The budgetary position of Mauritius gives food for thought:

2000-2001 ? 6.8% deficit

2001-2002 ? 6.5% deficit

2002-2003 ? 6% deficit

2003-2004 ? 5.5% deficit (projection)

Alarming, unsustainable ? no Government can survive with such long-term deficit without being heavily indebted. This means a drastic increase of public debt with the repercussions on the economy we all know: inflation, balance of payment problems etc.

Of several questions being asked: What is wrong with the economy? Where did we go wrong? How did we go wrong? There have been no clear-cut answers. Who is to blame then?

One can point to Keynesian economics, which has made the great days of the British Labour Government: deficit budgets to enhance employment and boost economic activity. But the difference in UK is that it has a stable revenue from North Sea Oil, a dynamic financial sector and a prosperous manufacturing industry.

In Mauritius, quite a big chunk of each rupee spent goes overseas on imports and consumption, on infrastructure as contracts to overseas companies. While there are several causes for the large and persistent budget deficits, the main one can be none other than heavy non-essential and non-priority expenditure. Where are these?

- Consumer Sport

Since 1983, sport in Mauritius has become a consumer item. Expenditure on infrastructure has multiple benefits but we cannot continue funding Jeux de l?Avenir, Jeux des Jeunes, training camps overseas, air tickets, hotel accommodation etc. as if we are a developed country. In 1983, Club M had a crucial qualifying match for the African Nations Cup in the heat of Zimbabwe. Paradoxically, Michael Glover sent the team to train in the snow of Saint-Etienne. You can guess the outcome of the game! And the expenditure!

Maurice Espoir has been another failure with training as semi-professionals. Jeux des Iles, of course, is our national pride and needs to be financed but we must be careful about sending athletes to train overseas. Another example is the training 7-0 of our national team in Egypt. After such spending in the Espoirs it cannot be an accident de parcours. Now they are being sent to training camps in South Africa. Tourism on taxpayers? money? Infrastructure benefits the whole nation; pseudo-training camps overseas do not. Therefore we must build infrastructure around the island to benefit the whole population. Quantity will naturally lead to quality instead of ?doping? a few élites at great cost! John Stuart Mill, the great English philosopher, said that any action should be beneficial to the whole.

We must evaluate our strengths and weaknesses and then decide on allocation of funds. We all know that Mauritius has a particular strength in badminton ? we should have built on this strength. Furthermore, tennis is a highly rewarding discipline with high returns in the professional circuit, yet we can count tennis courts on our fingers in Mauritius. Sweden after Bjorn Borg and Spain nowadays are budding with young tennis players. Marine Giraud is showing the way; so we could invest there rather than in unnecessary activities.

One can easily draw a list of such unnecessary expenditure at a time of high budgetary deficits. That list can be long, but there is another way of looking at it. Even tiny Seychelles is showing the way by closing three embassies including London. We are opening a new one in Russia. My view is that we can overturn this deficit position only if we invest for the future.

We need to expand our economic base and invest heavily in new sectors. Mauritius has reached a new level of development on the continuum and we cannot concentrate on the same products (textile) at the risk of being uncompetitive, even in subsidizing the EPZ. We can either compare our development with that of China or compete with the latter. China has in fact become a price setter in the textile sector. Therefore we need to develop products compatible with our level of development in the manufacturing sector ? these can be electronics, computers and the automobile industry in the medium and long term.

- The Need for Research and Development

If Mauritius had invested earlier in research and development and in new product development, we should certainly have reaped the benefits today and the budgetary deficits would have been under control. This would mean economic activities of productive nature and government reaping taxes, employment and, with the multiplier effect, a great leap in economic development and benefits for the whole society.

The Mauritius Research Council (MRC) has done a great job with the American block. This is a major breakthrough for the building industry as it lowers construction costs by 40%. Paradoxically, no company wants to take it for mass production. Consider United Basalt Products (UBP). The ad says ?li pas pou bouge ène pouce.? This is where the shoe pinches. UBP has announced that it cannot change moulds. So it will continue to saturate the market with its old products, without innovating and increasing its percent will.

Now consider a successful global company, like Toyota, which changes models every six months and sells on global markets. The question is which country will benefit from ?Globalisation?? Yet some commentators are saying the budget is ?adjusting to the challenges of globalisation. The Minister of Agriculture and Food Technology also commented that this budget is meeting the challenges of globalisation. Our Forest Department is researching on feuille rouge making them yellow and vieille fille while, in USA, research has reached high tech and GM foods. During her visit in Mauritius, Madeleine Albright commented on our manufacturing sector asking: ?How do you survive in a void of globalization without aid??

- Globalisation and Regionalisation

Many have taken globalisation as a curse ? because of fear of losing our preferential sugar and textile prices and tariffs. However globalisation offers a host of opportunities for our products if we develop those that can be adapted to the global market. The SADC, NEPAD, COMESA countries are our neighbours. If we want to succeed we must join hands with our neighbours and serve the markets, which are welcoming us. Zimbabwe has left a vacuum in maize production. Our farmers and entrepreneurs should show their ingenuity.

There are opportunities for electronics, the automobile industry and quite more. We can mount such industries through joint ventures. Quite a few countries around the world have started with State Businesses and have then privatised them. Why can?t South Africa, Mauritius and other African countries build an automobile industry? There is a vast regional and global market for automobile.

Just before the Iraq war, George W. Bush released $ 80m to research and develop the "Electric Car". I think that lots of benefits can accrue to Mauritius and the region if we can do something similar. The theory for New Product Development says that it can be a modification, an addition or subtraction to a product, a change in colour or design. The "Electric Club" car used on golf-courts can be our subject of interest, research and development. Some modifications to it can be a breakthrough. One can imagine the impact on oil import bills and the environment. TATA has proposed a joint-venture with the Government of Mauritius, what are we waiting for? By the way, where are we with the new discovery of an engine propelled by water by a Mauritian Engineer. This is a project, which needs government support and a constant follow-up to see that it reaches its climax. A budget should concentrate on funding such developments instead of focusing on sports and its consumerism.

Something like a domestic electric switch with a remote control would be another breakthrough for the global market. This is how we can meet the challenges of globalization and regionalization.

- The PPP

One may think that Government should not invest in private projects. While this may be true, we have not seen much private sector enthusiasm in investing in new products (vide UBP) over the last 3 years. Furthermore, it seems that our private sector has run out of ideas. The PPP is not well conceived. In fact, it means Government spending and the private sector reaping the benefits. This is a clear recipe of Keynesian economics and its inherent deficits. I believe Government should take the lead in mounting Joint Ventures (JV) with the Private Sector or even alone in projects of economic nature. The B.O.T. (Build, Operate, Transfer) has not taken off, therefore Government can take the lead in profitable projects and end up with a BOP (Build, Operate and Privatise). This can apply to the electronics sector, automobile Sector, computer Industry, etc.

- The Sugar Sector

The Mauritian strategy for the sugar sector is to extend the Sugar Protocol on preferential prices. We should not forget that WTO is a Supra International Organization. Since the European Union (EU) announced the dismantling of the Sugar Protocol by 2008, it is most unlikely that our strategy will work out. On the other hand, Brazil and Australia are fighting the EU on the subsidy issue. Even the US and South Africa have spelt out that the EU is heavily subsidizing its agriculture, which is against free and fair trade and therefore against WTO rules. We know that our price of sugar is pegged on the EU beetroot, which is heavily subsidized. Therefore if the subsidy is removed, the price will naturally go up and will reflect on the price of sugar. The ACP has not known an increase of its price for more than 2 decades. Accordingly it would be better for Mauritius to win the Australian/Brazilian strategy. Now Thailand has also joined this stand. We must recognise that on this issue our fight should be against the E.U. The Australian/Brazilian stand can be a blessing in disguise.

- Computer Industry

The Cybercity is coming fast and the Cyberisland taking shape. This is the best thing that could happen to our country. The computer industry will see a heavy investment in hardware (primary schools, secondary schools, the tertiary sector, home PCs, municipalities, businesses, the Civil Service), yet we are importing all. Government should encourage hardware industries to set up their production base here or take the lead by investing through its private investment arm, the SIT, or create another investing public company. We should be able to produce our own casing, diskettes, CD-Rom, hard disks and import the micro chips. Considering the needs of the national, regional and global market, the faster the investment the better will be the returns.

More?s Law says that computers become obsolete every 18 months. It means new demand, upgrading and product development. Consider IBM. This company started with dealings using Super Computers. They were using PCs heavily and found out that ?making them? was a better solution that ?buying them?. So they decided to manufacture them. Now IBM is a leader in the hardware PC market. Our cyber island should not necessarily be a software industry through Business Process Outsourcing.

Speaking of the investment in the computer industry it is good to mention that Malaysia has just invested this year a huge US $ 20 bn whereas Microsoft is setting up centres in China for a massive US $ 750 bn. Both countries are developing both hardware & software technologies. We are hovering around US $100m in BPO only.

The Private Sector has been complaining about rise in labour costs and has demanded a freeze in wage increase. Now let us consider the financial statements of Air Mauritius (AM). Some time back, this company won the award of best-published accounts. A saying on financial statements goes like this. A Financial statement is like a woman in a bikini. Although it is revealing it is more concealing. The following year AM was hit by the mega-scandal of the caisse noire involving unaccounted and concealed figures of more than Rs 100m. Last year, AM announced an internal restructure at a cost of 1 m Euro and took care not to mention its equivalent in MRUs in its PR (Public Relations). I wish to point out that, at the time, the Euro was around Rs 23. A simple calculation would tell us that it has cost Rs 23 m to AM. Then this year, AM announced a donation to Rodrigues Cyclone Relief Fund to the tune of Rs 500,000. Since they omitted (italics are mine) to mention it in Euro, I would point out that, since March this year, the Euro is Rs 30, which means Euro 16,666.

AM has made a few top level highly paid foreign recruitments this year. One of them is a Financial Manager Up to now, I know that our Accountants and other Financial Managers have been trained and possess highly prestigious UK qualifications. Recruiting a foreigner brings discredit to UK standards and Mauritian competence. No one can blame an accountant for a dishonest and creative financial statement if he is following the Big Boss?s instructions or risks losing his job.

Consider the case of Bonair Knitwear. The Foreign Accountant, while accounting for the Company?s so-called losses said that he was simply following the Chief Executive?s instructions. By the way, would a foreign Accountant have discovered the fraud at the Mauritius Commercial Bank? AM pays Rs 1m to its Legal Adviser for appearing in a case. So here is a recipe for rise in cost of production and of course at the expense of the Customer. Are our Companies customer-oriented then?

Businessess of the likes of AM and UBP naturally weaken the case of the private sector for a wage freeze demand. Mauritius being a high tourist destination, there is a great demand for travel and therefore opportunities for competition in the local air space. Our businessmen should be aggressive. Air Indian Ocean project necessitates a review because of the increasing air traffic in the region with the development of the Indian Ocean Commission, COMESA, SADC & NEPAD. In 1993, Air Pacific was on sale. We have not seen much enthusiasm from our businessmen to acquire such a Business. Singaporean businessmen were prompt to seal the deal. Last year, closer to us, Air Austral was on sale again and our private sector remained dumb. And now they are complaining of lack of opportunities.

Our Maritime traffic has increased by over 100%. Again we are not seeing much enthusiasm from our private sector to invest in cargo vessels and maritime traffic. The vision of Maersk is paying dividends.

- The Health Sector

The Action Plan on the Health Sector is another "budget-eater". At a time of 6% deficit of the national budget a plan estimated at Rs 6 bn is unrealistic. We all know that Mauritius has a diabetes population of more than 20%. It is progressing rapidly year after year. A caring government should have given serious thoughts to curing the illness, not the effects of a disease, which is costing us millions. Here it means being the cause instead of the effect. Denmark has become the leader in insulin production after it pioneered its research. This means substantial revenue in holding patents and licences. For us it would mean an intensive research programme to develop a vaccine with the help of international agencies and friendly countries. Then we can hold licences and patents for some exclusive products in the medical field.

- Concluding note

A Government with no vision for the long term does not mean business. A Government ignoring the benefits of ?business? and persisting in onerous public expenditure does not mean business especially with high deficits. The EU has set a standard for its members: a budgetary deficit of not more than 3%. France has just been reprimanded for trying to surpass this limit.

A country in which private investment is lesser than public investment is sure to have economic problems in the future (employment, balance of payments, inflation). A country in which the net employment creator is the public sector will certainly meet economic problem in the future of sustainability and development. A Government, which does not invest in beneficial financial projects, is jeopardizing wealth creation to sustain future economic growth. Onerous public projects without returns such as embassies can be delayed.

Companies, which do not invest in R & D and New Product development will not survive in the global market and cannot meet the challenges of globalisation. A good example of an innovating company in Mauritius is Une Histoire D?Amour, which has always been creating new designs, different colours and sizes. Unfortunately they do not have outlets for men to purchase them as marketing research show that men are more apt to buy these products as gifts as much as Gillette discovered that its multicolour razors were of no use as women were buying them for their counterparts.

Therefore it is necessary to identify those sectors where we need to invest, develop R & D, new products, innovate and create. France 2 has an occasional TV programme on Discoveries and Inventions. We all have appreciated the French ingenuity. Where are we with our MBC and Mauritian genius? We do not even have a proper business magazine. The time has come to act and encourage our youth to become entrepreneurs, innovate and create. Only then will Mauritius have security of employment and a sustainable development and prosperity.

Much of the answer lies in technology, one of the drivers of globalisation. From containerisation to super-jet travel, mechanisation, automation of production, the Internet, satellites, biotech food, some imperative and other enabling technologies have revolutionised commerce and ways of doing. Business around the globe, thus making globalisation a reality, has shrunk time and space. Consider the special benefits and high profit derived from exclusive licences held by some US businesses such as Kentucky, Mc Do etc.

We must be able to take advantage of the availability of such technology or develop our own technology. It has a lot to do with science and technology learning. This means a new method of schooling: polytechnics, familiarising students with computers and computer parts, automobile engines, electrical parts and electronic goods. Let us hope that the Rajiv Gandhi School of Science does not remain a museum. If we can sacrifice language conflicts and other classical education ?to the benefit of technological education?, we can reach our objective. Technology is changing fast; we cannot afford to remain static.

Rajesh DHAYAM