Mauritius: Getting it right
In 1961, things were not looking good for the small Indian Ocean island of Mauritius. A British colony at the time, its economy relied almost entirely on sugarcane. Unemployment was rife and its multiethnic population was growing fast. So dire were its prospects that Nobel Laureate for Economics, James Meade wrote: “It is going to be a great achievement if [the country] can find productive employment for its population without a serious reduction in the existing standard of living. The outlook for peaceful development is weak.”
Fast-forward 50 years and Meade’s prediction looks comically offthe-mark. As Joseph Stiglitz, another Nobel Prize-winning economist, wrote in 2011: “Mauritius…is neither particularly rich nor on its way to budgetary ruin. Nonetheless, it has spent the last decades successfully building a diverse economy, a democratic political system and a strong social safety net. Many countries, not least the US, could learn from its experience.”
In the African context, the island country has become a beacon of good governance and best practice, topping many rankings within the continent, including successive versions of the World Bank’s “Doing Business” report, the World Economic Forum’s “Global Competitiveness” report and the Mo Ibrahim Index of African Governance. Often, it has even surpassed more developed countries (see table).
So how did this small mono-culture economy become the place to do business in Africa? The answer is deceptively simple: political commitment. Jean-Pierre Dalais, executive director of Ciel Group, one of Mauritius’s largest conglomerates active in textiles, financial services, agribusiness and more, says that following the 1970s and 1980s—which were marked by high unemployment, restrictive economic policies and punishing taxation—the country had no choice but to reform. “We needed to excel in
corporate governance and doing business to attract people,” he says. “For our country to grow, we also needed to go outside, and for that we needed structures in Mauritius to have a business base.”
Mr Dalais says that the country’s experience in economic diversification in the 1990s—first through Export Processing Zones (EPZs), then tourism and the financial sector—was formative in fostering good relationships between the government and the business community. The collaboration is still thriving today.
Santiago Croci Downes, senior private sector specialist with the World Bank’s Doing Business project, says that this shared interest is evident from the project’s records. “In the last eight years, we have recorded reforms almost every year and the level of activity has been really intense,” he says. Take “enforcing contracts”, for instance: Mauritius implemented reforms to improve this indicator in 2010, 2011, 2014 and 2015. “When they decide to reform, it’s not just a one-off: there is a middle- to longterm vision to improve the business environment,” he says.
Mr Dalais says that the country’s initial forays into diversification also provided valuable lessons into what makes a good business environment. “Gradually we understood that the only way forward was to be open and light,” he says. The result: the island’s economy is now one of the most liberalised in the world. It has a good, flexible Companies Act, and it is easy for companies to invest and divest, as well as to recruit and obtain permits, he explains. “We really have full movement of human capital and capital and that’s really important.”
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