Doing Business 2017: A wake-up call ?

Mauritius ranks 49th in the Doing Business 2017 report released by the World Bank on Tuesday. This spectacular fall from the 32nd position achieved last year has stirred up a hornets’ nest, with business leaders, bureaucrats and economic stakeholders trying to identify the causes. Is the country gradually losing its shine in global rankings?

Mauritius at the 49th place in a list of 190 countries after nearly a decade of economic reforms! Indeed, stakeholders could hardly digest the news, the more so when the recent Budget 2016/2017 laid great emphasis on Business Facilitation issues. A glance at the ranking trends over the past few years reveals that the decline actually started in 2011, followed by a couple of stable years and then a rapid plunge in 2014 and 2015. 

Readers will recall that the country embarked on a vast reform program in 2006, with the promulgation of the Business Facilitation Act, against the backdrop of global competition ending trade preferences. Various schemes such as the Export Processing Zone, the Pioneer Status, etc were abolished, in favour of a level playing field for all enterprises. The economy was at the same time opened further to foreigners, mainly investors and professionals, and real estate buyers. 

In 2010, a second wave of reforms took place with the objective of rebalancing growth. During the following four years, Mauritius remained more or less in the Top 20 of the Doing Business Survey of the World Bank, until the first significant decline in 2014, from the 20th to the 28th place. In 2015, we dipped further, losing four more places to settle at the 32nd position. In 2016, the 49th rank is a big blow to the country, even though we remain first in Africa. Interestingly, Rwanda, which ranks 56th worldwide, comes second in Africa. This emerging African country has had a remarkable performance, moving upwards from the 62nd position it occupied in 2015. 

Most observers are of the view that the timing of the survey has played against us, since it was carried out a few months before the Budget speech. Furthermore, the survey has added two new indicators in this year’s edition, and Mauritius has fared poorly in them. 

Nikesh Patel: “Rwanda can inspire us”

The Honorary Consul of Rwanda, Nikesh Patel believes “the ranking is testimony to the fact that the Rwanda growth and development story is not a fluke or something that came by chance, but is the result of a concerted and focused effort by all stakeholders (citizens, business, Government) in the country and being guided by the Vision 2020 strategy. If one looks at previous World Bank reports (and reports from other bodies like the World Economic Forum etc), one will see that from around 10 to 15 years ago, Rwanda started on its upward trajectory, and has not stopped since. So the fact that it is now number 2 placed in Africa for Ease of Doing Business should not come as a surprise. Yet, on the other hand, for the country to have shot up so quickly after the devastating genocide of 22 years ago when it was totally destroyed is nothing short of remarkable.

Rwanda is progressing fast but has much more to achieve. The country is moving well and in the right direction along that road.” When asked what Mauritius could learn from Rwanda, Nikesh Patel replies that “The Mauritius story and the Rwanda story are two different stories due to different historical, socio-economic backgrounds of the two countries. Neither can be equated with the other in any meaningful way. What I can say is that the success factors for Rwanda are good governance, strong leadership, a well defined and planned strategy and goals that take in all stakeholders, and then executing the various components of the strategy in a timely manner to achieve the goals. If there is anything to learn, it is the importance to get the buy in and commitment of all stakeholders in a common country strategy and vision, and then execute.”

Dr Bhavish Jugurnath: « Need for a coherent strategy »

“It is a fall from grace,” says Dr Bhavish Jugurnath, Financial Consultant. “The decade-long improvement of Mauritius comes to a halt this year losing 17 places in the 2017 Ease of Doing Business report by the World Bank, plummeting from the 32nd to the 49th place. Although the country still ranks first in Africa, this will surely put a dent in foreign investors’ willingness to set up on the island. Small improvements in the basic factors for competitiveness namely institutions, infrastructure, and higher education are offset by declines in the efficiency of labour and the financial market. I believe this will negatively direct impact on FDIs in Mauritius which may decrease the aggregate demand of the country in the short run, via productivity decrease and technology transfers.

FDIs have created tremendous opportunities for Mauritius economic development and helped to boost the performance of local firms as well as the globalisation of some of them. This has undeniably raised Mauritius stature among developing countries. Mauritius needs massive investment to sustain high quality economic growth, particularly in the financial services, energy and infrastructure sectors. Policymakers are looking at FDI as the primary source of funds. It is important to keep in mind that FDI on its own is not a panacea for rapid growth and development. What Mauritius needs is to put in place a comprehensive development strategy, which includes being open to trade and FDI. This should go a long way in fulfilling the ultimate goal of permanently eradicating poverty. In terms of the Ease of doing business report, as the country transitions moves up the development ladder, more needs to be done by policymakers to unlock the areas of competitiveness conducive to a knowledge-driven economy: higher education, especially its quality; the use of ICTs and ability to absorb new technologies, where it has steadily declined over the past decade and the capacity to innovate, about which business leaders are particularly concerned and an inadequately educated workforce.”

Prithviraj Fowdur: “The results depict the prevailing mood”

Having had a long career as top official in the public service, Prithviraj Fowdur, economist, is very familiar with World Bank Reports. He says the latest ranking comes as a surprise, but he thinks this poor result can be explained by the mood prevailing in the country at the time the survey was carried out. “The causes amongst others could be political instability. We experienced over the last two years, situations of bad governance, leakage of bank secrets, zero public sector project launch, tight credit control by bankers, decrease in savings following sudden drop in interest payable by banks, etc. The institutions responsible for the issue of operational/development permits were so sluggish… Civil servants are very scared to push things due to high probability of answering to charges of ICAC for no solid reasons... In short the Civil service had all the excuses not to perform! This reflects on the government machinery which went on slow motion mode.... Most of them on parking mode! There was also a disconnect between the elected members of Parliament and those who voted them to power ....All these translated into the ‘mood’ of those surveyed by the World Bank, hence the results as we know…”