The notion of a paradigm shift has now become part of the thinking process among all those involved in imagining the future of Mauritius. The credit for first pointing out that the economic and social structure of Mauritius was going through a ?paradigm shift? accrues to Manou Bheenick who was then the Director of the Economic Planning arm of government. That was more than twenty years ago.

Later on when he became the Minister of Finance in the first Navin Ramgoolam government, Manou Bheenick came up with a budget which was faithful to his conviction about the paradigm shift. The rest as we say, is history. There was such a barrage of protests against the proposed budget that it had to be withdrawn and a new budget was introduced in Parliament.

Although one may still find some faults with the measures proposed in this now ?infamous? budget, there is growing agreement that the thrust of the measures announced, had they been applied, would have gone a long way in starting to put in place much needed structural reforms.

These comments are made, not in a spirit of crying over spilt milk, but rather as a reminder that what looks like ?heresy? at some point in time, may well turn out to be part of ?conventional wisdom? at a later stage. And of course, it is easy to be wise after the events.

Since then much water has flown under the bridge and although the vocabulary may have changed ? Economic Transition (JEC 1999), the new economic model, or more recently Percy Mistry?s admonitions, are concepts that are now being used to describe the inevitable fundamental shifts in the economic parameters of Mauritius.

We have, in previous articles written here for the Mauritius Chamber of Commerce and Industry, articulated the arguments for a new approach to economic and social development in our country. Basically we have argued that the new global environment translates into the fact that we are now moving away from a preferential market access and tariff protection based economy to one, which will need to integrate the competitive global economy on a level playing field.

In this article, we intend to write more on how the ?paradigm shift? impacts on the nature of the public-private partnership, which has been the hallmark of our erstwhile economic success. We shall argue that the shifts in the economy are so fundamental that mere tinkling with the existing model will not even begin to provide the kind of synergy, which is required for a successful partnership between the public and private sectors in the new context.

Many theorists, influenced by the prevailing dominant neo liberal ideology, would question the very idea that governments can play any role in the development of policies and actions which contribute to economic development and growth.

While subscribing to the general view that the market forces will have an increasingly more important role in achieving allocative efficiency of resources in a more ?open? economy, we believe that it is as important for governments in developing countries to maintain some ?policy space? if they are to avoid the kind of economic dislocations which hit the East Asian economies at the end of the last decade.

This is especially true in Mauritius where the model of economic development of the country is nearer to the East Asian development path than to other developing nations. Sociologist Peter Evans described the role of the state in these East Asian countries as possessing ?embedded autonomy?. The autonomy permits governments to set national goals and to discipline private sector behaviour. ?There is a delicate balance between personal relationships, which foster information flows and create trust, and autonomy, which allows the government to pursue a broad-based social agenda.?

We start from the premise that public-private partnership is still a necessity for a small open economy like Mauritius, especially with its rich and successful history of such a partnership. We surmise that what is at issue when revisiting its nature and content, is how to rebalance the level of autonomy of the State and the functional relationships with the private sector which are beneficial to the synergy which is being sought.

The new partnership will also be expected to deliver on the new demands emanating from the inevitable need to integrate the global economy at the least economic and social cost. It is very interesting to note that the critiques of the very idea of public-private sector partnerships are not necessarily based on the inevitable failure and inherent weaknesses of the State alone. For many scholars, in this association the State?s intervention in the economy generates rents (excess profits) and the private sector ?partners? engage in collective actions to secure these rents.

Economic reforms tend to concentrate the costs of these on the actual beneficiaries of state intervention and disperse initially uncertain benefits to a broad range of groups. Hence according to this school of thought, the clear losers will not challenge the prevailing arrangement that is distorting the economy while the eventual gainers are unlikely to organise in support of reform.

In a small open economy like Mauritius, however, the challenge to the economic model, of which the public-private partnership is an inherent component, is coming from the exogenous forces of globalisation and liberalisation. The reduction of tariff protection and the erosion of market preferences, for example, are irremediably dissipating the opportunities for rent capture. Hence the question, which we need to ask, is, what in this new situation would constitute the basis for a new partnership? If rent creation and rent capture is no longer the cement of the public-private sector partnership, what then constitute its new rationale? This is indeed what we call the search for the new growth coalition.

<I>?The new partnership will also be expected to deliver on the new demands emanating from the inevitable need to integrate the global economy at the least economic and social cost.?</I>

Between the two extremes of total free market principles and massive government interventions in the economy, it is now increasingly recognised that developing societies need to enlist private initiative within a framework of public action to encourage restructuring, diversification and technological dynamism beyond what market forces on their own would generate.

Despite ongoing debates over what would be the ?right? economic policies for Mauritius, there is consensus on a broad set of core principles to which both government and business should subscribe: macro economic balance, a stable and unbiased exchange rate, incentives for exporters and innovators. Beyond that, the right policy from government would be that which encourages strategic collaboration between government and the private sector to uncover where the most significant obstacles to restructuring and growth lie and what type of intervention is most likely to remove them.

The rationale for the new growth coalition is not for the government and private sector to come together to fix policy outcomes. It aims at getting the policy process right: how to design a setting in which private and public sectors come together to uncover the most significant obstacles to growth and economic development and what actions need to be taken to remove these.

In a developing economy characterised by economic transition from one model of economic development to another a strong State is very often called for. This is so because the State is expected to take action, which will meet with resistance from social forces, interests, customs and institutions that have vested interests in the status quo and which constantly oppose radical change. The risks associated with a strong State are obvious.

<I>?The growth coalition is premised on the existence of a strong developmentally progressive State characterised by a modernising and innovating bureaucracy.?</I>

The growth coalition is premised on the existence of a strong developmentally progressive State characterised by a modernising and innovating bureaucracy. The new growth coalition will therefore require capacity building within the state bureaucracy so that the new dimensions of development and implications of integration into the new global economy can be properly assessed. There is need to differentiate between the developmental state and the Regulatory state which is mostly favoured by the Washington consensus.

Whereas the latter is viewed as a depoliticised decision ? making apparatus within the confines of good governance parameters the developmental state is quite the contrary. The conventional regulatory state merely establishes the legal and institutional framework in which the private sector is left free to set its own goals.

As we have pointed out earlier, the traditions of both the private and public sectors in Mauritius as well as the tasks ahead at this particular juncture of our economic development call for a new growth coalition under the leadership of the State with the active participation of the private sector within the framework described above.

From the private sector perspective, the urgency is to come to terms with the new situation created by the transition to a competitive economy. There is no room for any rationalisation or burying its head in the sands of convenience. It is time for it to come to terms with the harshness of reality. As part of the paradigm shift and in order to take its legitimate place in the new growth coalition the private sector will have to undertake a fundamental rethink of its past strategies and reprioritise its goals.

There have recently been many adverse remarks made on the capacity of the private sector to play a determining role in the economic development of the country. Regardless of the fairness or not of such comments it is clear that the level of growth, which the private sector is expected to generate to ensure the sustainable development of the country, will only come from a quantum jump in the way it thinks, works and is organised.

Globalisation and liberalisation will impact on the economy of Mauritius in the same way that deregulation has on the economies of such developed countries as in the European Union or the United States. As the economy is liberalised and restrictions on businesses or industry specific incentives are removed the industry structure undergoes a significant change as one or more of the five forces of competition ? via suppliers, customers, substitute products, new entrants and rivalry among existing operators ? are affected by the new environment.

In addition to exogenous pressures resulting from such factors as lower tariff protection, for example, government will either regulate (in cases of obvious market failures) or introduce such mechanisms as the competition authority. All these measures will create a state of flux in different industries and sectors. Removal of restrictions on entry ? e.g. the case of Mahanagar in the telecommunications sector? can lead to relatively rapid increases in the number of new entrants, including those from overseas. The ability of the private sector to cope with such dramatic changes will depend on two sets of factors.

First, at the level of firms, the management systems of planning, forecasting and competition analysis will have to be revamped and capacity will have to be built to understand the complexities arising out of liberalisation.

Second at the level of interaction and networking with the government, a mechanism will have to be put in place so as, not only, to find out the pattern of increased domestic and international competition and availability of new opportunities, but also to develop an advance system of warning to monitor the nature of emerging threats so that the firms get adequate time to prepare. The transformed industry structures will be an important element of the context against the background of which firms will have to redefine their competitive response and growth strategy.

It is in the light of this new scenario including the new role of the State and the future competitive context, in which the private sector will have to operate, that the new growth coalition will have to define its role. Arguably this will be substantially different, in form as well as in content to what has prevailed in the stable and predictable environment in which we have operated for the past nearly forty years. It is in this that the new Growth Coalition will differ from the public-private partnership that we have known up to now.

<B>Rajiv SERVANSINGH

<I>Dep. Secretary general

Mauritus Chamber of Commerce and Industry</B></I>