Economic Challenges ahead for Mauritius: The six commandments

Both economists Pierre Dinan and Arvind Nilmadhub believe that Mauritius has the potential to do better. However, they both agree that there are a series of challenges that Mauritius need to overcome:

Modernisation of existing sectors 

Pierre Dinan states that it is high time Mauritius adapt itself to the new world situation. “For instance, the sugar industry must start focusing on renewable energy. As compared to Asia and especially Bangladesh, we have become rather costly when it comes to EPZ. We have to improve our productivity and produce higher quality goods for exports. In the tourism sector also we must diversify our activities. The Europeans may like our sea but it is not necessary that the Chineses or Indians have the same likes. In this case, Mauritius needs to develop more inland attractions like museums, religions places and towns.” He further explains that with the losing benefits of the DTA, the financial sector needs to bring more specific services for investors. “ICT sector is already suffering from lack of qualified people. So there is need to attract more professionals in this sector.” 

Identify new sectors

Pierre Dinan recalls that along with developing existing sectors, Mauritius needs to identify new sectors as well. “Mauritius should be able to better use its sea resources. We have our territorial zone but still unable to develop it. Why are we still importing fish from other countries? It is a great challenge for Mauritius to develop this area.” 

Demography

Another challenge for Mauritius is to deal with its ageing population as highlighted by Pierre Dinan. “It is very good that our people are living longer. But economically, there are some impacts. First, the number of pensioners is rising. On the other hand, the number of births is decreasing. So there will be a time where there will be more elder people than youngsters. The big question that remains is who will constitute our workforce.  Our biggest resource is our people. If the people itself are not able to work, then how the economy will grow? Proper measures are not being taken. We are having recourse to foreign labour. If the numbers of immigrants surpass the number of residents, this can create social tensions as year passes,” he adds.  

Sustainable job creation

For Arvind Nilmadhub, one of the most important factors for Mauritius is sustainable job creation.  “The Mauritian economy is consumption driven.  This means that positive change in consumption brings in economic growth.  However, increase in consumption is possible only if there is sufficient disposable income for consumers and there is sustainable job creation.  We have witnessed, over the years, diminishing disposable income of consumers which has led to a fall in consumption.  Regarding sustainable job creation, our economy has become a services-oriented economy and it is important to create and maintain sustainable jobs in these sectors.  However, the Government of Mauritius is still focusing on property development and construction projects to bring more employment. Moreover, the Government aspires to make Mauritius a high income country.  The road to making this a reality is very bumpy ahead. Unless we solve these issues of sustainable job creation and falling disposable income, we will never become a high income country!

Commercial partners 

Our commercial partners are also important for the success of Mauritius, says Arvind Nilmadhub.  “Europe is going through some tough times and there are several events which will affect our affect our economy this year, namely the Presidential elections in France and Germany, Brexit and Greece economic situation. We have already seen a wave of nationalism in the US and now this wave is getting the shores of Europe.  Government policies in USA and EU will definitely impact our economy.  Lately, we have seen that the Government of Mauritius is favouring India as its partner compared to China.  This game of geopolitics can play negatively on the Mauritian economy in the long run.” 

Change in mentality

Pierre Dinan explains that it is time for people to change their mindset. “Many people believe that today our economy is not good. But these people have not seen real crisis that existed before. Many of us tend to believe that the manor will fall from the sky. We have to fight for ourselves. We must exploit our entrepreneurial skills, think out of the box and be more productive to progress.” 

Finance Sector: Dynamic but…

Swadicq Nuthay, economist, is of view that the finance sector is very dynamic and Mauritius has indeed to face various challenges. Some of the main challenges as highlighted by Swadicq Nuthay are:

More regulations

“Developed countries have established new regulations for control in the finance sector. Undoubtedly, Mauritius is under pressure. Mauritius has to adapt itself to new regulations like FATCA, BEPS (base erosion and profit shifting) and CRS. Mauritius wants to position itself as an international financial centre for the African region. In this view, it has to work according to all the international standards and regulations. Moreover, changes in the Double Taxation Treaty with India will also have an impact on Mauritius. If other countries follow the steps of India, Mauritius will be under more pressure.”

Setting up of an ecosystem

Another main challenge for Mauritius is the setting up of an ecosystem. “Mauritius should aim to become a centre of substance. In the past, Mauritius has concentrated on low value and back office activities. It should now aim to move towards higher value added services with more inputs, knowledge and skills. It should be able to encourage structured deals. It should be able to create a proper eco system and financial centre which will be known on international platform. Mauritius needs to create its visibility with proper infrastructure. This is not easy.”  

Lack of professionals

According to Swadicq Nuthay, the finance sector requires lots of competences in the field of legal, finance and accounting. “There is a lack of skills in the field. We need more competent professionals in the field of investment banking and structuring finance. Mauritius has a real challenge to attract local and foreign talents to work in the finance sector.” He further explains that Mauritius needs to bridge the gap between universities and business. “Our students are too academic nowadays. There is need to train them according to the demands of the sector if we want to progress further.”

Being a dynamic sector, professionals in the finance sector need to update themselves on a regular basis. “Each day, around the world, new tools and techniques are being developed by experts, so our professionals also need to be updated. On-going training is needed for all the professionals including regulators.”  

Tourism sector: All is not rosy

Managing Director of the Tourism Business Intelligence, Sen Ramsamy argues that there are a numerous challenges facing tourism in Mauritius. He lists the challenges as follows:

Low tourist expenditure pattern

“This is one of the principal challenges for Mauritius. The performance of tourism is measured primarily by number of tourist arrivals. This is very misleading. It is better to have fewer tourists who spend lots of money than to have a large number of visitors spending peanuts. Unfortunately, many people tend to be satisfied with mere volume whereas the focus should be revenue in forex. According to the Bank of Mauritius, tourist earnings were estimated at Rs 55.9 billion last year.  This represented an average of only US$ 117 per tourist per day and it included spending on tourist accommodation, food and beverages, airport transfers, excursions, shopping etc. And this figure is by far lower than that of Seychelles, Maldives and even Sri Lanka. It is clear that Mauritius is lagging seriously behind in terms of real tourism benefits accruing to our national economy. If we had managed to develop and enhance our tourism offer in line with new trends, and if we use the same average tourist expenditure as in Maldives, Mauritius should have reaped more than Rs 100 billion of tourism earnings last year.” 

Tourist safety and security 

“Tourist safety and security is also a major issue, which should be tackled urgently with more proactive measures, rather than being hopelessly reactive all the times. As former Director of the Tourism Authority, I started with a series of bold actions in this regard. But these were sabotaged by a bunch of irresponsible and archaic people in Government who have no vision and absolutely no clue of what tourism is all about. They are only for the perks. The quality of services to tourists in Mauritius is also a matter of serious concern if we measure by international standards. Whereas in the past, the quality of services in hotels and on board our national airline used to be a world reference, today our legendary smile has become commercially suspicious. On many scores, Mauritius tourism has been taken over by its competitors and we have a lot to catch up, if at all we can, with whatever we have.” 

More experts in the field

Sen Ramsamy believes that Mauritius can still make up for the many missed opportunities in tourism but it depends on the vision and the leadership for this industry.

“Foremost, we need to have tourism professionals, especially from the young generation, to propel this industry to new heights. Unfortunately, this is not the case at present and I fear that we may be going from bad to worse. In spite of perceptions, tourism is highly technical. But in Mauritius, everyone is an expert in tourism over-night. These are mostly excited about tourism promotion and marketing but for the glamour. The technicalities of tourism are hardly understood and managed professionally with a sense of vision, as do most of our competitors. The new Minister of Tourism has still not announced publicly his vision and strategies for tourism development, nor do we have any idea of his new policy orientation. I am sure he will do so soon but in the meantime, the industry seems busy moving in different directions to nowhere.”

New business model 

“Mauritius tourism urgently needs a new business model with a new vision to 2030. In fact, since independence, the former leaders had successfully traced out a sound vision for this industry and which we are still stretching beyond its capacity as tourism development model in 2017. It is but time to define a new vision for tourism for the next 50 years, but with carefully worked out strategic plans for the short, medium and long term. We are diversifying our market base from the Europe to China, India, Africa, and Middle East but our product has remained singularly euro-centric. There is a mismatch between our tourism supply and new demand trends. Tourism in Mauritius needs innovation. The new generation of travellers across the world is very demanding as a result of information technology and social media. We must be able to anticipate demand, understand the pattern of tourism growth, know who will be the future world travellers, where will they prefer travel to and why, what will be their expectations and how prepared are we to face the global shift in balance of power and the new economic and geopolitical order.”

Private sector: untapped potential

Ahmed Parkar asserts that the private sector in Mauritius has immense potentials but unfortunately it faces real challenge. He numerates the following challenges:

Create value added industries

“Mauritius has always diversified in its services. But now it has to diversify further so as not to remain stagnant. For instance, we are already in the agriculture. So why not diversify further toward bio farming. This will bring added value and decrease in import of food. Another example is introduction of solar power which is a long term investment. It is a challenge to make all the private sector think in this direction.” 

Lack of skilled labour 

 “Labour has been an issue in the country for long and a real challenge. All the sectors suffer from lack of skill labour. Mauritius already has limited resources and now has to deal with lack of labour. Instead of viewing immigration has an obstacle, Mauritius need to encourage it. Many countries around the world are encouraging people to work in their country as for them it is a value added opportunity to progress. Mauritius also should adopt the same attitude.”

ICT sector: Era of innovation

Director of Whitefield Business School, Subheer Ramnoruth explains that IT remains the sector where the challenges in ongoing for those that do not evolve or adapt. The various challenges as discussed by Subheer Ramnoruth are as follows:

The need for change and innovation 

“The rate of growth, innovation and development of technology means that those who fail to learn how to surf along the technology wave will definitely drown. In practical terms you can see it. In this era where billions of pictures of being clicked, you would imagine that the photography / camera industry would be one of the most lucrative industry to be in. Yet, the mogul of this segment has collapsed: Kodak! It is so simple to see why. Because they did not anticipate or accept that technology would revolutionise the way we work. The main challenge is not to adapt to technology. That is also not good enough. Look at Nokia for example, they did try to adapt, but they fail because their timings were not correct. By the time they realised that they needed to change, it was too late. They were too far behind competition.”

Adapting to new trends 

“We have been mostly exposed to IT systems that execute predefined instructions but lately we saw the emergence of IT systems that learn and adapt to changing environment. But its applications have been fairly limited. However, we shall see further development of this trend in 2017. Fuelled by big sets of data to feed their algorithms, the “Artificially Intelligent” IT systems of the future shall be able to learn from its environment, adapt to changing circumstances and perform almost autonomously. So in 2017, we can expect to see more invasions of “smarter” and intelligent machines in our landscape.  Another example is the field of graphic design which shall experience a gradual shift from virtual reality to augmented reality. For example, software will allows engineers to see virtual wires through a real life wall on a construction site. That’s pretty cool and very useful stuff!” 

Security 

He believes that one should not neglect the element of security. “Not neglecting security, with more devices being connected and the growing importance of the “internet of things” the security threat to our data is on the rise and we shall be even more exposed. This is set to continue, despite our best effort to foil the plans of the malicious cyber criminals. But the million dollar question is: how many IT professionals do we have in these above mentioned fields; how good are we at managing big data to enable our system to be more intelligent and autonomous? Are we really equipped to outperform cyber threats?” 

Mauritius is still at early stages 

“There is still much room for progress in this industry and we are still at the early stages of the IT industry development life cycle. But this is both good and bad news. Good news because if there is still scope for work to be done, it implies that there is room for economic growth, development and creation of new jobs. On top of that, we have Africa next door, which shall have the largest population of young pros - one of most lucrative market segment and potential workforce for the IT Industry - in a few years time. And the bad news is that, should we fail to embrace and adapt to the rate of technological progress, the gap will keep on widening between Mauritius and the leading nations. And not to forget, the giants of this industry or the trend setters, are way ahead of us and they have also set their eyes on Africa.”