Sound macro-economic policies, backed by the stability provided by a democratic political system and a cohesive society have contributed to the strong economic performance in Mauritius over the past two decades. The country has thus been able to develop from a low-income to a middle-income one. It is worth noting that the GDP growth rate for Mauritius in 2006 was 4.7 percent.

Agriculture, manufacturing, tourism and financial services constitute the main pillars of the economy. Sugar production fuelled growth in the 1970’s. During the 1980’s and 1990’s, the economy became increasingly diversified as manufacturing and tourism gained momentum and the relative importance of sugar subsequently declined. In consequence, the share of agriculture in real GDP decreased, whilst the services sector, dominated by tourism and financial services, has emerged as the most important sector of the economy, accounting for around 51.7 percent of real GDP. Services exports generate more than one-third of total foreign exchange earnings, with tourism contributing the largest and increasing share.

However, the recent EU decision, in the context of the reform of its sugar regime, to impose a reduction of 36 percent on ACP sugar prices has put the Mauritian sugar sector under severe pressure. In such instances, Mauritius will no longer be able to maintain its preference margin on its export market and benefit from the remunerative price under the Sugar Protocol. Being a small island economy with its numerous inherent weaknesses, Mauritius’ economy will be jeopardised if no flexibility and support is provided to such small island economies.

The rapid growth of the manufacturing sector in Mauritius has depended mainly on exports of textile and clothing to its preferential markets like Europe, where the country has enjoyed duty and quota-free access under the Lomé Convention and the Cotonou Agreement. However, the dismantlement of the MultiFibre Agreement and trade liberalisation has been a severe setback. The export structure has recently registered some change as a result of the adoption and extension of the Africa Growth and Opportunity Act (AGOA) intended to increase exports to the United States.

However, the refusal of the United States to extend the third country fabric derogation to Mauritius is undermining the Mauritian textile and apparel sector. The dismantling of the Multi-fibre Agreement at the beginning of 2005 has already exposed the country’s textile sector to the fierce competition emerging from big low-cost developing countries such as India, China, Thailand, etc. This has resulted in the closing down of factories and the resulting losses in employment and government revenue.

Mauritius is now poised to become a cyber-island and to serve as an info-communications hub in the region. In fact, it is the Government’s declared policy to make ICT the fifth pillar of the economy alongside sugar, textiles, tourism and financial services and to transform Mauritius into an Information society. The ICT sector is viewed as an important engine of growth for wealth and job creation and Government has provided various incentives in view of developing Mauritius as an attractive investment location for ICT.

Besides, following the Government’s objective of developing Mauritius as a competitive outsourcing destination for ICT and BPO/ITES, the ICT industry has evolved towards exports-oriented services. An increasing number of foreign ICT companies have set up their development centres in Mauritius to conduct software development, multimedia, BPO and ITES activities for the export market.

Mauritius is also engaged in the creation of a sea food hub. The Mauritius Exclusive Economic Zone stretches more than 1.8 million sq. kms and abounds with opportunities for lagoon based intensive farming and high seas extensive farming using modern, high-tech floating cages technology. More importantly Port Louis is now ready to act as a platform for fish landing, processing and re-shipment. In this regard, the appropriate legal framework and infrastructural facilities are being put in place for the above activities, and for servicing of fishing vessels.

Mauritius has also taken positive steps in promoting itself as a platform to deliver on emerging services. It has embarked on initiatives to position itself as a knowledge hub through the creation of centres of excellence. In so doing, it is welcoming high-level institutions to establish presence on the island. Moreover, the country also envisages exporting its services in this sector in the region under the terms and conditions of existing specific protocols.

Mauritius is now at a crossroad. It faces numerous challenges, particularly due to the changing international environment, including the erosion of preferences, the rising freight charges and the consequential increase in competition. In response to these challenges, Mauritius has been diversifying its markets and promoting the production of capital-intensive and higher value added goods. Moreover, a significant amount of labour-intensive activities have been delocalised to neighbouring countries in the SADC and COMESA regions.

In its recent budget in June 2006, Government has announced major reforms in areas of economic restructuring, investment and business environment, fiscal policies and social justice. The Budget laid the basis for the launching of a Comprehensive Economic Reform Programme which is based on the key principles of openness, competitiveness and transparency. The objective is to give global perspective to our outward looking strategy with a view to opening our economy to investment, foreign talents, know-how, ideas and technology. Accordingly, Government has also encouraged the private sector to work towards joint ventures with companies established in the region. However, such reform process involves heavy transition and restructuring costs, especially for small economies like Mauritius.

Accordingly, Mauritius has been very forceful at the level of the WTO in arguing for members to consider the specific problems encountered by small economies and find adequate responses to the trade related problems to enable them to integrate the multilateral trading system while backing up the necessary economic resilience. Besides, Mauritius is also playing an increasingly important role in the EPA negotiations, and in the regional context of COMESA and SADC.

However, it is important to note that despite many years of arduous negotiations, there are still some important unfinished business with respect to the SADC Trade Protocol, in particular in the area of Rules of Origin. Moreover, progress has also to be achieved in the elimination of Non-Trade Barriers. These constraints have to be addressed for the Trade Protocol to be fully effective in generating intra-regional trade. There is a laudable initiative to put in place a mechanism for SADC cooperation in standards, quality assurance, accreditation and metrology. Equally, industrial cooperation should receive high priority in SADC. In this context, the establishment of a Regional Industrial Development Forum to deliberate on industrial issues is most welcome.

In keeping with the philosophy of enlarging economic integration at continental level there would need to be convergence on the trade agenda among the different economic blocs in the region. This would facilitate the integration of our economies in an increasingly liberalised trading environment.

M. DULLOO
Minister of Foreign Affairs, International Trade and Cooperation