Few knew the course Mauritius’ economic development would take after Independence. We did not have a past track record on which to build the future
Few knew the course Mauritius’ economic development would take after the vote of August 1967 in favour of independence. Unlike other nations of the world which had centuries of history, newly independent former British colonies didn’t have a past track record on which to build the future.
Most of the latter countries had been at the service of Her Majesty, contributing to the growth and prosperity of Britain. Mauritius itself had been taken for its strategic importance to British economic interests, with a view to ward off the security threats posed to ships plying between London and the sprawling British Empire part of which bordered the vast Indian Ocean.
So, we had to go through an extensive learning process, building with whatever scarce resources we could lay our hands on, a new country, a new economy and a future that didn’t look too certain. It must be recalled that the 1960s were not an era of all-round prosperity or of open international markets.
Eight years before independence in 1968, one report on the economy by Professor James Meade and a Sessional Paper by Professors Richard Titmuss & Brian Abel-Smith on demography and social policies, had highlighted numerous economic and social constraints standing in the way of the development of Mauritius, on the basis of facts as they stood at the time.
Mauritius then had a high unemployment rate which made precarious the lives of almost a quarter of its working force. The budget was in deficit and there was not much we could look forward to from this source to launch significant economic activities. There were two small hotels on the island and barely any tourism activity of significance. Mauritius was completely removed from the trans-Atlantic business hub.
Our main hope was that once we started making decisions for our own future, many things would fall in place and we would be able to steer a better course than when the economy was being managed to upkeep British interests. Many were pessimistic. Yet, the decision in favour of independence having been made already, the need of the hour was to chart a sustainable course for the country through thick and thin.
Two public institutions
Several public institutions were already in place for the good governance of the country at the time of independence.
The good thing about the efficient working of all these public institutions was that they were not undermined by corruption. And they were in the hands of able public officials groomed up in the strict tradition of the then British Civil Service. The public regulatory system may not have been as complex as the one we have today but it provided a good base for supporting economic development.
All these public institutions contributed to transform Mauritius for the better. I would like however to pick up two of them, which are celebrating in June and August this year the 50th year of their establishment, to highlight the way in which they’ve helped to advance the economic well-being of the country. They are: Air Mauritius and the Bank of Mauritius.
Although it is owned in the majority by the public sector, Air Mauritius is a listed entity on the Stock Exchange of Mauritius. Like most airline companies of the world, Air Mauritius has had a chequered history of ups and downs. We should however look beyond these vicissitudes of corporate life and see the national airline in its larger dimension of service towards the country.
For, although Mauritius has a very wholesome and distinctive living environment and is endowed with some of the best tourist attractions of the world, distance from markets did not at first give the local tourism industry much scope. In 1967, when Air Mauritius was set up as a ground handling agent without any fleet of aircraft, it wasn’t so clear it would eventually connect us efficiently with markets to overhaul our tourism industry.
As it started acquiring long-haul aircrafts at a later stage of its development, on lease or through outright purchase when it had the means to do so, it became our best link with outside markets once it adopted non-stop flights to markets, beginning with Europe. Then Asia, Australia and Africa. It paid off. Other airlines serving Mauritius followed suit and that’s how the destination gained in popularity. The national airline helped break the connectivity barrier standing in the way of our economic development.
Yes, national airlines do sometimes fail, whether because they can’t face international competition or don’t have enough payload, in terms of both passengers and cargo, to make them viable. Air Mauritius has also been through several storms in the course of this last half century. Political interferences and consequent weak managements are partly to blame. Open skies policy and the resulting competition have forced it to take the cue not to take things for granted.
It is the quality of service which has helped sustain the business despite running an aged and old fleet of aircrafts. It has overcome poor mismanagement decisions on occasion, such as when it landed into catastrophic hedging contracts for its fuel oil some years back. Hopefully, politicians and other intruders have learnt the lesson and they will let the company do the job which it has successfully done in favour of the country, in spite of all.
The airline is now part of our successful economic history. If those in charge of running it bear this fact in mind, they will not allow it to sink.
Bank of Mauritius
The Bank of Mauritius (BOM) was established as the country’s central bank by the Bank of Mauritius Ordinance of 15th October 1966. It started operations in August 1967 and has now been with us for 50 years.
I must declare my interest here, having joined the Bank in 1967 and left it in 2006. I can say without parti-pris however that the Bank of Mauritius has, together with other public bodies, played a transformative role in the economic development of Mauritius. Not much was known in 1967 as to how to steer a new economy from out of the serious economic challenges the country faced at the time. And how exactly should a central bank play its part to make the financial sector of the country contribute to its sound development.
The Bank was established in a strong central banking tradition that was at the basis of the Venerable Old Lady of Threadneedle Street, namely the Bank of England. Accordingly, strict codes of conduct governed the staff and management of the Bank.
Two major actions signalled the Bank’s presence on the market in 1967. The first was the replacement of the old currency notes of the Board of Commissioners of Currency in circulation by new banknotes issued by the Bank of Mauritius. The second was the decision taken in September 1967 to devalue the Mauritius rupee by 14.67% to keep its parity of Rs13.33 1/3 against the Pound sterling after the latter’s devaluation of the same order.
The Bank’s legislation gave it two specific duties: (i) to maintain confidence in the internal and external value of the rupee, and (ii) to make the domestic financial sector a sustaining pillar in the sound and stable growth and development of the economy. This task was undertaken with earnest and sober discipline, putting the Bank in a trusted middle position between the public and private sectors.
Although it hasn’t been easy for the Bank to balance neatly the equation between sometimes aggressive demands upon it of certain private sector lobbies, on the one side, and the public interest, on the other, many of its decisions over this half century have concretely helped to develop soundly the local financial market and, along with it a diversified economy in Mauritius. The few occasions the Bank has publicly resisted politicians show that politicians haven’t always kept a reasonable distance to allow the Bank to do its assigned work objectively.
At the macroeconomic level, the Bank has contributed substantively to raise the scope of the local financial sector from a narrow domestic economy base to hosting “offshore” financial activities, by adopting policies and practices adapted to the evolution of international markets. At the overall economy level, not only has it successfully gone through the rough and tough of frequent turmoils in international markets. It has also ensured that sectors needing to be groomed up for economic diversification are prudentially supplied with the necessary funds at reasonable cost for their growth.
The Bank was instrumental towards even the physical transformation of the financial marketplace of Mauritius. Its dynamism equipped the financial system of Mauritius with an electronic real-time payments processing capability way back since 2000. It went on to build a centralised Credit Information Bureau for the country on the back of this infrastructure to enable lenders to take better-informed decisions and, hence, to support the good health of Mauritius’ financial system.
When it has come to the crunch, the Bank has applied the expertise it has acquired tackling all sorts of problems affecting the financial system with care and caution, changing laws as and when necessary to help economic expansion and giving financial institutions operating in the country the same fair and objective treatment for all. It has been listened to as a privileged interlocutor at policy-making, given all the experience it has gathered over the years.
As other central banks have proved, resilience towards the ever-changing global situation in policy-making is a reality of modern times. It is by acquiring a solid reputation of no-nonsense regulation of the financial system that the Bank will successfully chart its next 50 years and maintain constructive confidence in the Mauritius financial system.
* Published in print edition on 18 August 2017