Our reform strategy has unleashed economic growth. In less than two years, we have reversed the economic decline and put the economy on the path of robust and sustainable growth. Most economic indicators have improved and continue to perform well. Growth, employment creation, investment, the share of private sector investment, foreign direct investment, the foreign exchange reserves, the number of weeks of import cover, are all rising. The budget deficit, the share of public and central government debt to GDP and unemployment are all coming down. Most sectors are doing well with boom like growth in tourism, textiles and clothing, construction, financial services, ICT/BPO/ KPO, seafood and professional services. Economic growth looks to be resilient with the new town at Highlands, the Tianli project at Riche Terre, the major development at La Tour Koenig, the setting up of the Land Based Oceanic industry, the knowledge and medical hubs, the acceleration of investment in the tourism, hospitality, real estate and manufacturing sectors, and investment in public infrastructure.

Having secured sustained and robust growth we now need a new social agenda to ensure it is more inclusive. We have a unique opportunity to lift almost all our compatriots out of poverty. With the right policies based on hard facts rather than prejudices and myths, it is within our reach to eradicate poverty as defined by an income threshold close to 50% of current median income, for a family of two adults and two children.

?Even if poverty were limited to a specific group, any government has a responsi-bility to fight it. For moral, solidarity, social and economic reasons.?

I am in a very privileged position as minister of Finance and Economic development to have an overview of both the opportunities and the challenges to roll back poverty. I must humbly confess that, based on statistical data and empirical evidence, there is a wide chasm between the opinion as expressed by probably some well intentioned but misguided people on the victims of poverty and the realities as shown by these evidence. However, prejudices and myths die hard even when they have run their full course and are totally out of touch with realities on the ground. We must confront with facts and figures these myths to dispel the construction of the imagination of some. Let me give some examples.

Some ethnicised economic reforms. Yet we have stopped the economic decline. All things constant, surely a 6 % growth is significantly better than 2.5 %. A rising tide has a better chance of lifting all boats than a receding one. Creating 10000 jobs per year that go primarily to the unemployed, the new entrants in the labour market, the recycled women from the EPZ and the long term jobless youth from the low and the lower middle income groups must be, by any standard, far better than generating 4000 employment annually. These are not simply crude statistics and raw impersonal data. They are real people, ordinary men and women, who did not have access to financial resources before and can now use them to cater for the needs of their loved ones. Those benefiting from these jobs are from both rural and urban areas, from all communities in our society and from all walks of life. A lower budgetary deficit allows government to create fiscal space to better help the poor and the underprivileged. This is exactly what we have done with a very ambitious Empowerment programme of Rs 5 billion over five years.

More than 3,000 people from the lower and lower middle income groups have already benefited. Surely this must be better than what existed previously without such a programme. An annual Foreign Direct Investment of Rs 10 billion must be more welcome than one of Rs 2 billion. Just like a student that gets 5 B?s at HSC has done much better than one with 5 E?s. Of course, we would prefer 5 A?s. Misplaced passion and unwarranted prejudices should not lose sight of these basic accomplishments since June 2005.

Some have ethnicised the income tax reform. Yet more than 50% of taxpayers have been removed from the tax net. Very few employees, both in the public and private sectors, pay personal income tax, as the tax threshold has been more than doubled. Only 7% of the labour force are concerned with PAYE; this is one of the lowest in the world. Mauritius is one of the few countries where taxation is very low at 15% and only 7% of the labour force pays such taxes. Also there is hardly any country where people start paying taxes at a level almost twice the GDP per capita. The rest of taxpayers pay only a maximum of 15% compared to 30% before. All groups have gained from the lowering or elimination of the tax burden.

Some have ethnicised the reduction in corporate tax from 30% to 15%. Little do they realize that most of the corporate sector was already subject to a legal rate of 15% through special schemes, while their effective rate of taxation was lower. The large firms in the sugar, tourism, EPZ and financial services sector were taxed at a legal rate of 15 % but their real effective rate was lower. However, many small and medium entrepreneurs and new firms were taxed at 30%. We have leveled the playing field. Yet some continue with their wicked and ethnically loaded propaganda that the 15% corporate tax has benefited only a particular group. This is totally false. In fact, we have imposed an additional levy on the banking and hotel sectors to capture some of the additional profits from these two very successful clusters that have the ability to pay. It should also be noted that the reduction in both personal income tax and corporate tax to 15 % has had a significant contribution in the recovery of the economy and the massive inflow of foreign direct investment.

?We have a good idea of who they are, where they are, what are the causes of poverty and what are their other social characteristics.?

Some ethnicised the NRPT. Worse they terrorized even people unaffected by the tax. Fewer than 5% of all households are paying the NRPT. One of the largest contributors by far is the corporate sector and not those viciously imagined by the eternal ethnicisers. Better, the receipts from NRPT are being used to construct market fairs at Rose Belle, Flacq, Briquetterie, Riviere des Anguilles and Quatre Bornes. And also a landing and fish station at Grand Baie. What better example of inclusive growth than this redistributive policy from those who can afford to those who need good infrastructure to improve their daily life.

Some ethnicised the tax on interest, suggesting that a huge percentage of the population from one particular group will be affected by that tax, with the usual ethnic spin. How far from the truth. Only 2.5% of the population is paying this tax.Very broad-based.There is affordability especially as the top tax rate has been halved from 30% to 15% and the proceeds are being used to fund vital infrastructure and social policies.

Some ethnicised the removal of tax exemption for small planters without realizing that the new threshold has been worked out so that no small planter has to pay any income tax whatsoever on his sugar revenue. This is true also for small fishermen, for small cow and pig breeders, for small vegetable and flower growers, for small carpenters and small furniture makers. All boats must benefit from a rising tide.There is no small planter (93% of small planters have less than 5 arpents of sugar land ) who pays personal income tax on his sugar proceeds.

Some ethnicised the work of the empowerment programme. Again the statistics are totally different. People from all regions and from all communities are benefiting from the training, reskilling and placement activities of the programme. From Flacq to Roche Bois, from Triolet to Plaine Verte, from Surinam to Bel Ombre. The first tourism village will be set up in Belle Mare, Flacq while the next three will be in Medine, le Morne and Rodrigues. Poverty must be fought wherever it is.

Some ethnicised the reach of the Trust Fund. Again most, if not all, projects relate to social housing, micro credit, training and reskilling, distribution of educational materials and equipments to empower our poorest compatriots. It is very broad-based. I have been with the Prime Minister in Calebasses; with Minister Boolell and Honourable Shakeel Mohamed in the south and with Honourable Dr Babajee in the south west. I have visited Flacq, Le Morne, Camp Diable and other regions. Many projects have been approved for our citizens in Roche Bois, Plaine Verte, Flacq, La Chaumière and Rodrigues. They are all destined to alleviate poverty, irrespective of gender, ethnicity and social markers.

Some ethnicised the IRS. Yet research by both independent analysts and the Board of Investment show that Government, directly and indirectly, is obtaining around 25% of the returns with the promoter/developer receiving a return on investment close to 22%. Government revenues are collected from taxes on (i) acquisition of land by the IRS company (ii) conversion of agricultural land, (iii) project development (iv) sale of IRS residences (v) profits realised by the IRS company, (vi) rental of residential property and (vii) resale of IRS residences. In addition, we have introduced a social contribution of US$ 6,000 per villa, which will be used to fight poverty in regions where these IRS are located. We have democratized the scheme by allowing small landowners, both in rural and urban areas, to participate in a new scheme. And they do not have to meet the social obligations of the large IRS.

Now some want to wickedly ethnicise poverty. Again they are very wrong. Sure, poverty exists in some suburbs of Port Louis and other towns, in Le Morne and Rodrigues but it is also prevalent in Stanley, Vallée de Prêtres, Flacq, Camp Diable and Calebasses.The research and findings of the Central Statistical Office, the database of the Trust Fund, the short experience of the Empowerment Programme, the profile of the recipients of the ?casting of slab policy? of Government, the data bank of the Social Aid policy and the direct income support programme are clear evidence that poverty, while relatively low in Mauritius at 8% compared to international standards, affects all communities and all ethnic groups even if there is some statistical difference between their percentage in the population and their share in the poverty cohort.

Even if poverty were limited to a specific group, any government has a responsibility to fight it. For moral, solidarity, social and economic reasons. However, this cruel ethnicisation of poverty is as unfortunate as it is unwarranted since it is not borne out by statistical data and empirical evidence. Studies show that poverty affects all ethnic groups even if some areas are more affected than others, as demonstrated by the spatial distribution of poverty. There is no poverty in our country if we use the definition of one US dollar a day; there are around 1.5% poor families if we adopt the US$ 2 a day definition. However, if we embrace the definition of poverty as it exists in rich countries like France, UK and the USA (those below 50% of the median income), we have around 8% of households that are poor (26,000 families). We have a good idea of who they are, where they are, what are the causes of poverty and what are their other social characteristics. They hail from both rural and urban areas and from all communities, even if the incidence is not uniform. However, the statistical variation is not as high as some fertile imagination would have us believe.

In addition to sustained and robust economic growth, we have introduced some specific measures with respect to the democratisation of the economy, the empowerment programme, the creation of economic opportunities and the targeting of some benefits. There are some early positive results.They need to be consolidated. We have removed all lower middle income and many middle income families from the tax net.We have reduced the top marginal income tax rate from 30 % to 15 %, thus lowering the fiscal burden of many of our citizens. If we want to eradicate poverty over the next ten years ,we need to embrace a new agenda of proactive social policies targeted to help the poor to guarantee inclusive growth. It is within our reach as the resources required to attain this objective can be mobilized with a better allocation and utilisation of resources. The more so as untargeted social spending is very high compared to what is required to close the poverty gap. Of course we will end up with a mix of universal support and targeted benefits. The alternative is to continue with the current incremental approach to alleviate poverty. It may be working but it will take time to give significantly tangible results.

?We should bury our prejudices in the sand, abandon our myths and realize that poverty affects all social groups.?

We can and must do better. As we have repaired the economy and put it on a sustainable path,this is the time to develop a consensus on this new social agenda. Of course, as is amply demonstrated both in other countries and locally, it is not only a question of money. But it is sheer folly to believe that we can do it without adequate financial resources. We must articulate a multi-faceted approach to really help the poor benefit from growth and lift them out of poverty and exclusion. We need a multi-pronged strategy anchored as follows:-

● sustaining robust economic growth to create better and higher paying jobs. This necessitates that we continue on the path of reform, openness and improving the business climate;

● revamping social aid by providing more generous income transfer to close the poverty gap, pending the outcome of other policies;

● increasing support to those unable to work like the sick, the disabled. Basically to support those who cannot help themselves.This is a solidarity component;

● focusing policies to help those who can help themselves to raise their income over time,thus reducing the need for large cash transfer.This can be achieved through a strong emphasis on education, training and reskilling;

● enhancing targeted support to ensure that poor kids end up in secondary, vocational and tertiary institutions

● creating opportunities for integrating the poor in the economic mainstream,in micro enterprise,in small and medium firms and in self employment;

● investing faster in social housing by revamping low income housing programmes;

● articulating a policy of ?accompagnement social?, psychological support,mentoring and social monitoring to encourage those who have been marginalized to reconnect and stay with the mainstream. In essence, giving hope to those who have been marginalized.

Equally we must design new policies that will address the problems confronting the lower middle income group.This is essential to buy the necessary capital to minimize the opposition to a policy that will provide more resources to the poor. Again this should not be difficult.

We also require a new social partnership between Government, NGOs,the civil society and the private sector to reach out to the poor. There are probably many programmes but there is often a lack of coordination and cohesion. Something similar to a donor?s coordination and harmonization will certainly improve the efficiency and effectiveness of our poverty reduction strategy.

Poverty eradication is well within our reach. First it is not as rampant as in many least developed and developing countries (for instance it is 92% in oil-rich Nigeria on the basis of US$ 2 per day ). Poverty as measured by the rich counties? definition of below 50% of median income is only 8% compared to 12% in Australia,12 % in the UK and 17% in the US. Second, we have a wealth of information (the CSO, the Trust Fund, Social Aid programme, the direct income support policy, the casting of slab statistics, the Empowerment programme and the experience of many NGOs and the corporate social programmes of many enterprises). We should bring all these facts, figures, experience and knowledge together and produce a really strong and effective and an action oriented plan to eradicate poverty over the next ten years.

Third, we have been able to turn around the economy and place it on a robust and sustained path.This should certainly contribute significantly to alleviate poverty by generating jobs, creating new openings and widening the circle of opportunities. Fourth, the financial resources needed to eradicate poverty should not be a problem if we judiciously allocate and use our scarce resources.

We should bury our prejudices in the sand, abandon our myths and realize that poverty affects all social groups. Instead, we should reflect positively on how to move forward and to collectively pool our resources, our energy, our intelligence, our time and efforts to eradicate poverty in our country. Dispassionately and without unnecessary insults and provocations.

Fighting poverty is a moral imperative as we have a duty towards our less fortunate fellow citizens. It is a social responsibility as we cannot afford to let this hardcore of poverty continue unchecked. It is an economic necessity as it represents a pool of resources that can be harnessed to further develop the country while improving the quality of life of the poor.

It is also a ?security issue? as there is a correlation, not to say a causal relationship, between poverty on the one hand and delinquency, insecurity, drug, prostitution, violence, crime and other social evils,on the other. Poverty eradication is thus a public good. And it can also be a case of enlightened self interest for some who persist in wrongly ethnicising the problem of poverty and raise the spectre of racial riots. If anything, eradicating poverty could avoid social tensions and ethnic cleavages.

by Rama SITHANEN