Artificial Intelligence (AI) is dominating conversations about the future of economic growth in Mauritius and around the world. But there is another, far less glamorous determinant of prosperity that receives much less attention because it is much harder to reform: institutions. Economists have long argued that institutions are among the fundamental drivers of economic development. Douglass North, who won the Nobel Prize in Economics in 1993, famously defined institutions as the “rules of the game” that shape how people interact. More recently, the 2024 Nobel Prize was awarded to Daron Acemoglu, Simon Johnson, and James Robinson for demonstrating how the quality of institutions largely explains why some countries prosper while others remain poor.

Institutions include constitutions, laws, courts, and regulations, but also informal norms such as trust and social expectations. Among the most important of these institutions is the ability to enforce contracts. Economic exchange depends on people doing business with complete strangers. A company pays a supplier a deposit in exchange for future delivery. A bank lends money to a borrower. An employer hires and trains an employee. Every one of these transactions rests on the assumption that agreements will be honored and, if they are not, the legal system will provide a timely remedy.

That is where Mauritius faces a serious challenge. According to the World Bank’s 2025 Business Ready (B-READY) indicators, Singapore scores 73.3 on the ease of commercial dispute resolution, compared with 42.2 for Mauritius (with the maximum score being 100; the top three scorers are Bhutan (96.79), Bahrain (83.36) and Taiwan/ China (83.24)). Mauritius also trails Singapore on the quality of dispute resolution regulations (49.0 versus 66.0) and public services supporting dispute resolution (46.4 versus 62.8). However, the largest gap lies in the efficiency of commercial litigation and alternative dispute resolution itself. Statistics Mauritius reports that, at the end of 2025, more than 70,000 cases were pending before the courts, including over 13,000 civil cases (which also include commercial cases), highlighting the pressure on the justice system.

Businesses do not wait until a dispute reaches court before considering the legal system. They anticipate the likely costs of enforcement when making decisions every day. Consider a company that terminates a contract without giving proper notice, refuses to refund a client’s deposit, and abandons the project. Legally, the client has every right to sue for breach of contract. But if litigation is likely to take years and involve substantial legal costs, many clients and businesses simply write off the loss instead. The company understands this, making opportunistic behavior more attractive. The same logic applies to employment contracts. An employee who has signed a non-compete agreement may nevertheless join a direct competitor, calculating that enforcing the agreement will take years and cost more than the agreement is worth.

Institutional economics

Economists describe these problems as transaction costs: the costs of making, monitoring, and enforcing agreements. High transaction costs make every economic exchange more expensive and more uncertain. Perhaps their most important consequence is that people become far more selective about whom they trust. In fact, one reason family-owned businesses remain so common across much of the developing world is not simply culture or tradition. It is institutional economics. If contracts cannot be enforced efficiently, it becomes safer to hire your cousin than a stranger, even if the stranger is more qualified. Personal trust substitutes for institutional trust. The result is an economy that allocates opportunities based less on competence and more on who you know. Businesses become less innovative, less productive, and less willing to expand beyond their existing networks. Over time, this slows economic growth.

Mauritius has rightly invested considerable effort in improving the ease of doing business. But making it easy to start a business is only half the battle. Businesses also need confidence that agreements will be enforced quickly, predictably, and at reasonable cost.

The next phase of economic reform should therefore focus not only on passing good laws, but on making those laws work in practice. Strengthening the capacity of the Commercial Division of the Supreme Court, creating a more efficient small claims process for lowervalue commercial disputes, expanding the use of mediation and arbitration, and accelerating the digitalization of case management would all make contract enforcement faster and more predictable.

None of these reforms is as attractive as announcing a new AI strategy or launching another digital platform. Yet their long-term economic impact may be considerably greater. Technology can raise productivity, but only strong institutions create the confidence that allows markets to flourish. If Mauritius wants faster economic growth, reforming contract enforcement should be viewed not merely as a legal priority, but as an economic one as well.

Bio

I’m an experienced economic, social, and gender consultant based in Mauritius. I am a Professor at Parami University, an online liberal arts college affiliated with Bard College in the US, an honorary research fellow at UCL, a fellow at the Global Labor Organization, and I am affiliated with IOS-Regensburg, Germany and CELSI, Slovakia. I am an associate editor at Gender, Technology and Development. I received my PhD from Princeton University in 2011 and my undergraduate degree from Gettysburg College in the US (…).