The way Communist China is deploying a high level of ingenuity in adapting its state command structure with the principles of market economy is the latest example of the complexity of state-market interplay in the context of developing countries. India, on the other hand, is in many ways engaged in the same exercise of leapfrogging its economic development from one “stage” to a higher level. In its case, it is trying to marry the exigencies of electoral democracy with a more liberal economic organisation, again starting from the initial context of a poor developing nation.

This approach to economic development can appropriately be associated with countries in which the state is deliberately directing economic development with the explicit object of jumpstarting, in the shortest possible time, the transition from a developing economy into a developed one.

The concept of the developmental state, to which we shall come later, has been closely associated with this mode of operation.

The “eminent personalities” who visited Mauritius recently shared their hands on experience of how they had steered their respective countries from near stagnation to respectable growth. Among them some promoted a model that seem to come directly from the books of the World Bank and the International Monetary Fund. This approach is premised on the belief that liberalisation and deregulation of the economy will eliminate market distortions and necessarily lead to better and more efficient allocation of resources.

Interestingly enough, even this model concedes that there is a role for the state in providing for, among other things, education and skills development, which are essential for providing the competence which are needed by the productive sectors.

<I>“There is a need for a policy space for government to somehow direct the economic strategy based on an understanding and leveraging of market forces and processes.”</I>

In fact, over the recent years, under what is known as the “augmented Washington Consensus” even these institutions have admitted that there is a need to integrate such notions as “poverty reduction” and “environmental sustainability” in the economic strategy of developing countries – thus conceding that there is need for some policy intervention. Actually one of the personalities came from the Republic of Ireland, a country known for its activist and most successful promotion of economic development. That small economy may hold lessons for Mauritius, as we can infer from the following quote from an original policy paper of the Irish Industrial Development Authority (IDA).

“The central industrial strategy in the IDA Plan is to shift our industry into products with higher added value based on good quality and design, aimed at specialist market niches using well planned professional marketing. The strategy will aim to capitalise on the strengths of the country...”

It is against this backdrop that we wish to analyse the issue that is raised in the title to this paper. Can a country be run as a corporation? To what extent are the analytical tools and concepts used in the management of large corporations, applicable to the running of a country. More specifically we shall examine the question in the context of a small developing economy like Mauritius.

If you open any serious business newspaper today you are most likely to find references to, say a country like India, trying to vaunt its Unique Selling Proposition, its “core competencies” and its “brand equity”. All notions developed in the business context. The publication of Michael Porter’s Competitive advantage of Nations in 1990 gave a huge impetus to the new role of the state in creating the conditions for national companies to increase their competitiveness.

<B>Upgrade advantages over time</B>

In his now famous Diamond of National Competitive Advantage, he identified four broad attributes of a nation (factor conditions, demand conditions, related and supporting industries, firm strategy, structure, and rivalry) that individually and as a system constitute the determinants of the playing field in which industries are called to operate.

Not necessarily as a direct result of Porter’s writings and more likely as a competitive response to actions by other countries, strategic planning, to create these conditions, on the part of the state has become the hottest thing with governments.

“When a national environment permits and supports the most rapid accumulation of specialised assets and skills – sometimes simply because of greater effort and commitment – companies gain a competitive advantage. When a national environment affords better ongoing information and insight into product and process needs, companies gain a competitive advantage. Finally when the national environment pressures companies to innovate and invest, companies both gain a competitive advantage and upgrade those advantages over time,” writes Michael Porter.

This new role for government has nothing to do with the “central planning” or “planning commission” approach but preserves one shared characteristic, which is a willingness of these governments to control their own destinies. As opposed to the generally prevalent notion that globalisation would witness the withering of the nation-state this sort of strategic planning driven by market forces has indeed led to what some authors have described as the “rise of the nation-corporation.”

While Japan Inc. has probably been the nation which can actually lay claim to being the first to adopt and refine this approach, the classic case in point remains Singapore. A tiny country with no natural resources and internal market to speak of, was able to leverage its one key advantage – a strategic location – into sustained, long term prosperity by becoming a highly efficient “value added switching hub” for air and sea shipments.

Singapore also made itself an attractive manufacturing base for multinationals by investing in a highly sophisticated manufacturing base for production. Singapore has subsequently promoted itself into a fully automated, networked society – a vision described as the “intelligent island” initiative. The success of Singapore can be attributed to a number of factors but one of the most relevant for our purpose is the intelligent manner in which the state of Singapore has mastered the tools of management and applied them to their objective of turning a stagnant economy, threatened by hostile neighbours, into a highly successful country.

Lee Kwan Yu, the architect of this success would not shy away from being described as the managing director of Singapore Inc. who had a Vision and a Mission Statement but also as someone who had the qualities of leadership and conviction to implement that mission in the face of the most adverse conditions.

George. S. Day from the Wharton Business School writes thus about strategy. “Strategy is about seeking a competitive edge over rivals while slowing down the erosion of present advantages. Few advantages can be sustained indefinitely, for time eventually renders them obsolete. In dynamic environments, this process of the creation and erosion of advantages accelerates. As advantages become increasingly temporary, managers shift their emphasis from seeking an unassailable static advantage to building organisations that continually seek new sources of advantage. Understanding the key sources of advantage and how they are sustained or eroded has thus become more crucial than ever in formulating competitive strategies.”

As we look at the difficult transition through which Mauritius is going since some years, the above definition of the need for strategy, meant for a business context, is almost totally applicable for understanding of our actual position and even offers some explanation about why we find ourselves in such a critical situation. Globalisation and liberalisation have constituted the dynamic environment, which have eroded our preferences (advantages). This has taken the form of a forecasted fall in sugar prices; while the end of the Multifibre agreement and World Trade Organisation led reforms will severely erode our quota and tariff preferences.

The validity of such a strategic approach in the actual circumstances of Mauritius seems very obvious. What is not clear however, are the implications in terms of capacity building requirements and the appropriate institutional arrangements needed for this to happen optimally.

Strategy has also been described as “representing an overall posture not tied to present situations. It focuses on end states rather than on initiating events.” This can constitute a more controversial definition for it lies at the heart of divergent approaches concerning the role of the state and the question of who decides about this “overall posture and the desired end states”.

<I>“When a national environment permits and supports the most rapid accumulation of specialised assets and skills (...)
companies gain a competitive advantage.”</I>

The proponents of market liberalism would argue that the forces of supply and demand, given the proper institutional environment, of which respect for private property is the most fundamental, will ensure the most efficient allocation and use of productive resources. The assumption of the existence of the proper institutions which will favour the development of market liberalism is a risky proposition, in a small island economy like Mauritius, historically skewed by limited demand and a small market dominated by a few conglomerates.

There is a need for a policy space for government to somehow direct the economic strategy based on an understanding and leveraging of market forces and processes. Any suggestion for promoting a particular sector is immediately taxed, under the new conventional wisdom, as a decision on the part of bureaucrats to “pick winners.”

In actual fact, developing a strategy for accelerating growth is not incompatible with such a policy of adopting leading sector strategies. Private firms often make a deliberate choice to abandon some lines of production and focus on some other “core” activity. “Creative destruction” is not just a market process: it is often the deliberate result of corporate decision-making as companies re-invent themselves. (Kodak abandoning chemicals-based films and to invest heavily in digital imaging).

Similarly the state can adopt a strategy of developing, as a priority, one or a few leading sectors. In a market driven economy such a policy would result, not in a privileged status or favoured treatment to the chosen sectors. It will only call for the deliberate removal of handicaps or obstacles facing these sectors. By removing these handicaps and institutional barriers, the market is made to function and such actions place these sectors on a par with other sectors.

The issues related to human resources management and development have long been a central part of the strategy of large corporations, as knowledge has emerged as a critical competitive factor. Firms analyse their needs for competence and assess the resource gap in their requirements. It has been said that Mauritius may not possess the critical mass in terms of population needed for developing its economy in the face of the challenges posed by globalisation and liberalisation. This only makes it more urgent to make the most efficient investments in the human resources that we have.

A competence-building plan aims at closing the gap and will include many different development activities. Training is among the most important of these and includes formal training through educational programmes.

As Mauritius moves into a service export driven economy, the significance of competence as a productive resource is increasing.

The possession of the right competence becomes even more crucial for future performance. The most glaring example of how the lack of properly trained human resources can constrain the declared policy options of government is in the Business Process Outsourcing sector. It is not an exaggeration to suggest that the size of the industry and the number of people employed in the sector will be a direct function of the skilled and trained manpower available on the market. Figure 1. that has been designed in terms of the competence planning exercise of a firm can be readily adapted at the country level.

Remain competitive</B>