far has beento allow private enterprise fairly complete freedom in most aspects of afirm's operations. Howevere, a minimum domestic participation of about 30percent is now expected in export enterprises. The Government's role in theindustrialization process :Ls seen as a two-fold one. First, to create thenecessary climate in which private initiative can be attracted and canflourish, by providing generous incentives and assistance in the start-upof enterprises. Second, to ensure that growth of output will be accompaniedby growth of employment, by favoring labor-intensive enterprises.

Marketing and Finance

84. Preference for imports is a problem common to manufacturers in manydeveloping countries. In Mauritius this is compounded by the smallness of thedomestic market. Producers of intermediate goods find it difficult to competewith foreign suppliers for lack of quality standards. Thus until recentlythere has been a great deal of unused capacity in manufacturing though data onits extent is lacking. The marketing of imported products seems to be gen-erally more efficient than for domestic products because

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of lack of wholesale facilities for the latter, while the former pass throughfairly large import houses. In this respect firms producing for exporthave an advantage, particularly if they have parent companies or affiliatesabroad. Many local producers have to compete with "backyard producers"with inferior products and low overhead, while being unable to competeabroad. The development of specialized export houses, enjoying economiesof scale in marketing and after-sales services, could be of help in theoverseas expansion of some local firms which lack the requisite marketingknow-how, organization and experience.

85. The major export markets for manufactured goods are France,West Germany and other EEC countries, the United States, Hong Kong, Japanand Reunion Island. As an Associate Member of the EEC, Mauritian exportsenjoy preferential access under the 1974 Lome Convention (which supersededthe earlier Yaounde Convention) in the form of duty-free entry for manu-factured goods "originatingt " in the island. The conditions for "originating"vary from product to product, but in general the value added in Mauritiushas to be at least 50 percent of the value of the finished product. Accessto the EEC market has been a major inducement to foreign entrepreneurs,especially those from Hong Kong and India, to set up plants in Mauritius.

86. Mauritius has fairly well-developed commercial banking with9 commercial banks. The banks extend both working capital and term loans(normally up to 7 years) and occasionally participate in equity, or longer-term lending in conjunction with the bevelopment Bank. The Governmentestablishes maximum interest rates. A stock market is gradually emergingand a few insurance companies are involved in limited equity financing.

87. The Development Bank of Mauritius, which was established in 1964as a government-owned corporation, continues to be the only significantinstitutional source of long-term finance. Between March 1964 and June 30,1975, the Development Bank approved loans of nearly Rs 122 million forindustrial projects. Total disbursements by the Development Bank in theindustrial sector up to June 30, 1975 totaled Rs 54 million, of which nearly30 percent was in fi5cal year 1975, and financed about 10 percent of totalindustrial investment in that year. The outstanding loan portfolio con-sisted of textiles (45 percent), hotels (17 percent), and food, fish andlivestock processing (11 percent), and covered more than half of allcompanies with Export or Development Certificates. Loans are generallyrepayable over 10 years including a two-year grace period and the presentinterest rate is 10 percent.

88. The Development Bank also operates a fairly successful scheme forlong-term loans to small-scale industry, under which loans of up toRs 15,000 are advanced to any one enterprise at an interest rate of 2.5percent and repayable over 10 years. The Government reimburses theDevelopment Bank for the costs of administering the scheme and assumes therisk of defaults by sub-borrowers. Between fiscal years 1972 and 1975, 742loans to small-scale firms, totaling Rs 5.1 million, were approved by theDevelopment Bank and were fairly evenly distributed among food processing,

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light engineering, garment-making, furniture and other industries. Since1974, the Development Bank has been trying to make its assistance moreeffective through reduced processing times and more flexible securityrequirements. For the majority of small enterprises, however, themost common sources of funds are still either friends and relatives, orthe "curb market", which charges interest rates up to 10 percent per month.Small industry (now defined as those employing no more than 25 workers andcapital investment below Rs 100,000) would seem better adapted to Mauritiusthan to larger countries. In fact this subsector seemed to be rather over-expanded until the recent prosperity produced excess demand and even laborshortages in some lines such as furniture and garments. As is usual in smallindustry, it is not possible to generalize about the quality of product orefficiency of operations,. There is scope for small industries with goodmanagement to develop as ancillaries of larger enterprises, a category inwhich small industries are usually most competent. However, the legaland institutional structure discriminates against small enterprises -- forexample, industries in the Export Processing Zone cannot provide smallsub-contractors with duty-free materials, while the Development Certifi-cate Scheme also favors only the larger import-substitution industries withduty concession. The three-man Small Industries Unit in the Ministry ofCommerce and Industry, which is supposed to be responsible for technicalassistance and project preparation, has had a relatively small impact sofar. Recently, the Indian Government has concluded an agreement to provideassistance to small-scale enterprises in Mauritius, possibly including theestablishment of an industrial estate and training facilities.

Incentive Schemes

89. The Government's role in the industrialization process is seen asa two-fold one. First, it has attempted to create the necessary climate inwhich private initiative can be attracted and can flourish, by providinggenerous incentives, and some technical and financial assistance. Second,it has tried to ensure a degree of equity in the whole process by imposingdomestic price and wage guidelines, so that the benefits of nrowth can beshared with consumers and wage-earners.

90. According to representatives of industry, however, there are complexprocedures involved in getting an enterprise off the ground. Many agencieshave to be contacted and :he time required for clearance for Export: Proces-sing plants runs from 3 to 9 months. Even though procedures are less cumber-some than in many other countries, they are not as expeditious and concentratedas in Hong Kong which eventually may offer strong competition.

91. Development Cert:ificate Scheme. This was the prLncipal means ofstimulating industrial development from its adoption in 1964 till 1970.Development Certificates were granted to those entrepreneurs who seemedbest able to carry out projects in a selected group of import-substitutionindustries "of importance to the island's economy". Because of the lowlevel of demand for consumer goods and the lack of adequate finance forindustry, the scheme had cnly limited success. However, DevelopmentCertificates are still issued and entitle companies to many benefits,

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the most important of which are import duty exemption or rebates on materialsand equipment, a five-to-eight year company tax holiday (depending on de-preciation allowances taken), exemption from income tax on dividends, freerepatriation facilities. Companies may qualify for long-term loans from theDevelopment Bank for up to 50 percent of capital cmployed. Enterprises incertain activities undertake, in exchange, to maintain prices at agreedlevels, and cannot increase them without government approval (a 15 percentannual return on paid-in capital is generally considered appropriate byGovernment in approving price increases).

92. In the beginning, new Development Certificate companies facedconsiderable consumer resistance to locally-produced goods, as well ascompetition from traditional importers, who tried to drive them out of themarket through dumping and other tactics. By the end of 1975, Certificateshad been issued to about 100 companies, of which more than 80 had goneinto production employing a total of approximately 5,500 workers. Applica-tions from 97 other enterprises had been approved or were still underconsideration, with a total potential employment of 4,400. The enterprisesestablished under the scheme cover a wide range of industries, including foodand drinks, vegetable oils and fats, chemical products, iron and steel goods,garments, furniture, plastic goods, etc. As of March 1976, food processingand related industries accounted for nearly one third of total employment byDevelopment Certificate companies, paints and other chemical-related indus-tries for another 16 percent, shipping (including repairs) for 13 percent,metal products, 10 percent and garments, 8 percent. The limited size of thelocal market resulted in generally low rates of plant utilization (60 to 75percent of single shift capacity) until the early 1970s. At that time theincrease in sugar earnings had the effect on secondary industry noted above.

93. Export Processing Zone Scheme. The apparent running down ofopportunities for import substitution at the end of the 1960s induced theGovernment to examine what could be done to attract export industries basedon the then substantial surplus of Mauritian labor. A world-wide study ledto the idea of offering a package of incentives similar to, but somewhatbroader and more liberal than, those offered by the Development Certificatescheme, but confined to firms that would export all their output. The taxholiday on retained earnings was two years longer than the eight years underthe Certificates. Other benefits granted to export industries included: liberalwork permits for specialist expatriate staff, export financing at preferentialrates, supply of power and water at subsidized rates initially, relaxationfrom provisions of certain labor laws and free repatriation of projects andcapital. The Government has defined the types of industries it considersdesirable as those with high value added and low weight, high value inputs andproducts. Priority is given to industries which are highly labor-intensiveor create substantial indirect employment opportunities, and which introducenew technology and marketing know-how. In practice, the approval of newindustries has not always systematically taken these factors into accountand has sometimes also been dictated by other considerations, such asavailability of water and basic infrastructure.

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94. By the end of 1975, a total of 66 enterprises were operatingunder the Export Processing Zone Scheme, with an employment of 11,400(over twice those employed under Development Certificates), of which over85 percent were female. Twenty-four other companies had been granted cer-tificates and about 90 more applications were under consideration, with afurther employment potential of nearly 20,000. Textiles and garments,electronic components, footwear and toys have been the most importantindustries established. The predominance of textiles and electronic com-ponents follows the pattern of industrialization in other countries, suchas Hong Kong, Singapore, South Korea and Taiwan, which have offered exportprocessing incentives. While most of the investment has come from overseas,the Government (through ithe Development Bank) has encouraged cooperationbetween established fore:Lgn manufacturers and local entrepreneurs, who lackthe know-how, and the export marketing organization.

95. As might be expected, local value added per worker is much lowerin the Export Processing Zone than in other large enterprises in the ratioof about 1 to 3.

96. Thus the package of incentives granted by the Government toinvestors in Mauritius is extremely liberal. Apart from the fiscal advan-tages offered under the Development Certificate and Export Enterprise Schemes,investors are offered financing through the Development Bank and the Bank hasalso set up industrial estates with all the necessary infrastructure andstandard factory buildings. Two major estates near Port Louis have beencompleted and are partly occupied, while plans are afoot to develop furtherareas at Beau Vallon and Vacoas-Phoenix.

97. Another advantage of locating in Mauritius is the AssociationMembership of that country in the EEC under the Yaounde and Lome Conven-tions. Mauritius was in a good position to take advantage of the agreementwith the European Economic Community, given the relative development of itsentrepreneurial class, it:, easily trainable labor force, and relatively littleadministrative red tape. It also had close cultural ties with countrieslike Hong Kong and India, from which most foreign entrepreneurs came. Manyof these already had established contacts in the West European market but werereaching the limits of the European Economic Community quotas assigned totheir own countries for textiles and other products. The period from 1971 toearly 1974 also being one of generally expanding economies and buoyant demand,particularly in industrialized countries, Mauritius offered a useful launchingplace for exports to these growing markets.

98. The value of exports by export processing enterprises rose steadilyfrom Rs 10.5 million in 1972 to Rs 45.7 million in 1973, Rs 135.6 million in1974, and Rs 196.1 million in 1975. Textiles accounted for 60 percent andelectronics for 30 percent of exports from the Zone in 1975. On aggregate,about 90 percent of all manufactured exports over the period since 1972have originated in the Export Processing Zone. In terms of overall employ-ment creation, therefore, the scheme appears to have been very successful.In addition, the increased purchasing power created as a result has led to

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further utilization of plant capacity by local firms and a general quick-ening of the pace of industrial innovation and development in Mauritius.The expanding demand for factories and better houses has caused a boomin the construction industry and widened the market for local enterprisesmanufacturing paint, iron bars and other building materials. This wideningof possibilities for import-substitution firms is now also increasing theexport-consciousness of a number of them.

99. In order to try to evaluate the net benefit to Mauritius of thescheme in a systematic manner, the mission attempted to estimate the eco-nomic rates of return in a sample of 14 out of the 66 enterprises operatingunder the scheme as of March 31, 1975. The enterprises covered included4 yarn and cloth firms, 3 units making jute and plastic products, 4 garmentmanufacturers, one maker of industrial gloves, one toy factory and oneelectronics assembly firm.

100. The study defined the benefits to the Mauritius economy of thescheme as consisting primarily of gross domestic value added. No attemptwas made to assess the impact of the scheme in terms of linkages and inducedactivity in other sectors, since the majority of enterprises studied pur-chased less than 5 percent of their total raw material needs locally.Even those textile units which supply most of the cloth requirements ofsome garment manufacturers are themselves in the Export Processing Zone, sothat the direct impact on the production of other domestic enterprises is notlikely to be very significant and, in any case, is extremely difficultto quantify. Similarly, while it was recognized that indirect multipliereffects on domestic production of the incremental incomes from ExportProcessing Zone firms do exist, their relative total in quantitative terms(less than one percent of national income) is again insubstantial. Theseand other secondary benefits were, therefore, excluded from the analysis.

101. The costs side included all projects costs which had to be financeddomestically. In addition, the mission estimated that each new job createdin the industrial sector in Mauritius requires an additional public invest-ment of roughly Rs 10,000 for roads, electricity, water supply, sewerage,administration and other facilities. The subsidy elements contained in thecurrent electricity and water charges of manufacturing firms were alsoaccounted for as recurrent costs. Since the scheme created productiveemployment for workers who would otherwise have had no alternative jobopportunities, especially the 85 percent of female workers, the shadowprice of labor was assumed to be approximately zero. All costs and bene-fits were converted to 1975 prices to make them comparable with one another.The rates of return were then calculated over a ten-year period, with theassumption that full production in each case is attained in the third year ofoperation. These are obvious difficulties, conceptual and other, in derivinga rate of return on part (in this case the Mauritian) of the investment in anenterprise. The factor blend as between Mauritius and foreign participation,and the relation of social or economic costs to monetary costs of such factorscrucially affect the outcome. In this case putting a zero value on locallabor understates costs because, inter-alia, it does not take account of the

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consumption effects of increasing the economy's wage bill. Also the errorslikely to be involved in price projections are very substantial in relationto profits. The ten-year limit seems rather short if initial investment islarge and if the discount factor is relatively small. Since domestic valueadded (benefit) and domestic costs are likely to correspond, except forindirect benefits and costs, value judgements regarding the latter are boundto be crucial.

102. Nevertheless, the relation between, if not the absolute values of,the returns for different plants is interesting. For example, there is adirect positive correlation between the rates of return and the labor-intensities of textile manufacturing firms - that is, the lower the projectcost per worker employed, the higher, in general, is the return to theMauritian economy. This result is not surprising.

103. The group of .3 units making Jute and plastic products showeda rate of return of 11 percent, while the 7 textile firms had an averagereturn of 4.2 percent, although 2 of them showed a negative return. The yarnand cloth manufacturers showed variances between 7.5 and 8.7 percent, whilethe 4 labor-intensive garment makers have returns ranging from 6.6 to27.5 percent. The other three enterprises covered also differ widely fromnearly zero for toys to 8 percent for electronics and 12 percent for indus-trial gloves.

104. The wide varia!nces among firms in similar or closely relatedkinds of endeavor are very interesting and it would be worthwhile to pursuethe matter further and particularly to find out whether the assumptionsmade in the study, or inter-plant differences, or factor blends betweenMauritian and foreign inputs were appropriate. This might provide someguidance to the authorities in selecting applicants under the scheme.

105. A similar evaluation was performed for plants set up under theDevelopment Certificate Scheme. Here, of course, the problem of dividingbenefits and costs between Mauritian and foreign participation did notarise, or at least it was minor. As might be expected, the rates of returncalculated from domestic costs and benefits turn out to be greater on averagefor Development Certificate enterprises than for the Export Processing Zone.With a high gross domestic value added, the rates of return vary between 7.7percent and 30.3 percent..

106. As in the case of export processing plants, the more labor-intensive plants are more profitable, given the assumption of near-zeroeconomic cost of labor. Among industrial groups, there is some variationover a range from 11.6 percent for food-related firms to 19.3 percent forpaper products.

Conclusions

107. Prospects for continuing growth, albeit at a slower rate, inMauritius' manufacturing sector seem favorable. Although shortages of labor

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have appeared in some locations and seasons, the participation ratio of thefemale labor force is about 50 percent lower than in such countries as Taiwanand South Korea. As for exports, it is not likely that countermeasures byimporting countries would be directed against such a small producer asMauritius. On the negative side, the vulnerability of domestically-orientedproducers to the ups and downs of the sugar market must be expected. Thiswould argue for a long-run strategy of melding import-substitution and exportprocessing industries by more subcontracting of the latter with the former andby domestically-oriented industries adopting quality standards that wouldallow them to compete abroad. Vocational training can help in this regard.

108. It is difficult to see why the relatively minor differentiationsshould remain between the benefits under the Development Certificate and thethe Export Processing Zone Schemes. The fact that export processing receivessomewhat better tax treatment, etc, than domestically-oriented productionmight, at some stage, provoke foreign countermeasures. Thus it would seemdesirable to progressively merge these two schemes. Since Mauritius' smallindustries need both export contacts and wide local markets, their relationswith the export processing plants should be strengthened. Also "export"plants should not be kept out of the domestic market.

109. The incentives offered in Mauritius and the tax revenues fore-gone are generous and large, particularly in view of the fairly low economicrates of return reflected in the mission's study. It would be worthwhile tofind out how essential they are to the establishment of plants in Mauritius.Also the Government needs to be rather selective in providing incentives,since few industries are well-adapted to Mauritius at this stage of herinfrastructural development. However, competition among "free zones" andinvestment incentives by countries in Southeast Asia is keen, therefore,Mauritius should be conservative in adversely changing her incentives package.There is a clear need for better publicity to increase overseas' investorsawareness of the advantages that Mauritius offers. Also when tax reliefis given, it should benefit the foreign investor rather than his Governmentwhich may simply deny him a foreign tax credit. To do this is difficult,but the Government should continue to explore "tax-sparing" agreementswith countries whose nationals obtain tax relief under the Mauritian program.

110. The incentives currently offer no particular inducement to entre-preneurs to use labor-intensive techniques of production (other than thegenerally low wages of the past) or to employ a higher proportion of males,both of which would be highly desirable from the perspective of the Mauritianeconomy. However, any employment-related subsidy would be very difficultto administer, while unnecessary changes in the incentives in general couldvery well be misconstrued by new investors as having a net adverse effect.

111. The importance of providing fully serviced industrial sites,through estates or otherwise, is becoming particularly acute with the emer-ging physical constraints in infrastructure facilities, such as watersupply, which may limit future growth, at least over the next couple ofyears. The Government has been debating for some time now whether to create

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the wage differential between unskilled male and female labor. A gradualreduction in that differential would be desirable in order to employ moremale workers. This is apparently already occurring. However, this shouldnot be carried to the point where the female participation ratio fails torise.

115. Plan Prospects in Manufacturing. The growth in the real valueadded by the manufacturing sector (excluding sugar) slowed down in 1975 toabout 10 percent as compared with the phenomenal rate of 55 percent in 1974.The slowdown in 1975 appears to have been largely the result of short-termfactors such as the recession in industrial countries abroad and the cyclonein Mauritius. As a result of all these factors, businessmen's confidence wasrather shaken, so that the pipeline of new projects and investors' inquiriesdried up completely towards the end of 1975. Demand in industrial economiespicked up somewhat, in 1976, benefiting both exports from and investment inMauritius. A sudden and substantial rise in real labor costs and an increasein absenteeism may have a longer-term effect.

116. As noted in the Budget Speech of the Minister of Finance of April26, 1977, there are some longer-term factors that may indicate a slowing downof growth in manufacturing. The Minister noted that, although employment inmanufacturing rose by 30 percent in the year ending September 1976, at the endof 1976, the number of applications for Export Enterprise Certificates hadfallen to 25 with a job potential of about 3,000. This contrasts with 64applications with an employment potential of 11,000 a year before. This isparticularly significant for the Five Year Plan, since of the 39,000 new jobswe project for the manufacturing sector over the 5 years, over 69 percent wereexpected in the Export Processing Zone. The Budget address also noted thatwhereas real wages rose in 1976, productivity declined. This decline inproductivity is associated with subjective factors such as absenteeism ratherthan a change in the structure of industry. The mission (see Annex II) hasestimated the following expansion of employment in manufacturing during the1975-80 Plan.

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Table 10: EMPLOYMENT CREATION IN THE MANUFACTURING SECTOR

Small- PercentageYear Export Development Other Large Scale Total of Male(as of Processing Certificate Estab- Enter- Manufac- Workers inJune) Zone Companies lishments prises turing Total (%)

1974 8,500 4,600 6,400 14,500 34,000 66

1975 9,900 5,300 6,800 15,000 37,000 66

1976 14,000 6,000 6,900 15,700 42,600 65

1977 19,000 6,800 7,000 16,500 49,300 62

1978 24,100 7,800 7,100 17,30u 56,300 64

1979 29,600 9,300 7,200 18,100 64,200 64

1980 35,500 11,200 7,300 19,000 73,000 65

Increase

1974-1980 27,000 6,600 900 4,500 39,000

Source: Mission estimates.

117. We do not have an estimate of actual growth in output of the manu-facturing sector in 1976:, but it seems certain that the increase in employmentduring the first three quarters of the year must have meant a substantial risein output for the year as a whole. The Plan contemplates that manufacturingGDP (at factor costs) in 1974 prices will rise from Rs 214 million in 1974 toRs 660 million in 1980 or over 25 percent a year. The mission feels this istoo high. On the basis of the employment projection above and little changein productivity, a real output (1974 prices) of Rs 450 million can be esti-mated for 1980 or a growth rate of about 16 percent a year. The Plan projec-tions of a 40 percent annual growth of manufactured exports would appear to benearly double that likely to be achieved unless the combined GNP of EEC coun-tries grows much faster than the 5 percent now estimated by the World Bank andMauritius manages to hold her competitive edge as domestic costs rise andother countries gain access to EEC.

118. Again on the basis of the employment projection, the missionhas used the results of the joint World Bank/Development Bank study to

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estimate total investment required for the period 1974-80 to produce anincrease in real GDP from Rs 214 million to Rs 450 million. This wouldrequire Rs 1,300 million of investment, including the necessary publicsector investment in supporting infrastructure (23 percent of the total).The implied ICOR is 5.5, which compares with only 3.6 during 1970-74.This reflects principally the greater capital intensity in the integratedtextile plants and other enterprises planned for the 1975-80 period. Thebreakdown of investment by industry grouping would be as follows:

Table 11: GROSS CAPITAL FORMATION IN INDUSTRY, 1974-1980(in millions of Rupees at 1974 prices)

Item Private Sector Public Sector Total

Export Processing Enterprises 540 220 760

Other Large-Scale Enterprises 450 60 510

Small-Scale Enterprises 10 20 30

Total Manufacturing 1,000 300 1,300


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CHAPTER 4

HUMAN RESOURCES, EMPLOYMENT AND INCOME DISTRIBUTION

119. Mauritius' diverse ethnic and religious groups adhere to their ownlanguages, religions and customs. Therefore particular occupations or economicactivities have come to be associated with different communities or subcommuni-ties. In 1972 the population by ethnic origin was as follows:

Table 12: POPULATION BY ETHNIC GROUPS(in thousands)

Ethnic group Males Females Totai % of Total

General 116.3 120.6 236.9 28.7

Hindu 215.7 212.5 428.2 51.8

Muslim 68.8 68.3 137.1 16.6

Chinese 12.8 11.2 24.0 2.9

Total 413.6 412.6 826.- 100.0


The Franco-Mauritians classified under the general group own over half thesugar plantations, run most of the hotels and importing houses, and are movinginto the manufacturing sector. Indo-Mauritians (Hindu and Muslim) work mainlyon the estates, own small plantations and staff most of the civil service.Creoles (also included in the general group) work as longshoremen and fisher-men, and in the service industries. Much of the retail business is run bythose of Chinese origin.

Growth of Population and Lts Control

120. The long-term demographic trends in Mauritius are documented inthe country's excellent demographic data; censuses have been undertakenregularly for over a hundred years, and births and deaths have been recordedsystematically since 1870.. Population growth in the 19th century was mainlya result of the importation of labor for the sugar plantations. Duringthe 1880s the influx of indentured labor largely ceased and for the nextfifty years the population grew little; in some years the number of deathsexceeded births. After 1945 there was a marked rise in the natural rate ofpopulation growth. The baby boom that was almost universal after World War IIalso was felt in Mauritius. During the war there had been a tendency to

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postpone marriages and births, and in the immediate postwar period the birthrate rose. At the same time, the start towards the eventual eradication ofmalaria, one of the country's killers, and improvements in health servicesgenerally caused the crude death rate to fall from around 28 per thousand in1945 to 11 per thousand in 1960. As a consequence, the population rose from420,000 to 645,000 at an average annual growth rate of just under 3 percent.This exceeded the rate of economic growth, and elicited dire Malthusianpredictions from many quarters. Mauritius became one of the most denselypopulated of the world's primarily rural communities with 1,200 persons persquare mile. In recent years there has been a remarkable reversal in demo-graphic trends, which eased many of the worst fears of overpopulation. From1960 to 1976 the population increased by only 1.9 percent per year, reaching856,500 by 1975, while the gross reproduction rate fell from 2.87 to 1.67.This is one of the fastest rates of fertility decline yet observed in adeveloping country. The crude birth rate, which peaked at 40.2 births perthousand of population in 1963, declined steadily thereafter to 22.7 in1973.

121. Recognizing the advantages of a stable population, the secondDevelopment Plan 1975-80 aims at a gross reproduction rate of 1.1 for themid-1980s and sets the net reproduction rate of unity, which means that thewomen of reproductive age will then be just replacing themselves.

122. Even when this is achieved, the high birth rate of the 1950s willcontinue to produce population growth for many years to come. Indeed, theannual growth rate will rise over the next few years as the number of thewomen aged 15 to 44 is projected to grow from 193,000 in 1975, to 229,000 in1980, and to 262,000 in 1985, an increase of 35.8 percent over the decade. Onthe basis of the Plan's target for lowering the gross reproduction ratedescribed above, Mauritius' population could reach 935,000 by 1980 and wouldexceed one million by 1985.

123. Two important factors accounted for the decline in populationgrowth. Firstly, there has been a distinct trend towards late marriages.Although Mauritius does not have the very late marriage patterns of certaineast Asian countries such as Hong Kong and Singapore, marriage now occurslater on average than in a number of industrialized countries. The median ageof women at marriage rose from 19.9 in 1962 to 22.4 in 1972. This trend mayhave reflected to some extent the poor economic conditions of the 1960s andthe difficulty of young unemployed workers in supporting families, but itexplains in large part the drop in the fertility of younger women. It isnoteworthy that in the past fertility has been particularly sensitive tochanging economic conditions. The sugar boom of the early 1920s correlatedclosely with a rise in the birth rate, and, conversely, when Mauritius was hitby the world economic depression of the 1930s, the rate fell in one year toas low as 26 births per thousand. Secondly, the growing use of contraceptivetechniques has been a major factor in the decline in fertility. The trendtowards a lower birth rate first became evident in the early 1960s, which iswhen family planning services first got underway. Family planning services,which were started on a voluntary basis in 1957 and privately sponsored, in the

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initial years encountered strong opposition from a number ot quarters. However,they had the full backing of the Government, which was anxious to avoid theworst consequences of continuing rapid population growth.

124. From 1964 onwards the Government extended financial assistance tothe two principal voluntary organizations, the Mauritius Family PlanningAssociation and the Roman Catholic "Action Familiale". In 1970 a nationalfamily planning program was established, and two years later the 62 clinicsand 29 supply centers of the Mauritius Family Planning Association wereintegrated with the Maternal and Child Health Services of the Ministry ofHealth.

125. By 1975 there were 80 clinics and 45 supply centers, enablingmost women to have easy access to family planning services. To meet theneeds of a few families in isolated areas, a mobile clinic was scheduled togo into operation in 1976. Mauritius has benefited from a subsidy from theUnited Nations Fund for Population Activities, which initially in 1972covered 80 percent of the recurrent costs of the national family planningprogram. However, the subsidy has been largely phased out and there is adariger that the impetus so recently gained may be partly lost unless there issome continuing support from external agencies. It is estimated that approxi-mately 30 percent of women in the reproductive age group are now practicingsome form of contraception. This marked interest in limiting family size maybe largely attributed to the high level of adult literacy and to the largeproportion of the active population in wage rather than peasant employment.Mauritius has few if any subsistence farmers; it is this element of thepopulation which in other developing countries has proven least receptive tofamily planning advice because of the advantage of large families in peasantagriculture.

126. Abortion, even on medical grounds, is illegal, and continues tobe strongly opposed by i:he Catholic church. Two thirds of maternal deathsare reportedly the resu:Lt of illegal abortions; in the first five years anaverage of 2,180 cases of these abortions and complications following abortionhave been admitted to government hospitals. The actual number of illegalabortions is estimated to be several times that number. Voluntary sterili-zation is also illegal.

127. In the longer-term it will become increasingly difficult to achievethe target decline in fertility without legalized post-conception protection,since even with the most effective methods of contraception a degree offailure is to be expected. Nonetheless, the main argument for legalizingabortion remains the fact that the present demand for the termination ofpregnancies is resulting in a large number of dangerous illegal operationsundertaken in unsanitary conditions.

128. Declining mortality, combined with a high birth rate in the 1950sand a-falling birth rate in the 1960s, is reflected in the evolution of theage structure of the population, with significant implications for futureeconomic and social policies. The proportion of the popuLation under 15 years

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of age reached a peak of 45 percent in the early 1960s, declining thereafter;the age structure at the time of the 1972 census closely resembled that ofthe census two decades earlier, the main difference being a small increasein the number of those aged 65 and above.

129. Over the past 35 years life expectancy at birth has almost doubled;males may now expect to live to 61 and females to 66. The major implicationof the changing age structure for current policies is the rapidly growinglabor force that has resulted as the 1945-1960 birth rate bulge reachedworking age, and increased longevity extended the working lives of many people.Job creation necessarily became one of Government's principal objectivesin the late 1960s and has since been a predominant theme of economic policy.

External and Internal Migration

130. A special factor affecting the characteristics of the populationis emigration. From 1962 to 1972 some 28,000 Mauritians left the islandto take up permanent residence elsewhere. Over the past five years thenumber emigrating annually has averaged 3,570, about a third of whom werechildren under 15. A majority of the adults were women -- many of themtrained nurses -- a large proportion of whom were in the age groups of highestfertility. Recently the traditional recipient countries, particularly theUnited Kingdom and France, have become less willing to accept immigration.While a slowdown in emigration might cause population to grow more rapidlythan it would otherwise, the island would gain from retaining a greater numberof its trained personnel. There is also significant migration into the largerurban areas from the small town centers and villages scattered throughout therural parts of the island. Although no locality is more than 25 miles from atown center and villages are scattered throughout the island, it is neverthe-less possible to distinguish rural areas where the population is predominantlyengaged in agricultural activities, and urban areas consisting of five munici-palities which had 44 percent of the population within their proclaimedboundaries in 1972.

131. Internal migrations in the period 1962-72 involved about 28,000people who moved mostly into the areas bordering Port Louis, the main centerof new employment. The precise extent of rural-urban migration, however, isnot accurately recorded. The urban population overflows the municipal bound-aries, with many of the newest arrivals living on the fringes of the munici-palities, and migration to the towns has compensated for the lower rate ofnatural increase in urban areas and replaced those emigrating overseas whowere mainly urban residents.

132. One of the consequence of this internal migration has been growingcongestion in the Port Louis area, with shortages of residential and commer-cial sites to accomodate expansion. The other main urban growth pointswere Quatre Bornes and Beau Bassin-Rose Hill, which are preferred residentialareas owing to their agreeable climate and convenient location within thePort Louis-Curepipe urban corridor.

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133. The labor available for the sugar estates has decreased or stag-nated, which partly explains the labor shortages experienced by estates inrecent years. The numbers living outside the municipal and village bound-aries, but on the edges of employment centers such as the Plaine Wilhemsindustrial area, have intcreased very rapidly, in several instances resultingin shanty settlements; these constitute an integral part of the urban areas,but are not yet officially recognized as such.

Labor Force and Employment Trends

134. During the intercensal period 1962 to 1972, the labor force (definedas comprising persons aged 15 and over, either employed or actively seekingwork) grew from 184,000 to 255,000, an increase of 39 percent in ten years orabout 3.3 percent a year. However, employment including public relief worksgrew by only 23 percent during the same period. The participation rate in1972 for both sexes was 51 percent, 83 percent for males and only 20 percentfor females. This is relatively high for males but low for females as com-pared with other developing countries such as Taiwan and Korea. 1/

135. Unemployment (defined as consisting of persons aged 15 and overwithout work and actively seeking employment) increased from 6 percent of thelabor force in 1962 to 16 percent of the labor force in 1972. Owing to theseasonal nature of emplonyment in the sugar industry (a principal sector whichemployed as much as 31 percent of the labor force in 1974), unemployment hasbeen lower in the cutting season (June to December) than during the remainderof the year. However, estates have been encountering increased difficultiesin securing labor during the cutting season and this indicates that there islittle hard core unemployment. This is confirmed by the fact that a number ofmanufacturing firms have reported difficulties in recruiting labor for certainunattractive manual operations. The implication is that unemployment in aboom period is now predominantly structural or frictional.

136. Looking at the age composition of those employed during the same 10-year period, an increasin!g proportion of heads of families have been employedwhile unemployment among the youth grew very significantly. The rate ofunemployment of those aged 25 and over fell from 6.2 percent to 4.8 percentduring the 10-year period; for the male labor force as a whole, the figures were6.7 percent and 5.0 percent, respectively. At the same time, unemployment ofthose in the 15-24 age group rose from 6.1 percent to 31.0 percent; thefigures for the male labor force in this age group rose from 6.6 percent and29.8 percent, respectively.

137. Although both the 1962 and the 1972 censuses revealed that a veryhigh proportion of the woimen in the labor force were employed, there mightstill have been a large degree of concealed female unemployment. Indeed, in1972, there were some 30,000 unmarried girls aged 15 to 19 who were neitherattending school nor economically active outside the home, and yet only 3,428were recorded by the censujs as unemployed.

1/ In 1972 South Korea had a participation rate for females of 38.2 percentand Taiwan 34.4 percent.

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138. The distribution of employment by sectors is given in Table 13below.

Table 13: GROWTH IN EMPLOYMENT BY SECTOR 1971-76 (LARGE ESTABLISHMENTS)

March 1971 March 1976 % Increase

Agriculture 55,447 59,459 7.2Mining and quarrying 154 149 -3.2Construction 2,058 6,828 231.7Manufacturing 9,183 26,416 187.7Electricity, gas & water 1,283 3,062 138.7Commerce 3,939 8,110 105.9Transport, storage & communications 4,930 8,919 80.9Services and other activities 53,763 56,297 ) 19.3Development Works Corporation -- 7,816 )Total 130,757 177,056 35.4


139. Thus despite its much greater importance in the economy, between1971 and 1976, fewer jobs were created in agriculture than in manufacturingor construction. The boom in the construction industry has given rise tomany new jobs. The success of the export industries promotion drive alsocontributed a large percentage increase in the number of jobs in manufacturing.It is noteworthy that three quarters of all new jobs created in the manufactur-ing sector were provided by establishments set up under the Export ProcessingZone legislation.

140. The literacy rate for the labor force in Mauritius is extremelyhigh. With 92 percent of the population aged 6 to 11 attending school, thecountry is very close to achieving universal primary education. A breakdownof the registered unemployed by the level of education is given in Table 14below:

TABLE 14: REGISTERED UNEMPLOYED BY LEVEL OF EDUCATION

Level of education Nov. 1972 Sept. 1975Number Percentage Number Percentage

School Certificateand Above 2,512 9 2,629 15

Form I to Form V 6,387 24 4,411 24Passed Standard VI 5,361 20 3,489 19Up to Standard VI 12,504 47 7,517 42Total 26,764 100 18,046 100


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141. A surprisingly high percentage of the registered unemployed havehad some secondary education, 1/ this proportion rising from 33 percentin November 1972 to 39 percent in September 1975. Significantly, too, manyof the educated unempLoyed holders of a School Certificate or higher had beenregistered for over six months. The 1972 census data also revealed that 80percent of the unemployed were "first job seekers". Out of 37,000 recorded asunemployed, only about, 1,000 were skilled and experienced workers.

142. The geographical distribution of jobs within the island does notclosely match the residential distribution pattern of the work force. Con-sequently, the labor force is obliged to travel excessive distances to andfrom work, resulting in substantial economic loss. This situation is ex-acerbated by the inefficiency of the public transportation industry. In someinstances, jobs remain open despite the presence of unemployment, simplybecause the potential workers are deterred by the problems of commuting. Adetailed study recently undertaken reveals that, in so far as businesses with10 or more workers are concerned, 70 percent of all-agricultural jobs areconcentrated in the urban zones. There is also more imbalance in agriculturalemployment with 54 percent of the primary sector's jobs located in threegeographical districts, namely, Flacq (12 percent), Savanne (17 percent) andGrand Port (16 percent), whereas two districts of high agricultural potentialcontain a surprisingly low percentage of primary employment, namely Pample-mousses with 7 percent and Riviere du Rempart with 12 Percent.

143. The 1972 Census data reveals significant differences in the laborforce participation rates between urban and rural areas. Owing partly to theconcentration of secondary schools in urban areas, the participation rateof males aged 15 to 19 is only 59 percent in the urban areas as compared to 68percent in rural areas. The converse is true for females as a result of thegreat number of jobs available to women in urban areas. The unemployment ratefor women is also much higher in towns, where job opportunities induce aninflux of job seekers.

Plan Targets

144. The Second Development Plan sets as its principal target the achieve-ment of full employment by 1980. "Full employment" here is const:rued to meanthat 98 percent of the :Labor force is employed, the remaining 2 percentregarded as the unavoiLdable level of frictional or structural unemployment.

145. In estimating the size of the labor force in 1980, the Plan projectsthat the overall participation rate will remain virtually the same as in1972, with a small decline in the participation rate for males balancedby a small increase in that for females. Over the five year period of thenew Plan, an average of 14,600 new jobs per year would have to be createdto fulfill the Plan's target.

146. As full employment is approached, labor is likely to become anincreasingly volatile and unpredictable element in the economy. Moreover, as

1/ "Secondary education" here includes "School Certificate and Above" andForm I to Form V.

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more technologically sophisticated industries are set up, the shortages ofskilled craftsmen and technicians, already a bottleneck in some areas, mayassume critical proportions. At present, vocational training is provided inseveral institutions, such as the Industrial Trade Training Center at BeaBassin, but the numbers trained so far have not kept pace with the demandfrom industries.

Wages

147. The wage levels in Mauritius are relatively low compared with thoseof countries such as Korea, Hong Kong and Singapore, but they are well abovethose in most African countries. Typical wages for daily-paid laborers in1976 might be around Rs 360 per month; they might be somewhat higher in thesugar industry. In the 1960s, when there was an excess supply of labor, thewages remained at a constant level. In recent years, however, the emergingshortage of labor put considerable pressure on wages and was reflected inlarge wage increases for many of the better organized groups. Wages wereincreased principally through the efforts of the National Remuneration Boardand the Government. The initial step in raising wages was the Report of theSalaries Commissioner in mid-1973 (the "Sedgwick Report"), which made salaryawards averaging over 30 percent to civil servants. Greater increases weremade at the highest levels, to attract the more highly qualified Mauritiansinto Government. The Report also recommended setting up cost of livingallowances to be linked to the consumer price index over a certain range.The awards to civil servants were subsequently extended to public corpora-tions, and cost of living allowances were legislated for the private sector.The National Remuneration Board, soon after its inception in 1974, madesalary awards for the sugar workers, dockers, etc. The Board usuallyjudged in favor of labor unions and it was supported by the Permanent Arbi-tration Tribunal.

148. Statistics on wages are only available for large establishments,but the following table gives a broadly accurate picture of changes inabsolute and real wages in the past six years. Total average salariesand wages increased 2.6 fold between 1970 and 1976, with the larger partof the increase in the last two years. This increase is much more thanthe increase in labor productivity, which is estimated at some 15 percentbetween 1970 and 1976; hence, the labor cost per unit of production hasincreased dramatically. The Government has become concerned about therelative competitiveness of Mauritius, and intends from now on to attemptto link wage increases more closely to productivity gains. The table alsoreveals that the workers in the sugar industry have succeeded in improvingtheir wages more than the others. It is also noteworthy that the daily-paidworkers have somewhat improved their relative position vis-a-vis the monthly-paid workers. In 1970, the average monthly wage was 2.8 times higher than themonthly equivalent of daily-paid workers; in 1976 this figure had declined to2.6.

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Table 15: AVERAGE MONTHLY SALARIES AND WAGES 1/(Amounts in Rupees)

i Increase1970 1974 1976 1970-74 1970-76

Current Wages:

Total Monthly-Paid Workers,excluding Sugar 422 600 948 421 125

Total Daily-Paid Workersexcluding Sugar 149 210 361 411 142

Total Monthly- and Daily-Paid Workers in Sugar 185 347 553 88 199

Grand Total Monthly andDaily Paid Workers 244 383 634 57 160

Wages in 1970 Prices:

Total Monthly-Paid Workers,excluding Sugar 422 374 463 -11 10

of Which:Food, Beverages, etc. 414 329 355 -20 -14Textiles, Wearing Apparel 310 259 323 -16 + 4Metals, Repairs, etc. 495 454 513 - 8 + 4Construction 541 673 637 +25 +18Government 428 361 478 -16 +12

Total Daily-Paid Workers,excluding Sugar 149 131 176 -13 +18

Of Which:Food, Beverages, etc 137 117 133 -14 - 3Textiles, Wearing Apparel 117 70 106 -40 - 9Metals, Repairs etc. 148 136 163 - 8 +10Construction 212 163 272 -23 +29Government 139 128 172 - 8 +23

Total Monthly- and Daily-Paid Workers in Sugar 185 216 270 +17 +46

1/ In large establishments only; situation as of Septemberin each year. For further details and explanatoryfootnotes see Statistical Annex, Table 2.7.


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149. The table also illustrates the development of real wages between

1970 and 1976. With a few exceptions (sugar and salaried employees in the

construction industry), real wages generally fell up to 1974. Only in the

last two years real wages increased strongly, so that for most categories

of workers real gains as compared to 1970 were achieved. There are, however,

large differences by sector, which reflect better bargaining positions of

some groups, and also the relative scarcity of certain skills. The sugar

workers obtained the largest improvement in their relative position over

the last six years, followed by daily-paid construction workers, which

have become much sought after since the investment boom started in 1973.

The overall wage developments need also to be viewed in the context of

increasing employment of females, who constitute a large part of the laborforce and are paid wages that are about 30 percent lower than those receivedby male workers. In 1970, for instance, 40 percent of the labor force

in the textile and apparel sectors was female; by 1976 this percentage had

risen to 77.

Income Distribution

150. The distribution of income in Mauritius resembles that in otherdeveloping countries, although it may be a little more unequal than mostbecause of the importance of sugar estates in the economy. The most general

measure of income distribution is the Gini function. 1/ In Mauritius the

mission estimates the Gini ratio to have been about 0.50 in 1961/62 and 0.52in 1975. The latter was certainly affected by the sugar boom which swelled

the profits of the estate-holders more than it increased other incomes. Ifaround 0.50 is a fair estimate of this measure of income distribution, it

indicates that income distribution is slightly more even in Mauritius than in

the Philippines but much more unequal than in Taiwan where the Gini ratio is

about 0.30.

151 Ceteris paribus, the increase in industrialization or converselythe lessening of the importance of agriculture has a positive effect in

reducing the inequality of income distribution. 2/

1/ This expresses the relationship of actual income distribution to com-

pletely equal income distribution. The range of the ratio is zero to

one with the former indicating equal income distribution. See Chart

Statistical Annex Table 8.1 for curve of household income in Mauritius.

2/ See Shail Jain, Size distribution of income: A compilation of data

(Washington D.C.; World Bank, 1975).

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152 The data for ]Mauritius were collected from household surveys in1961/62 and 1975. In both years, the poorest 40 percent of the populationhad 14 percent of total income, while the richest 20 percent had over half.Within the upper 50 percent of the population there was a slight shift inthe distribution, with the very richest increasing their part and the middleto upper groups receiving a somewhat reduced proportion. As most land ownerswould be expected to fall in the upper income brackets, the shifting of shareswithin the richer half of the population may partly reflect the growingconcentration of land ownership.

Table 16: INCOME DISTRIBUTION OF HOUSEHOLDS

Cumulative percentage Cumulative percentage

of households of incomes

1961/62 1975

20.0 4.. 4.540.0 14.0 14.060.0 29.0 27.080.0 49.0 45.095.0 72.0 69.0

100.0 100.0 100.0

Gini coei'ficients 0.50 0.52

Source: Statistical Annex, Table 8.1, and mission estimates.

153. However, this concentration may be somewhat reduced by the factthat the largest landowners are now corporations, though ownership of thesecorporations is closely held. Seventy percent of the sugar land is owned byone percent of the landowners, and 40 percent of the small landowners culti-vate 4 percent of the land. As noted in our discussion of agriculture, thesmallholders' yields are less that those on the larger estates. In fact thosein wage employment are often better off than the very small landowners. Itappears that while the share of the sugar producers in gross national productincreased from 23.4 percent in 1970 to 27.4 percent in 1975, this gain wasfairly evenly distributed throughout the industry regardless of size ofholding. Also although t'he share of GNP in the form of salaries and wagesfell from 48.9 percent in 1970 to only 38.5 percent in 1974 at the top of thesugar boom, as early as i!975 it had recovered to 44.1 percent. Thus the de-crease in the relative share of wage income seems to have been quite temporary.

154. The Government had committed itself to an improvement in incomedistribution at the beginning of the Plan period in 1971. This was to bedone principally by the creation of new jobs for the unemployed. The unemploy-ed and employment data cited above (para 135-138) indicate a good deal ofsuccess. However, with the rapid rise in consumer prices after 1972, govern-ment policy was more concerned with halting the decline in wage-earners'

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sf%re of GNP by permitting or encouraging wages to increase. At the same timeconsumption subsidies and pegged consumer prices were used and some shift inthe tax burden to the higher income groups was undertaken. One major changewas the graduation of the sugar export tax, which is currently 12 percent forlarge producers and reducing to complete exemption for small producers.Formerly 6 percent applied across the board. Other tax changes discussed inchapter 6 had similar redistribution objectives.

155. The most notable of the consumer subsidies were for rice and wheatflour. These amounted to Rs 157 million in 1974/75, 21.4 percent of therecurrent budget. In addition to direct subsidies, Government introducedprice controls for about 35 basic consumer items, mostly foodstuffs. Althoughit is believed that the regulated prices were generally observed in retailoutlets, many retailers were reluctant to maintain a supply of these itemswithout proportional increases in retail prices to match the imported costs,and the policy was therefore somewhat less successful than hoped. Governmentalso held down the prices of utilities (water and electricity), though recentlyelectricity prices had to be increased substantially.

156. Although it is understandable that Government should endeavorto shelter the economy against price hikes in imports, as in rice which islargely consumed by the poor, the continuing inflationary impact of fiscaloperations means that Government is now helping to accentuate the problemit is endeavoring to ameliorate by wage and price control policies. It isvery difficult for such policies to avoid serious inequities since theirenforcement and incidence is bound to vary with the degree of bargainingpower of different groups and, in any case, mis-allocation of resourcesis very likely to flow from them as it has in other countries.

157. Government experience with the Export Processing Zone and theTravail-Pour-Tous program demonstrates the critical nature of wage policy.On the one hand, labor costs must remain low to attract foreign extrepreneurs;on the other hand, private sector wages need to rise so as to draw people outof the Development Works Corporation. 1/ Moreover, distributional considera-tions weigh heavily in the Government's decision-making, and high wages areseen as one method of holding the profits of private industries in check.Civil Service wage levels are among the highest so that a general increase inwages and salaries in the Government can only take place at a considerablecost to the Treasury. From a relatively low base in 1970 wages of Governmentpersonnel were allowed to rise more rapidly in the Government than in manybranches of the private sector. According to the labor laws a long list offactors including ability to pay are to be taken into account in determining

1/ The Development Works Corporation was established in 1973 to undertakeinvestment-related activities such as village improvement, reafforestationand preparation of new agricultural land. With a total labor force ofabout 7,000, it uses labor-intensive methods in the implementation ofprojects wherever possible, and has been instrumental in the creation ofa large number of jobs.

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wage awards. The relatilvely high wages paid by the DeveLopment Works Corpora-tion are frequently mentioned as a cause of labor shortage in the privatesector. Officials dealing with the private sector stated that Mauritius'manufactured exports couiLd be increased substantially if sufficient labor wasavailable, particularly ior the operation of double shifts. Recent labordisputes in the Port Louis area have caused losses to export processingindustries.

158. Two examples serve to illustrate the danger of an inconsistentpolicy on wages in terms of its impact on the structure of employment.First, experiences with the Export Processing Zone demonstrate the sensi-tivity of employers to labor cost differentials. The Zone was particularlysuccessful in recruiting female workers so that there was a concern that theZone might not be doing enough to relieve unemployment among the older malelabor force. The high proportion of female employment under this scheme canbe attributed to the nature of the work involved, and to the low level ofwages for female workers. 1/ The typical industries that come to Mauritiusare generally labor-intensive, 2/ paying wages and salaries that on theaverage account for 53 percent of the value added. This makes the laborcosts a critical factor, aind since the wages for female workers are lower,the employers naturally prefer to employ women.

159. Second, there is the impact of wage levels in the DevelopmentWorks Corporation on the supply of labor to the rest of economy. The wagespaid by the Corporation were initially set at 20 percent below those ofunskilled government workers, which at the time compared quite unfavorablywith the wages in the private sector. Hence, it was believed that thedevelopment workers would have a strong incentive to leave the Corporation assoon as more lucrative employment opportunities presented themselves, and thatthe scheme would not affect adversely the supply of labor to the rest ofthe economy. In practice, however, it has proved more difficult to placeCorporation employees in private sector jobs than it was originally envisaged.Since July 1973, the government salaries have more than doubled, while thosein the private sector have risen more slowly. Although the 20 percent differ-ential with the government workers has been maintained, the developmentworkers now earn much more than their counterparts in the Export ProcessingZone, particularly in the early years of employment. The slow turnoverpatterns among the development workers closely reflect these anomalies of thewage structure between the private and the public sectors.

160. As for remedial action it is our view that rather too much (in1974/75 about one third of recurrent expenditure) is going for transferpayments and too little for schemes to increase the productivity of the poor.

1/ In 1976, the minimum wage rates were Rs 7.45 per day for women as comparedwith Rs 9.99 - Rs 12.23 per day for men.

2/ The employment generation effect, in fact, is one of the most importantcritpria in thp RplPrtinn nf induiriripq fn.r thp Znnp

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While these transfer payments include pensions and family allowances whichcannot and should not be changed, only a small portion of payments have animpact on the earning capacity of the poorer groups.

161. Thus for example, Government has already started channeling itsfunds into a program to help small fishermen earn a better living throughcredit to buy better boats, improving the marketing system for his catch, andsetting up processing facilities. Another field would be an extended programto promote small-scale industries in areas where there are few jobs oppor-tunities; or by helping individuals to set up small transport companies (busor taxi); or the promotion of construction activity in the poorer areas.Although the above suggestions have mainly concerned small-scale enterprise,there is, of course, no reason why larger enterprises should not be encouragedto offer more employment opportunities in the high unemployment areas.

162. A shift in the direction and purpose of government expenditureis also needed to support the redistributive objective. For example, ratherthan pursuing an increase in secondary education in some of the better-offareas, greater emphasis could be placed on giving appropriate practical skillsto the poor through well-located vocational training programs. Expenditure onroad transport might be restructured so that more attention is given toimproving access in the remoter areas. Public transport could be encouragedso as to increase the mobility of the labor force.

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CHAPTER 5

External Trade and Payments

163. Not only does foreign trade play a vital and quantitativelyimportant role in the Mauritian economy but that role has been remarkablystable, at least over the last decade or so. However, with the sugar boom,the importance of the external sector increased as is seen in the followingtable.

Table 17: IMPORTANCE OF THE EXTERNAL SECTOR(Percent)

1964 1970 1974 1975

Exports /1 as Percent of GDP 48.0 43.6 63.6 63.6Imports as Percent of Total

Resources 34.0 31.5 37.6 39.2Sugar /2 of Total Exports 95 88 86 84Terms of Trade 115.6 100.0 137 160

/L Merchandise only./2 Includes molasses.

Source: Statistical Annex, Tables 4.2, 4.5 and 4.8

Of course, the sharp improvement in the terms of trade in 1974 and 1975 largelyaccounts for this. Since in 1976 the terms of trade are reported to havefallen by about 25 percent, the foreign trade sector probably declined inrelative importance in that year, as compared with previous years. In respectof the commodity concentration of exports while sugar and molasses remaineddominant, clothing, diamonds and other manufactures increased their role inMauritius exports by about 10 percentage points. This is particularly note-worthy in view of the nearly four-fold increase in the pr ce of sugar from1970 to 1974. The conjuncture of the expansion of export processing anda spectacular rise in sugar prices is unlikely to recur otten.

164. The share of sugar at around 85 percent of exports somewhat under-states the diversification that has occurred. At 1970 prices the share ofsugar in fact declined to under 78 percent in 1974, while that of manufacturedgoods rose from 1.6 percent in 1970 to 9.9 percent in 1974. In 1975 the shareof manufactured goods was much higher, though the loss of sugar throughcyclone damage that year makes comparisons between 1975 and other years moredifficult.

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Table 18: MERCHANDISE EXPORTS IN CURRENT AND CONSTANT (1970) PRICES(in millions of Rupees)

Ave.1964-66 1970 1974 1975 1976 /1

At current prices

Sugar and molasses 317.5 350.7 1,583.0 1,572.4 1,353.2Tea 5.6 14.1 19.7 16.0 29.2Other agriculture - 4.4 25.3 26.8 42.1Manufactured goods 3.0 5.9 143.0 202.8 312.1

Total 326.1 375.1 1,771.0 1,818.0 1,736.6

At constant prices

Sugar and molasses 351.3 350.7 413.3 308.6 341.7Tea 5.8 14.1 16.8 11.4 18.4Other agriculture - 4.4 7.8 n.a. n.a.Manufactured goods 4.8 5.9 68.5 n.a. n.a.

Total 361.9 375.1 506.5 n.a. n.a.

/1 Provisional.

Source: Statistical Annex, Tables 4.2 and 4.3.

Summary of the Balance of Payments

165. There are few quantitative trade restrictions. The import licensingsystem is liberal as are allowances for travel, etc. Tariffs are not widelyused except for revenue and do not apply to export processing industries.

166. Merchandise imports and exports have been in close balance over along period. The dependence of incomes on exports, particularly sugar, and astable propensity to import probably account for the stability of the trademargins. This means, of course, that capital flows have not been of greatimportance in the balance of payments, even though foreign investment has beenimportant in the recent growth of export processing industries. 1976 wasan exception to the condition of closely balanced foreign trade. In 1974exports exceeded imports by about 10 percent but this favorable balance wasprobably largely redressed in 1976 when a trade deficit of Rs 563 millionoccurred because of the adverse move in the terms of trade. The followingtable summarizes the balance of payments over the last decade.

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Table 19: SUMMARY BALANCE OF PAYMENTS,(in million of Rupees)

Ave.1964-66 1970 1971 1972 1973 1974 1975

Exports, goods and NFS 398 531 523 759 991 2,124 2,269Imports, goods and NFS 427 515 583 722 1,037 1,902 2,227

Resource balance -29 16 -60 37 -46 222 42

Other current transactionE; (net) 6 26 30 46 48 89 85

Current account balance -23 42 -30 83 2 311 127

Private long-term capital (net) -15 5 5 24 14 22 29Official long-term capital (net) 20 - -12 7 11 34 55

Other (net) 1 47 46 10 -48 -2 138/1

Change in reserves (-= increase) 17 -94 -9 -124 21 -365 -350

/1 Includes insurance compensation for sugar losses.


Export Arrangements

167. Because of the dependency of the island's economy on toreign tradeit is fortunate that the Government has been able to secure favored accessfirst to the British Commontwealth and later to the European Economic Communitymarkets for sugar and now f'or processed manufactured products. Mauritius has,of course, a special association with the British market, wnich from 1970through 1974 took about half of the country's exports. In 1975 with the

further sharp hike in the price of sugar of 35 percent (to 220 percent over1973) in the United Kingdom market, the UK share of Mauritius' exports rose toover 77 percent (Annex Table 4.9). Canada, the United States and South Africahave been other important customers, though the share of tne first two fellsharply in 1975 because of changes in sugar purchasing arrangements. From1951 until 1975, Mauritius exported to the UK under the terms of the Common-wealth Sugar Agreement, which provided that the British Gov'ernment wouldundertake to purchase, and the Commonwealth sugar industries would undertaketo supply, each year specifLc quotas of sugar at a price which, according tothe agreement, was supposed to be "reasonably remunerative to efficientproducers". The United Kingdom Sugar Board, which was inst'ituted under the1956 Sugar Act, was entrusted with the task of carrying out the Government'scontractual obligations under the agreement. Other sugar could be exported to

the UK beyond the quota amount, but at prevailing world market prices, whichwere usually considerably below the quota prices.

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168. When the agreement was renewed in 1971, Mauritius was allocated386,000 long tons (about 60 percent of the island's production) at aprice of 50 per long ton, plus an additional special payment of between7 aad 11 per long ton paid only to the developing countries who were

parties to the agreement. This special supplemental payment varied inverselywith the world free market price of sugar. During 1974, the last year ofthe Commonwealth Sugar Agreement, the quota price changed several times,mainly as a result of claims made by the exporters to renegotiate the pricein view of the worldwide shortage of sugar, and eventually reached 140 perlong ton. Although Mauritius received a lower price from its quota salesthan from world market sales in 1973 and 1974 due to the exceptional worldmarket conditions, Mauritius honored its quota agreement, recognizing thatthe longer-term security afforded by a quota system was worth more than thetemporary gains that could have been made in those years. The unit priceobtained for sugar has been as follows:

Table 20: MAURITIUS SUGAR EXPORT PRICES BY MAJOR MARKETS(in Rupees per m7etrit ton)

1970 1971 1972 1973 1974 1975 1976

Average 591 641 757 870 2,301 3,114 2,399UK 621 621 733 761 1,478 3,102 n.a.US 823 877 907 995 2,400 2,705 n.a.Canada 494 651 825 936 3,850 2,597 n.a.Other - 663 706 1,179 3,134 3,355 n.a.

Source: Annual Report of the Customs and Excise Department.

169. When the UK integrated its sugar policy with that of the EuropeanEconomic Community in 1975, the supply of sugar from Mauritius to the UKbecame part of an overall arrangement between the European Economic Commu-nity and its 46 African, Caribbean and Pacific Associate Members (the ACPstates). That arrangement was based on an agreement which was signed onFebruary 1, 1975 the so-called EEC-ACP Convention of Lome.

170. It provides that the EEC will purchase ACP sugar at guaranteedprices for an indefinite period. 1/ The total annual quotas which the EECundertakes to import is about 1.3 million metric tons, of which Mauritiusshare is 487.2 thousand metric tons or about 70 percent of the 1974 crop.The annual quota for EEC imports and the export country shares, as well as

1/ The EEC-ACP sugar agreement is annexed to the Protocol of the LomeConvention. The conditions specified in the Protocol have to bereexamined before the end of the seventh year, and changes cannotbe put into effect before a lapse of five years from the date theConvention was signed.

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the minimum CIF price (in EEC units of account), are negotiated annually.The normal procedure is that buyers and sellers negotiate freely over sugarprices within the quota. If the agreed price exceeds the minimum, then theagreed price is paid. If, however, quota sugar from ACP countries cannotfind a buyer in the Community at a price equivalent to or in excess of theguaranteed price, then the Community is obliged to purchase that sugar atthe guaranteed price. For the first .period of the agreement - betweenFebruary 1, 1975 and June 30, 1976 - the guaranteed price was the equivalentof about 150 per long ton. 1/

171. As an Associate Member of the EEC, Mauritius receives concessionsfor its exports of manufactured goods to the Community as described above,most of course are produced in the Export Processing Zone, and qualify forduty free entry if 50 percent of value added is in Mauritius. Europeangoods receive Mauritius' lowest tariff rates.

172. Under the Commonwealth Sugar Agreement, the Canadian Governmentalso gave preference to exporting members, though without formal negotiatedprice quotas. Sugar was imported into Canada at prevailing world free marketprices, and a bounty was then paid by the Canadian Government to the supplier.Under this arrangement, Mlauritius generally chose to sell about 150,000metric tons annually to Canada until the expiration of the agreement in 1974.In 1975, only 85,000 metric tons were available for export to Canada dueto cyclone damage. Until the end of 1974, Mauritius also had an annual quotaof 27,000 metric tons to the United States, under the US Sugar Act. In thelast few years of the US Sugar Act, however, Mauritius exported almost 40,000metric tons to the US annually by taking advantage of prorated shortfallsin other suppliers' quotas. Under this agreement, prices were negotiatedannually, but were usually above free market and Commonwealth Sugar Agreementprices. The very favorable prices offered in the US up to 1974 made it anattractive outlet for Mauritian sugar. With the expiration of the US Sugar Actat the end of 1975, Mauritius has no special arrangement in the US., and cansell any quantity at world market prices.

173. Mauritius has also negotiated preferential ar nents with SouthAfrica for about 60 percent of its tea exports. The price obtainecl is nego-tiated annually and generally approximates expected prices at the LondonAuctions, though Mauritius3 benefits to the extent of saved transport costs.The tea industry supplied about 90 percent of agricultural exports (exceptsugar) in 1970, and with the support of Government through the Tea Develop-ment Authority, which organized a smallholder project, managed to increaseexport volume by over 4 percent annually. The price incentive to teaexporters was not strong, but increased by access to the Snilth African

1/ This was 25.53 units of account per 100 kg of raw si . The unitof account was equivalent at the time of writing the Protocol to aSpecial Drawing System where 1 SDR was about US$1.2. However, sub-sequently the Community decided to define the unit of account interms of a basket of currencies of the member states. From April 1,1976 the agreed price was 26.67 units of account per 100 kg CIF.

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market on a preferential basis and the depreciation of the Rupee. Withoutthese, the industry would have been in some financial difficulty. Much ofthe remaining growth in agricultural exports was from fish and fish products,which grew from almost nothing in 1970 to Rs 14.6 milion in 1974, at wfliCItime it contributed almost as much foreign exchange earnings, on a grossbasis, as the tea industry. This growth reflected the establishment of a tunafish factory to service a Japanese fleet based in the Indian Ocean area.

174. Before the establishment of the Export Processing Zone, there werefew manufactured exports. By 1974, their value had reached Rs 143.9 millionand in 1975 were over Rs 200 million. The factors underlying this growthwere discussed in the section on manufacturing. Incentives and ease ofaccess to the EEC certainly helped. Even the rapid rise in wage rates haspartly been tempered by the depreciating Rupee. For the future, wage ratesseem likely to rise, while the repegging of the Rupee to the SDR has alreadyhalted the depreciation of the currency. Thus, the other incentives - taxholidays and easy access to the EEC - are likely to take on increased impor-tance. Service exports have also been stimulated by Government's incentivepackages which were accorded to hotels.

175. Imports. Imports have just about kept pace with exports except inthe unusual year of 1974 when sugar prices increased about 165 percent,boosting exports to yield a trade surplus of Rs 218 million. The ratio ofimports to GDP has not shown any marked trend during the past decade. It was51.2 percent in 1964, dropped to 46.0 percent in 1970 but rose to 60.4percent in 1974 and 64.5 percent in 1975. Thus there has been no net importsubstitution but rather a move in the opposite direction as the externalsector has grown and a larger share of total resources have been imported.The elasticity of imports with respect to gross domestic income has been1.15. After 1977, the composition of imports changed appreciably in favorof imports of capital goods, no doubt as a result of heavy investment inmanufacturing.

Table 21: IMPORTS BY GENERAL CATEGORIES

Percent of Total Imports

1964 1970 1975

Consumer Goods 45 49 39Intermediate Goods 37 38 39Capital Goods 18 13 22

100 100 100

Source: Bi-Annual Digest of Statistics.

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176. The fact that overall import substitution has been negative 1/does not mean that there has been no import replacement in some categories.Imports of intermediate goods have had an elasticity of .82 in respect ofvalue added in industry, Lndicating that a larger portion of domestic goodshas been going into manufacturing. This has been offset by the elasticityof capital goods imports, which has been 1.4 with respect of gross fixedcapital formation, indicaiting the increase in the capital-intensity of thatactivity. Consumer goods imports other than food has been rather high withan elasticity of 1.4 in respect of private consumption while food importsjust about kept pace with private consumption. This category of importshas decreased, however, an a percentage of total imports. Import dutieson many luxury items were raised by 25 percent in 1973, and other adjust-ments have taken place since, yet this did not hold down demand for thesegoods. It may therefore be possible in future to consider even higherduties as a means of achieving higher revenue for the budget, especiallyas the average rate of duty on Mauritian imports was relatively low at only10-11 percent in 1974 and 1975.

177. The functional classification of Mauritian imports in nominal andreal terms is shown in Steitistical Annex Tables 4.5 and 4.6.

Trade Projections

178. Exports. In the 1975-1980 Five-year Plan, exports of goods areprojected to increase at an average annual rate of 8 percent in reaL termsbetween 1974 and 1980. Because of the anticipated fall in sugar prices,however, this would mean a 3.2 percent annual increase in exports at currentprices. During the decade ending in 1974, exports in real terms increasedby 3.5 percent a year, but this relatively low figure, of course, stillreflects the economic stagnation during the first half of that decade.Between 1970 and 1974, exports grew by nearly 8 percent a year in real terms.The mission believes that it may be difficult to maintain a real growth rateof 8 percent a year in the future, but with sugar and tea prices bet:ter thanthose expected in the Plan, exports in current prices might increase at anannual rate of close to 8 percent between 1974 and 1980.

179. As was noted in ithe chapter on agriculture, the mission feels thatthe Plan estimate of 800,01)0 tons of sugar to be produced in 1980 may be onthe high side by about 30,000 tons. Allowing for an amount of some 40,000tons for domestic sales, about 730,000 tons would then be available forexport in that year. In 1974 (before the cyclone), exports were 666,000 tons.Under the terms of the agreement between the EEC and the sugar-producingcountries in Africa and the Caribbean and Pacific Ocean areas. Mauritiusreceived a. long-term guaranteed quota of 487,200 tons. This would leave anamount of sugar to be sold in the free market of about 243,000 tons. Whetherall of this can be sold in the free market is still an open question. Underthe 1977 International Sugar Agreement, adopted in October 1977, Mauritius

1/ Imports to GDP has rise.

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receIived a "basic export tonnage" for sales in the free market of 175,000tons. There is a possibility, however, of a larger quota later, if othermembers fail to meet their quotas.

180. A projection of the future sugar price is of course highly specu-lative. Mauritius' average export price has fallen from about Rs 3,110 perton in 1975 to Rs 2,400 per ton in 1976. For 1977, a further decline, toabout Rs 1,875 per ton, is estimated. The latter figure is the result ofsales to the EEC at about 14 US cents per lb. equivalent, and free marketsales at about 8.5 US cents per lb. The EEC price reflects the considerablelobbying power of European beet producers within Europe. The mission hasassumed that this price will move at least in line with general inflationin Europe, estimated at 7 percent a year. For projection purposes, themission has assumed that the free market price also increases at 7 percenta year, although this assumption may turn out to be somewhat conservative.Under these circumstances, Mauritius' average sugar export price may increaseto about Rs 2,300 per ton in 1980, which would be alsmot as high as in 1974.If, in 1980, a total of 730,000 tons is exported, sugar export proceeds maythen amount to about Rs 1,675 million.

181. Other agricultural exports amounted to about Rs 93 million in 1976.Of those exports only tea is likely to be significantly expansive, as aresult of both better prices and more tea becoming available from maturingrecent plantings. Tea exports may well double from almost Rs 30 million in1976 to Rs 60 million in 1980. In total, other agricultural exports maythen amount to some Rs 130 million in that year.

182. In the Plan, manufactured exports are projected to increase fromRs 146 million in 1974 to Rs 1,056 million in 1980, or about 40 percent ayear. In 1976, manufactured exports were Rs 312 million, which means thatan even higher growth rate was attained. For the future, however, the missionbelieves that a more conservative projection might be used, more roughly inline with the expected growth of the manufacturing sector generally. Arealistic estimate for manufactured exports would be a real growth rate ofsomewhat over 20 percent a year, which, combined with an expected inflationrate of 7 percent a year, would result in a figure of about Rs 900 million ofmanufactured exports in 1980. Taking into account some minor miscellaneousexports, total exports of goods are then projected to be about Rs 2,750 mil-lion (US$410 million) in 1980.

183. Imports. The Plan projects imports at 1974 prices of Rs 2,735million (US$410 million) in 1980, an annual rate of growth of over 10 per-cent. This compares with the overall GNP growth target of 6.5 percent andthe export growth we expect to be achieved of about 8 percent in real terms.Even in normal circumstances the import ratio seems to be on the high side.However, in the light of the sharp deterioration in the foreign reservesposition in 1976 and 1977 (international reserves fell from US$166 at theend of 1975 to US$46 in August 1977), the Government will almost certainlyhave to take measures to contain imports. Also, the lower earnings in thesugar industry (as compared to 1974 and 1975) will exercise a restraininginfluence. Measures to contain imports could include, for instance, anextra surcharge on import duties. In particular, the Government might wish

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to consider, on a continuing basis, measures to hold down the growth rateof consumer goods imports perhaps by selective increases of various taxes.

184. Assuming that the Government takes appropriate measures, themission projects imports of goods at 1974 prices to be about Rs 2,360 million(US$ 355 million). If the Government's measures are aimed at containingconsumer goods imports, this lower projection need not be at the expense ofimports of intermediate and capital goods.

185. In general import prices are expected to rise by about 6 to 7percent annually until 1980. On the base 1974 = 100, import prices were108.5 in 1976, and are ecpected to reach 155 in 1980. When growth of importvolume and price levels are compounded, the projected level of imports for1980 should be around Rs 3,660 million. This would mean a trade deficit ofabout Rs 900 million at current prices.

186. Tourism and Other Service Incomes. Over the last few years Mauritiushas established itself as a tourism country. The number of tourists increasedfrom 27,600 in 1970 to 74,600 in 1975. There was some slowing down in growthafter 1973. Reunion and South Africa supplied 64 percent of the tourists in1975 and Europe 25 percent. Investment in tourism was encouraged by Govern-ment through the generous provisions of the Development Scheme. These includethe granting of a 5 to 8-year tax holiday from corporate income tax as wellas personal income tax on dividends, and suspension of import duties forcapital goods. These concessions, together with the ready market for inter-national tourism in the early 1970s when most investments were carried out,promoted the construction of tourist facilities. In addition, Governmentcontributed to the equity of the first major, predominantLy Mauritian hotelcompany, which now owns 4 of the largest hotels. Government's contributionwas important in reassuring private investors. The availability of otherfinance from private domestic sources - mainly the profits of sugar millsor related industries channeled through holding companies - was also animportant factor in allowing investment to go ahead rapidly. There wererelatively fev constrainta, to new investment - coastal land could be obtainedfairly easily and, given Government's priority for the industry, littledifficulty was experiencedl in obtaining water and electricity supplies. By1977 existing projects will bring the number of beds to 5,000.

187. Gross earnings from tourism more than trebled during the 1970-74Plan period and were estinated by Government at Rs 112 million in 1974.The same year, the value added in hotels and restaurants was estimated atRs 35 million, and in 1975 at Rs 40 million, equivalent to one percent ofGNP. As a large share of value added represents returns to capital, andforeign participation in hotels has been quite high on average, a consider-able but unquantified portion of value added was in fact remitted overseas.Moreover, much of the equilpment and supplies for hotels was imported, aswell as the top management in some instances. It therefore seems likelythat the net foreign exchange earnings up to now were quite low - possiblyas little as 25 percent of gross earnings. In 1975 the balance on travelacccount amounted to about Rs 57 million and other current receipts to aboutRs 114 million; by 1980 nel: receipts on these accounts should amount to about

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Rs 250 million. According to the Plan, the increase in foreign investmentwill cause the investment income balance to fall from about Rs 15 million in1975 to negative Rs 75 million by 1980. Taking all these factors into account,the mission projects that the current account deficit will amount to aboutRs 400 million (US$60 million) in current prices. Projections for the longerrun are, of course, very speculative because of the uncertainties surroundingccmmDdity prices. Assuming that after 1980 sugar prices vill continue toincrease in line with general inflatlon, and also assuming that manufacturingexports and receipts from tourisa continue to be strongly expansionary, thecurrent account deficit might stay at about the same level as in 1980, or evendecline somewhat up to 1985.

188. Capital Flovs. In the past Mauritius has not been a large bene-ficiary of foreign investment, private or public. During the five yearsending in 1974 net long-term private investment vas only Rs 70 million andnet official long-term capital inflows only Rs 40 million. Of course underthe Export Processing Zone Act of December 1970, a real effort vas made toattract private foreign as well as domestic investment into export industries.Such investment is estimated at about Rs 33 million (about US$5 million) in1975, almost double the amount received in 1973. In 1975 disbursementsagainst official loans to Government were Rs 56 million (US$9.2 million).In addition, Government received Rs 40 million (US$6.6 million) in officialgrants which financed both capital investments and technical assistance.In total the gross inflow of long-term capital was therefore just over Rs 140million (US$21 million), or about 12 percent of gross fixed capital formation.In previous years its proportion was usually between 8 and 12 percent.

189. For the 1975-79 calendar year period net capital inflow of Rs 430million at 1974 prices is contemplated by the Plan after a buildup of Rs 730million of reserves. Less than 9 percent of Plan investment would be financedfrom net capital inflows. This might seem to reflect a conservative policy inrespect of foreign exchange reserves which amounted to Rs 1,136 (about US$170million) at the end of 1975 or about eight months of 1975 imports. However,the Hauritian balance of payments is very volatile and total reserves declinedto Rs 385 million by June 1977, or two months of imports.

196. While private foreign investment has been encouraged and repatri-ation of earnings and capital assured, the Government has negotiated officialdevelopnent assistance from diverse sources. 1/

1/ These have included the United Kingdom, France, the United States, thePeople's Republic of China, the Soviet lUmnion, C Astralia, theUropean Develapumt 1Ptd, the Eur o Investmet lak, vMnited &atirn Agencies, the African DevelLpmmt Balnk, and ali threeaffiliates of the Wnorlid 1Ir Group.

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191. Yet despite the variety of sources, the overall impact measured inactual flows has been relaitively small, and cannot be said to have played amajor role in financing Mauritian investments. But, judged from the balanceof payments projections cited above, it is expected to be more important inthe future.

192. Until recently public capital inflows originated almost entirely inthe United Kingdom. Prior to Independence, a number of grants were receivedfrom that country; some transfers continue, covering for example the cost ofsome public service pensions. Very recently, Mauritius also became eligiblefor development grants from the European Development Fund. Other grants werelargely in the form of food aid from USA, Australia, and the World FoodProgram. The United Kingdom was also the main source of loan capital until1974, when it disbursed US$4.2 million out of a total gross inflow of US$7.4million. In 1975 the preeminence of the United Kingdom was diminished asflows from other sources grew. The most important of these were multilateralagencies: the Arab Fund for Economic and Social Development (US$2.7 million),IDA (US$3.0 million) and the World Bank (US$4.1 million). The rapid increasein loan disbursements in 1975 reflected Government's considerable efforts inprevious years to extend and diversify the sources of external assistance.

193. Prospects for mobilizing external loans are relatively good. Mauri-tius has cultivated close working relationships with many bilateral and multi-lateral agencies in the past., and its historical, linguistic and culturalaffinities with a number of countries have enabled it to obtain favorabletreatment in many instances. In borrowing from external agencies, Mauritiusalso has the advantage that creditworthiness is not an overriding consider-ation.

194. Creditworthiness. Using conventional measurements, Mauritiusexternal debt is small and her debt service burden minimal. The disbursedpublic foreign debt amounted to US$46.2 million at the end of 1976. A furtherUS$86.7 million was committed but not disbursed.

195. Public debt service payments amounted to US$3.5 million in 1976 orabout one percent of export earnings. This compares with about 2 percent in1972-73. Even if all of presently committed debt were disbursed, the debtservice ratio would remain low by international standards, and not remarkablyhigh if exports declined in FL given year by, say, 25 percent. If these twocircumstances were to occur the debt service ratio would still be less than 4percent.

196. The element of risk in external borrowing by Mauritius is smalland present Plan projections appear conservative. Only a large persistentshortfall in sugar earnings of 20 percent or so would indicate a review ofexternal borrowing policies. The chances of such a persistent shortfallappear very small, given the well-organized nature of the sugar producers,their strong commitment to this crop, and the favorable marketing arrange-ments that have already been negotiated.

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197. For illustrative purposes, if commitments were to rise by 10 per-cent annually for the next decade, the total disbursed debt would be aboutUS$300 million by 1985. On non-concessional terms - an average maturity of12 years with 2 years grace and 10 percent interest - debt service wouldreach about US$50 million by 1985, equivalent to about 8 percent of probablyexport earnings. The debt service ratio could decline thereafter, dependingon the extent to which domestic savings can eventually substitute for externalcapital. In reality, however, foreign capital is likely to be available onless hard terms if Mauritius limits itself to reasonable amounts of conven-tional borrowing, and the debt service ratio is not likely to be such higherthan 5 percent by 1985.

198. Terms and Conditions for External Assistance. The terms of externalassistance have been relatively favorable in the past. The average grantelement in debt outstanding at the end of 1975 was around 35 percent (usinga 10 percent discount rate). The reason for the concessional terms is thatmany of the external loans and grants were committed prior to the increase insugar prices in later 1974, and therefore reflect Mauritius' more stringentcircumstances at that time.

199. Mauritius now appears to be in a position to manage somewhat harderaverage terms for borrowing if required to reach a projected disbursementlevel of public capital of about US$70 million in 1980 and US$105 million in1985. To reach this level of disbursements, commitments of foreign publiccapital, which averaged US$25 million a year in 1972-1976, would have to bestepped up to about US$85 million in 1980 and US$135 million in 1985.On the assumption that creditworthiness will not restrain external borrowing,the main problems the Government needs to tackle to ensure the availabilityof external resources are a sustained flow of carefully prepared, economicallysound projects, and continued good relations with external agencies. In thepast, project preparation has been weak in many sectors, with the result thatexternal agencies have been unable to commit their funds as quickly as theywould wish on the basis of the proposals and analysis submitted. Governmenthas made some use of consultants to prepare projects, but responsibility hastended to rest too heavily on the Ministry of Planning. In other instances,projects have been economically weak, showing low overall or financialreturns. A marked strengthening of project preparation capacity could berapidly achieved in Mauritius, where the administration is relatively well-developed, and properly trained and educated manpower at the highest levelsis not a binding constraint, as in many other countries.

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Chapter 6

Domestic Finance

200. The budget and guvcurnment financial system of Mauritius has beenrather more effective at achieving the social goal of effecting a reductionin consumption disparities rather than at mobilizing domestic savings forinvestment. Thus while current revenue has increased rapidly, reaching 30percent of GDP in 1975/76, budgetary savings have remained relatively modest.Only in 1972/73 and 1975/76 were there any sizeable contributions to thecapital revenue account. However, a substantial current deficit occurred in1976/77 and is in prospect for 1977/78. The revised budget estimates for1976/77 show an excess of recurrent expenditures over revenue of Rs 39million, whereas the estimates for 1977/78 reflect a deficit of Rs 52 million.Since the recurrent expenditures for 1977/78 are only slightly higher thanthe revised estimates for 1976/77, in the face of continuing rather highprice inflation, a serious question arises as to whether the 1977/78 esti-mates are not too, low. The possibility, of increased expenditures is noted inthe 1977/78 Budget Speech. No new taxes are being planned at present. Overthe last 6 years only about three percent of the Government's revenues havebeen made available for the capital budget. The current budget totals havebeen as follows:

Table 22:: SUMMARY GOVERNMENT CURRENT BUDGET(in millions of Rupees)

Average Average1964/65- 1970-71- Estimate Budget1966/67 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78

Current revenue 204 310 515 745 1,076 1,155 1,145Current expenditures 1/ 186 255 510 704 923 1,194 1,198

Budgetary Savings 18 55 5 41 153 -39 -52

1/ Current expenditure excludes expenditures of a capitaL nature, such astransfers to capital revenue, redemptions of loans and sinking fundcontributions, and expenditures for development relief work, which inthe course of 1976/77 were uransferred to the capital budget.

Source: Bi-Annual,Digest of Statistics and Budget Estimates 1977/78.

20i. betore turtner discussion ot tte tisca.L situation in Mauritius, abrief summary of the organization and normal financing of the public sectormay be useful.

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The Public Sector

202. In addition to the Central Government, which carries out normalpublic functions, there are eight local government authorities. 1/ Theyreceive grants and loans from the capital budget of the Central Government tofinance most of their capital expenditures. The sector also includes theMauritius Housing Corporation, the Central Housing Authority and the Develop-ment Works Corporation. The last one implements the Travail-Pour-Tous publicworks, employment-creating program. Public enterprises more closely relatedto economic services for the economy are: the Central Electricity Board, theCentral Water Authority, Rose Belle Sugar Estate, the Tea Development Autho-rity, the Agricultural Marketing Board and the Port Authority. It is evidentthat the private sector, particularly agriculture, has close ties with publicagencies, particularly on the marketing side. Rather unusually, civilaviation and telephone services are included in central government receiptsand expenditures, as is the post office. The major public financial institu-tions are the Bank of Mauritius (the Central Bank), the Development Bankand the Mauritius State Commercial Bank. The Cooperative Central Bank, thePost Office Savings Bank and the Sugar Insurance Fund may be classed asparastatal financial institutions.

203. The financial inter-relationship among the public sector organ-izations is quite complex and the line between recurrent and capital ex-penditure is not always clearly drawn. In the following paragraphs andtables, the mission has attempted to make a clearer distinction. For thatreason, the missions's figures sometimes deviate from the official budgetfigures. The latter figures, however, are given in the Statistical Annex tothis report. Local governments and the public corporations maintain separateaccounts and the Government does not publish consolidated data for the publicsector. Of course few local governments do this but it would be helpful ifall public and parastatal agencies conformed to the Government's fiscal year(ending June 30th).

Current Revenue

204. The revenue of Central Government and its principal componentsare given in Table 23. After more or less stagnating during the 1960s inline with the general level of economic activity, the expansion of revenue inthe 1970s has been particularly rapid. Between 1970/71 and 1975/76 itsaverage annual growth rate was 33 percent, while tax revenue grew even morerapidly at 36 percent annually. The fiscal burden (defined as the ratio ofcurrent revenue to GDP) increased from 23.5 percent in 1970/71 to 30 percentin 1975/76. In comparison, the fiscal burden in the mid-1960s averagedaround 22 percent. If taxes alone are considered, the burden rose from 18.7percent to 26.3 percent (18.6 percent in mid-1960s). By international

1/ Port Louis, Beau Bassin/Rose Hill, Quatre Bornes, Curepipe, Vocoas/Phoenix, Mahe Flacq, Pamplemousses/Riviere du Remport and Grand Port/Savanna. Rodrigues also receives transfers from the central budget.

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standards the more recent. figures are high, and for a aevelopLng country areeven remarkably so. Of course the large role of foreign trade, and parti-cularly sugar, makes revenue collection simpler than in most countries.Also the large proportion of transfer payments in current expendituresreduces the net burden of taxation on the economy as a whole and particu-larly on the lower income groups.

205. The data in the following table show that, over the years 1970/71-1976/77, the share of taxeas on international trade increased from 35.6percent to 38.5 percent o;- total revenue, while direct taxes rose from 20.1percent to 37.0 percent. There was, however, a shift away from import dutieswhich declined in importance from 28.4 percent to 27.7 percent of totalreceipts. As a percentage of imports, import duties fell from 16.7 percentin 1970/71 to 11.9 percent: in 1975/76, reflecting the elimination of dutieson most foodstuffs, unrevised specific duties, and significant duty freeconcessions granted to Export Processing Zone and other industries. The fallin importance of import duties was more than offset by an increased propor-tion of revenue from export duties from 7.2 percent in 1970/71 to 10.8percent in 1976/77. Other miscellaneous taxes declined in importance from23.6 percent to 13.7 percent of total revenue over the last six years.

Table 23: GOVERNMENT RECURRENT REVENUE(in millions of Rupees)

Average Average1964/65- 1970/71- Estimate Budget1966/67 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78

Income tax 54 62 122 191 389 373 262Other direct taxes 9 17 31 34 42 53 56

Taxes on inter-national trade 70 112 190 318 387 444 491

Excise duties 26 43 75 89 94 101 129Other indirect taxes 13 19 26 32 39 58 69

Total taxes 172 253 444 664 951 1,029 1,007

Receipts frompublic servicesand utilities 17 35 41 48 61 62 71

Other revenue 15 22 30 33 64 64 67

Total revenue 204 310 515 745 1,076 1,155 1,145

Source: Bi-Annual Digest of Statistics and Budget Estimates 1977/78.

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206. To obtain a basis for projecting tax receipts with changes in GDPand also with changes in the base to which particular taxes apply, themission calculated the elasticities of the main tax receipt categories to GDPand to the tax base to which the taxes apply. The results are shown in thefollowing table based on the 1970/71-1975/76 period.

Table 24: ELASTICITY OF TAX REVENUE, 1970/71 - 1975/76

Elasticity of Tax receipts Tax receiptsWith respect to: GDP at f.c. Tax base

Tax Tax Base

Direct taxes GDP 1.68of which:Individual Compensation employeesincome tax and income unincor-

porated enterprises 1.32 1.35

Company tax Other business income 2.20 1.65

Indirect-taxes 1.06of which:Import duties Imports 1.04 0.76Export duties Sugar Exports 1.68 1.35Excise duties Private Consumption 0.86 1.11

Total Taxes GDP 1.29

Source: Mission calculations.

207. The reason for elasticities greater than unity for, say, the per-sonal income tax is the progressivity of the tax rates whichserve to put more persons into higher brackets during an inflationary period.On the other hand, specific taxes show an elasticity of less than unityduring a period of rising prices. Naturally, direct taxes proved to be muchmore elastic than indirect ones, having a calculated elasticity of 1.68 withrespect to GDP as opposed to 1.06 for indirect taxes. Overall, the elasti-city of the tax system with respect to GDP is around 1.29. Given the presenttax structure of Mauritius, and without change in rates, tax receipts seemlikely to change almost 30 percent more than the GDP would. The relativelylow elasticity of indirect taxes could be increased somewhat by convertingspecific to ad valorem rates. Mauritius' exposure to cyclical factors in thesugar market makes such a change desirable. Another conclusion is that, exceptthrough the income tax, the Government has, at present, no way of capturing a

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larger proportion of the price of sugar when it rises to exceptionally highlevels. Until 1972 the sugar export tax was levied at a flat rate of 6percent of export sales. It was subsequently graduated so that the largeproducers pay 12 percent while small producers are exempt, but this involvedonly a slight increase in the overall average rate of taxation. In any case,the tax has no built-in mechanism which raises the tax rates as sugar exportprices increase. However, the export levy on sugar increased from Rs 46.8million in 1973 to Rs 124.2 million in 1975 and rates were reviewed onlyslightly and on an ad hoc basis.

208. The propensity to save is high among the large sugar estates andtherefore the present system should be advantageous to the private sector.On the other hand, if a sugar tax scale adjusted to price had been in effect,more of the excess demancl that resulted from the sugar boom could have beenused for capital expenditures in the public sector without the inflationaryconsequences that deficit: financing produced. In most countries dependenton a single export crop, a higher proportion of gross earnings accruesto the Government when the price of the crop is high than when it is low.We suggest that the Government give this subject further study. Of coursethe high elasticity of receipts from sugar to GDP reflects the increasingimportance of sugar in the Mauritian economy during sugar boom period.

209. A few other features of the tax system are woruny of note. Theelasticity of personal income tax receipts to wages and salaries is 1.35and reflects the fact that the highest marginal rate of tax is 75 per-cent, while at lower incomes no tax liability is incurred. Tax evasionis believed to be prevalent, particularly among traders and small business-men, and if these were included within the tax net, it is possible thatthe elasticity of personal. income taxes could be increased. Company taxhas had an elasticity of 1.65 with respect to business income. This highelasticity probably reflects the fact that company tax receipts wereextraordinarily low in 1970/71, a year in which many exemptions were granted.Excise duties show on elasticity of about 1.1 with respect to private con-sumption. In 1975/76, however, they still amounted to no more than 4.7percent of total private consumption. In fact, the only excise dutiesare those on alcohol and tobacco products. If necessary, it would appearthat there is scope for increasing taxes on consumptive expenditures. Infact, for imported alcohol and tobacco products, the duties have alreadybeen changed from specific to ad valorem levies.

210. For the future, Government's objective of a more even distributionof income is expected to result in a relatively faster growth of consumption,in which case the consumption-related taxes will take on increasing signifi-cance, while direct taxes cn income would be expected to yield relativelyless revenue as the distribution of incomes is reshaped. There may there-fore be a long-term need to improve the overall elasticity of the tax systemto provide adequate revenue.

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211. A final observation on government revenue is the relatively slowincrease in non-tax receipts, which includes earnings of various branchesof Government from sale of services, or from licenses, fees and so on.Many of the charges for these were not raised during the inflation of thelast five years, and as a result the share of non-tax receipts in govern-ment revenue declined from 20.7 percent in 1970/71 to 10.9 percent in 1976/77.As the level in the mid-1960s was around 16 percent, much of the improve-ments made in the late 1960s have therefore been eroded. However, recentlypower rates have been increased and increases in the rates of other utilitiesare being considered.

Current Expenditures

212. The current outlays of the Central Government grew about 5.2fold from 1970/71 to 1976/77 and as a percentage of GDP from 21 to about 30percent. Over this period the compound rate of growth of current expendi-tures was about 32 percent, as compared to about 28 percent for currentrevenues. The growth of public expenditure in real terms depends criticallyon the deflator one uses. Using the Consumer Price Index, which seems mostrelevant, the average annual increase in real expenditure was about 18percent during the first half of this decade. This compares with an increaseof about 8.5 percent in real economic growth.

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Table 25: GOVERNMENT RECURRENT EXPENDITURES I/(in millions of Rupees)

Average Average1964/65- 1970/71 Estimate Budget1966/67 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78

General services 26 44 70 92 129 - -Security 14 22 35 45 69 87 79Other 12 22 35 47 60 - -

Community Services 17 18 22 37 51

Social services 80 103 267 368 429 - -Education, health 44 68 111 147 214 307 329Food subsidies - - 107 157 121 101 100Other 36 35 49 64 94 - -

Economic services 18 24 36 51 90 - -

Agriculture 8 8 13 20 48 53 56Other 10 16 23 31 42 - -

Other expenditure 46 66 115 156 224 - -Financial obliga-tions 25 40 61 87 100 141 150Other 21 26 54 69 124 - -

Total 187 255 510 704 923 1,194 1,198

- indicates not available.

1/ Excludes expenditures of a capital nature; see footnote to Table 22.

Source: Bi-Annual Digest of Statistics and Budget Estimates 1977/78.

213. The sharpest increase in current expenditure was trom 1974/75to 1976/77 when the cumulatLve increase was about 70 percent over the two-yearperiod. In real terms current expenditures increased about 42 percent,or over 19 percent a year.

214. About 45 percent of Government's recurrent expenditure is directedinto social programs of various sorts, a pattern which prevailed as earlyas the mid-sixties. The type of expenditures within this total have,however, changed considerably. In the mid-1960s the most important socialexpenditure was social security payments (14.6 percent of current expendi-ture) followed by education (12.9 percent) and health (9.0 percent). By

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1975/76 these proportions had changed to 7.6 percent, 13.6 percent and 9.6percent, respectively, while a new category of expenditures for food sub-sidies claimed 13.1 percent of current expenditure. Many of the socialexpenditures contribute towards a significant redistribution of effectiveincomes. The total amount of social expenditure is around 12 percent of GDP,and of this most represents a transfer of resources between income groups;much of Government's revenue is derived from the wealthier segments of thepopulation and the sugar industry, while all citizens regardless of incomereceive benefits from the social programs. For example, there is freeuniversal primary and secondary education, and health services are availableto all at nominal charges. Food subsidies, 1/ paid by Government for rice,flour and potatoes, do not differentiate between richer and poorer consumers.Of course the poor, as a proportion of their total income and expenditures,benefit much more than the well-to-do.

215. Although the subsidy scheme for rice and wheat flour consumptionhad been in operation for a number of years, no payments by Government werenecessary until 1973/74 when Rs 107 million - equivalent to 20 percent ofthat year's budget - was required because of rising imported rice prices.The following year the payment was Rs 157 million, equivalent to over 21percent of the budget. The amount of the subsidy reflected almost entirelyan exceptional boom in world prices for rice, and subsequently price reduc-tions have occurred; rice and flour subsidies dropped to Rs 101 million in1976/77. It was fortunate for Government that the exceptional earnings fromsugar were available to finance the high cost of imported food.

216. As is apparent from Table 25, social expenditures have increasedmuch more than other outlays during the 1970s in relative terms. The useof the budget as a vehicle for redistributing income was emphasized by theGovernment. This was partly effected by means of subsidization of foodprices and partly by other social transfers. The portion of current ex-penditures going for subsidies and other current transfers increased fromabout 24 percent in 1973 to about 40 percent in 1976.

217. The share of expenditures with an immediate impact on the productivecapacity of the economy, such as the maintenance of roads, water supply,communications and agriculture, fell markedly. Whereas the proportion ofexpenditure on these services was 16.5 percent in the mid-1960s, the propor-tion declined to only 13.3 percent in 1975/76.

218. It is possible to contend that the relative decline of spending onthese economic services reflected lack of need because Mauritius was quitewell-endowed with infrastructure, given the economy's slow growth in the

1/ It was originally contemplated to place a surcharge of 10 percent onthe income tax to match the subsidies but this was dropped. Additionalad valorem taxes up to 25 percent were imposed on luxury imports.

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the 1960s. When growth began to occur in the 1970s, however, the alloca-tions to the economic services of Government were not increased in propor-tion to other expenditures partly because these were still considered ofsecondary importance. The declining share of economic services may not havebeen appropriate when viewed in a longer-term context. The water supplynetwork has tended to fall into disrepair, sanitation services are no longerentirely adequate, a greater amount of resources spent on agriculturalextension could have helped the small planters improve their sugar yieldssubstantially. Delays in maintenance have increased the cost of repairs whenultimately made.

219. Wages and salaries constituted 44 percent of current expendituresin 1973 and 57 percent iTI 1976. The Government, since the 1960s, has triedto keep salaries abreast of the cost of living, but nevertheless up to 1974real earnings probably declined somewhat. However, since mid-1973 therehave been several increases in government salaries, which amounted to realgains in purchasing power. Between 1970 and 1976 the average yearly earningsof monthly-paid government workers rose from Rs 5,100 to Rs 11,700, oralmost 130 percent; those of daily-paid workers rose from Rs 1,700 to Rs4,250, or 150 percent. By comparison, the consumer price index rose by 104percent over the same period. The number of public employees rose from28,000 to 41,000 between 1971 and 1975, or from about 20 percent to 24percent of employment in Larger establishments (in September of each year).The Government probably had little alternative to raising the pay of govern-ment workers during this period of inflation. However the problem of pre-venting the government wage and salary bill from perpetuating inflation asthe economy enters a period of retrenchment is likely to confront authoritieswith a difficult choice.

Capital Expenditure

220. The capital budget is the instrument under which the Government'sinvestment program in the Plan is carried out. The program includes bothprojects implemented by the regular ministries and those carried out byparastatal bodies. It is necessary to distinguish between direct expendituresby the regular ministries and funds loaned to such institutions as theDevelopment Bank, the Central Electricity Board, the Tea Development: Autho-rity, the Central Water Authority and others. The following data includeboth categories.

221. By delegating authority to various agencies, Government freeditself from some of the constraints inherent in public service. For thoseagencies which generated their own resources wholly or in part, it alsogave a greater degree of financial autonomy in controlling their own develop-ment. Government did, however, retain considerable control over the pricingpolicies of public agencies and in some instances deferred price increases.Other agencies, such as the Development Bank or the Port Authority, haveachieved greater autonomy and are run along commercial lines. AlthoughGovernment's capacity to prepare and implement projects was limited, theapproach adopted of delegating authority to the parastatals was by and

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large successful. Major investments were undertaken in the port, in tele-communications, and in rural development (general upgrading of the economicand social infrastructure in the villages), while an increased volume ofloans to public corporations was made.

Table 26: GOVERNMENT CAPITAL EXPENDITURES 1/(in millions of Rupees)


Agriculture, ruraldevelopment 8 17 51 65 78 95 96

Development, reliefworks 12 22 39 52 65 87 85

Transport, tele-communications 7 12 34 24 58 74 76

Power 5 3 2 13 15 16 41Education, health 7 4 8 14 22 21 61Housing, sewerage,water 14 9 19 28 40 60 149Development Bank 4 5 16 24 38 39 21Island of Rodrigues 2 4 5 12 23 31 31Other 8 23 52 29 64 67 75

Total 67 99 226 261 403 490 635 2/

of which:Direct expenditures 51 81 170 191 303 368 432Loans 16 18 56 70 100 122 203

Fixed investmentdeflator(1970/71=100) 84 114 178 224 262 290

Total at1970/71 prices 79 85 127 117 154 169

1/ Excluding subscriptions to international organizations and IMF repurchaseobligations, which are normally contained in the "Capital Budget";including the portion of expenditures for Development and Relief Worksthat during 1976/77 was transferred from the recurrent to the CapitalBudget.

2/ Excluding Rs 40 million "Reserve" provision.

Source: Capital Budget 1977/78, Estimates 1977/78, and Bi-annual Digestof Statistics.

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222. As can be seen from the table, the Government's capital expen-ditures increased very rapidly from about Rs 100 million a year in thebeginning of the 1970s to Rs 490 million in 1976/77. Part of this increasewas eroded by inflation, but even allowing for this (by deflating capitalexpenditures with the fixed investment deflator), the figures show animpressive 15 percent average annual increase in real terms between 1970/71and 1976/77. This compares favorably with the near-stagnation between themid-1960s and the beginning of this decade. In spite of this sharp increase,certain bottlenecks have cleveloped. From 1970 to 1976 private investmentsincreased in real terms even faster than public investments; namely, by28 percent a year on the average. As a result certain mismatches haveoccurred between private investment and supporting public investment, suchas in water and power supply, and transportation facilities. In general,the constraint to even faster growing public capital expenditures wasnot so much a financial one as a physical one. The preparation and implemen-tation capacity of the various ministries and other government agencies couldnot be increased fast enough to fully cope with the demand for publicinvestment.

223. The proportion ofE loans in the capital expenditure of Governmenthas been around 25 percent since the mid-1960s. During the 1970s therehas been a marked shift in the direction of such borrowing. Whereas previouslythe principal recipients were the housing authorities and the ElectricityBoard, increasing amounts were channeled to the directly productive sectorsof the economy through the Development Bank which served both industry andagriculture, through the Tea Development Authority which undertook a majorsmallholder tea project, and an exceptional loan to the new Mauritius HotelsGroup for hotel construction. The rechanneling of loans in this way made animportant contribution to growth in these sectors. In the total of capitalexpenditures, the share of direct productive expenditures (agriculture,Development Bank) and those directly supporting production (transport,communications, power) has increased from 37 percent in the beginning of the1970s to 46 percent in 1976/77.

Overall Budgetary Financing

224. As mentioned in para. 200, current budgetary savings have notplayed a major role in the financing of capital expenditures. Over the years1970/71-1976/77, a total of Rs 114 million was transferred to capital revenue,which helped finance 7 percent of capital expenditures in those years.Internal borrowing in the form of bond issues has always been the major sourceof capital revenue, financing up to 60 percent of capital expenditures.Recourse to foreign borrowing and grants has been rather limited: about 20percent of capital expenditures. Up to 1975/76, there were rather modestoverall surpluses or deficitS, which added to/or subtracted from the Govern-ment's reserve position. In 1976/77, however, when there were no currentbudgetary savings, and long and medium-term domestic borrowing had declined,there was a large overall budget deficit of almost Rs 300 million, and theoutlook for 1977/78 is not much better. These deficits, of course, have ledto a sharp increase in short-term domestic credit, thereby contributing toinflationary pressures.

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Table 27: SUMMARY GOVERNMENT BUDGET FINANCING(in millions of Rupees)


Current budgetarysavings 1/ 18 55 5 41 153 -39 -52

Loan redemptions andsinking fundcontributions -5 -23 -21 -26 -42 -40 -45

Subscriptions tointernationalorganizations andIMF repurchaseobligations - -4 -22 -2 -47 -9 -9

Capital expenditure 2/ 67 99 226 261 403 490 635

Financing gap 54 71 264 248 339 578 741

Capital revenue 3/ 43 117 130 412 264 281 461of which:Grants 4 8 3 7 2 5 4Foreign loans 13 13 38 53 37 115 242Local loans 9 91 84 306 208 150 200Investment income I - 2 7 8 7 8Miscellaneous 4/ 16 5 3 39 9 4 7

Overall surplus (+)or deficit (-) -11 +46 -134 +164 -75 -297 -280

l/ As defined in Table 22.2/ As defined in Table 29.3/ Excluding transfers from the current budget, which are part of "current

budgetary savings".4/ Includes drawings from the IMF and SDR allocations.

Source: Capital Budget 1977/78, Estimates 1977/78, and Bi-annual Digestof Statistics.

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225. The 1977/78 budget has been prepared on a conservative and perhapsrather optimistic basis as far as recurrent receipts and expenditures areconcerned. Both are expected to be at about the same level as in 1976/77(Table 22). Nevertheless, the overall deficit is expected to be Rs 280million. Even with the hoped for sharp increase in foreign loan disburse-ments, which of course will depend upon more rapid implementation of foreign-aided projects, there is no doubt that the inflationary impact from fiscaloperations will continue. Over 1976/77 and 1977/78, almost Rs 600 millionof the Government's reserves will be monetized, which amounts to almost30 percent of Mauritius' money and quasi-money stock as of January 1977.

226. The budgetary developments in 1976/77 and 1977/78 make it verydoubtful whether the capital expenditures under the new 1975-1980 Plancan be financed as anticipated by the Government. The Government indicatedthat about half the propo0sed investment program of Rs 4,865 million (at1974 prices) would be public investment. About one third of this wasexpected to be financed by direct budgetary savings, an additional thirdby domestic borrowing in the form of bond issues, and the remaining third byexternal loans and grants from various bilateral and multilateral agencies.As it looks now, budgetary savings, if there are any at all, will be muchless than expected. While in theory the scope for budgetary savings iswithin Government's direct control, in practice it will require politicallydifficult measures, such as increasing taxes and containing recurrentexpenditures.

227. With budgetary savings lower than expected, the mobilizationof the remaining financing items will need to be stepped up by apprcpriatedomestic and external policies. The Government sets forth a number ofinitiatives which can be undertaken to improve the mobilization of domesticresources for the public sector, mainly centered around contractual andinstitutionalized savings. As regards mobilizing external assistance,Government anticipates no ctifficulty, though it clearly sees a need forproject preparation and negotiation procedures to be speeded up. Duringthe first Plan the Government was able to place long-term bonds with thebanks. Whether this will be repeated during the present Plan perioddepends on a number of internal and external factors. We will return tothis subject in the last chapter when the Plan as a whole is discussed,and after we have reviewed the principal macro-economic aspects of theproblem.

Financial Operations of Local Authorities

228. Local authorities consist of 5 municipalities and 3 districtcouncils. There are also 98 village councils. The urban local authoritiesand municipalities raise about one quarter of their financial needs bylocal taxation (mainly on housing) and the remainder is derived from trans-fers from the Central Government and are included in its budget. In 1974the local governments raised revenues of Rs 9 million and received transfersof Rs 38 million from the Central Government. Thus their gross receiptswere Rs 47 million. In 1975/76 this was estimated at Rs 45 million andin 1975/76 budgeted at 55 miLlion. On the expenditure side, current expendi-tures are about two thirds and capital expenditures one third of the total.

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Money and Credit Policies and Performance

229. Monetary Movements and Policy. During the five years ending in1975 Mauritius experienced a very rapid monetary expansion during which thestock of money and quasi-money increased over 4.2 times. The impetus wasprimarily from a fourfold increase in foreign exchange reserves and secondlyfrom a 4.7 fold increase in domestic credit.

230. The period of greatest acceleration in the expansion was 1973through 1975, when the average export price of sugar rose by over 300 percentand foreign assets by 180 percent. Credit to both the public and privatesectors also expanded rapidly. The changes can be seen in the followingtable.

Table 28: MONETARY SURVEY, 1970-77(in millions of Rupees; end of period)

June1970 1971 1972 1973 1974 1975 1976 1977

Foreign assets (net) 280.8 268.3 407.1 397.2 769.7 1136.0 620.1 368.8

Domestic credit 233.5 354.7 382.9 625.1 995.2 1110.6 1755.1 2,089.4

Government (net) 23.6 43.7 26.4 79.7 400.9 364.0 597.9 736.4Private sector 209.9 311.0 356.5 545.4 504.3 746.6 1157.2 1,353.0

Money 229.6 261.6 376.3 466.6 783.7 993.2 1098.6 1,036.1

Quasi-money 231.6 273.8 301.2 413.9 802.0 953.4 985.3 1,077.5

Other items (net) 53.1 87.6 112.5 141.8 179.2 300.0 291.3 344.5

Source: Statistical Annex, Table 7.1, and IFS.

The inflationary pressures were most acute in 1974, when imports doubled andconsumer prices increased by 29 percent. About 35 percent of consumer sexpenditure was on imported goods in 1974 and as import prices rose rapidlyat the same time, it is difficult to isolate international inflationary trendsfrom domestic pressures. However, the following indices suggest that only apart of the overall price inflation can be accounted for by imported priceincreases. Although the initial impetus to inflation came from rising importprices, domestic factors also contributed.

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Table 29,: CONSUMER AND IMPORT PRICE INDICES(1970=100)

Consumer Adjusted Import ImportPrice Consumer Price Index Price IndexIndex Price Index /1 All Goods Consumer Goods

1971 100.3 100.3 108.1 110.81972 105.7 105.7 116.7 121.11973 120.0 129.3 157.4 162.31974 154.9 186.6 247.3 278.51975 177.7 199.5 279.9 ri.a.1976 (Dec.) 205.9 n.a. n.a. n.a.

/1 Adjusted by assuming that the consumer price of rice followed theimport price in 1973--75, instead of being subsidized by Government.

Source: Statistical Annex, Tables 7.8, 4.5, 4.7.

231. Without the rice subsidies paid by Government, it is estimated thatthe consumer price index would have been some 32 percentake points higher in1974 and 22 points higher in 1975. After adjusting the consumer price indexto compensate for these subsidies, and allowing for the increase in pricesaccounted for by imports, it is estimated that the prices Df domesticallyproduced consumer goods and services rose by about 50 to 5:5 percent from 1970to 1974. Up until 1974 the major credit expansion occurred for the privatesector but in that year the government deficit was nearly as important as thegrowth of foreign assets in contributing to the increase ii money supply.

232. Between 1973 and 1975, Government took several measures designedto reduce the liquidity of the banks and simultaneously hold down credit.The minimum cash reserve requirement of the commercial banKs was increasedsuccessively from 6 perceni: to 8 percent and then to 12 percent of deposits,so that part of their liqui.dity was immobilized.

233. Commercial banks rarely held substantially more than 12 percentreserves, indicating that almost all the excess reserves of the banks wereremoved from the monetary circuit by this measure. On the other hand, thegrowth of reserves was still adequate to permit the high growth of credit,whereas an even higher cash reserve requirement might have introduced somerestraint.

234. At the same time a ceiling was placed on the growtn of credit. Theceiling was 15 percent growth from one year to the next, b..t a number of im-portant exclusions were made, which allowed overall credit to increase morerapidly. Firms in the Export Processing Zone were not affected by the creditrestrictions in line with Government's long-term priority of promoting

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industrial growth. Credit to Government was also not included within theceiling. On the other hand, credit to importers, traders, and other heavyusers of short-term credit was squeezed, so that one effect of the creditlimit was some reallocation of credit away from short-term users towardslong-term borrowers. Another important omission in the definition of creditwas the failure to include rediscounted sugar bills in the total in 1973and 1974. The Government subsequently withdrew the rediscount exemption.In fact, the sugar industry was so liquid it is doubtful whether extensiveuse would have been made of the rediscount privilege in any case. The numer-ous gaps in the definition of "credit," however, reduced the effectiveness ofthe credit restrictions.

235. Given the importance of the export sector in the Mauritian economyand the Government's long-term development objectives, there was probablylittle that monetary policy could have done to stabilize the economy duringthe period up to 1975. It was unfortunate that the budget deficit was allowedto grow as much as it did in 1974. Greater elasticity-in government revenues,particularly a larger increase in the tax on sugar, would have been highlydesirable in 1974 and 1975. It should be noted, however, that there were twospecial, extra-budgetary levies on sugar exports in 1974 and 1975, in totalamounting to Rs 275 million, which are earmarked to help finance the construc-tion of a bulk terminal in the harbor of Port Louis.

236. After 1975, while monetary expansion continued, the expansion in1976 was only 7 percent or one third that of the previous year; and this de-spite the fact that domestic credit expanded by over 56 percent, as comparedwith only 11.6 percent in 1975. The reason, of course, was the dampeningeffect of the draw down of foreign reserves by 45 percent in 1976, consequenton the 37 percent fall in the export price of sugar. The Government iscurrently engaged in examining both its recurrent and capital expendituresin order to reduce or defer spending of low priority. It is important thatthis exercise should result in substantial economy if the budgetary deficitis not to lead to serious inflationary and balance of payment pressures.

237. One field in which almost immediate action might be taken isin the interest rate structure. Although some minor adjustments have beenmade in recent years, it is apparent from the following table that bothdeposit and lending rates are very low in the face of a 10-15 percent rateof inflation that has prevailed over the last three years.

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Table 31: SELECTED INTEREST RATES, 1974 AND 1976(in percentages; end of period)

Deposit rates 1974 1976

Post Office Savings Bank 4.0 4.0Commercial banks: savings accounts 4.0 4.0Commercial banks: fixed deposits

3 months 4..) 4.56 months 4.75 4.75

12 months 5.75 5.7524 months 7.0 7.536 months 7.5 7.75over 36 months 7.75 7.75

Lending rates

Bank of Maur:itius: discount rate 6.0 6.0 1/Commercial banks: advances 8.75 9.0Public notariles: mortgage loans 10.0 11.0Mauritius Housing Corporation 8.5 8.75Development Bank of Mauritius 10.5 10.5

1/ The discount rate was raised to 7 percent in March 1977.

Source: Bi-Annual Digest of Statistics, December 1976.

With end of the sugar boom, this rate of inflation shoul- --bside but thenominal rates shown above are likely to produce negative real rates for sometime to come. A selective increase in the interest rate structure would bedesirable.

238. Also while there has been a considerable differentiation of ratesbetween short- and long-term deposits, when reviewed in terms of the rateof inflation, this is inadequate to induce depositors to pledge their moneyfor a longer period if the money market grows tighter. The rate for 3 monthsdeposits is 4.5 percent, while for over 36 months the rate becomes 7.75percent annually. When these rates are adjusted for income tax, the gap ismuch smaller. For those paying the highest rate of tax (75 percent), thenet difference between long and short-term rates is less than one percentannually, which is unlikely to stimulate the longer-term end of the market.

239. The mission has made the following estimates of the real rate ofinterest, both in terms of external funds and their equivalent in foreign ex-change if the depreciation of the Rupee is taken into account. The tableshows the combined effect of the nominal interest rate avaLlable in Mauritius,the inflation in Mauritius and the depreciation of the Rupee. In short, itis the real return on funds deposited in Mauritius expressed in foreignexchange equivalent.

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Table 31: CALCULATION OF REAL INTEREST RATES(in percentages)

Real Real Interest Rates inDeposit Rate Rate of Interest Foreign Currency

Year (12 months) Inflation Rate (Rs) Depreciation Rate (SDR)

1971 5.25 0.3 4.9 0.1 5.01972 5.5 5.4 0.1 -4.3 -4.21973 5.5 13.5 -7.0 -10.7 -17.01974 5.5 29.1 -18.3 -5.4 -22.71975 5.75 14.7 -7.8 -6.2 -13.51976 5.75 10.0 -4.75 -5.2 -12.8

1971-76 (ave) 5.55 12.7 -6.4 -5.7 -11.7

Sources: Statistical Annex, Tables 7.7, 7.8, and 4.10.

240. Based on these features of the interest rate structure, it wouldseem that Mauritian policy is in need of careful review, if it is to beconducive to financial resource mobilization for longer-term commitments.Government has, however, put forward a number of arguments in support oflow rates, or at least in favor of not changing existing rates substantially.The arguments are, briefly, that there is little evidence that low rates havediscouraged savings in the past, that the level of deposits is not substan-tially determined by the level of interest rates, that higher interest chargeswould eventually be reflected in the cost of living index, that world ratesare irrelevant because of Mauritius' small need for external capital, and,finally, that direct credit controls would be more effective than the useof interest rates as a monetary tool.

241. These arguments may well have been partially valid for a periodsuch as the first half of the 1970s, when boom sugar conditions prevailedand level of all deposits -- demand or savings -- was rising rapidly. Forthe future when a more vigorous official approach to savings mobilizationmoney supply and credit will be necessary, the role of interest rates isless readily deniable. Following the drop in sugar export prices in 1976,the rate of growth of incomes is likely to be slower, and thus the capacityto save reduced.

242. The 9 percent ceiling of commercial banks' lending rate was raisedto 10 percent early in 1977. The limit was designed to prevent usury. How-ever, the deposit-lending rate relationship was such that, while a satisfac-tory return can be made on short-term lending, long-term loans are generallyless profitable to the banks under present circumstances. For example, therate paid on savings deposited for 3 months is 4.5 percent, leaving room foran adequate Bank margin if a short-term loan is made at 9.0 percent. Onthe other hand, if the same bank receives a 3-year deposit, it must pay

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7.75 percent, while stiLl being unable to charge more than 11 percent if itrelends the deposit on a long-term basis. There is therefore little incentivefor banks to encourage long-term transactions. For the future, Governmentmight consider limiting the scope of its interest rate restriction in sofar as it applies to long-term loans, if it wishes to see an improvement inthis aspect of resource mobilization.

Monetary and Credit Institutions

243. In respect of the institutional structure for mobilizing financialresources, for its size Mauritius has a remarkable range of financial in-termediaries, yet there are important gaps in the institutional structure.Despite the number of institutions and the wide use of bank accounts (it isbelieved that 9 households out of 10 have a bank or other sort of financialaccount), the provision of services is concentrated in the wealthier areasaround Port Louis, Curepipe and Rosehill, while the potentially high savingsof the rural areas are not adequately tapped.

244. The Mauritian economy is almost fully monetized and, despite itssmall size, it has a wide range of banking and other financial institutions.At the center is the Bank of Mauritius (the Central Bank) which acts underthe policy guidance of the Ministry of Finance. In addition, there are 10main types of financial and quasi-financial institutions. These are: (i)nine commercial banks; (Li) the Post Office Savings Bank; (iii) the Develop-ment Bank of Mauritius which extends medium- and longer-term credit to agri-culture and industry; (iv) the Mauritius Commercial Bank Finance Corporationwhich also extends longer-term credit; (v) 3 development companies, one ofwhich the Mauritius Deve:Lopment Investment Trust operates as a mutual fund;(vi) the insurance companies providing life and other coverage; (vii) theSugar Insurance Fund; (viii) the Mauritius Housing Corporation; (ix) theMauritius Cooperative Central Bank, and (x) several pension funds, princi-pally that of the sugar industry. The sugar insurance and pension fundsare the largest of the financial intermediaries.

245. With this group of institutions the role of mouccary policy couldbe very significant in the economy but of course is constrained by the open-ness of the economy and particularly by its very heavy dependence on foreigntrade in sugar. Changes in liquidity which flow from shifts in the balanceof payments situation strain the capacity of monetary and fiscal authoritiesto maintain stability in domestic demand and prices. The following summaryis largely drawn from Annex IV.

Commercial Banks

246. The number of commercial banks has increased from 5 to 9 since1968. However, the Mauritius Commercial Bank is dominant. As noted earlier,commercial credit grew rapidly during the first half of this decade, infact about three times as fast as the price level. Most bank credit isostensibly for short-term activities, though, as elsewhere, Mauritian banks

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roll over short-term credit to meet longer-term needs. In terms of sectoraldistribution, about 60 to 65 percent of the total is for trade, commerce, andindustry. Although no separate figure is available for manufacturing, creditto enterprises under the heading "other industries," which includes manufac-turing and service industries, grew very fast from 14 percent of the totalin 1970 to 51 percent in 1975. Agriculture, including all aspects of sugarproduction, had only modest credit needs in the recent past because of thesugar industry's extreme liquidity, and absorbed less than one tenth of thetotal credit. However, with the decrease in sugar prices, credit needs ofthe sugar industry have picked up sharplyin 1976. In view of the substantialamounts of credit made available, it is likely that priority financing needsin most other sectors are being met. In all sectors, however, small enter-preneurs have considerably more difficulty in obtaining credit than largerfirms, as elsewhere.

Table 32: SECTORAL DISTRIBUTION OF COMMERCIAL BANKS' CREDIT(in millions of Rupees; end of period)

1970 1974 1976

Sugar industry 73.3 31.9 170.5

Other Agriculture 3.2 26.8 32.7

Trade 49.2 133.1 221.1

Other industries 27.5 257.1 454.6

Public bodies and Government 9.3 7.8 27.1

Financial institutions 0.8 3.0 23.3

Personal and other 30.6 61.5 115.5

Total 193.9 521.2 1,044.8


247. Apropos the comment above regarding the liquidity of the com-mercial banks and its dependence on foreign, particularly export, trade,Table 33 shows the primary liquidity position of the commercial banks, whichdeclined sharply between 1970 and the beginning of 1973, but since thenit has risen rapidly, so that by December 1975 it equaled 14 percent. Thisreflects the result of the higher incomes from sugar.

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Table 33: THE LIQUIIDITY POSITION OF THE COMMERCIAL BANKS, 1970-75

Pr imary Primary Liquidity asYear LiAuidity /1 Total Assets Percent of Total Assets

(December)

1970 47.5 360.3 131971 31.5 447.4 71972 55.8 589.5 91973 70.6 827.9 91974 150.1 1,377.7 131975 232.0 1,628.6 141976 195.8 1,750.8 11

/1 Primary liquidity i: cash-in-hand, balances at the Bank of Mauritiusand balances with banks abroad.

Source: Bank of Mauritius, Annual Reports.

248. The sugar boom, culminating in 1975, had an important effect onthe distribution of commercial bank credit as among sugar, other agriculture,and other industries and manufacturing. The share of sugar fell from 22percent of commercial bank credit in December 1973 to only 6 percent ayear later. During the same interval other agricultural borrowers increasedtheir share from 2 percent to 5 percent, while the secondlary industriesincreased theirs from 28 percent to 47 percent. With the decline in the priceof sugar in 1976, the industry's resort to commercial bank credit increased to16 percent of total bank credit in December 1976.

Post Office Savings Bank

249. As in other countries, the Post Office Savings Bank attracts mostlysmall deposits, averaging only Rs 550 at the end of 1975. There is a ceilingof Rs 20,000 upon individual accounts. Accounts with the Savings Bank havedrawn interest at 4 percent per annum for the last severai years, althoughthere is now a scheme to offer prizes, thus, in effect, increasing rates byabout one percentage point.. It does not offer fixed-term iccounts.

250. Although the interest rate paid by the Savings Bank is equal tothat paid by the other deposit-accepting institutions, it has grown moreslowly than the others, with only a 75 percent increase ii deposits overthe four-year period December 1970 to December 1974. Moreover, over thelast few years, rapid increases in agricultural laborers' learnings do notappear to have been reflected in any marked increase in deposits with it.One explanation may be the failure to offer fixed-term deposits.

251. In order to increase the savings mobilization oi une Savings Bank,which is fulfilling a usef;l role in introducing small savers to the finan-cial system, more flexibility should be introduced.

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Development Bank of Mauritius

252. The DBM plays a role similar to that of development finance compa-nies elsewhere, except its field is somewhat broader, encompassing agricultureand tourism as well as industry, large and small. It was set up in 1964 butgrew slowly until 1970. From 1970 to 1973 the total assets of the Bank grewby 36 percent and during the following year by 60 percent.

253. The Development Bank raises its funds from three main sources:the Bank of Mauritius; foreign loans, notably from the World Bank Group, butalso from the Kreditanstalt fur Wiederaufbau; and from deposits. Under theDevelopment Bank of Mauritius Bill (1972), the Development Bank is empoweredto issue bonds and debentures. However, so far, the Government has limitedits flexibility in raising longer-term funds. Because of their volatility,deposits are not a satisfactory substitute for its own bonds as a means ofraising capital for long-term commitment.

254. The Development Bank lends to areas which would otherwise experi-ence difficulty in obtaining financing. It administers a small lendingscheme, granting loans at the concessionary rate of 2-1/2 percent, andprovides equity and debt financing for projects which have experienceddifficulty in obtaining bank loans or which could not find finance withappropriate terms. The provision of equity finance is especially crucialto new entrepreneurs because, unlike established firms or sugar estates,new enterprises are likely to experience cash flow problems in the firstfew years after investment if they obtain debt financing from the banks.Thus, the Development Bank's importance is greater than is indicated eitherby its total assets (which in 1973 amounted to 8 percent of total assetsof commercial banks) or by its flow of funds to finance fixed capitalformation (which amounted to only one to 3 percent of total fixed capitalformation between 1970 and 1974). Total loans amounted to Rs 54.2 millionat the end of June 1975.

255. The earlier stagnation of total outstanding loans occurred becausethe increase in loans to the manufacturing sector was offset by the steadydecline in credit to agriculture, reflecting the Development Bank's policyat that time of de-emphasizing sugar (except for diversification efforts),while concentrating on employment-creating industrial projects. As a resultof this policy, and following the introduction of the Export Processing Zone,most of the new loans were to manufacturing enterprises. The share of indus-trial loans in the total loans outstanding rose from 52 percent at the endof June 1972 to 84 percent at the end of June 1975.

256. The Government recently announced its intention to set up a UnitTrust Scheme to be temporarily managed by the Development Bank. The Trustis expected to begin operations with a capital of Rs 5 million, to be pro-vided in equal proportions by the Government, the Bank of Mauritius, theState Commercial Bank and the Development Bank. Units will also be soldto individuals. The Trust will further assist the mobilization of smallindividual savings, and will also help achieve the goal of a 30 percent

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minimum domestic participation in export processing enterprises throughinvestment of the Trust's resources in them.

Other Longer-Term Lending Institutions

257. The country's largest commercial bank, the Mauritius CommercialBank, together with Lloyds Bank of the UK, has a subsidiary, the MauritiusCommercial Bank Finance Corporation, which specializes in long-term lending.It is partly financed by fixed-term deposits of one year!or more. TheCorporation has diversified away from sugar, since its inception in 1967,into industry such as agricultural processing and textiles. At the end ofJune 1976 its total assets were Rs 77 million, or less than 7 percent ofthose of the commercial banks.

258. Also in the longer-term financing business are three developmentcompanies, two of which are financed with shares which are said to be heldmainly by larger sugar estates. The other's shares are quite widely held.The funds of these companies are invested largely in Export Processing Zoneand Development Certificate industries. The assets of the 3 companies areestimated to be less than 3 percent of commercial bank assets. As vehiclesfor the small investor to funnel his funds to industry, these institutionsshould be encouraged.

Other Financial Institutions

259. The insurance companies require no special comment. They are 16in number, 10 foreign and 6 domestic. The latter dominate the business.The Sugar Insurance Fund is rather unique, since it has vaid benefits onthe basis of the current market value of the crop rather chan a guaranteedminimum price. Thus in a sense it is an insurer against more than merelyphysical losses at a predetermined price. It reinsures both in Maauritiusand abroad. This is necessary in view of the hazards of large scale lossesfrom cyclones or drought in a given year. It is one of the largest fundsin the country and also has access to the Bank of Mauritius' refinancingfacilities and, of course, to outside reinsurance funds. In view of theerratic demands upon it, and some difficulties in obtainiag reinsurance atreasonable rates, the Fund1 has felt it necessary to keep very liquid.

260. The Mauritius Housing Corporation was set up in 1963 to providehousing finance, particuLarly to lower income groups. With the passage oftime, it has moved cautiously into normal mortgage financ>. Reflecting theconcessionary nature of much of its lending, the Corporation has been forcedto tely largely upon funds raised outside the market. In consequence, muchof its funds have come from foreign aid and the Government. At the same time,it has broadened its sources.

261. The Housing Corporation, the Sugar Pension Fund and the insurancecompanies are almost the only institutional sources of mortgage financingin Mauritius. Annex IV suggests that the intermediary role of the HousingCorporation be increased through a guarantee device that would extend access

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to mortgage money through the participation of individual and institutionalinvestors.

262. The Mauritius Cooperative Central Bank, registered under the Coop-erative Societies Ordinance and owned by the 400 or so cooperative societiesin Mauritius, operates along very similar lines to a commercial bank. Itraises its funds largely from the deposits of the public but was recentlygiven a line of credit by the Central Bank at a concessionary rate of 2 per-cent. In addition, the Sugar Insurance Fund deposits a part of its premiumreceipts with the Bank. The Cooperative Bank extends a larger share of itscredit in the form of medium-term loans to finance agricultural developmentand housing than do the commercial banks and, reflecting its ownership, mostof its loans are channeled through the cooperatives. It has had an impres-sive rate of growth paralleling the cooperative movement in general. Itsassets increased 16.5 percent from early 1970 to 1974.

263. A number of industries, as well as the government sector, providepension schemes for their employees. Unfortunately, data is available onlyfor the pension fund of the sugar industry, which is the largest and bestestablished. Assets of the Sugar Industry Pension Fund at the end of 1974were about Rs 93 million, a figure which ranked it fourth in size after thecommercial banks, the Sugar Insurance Fund and the insurance companies. ThePension Fund covers 36,000 workers, from fieldworkers to executives, and isan important source of mortgage financing.

Cost of Finance Capital in Mauritius

264. In para 240 above we remarked on the low nominal and, during thepresent inflationary period, the negative real interest rates in Mauritius.A further word on this subject is appropriate after our brief review of theinstitutions involved in the Mauritian money market.

265. Until 1969 the bank rate in Mauritius was linked with the UK bankrate, and the interest rate structure of the island reflected British ratherthan Mauritian financial and monetary conditions. However the Bank ofMauritius' move to follow an independent course has not resulted in a real-istic interest rate structure and the mission welcomes the Government's ini-tiative to have the problem studied by an independent expert.

266. The discount rate was reduced to 6 percent in July 1970 and hasnot been changed until March 1977, when it was raised to 7 percent, exceptthat, as part of the March 1974 credit control measures, the Bank introduced apenalty rate of 12 percent on direct advances to commercial banks above acertain level. In September 1974, the commercial banks raised their commerciallending rate, but the prime rate remained unchanged. On the whole, depositsrates changed little between September 1970 and August 1974. In that monthand in June 1975, most fixed deposit rates were increased. However thedeposit rate on savings accounts has remained unchanged at 4 percent per annumsince 1968, though the amount of interest exempt from tax has been increasedand in June 1976 stood at Rs 1,500.

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267. he reluctance of the authorities to raise institutional ratesof inrerest in Mauritius centers on the fact that low rates have not pre-vented the generation of substantial savings, such action would make govern-ment borrowing more expensive, and the not unfamiliar feeling that a rise inthe cost of money, like ;prices of goods and services, is cost-push infla-tionary. Direct controls over the supply of credit are preferred and said tobe more effective.

268. Savings have inideed been quite buoyant but whether this will betrue after the drop in sugar prices in 1976 remains to be seen. Low in-terest rates of course fEvor borrowers as against lenders and thus has aredistributional aspect. However the redistribution may not be in the direc-tion desired, since most depositors in savings institutions are people ofmodest means, whereas the borrowers are more likely to be in the upper incomebrackets. Low interest rates of course also invite an outflow of capital.As for the direct cost-push inflationary aspects of higher interest rates,this may have an element of truth in the very short-run but the statisticson price behavior and credit expansion in recent years refute it as a longer-run proposition. Credit ceilings have not been as effective as they mighthave been if buttressed by a realistic interest rate policy after the mannerof Taiwan ana South Korea.

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Chapter 7

Economic Growth, Investment, and Savings

Growth

269. During the period 1964 - 1970, the Mauritian economy grew slowlyand erratically, largely in response to fluctuations in prices and productionof sugar. In real terms, GDP increased less than 0.5 percent a year. Theeconomy showed little tendency to diversify as manufacturing (including sugarmilling) dropped from 17.5 percent to 15 percent of real GDP. In agricultureit seemed that all possibilities for increasing the area under sugar wereexhausted and, in any event, since the Commonwealth price of sugar fellfor 5 of the 10 years of the period and ended the decade over 9 percentbelow the beginning, there was little incentive to increase productionby more intensive cultivation or better inputs. Also, it implied that theterms of trade deteriorated and that, as a result, real gross domestic income(GDY) declined by 0.6 percent a year between 1964 and 1970. This situationwas doubly unfortunate since, as discussed in Chapter 4, the 1960s was thetime when children born in the post-war baby boom entered the labor force,which grew about 2.8 percent a year so that increased unemployment wasinevitable. Also though gross capital formation in the 1960s was about 17percent of GDP, over a quarter of this investment went into housing andanother 20 percent into transport and communications. By comparison, agricul-ture's share was less than 11 percent and manufacturing's 13 percent.

270. In contrast with this rather gloomy record, the first six years ofthe present decade were a period of considerable progress in spite of themajor misfortune of the 1975 cyclone which destroyed over a third of the sugarcrop in that year. The growth rate of real GDP was 8.7 percent per annum overthe period 1970-76, compared with a 1971-1975 Plan target of 7.3 percent.Moreover, even though the sugar price fell in 1976, there was a considerableimprovement in the terms of trade over the period as a whole, as a result ofwhich real GDY grew at 10.4 percent a year between 1970 and 1976. Meanwhile,there was a considerable slowing down in the growth of the population and thelabor force, and unemployment was reduced considerably (see Chapter 4).

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Table 34: GDP AND GDY AT 1970 PRICES, AND REAL GROWTHRATE1S OF GDP, GDY, EXPENDITURES AND SAVINGS

1970 1971 1972 1973 1974 1975 1976-----------(in millions of Rupees)-----------

GDP at market prices 1,048 1,093 1,184 1,326 1,442 1,455 1,688Adjustments for changesin terms of trade - -5 48 -3 283 318 165

GDY at market prices 1,048 1,088 1,232 1,323 1,725 1,773 1,853

(Average annual % changes)

1964-1970 1970-1976

GDP at market prices +0.3 +8.1GDY at market prices -0.6 +10.4

Private consumption -0.9 +6.8Public consumption +1.3 +10.0

Fixed investment -5.6 +23.4

Domestic savings +3.0 +32.4


271. Two main reasons exist for this turn-around in the fortunes of theMauritian economy between these two periods. The first is the redirectionof investment toward more productive activities. In the 1970-76 period,33 percent of total investment went into agriculture and manufacturing,compared to 24 percent in the lower program of the 1960s. To a certainextent, however, it can be said that infrastructuraL investments in the 1960slaid the basis for this emphasis on productive investment in the 1970s. Thelatter was also prompted by the expansion of domestic demand.

272. The high level of demand in the 1970s ensured that most investmentsin manufacturing for the domestic market worked at full capacity, while thoseinvestments geared towards export manufacturing are known to have producedhigh returns. Other productive investment in such sectors as tourism (about8-10 percent of total fixed investments) and construction (3 percent), alsocontributed to increased productivity. On the other hand, the share ofless immediately productive investments in the'services and the socialprograms were proportionate:Ly less, while demand for their products rose,enabling better use to be made of past investments. Public utilities, for

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example, claimed only 6 percent of total fixed investment, but managed toexpand production on the basis of earlier investments made in the 1960s. Theincrease in the share of private investments was probably symptomatic of thetrend towards more directly productive investments.

273. This redirection of investment alone of course would not have beensufficient. The second stimulus to domestic production was the unprecedentedhigh level of preferential and world market prices for sugar in the latterpart of the Plan period. This raised the value of the sugar crop from Rs 376million in 1970 to Rs 1,820 million in 1974, almost a five-fold increase ascompared with only a 21 percent increase in the actual output of sugar. Theshare of sugar in GDP at factor cost rose from 27 percent to 53 percent overthe same period, though declining to 45 percent in 1975 because of the cyclone. As real export prices rose about 30 percent between the late 1960s andtoday, and are unlikely to fall in real terms in future, it is clear that thecontribution of sugar to GDP has been much increased on a permanent basis.The 1976 crop returned to its normal growth pattern.

274. The growth of real incomes - and aggregate demand - were reflectedin a rapid supply response on the part of producers. There were in factbarely any constraints to expanding output in all sectors except agricultureduring the early 1970s. Labor was initially reasonably plentiful, industryhad a margin of unused capacity, the domestic market grew extremely fast andnew export markets were opened up. In agriculture, output was constrainedby shortages of land, and the long gestation period of investments designedto increase yields. After a few years despite the incentive to increaseproduction in the sugar industry as well as than in other economic branches,rapid expansion proved impossible. Towards the end of the Plan period therewas evidence that the spare capacity had been exhausted in many other indus-tries, and shortages of human skills, water, land, and electricity began tohamper continuing expansion.

275. The 3.8 fold increase in the EEC price of sugar between 1973and 1975 produced a marked difference between the relative contributions ofthe various sectors to GDP when measured in money as compared to real terms.The following table shows that, whereas agriculture declined from 36 percentto 21 percent of GDP from 1970 to 1975 in real terms, it increased in thelatter year to 44 percent in money terms.

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Table 35: GROSS DOMESTIC PRODUCT, 1960-1975(in million of Rupees)

1975AL960 1970 1975 _ in 1970 prices)

% of % of % of % ofAmount Total Amount Total Amount rotal Amount Total

Sugar production 222 32.7 245 26.9 1240 40.1 186/2 14.1Other agriculture 55 8.1 83 9.1 134 4.3 94 7.1Manufacturing 44 6.5 73 8.0 294 9.5 218 16.6Construction 52 7.7 48 5.3 217 7.0 119 9.0Public utilities 14 2.1 29 3.2 69 2.2 57 4.3Governmentadministration 30 4.4 51 5.6 140 4.5 76 5.8

Services /1 262 38.6 383 42.0 996 32.2 566 43.0

GDP at factor cost 679 100.0 912 100.0 3090 100.0 1316 100.0

/1 Includes transport, communications, trade, commerce banking, education,health, tourism, and other services.

/2 A cyclone caused major crop damage in 1975. Without the cyclone, thevalue added in sugar production would have been around Rs 280 million,and the share of sugar in the total would have been around 18 percent.

Source: Statistical Annex, Table 3.1, and mission estimates.

276. In manufacturing the Government's most important initiative wasthe Export Processing Zone scheme discussed in Chapter 3. Largely becauseof the growth of manufactured exports, manufacturing growth averaged over17.5 percent a year from [970 to 1975. This compares with 20 percent forconstruction, 14.5 percenit for public utilities and 12 percent for trade.

Savings and Investment

277. The domestic propensity to save increased with the higher incomesgenerated in the first haLf of the 1970s. Whereas the saving rate was about13 percent in 1964-1966, it reached 36 percent in 1974. In 1975 and 1976,in part owing to the drop in sugar prices, savings were closer to 30 percentof gross domestic income. As the economy grew in the 1970s, the distributionof income became somewhat less even (see Chapter 4). This greater concen-tration, together with the overall rise in incomes, led to a significantincrease in the proportiort saved.

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Table 36: THE USE OF RESOURCES(in % of gross

domestic income)

1964-66 1970-72 1973 1974 1975 1976

Current Prices

Private consumption 71.8 69.2 60.6 52.4 55.0 55.0Public consumption 15.3 15.6 12.7 11.2 13.0 15.5Fixed investment 17.1 15.3 25.9 23.3 33.3 36.7Changes in Stocks -1.1 0.1 3.3 6.2 -2.5 2.6Domestic Savings 12.8 15.2 26.7 36.4 32.0 29.5

1970 Prices

Private consumption 71.7 70.9 66.1 57.2 60.3 59.5Public consumption 15.3 16.4 14.8 13.4 14.0 15.6Fixed investment 16.8 15.2 22.9 20.8 25.1 26.4Changes in Stocks -0.8 0.0 3.1 3.1 -1.0 1.3Domestic Savings 13.0 12.6 19.1 29.3 25.7 24.9Statistical discrepancy 0.2 -2.3 -4.6 - 0.6 4.0

Source: Statistical Annex, Tables 3.5 and 3.6.

278. Over the last decade, domestic savings have, on the whole, financedinvestment in Mauritius; and, as mentioned in connection with the balance ofpayments in Chapter 5, external capital movements have played a minor role.The main impact of foreign capital in both private and public sectors hasbeen to encourage diversification and stimulate Mauritian investors to seeknew uses for their own funds; it has thus been more of a catalystic naturethan an important source of investment financing. This was, until 1976, anoutstanding feature of Mauritius' economy and may stand in contrast with thelikely developments in the rest of the 1970s as explained in para. 334 below.

279. As compared to the relatively low level of per capita incomes, theinvestment rate in Mauritius is rather high; this may reflect the structuralaspect of an economy dependent on one commodity export. It is also linkedto the relative concentration of incomes, savings, and investment decision-making. The average ratio of fixed capital formation to GDP was 17 percentin 1964-66 and 23.5 percent in 1970-76. The investment rate increased from15 percent in 1970-72 to close to 37 percent in 1976. The trends in thegeneration and use of resources are shown in Table 36.

280. In the mid-1960s, about two thirds of total capital formationtook place in the private sector though in recent years the share of privateinvestment was around three quarters. This shift in the composition ofinvestment largely reflects the boom conditions of the 1970s which increased

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private incomes very rapidly. In the first six years of. this decade privateinvestment grew by about 28 percent annually in real terms, while publicinvestment increased about 15 percent. The lower growthirates for the lattermay partly reflect temporary lags, as public sector projects generally takemore time to prepare thall private investments and as public savings generatedby suddenly higher proceeds depend on the previous year's income tax base.

Public Investment, 1971-75

281. Despite the increase in total gross investment over the 1971-75 Planperiod (Table 37) , public investment fell 30 percent short of the Rs 660million projected in the Plan. The major short falls were in transpor-tation and electric power.

Table 37: PLANNED AND ACTUAL PUBLIC INVESiTMENT(in million of Rupees)

Actual, 1971-75Planned Constant % of Current1971-75 Prices /1 rarget Prices

Roads and bridges 30.3 9.7 (32.0) 12.3

Ports and airports 92.1 35.9 (38.9) 54.7

Water and sewerage 95.8 45.9 (47.9) 63.1

Telecommunications 19.4 12.1 (62.4) 18.7

Electricity 40.7 14.8 (36.4) 23.0

Infrastructure,Subtotal 278.3 118.4 (42.5) 171.8

Other publicinvestment 382.0 339.6 (88.9) 525.6

Total publicinvestment 660.3 458.0 (69.4) 697.4

/1 Deflated by the general investment deflator, but adjuslted so that 1971 =

100. The fiscal year deflator is the average of that for the precedingand following year: 1972/73 = 122.8, 1973/74 163.2, 1974/75 - 199.6.

Source: 5-Year Plan, 1975-1980.

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282. Delay in the final planning as well as in the execution of projectsrather than any financial constraints were chiefly responsible for thisshortfall. Many of the projects to be undertaken had long gestation periodsbetween the time the project was identified and the time when payments forcompleted work on contracts were actually made. The main spur of payments forpublic investment only became apparent late in the Plan period and spilledover into the current Plan. For example, a long period was required toprepare a masterplan for the harbor area before work could begin; similarlythe planning of a proposed new airport is also taking a considerable time,and, in fact, work is still not underway. A related factor is that certainkey ministries do not have planning units capable of making necessary revisionsin consultant's plans and studies when it comes to the implementation stage.The following paragraphs review some of the sectoral problems and accomplish-ments of the last Plan and expectations for the one now in progress.

283. Internal Transport. The increase in private and corporate incomesfrom sugar coupled with relatively easy credit enabled-a far wider section ofthe population to become vehicle owners or, in the case of companies, to ex-pand their fleets in the last few years. Moreover, the establishment of newemployment opportunities was accompanied by a 13.4 percent annual increasein the use of public transport for the journey to and from work, and as muchof the increase in employment occurred in the already crowded strip runningfrom Port Louis to Curepipe, the growth in traffic was greatest in this area,resulting in a considerable degree of congestion around Port Louis. To re-lieve the congestion, a 10-mile expressway connecting Port Louis and Phoenixwas completed in 1974. Practically no other investments were undertakenduring the previous Plan period to improve internal transport.

284. During the 1975-80 Plan, it is proposed to improve the existingnetworks and construct new roads in and out of Port Louis. In addition toRs 115 million (at 1974 prices) of public investment, about Rs 125 million ofprivate sector investment is contemplated for new buses, trucks and taxis.

285. Air Transport. The airport at Plaisance in the southeast is theonly one on the island and handled 2,341 flights in and out of 1975, or anaverage of 6.4 per day. Aircraft movements increased by 21.6 percent annuallybetween 1970 and 1975, largely in response to the growing volume of touristtraffic, though freight traffic also grew substantially. In addition toincoming and outgoing traffic, some airlines make use of Mauritius' locationas a refueling stop on the Africa-Australia route. Twelve internationalcarriers offer 25 scheduled flights to Mauritius weekly, as *ell as a numberof charters. Recently the runway and parking facilities at Plaisance wereenlarged to accommodate jumbo-jets. Navigational aid improvements werealso introduced. However, flight operations are made difficult by the loca-tion of the airport between the mountains and the sea, and are hazardousunder adverse weather conditions and at night. The 1976-80 Plan envisagesthe construction of a new airport in the north. Agreement was reached withthe People's Republic of China for financing and construction, at a costequivalent to Rs 180 million at 1974 prices. However, it now appears that

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this amount would be insufficient and the project is now being reviewed. Afurther Rs 20 million will be spent in improving and extending the existingairport at Plaisance to accommodate the growth of traffic in the immediatefuture.

286. The Port. A1L surface imports and exports are shipped throughPort Louis, the country's only commercial deep-water port. Port Louis hasan excellent natural harbor and is well protected from prevailing storms bythe surrounding mountains. In 1975, Port Louis handled a total of 1.67 mil-lion tons of cargo. The volume of freight grew by an average of 9 percentannually from 1970 to 1973, but grew by only 1.8 percent in 1974 and declinedby 14 percent in 1975 whten sugar was destroyed by the cyclone. Although thevolume of exports and imports is more or less evenly matched, sugar exportsand other merchandise (mainly imported) are handled separately, necessitatingthe use of separate facilities. Sugar is at present carried in sacks to theport, lightered out to cargo ships where the sacks are opened and the sugaris then transported in bulk. General merchandise is often imported in verysmall lots, which makes for difficulties in operating the port efficiently.Under the 1971-75 Plan, a major expansion of the port facilities was begun;responsibility for the port administration was also recently transferredfrom Government to a financially autonomous Marine Authority.

287. Investment in the port is estimated at Rs 290 million for the1975-80 Plan period. As a bulk sugar terminal is expected to be financed bythe sugar industry directly, public investment would amount to Rs 115 million,for the construction of .3 deep water general cargo berths, cargo handlingequipment, transit sheds, and a number of other related facilities. The newlycreated Marine Authority will be responsible for the implementation of theseinvestments.

288. To assist in formulating transport policy, Government is settingup a transport unit within the Ministry of Works to serve in an advisorycapacity.

289. Electricity Su-ply. Mauritius has no known fossil fuel resources.Despite the large annual rainfall, the hydroelectric potential of the islandis very limited because of small catchment areas, lack of sites combiningsuitable storage and good heads. Most electricity is diesel-generated bythe Central Electricity Board (CEB), though the sugar estates meet theirown needs during the harvest season by burning bagasse, and even sell smallamounts to the Central Electricity Board. The total installed capacity is103.2 MW as follows:

CEB - Diesel 62.4 MWCEB - Hydro 25.7 MWSugar Estates 15.1 MW

Total 103.2 MW

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290. The Central Electricity Board was established in 1952, as the resultof a merger of various electricity undertakings; since 1956, it has been thesole supplier of public electricity on the island. Over the past decade,its sales have more than doubled, while the number of consumers increased byabout 50 percent. Growth was particularly rapid in industrial consumption.Government also gave high priority to rural electrification. More than 80percent of the population has access to electricity and the few villagesstill without electricity were to be electrified by the end of 1977. Domesticuse accounts for 40 percent of consumption, and industrial and commercial usefor 46 percent. The balance is for irrigation and miscellaneous uses.

291. The 50 percent increase in installed capacity during the past decadedid not match the growth of power demand. Because of this, Government isprojecting a rapid increase of electricity investments, which are plannedat Rs 210 million over the 1975-80 Plan period. The main emphasis is to beon new generation capacity, though some improvements to the transmission anddistribution network are also to be undertaken. Two small hydro electricitygeneration schemes are planned to take advantage of existing potential, butmost investment is to be in diesel generators.

292. Water Supply. Mauritius has relatively high average annual rain-fall. There is no overall shortage of water resources but the more easilydeveloped supplies have already been harnessed for irrigation, piped watersupply and hydro power. The piped water supply systems have not been sys-tematically maintained for many years so that leakages and wastage average50 percent of deliveries. Furthermore, relatively little new supply hasbeen provided in recent years. The result of these two factors has beeninadequate supplies in some parts of the island at a time when demand forwater for industry is growing fast.

293. To meet the growing long-term demand for water, Government hasprepared a 20-year program of works, of which investments totaling Rs 190million are to be undertaken in the 1975-80 Plan period. In the immediatefuture, a leak detection survey is expected to help provide a substantialpart of the additional water supply until the development of groundwatersources and storage reservoirs can make additional supply available.

294. The improvement of water supply, however, faces major financialconstraints. A Central Water Authority was created; it is expected amongother things, to plan and execute the program of investment, but tariffsfor treated water and for irrigation are so low that they do not even coverthe operating costs of the Authority. In 1975/76, it received a governmentsubsidy of Rs 18 million, an amount greater than the Authority's revenue fromwater sales.

295. A sector study by the Bank recommends, inter alia, a study by theGovernment to indicate how water resources should be allocated and changesdetermined.

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Construction

296. The public and private construction sector dCCUUflLeU Lor about 7.5percent of GDP in 1976, or Rs 260 million. Value added by the sector declinedin the 1960s, then grew at an average annual rate of 20 pe±rcent from 1970to 1975. Like other productive activities meeting the needs of the domesticmarket, the most significant factor determining this growth aggregate level ofdemand, which in turn was largely determined by the value of the sugar crop.For example, the number oE residential buildings approved by local governments,which is a good indicator of the level of demand, rose from 1,525 in 1970 to3,775 in 1975, an increase of 148 percent. In the later years of the Planperiod, the construction iLndustry had to undertake increasing amounts ofinvestment to increase its capacity, though in the event shortages of skilledmanpower proved to be the greatest bottleneck.

Table 38: CONSTRUCTION APPROVALS

Residential Non-residential

No. of permits Thousand sq feet No. of permits Thousand sq feet

1970 1,525 1,308 209 4591971 1,685 1,710 183 5801972 2,006 2,201 197 5191973 2,623 2,673 332 9051974 2,918 3,021 288 2,1871975 3,775 3,749 269 9121976 4,141 4,123 314 543


297. The sector consists of about 15 larger contractors who togethercarry out most of the larger projects, the Development Works Corporationwhich handles a wide range of smaller public works, and a large number ofself-employed contractors or small firms which expand or contract their levelof activity according to the state of the market. The few large firms under-taking the larger projects occupy an oligopolistic position in the market, andduring the last few years when the level of demand has been high, have notsubstantially competed with each other. The Development Works Corporation,by its commitment to labor-intensive methods, has not compe.ed with thelarge firms undertaking civil works.

298. The construction Lndustry had a total labor force estimated at27,000 in 1975 (including those Development Workers engaged in construction,the self-employed, and the small contractors). About half vf the labor forceof the registered firms (10 or more workers) comprised skilled workers. The

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industry recently began to run into difficulties because of shortages ofskilled workers, and responded in part by organizing its own training andin part by offering higher wages for skilled workers. Both these measures -but especially the latter - raised construction costs by 46 percent in 1973and 51 percent in 1974.

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Chapter 8

Devei'opment Strategy and Needs, 1975480

Accomplishments of the 1971-75 Plan

299. Despite the shortfall of over 30 percent in public investmentand the lack of substantial public savings, the Plan that ended in mid-1975must be adjudged a success. This is already clear from the accounts of theagriculture and manufacturing sectors in Chapters 2 and 3, and from thegrowth investment and saving performance discussed in Chapter 7. Tea,tourism and export processing were added to the traditional agriculture andimport substitution activities of the country. Most of the indicators ofeconomic progress have already been mentioned in this report but, as back-ground for our discussion of the goals for the 1975-80 Plan, the more impor-tant ones may be repeated here. The target rate of economic growth was 7.3percent (a rate that would double GDP in 9-1/2 years) and estimates indicatethat over 8 percent was achieved. Barring the cyclone disaster of 1975 thegrowth would probably have been about 10percent. Investment, originallyprojected at 20 percent of GDP, reached 25 percent by the closing years ofthe Plan. Perhaps most important, the high rate of unemployment of 16percent was reduced to about 11 percent, as employment, excluding make-workprojects, increased on average by 5.5 percent annually which exceeded thenumber required to reach the employment target of 52,000 new jobs to becreated over the Plan period. Employment in the larger establishmentsincreased about 43,000. A positive factor outside the country's controlwas the quadrupling of sugar prices, which produced about a 17 percentimprovement in gross domestic income in both 1974 and 1975.

300. The sudden rise, of incomes produced an unexpected demand-led boomfor both consumer and capital goods, and industries whicn had previouslystagnated embarked on a period of expansion. Many industries operatingunder the Development Certificate Scheme were able, for the first time,to make full use of the investments they had undertaken during the 1960s,and a rapid increase in the supply of manufactured consumer goods occurred.At the same time, there was an increased demand for new Development Certifi-cates, as entrepreneurs became aware of the increased sal!es opportunities inthe domestic market, and this was reflected in an investw4nt boom, much ofit financed by funds earned in the sugar industry. There was a high demandfor locally produced foods, especially the better grades, and the supply ofthese expanded at a pace unimagined in the 1960s, despite the lack of spe-cial government programs or incentives. Even the export-oriented manufac-turing and tourism sector,, although demand for their products was independentof the boom conditions wit:hin Mauritius, benefited from the boom because thewindfall of the sugar industry partly financed factory and hotel investments.Demands for new housing aLso increased dramatically, and Government builtnew public buildings. Thits caused a surge in construction activity which

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stretched the building industry to its limits, and sometimes beyond. Infra-structural services such as electricity and transport became heavily strained.

301. The developments of this period which qualified this successfulperformance were principally in the field of domestic finance and are closelyrelated. The first was the Government's failure to mobilize sufficient finan-cial resources to outstrip recurrent expenditures and generate much real pub-lic savings. The second was the monetary expansion which contributed toan inflation rate of about 15 percent a year. Artificially low and usuallynegative interest rates were a factor in this credit expansion. The excessliquidity that has been created by overly expansive monetary operations,when combined with the large build-up of foreign exchange reserves, whichcontinued through 1975, made the economy and particularly the balance ofpayments highly vulnerable to the drastic reversal in the terms of trade andthe continuing monetary expansion that occurred in 1976.

Main Objectives of the 1975-80 Plan

302. In 1976 the Government issued a new Five-Year Plan for Social andEconomic Development for the period from July 1, 1975 to June 30, 1980. ThisPlan gives priority to the basic objective of its predecessor of achieving"full employment" 1/ by 1980. Short-term public sector employment is tocontinue until it can be replaced by permanent employment. The labor forceof 322,000 projected for 1980 is 82,000, or 34 percent, above the mid-1974level. The Plan envisages an increase of employment from 240,000 in 1974to 316,000 by 1980, an increase of about 4.7 percent a year (5.6 percent ayear for the Plan period proper). This would leave about 6,000 withoutwork, the frictional unemployed. The other main parameters of the Plan area growth of real GNP of 6.5 percent a year, and gross savings and investmentrates of 24 and 27 percent of GNP, respectively.

303. The Plan contemplates gross capital formation in 1974 rupees ofRs 4,865 million over the five calendar years 1975-79. The remainder of thisreport will be concerned with two major questions and two ancillary ones.The former are: first, will investment of this magnitude be likely to generatethe 76,000 new jobs projected for the Plan period and, second, will it pro-duce the Plan growth rate of 6.5 percent per annum? The first ancillaryissue is how can the Government's wage and income redistribution policiesbe expected to affect the job and growth targets; the second is to what

1/ According to the Plan document this means that about 2 percent of thelabor force may be out of work at any time because they are betweenjobs, seeking their first job or unemployable. A somewhat higher per-centage of structural or frictional unemployment would be more realistic.

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extent may foreign capital inflow be required to supplement domestic savingsto accomplish the investment contemplated? Answers to questions of thistype must, perforce, be only approximate, particularly in a country so largelydependent on a single export crop for both foreign exchange and domesticincome generation.

Employment Generation

304. Viewed in terms of the simple relationship bet --. l forma-tion and employment, that is assuming no structural change in the economyor in the composition and job-generating propensity of investment, the76,000 new jobs for the nel Plan appear feasible. Both measured in 1974prices, the gross capital Eormation anticipated in the 1975-79 period ofRs 4,865 million is almost double the Rs 2,450 million of the 1970-74 period.Therefore the gross investment/labor ratio could increase by over 36 percentand the Plan target for new employment still be met.

305. While such a calculation provides some assurance that the employ-ment targets of the Plan are not too unrealistic, more analysis at both themacro and the sector level is necessary. In respect of the former it isnot only gross capital formation but the growth in total output that willdetermine incremental emplcyment. During 1970-74 GDP at factor cost in 1974prices is estimated to have increased by about Rs 882 million. This wouldindicate a gross incremental capital/output ratio of about 2.8 and an incre-mental labor/output ratio of 58 jobs per million Rupees of additionaL output.During the 1975-80 Plan the new employment would have to bc 54 jobs per mil-lion Rupees of additional output. The incremental output i's projected to beconsiderably more capital-intensive in the new Plan as impl:ied above. Theincremental capital/output ratio is, in fact, projected as about 3.5 accord-ing to mission estimates. Therefore, the increase in productivity per newworker in the new Plan as compared with the old of about 7 percent (4 + 58)does not seem unreasonable. On the basis of these observations and assumingthat the growth targets of the new Plan are met, the incremental employmenttarget is not overly optimistic.

306. Turning to the sector breakdown of the employment projections, thePlan indicates that manufacturing is intended to be the leading sector in thenew Plan in terms of relative rates of growth in output and employment. Thisis clearly indicated in Table 39.

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Table 39: EMPLOYMENT AND OUTPUT ANNUAL REAL GROWTH(percent except last column)

1971-75 Projected 1974-80

Employment Output Employment Output New Jobs

Agriculture /1 4.9 5.4 1.3 2.0 6,000

Manufacturing 18.1 17.1 17.0 /2 20.6 /2 47,000

Infrastructure 15.3 /3 25.8 /3 7.9 11.6 21,500

Services 10.2 /4 9.4 /4 3.5 6.6 17,500

Others - - - - 2,000

All sectors(weighted average) 6.6 6.5 4.7 6.5 94,000 /5

/1 Includes sugar and tea mills, forestry and fishing.

/2 Includes mining and quarrying.

/3 Construction, utilities, transport and storage.

/4 Trade, restaurants, hotels, finance, and other services.

/5 This is the estimate for 1974-80. The 76,000 referred to above is forthe Plan period proper.

Source: Table 3.1 of 5-Year Plan, 1975-80, and Central Statistical Officefor 1971-75 data.

307. From the standpoint of the efficiency of investment in producingjobs, the investment in manufacturing in the 1970s has compared very favorablywith other sectors. Manufacturing claimed a fifth of investment resourcesin 1971-75, but contributed a third of incremental employment over the sameperiod. On the other hand, a tenth of investment went to agriculture, butthe sector provided only a twentieth of the new jobs. Tourism's share ofinvestment resources was approximately in line with its incremental contribu-tion to employment. Thus, insofar as Government's main employment-creationefforts were focused on the manufacturing sector, this choice has been jus-tified. The employment potential for services seems to have been underesti-mated by the planners. In the first Plan, the increase in employment grew 69percent as fast as the increase in output, whereas it is expected to increaseonly 53 percent as fast in the 1975-80 Plan.

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308. Rs 2,390 milLion or nearly half of the total investmernt planned for1975-79 is to be in the public sector. Rs 1,090 million of this will be ininfrastructure. 1/ These are or can be quite labor-intensive investments.The rest of planned public investment is mainly in agriculture, servicesincluding tourism, houE;ing and manufacturing. The following table indicatesthe sectoral breakdown in the Plan document.

Table 40: CAPITAL FORMATION, 1975-79(in millions of Rupees at 1974 prices)

Public Privalte Total

Agriculture /1 335 570 905

Manufacturing /2 200 705 905

Infrastructure 1090 545 1635

Services /3 400 340 740

Housing 200 300 500

T.P.T. /4 100 - 100

Rodrigues 65 15 80

Total 2390 2475 4865

/1 Including forestry and fishing. Also includes sugar millingand tea manufacturing.


/3 Includes tourism.

/4 Travail Pour Tous, public works including rura development.

Source: Table 4.1 of 5-Year Plan, 1975-80.

1/ The breakdown of infrastructure investment is:

Million 1974 Rupees

Roads and Bridges 115Ports and Airports 320Water and Sewerage 348Telecommunications 210Electricity 97

Total 1090

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309. If Mauritius is able to execute the investment program outlinedabove, she should come close to meeting the employment target of the Plan.Of course there are many imponderables on both sides of the labor marketand the speed with which public sector investment can take place is diffi-cult to foresee. As indicated before, there was a shortfall in publicinvestment of about 30 percent during the first Plan. Another importantfactor is the participation ratio for female and younger male workers. Thissubject was discussed in Chapter 4.

310. The increase in the total female labor force between 1972 and1980 projected by the Plan is 40 percent. Since the employment surveyreveals that between 1972 and 1974 alone the increase in female employmentwas 30 percent and, given the close link between the numbers in the femalelabor force and the numbers employed, it is to be expected that by 1980 thepotential labor force participation rate could be substantially higher thanenvisaged in the Plan if sufficient jobs were available. In the previousdecade 39 percent of all new jobs were filled by women. It should alsobe recalled that the projected female participation rates were substantiallybelow those observed in other countries at a similar stage of development.

311. With the sharp decline in the birth rate one would expect thefemale participation rate to rise by more than the 2 percent contained inthe Plan projections.

312. In Annex IV the mission has made its own estimate of employmentlikely to be generated up to mid-1980. The maximum new job potential isestimated at 12,300 annually. This would reduce the unemployment rate toabout 5 percent by 1980. In summary, total employment is projected to reach306,000 with 74,000 new jobs being created in the period 1974 to 1980, ashortfall of 10,000 as compared with the full employment target. Of thenew jobs, about 54,000 would be for men and 20,000 for women. Our projec-tions are as follows:

Table 41: PROJECTED GROWTH IN EMPLOYMENT, 1974-80(in thousands)

IncreaseMid-1974 Mid-1975 Mid-1980 1974 - 1980

Agriculture 76 78 73 - 3Manufacturing 34 37 73 39Construction 25 27 35 +10Tourism 3 3 5 2Transport and communications 18 20 24 6Electricity and water 3 4 5 2Services 73 75 91 18

Total 232 243 306 74


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313. The principal d:Lfference between the Plan and the mission's projec-tions is in manufacturing Whereas the Plan anticipates 47,000 new jobs inmanufacturing between 1974 and 1980, this report projects a figure of about39,000 over the same period. The basis for this figure is explained fullyin Annex III.

314. Of the 39,000 new jobs in the manufacturing sector, about 27,000are expected to be created in the Export Processing Zone, 7,500 in otherlarge manufacturing establishments (including Development Certificate com-panies), and 4,500 in small-scale enterprises.

315. Constraints on Full Employment. While the analysis of employmentcreation potential clearly demonstrates that it is feasible to create anappropriate number of jobs over the next five years to more or less attainfull employment shortly after 1980, some problems have begun to emerge inrecent years which suggest that structural constraints in Ithe labor marketare developing which could make the achievement of full employment moredifficult. These constraints began to manifest themselves in a number oflabor shortages in recent years.

316. For example, it was noted in Chapter 2 that the sugar industry hadbegun a modest program of maechanization in response to its difficulties infinding field laborers dur:ing the peak harvest season. The aging of the laborforce in the sugar industry indicates a growing disenchantraent with field workon the part of young peoplel.

317. Whether full employment can be readily achieved within the nearfuture depends very much on the pace at which mechanization continues. Aslong as mechanization is only in response to identified labor shortages, noloss of jobs is likely to be incurred as a result. If, on the other hand,the pace of mechanization is stepped up for cost reasons, it is probablethat full employment would not be achieved as quickly. Therefore, in orderto be successful in creating full employment one of the Government's mainaims must be to ensure that wage increases do not exceed productivity in-creases, causing labor costs per unit of output to rise.

318. It is still premature to conclude that a marked cinange in relativefactor costs has taken place in Mauritius, though the data on wage movementsclearly suggest that such a change is beginning. The approach to full employ-ment can only hasten this change. Movements in wage and imported machinerycosts can be seen in the foLlowing table.

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Table 42: FACTOR COST INCREASES, 1972-75

Percentage increase, 1972-75

Average daily earnings (all sectors) 79.8

Selected daily wage rates:factory worker (EPZ) 92.0mechanics 292.4carpenters 107.1masons 132.0drivers 172.4laborers (unskilled) 113.6

Index of prices of imported machinery 111.3

Source: Bi-annual Digest of Statistics.

319. The consumer price index rose by about 71 percent during thisperiod so that average daily real earnings rose only about 9 percent. How-ever, it is apparent that shortages in some specific skills have pushed upearnings considerably more than the average or than even the cost of importedmachinery. Mechanization or capital intensification is likely to followand the growth expected of the manufacturing sector (particularly EPZ indus-tries) is likely to fall short. Export industries are now about 40 percentof the total sector.

320. The growth in wages poses a number of fundamental questions forfuture development strategy. Is the emphasis on labor-intensive activitiesrealistic if real wages continue to rise? And what will be the effect ofhigher wages on various sectors and the overall growth of the economy? More-over, what is the scope for increasing real wages in an open economy wherethe competitiveness of exporting industries has to be maintained if growthis to be achieved? The stated policy of the Government is to allow realwages to rise in proportion to productivity. Private sector representativessay that productivity is not rising but falling, while real wages are keptstable.

321. One of the main difficulties for wage policy is that it has to beformulated in a broader context, taking into account other government objec-tives, such as redistributing incomes through higher wages, or maintaininga high level of consumption demand in the economy. The present state ofGovernment's wage policy leaves many of the criteria for wage increases indoubt.

322. The central question is to determine the trade-offs, if any, betweeneconomic growth and a more even distribution of income. In the case of ExportProcessing Zone industries, the value added they leave in Mauritius may be

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fairly small (judging from the mission's rate of return estimates in AnnexIII), nevertheless, they make a net contribution to the lower family incomeswithout much real economic cost to the economy.

323. A digression seems called for at this point. Since some EPZindustries have found difficulty in securing the female labor that madetheir operations economic in the areas where they are located, past practicehas permitted employers to establish factories wherever they wished on theisland, within very broad limits, and in most instances employers chose tolocate in the already crowded urban areas, where better e±ectricity and watersupplies were available, access to the port was easier, and so on. Theconvenience of employees, or the location of industry so as to make best useof social infrastructure, were not part of the private businessman's criteria.However, in response to the labor shortages experienced recently, some of themore enterprising businessmen have moved parts of their operations to newareas where they anticipated labor might be available, and other employershave provided their own transport for workers.

324. The most importiant export industry in Mauritius is, of course,sugar production. In the past, earnings have risen rapidly in the sugarindustry. The sugar estai:es recently began a modest program of mechaniza-tion in response to labor shortages but so far have not adopted mechanizedtechniques on cost grounds, and in fact have found mechanization only mar-ginally profitable at best:, unless labor is unavailable. The potential formechanization is limited in several important respects. In the short-term,the introduction of mechanical harvesters might strain the capacity of thesugar industry to maintain such machinery, particularly as mechanics are inshort supply and this might raise costs. In the longer-term, only abouthalf of the crop area is suitable for mechanization because of the uneventerrain in many localities, so that, for at least part of the crop, higherlabor costs could not be avoided by mechanization. Furthermore, mechaniza-tion would impose a heavy capital cost for the sugar industry, and while itcan probably finance the necessary level of investment without too much dif-ficulty, capital charges would raise production costs. It is also question-able whether this would be the best use of the nation's resources, particu-larly as the number of laborers who might eventually be displaced throughmechanization could be as 'high as 12,000, many with no alternative skills.In either case - whether t'he higher labor costs are borne by producers oravoided through mechanization - the costs of sugar production would behigher, and profit margins reduced, which would tend to dnmnpn the growthand prospects for the country's most important sector.

325. The tea industry:, which was expected to reduce LULcL unemploymentsubstantially, is likely to suffer severely if wage levels keep rising.There are, moreover, several sorts of pressure on tea plantation workers'wages. Firstly, earnings expectations correspond closely to those in thesugar industry because of the similar background, skills, and other fea-tures of the two labor forces. Secondly, the level of ealuings in thetea industry has lagged in recent years and is under pressure to catch up.Finally, the fact that tea plantations are in general in tne less populous

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and less accessible areas creates difficulties in attracting labor, whichcould easily justify a claim for a wage premium. While increased wagesmight enable a larger labor force to be attracted, however, it is doubtfulwhether the industry can bear higher prices without a substantial loss ofprofitability. The trend in world tea prices since the fifties has beendownward in real terms because of an excess supply position and, althoughfor the short-term prospects are better because of the link between theworld tea and coffee prices, there is no reason to believe that the overallsupply position in the world market is about to change. As in the case ofthe sugar industry, the tea plantations could absorb some wage increasesthrough mechanization, but it is unlikely that the sector would be profit-able enough to justify rapid expansion.

326. In the public sector, the port, which has long been highly labor-intensive in its operations, is trying to eliminate some of its lighterageoperations, and construction of a bulk loading facility for sugar has alreadystarted. The Development Works Corporation has found adequate labor supplies,but also paid relatively high wages and offered the job security of publicsector employment.

327. To conclude this discussion, it seems fairly clear that there issome trade-off between higher wages and more even income distribution onthe one hand, and economic growth on the other. It arises chiefly in themanufacturing sector but also to a lesser extent in sugar and tea. TheGovernment may wish to keep this trade-off to a minimum until full or fulleremployment is reached. The mission only wishes to point out the problem,as there are clearly legitimate political considerations involved in theGovernment's consideration of the matter.

Growth Potential and Mobilization of Resources

328. The second major question we posed in para 303 was whether the grosscapital formation of Rs 4,865 million (at 1974 prices) was likely to produce agrowth of real GDP of 6.5 percent a year. Assuming a gross investment/outputratio of 3.5 similar to that which prevailed towards the end of the first Planthis amount of investment should produce an average annual growth of about6.5 percent with the sectoral ICORs achieved in 1970-74, the average realgrowth rate in GDP would be 9.5 percent per annum, as shown in the followingtable.

Table 43: SECTORAL INVESTMENT AND GROWTH(in millions of 1974 Rupees)

(assuming no changes in ICORs)

197C0-74 i#/u-79(1) (2) (3) (4) (5) (6)

Increment Increment Annual Growthin Value Invest- Investment in Value in GDPAdded ment ICOR Proposed Added (Percent)

Agricul-ture / 304 297 0.98 905 9Z 7.2

Manufac-turing /2 191 435 2.28 905 397 10.3

Infra-structure 142/3 701/3 4.9 1635 334 10.9

Services 211/4 381/4 1.8 740 411 9.2

Housing 8 580 72.5 500 1 0.1

Other - - - 180 64 /6 n.a.

Total 856 2394 2.80 4865 2130 9.5

/1 Includes sugar and tea milling, forestry and fishing.


/3 Construction, electricity, gas, water, sanitary services, transport,storage and communications. May not be the same as infrastructurein Plan.

/4 Wholesale and retail trade, banking insurance and rea] estate, andother services. May not be the same as services category in Plan.

/5 Derived by dividing col. (4) by col. (3).

/6 Using 2.8 as ICOR.

Source: Statistical Annex, Tables 3.2 and 3.3. Table 4.1 of the 5-YearPlan, 1975-80.

329. Of course a resulit of this kind must be used with great cautionprincipally because of the probable instability of the sectoral incrementalcapital/output ratios in an exposed economy like Mauritius. However, it

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should not be too surprising that a level of investment more than double thatof the first Plan would produce, a priori, a much higher rate of growthparticularly when it is recalled that the economy, aside from the effects ofthe 1975 cyclone, was probably growing at close to 10 percent a year in1974-75. In any event, if the investment contemplated is achieved, a growthprojection of 6.5 percent seems conservative.

330. Mobilization of Resources. We turn now to the last importantproblem, namely, how are investment resources amounting in real terms toabout double those of the 1971-75 Plan to be mobilized? Even if the produc-tivity of the economy has increased 30 to 40 percent as between the mid-pointsof the two Plans, this would appear to be a formidable undertaking. We willlook first at the Plan level for the economy as a whole and then with partic-ular regard to the public sector, where 49 percent of the Plan investment isto be made. This compares with about 25 percent during the first Plan.

331. The rate of both public and private saving in Mauritius has andwill continue to depend largely on the output and price of sugar. In 1974,for example, gross domestic savings were about 36 percent of gross domesticincome at market prices as compared to 15 percent in 1970. This increasemay be mostly accounted for by the 18 percent increment in income due toimprovements in the terms of trade and on the likely assumption that most ofthe income generated from this source found its way into savings.

333. The Government expected that aggregate domestic savings for thefive years 1975-79 will be Rs 4,370 million at 1974 prices. Assuming thatno further change occurs in the terms of trade and the real growth rateof 6.5 percent a year is achieved, this would mean an average rate of grosssavings of about 27 percent of GDP at factor cost. The question would appearto be, therefore, can Mauritius achieve the rate of savings throughout thenew Plan period that she enjoyed the first half of the 1970s without the helpfrom the improvement in terms of trade that was then so important? Theplanners themselves expect savings to decline to 22 percent of gross income by1980, as a result of changes in the terms of trade and the proposed increasein the share of national income accruing to the lower income categoriesof the labor force. At the same time, the saving target may be reached witha lower saving rate if GDP growth exceeds the Plan target.

333. Looking at the subject in general (rather than quantitative) terms,it appears difficult to reach the conclusion that overall savings will comeup to the Plan target. Reference has already been made to the effect of theterms of trade on savings and it is therefore inevitable that future savingslevels will be below those of the boom years; it might even be difficult tomaintain levels above those experienced in the early 1970s because consumptionlevels have already adjusted to the boom conditions. Moreover, a wage pricespiral has built up which makes the prospects for wage restraint and a modera-tion in the growth of consumption seem poor.

334. To attempt to quantify any shortfall in overall gross savings is,of course, difficult. The decline in sugar prices is expected to reduce the

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level of real income some 15 percent below the level it otherwise would havebeen. This would mean that, even in 1977, real income will be at about the1974 level. In this case it seems very doubtful that the savings goal of thePlan can be achieved even if quite vigorous growth is soon resumed. A real-istic assumption might be to count on a savings rate of approximately 23percent for 1975-1979. If we continue to use the Plan growth rate of 6.5percent, this set of assumptions would produce gross domestic savings of aboutRs 3,800 million at 1974 prices over the Plan period. If the Government wereto accept some such rough estimate for planning purposes, it would have todecide on whether to reduce Plan investment and perhaps growth targets(although some leeway exists in respect of the latter) or to increase externalfinancing of investment beyond about Rs 430 million (US$63 million) put intothe Plan frame. 1/ In view of Mauritius' comfortable foreign debt serviceratio and the very small net capital inflow during the first Plan, we wouldrecommend that more foreign resources be sought.

335. In the balance of payments projection in the Plan document a capi-tal inflow of Rs 1,160 million is contemplated, Rs 900 million of which is netdisbursements of public loans and grants, and the remaining Rs 260 millionprivate investment. At the same time foreign exchange reserves are projectedto increase by about Rs 7.30 million. Thus net foreign resources for theinvestment program would be only Rs 430 million as noted above. In view ofthe sharp decline in Mauritius' reserves in 1976 and 1977 some buildup ofreserves is necessary. However, the amount contemplated in the Plan wouldincrease reserves above even the 1975 levels and could be reduced perhaps byabout 40 percent or, say, by Rs 300 million. 2/ If suitable projects can beprepared additional public loans can be sought to the extent of about Rs 500million (in 1974 prices). However, probably not more than Rs 100 million ofthat would be disbursed during the Plan period. These factors plus thesavings estimated above would provide Mauritius with total internal andexternal financial resources of about Rs 4,600 million of 1974 Rupees for hersecond Plan, an amount which can only be reached if foreign borrowing islarger than contemplated in the Plan. In order to meet the Plan investmenttarget, Mauritius would have to rely on additional external conventionalborrowing for as much as Rs 250 million of 1974 Rupees.

Financing Public Investment

336. The Plan document indicates that, of the projected amount of Rs 2,390million of public investment in the 1975-79 period, it expects to finance 31percent through budgetary savings, 36 percent through domestic borrowing and33 percent through externa:L borrowing. The figure for budgetary savings is

1/ This is Rs 1,160 million of private investment, and public loans andgrants less a projected buildup of reserves of about Rs 730 million.

2/ In June 1977, reserves were Rs 380 million; if the Rs -30 millionbuildup we are suggesting occurred, reserves in 1980 would be Rs 810million. This would probably be almost 3 months' imports or roughlythe same as at the end of 1976.

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backed up by projections of government revenue and expenditure. Local borrow-ing is estimated, based on private investment and savings levels, while theexternal financing item is treated as a residual.

337. Based on budgetary savings during the first Plan, the 31 percent orRs 830 million for budgetary savings (at 1974 prices) seems very optimistic.During the first Plan public savings (including capital revenue) was aboutRs 159 million or approximately 19.5 percent of the Government's capitalexpenditure during that period. To achieve the Rs 830 million of budgetarysavings in the second Plan would require an increase of 11.3 percent per annumin revenues and only 6 percent a year in current expenditures (both in 1974prices) over the 1975-79 period. The projected budgetary outcome as com-pared with actuals for 1974 is shown in the following table.

Table 44: PROJECTED GOVERNMENT REVENUE AND EXPENDITURE(in millions of Rupees at 1974 prices)

1974 1975-79 Ave. growth rate(Actual) (Plan estimates) (%)

Revenue 630 4395 11.3

Expenditure 596 3565 6.0

Consumption expenditure (329) (2120) 8.5

Transfers (220) (1050) -1.5

Interest on public debt (38) (350) 21.1

Other (9) (45)

Budgetary savings 34 830

Source: Five-Year Plan, 1975-1980.

338. The outcomes of the budgetary performance in 1975/76 and 1976/77,and that projected in the budget for 1977/78, are in sharp contrast with thisprojection and very much enforce the view that budgetary savings have beenover-estimated. If the estimates turn out to be correct, the budgetarysavings of these three years will not be more than Rs 60 million at currentprices (see Table 22 in Chapter 6).

339. In view of this, it is not necessary to go through any elaborateelasticity analysis to predict that Rs 770 million of public savings willnot be realized in the last two years of the Plan. In fact we see noreal basis for predicting that any significant public savings will material-ize under present revenue and expenditure patterns. Even using the Plan'sgrowth targets for revenue and current expenditure, and assuming a 6 percentrate of inflation for the last two years of the Plan, the best that one can

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hope for is a balanced current budget in 1978/79 and a small surplus in1979/80 of about Rs 70 million. Since this is a hope rather than a fore-cast and in any event is very small, it seems fair to say that at t-his stageno public savings can be counted on for the Plan un7ess new revenu'o measureFare adopted or current expenditures are reduced.

340. Possibilities for increasing revenues during the rest of this Planperiod seem limited. As the Plan document indicates, certain consumptiontaxes are yielding only sLightly more revenue in response to inflation,partly due to Government's decision to remove import duties on most food-stuffs, but also because some of the major consumption duties are specificand thus their effective rate fell. Income tax receipts moreover were low-ered by the concessions to Development Certificate and Export ProcessingZone companies. Finally, charges for government services generally did notkeep pace with either inflation or the cost of providing these services.

341. The Government Ehas already started converting specific taxesinto ad valorem taxes on a limited number of consumer goods. There appearsto be some scope for extending this practice. In respect Df tax conces-sions to new industries, the mission feels that such concessions have beenunnecessarily generous but any reduction in concessions would have onlya marginal effect on revenues during the present Plan period. Besides,balance of payments projections rely heavily on exports of manufacturesfrom the EPZ. There are other difficulties about making the kind of taxadjustments referred to in the Plan and incorporated into the revenue pro-jections on which the public savings figure was based. The most importantdifficulty is probably the regressive effect of proposed adjustments whichwould run counter to the government objective of better income distribution.

342. The Plan also recognized the need for restraining current expendi-tures, particularly consumption outlays. The latter were to increase only6 percent per annum in real. terms. The actual increase in the first yearof the Plan was 27 percent in current prices and probably about 12 percentin real terms. While a small decrease (at current prices) is budgeted for1977/78, this would appear very difficult to achieve.

343. The new tax proposals in the 1977/78 budget provide for an increasein revenue of Rs 130 million. Rs 35 million of this will come from importduties, Rs 28 million from excise duties, Rs 13 million from the companytax, Rs 12 million from the export tax and Rs 42 million frDm other sources.In line with government policy, the incidence of these measures will falllargely on the upper income segment of the people.

344. The mission is noit in a position to make specific suggestionsto the Government as to how public savings can be generated in the lasttwo years of the Plan. Nevertheless, it seems imperative that action betaken to this end. In our estimates in para 335, we suggested that a Plansize of about Rs 4,600 million at 1974 prices might be a reasonable target.This would be 9 percent below the original Plan target. Assuming thatprivate investments would be as projected (Rs 2,475 million), this would leavea public sector program of Es 2,125 million. As closely as we can estimate

- 116 -

about Rs 1,150 million will have been spent (at 1974 prices) by the end of thefirst three years of the Plan, leaving about Rs 975 million for the last two

years.

345. Even though public savings at 1974 prices of Rs 830 million (inoriginal Plan) now seems far out of reach, we feel that the Government shouldbe able to realize public savings of about Rs 200 million during the last two

years of the Plan. This would mean an increase in revenues of about 18 per-cent a year (in real terms probably about 8-12 percent). With real economicgrowth of 6.5 percent this should be feasible. This assumes that Mauritiuswill soon return to the growth path from which she was dislodged by the endof the sugar boom, even though the reliance on foreign capital will be muchlarger than before.

Main Policy Issues and the General Outlook

346. The two principal internal issues confronting Mauritius at thepresent time (aside from the price of sugar and the external terms of trade)are the capacity of the Government to mobilize sufficient financial resourcesfrom non-inflationary sources to carry forward a needed infrastructuralprogram, and her ability to sustain the Export Processing Zone industry drive.

The capacity of the Government to mobilize savings either through the budget

or in parastatal enterprises has been small or negative in recent years,resulting in a shortfall of 30 percent in the 1971-75 Plan, despite theprosperity of that period. There is the possibility of a similar shortfall

during the current Plan. Economic growth in the Second Plan is unlikely toachieve the 8 percent plus rate of the First. The difficulty appears tobe the elasticity of expenditures compared to the inelasticity of revenues.Some remedial measures have been taken in respect of the latter but notsufficient to cope with rapidly expanding recurrent expenditures. Unless

this problem is resolved, the growth of the economy will inevitably slow downsharply during the next decade.

347. A mixed picture emerges regarding further industrial growth. Mostof the issues revolve around the problems related to labor, both in respectof productivity and of wages. The private sector contends that productivityper worker is falling, which it attributes to overly generous increases inthe minimum wage which promotes absenteeism. Industrial relations in generalare not very satisfactory. At present all disputes go to the ArbitrationTribunal. The procedure is slow and, while the workers cannot strike whilethe issue is being arbitrated, illegal strikes are common.

348. Other complaints are that the Government is doing insufficientpromotional work to encourage new investors (except in France) and thatthe public authorities are too bureaucratic and fail to sufficiently con-sult with the private sector when policy changes are being considered.Heavy emphasis is placed on the importance of tax concessions and the fearis expressed that the investors will pull out if the tax holidays are notextended. This contrasts with Hong Kong, where no particular tax concessionsare made to export industries. The whole subject of public sector/private

- 117 -

sector relations seems likely to have an adverse effect on the diversifica-tion of the Mauritian eccnomy. Another concern is that some of the EEC coun-tries are said to be considering imposing quotas on Mauritian (as well asother associate members') exports of textile products, almove that could havea very serious effect.

349. Providing Mauritius maintains her preferential position in the EECand improves her procedures in the fields of labor relations, promotion andprocessing investor applications, she should be able to further diversifyher economy in the longer-run. However, her most urgent problems relate tofiscal and monetary policies to be seen against the background of the need toincrease resource mobilization and improve income distribution.

STATISTICAL ANNEX

IBRD BASIC ECONOMIC REPORT ON MAURITIUS

February 6, 1977

Table of Contents

Table No.

Demography

1.1 Population, Nat:ural Growth, and Migration1.2 Population Growth and Birth and Death Rates1.3 Population by Sex and Age Group1.4 Population by Ethnic Group1.5 Urban and Extra-Urban Population1.6 Life Expectancy at Selected Ages1.7 Age Specific Birth and Death Rates for Females aged 15-49 years1.8 Fertility Trends, Gross and Net Reproduction Rates1.9 Projected Population, by Sex and Age Group

Labor Force and Employnent

2.1 Labor Force and Employed Population, 1962 and 19722.2 Employment by Sector and Sex2.3 Employment in Large Establishments2.4 Registered Unemployed2.5 Distribution of Employment by District and Sector, 19722.6 Unemployed by Education Level and Length of Unemployment2.7 Average Monthly Salaries and Wages by Selected Sectors

National Accounts

3.1 Gross Domestic Product by Sector of Origin at current Prices3.2 Gross Domestic Product by Sector of Origin at Cqnstant 1970 Prices3.3 Sectoral Output 'Deflators3.4 Distribution of Gross National and Domestic Incomes at Current Prices3.5 Resources and Uses at Current Prices3.6 Resources and Uses at Constant Prices3.7 Gross Fixed Capital Formation by Industry at Current Prices3.8 Gross Fixed Capil:al Formation by Industry at ConaLant Prices,3.9 Gross Fixed Capital Formation by Type of Capital at Current Prices

External Finance

4.1 Balance of Payments4.2 Merchandise Exports at Current Prices4.3 Merchandise Exports at Constant 1970 Prices4.4 Unit Prices of Major Exports4.5 Merchandise Imports at Current Prices, c.i.f.4.6 Merchandise Imports at Constant 1970 Prices, c.i.f.4.7 Unit Prices of Selected Imports, c.i.f.4.8 Export and Import Price Indices4.9 Origin and Distination of Foreign Trade4.10 Annual Average Exchange Rates

Public Finance

5.1 Overall Government Budgets5.2 Central Government Recurrent Revenue5.3 Central Government Recurrent Expenditures5.4 Central Government Capital Revenue5.5 Central Government Capital Expenditures5.6 Economic Analysis of Central Government Expenditure, 19745.7 Economic Analysis of Public Sector Expenditure, 19745.8 Public Sector Finance, 1974

'External Debt

6.1 External Public Debt as of December 31, 19756.2 Estimated Future Service Payments on External Public Debt

Monetary Statistics

7.1 Monetary Survey7.2 Summary Accounts of the Bank of Mauritius7.3 Summary Accounts of the Commercial Banks7.4 Ownership of Time Deposits7.5 Ownership of Savings Deposits7.6 Sectoral Distribution of Commercial Banks' Credit7.7 Structure of Interest Rates7.8 Consumer Price Indices

Distributive Statistics

8.1 Income Distribution, 1961/62 and 1975Chart: Estimated Income Distribution Curves 1961/2 and 1975

8.2 Distribution of Personal Income Tax, 1972/738.3 Distribution of Corporate Income Tax, 1972/738.4 Personal Income Tax Schedule8.5 Distribution of Sugar Land - 1974 Crop8.6 Graduated Producer Prices and Export Taxes for Sugar, 1974-75 Crop

Sugar

9.1 Land Use, 19729.2 Sugar Production9.3 Cane Production9.4 Sugar Production and Disposal9.5 Economic Contribution of Sugar, 1974

Table 1-1: POPULATION, NATURAL GROWTH, AND MIGRATIONI/(in thousands)

Estimated 2/ Natural Migration Total changesYear population-/ Births Deaths change Immigration Emigration Net in population

1950 464.7 23.1 6.5 16.6 n.a. n.a. n.a. n.a.

1955 555.1 23.0 7.1 15.9 0.1 0.1 - t-15.9

1960 644.7 25.3 7.2 18.1 0.3 - 0.3 t18.4

1965 735.2 26.3 6.3 20.0 22.0 24.2 -2.2 .17.81966 753.3 26.8 6.7 20.1 26.5 29.3 -2.8 +17.31967 767.8 23.5 6.5 17.0 29.3 32.9 -3.6 .13.41968 781.6 24.4 7.1 17.3 31.4 36.0 -4.6 .12.71969 792.9 21.7 6.4 15.3 35.9 38.9 -3.0 *12.3

1970 805.5 21.6 6.3 15.3 48.8 52.0 -3.2 +12.11971 816.6 20.8 6.2 14.6 60.8 64.0 -3.2 *11.41972 826.2 20.5 6.5 14.0 77.2 81.5 -4.3 + 9.71973 834.8 19.0 6.5 12.5 101.2 104.7 -3.5 + 9.01974 845.8 22.9 6.2 16.7 109.1 113.4 -4.3 +12.4

1975 856.5 21.5 7.0 14.5 117.5 120.7 -3.2 +11.31976 867.9 22.2 6.8 15.4- 139-.3 -1-41.1 --I-.-8 +13.6

1i Excludine the population of the Island of Rodrignes, estimated at 27,000 in 1976.2/ Mid-Year.


Table 1.2: POPULATION GROWTH AND BIRTH AND DEATH RATES

Estimated I/ Actual Natural Crude Crude Infant 2/Year population- increase increase birth death mortality-

('000) (%) (%) (rates per 'C00) (per tAf^)

1950 464.7 n.a. 3.58 49.7 13.9 76.3

1955 555.1 2.86 2.86 41.4 12.8 67.2

1960 644.7 2.79 2.81 39.3 11.2 69.5

1965 735.2 2.65 2.71 35.7 8.6 64.11966 753.3 2.45 2.67 35.6 8.9 64.21967 767.8 1.93 2.21 30.6 8.5 70.5

1968 781.6 1.80 2.21 31.2 9.1 69.11969 792.9 1.44 1.93 27.4 8.1 70.4

1970 805.5 1.59 1.90 26.8 7.8 57.01971 816.6 1.37 1.78 25.5 7.7 51.71972 826.2 1.18 1.69 24.8 7.9 63.81973 834.8 1.04 1.49 22.7 7.8 63.31974 845.8 1.31 1.97 27.1 7.4 45.6

1975 856.5 1.27 1.70 25.1 8.1 48.7

1976 867.9 1.01 1.77 25.6 7.8 40.4

1/ Mid-year.

2/ Number of deaths of infants under one year per thousand live births.


Table 1.3: POPULATION BY SEX AND AGE GROUP(in thousands)

1/1952 1962 1972

Age group Males Females Total Males Females Total Males Females Total

0 - 1 8.8 8.6 17.4 11.8 11.7 23.5 9.8 9.8 19.61- 4 35.0 34.8 69.o 44.9 43.7 88.6 41.5 40.4 81.95 - 9 32.3 32.2 64.5 52.7 51.9 104.6 60.0 58.6 118.6

10 - 14 24.9 24.7 49 45.6.2 8 a 92.0 56.2 55.1 111.3i5 - 19 23.3 23.1 46.4 31.1 31.1 62.2 50.2 50.4 100.620 - 24 20.6 21.5 42.1 23.6 23.7 47.3 40.2 39.7 79.925 - 29 21.9 21.1 43.0 22.0 22.2 44.2 26.2 27.0 53.230 - 34 16.8 15.6 32.4 19.9 19.3 39.2 21.2 21.5 42.735 - 39 16.0 14.5 30.5 21.7 20.1 41.8 20.7 20.5 41.240 - 44 13.6 11.6 25.2 16.6 15.0 31.6 18.3 17.7 36.045 - 49 11.2 9.4 20.6 15.1 13.4 28.5 20.1 18.4 38.550 - 54 9.4 8.5 17.9 12.0 10.6 22.6 14.5 13.2 27.755 - 59 6.6 6.5 13.1 9.3 9.2 18.5 12.6 12.5 25.160 - 64 5.3 6.3 11.6 7.0 7.7 14.7 9.2 9.6 18.865 - 69 3.1 4.8 7.9 4.1 5.6 9.7 6.1 6.9 13.070 and over 2.6 5.6 8.2 4.2 8.1 12.3 6.4 10.9 17.3Age not stated 0.5 0.5 1.0 0.1 0.2 0.3 0.4 0.4 0.8

Total 251.9 249.3 501.2 342.3 339.3 681.6 413.6 2412.6 -826.-2--

1/ Excludes foreign military personnel.

Source: Population Census Reports.

Table 1.4: POPULATION BY ETHNIC GROUP(in thousands)

1952 1962 1972

Ethnic group Males Females Total % of Total Males Females Total % of Total Males Females Total % of Total

General 70.4 77.9 148.2 29.6 99.0 104.7 203.7 29.9 116.3 120.6 236.9 28.7

Hindu 123.7 118.3 242.0 48.3 174.7 169.9 344.6 50.5 215.7 212.5 428.2 51.8

Muslim 47.5 45.8 93.3 18.6 56.0 54.3 110.3 16.2 68.8 68.3 137.1 16.6

Chinese 10.4 7.4 17.9 3.5 12.6 10.4 23.0 3.4 12.8 11.2 24.0 2.9

Total 252.0 249.4 501.4 100.0 342.3 339.3 681.6 100.0 413.6 412.6 826.2 100.0

Source: Population Census Reports.

Table 1.5.: URBAN AND EXTRA-URBAN POPULATION

City/District 1952 1962 1972 1976 1'

Urban 165,996 232,300 364,902 383,939

Port Louis 69,693 89,096 133,996 141,343Beau-Bassin/Rose Hill 28,690 37,797 80,043 83,790Curepipe 22,026 35,275 52,154 54,455Quatre Bornes 17,707 28,389 50,825 53,551Vacoas/Phoenix 27,880 41,743 47,884 50,800

Extra-urban 335,329 449,319 461,Z97 496,842

Mahebourg 9,329 13,005 13,759

Port Louis 14,846 30,854 -Pamplemousses- 40,663 55,899 69,948Riviere du Rempart 40,323 53,309 66,995Flacq 56,867 73,061 89,050Grand Port 43,380 56,018 66,960Savanne 35,309 46,380 53,011Plaines Wilhelms 53,311 64,980 26,793Moka 27,961 37,245 48,610Black River 13,430 18,568 26,171

Total 501,415 681,619 826,199 880,781

1/ End-year estimate

Source: Population Census Reports and Bi-annual Digest ofiStatistics.

Table 1.6: LIFE EXPECTANCY AT SELECTED AGESA/

Males FemalesAge 1951-53 1961-63 1971-73 1951-53 1961-63 1971-73

0 49.8 58.7 60.7 52.3 61.9 65.310 49.2 55.1 56.5 52.2 58.1 61.120 40.1 45.7 47.0 43.7 48.9 51.630 31.6 36.6 37.7 36.2 40.3 42.640 23.6 27.7 28.6 28.7 31.9 33.650 16.7 19.6 20.3 21.2 23.5 24.960 11.2 13.2 13.3 14.6 15.8 17.070 6.7 8.5 8.3 9.1 9.7 10.380 4.3 4.8 4.8 5.3 5.4 5.7

1/ Excluding Chinese population .


TabLe 1.7: AGE SPECIFIC BIRTH RATES FORFEMALES AGED 15 - 49 YEARS(Life births per 1,000)

Age Group 1962 1972 1976

15 - 19 107.3 50.3 60.5

20 - 24 298.3 188.4 174.8

25 - 29 301.4 190.8 179.2

30 - 34 233.3 130.1 116.2

35 - 39 163.1 88.4 65.6

40 - 44 60.1 31.7 27.4

45 - 49 9.0 3.8 2.3

Source: Central Statistical Office

Table 1.8: FERTILITY TRENDS GRCOSS AND NET REPRODUCTION RATES

1959 1960 1961 1962 1963 1964 1965 1966 1967

Crude birth rate 35.1 39,3 39.4 38.5 40.2 3804 35.7 35.6 30.6

General fertility rate 177.4 183.2 184,4 181.4 157.2 177.9 163.5 160.3 136.3

Gross reproduction rate 2.8 2.87 2.95 2.90 3.04 2.94 2.72 2.70 2.24

Net reproduction rate 2.33 2.49 2.56 2.51 2.63 2.55 2.35 2.34 1.94

1968 1969 1970 1971 1972 1973 1974 1975 1976

Crude birth rate 31.2 27.4 26.8 25.5 24.8 22.7 27.1 25.1 25.6

General fertility rate 136e6 117.8 113.9 106.9 104.5 95.6 108.9 101.9 103.3

Gross reproduction rate 2.27 1.92 1.86 1.71 1.67 1.50 1.71 1.57 1.54

Net reproduction rate 1.97 1.66 1.61 1.49 1.49 1.34 1.53 1.40 1.38

Note:

Crude birth rate: Births per 1,000 of total population at mid-year.

General fertility rate: Births per 1,000 women aged 15-49 years.

Gross reproduction rate: The average number of daughters born to an average woman assuming that she survives

to the end of childbearing age and is subjected to a fixed schedule of age-specific

fertility rates.

Net reproduction rate: The gross reproduction rate adjusted for the possibility that women going through

childbearing age may die.


Table 1.9: PROJECTED POPULATION, BY SEX AND AGE GROUP(in thousands)

1975 1980 1985Age group Males Females Total Males Females Total Males Females Total

0 - 4 47.5 47.1 94.6 53.2 53.0 106.2 54.2 54.0 108.2

5 - 9 56.0 55.0 111.0 46.4 46.3 92.7 52.6 52.6 105.2

10 - 14 58.5 57.3 115.8 55.3 54.4 109.7 46.2 46.2 92.4

15 - 19 53.2 52.7 105.9 57.7 56.6 114.3 55.0 54.3 109.3

20 - 24 46.0 46.0 92.0 52.2 51.9 104.1 57.2 56.3 113.5

25 - 29 33.8 33.7 67.5 45.1 45.3 90.4 51.7 51.6 103.3

30 - 34 22.6 23.4 46.0 33.2 33.1 66.3 44.7 45.0 89.7

35 - 39 20.5 20.5 41.0 22.1 22.9 45.0 32.7 32.8 65.5

40 - 44 19.2 18.9 38.1 19.9 20.0 39.9 21.7 22.6 44.3

45 - 49 18.5 17.6 36.1 18.5 18.3 36.8 19.4 19.6 39.0

50 - 54 17.7 16.1 33.7 17.6 16.9 34.5 17.8 17.8 35.6

55 - 59 12.7 12.0 24.7 16.4 15.2 31.6 16.5 16.2 32.7

60 - 64 10.6 10.9 21.5 11.3 11.2 22.5_ 14.9 1-4-.3 29.2-

65 - 69 7.0 7.8 14.8 9.0 9.7 18.7 9.7 10.0 19.7

70 and over 7.4 11.4 18.8 9.7 13.2 22.9 12.6 16.2 28.8

Total 431.2 430.3 861.5 467.6 468.0 935.6 506.9 509.5 1016.4

Note:

Totals may not add due to rounding.

Source: Mission estimates, based on declining fertility target specified in the Five-Year Plan for Social andEconomic Development (1975-80)-

Table 2.1: LABOR FORCE AND EMPLOYED POPULATION, 1962-72

Age GroupSex 1962 1972

Percent- Percent- Percent- Percent-Labor age of age of Labor age of age offorce popula- Empl. tabor force Popula- Empl. labor('000) tion ('000) foece ('000) tion ('000) force

Males

15-19 13.4 43 12.7 94 32.2 64 14.3 4420-24 20.0 85 18.5 92 37.9 94 27.9 7425-64 115.3 93 108.2 94 131.0 92 124.3 9565+ 2.6 32 2.5 93 2.7 22 2.7 98

Total 151.4 81 141.8 94 203.9 83 169.2 83

Females

15-19 2.6 8 2.5 97 7.5 15 4.0 5420-24 3.9 16 3.8 96 8.7 22 6.5 7525-64 25.2 21 24.3 97 33.5 25 32.0 9565+ 0.9 7 0.9 98 0.9 8 0.9 99

Total 32.6 17.5 31.5 97 50.6 20 43.5 86

Both sexes

15+ 184.0 49 173.3 94 254.5 52 212.7 84

Source: 1962 and 1972 Census, Central Statistical Office.

Table 2.2: EMPLOYMENT BY SECTOR ANI) SEX(in thousands)

1952 1962 1972Male Female Total Male Female 'I'otal Male Female Total

Agriculture. hunting. forestryand fishing 55.9 17.1 73.0 57.5 13.4 70.9 54.3 16.4 70.7(of which sugar) .. .. . (47.4) (11.8) (59.2) (36.7) (14,2) (50.9)Mining and quarrying 0.1 - 0.1 0.1 - 0.2 0.1 - 0.1Manufacturing 19.6 3.2 22.8 25.1 2.3 27.4 24.6 4.5 29.1Electricity, gas & Water 1.1 0.1 1.2 2.2 0.1 *2.3 3.1 0.1 3.2Construction 14.2 0.2 14.4 19.8 - 19.8 20.4 0.1 20.5Trade, restaurants, hotels 13.8 1.0 14.8. 17.1 1.7 18.8 17.7 2.9 20.6Transport, storage, communication 8.7 0.1 8.8 11.7 0.2 11.8 13.8 0.4 14.2Finance, insuranice, etc. }17.4 )11.0 )28.4 ]19.5 15.5 335.0 2.3 0 2.8Services ) 3

34.6 19.0 53.6Activities, n.e.i. 0.4 - 0.4 1.1 0.1 1.2 0.7 0.2 0.9Total in employment 131.2 32.7 163.9 154.1 33.3 187.4 171.5 44.1 215.6

Llote. Totals may not add due to rounding.

not available.

Source:~-Popul-tfion Census Reports.

Table 2.3: EMPLOYMENT IN LARGE ESTABLISHMENTS

1970 1971 1972 1973 1974 1975 1976

March Sept. March Sept. March Sept. March Sept. March Sept. March Sept. March Sept.

Sugar 8,124 55,530 48,468 54,758 47,850 54,010 49,961 54,107 48,223 55,744 50,612 57,773 52,620 57,791Other agriculture 5,683 5,031 6,979 5,084 10,310 7,914 8,958 7,956 8,624 7,305 7,545 6,696 6,839 6,391Mining & quarrying 154 160 154 165 150 146 163 144 153 152 148 163 149 153Manufacturing 8,057 8,336 9,183 9,775 10,306 11,576 13,489 15,722 18,480 20,673 21,097 22,483 26,416 29,348Utilities 1,288 1,294 1,283 1,293 1,294 1,338 2,598 2,739 2,880 2,918 2,935 2,989 3,062 3,093Construction 1,779 2,004 2,058 2,226 2,523 3,003 3,436 4,552 4,580 5,050 5,441 5,631 6,828 6,188Trade, restaurants & Hotels 3,546 3,715 3,939 4,693 5,147 5,353 5,787 6,154 6,507 6,672 6,902 7,107 8,110 8,421Transport, storage & comm. 5,430 5,242 4,930 6,568 6,307 6,886 6,809 7,911 8,163 8,989 9,167 9,319 8,919 9,813Finance, insurance, etc. 1,200 1,242 1,277 1,755 1,822 1,955 2,155 2,295 2,913 2,520 2,630 2,774 2,9232/ 3.179Governmentl/ 30,268 29,336 30,696 30,766 31,042 32,377 33,290 34,008 33,684 33,984 34,853 34,753 47,147- 4 7 , 4 8 3 2/Other services 3,722 3,932 4,238 4,734 5,129 5,199 5,362 5,577 5,847 5,931 5,528 6,599 6,227 6,428Relief/development workers 14,427 16,094 17,552 16,691 12,504 11,561 11,629 10,765 10,595 10,189 10,280 10,122 - -DWC - - - 3,206 6,153 6,203 6,223 5,621 6,008 7,191 7,642 6,880 7,816 6,653

All sectors 123,681 131,916 130,757 141,714 140,542 147,521 149,860 157,551 156,156 167,328 164,780 173,289 177,056 184,941

1/ Central & local2/ Including relief/development workers


Table 2.4: REGISTERED UNEMPLOYED(December)

1970 1971 1972 1973 1974 1975

Agricultural laborers 7,258 8,325 6,780 4,509 5,728 5,528

Unskilled laborers 3,357 3.360 2j75h 1,826 2,125 2,3i5

New workers seeking employment 8,258 11,747 12,503 9,962 7,848 7,511

Others 6,455 7,200 6,328 4,394 4,217 4,440

Total 25.328 30.632 28,367 20.691 19,918 19.794

Source: Ministry of Employment.

Table 2. 5: DISTRIBUTION OF EMPLOYMENT BY DISTRICTAND SECTOR, 1972(in thousands)

PopulationDistrict Primary Secondary Tertiary All sectors Iged 15-59

sector sector sector (percentage) (percentage)

Port Louis 1/ 1.2 21.9 36.7 27.8 16.8Pamplemousses 5.7 2.9 4.6 23.2 32.5Riviere du Rempart 8.6 2.7 3.7 6.1 8.2Black River 6.4 0.8 1.9 7.0 7.8Plaines Wilhems 1/ 7.7 13.0 29.4 4.2 3.0Moka 3.6 1.1 5.6 4.8 5.8Flacq 14.8 3.5 4.5 10.6 10.2Grand Port 11.0 1.9 4.9 8.2 9.4Savanne 11.9 1.8 3.7 8.1 6.2

Total 70.8 49.6 95.0 100.0 100.0

1 / Urban Zones.

Source: Cahier No. 6, Mission d'Amenagement du Territoire a l'Ile Maurice.

Table 2.6: UNEMPLOYED BY EDUCATION LEVEL AND LENGTH OF UNEMPLOYMENT

November 1972 September 1975Less than 6 months Over I year & 2 years Less than 6 months Over 1 year & 2 yearsEducational level 6 months to I . par under 2 years and over Total 6 months to I year under 2 years and over Total

Higher school certificateand above - 2 - - 2 2 2 - 1 5

School certificate 673 979 608 250 2,510 1,061 644 458 461 2Form I to Form V 1,688 1,989 1,748 962 6.387 1,656 861 664 1,230 e4411

Passed Standard VI 1,390 1,545 1,462 964 5,361 1,293 706 484 1,006 9Up to Standard VI 3,633 3,736 3,177 1,958 12,504 2,859 1,541 1,010 2,107 7,517Total 7.384 8.251 6,995 4,134 26,764 6,871 3,754 2,616 4,805 18,046(Unspecified)

(1,600) (500)

source: Ministry of Employment.

Table 2.7: AVERAGE MONTHLY SALARIES AND WAGES BY SELECTED SECTORS

(in large establishments; amounts in Rupees)

Current Salaries and Wages Real Salaries and Wages2/ Real % increase

1970 1972 1974 1976 1970 1972 1974 1976 1970-1974 1970-1976

Monthly paid workers:Tea 552 539 726 1113 552 501 453 543 -18 -2

Food beverages, tobacco industries 414 481 528 727 414 447 329 355 -20 -14

Textiles, wearing apparel 310 327 414 662 310 304 259 323 -16 +4

Chemical industries 346 431 715 819 346 400 446 400 +29 +16

Metal, repairs, etc, 495 496 728 1052 495 461 454 513 -8 .4

Construction 541 637 1079 1306 541 592 673 637 +25 +18

Trade, hotels, etc. 404 426 630 771 404 395 393 376 -3 -7

Government 428 433 579 979 428 402 361 478 -16 +12

Total, excluding sugar 422 436 600 948 4 405 374 463 -11 +10

Motlthly equivalent of dailypaid workers 3/ :Tea 93 108 152 295 93 100 95 144 +2 +55

Food, beverages, tobacco industries 137 153 188 273 137 142 117 133 -14 -3

Textiles, wearing apparel 117 119 113 217 117 111 70 106 -40 -9

Chemical industries 105 112 144 273 105 104 90 133 -14 +27

Metals, repairs, etc. 148 248 218 335 148 231 136 163 -8 +10

Construction 212 208 261 558 212 193 163 272 -23 +29

Trade, hotels, etc, 136 174 217 311 136 162 135 152 -1 +12

Government 139 142 205 353 139 132 128 172 -8 +23

Total, excluding sugar 149 170 210 361 149 158 131 176 -13 +18

Total monthly and daily paid workers

in the sugar industry 4/ 185 255 347 553 185 237 216 270 t17 +46

Total monthly and daily paid workersin all other industries 299 321 400 670 299 298 250 327 -16 tlO

Grand total, monthly and dailypaid workers 244 293 383 634 244 272 239 309 -2 +27

1/ Situation as of September in each year.

2/ Current salaries and wages deflated by the consumer price index.

3/ Assuming that a daily paid worker works 23 days a month.

4/ Because of a significant shift in status from daily paid workers to monthly paid workers in the sugar industry,

a comparison over time of the averages of monthly paid workers and those of daily paid workers is not meaningful;

hence only the average totals for the industry are given.

Source: Mission Calculations on the basis of data in the Survey of Employment and Earnings and the Biannual Digests of

IRtati RtiCes.

Table 3.1: GROSS DOMESTIC PRODUCT BY SECTOR OF ORIGIN AT CURRENT PRICES(in millions of Rupees)

1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976Agriculture, forestry, huntingand fishing 180 198 190 203 193. 224 222 262 353 494 1323 1034 985(of which sugar cane cultivation) (118) (138) (124) (138) (128) (160) (139) (174) (251) (357)(1208) (900) (-)

Mining and quarrying 1 1 1 1 1 1 1 1 2 2 2 4 5

Manufacturing 119 129 121 130 124 142 146 168 233 277 505 564 660(of which sugar milling) (64) (73) (65) (73) (67) (82) (73) (90) (116) (127) (288) (270) (-)

Construction 53 55 52 59 49 46 48 60 73 114 155 217 260

Electvicity, gas, water andsanitary services 22 25 26 30 30 30 29 34 39 43 49 69 75

Transport, storage & communication 95 102 99 100 102 105 108 114 129 161 195 281 310

Wholesale and retail trade ) 102 )103 ) 100 106 108 109 91 94 127 172 221 279 320banking, insurance & real est. )20 18 22 31 44 66 75

Owership of dwellings 59 61 63 65 66 68 70 71 74 77 83 94 100

Public administration & defence 38 40 41 43 44 46 51 53 61 76 105 140 225

Services 91 94 99 104 110 116 126 141 166 203 259 342 400

Gross domestic product at factor cost 760 808 792 841 827 887 912 1016 1279 1650 2941 30-90 34-55(Sugar) (21-3) (246-) (-2-20) -245)- (228)- (278 (245) (300) (411) (540)(1542)(1240) ()

Indirect taxes net of subsidies 118 114 120 128 139 149 136 145 153 202 275 326 360

Gross domestic project at market prices 878 922 912 969 966 1036 1048 1161 1432 1852 3216 3416 3815

Deflator (1970 = 100) 84.6 86.2 88.4 90.0 96.3 98.5 100.0 106.2 120.9 139.7 223.0 234.8 226.0

Gross domestic product at constant 1970 1038 1070 1032 1077 1003 1052 1048 1093 1184 1326 1442 1455 1688market prices


Table 3.2: GROSS DOMESTIC PRODUCT BY SECTOR OF ORIGIN AT CfnlWR4Iv ln7q PVICES

(in millions of Rupees)

1970 1971 1972 1973 1974 1975 " 19762

Agriculture, forestry, hunting andfishing 222 239 269 281 277 195

(Sugar cane cultivation) (139) (150) (166) (173) (168) (101)

Mining and quarrying 1 1 2 2 2 3

Manufacturing 146 151 170 187 237 218

(Sugar milling) ( 73) ( 79) ( 87) ( 91) (88) (54)

Construction 48 54 57 84 106 119

Electricity, gas, water andsanitary services 29 32 38 40 44 57

Transportation, storage andcommunication 108 109 114 130 138 168

Wholesale and retail trade 91 87 107 123 148 162

Banking, insurance and tead estate 20 20 22 31 35 47

Ownership of ckellings 70 71 72 74 78 78

Public administration and defence 51 52 54 61 66 76

Services 126 141 153 168 188 193

Gross domestic product at factor cost 912 957 1058 1181 1319 1316 1529

(Sugar) (245) (264) (292) (306) (297) (186)

2/Indirect taxes less subsidies - 136 136 126 145 123 139 159

Gross domestic product at market prices 1048 1093 1184 1326 1442 1455 1688

1/ Mission estimates.2/ Deflated by the GDP deflator at factor cost.

3/ Details for 1976 not yet available


Table 3.3: SECTORAL OUTPUT DEFLATORS

(1970 - 100)

1971 1972 1973 1974 1975 19769/

Agriculture, forestry, huntingand fishing 109.6 131.2 175.8 481.1 484.6

(Sugar cane cultivation) (116.0) (151.2) (206.4) (719.6) (864.9)

(Other agriculture) ( 98.9) ( 99.0) (126.9) (106.5) (120.0)

Manufacturing 111.3 137.1 148.1 214.9 248.8

(Sugar milling) (113.9) (133.3) (139.6) (328.4) (482.8)

(Other industries) (108.3) (141.0) (156.3), (146.9) (165.0)

Construction 111.1 128.1 135.7 147.6 175.0

Electricity, gas, water andsanitary services 106.3 102.6 107.5 111.4 115.0

Transportation, storage andcommunication 104.6 113.2 123.8 142.3 160.0

Wholesale and retail trade 108.0 118.7 139.8 150.3 165.0

Banking, insurance and realestate 90.0 100.0 100.0 125.7 135.0

Ownership of dwellings 100.0 102.8 104.1 107.8 115.0

Public administration and defiance 101.9 113.0 124.6 159.1 175.0

Services 100.0 108.5 120.8 139.2 170.0

Gross domestic product atfactor cost 106.2 120.9 139.7 223.0 234.8 226.0

(Sugar) (113.6) (140.8) (176.5) (519.5) (663.3)

(Other) (103.3) (113.3) (126.9) (138.1) (159.1)

Indirect taxes less subsidies 106.2 120.9 139.7 223.0 234.8 226.0

Gross domestic product atmarket prices 106.2 120.9 139.7 223.0 234.8 226.0

/ Mission estlmateb.21 Details for 1976 not yet available.Source: Central Statistical Office.

Table 3.4: DISTRIBUTION OF GROSS NATIONAL AND DOMESTIC INCOMES AT CURRENT PRICES


1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976

Compensation of employees 445 464 470 488 484 498 516 555 656 833 1241 1568 1863

Income from unincorporatedenterprise 102 106 110 111 119 128 128 140 180 235 387 538 471

Income from property 106 107 107 112 113 129 128 137 161 228 322 295 336

Savings of corporations 86 102 76 98 83 102 99 135 184 244 600 320 500

Direct tax on corporations 12 14 17 18 19 23 39 47 91 126 400 404 320

General government incomefrom Property and entrepreneurship 20 23 26 28 28 30 33 34 37 37 47 50 55

Less: Interest on public debt -9 -10 -11 -15 -18 -18 -20 -21 -24 -32 -38 -59 -65Interest on consumers debt -4 - 4 - 4 - 4 - 4 - 4 - 4 - 4 - 4 - 5 -8 -9 _10

Gross national income at factor cost 758 802 791 836 824 888 919 1023 1281 1666 2951 3107 3470

Less: Net factor incomes fromthe rest of the world - 2 - 6 - 1 - 5 - 3 1 7 7 2 16 10 17 15

Gross domestic income at factor cost 760 808 792 841 827 887 912 1016 1279 1650 2941 3090 3455

Indirect taxes less subsidies 118 114 120 128 139 149 136 145 153 202 275 326 360

Gross domestic income at marketprices 878 922 912 969 966 1036 1048 1161 1432 1852 3216 3416 3815


Table 3.5: RESOURCES AND USES AT CURRENT PRICES(in millions of Rupees)

1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 19752

Gross domestic 878 922 912 969 966 1036 1048 1161 1432 1852 3216 3416 3815product atmarket prices

Net Export ofgoods and non-factor services -36 -42 -10 -57 -27 26 16 -60 37 -46 222 42 -375

Total resources/uses 914 964 922 1026 993 1010 1032 1221 1395 1898 2994 3374 4190

Consumption 778 779 E07 851 857 839 912 1026 1L48 1357 2044 2321 2690

Privateconsumption 652 641 655 688 703 683 746 844 929 1122 1684 1878 2100

Publicconsumption-/ 126 138 1.52 163 154 156 166 182 219 235 360 443 590

Investment 136 185 113 187 135 169 122 197 257 469 686

Private grossfixed capitalformation 126 107 86 87 94 100 94 132 JAA 378 561 852 994

Public gross fixedcapiti3 forma-tion - 51 48 47 58 47 44 51 52 66 102 189 286 406

Change in stocks -41 30 -18 30 -5 27 -25 11 18 61 200 -85 100

Gross domesticsavings 100 143 10.5 118 109 197 136 135 284 495 1.172 1095 1125

:L Preliminary estimatesCentral and local government

J Central and local government, plus that part of investment of publ!ic corporationsfinanced by central government.

Source: Central Statistical Office and mission estimates

Table 3.6: RESOURCES AND USES AT CONSTANT 1970 PRICES(In millions of Rupees)

1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976

GDP at market prices 1037 1070 1032 1077 1003 1052 1048 1093 1184 1326 1442 1455 1688Adjustment for changesin terms-of-trade 65 -4 15 28 -47 -35 - -5 48 -3 283 318 165

Gross Domestic Incomeat market prices 1102 1066 1047 1105 956 1017 1048 1088 1232 1323 1725 1773 1853

Imports minus exports 107 46 26 95 -19 -61 -16 50 16 27 189 302 293

Total resources/uses 1144 1116 1058 1172 984 991 1032 1143 1200 1353 1631 1757 1981

Total consumppion 956 922 919 965 845 818 912 992 1038 1070 1219 1318 1392Private consumption 798 762 746 778 693 666 746 811 831 874 987 1069 1103Public consumption 158 160 173 187 152 152 166 181 207 196 232 249 289

Fixed investment 209 180 151 161 146 146 145 172 194 303 359 445 490Changes in stocks -41 34 -20 33 -7 30 -25 10 14 41 53 -17 25Total investment 168 214 131 194 139 176 120 182 208 344 412 428 515

Statistical discrepancy 20 -20 8 13 - -3 - -31 -46 -61 - 11 74

Gross domestic savings 146 144 128 140 111 199 136 96 194 253 506 455 461

Source: Central Statistical Office, and Mission estimates

Table 3.7: GROSS FIXED CAP:tTAL FORMATION BY INDUSTRY AT CURRENT PRICES(In millions of rupees)

1964 1965 1966 1967 1968 1969 1970 19171 1972 1973 1974 1975 1976

Agriculture, Forestry,Hunting & Fishing 17 17 16 19 17 20 23 28 20 38 84 120 169

Mining and ouarrying - - - - - - - - - - -

Manufacturing 33 17 11 13 14 12 16 28 37 79 186 292 324

Construction 3 4 3 3 4 4 5 6 8 14 21 22 48

Electricity, Gas, Waterand Sanitary Services 16 15 12 14 13 15 12 16 32 33 39 71 50

Transport, Storage andCommunications 39 33 37 21 30 37 32 35 42 126 134 184 197

Wholesale and RetailTrade 6 9 4 6 6 6 5 7 7 21 21 37 52

Banking, Insurance andReal Estate 2 1 2 - - 1 3 D 1 2 4 1 6

Ownership of Dwellings Z5 38 29 38 32 35 33 id 54 10:3 165 264 335

Public Administration 1 3 4 1 - 1 - 1 3 14 44 54

Services 12 16 13 28 21 11 12 16 23 51 68 91 150

Legal Fees, Stamp Duties,etc. 3 2 2 2 4 3 4 3 4 10 14 12 15

Gross Fixed Capital 177 155 133 145 141 144 145 184 229 480 750 1138 1400Formation

Source: Central Statistical Ofiice

Table 3.8: GROSS FIXED CAPITAL FORMATION BY INDUSTRY AT CONSTANT PRICES,

AND DEFLATORS(in millions of Rupees)

Amounts in Millionsof Constant 1970 Rupees

1970 1971 1972 1973 1974 1975 1976

Agriculture, Forestry,Hunting & Fishing 23 32 18 26 39 46 58

Mining and Quarrying - - - - -

Manufacturing 16 24 30 48 88 114 115

Construction 5 5 6 9 11 9 18

Electricity, Gas, Water,and Sanitary Services 12 15 25 22 27 40 26

Transport, Storage andCommunication 32 29 34 81 67 75 73

Wholesale and RetailTrade 5 6 6 13 10 14 18

Banking,.Insurance andReal Estate 3 5 1 1 2 1 3

Ownership of Dwellings 33 38 49 59 71 93 107

Public Administration - 1 1 2 6 15 17

Services 12 14 20 32 29 32 48

Legal Fees, Stamp Dutiesetc. 4 3 4 10 9 6 7

Gross Fixed Capital

Formation 145 172 194 303 359 445 490

Source: Central Statistical Office and Mission estimates

Table 3.9: GROSS FIXED CAPITAL FORMATION BY TYPE OF CAPITAL ATICURRENT PRICES(in millions of Rupees)

1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976

Land 3 2 2 2 4 3 4 3 4 10 14 12 15

Construction, Total 98 9 3 78 93 77 82 92 110 127 260 446 633 755

(ResidentialBuildings) (44) (37) (29) (37) (32) (35) (33) (38) (54:) (103) (169) (264) (333)

(Non-residentialBuildings (22) (25) (21) (29) (21) (13) (23) (30) (34) ( 76) (156) (201) (267)

(Public Works) (32) (31) (28) (27) (24) (34) (36) (42) (39) ( 81) (121) (168) (155)

Machinery andEquipment, Total 76 60 53 50 60 59 49 71 98 210 290 493 630

(TransportEquipment) (24) (18) (26) (15) (20) (26) (20) (23) (26 ( 85) ( 61) (104) (154)

Gross FixedCapital Formation 177 155 133 145 141 144 145 184 229 480 750 1138 1400

Source: Central Statistical Off:ice.

Table 4.1: BALANCE OF PAYMENTS(in millions of Bupees)

1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975

Exports of goods and NFS 408 393 392 378 452 457 531 523 759 991 2124 2269

(Exports of goods f.o.b) (367) (318) (338) (306) (359) (367) (388) (362) (577) (755) (1798) (1848)(Exports of NFS) (41) (75) (54) (72) (93) (X10) (143) (161) (182) (236) (326) (421)

Imports of goods and NFS 444 435 402 435 479 449 515 583 722 1037 1902 2227

(Imports of goods c.i.f) (390) (369) (339) (374) (411) (375) (414) (472) (614) (896) (1717) (1965)(Imports of NFS) (54) (66) (63) (61) (68) (74) (101) (111) (108) (141) (185) (262)

Balance of goods and NFS -36 -42 -10 -57 -27 26 16 -60 37 -46 222 42

Investment income receipts 8 9 12 11 11 14 17 19 16 27 26 60Investment income payments 10 13 14 17 14 14 12 14 17 18 20 45

Transfer receipts 11 12 50 20 39 25 31 36 62 52 103 93(official grants) (7) (7) (45) (15) (33) (17) (18) (21) (32) (16) (62) (44)Transfer payments 12 17 16 14 15 10 10 11 15 13 20 23

Current account balance -39 -52 22 -57 -6 41 42 -30 83 2 311 127

Direct foreign investment -28 -14 -2 -4 -3 10 5 5 24 14 22 29

(Inflow) (1) 5 (2) (-) (-) (10) (9) (8) (24) (14) (24) (33)(Outflow) (29) (19) (4) (4) (3) (-) (4) (3) (-) (-) (2) (4)

Government long term loans 32 11 17 9 19 -3 - -12 7 11 34 46

(Disbursements) (32) (11) (18) (11) (56) (5) (11) (12) (7) (19) (40) (56)(Amortization) (-) (-) (1) (2) (37) (8) (11) (24) (-) (8) (6) (10)

Other government capital movements -6 -9 -6 6 -1 27 4 7 -3 2 -6 -

(Inflow) (-) (-) (-) (6) (13) (27) (4) (7) (-) (6) (-) (15)(Outflow) (6) (9) (6) - (14) (-) (-) (-) (3) (4) (6) (15)

Net short-term private capital movements -1 1 - 1 - 5 -1 4 -4 -40 -38 180

Other net capital movements - 2 -4 35 -3 -23 36 36 13 -1 -5 -16

Net errors and omissions 28 9 -12 1 9 -2 8 -1 4 -9 47 -16

Change in net reserves (- increase) 14 56 -21 31 -17 -61 -94 -9 -124 21 -365 -350

For reference:Average exchange rate, Rs:US$ 4.7619 4.7619 4.7619 4.8280 5.5556 5.5556 5.5556 5.5325 5.3385 5.4422 5.7031 6.0268

Source: Biannual Digest of Statistics.

Table 4.2: MERCHANDISE EXPORTS AT CURRENT PRICES(in millions of Rupees)

1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976

Sugar 337.4 283.4 306.4 279.4 319.6 326.0 340.1 313.4 507.6 608.1 1538.0 1548.8 1321.5

Molasses 8.8 5.0 11.5 8.5 11.9 10.0 10.6 9.2 14.2 40.3 46.2 23.6 31.7

Tea 4.4 5.9 6.5 8.4 9.6 14.6 14.1 17.0 20.8 18.9 19.7 16- 2. '2

Fish - - - - 0.1 0.4 0.7 0.5 0.9 8.0 14.6 14.3 18.9

Spices - - - - - - 0.4 0.8 0.7 1.0 1.7 1.0 1.1

Feeding stuff for animals - - - - - - 0.3 0.2 - 0.9 2.0 2.4 1.6

Diamonds and stones - - - - - - 1.0 2.4 5.3 19.7 22.6 9.3 8.4Components for office - - - - - 0.2 0.4 0.5 0.7 5.3 48.6 62.1 61.7machinery

Clothing - - - - - 0.1 0.2 1.7 6.1 20.6 60.8 118.2 204.9

Other manufacturing 0.9 1.1 3.4 1.7 2.6 4.9 4.7 7.2 7.4 7.4 11.1 13.2 37.1Other domestic 1.6 1.2 0.8 0.8 1.4 2.0 2.7 2.8 2.4 6.7 6.7 9.1 20.5

Total domestic exports 353.1 296.6 328.6 298.8 345a2 358.2 375.1 3i5.7 566.1 736.8 1772.0 1818.0 1736.6

nunKer sales 4.1 4.2 4.3 9.4 17.1 17.9 14.2 17.3 21.1 28.5 65.3 73.2 64.9Reexports 7.0 9.9 9.0 6.1 7.7 7.0 8.3 6.0 7.7 11.6 15.4 20.9 33.5

Total exports 364.2 310.7 341.9 314.3 370.0 383.1 397.6 379.0 594.9 776.9 1852.7 1912.1 1835.0


Table 4.3: MERCHANDISE EXPORTS AT CONSTANT 1970 PRICES(in millions of Rupees)

1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974

Sugar 340.5 336.8 343.0 305.1 352.5 352.7 340.1 289.4 396.3 413.6 395.4

Molasses 10.5 9.7 13.5 10.2 17.9 13.2 10.6 14.1 15.0 19.6 17.9

Tea 4.3 6.0 7.1 8.7 9.2 14.1 14.1 16.8 21.2 20.1 16.8

Fish - - - - 0.1 0.6 0.7 0.2 0.4 2.6 3.6

Spices - - - - - - 0.4 0.7 0.7 0.9 1.4

Feeding stuff for animals - - - - - - 0.3 0.2 - 0.5 0.5

Diamonds and stones - - - - - - 1.0 1.2 1.2 1.4 1.4

Components for office - - - - - 0.3 0.4 0.8 1.1 0.6 12.9machinery

Clothing - - - - - - 0.2 2.0 4.2 12.7 21.9

Other manufacturing 1.4 1.6 3.6 1.9 7.6 10.4 4.7 6.8 12.9 14.1 14.1

Other domestic 4.4 2.3 1.1 1.5 2.9 3.4 2.7 2.8 2.0 3.5 2.0

Total domestic exports 361.1 356.4 368.3 327.4 390.2 394.7 375.1 335.0 465.0 489.6 507.9

Bunker sales 4.8 4.9 5.3 10.3 16.4 18.3 14.2 14.8 16.6 18.4 16.7

Reexports 7.0 9.9 9.0 6.1 7.7 7.0 8.3 5.6 6.6 8.5 9.2

Total exports 372.0 371.2 382.6 343.8 414.3 420.0 397.6 355.4 488.2 516.5 533.8

For reference:Export quantum index 93.6 93.4 96.2 86.5 104.2 105.6 100.0 89.4 122.8 129.9 128.4


Table 4.4: UNIT PRICES OF MAJOR EXPORTS(in Rupees)

Unit 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976

Sugar Ton 586.1 497.7 516.3 537.2 536.2 546.8 591.5 640.5 757.6 869.7 2308.3 3113.2 2398.8

Molasses " 88.8 54.3 90.2 87.7 70.3 79.9 105.6 69.0 99.7 217.6 273.4 194.7 245.4

Tea " 5500.0 5363.6 5000.0 5250.0 5647.1 5615.4 5423.1 5483.9 5333.3 5108.1 6354.8 7619.0 8588.2

Fish - - - - 3.0 1.8 2.9 6.7 6.3 9.0 11.8 - -

Spices " 3214.3 1254.8 1741.9 1807.5 3018.5 3810.1 555.1 1038.0 818.7 1065.5 2188.1 - -

Feeding stufffor animals " 4.9 - - - - - 716.8 688.3 256.5 1104.8 2658.2 - -

Diamond & Stones No. - - - - - - 17.2 32.3 75.1 245.1 276.3 - -

3ource: Annual Reports, Customs and Excise Department.

TabLe 4.5: fERCAINUNISE IMPORTS AT Cl1RRENT PRICES, c.i.f.(in millions of Rupees)

l/ ±11964 1965 1966 1967 - 1968 1969 1970 1971 1972 1973 1974 1975 1976

Consumer goods 191.5 196.4 187.4 198.6 211.1 195.3 201.9 218.6 283.8 385.8 786.9Food & beverages: 1 57- 132.9 135.1 l44.5 163.8 153.5 151.7 153.9 194.3 252.5 585.9Rice (39.2) (39.3) (37.5) (44.2) (55.7) (54.9) (38.2) (31.4) (42.6) (70.9) (227.0) (133.0) (130.5)Wheat flour (13.5) (14.4) (L3.1) (15.3) (17.6) (23.0) (22.8) (23.5) (29.0) (33.7) (85.6) (98.7) (70.8)Vegetable oil (9.4) (11.5) (8.6) (7.9) (0-6) (3.1) (15.3) (21.4) (16.7) (15.7) (52.2) (35.2) (47.3)Milk & cream (7.0) (7.3) (9.0) (7.7) (8.9) (8.1) (11.1) (11.4) (18.5) (17.7) (36.8)Meat & meat preparations (6.5) (6.3) (6.0) (6.0) (6.2) (5.5) (6.4) (6.2) (10.1) (14.5) (23.8)Fruits & vegetables (11.7) (10.6) (12.5) (12.0) (13.9) (11-3) (14.4) (13.7) (16.4) (21.7) (29.4)Animal feed (1.8) (2.8) (3.6) (4.8) (4.2) (4.8) (5.4) (7.0) (9.4) (14.8) (22.8)Animals (2.3) (2-8) (4.4) (5.6) (5.0) (5.6) (5.5) (5.9) (4.6) (2.2) (6.7)Other food (33.1) (37.9) (40.4) (41.0) (51.7) (37.2) (32.6) (38.4) (47.0) k61.3) (101.6)Passenger cars 9.3 7,4 4.2 4.4 5.4 4.8 5.9 8.7 11.8 19.6 26.5Clothing 10.5 8.3 7.8 9.1 8.0 6.4 7.7 7.7 11.2 15.0 19.5T.V. & radios 5.6 6.4 3.8 4.0 4.3 4.9 4.5 3.8 8.6 13.8 23.5Other non-food consumer 4.1.6 41.4 36.5 36.6 29.6 25.7 32.1 39.5 57.9 84.9 131.5

Intermediate goods 152.0 134.8 121.3 141.2 170.4 151.5 183.8 189.9 276.4 362.1 739.9Petroleum 17.0 17.7 15.4 25.4 35.9 31.7 29.8 29.7 50.7 63.6 161.5 192.7 206.3Fertilizers 19.4 18.4 17.4 19.0 19.3 17.1 18.2 16.8 28.5 30.9 55.9 35.2 47.3Textile yarns 25.6 21.5 21.5 23.5 23.0 22.9 27.9 32.2 53.1 71.0 129.2Cement 9.1 8.9 7.5 8.1 7.3 8.3 7.1 9.1 10.0 18.2 28.6 56.2 71.2Iron and steel 15.6 11.6 10.7 12.7 11.6 9.3 21.4 17.8 22.7 36.0 95.2 72.1 85.6Chemical products 19.3 12.9 19.0 19.8 25.1 21.9 25.7 28.4 36.8 44.7 85.6Machinery parts 11.7 8.2 5.6 5.9 9.1 5.8 9.6 10.2 11.4 15.6 23.0Other intermediate 34.3 35.6 24.2 26.8 39.1 34.5 44.1 45.1 63.1 82.1 160.9

CapItal goods 45.4 36.1 24.5 31.3 38.4 29.2 34.2 53.1 75.6 167.9 229.5Machinery, non-electric 21.7 18.2 t0.1 13.4 15.7 15.7 18.4 35.6 38.4 83.1 116.2 213.1 258.2Machinery, electric 13.4 11.6 9.4 12.8 12.8 9.1 8.8 11.3 27.2 28.5 70.8Transport equipment 8.3 4.5 3.6 3.3 8.4 3.2 5.8 4.8 8.3 53.7 38.1Other capital 2.0 1.8 1.4 1.8 1.59 1.2 1.2 1.4 1.7 2.6 4.4

Total imports 388.9 367.3 333.2 371.1 421.1 376.0 419.9 461.6 635.8 915.8 1759.8 1995.3 2397.9

1/ Full details for 1975 and 1976 not yet available.


Table 4.6: MERCHkNDISE IMIORTS AT CONSTANT 1970 PRICES, c.i.f.(in millions of Rupees)

1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974

Consumer goods 219.2 222.5 202.3 205.8 199.1 180.4 201.9 197.3 234.4 237.7 282.5Food and beverages 150.9 150.8 146.9 163.1 164.5 146.2 151.7 149.3 173.0 169.7 203.7

Rice (44.2) (43.7) (39.8) (43.4) (40.0) (42.1) (38.2) (35.1) (47.0) (37.7) (56.8)WhcaL fLour (14-4) (16.9) (15.4) (20.7) (18.3) (22.6) (22.8) (21.9) (24.9) (22.2) (25.4)Vegetable oil (9.8) (10.2) (7.9) (7.6) (0.6) (3.6) (15.3) (17.5) (15.4) (12.5) (17.9)Milk and cream (9-1) (8.5) (9.9) (7-9) (9.1) (8-5) (11.1) (11.1) (13.1) (11.4) (15.5)Meat and meat preparations (7.1) (6-4) (6.4) (6.1) (5.7) (5.4) (6.4) (6.1) (R.8) (E.:) (11.1Fru-its anid ve2etables (17.`, .- .u, (12.1) (13.6) (14.0) (11.1) (14.4) (12.5) (12.4) (15.1) (13.2)Animal feed (2.4) (3.7) (4.6) (5-8) (4.5) (5.1) (5.4) (6.8) (8.8) (9.6) (11.0)Animals (2.9) (3.0) (4.5) (9.2) (8.8) (5.5) (5.5) (7.l) (5.4) (10.1) (6.1)Other food (43.6) (44.4) (46.3) (48.8) (63.5) (42.3) (32.6) (31.2) (37.2) (42.7) (46.7)

Passenger cars 11.8 9.2 5.2 5.5 6.0 5.1 5.9 8.1 9.9 14.8 16.7Clothing 6.8 5.5 6.4 6.8 4.8 4.4 7.7 6.8 9.0 8.4 10.1TV and radios 8.2 9.1 4.9 5.5 4.4 3.7 4.5 5.0 8.8 11.6 13.4Other non-food consumer 41.5 47.9 38.9 24.9 19.4 21.0 32.1 28.1 33.7 33.2 38.6

Intermediate goods 185.1 163.8 149.5 177.6 193.0 163.4 183.8 184.2 243.1 262.5 323.0Petroleum 20.1 20.7 18.9 27.7 34.5 32.4 29.8 25.4 39.8 41.1 41.4Fertilizers 22.0 18.4 16.4 18.7 18.2 18.1 18.2 19.7 27.9 22.9 21.5Textile yarns 29.8 25.4 25.6 27.5 24.1 22.5 27.9 29.9 43.4 46.3 54.6Cement 11.3 10.4 8.7 9.6 7.3 8.3 7.1 9.0 10.2 14.3 16.5Iron and steel 24.8 18.4 16.6 18.8 16.4 12.1 21.4 20.0 25.6 31.9 47.0Chemical products 15.3 13.8 14.0 16.4 19.6 18.1 25.7 25.7 32.5 33.5 57.1Machinery parts 25.2 10.8 7.2 8.4 12.0 6.0 9.6 8.4 9.6 12.0 14.4Other intermediate 36.6 45.9 42.1 50.5 60.9 45.9 44.1 46.1 54.1 60.5 70.5

Capita_goods 54.9 49.6 33.1 49.4 34.7 40.9 34.2 45.6 67.2 81.6 104.7Machinery, non-electric 23.2 23.4 9.6 21.9 11.9 23.9 18.4 27.6 33.0 50.5 65.9Machinery, electric 18.9 16.6 13.2 17.1 14.5 10.9 8.8 9.2 22.6 16.3 19.0Transport fequipmient 8.6 7.2 8.5 8.6 6.5 4.9 5.8 7.6 10.4 12.4 16.8Other capital 4.2 2.4 1.8 1.8 1.8 1.2 1.2 1.2 1.2 2.4 3.0

Total imports 459.2 435.9 384.9 432.8 426.8 384.7 419.9 427.1 544.7 581.8 710.2

For reference:Import quantum index 109.4 103.8 91.7 103.1 101.6 91.6 100.0 101.7 129.7 138.6 169.1


Table 4.7 : UNIT PRTCES OF SELECTED IMPORTS,c.i.f.(in Rupees)

Unit L964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974

Consumer goodsRice Ton 575.6 584.8 612.7 661.7 905.7 847.2 649.7 580.4 589.2 1220.3 2594.3

Wheat flour " 472.0 429.9 428.1 373.2 484.8 512.2 504.4 541.5 588.2 765.9 1698.4

Vegetable oil 1403.0 1642.9 1592.6 1519.2 1500.0 1240.0 1457.1 1783.3 1575.5 1825.6 4243.9

Milk & cream 2258.1 2517.2 2647.1 2851.9 2871.0 2793.1 2921.1 3000.0 4111.1 4538.5 6943.4

Meat & meat preparations 3095.2 3315.8 3157.9 3333.3 3647.1 3437.5 3368.4 3444.4 3884.6 5800.0 7212.1

Fruits & zegetables 713.4 803.0 1096.5 937.5 1053.0 1076.2 1058.8 1161.0 1401.7 1517.5 2352.0

Animal feed 409.1 417.9 433.7 452.8 518.5 516.1 551.0 564.5 591.2 845.7 1145.7

Animals No. 191.6 232.1 236.5 146.4 138.1 247.7 241.3 201.1 204.7 53.3 261.0

Passenger cars " 6391.8 6514.1 6521.7 6528.2 7367.0 7559.1 8126.7 8726.2 9688.0 10728.0 12864.1

Clothing 3.4 3.3 2.7 2.9 3.6 3.2 2.2 2.5 2.7 3.9 4.2

TV 6 radios " 165.0 216.6 191.9 176.5 244.5 324.7 246.7 182.8 250.1 305.3 459.9

Other non-food consumer Kg. 23.5 10.2 21.5 25.3 25.4 28.5 24.2 24.4 17.1 21.1 24.1

Intermediate goodsPetroleum Ton 232.9 228.9 229.9 422.2 444.4 430.8 678.6 857.1 774.2 769.2 1447.4

Thou.Lit. 119.7 123.4 121.4 112.5 127.3 121.6 117.8 136.9 151.1 185.4 474.3

Fertilizers Ton 279.9 316.7 337.2 322.0 336.8 299.0 317.1 270.5 323.9 428.6 825.7

Textile yarns Kg. 10.3 10.3 10.3 11.3 9.8 12.7 7.4 9.0 10.0 9.8 20.3Sq. Mt. 1.7 1.7 1.6 1.7 1.9 2.0 2.1 2.2 2.5 3.3 4.6

Cement Ton 88.3 93.3 94.1 92.2 108.8 109.1 109.2 110.7 108.3 138.6 189.3

Iron & steel 732.4 734.2 748.3 784.0 822.7 894.2 1163.0 1092.0 1031.8 1313.9 2356.4Chemical products 3692.3 2723.4 3937.5 3517.9 3716.4 3516.1 2909.1 3215.9 3297.3 3903.5 4374.4

Thou.Lit. 2327.6 4021.6 6349.7 5233.5 5318.3 3152.4 3385.4 2947.4 3102.3 2025.5 3182.7

Maclinery parts Ton 5685.2 8771.1 8835.9 7971.7 9520.7 10823.5 12056.1 14210.0 14452.2 15441.6 19621.9

Capital goodsMachinery,non-electric Ton 7095.2 6619.0 8750.0 5000.0 10400.0 5238.1 10692.3 13761.9 13125.0 19702.7 18178.6

No. 9151.9 4780.4 3469.9 2690.1 3862.2 3433.4 1110.7 1415.0 1042.3 1034.5 2690.6Machinery, electric Ton 9230.8 9272.7 10250.0 10454.5 12666.7 13166.7 12166.7 15500.0 14529.4 22000.0 48285.7

Thou. 411.8 400.0 307.7 317.1 359.0 300.0 1500.0 928.6 1142.9 833.3 1187.5

Transport equipment Ton 18034.0 7622.1 13347.0 15762.3 4094.0 52811.0 46498.3 62489.5 24927.4 24401.5 21566.7

No. 1608.6 1084.0 722.7 639.0 2317.0 1049.5 1671.5 1050.5 1337.8 7230.6 3803.7


Table 4.8 EXPORT AND IMPORT PRICE INDICES

Rnpees 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974Exports at current prices 364.2 310.7 341.9 314.3 370.0 383.1 397.6 379.0 594.9 777.8 1851.7Exports at constanc 1970 372.0 371.2 382.6 343.8 414.3 420.0 397.6 355.4 488.2 516.5 533.8pricesImports at cuirrent prices 388.9 367.3 333.2 371.1 419.9 376.0 419.9 461.6 635.8 915.8 1756.3Tmports at constant 1970 459.2 435.9 384.9 432.8 426.8 384.7 419.9 427.1 544.7 58i.8 710.2prices

Fxc-.rt priCe iride. 97.9 83.7 89.4 91.4 89.3 91.2 100.0 106.6 121.9 150.6 346.9Import price index 84.7 84.3 86.6 85.7 98.4 97.7 100.0 108.1 116.7 157.4 247.3

U.S. DollarsExports at current prices 76.5 65.2 71.8 65.1 66.6 69.0 71.6 68.5 111.4 142.9 324.7Exports at constant 1970 67.0 66.8 68.9 61.9 74.6 75.6 71.6 64.0 87.9 93.0 96.1Prices and exchange ratesImports at current prices 81.7 77.1 70.0 76.9 75.6 67.7 75.6 83.4 119.1 168.3 308.0Imports at constant 1970 82.7 78.5 69.3 77.9 76.8 69.2 75.6 76.9 98.0 104.7 127.8prices & exchange ratesExport price index 114.2 97.6 104.2 105.2 89.3 91.3 100.0 107.0 126.7 153.7 337.9Import price index 98.8 98.2 101.0 98.7 98.4 97.8 100.0 108.5 121.5 160.7 241.0

Terms of trade 115.6 99.3 103.2 106.7 90.8 93.3 100.0 98.6 104.5 95.7 140.3

For reference:Exchange rate

Rs/US$ 4.7619 4.7619 4.7619 4.8280 5.5556 5.5556 5.5556 5.5325 5.3385 5.4422 5.7031

Table 4.9: ORTGIN AND DESTINATION OF FOREIGN TIADE(in miillions of Rupees)

1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976

ri_gin of imports

Ulntted Kingdom 175.2 98.4 79.1 77.8 99.6 74.4 88.0 101.5 131.0 193.4 253.4 336.3 390.2

Sootih Afric: 32.3 34.6 27.3 30.6 3].4 31.3 37.8 35.4 50.4 78.5 161.1 192.9 237.8

France 17.2 20.9 20.2 20.3 23.8 24.8 29.4 32.6 43.3 63.1 133.4 171.4 244.1

Jalpan 15.6 13.9 14.2 16.8 14.3 14.6 21.8 30.5 49.3 59.8 100.2 356.9 194.5

lran 11.3 11.1 11.4 17.8 12.6 19.9 14.9 22.4 42.1 50.6 148.8 177.3 153.6

tiniited Statos 11.4 12.7 7.5 7.3 8.8 6.0 23.9 31.8 21.6 25.4 87.2 99.5 72.4

A'<stralia 30.6 24.2 2. 28.() 25.7 27.1 30.6 30.2 44.9 4Q.1 83.1 120.6 115.4

Germany 13.7 15.2 19.7 25.9 27.9 17.1 20).5 22.3 36.6 46.1 110.6 132.0 145.5

India 16.3 11.2 9.9 9.4 11.5 10.2 12.8 12.9 16.8 30.6 35.3 57.7 91.2

Other 125.3 125.1 120.0 137.2 165.5 187.8 140.2 142.0 199.9 319.2 646.7 728.0 753.2

Total 388.9 367.3 333.2 371.1 421.1 376.0 419.9 461.6 635.8 915.8 1759.8 I995.3 2397.9

Destination of Exports

United Kingdom 279.5 245.5 275.7 269.2 272.2 260.5 260.4 198.8 339.5 338.6 630.6 1432.3 1226.6

Canada 57.1 28.0 30.9 9.5 44.1 63.2 77.6 101.1 107.7 185.9 640.2 70.5 67.1

United States 5.4 14.1 16.4 15.8 21.6 18.4 21.1 22.3 36.2 65.0 140.8 101.1 103.5

Souith Africa 2.3 11.8 1.3 3.4 6.9 9.5 12.1 15.8 18.9 17.4 24.2 23.7 39.6

France . . . .. .. .. 1.2 1.1 1.3 3.5 14.8 43.7 103.4 162.5

Germany .. .. .. .. .. - 0.2 0.3 ].5 2.6 18.2 30.6 48.6

Other 22.6 14.0 13.3 8.9 9.2 12.4 12.1 22.1 66.5 124.0 288.7 77.3 122.0

Total 366.9 313.4 337.6 306.8 354.0 365.2 384.6 361.7 573.8 748.3 1786.4 1838.9 1769.9


Table 4.10 ANNUAL AVERAGE EXCHANGE RATES

Year US$1.00 = Rs RslOO = US$1' I1.00 = Rs lb 100 = E SDR 1.00 = Rs Rs 100 = SDR

1959-66 4.7619 21.00 13.33 7.50 4.7619 21.00

1967 4.8280 20.71 13.33 7.50 4.8280 20.71

1968-70 5.5556 18.00 13.33 7.50 5.5556 18.00

1971 5.5325 18.08 13.33 7.50 5.5490 18.02

1972 5.3385 18.73 13.33 7.50 5.7961 17.25

1973 5.4422 18.37 13.33 7.50 6 '1878 15.41

1974 5.7031 17.53 .13.33 7.50 6i8576 14.58

1975 6.0268 16.59 13.33 7.50 7.3174 13.67

1976 6.7500 14.81 12.15 8.2g2 ,.u138 12.96

JJ All conversions to US$ in this report use these exchange rates, except. as specifically noted.

Source: International Financial Statistics

Table 5.1: OVERALL GOVERNMENT BUDGETS(in millions of Rupees)

1964/65 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 1971/72 1972173 1973/74 1974/75 1975/76

Current revenue 1/ 231.7 182.2 199.3 232.4 242.6 228.0 259.7 294.1 376.7 515.4 744.9 1075.7

Current expenditures - 185.7 201.9 221.0 232.3 241.6 227.3 250.5 268.2 311.4 534.8 734.3 991.0

Current surplus/deficit 46.0 -19.7 --21.7 0.1 1.0 0.7 9.2 25.9 65.3 -19.4 10.6 84.7

Capital revenue2/ 2.2 42.2 5.5 4.9 2.5 16.0 14.1 1.4 1.0 5.1 45.7 18.3

Capital expenditures 56.4 53.7 56.0 65.1 43.4 57.2 84.4 100.8 127.4 244.9 259.0 423.4

Capital surplus/deficit -54.2 -11.5 -50.5 -60.2 -40.9 -41.2 -70.3 -99.4 -126.4 -239.8 -213.3 -405.1

Overall surplus/deficit -8.2 -31.2 -72.2 -60.1 -39.9 -40.5 -61.1 -73.5 -61.1 -259.2 -202.7 -320.4

Financed by:Foreign grants 4.9 3.7 4.1 15.7 12.3 14.7 9.6 0.8 13.7 2.8 6.7 1.5

External borrowing 11.5 17.7 8.7 19.6 2.4 9.3 11.7 9.4 17.8 38.5 53.2 36.6

Internal borrowing 5.9 11.0 11.4 20.2 3.4 26.0 59.8 103.7 108.9 83.7 306.4 207.9Other intinal trans-actions - -14.1 -1.2 48.0 4.6 21.8 -9.5 -20.0 -40.4 -79.3 134.2 -163.6 -74.4

= increase)

For reference:Transfers from 20.0 12.0 - - - - 4.0 15.0 15.0 - - 80.0

recurrent budget tocapital budget

1/ Excludes transfers to capital budget.2/ Excludes transfers from recurrent budget._/ Includes build-up or run-down of government reserves.


Table 5.2: CENTRAL GOVERNMENT RECURRENT REVENUE(in millions of Rupees)

1964/65 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76

Taxes on income & capital 90.5 37.5 45.7 49.0 49.4 43.1 55.3 61.0 81.8 128.2 197.2 397.9

Income tax:Individuals 87.2) 22.1 27.5 26.6 26.7 24.8 28.9 31.8 40.9 63.3 93.6 137.7Cmpaulies ) 12.0 13.8 18.0 17.6 14.3 23.2 24.7 36.7 59.2 97.6 251.4Social security 1.8 1.9 2.1 2.1 2.2 1.6 1.8 1.9 2.0 2.7 3.0 3.5Succession duties 1.5 1.5 2.3 2.3 2.9 2.4 1.4 2.6 2.2 3.0 3.0 5.3

Taxes on financial transactions 7.2 5.2 6.1 6.7 8.9 8.7 8.1 13.2 16.8 25.1 28.6 32.9

Taxes on gambling 2.4 2.5 2.4 2.4 3.2 3.3 3.3 3.6 4.7 6.5 8.9 11.9

Taxes on consumption & production 201.1 203.6 109.4 118.8 123.3 125.5 139.3 158.3 213.0 283.9 429.4 508.8Import duties 56.2 52.3 56.6 62.2 64.1 63.8 73.8 86.6 107.1 141.6 187.8 260.5Export duties 12.9 15.2 13.4 15.3 14.6 16.8 18.7 19.6 29.9 48.1 129.8 126.1Excise duties 25.1 25.6 27.8 29.4 30.4 30.8 32.6 37.0 59.5 74.9 89.0 94.3Business & professional licenses 2.7 3.9 4.4 4.7 6.7 6.4 6.3 6.7 6.7 8.4 8.4 9.5Taxes on transportation 5.2 6.6 7.2 7.2 7.5 7.7 7.9 8.4 9.8 10.9 12.3 14.4Taxes on tourism - - - - - - - - - - 2.1 4.0

Other 29.5 33.4 35.7 55.5 57.8 47.4 53.7 58.0 60.4 71.7 80.8 124.2

Total 231.7 182.2 199.3 232.4 242.6 228.0 259.7 294.1 376 7 51-5.4 744.9 1075.7

Table 5.3: CENTRAL GOVERNMENT RECURRENT EXPENDITURES(in millions of Rupees)

1964/65 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76

General Administration 24.5 25.7 27.0 27.3 29.2 30.5 36.0 41.5 53.5 70.3 91.8 129.0

Administrative Services 1.2 1.3 1.6 1.4 1.5 1.6 1.8 3.1 4.1 7.3 8.1 14.9

Police & defense 10.3 10.6 11.1 11.6 12.0 13.5 14.9 17.2 19.5 26.8 35.0 56.1

Other general services 13.0 13.8 14.3 14.3 15.7 15.4 19.3 21.2 29.9 36.2 48.7 58.0

Community Services 16.6 16.5 17.3 17.1 16.7 16.9 17.6 18.4 18.9 21.6 36.7 50.5

Maintenance roads & publicbuildings 8.5 7.5 7.9 7.9 7.7 7.8 8.0 7.6 7.7 8.0 12.6 17.8

Domestic water supplies 2.7 3.4 3.9 3.9 3.9 3.9 4.0 4.5 4.2 4.1 11.0 14.3

Sanitation & Sewerage 3.3 3.4 3.3 3.1 3.0 3.1 3.3 3.7 4.0 5.4 7.1 9.6

Other community services 2.1 2.2 2.2 2.2 2.1 2.1 2.3 2.6 2.9 4.1 6.0 8.8

Social Services 76.1 80.2 84.0 90.4 91.2 85.1 93.4 104.0 112.9 266.6 367.6 428.7

Education 25.1 26.1 27.4 29.4 29.8 32.0 35.9 41.0 45.4 66.5 86.4 125.8

Health 16.4 17.7 18.3 18.8 18.8 21.5 24.1 27.4 30.7 44.4 60.9 88.4

Social security 27.7 29.6 30.5 30.2 25.8 25.7 26.5 28.8 29.4 38.4 48.3 70.0

Subsidy on rice & flour - - - - - - - - - 107.0 157.2 121.0

Other social services 6.9 6.8 7.8 12.0 16.8 5.9 6.9 6.8 7.4 10.3 14.8 23.5

Economic Services 18.0 18.0 17.9 20.7 18.9 19.9 21.8 25.1 26.1 36.0 51.1 89.9

Agriculture & forests 7.9 7.7 7.3 8.2 6.5 7.0 7.9 8.6 8.7 12.8 20.0 48.1

Civil aviation & marine services 2.5 2.5 2.7 2.7 2.8 3.3 3.4 4.1 4.4 6.3 8.5 12.3

Posts, telegraphs &telecommunications 5.2 5.1 5.0 5.9 5.8 5.6 6.3 7.4 7.3 10.2 13.1 17.3

Other economic services 2.4 2.7 2.9 3.9 3.8 4.0 4.2 5.0 5.7 6.7 9.5 12.2

Other Expenditures 50.5 61.5 74.8 76.8 85.6 74.9 81.7 79.2 100.0 140.3 187.1 292.9

Transfer to local authorities 5.9 6.4 6.8 6.9 5.8 6.2 6.9 7.0 6.9 17.5 24.4 46.0

Recurrent financial obligations 13.7 16.1 18.3 22.2 42.6 29.7 35.1 35.5 52.7 57.6 76.6 98.9

Public pensions & gratuities 13.6 14.5 14.7 15.8 17.0 17.2 16.2 18.1 19.5 25.0 36.6 42.4

Rodrigues 3.7 3.7 3.7 3.8 4.0 4.1 4.6 5.1 5.8 7.6 12.4 20.7

Other 13.6 20.8 31.3 28.1 16.2 17.7 18.9 13.5 15.1 32.6 37.1 84.9

Transfer to Capital Budget 20.0 12.0 - - - - 4.0 15.0 15.0 - - 80.0

Total 205.7 213.9 221.0 232.3 241.6 227.3 254.5 283.2 326.4 534.8 734.3 1071.0


Table 5.4: CENTRAL GOVERNMENT CAPITAL REVENUE(in millions Rupees)

1964/65 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76

Grants:

B riit4sh. oern-aen4 3. 5 4.1 15.7 10.7 14.7 9.6 0.8 8.7 0.2 0.1 -Other foreign sources - 0.2 - - 1.6 - - - 5.0 2.6 6.6 1.5

Internal borrowing 5.9 11.0 11.4 20.2 3.4 26.0 59.8 103.7 108.9 83.7 306.4 207.9External borrowing 11.5 17.7 8.7 19.6 2.4 9.3 11.7 9.4 17.8 38.5 53.2 36.6Interest on investments 0.5 0.5 2.0 0.7 1.3 0.1 0.4 0.2 - 1.7 7.0 7.7Transfer from recurrent budget 20.0 12.0 - - - - 4.0 15.0 15.0 - - 80.0Other capital revenue 1.7 41.71/ 3.5 4.2 1.2 15.92/ 1 3 . 7V 1.2V' 1.0 3.4 38.7 10.6Total 44.5 86.6 29.7 60.4 20.6 66.0 99.2 130.3 156.4 130.1 412.0 344.3

1/ Includes Rs 40.0 of sale of property.2/ Includes IMP Special Drawing Rights of Rs/14.9, 13.1 and 0.7 from 1969/70 to_l971/7Z,respectively.


Table 5.5: CENTRAL GOVERNMENT CAPITAL EXPENDITURES(in millions of Rupees)

1964/65 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 1971/72 1972/73 1973/74 1974/75 1975176

Agriculture, forests & irrigation 6.6 6.4 10.5 12.0 9.5 13.4 14.0 12.2 10.3 34.0 32.5 35.6Roads & bridges ) 4.7 2.1 0.9 1.0 1.4 2.5 4.0 4.1 2.8 1.4 2.6Marine services & civil aviation ) 3 3.2 2.6 1.2 4.7 8.8 5.2 7.0 7.0 25.2 15.5 37.3Domestic water supplies 2.6 3.6 3.0 3.9 2.7 2.6 6.1 4.7 - -Health 0.8 1.0 9.6 13.8 4.5 0.8 1.8 1.6 1.7 3.2 4.0 3.3Housing 4.1 2.8 2.7 0.6 1.8 0.7 0.2 0.1 0.3 0.3 5.7 8.1Sewerage 3.1 2.2 2.7 3.3 5.9 5.3 9.2 8.7 7.5 7.1 7.1 6.9Education 2.8 3.3 2.7 2.1 1.4 2.2 3.1 1.5 2.3 4.8 10.2 18.2Telecommunications - - - - - - - 1.4 4.6 5.9 6.8 18.0Rural development - - 0.2 1.8 10.8 14.8Development works - - - - - - 8.4 20.4 30.8 36.0 47.7 39.2Rodrigues 1.3 1.4 2.6 4.2 3.9 2.5 3.2 4.9 5.0 1/ 12.2 23.1Other capital expenditures 5.3 7.8 6.4 10.8 1.9 2.1 23.8 5.5 23.3 62.1- 34.8 116.2-/Loans 20.5 17.3 11.1 12.3 6.1 4.4 14.0 13.9 24.4 56.0 70.2 100.1

of which(Development Bank of Mauritius) (3.1) (3.0) (7.1) (7.7) (-) (2.0) (1.0) (6.0) (0.7) (10.7) (19.8) (33.2)(Central Electricity Board) (9.2) (4.9) (-) (2.0) (-) (-) (1.6) (1.6) (7.1) (1.8) (12.5) (15.1)(Tea Development Authority) (-) (-) (-) (-) (-) () () (4.8) (8.2) (11.6) (18.4) (20.0)(Central Water Authority) (-) (-) (-) (-) (-) (-) (-) (-) (1.9) (9.2) (8.7) (6.4)(Other) (8.2) (9.4) (4.0) (2.6) (6.1) (2.4) (11.4) (1.5) (6.5) (22.7) (10.8) (25.4)

Redemption of loans - - - - - 13.0 - 13.0 - - 0.1 -

Total 56.4 53.7 56.0 65.1 43.4 57.2 84.4 100.8 127.4 244.9 259.0 423.4

1/ Includes Rs 21.7 of additional subscription to IMF and IBRD.Z/ Includes Rs 42.3 of IMF Repurchase obligations.


Table 5.6: ECONOMIC ANALYSIS OF CENTRAL GOVERNMENT EXPENDITURE, 1974(in miLLions of Rupees)

Public administrationand defense Education Health Total

Wages and salaries 105 59 42 206

Value added 105 59 42 206

Purchase of goods and services 88 18 17 123

Government consumption 1Q 77 59 329

Interest on public debt 38 - - 38Transfers 246!-/ 1 - 247Subsidies 9 - - 9

Current expenditure 486 78 59 623

Amortization of public debt 26 - - 26

Expenditure of the consolidated fund 512 78 59 649

Capital grants and transfers 59 - - 59Capital formation 110 8 4 122Equity purchases 8 - - 8Loans 63 - - 63

Expenditure 6of the capital fund 240 8 4 252

1/ Includes: Rice subsidies Rs/142 million, Social Security Rs/44 million, Public servicepensions Rs/33 million, Transfers to local government Rs/27 million.

Source: Mission estimates based on financial reports

Table 5.7: ECONOMIC ANALYSIS OF PUBLIC SECTOR EXPENDITURE, 1974(in millions of Rupees)

Central Local Publicgovernment government corporations Total

Wages and salaries 206 19 100 325

Operating surpluses and depreciation - - 55 55

Value added 206 19 155 380

Purchase of goods and services 123 12 80 215

Public consumption 329 31 235 595

Interest on public debt 38 - 5 43

Transfers outside the public sector 220 10 230'

Subsidies outside the public sector - - - -

Current expenditure 587 31 250 868.

Amortization of public debt 26 - - 26

Capital grants and transfers outside thepublic sector 12 - - 12

Capital formaticn 122 12 55 235

Equity purchases outside the public sector 3 - - 3

Loans outside the public sector 2 _ 46 2

Capital expenditure 165 12 101 278

Total expenditure 752 43 351 1,146

Source: Mission estimates based on financial reports, local government budgets, and annualreports of public corporations.

Table 5.8: PUBLIC SECTOR FINANCE, 1974(in millions of Rupees)

Central Local Publicgovernment government corporations Total

Gross revenue 599 47 271 917

Less: Transfers from other parts of thepublic sector - 38 111 149

Net revenue 599 9 160 768

(Con iiiu-pticnt (329) (31) (235) (595)

(Savings) (270) (-22) (-75) (173)

Current expenditure 587 31 250 868

Current surplus/deficit 12 -22 -90 -100

Capital expenditure 165 12 101 278

(Capital formation) (122) (12) (101) (235)

Overall surplus/deficit -153 34 -19.1 -378

Financed by:

-Capi-ta-l -revenut - - 25Domestic resources - 302External borrowing - 42External grants J

Source: Mission estimates based on financial reports, local government budgets, andannual reports of public corporations.

Table 6.1: EXTERNAL PUBLIC DEBT AS OF DECEMBER 31, 1976

(in thousands of US Dollars)

DEBT OUTSTANDING!'

Disbursed Undisbursed Total

African Development Bank 200 6,738 6,938IBRD 9,725 23,245 32,970

IDA 11,036 9,383 20,419Special Arab Fund For Africa 2,700 - 2,700Total Multilateral Loans 23,661 39,366 63,027

People's Republic of China 834 22,201 23,035France 1,720 13,693 15,413

Germany, Federal Republic - 1,270 1,270

India - 3,653 3,653

United Kingdom 20,104 6,541 26,645Total Bilateral Loans 22,658 47,358 70,016

Total External Public Debt 46,319 86,724 133,043

Only debts with a maturity of over one year, repayable in foreigncurrency and goods are included.

Source: World Bank, External Debt Division

Table 6.2: ESTIMATED FUTURE SERVICE PAYMENTS ON PUBLIC DEBTETISTING7AS OF DECEMBER 31, 1976

(in millions of US dollars)

Year Debt outstanding at beginning of year Transactions during the year Dther ChangesDisbursed Total Commit- Disburse- Service payments Cancel- Adjust-

ments ments Principal Interest Total lations ments-

1972 28.9 47.2 42.9 2.6 1.6 1.3 3.0 - -5.91973 27.4 82.6 20.3 4.4 1.9 1.2 3.1 0.5 -1.51974 29.2 99.0 22.7 7.4 2.0 1.6 3.6 0.4 0.51975 34.4 119.7 20.3 13.7 2.1 1.6 3.7 - -10.01976 43.1 128.0 17.7 9.4 1.7 1.8 3.5 - -10.8

1977 46.3 133.0 - 24.4 2.0 2.0 4.0 - -1978 68.7 131.1 - 19.7 2.3 2.9 5.2 - -1979 86.0 128.7 - 20.1 2.6 3.4 6.1 - -1980 103.4 126.1 - 14.3 3.3 3.8 7.0 - -1981 114.5 122.8 - 3.9 3.4 3.9 7.3 - -1982 115.0 119.4 - 2.4 3.7 3.8 7.5 - -1983 113.7 115.7 - 1.6 5.3 3.7 9.0 - -1984 109.6 110.5 - 0.6 4.9 3.5 8.4 - -1985 105.3 105.5 - 0.2 5.4 3.3 8.6 - -1986 100.1 100.2 - 0.1 5.7 3.0 8.7 - -1987 94.5 94.5 - - 5.8 2.8 8.6 - -1988 88.7 88.7 - - 8.2 2.5 10.6 - -1989 80.5 80.5 - - 8.1 2.2 10.3 - -1990 72.4 72.4 - - 6.9 1.9 8.8 - -1991 65.5 65.5 - - 6.9 1.7 8.7 -1992 58.6 58.6 - b.D 1.5 8.0 - --199-3 52.1 DZ.i - 6.3 1.3 7.6 - -1994 45.8 45.8 - - 6.4 1.1 7.5 - -1995 39.4 39.4 - - 6.1 1.0 7.0 - -1996 33.4 33.4 - - 5.8 0.8 6.6 - -

11 Reflects mostly changes in exchange rates

Source: World Bank, External Debt Division

Table 7.1: MONETARY SURVEY

(in millions of Rupees, end of period)

1970 1971 1972 1973 1974 1975 1976 1977

Foreign assets (net) 280.8 268.5 402.6 397.2 769.7 1,136.0 620.1 368.8

Domestic credit 233.5 354.8 382.9 625.1 995.2 1,110.6 1,755.1 2,089.4

Government (net) 23.6 43.7 26.4 79.7 400.9 364.0 597.9 736.4

Private sector 209.9 311.0 356.5 545*4 594.3 746.6 1,157.2 1,353.0

Money 229.6 261.6 376.3 466.6 783.7 993.2 1,098.6 1,036.1

Quasi-mo 231.6 273.8 301.2 413.9 802.0 953.4 985.3 1,077.5

Other items (net) 53.1 87.6 108.0 141.6 179.2 300.0 291.3 344.6

Source: IMF, International Financial Statistics, October 1977

Table 7-2 SUMMARY ACCOUNTS OF THE BANK OF MAURITIUS

(in millions of Rupees; end of period)

1970 1971 1972 1973 1974 1975

Foreign asset (net) 256.6 264.6 397.9 383.4 743.6 1088.0Correspondents 131.0 64.3 124.9 163.8 554.3 327.6Treasury bills 16.1 76.9 106.6 52.3 152.4 470.5Other securities 84.8 82.0 106.1 99.7 17.6 23312SDR holdings 14.6 27.7 45.1 5n 6 17.3 14.3Fund reserve position in-i 13.7 15.2 17.0 -- 42.4

Claims on Government (net) -24.0 -31.1 -98.8 -59.6 - 106.0 145.9Claims on Government 5.2 3.0 33.4 13.7 - 17.6 a7.2Government securities 0.5 16.9 48.8 20.8 7.5 0.7Advances 1.2 1.2 1.2 1.2 1.2 0.4Other 1/ 3.5 -15.1 -16.6 -8.3 2 28 3 2803

Government deposits 29.2 34.1 132.2 73.3 86.4 118.7

Claims on commercial banks 1.4 31.7 31.6 66.4 10.9 4,6

Reserve money 144.9 145.6 217.3 258.3 475.5 653.2Currency in circulation 104.7 126.3 156.3 200.7 314.2 438.1Currency with banks 10.0 9.8 12.8 25.8 42.8 55.6Bankers' deposits 6.2 8.6 30.1 30.9 112.8 134.5Private sector deposits 24.0 0.9 18.1 0.9 0. 7 25.0

Time deposits of official entities 60.5 -70.6 -41-.9 38.0 46.5 60.6

bLjK allocation counterpart - 28.0 41.0 41.0 41.0 41.0

Capital and reserves 9.5 14.5 16.6 19.7 24.7 28.0

Other items (net) 19.1 6.5 13.9 33.2 60.8 163.4

1/ Results from the consolidation of Mauritius Treasury accounts witth tnose of the Bank of Mauritius.

Source: Bank of Mauritius, Annual Reports.

Table7.3: SUMMARY ACCOUNTS OF THE COMMERCIAL BANKS

(in millions of Rupees; end of period)

1970 1971 1972 1973 1974 1975

Foreign assets (net) 24.2 3.7 9.2 13.8 26.1 42,5

Foreign assets 34.8 18.0 17.1 25.3 35.8 54.3

Foreign liabilities 10.6 14.3 7.9 11.5 9.7 11.8

Reserves 34a9 R L7 in'o 4 HnOA

Claims on Gc.errment (net) 47.6 74.8 125.2 139.3 469.7 503.6

Claims on Government 50.1 78.5 127.6 145.4 479.4 518.7

Treasury bills 7.8 1.0 8.7 3.0 144.2 126.2

Other government securl-ttes __2.3 77.5 118.9 42.4 345.2 3..45

Government deposits 2.5 3.7 2.4 6.1 9.7 10.1

Claims on private sector 209.9 311.0 356.5 545.4 594.4 746.6

Loans and advances 177.4 238.6 275.2 388.4 463.5 609.9

Discounts and receivables 28.2 55.1 75.5 141.7 122.8 124.4

Investments 4.3 5.4 5.8 6.4 8.1 9.3

Rediscounts - 11.9 - 8.9 -

Demand deposits 123.8 134.4 201.9 265.0 468.8 530.3

Time and savings deposits 171.1 203.2 259.3 375.9 755.5 892.8

Credit from Bank of Mauritius 1.4 31.7 31.6 66.4 10.9 4.6

Capital accounts 17.8 30.7 31.9 40.0 45.1 53.0

Other items (net) 6.7 7.8 9.1 7.9 -29.5 7.2

Source: Bank of Mauritius,Annual Reports.

Table 7.4: OWNERSHIP OF TIME DEPOSITS

(in thousands of Rupees)

Category of Owner March 70 March 71 March 72 March 73 March 74 March 75

Sugar sector 5,813 9,916 7,958 13,529 16;611 15l,9l8

Other agriculture 3q7 433 366 4,905 1,281 2,200

Other industries 4,408 6,958 7,678 5,610 3,999 9,322

Trade sector 476 1,188 375 1,559 2,060 2,160

Personal & Professional 25,857 35,454 50,841 66,374 83,389 113,698

Public bodies 27,927 31,725 34,913 51,245 56,930 120.816

Financial institutions 8,689 11,701 19,811 23,266 23,105 61,295

Total 73,549 97,375 121,942 166,488 187,375 425,409

Source: Bank of Mauritius.

Table7.5: OINERSHIP OF SAVINGS DEPOSITS

(in thousands of Rupees)

Category of Owner March 70 March 71 March 72 March 73 March 74 March 75

Personal 51,396 66,585 92,602 125,072 177,414 271,378

Professional 653 629 390 996 1,465 1,397

Other 2,817 3,677 4,207 5,597 5,368 13,917

Total 54,866 70,891 97,699 131,665 184,247 286.692


Table 7.6.: SECTORAL DISTRIBUTION OF COMMERCIAL BANKS' CREDIT /

(in millions of Rupees, end of period)

lQ7f 1971 1972 1973 1974 1975 1976

Sugar industry 73.3 116.4 101.9 123.4 31.9 58.9 170.5

Other agriculture 3.2 7.2 9.5 11.7 26.8 26.1 32.7

Other industries 27.5 49.5 72.4 140.7 257.4 353.4 454.6

Trade sector 49.2 56.7 80.8 115.1 133.1 195.3 221.1

Personal and professional 20.7 23.2 30.5 53.9 46.3 64.2 94.3

Public bodies and Government 9.3 13.3 15.6 20.3 7.8 11.9 27.1

Financial institutions 0.8 1.2 1.3 2.7 3.0 9.4 23.3

OtherV/ 9.9 11.9 19.3 13.1 14.9 15.-0 21.2

Total 193.9 279.4 331.3 480.9 521.2 734.2 1,044.8

Sources: Bank of Mauritius, Quarterly Reviews; Bi-annual Digest of Statistics, December 1976.

1/ Excluding foreigr. bills discounted.2! Including loans and advances to stockbrokers.

TABLE7,7: STRUCTURE OF INTEREST RATES

(in percent per annum, mid-year)

1969 1970 1971 19721/ 1974 1975 1976

Lending

Bank of MauritiusBank rate 8 7 6 6 6 6 6

Rediscount facilities for export:Sugar - ) 6 6 6 6 6

Other - )6 1/2 51/2 51/2 51/2 51/2 5 1/2

Commercial banksPrime rate 81/2 73/4 71/2 7 7 7 7

Commercial rate 91/2 9 9 83/4 83/4 9 9

Mauritius Cooperative Central Bank 8 7 3/4 7 1/2 7 7 7 7

Deposits

Commercial banksDeposit accounts: 3 months 5 1/2 5 4 1/2 4 1/2 4 1/2 4 1/2 4 1/2

6 months 53/4 51/4 43/4 43/4 43/4 43/4 43/4

12 months 61/4 53/4 51/4 51/2 51/2 53/4 53/4

Savings accounts 4 4 4 4 4 4 4

Development Bank of Mautitius12-23 months 51/2 51/2 51/2 51/2 51/2 53/4 53/4

24-35 months 6 6 6 6 6 6 6

36 months 61/2 61/2 61/2 61/2 61/2 61/2 61/2

Mauritius Cooperative Central BankDeposit accounts: 3 months 5 1/2 5 4 1/2 4 1/2 4 1/2 4 1/2 4 1/2

6 months 53/4 5.1/4 43/4 43/4 43/4 43/4 43/4

12 months 61/4 53/4 5V4 53/4 51/2 53/4 53/4

Savings accounts 4 4 4 4 4 4 4

Post Office Savings Bank 4 4 4 4 4 4

Mauritius Housing Corporation 8 8 8 8 8 1/2 8 1/2 8 3/4

1/ Between 1972 and 1974, there was no change in interest rates.


TabLe 7.&: CONSUMER PRICE INDICES(1962 100)

Year Urban Rural Whole Island

(Average)

1962 100.0 100.0 100.01963 98.5 98.5 98.5

1964 100.5 100.2 100.31965 102.3 102.0 102.11966 105.0 104.5 104.7

1967 106.6 106.6 106.61968 113.0 114.9 114.11969 115.6 117.6 116.71970 117.6 119.2 118.51971 118.3 119.4 118.91972 125.8 124.9 125.31973 144.0 140.8 142.2

1974 L85.8 181.9 183.6

1975 214.7 207.6 210.6

1976 June 249.9 239.2 243.8


Table 8.1: INCOME DISTRIBUTION, 1961/62 AND 1975

1961/62

Income range Median income Number of persons Estitmated Percentage Cummulative Percentage Cuimulative(Rs/person/day) (Rs/person/day) (No.) total income of persons percentage of of incomes percentage

(Rs) persons of incomes

() (%) (%0 - 5 2.5 662 1,655 13.1 13.1 2.5 2.55 - 10 7.5 2338 17,535 46.4 59.5 26.8 29.310 - 15 12.5 270 12,125 19.3 78.8 18.5 47.815 - 20 17.5 497 8,697 9.9 88.7 13.3 61.120 - 25 22.5 286 6,435 5.7 94.4 9.8 70.925 - 30 27.5 69 1,897 1.4 95.8 2.9 73.830 - 40 35.0 95 3,325 1.9 97.7 5.1 78.940' 120.0 115 13,800 2.3 100.0 21.1 100.0

0+ 6.5 5032 65,470 100.0 100.0 100.0 100.0

19751/

incowe- range Median income Number of households Estimated Percentage of Cummulative Percentage Cummulative(Rs/household/ (Rs/household/ (No.) total income households percentage of of incomes pertage2 weeks) 2 weeks) (Rs) (%) households (X) of incomes

(%) (M)0 - 60 30 13 390 1.2 1.2 - -60 - 100 80 24 1,920 2.2 3.4 0.2 0.2

100 - 150 125 31 3,875 2.8 6.2 0.5 0.7150 - 200 175 46 8,050 4.1 10.3 0.9 ].6200 - 300 250 138 34,500 12.4 22.7 4.0 5.6300 - 500 400 317 126,800 28.5 51.2 14.8 20.4500 - 750 625 261 163,125 23.5 74.7 19.0 39.4750 - 1,000 875 105 91,875 9.4 84.1 10.7 50.1

1,000 - 1,500 1,250 88 110,000 7.9 92.0 12.8 62.91,500 - 2,000 1,750 52 91,000 4.7 96.7 10.6 73.52,000 - 3,000 2,500 19 47,500 1.7 98.4 5.5 79.0

3,000 10,000 18 180,000 1.6 100.0 21.0 100.0

0+ 490 1,112 859,035 100.0 100.0 100.0 100.0

1/Provisional figures for first sixth months only

Source: Based on unpublished data from the Mauritius Family Budget Inquiry, 1961/62 and information provided by

the Central Statistical Office, 1975.

Table 8. 1Chart

ESTIMATED INCOME DISTRIBUTION CURVES1961/2 and 1975

Percentageof income

100

-80

Gini coefficients -601961/62 0.541975 0.50

40

-20

Percentageof households 0

0 20 40 60 80 100

Sources: Mauritius Family Budgat Inquiry, 1961/2Mauritius Family Budget Inquiry, 1975 (preliminary results)Mission estimates

World Bank-16494

Table 8.2: DISTRIBUTION OF PERSONAL INCOME TAX, 1972/73

Range of gross income Taxpayers Gross income Tax Marginal(Rupees) Percent Cumulative Amount Percent Cumulative Amount Percent Cumulative Tax rate

No. of total percent (Rs.mil.) of total percent (Rs.mil.) of total percent (percent)

5,000 or less 2,216 15.5 15.5 9,09 4.2 4.2 0.34 0.9 0.9 3.74

5,001 - 10,000 4,544 31.8 47.3 33,60 15.6 19.8 2,29 6.4 7.3 6.82

10,001 - 15,000 3,234 22.6 69.9 39,59 18.3 38.1 3.17 8.8 16.1 8.01

15,001 - 25,000 2,330 16.3 86.2 44,43 20.6 58.7 5,22 14.5 30.6 11.75

25,001 - 50,000 1,546 10.8 97.0 51,97 24.1 82.8 9,61 26.6 57.2 18.49

50,001 - 100,000 349 2.4 99.4 22,83 10.6 93.4 7,72 21.4 78.6 33.82

100,001 - 250,000 77 0.5 99.9 10,48 4.8 98.2 5,48 15.2 93.8 52.29

Over 250,000 11 0.1 100.0 3,90 1.8 100.0 2.25 6.2 100.0 57.69

Total 14,307 100.0 215.89 100.0 36,08 100.0 16.71


Table 8.3: DISTRIBUTION OF CORPORATE INCOME TAX, 1972/73

Range of gross income Companies Gross income (Mn. Rs.) Tax Marginal(Rupees) Percent Cumulative Percent Cumulative Percent Cumulative

No. of total percent Amount of total percent Amount of total percent Tax rate

5,000 or less 117 23.1 23.1 0.25 0.1 0.1 0.10 0.2 0.2 40.00

5,001 - 10,000 34 6.7 29.8 0.27 0.2 0.3 0.10 0.2 0.4 37t04

10,001 - 15,000 21 /,.l 33.9 0.27 0.2 0.5 0.08 0.2 0.6 29.63

15,001 - 25,000 55 10.9 44.8 1.10 0.6 1.1 0.41 1.0 1.6 37.27

25,001 - 50,000 60 11.9 56.7 2.26 1.3 2.4 0.74 1.8 3.4 32.74

50,001 - 100,000 61 12.1 68.8 4.29 2.6 5.0 0.96 2.3 5.7 22.38

100,001 - 250,000 67 13.2 82.0 9.89 5.9 10.9 2.08 5.1 10.8 21.03

250,001 - 500,000 37 7.3 89.3 12.99 7.7 18.6 2.15 5.3 16.1 16.55

500,001 - 750,000 10 2.0 91.3 5.98 3.6 22.2 1.05 2.6 18.7 17.56

750,001 - 1,000,000 7 1.4 92.7 6.01 3.6 25.8 1.15 2.8 21.5 19.13

Over 1,000,000 37 7.3 100.0 124.66 74.2 100.0 32.14 78.5 100.0 25.78

Tot-al 506 100.0 167.97 100.0 40.96 100.0 24.39


Table 8.4: PERSONAL INCOME TAX SCHEDULEL/

MarginalTaxable income tax rate

(Rupees) (percent)

10,000 or less 10

10,001 - 25,000 20

25,001 - 45,000 30

45,001 - 65,000 40

65,001 - 75,000 50

75,001 - 85,000 60

85,001 - 95,000 70

95,001 or more 75

The following is a sample of the more common allowances

(as revised June 1976):

a) Personal allowance for a single person is Rs 4,500.

b) Personal allowance for a married couple is Rs 8,000.

c) Children's allowances are as follows:

1) Rs 1,500 for a child under 12 years of age;

2) Rs 2,000 for a child between age 12 and 18;

3) higher for older children still in school.

1/ Effective July 1, 1975.

Source: Ministry of Finance

Table 8.5: DISTRIBUTION OF SUGAR LAND_/ - 1974 CROP

Range Miller-Planters Owner-Planters Tenant-Planters Total(Arpents) No. of % of Cumula- % of Cumula-

No. Arpents No. Arpents No. Arpents planters Total tive % Arpents Total tive %

0.01 - 4.99 - - 26,952 34,872 1,265 2,338 28,217 90.8 90.8 37,210 19.7 19.7

5.00 - 9.99 - - 1,755 11,568 166 1,101 1,922 6.2 97.0 12,669 6.7 26.4

10.00 - 24.99 - - 598 8,759 62 970 660 2.1 99.1 9,729 5.1 31.5

25.00 - 49.99 - - 113 3,897 11 359 124 0.4 99.5 4,256 2.2 33.7

50.00 - 99.99 - - 69 4,679 3 155 72 0.2 99.7 4,834 2.6 36.3

100.00 - 199.99 - - 20 2,609 5 774 25 0.1 99.8 3,383 1.8 38.1

200.00 - 499.99 - - 26 8,332 - - 26 0.1 99.9 8,332 4.4 42.5

500.00 and over 21 104,038 5 4,845 - - 26 0.1 100.0 108,883 57.5 100.0

Total 21 104,038 29,539 79,561 1,512 5,697 31,072 100.0 189,296 100.0

1/ Area harvested.

Source: Mauritius Chamber of Agriculture, the President's Report.

Table 8.6: GRADUATED PRODUCER PRICES AND EXPORT TAXES FOR SUGAR, 1974-75 CROP

ProducerSize of Producer Prices Export Tax Tax Rate

(metric tons) (Rs per ton) (Rs per ton) (percent)

20 or less 2,295.05 - Exempt

21 - 75 2,163.96 131.07 6

76 - 1,000 2,138.581V 152.92 7

1,001 - 5,000 2,106.31 174.76 8

5,001 or more 2,062.62-2/ 218.45 10

1/ The price for small planters is higher by Rs 3.55 because of the lower rate of levyto the Mauritius Sugar Industry Research Institute.

2/ Applies to millers. Large planters without mills receive an additional Rs 10.43 per tonbecause of a lower levy to the Research Institute (-Rs 2 per ton)and no liability forthe Special Tax on Milling (Rs 8.43 per ton).

Source: Mauritius Chamber of Agriculture.

Table 9.1 LAND USE, 1972(in acres)

Agricultural land 262,500

(Sugar) (242,100)(Tea) ( 15,400)(Tobacco, vegetables and other

crops ( 5,000)

Forests scrub areas, grass, etc (159,300)

(Forest plantations) (16,740)(Natural forest) ( 5,900)(Savannah, grass, etc) (18,400)(Scrub and other forest) (118,260)

Reservoirs and ponds 2,900

Swamps and rocks 3,500

Built-up areas and roads 32,600

Total 460,800

Source: Based on UNDP-FAO Land and Water Resources Survey, 1965,and updated in the light of subsequent surveys.

Table 9.2: SUGAR PRODUCTION

Area Cane Yield SugarYear Harvested Produced Per.rent Produced

(Arpents)( 1000 m.t.)(m)(nt

1952 165,355 4,097 24.8 468,283

1962 193,772 4,624 23.9 532,817

1963 194,080 5,747 29.6 685,597

1964 195,411 4,380 22.4 518,994

1965 194,924 5,984 30.7 664,403

1966 195,868 4,843 24.7 561,762

1967 192,172 5,814 30.3 638,322

1968 189,254 5,152 27.2 596,549

1969 188,389 5,824 30.9 668,672

1970 190,483 5,120 26.9 576,204

1971 189,283 5,255 27.8 621,087

1972 190,128 6,315 33.2 686,366

1973 191,822 6,243 32.5 718,464

1974 189,296 5,964 31.5 696,786

1975 190,000 4,316 22.8 468,000

1976 192,000 6,402 33.4 690,000

Source: Mauritiu. Chamber of Agriculture, President's Reports and Bi-annual Digest of Statistics

Table 9.3: CANE PRODUCTION

Year Millers PlantersArea Cane Yield Area Cane Yield

(Arpents) (1000 m.t.) (m.t.per arpent) (Arpents) (1000 m.t.) (m.t.per arpent)

1952 76,600 2,360 30.8 88,755 1,737 19.6

1962 98,705 2,767 28.0 95,067 1,857 19.5

1963 100,058 3,515 35.1 94,022 2,232 23.7

1964 99,809 2,615 26.2 95,602 1,765 18.5

1965 101,287 3,619 35.7 93,637 2,365 25.3

1966 101,666 3,004 29.5 94,202 1,839 19.5

1967 101,178 3,568 35.3 90,994 2,246 24.7

1968 99,782 3,113 31.2 89,472 2,039 22.8

1969 98,779 3,564 36.1 89,610 2,260 25.2

1970 101,107 3,181 31.5 89,376 1,939 21.7

1971 101,897 3,433 33.7 87,386 1,822 _20.9-

1972 102,808 3,903 38.0 87,320 2,412 27.6

1973 103,459 3,854 37.3 88,363 2,389 27.0

1974 104,038 3,864 37.1 85,258 2,100 24.6

1975 104,000 2,783 26.7 85,000 1,533 18.0

1976 106,000 3,977 37.6 86,000 2,425 28.2

Source: Mauritius Chamber of Agriculture, President's Reports and Bi-annual Digest of Statistics

Table 9.4: SUGAR PRODUCTION AND DISPOSAL(in thousands of metric tons)

Stock at (of which Local Stocks atYear beginning Ptlfiuction Exports U.K.) Consumption end of

of year year

1952 .. 468.3 448.9 .. 19.4

1962 33.0 532.8 514.7 (415.5) 27.3 23.8

1963 23.8 655.6 580.3 (454.4) 27.0 102.1

1964 102.1 519.0 560.0 (407.7) 28.1 33.0

1965 33.0 664.4 578.4 (421.1) 28.3 90.6

1966 90.6 561.8 570.5 (431.6) 29.1 52.8

1967 52.8 638.3 531.4 (478.4) 29.7 130.1

1968 130.1 596.5 578.0 (420.9) 29.3 118.8

1969 118.8 668.7 591.6 (386.1) 31.0 164.5

1970 164.5 576.2 581.6 (408.6) 31.9 127.3

1971 127.3 621.1 568.4 (409.4) 33.4 146.1

1972 146.1 686.4 613.9 (394.2) 33.3 185.3

1973 185.3 718.5 697.6 (386.1) 35.8 170.8

1974 170.8 696.8 685.3 (407.3) 33.7 149.2not available

1/ Stocks at end of year equals initial stocks plus production less local consumption and exports.Slight differences are caused by rounding and storage differences.

not available

Source: Mauritius Chamber of Agriculture, President's Report.

Table 9.5: ECONOMIC CONTRIBUTION OF SUGAR, 1974


Agriculture Manufacturing Trahsport Distribution Total

Wages and salaries 175 62 20 15 272

Operating surpluses 1018 179 - - 1197

Consumption of fixedcapital 15 47 11 - 73

Value added at factorcost -1208 288 31 15 1542

Indirect taxes 5 1 1 1 7

Value added at marketprices 1213 289 32 16 1549

Intermediate consumption 138 68 27 3 237

Gross output 1352 357 59 19 1786

/ Sugar export tax is considered a direct tax on the operating surplusesof planters .

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