Abiding by law

Choices to make

I still recall that when we from Mauritius went out in the 1990s to convince people from other countries to come over to do financial business from Mauritius, one of the arguments that we employed and which made a lasting impact on our interlocutors was that Mauritius was very much a law-abiding jurisdiction. Our interlocutors were told that Mauritius had an independent judiciary and a hybrid legal system firmly grounded in the English Common Law system along with the French Code Napoléon. That we still maintained the Privy Council as our last court of appeal.

In addition to giving them commercial reasons for doing business from Mauritius, it made immense sense to them that Mauritius as a law-abiding country would not compromise on its abidance with law. It was reassuring. This is how we’ve been able to diversify our financial sector successfully. Without this kind of persuasive opening up, we would have narrowed down our financial services activities to operating on a small internal market.

Neither the numerous jobs the sector provides nor its value addition to the tune of around 11% of GDP would have been possible today without opening up in this manner. Strong principles pay good dividends. Places like Singapore have demonstrated that abiding by law in its full rigour can not only be reassuring towards investors; it can also be transformational for small economies.

I was recently informed by a cabdriver in Singapore that no one would dare park a vehicle in a specific club area in the City State during weekends when it was interdicted to do so, whether or not road traffic custodians were around. Discipline gets entrenched in social norms if it is implemented without fail.

It is a poor thing then that our decision-makers may, for purely political reasons, take risks to compromise this kind of good abidance with the law. Take the case of street hawkers in Port Louis. The Supreme Court gave a decision several years ago that street hawkers are not permitted to operate within a given radius in the City of Port Louis.

For reasons they know best, several past governments and municipal administrations played hide-and-seek with this ruling of the court. Port Louis continued therefore to be a pandemonium. Until a firm decision was taken last year by the present government to put some order in the City centre by abiding with the court’s decision.

The humane part of the matter was not discarded, notably that many among the so-called street “hawkers” depended on it for a living. Thus, while a more permanent accommodation would be provided them after completing construction of appropriate sites to carry on their trade, they were provided alternative locations in the City that would neither encumber the footpaths nor clutter up City traffic, nor flout the Supreme court ruling.

It seems some are not satisfied with this solution. They would like the chaos of the past to come back at the heart of the City, thus making it flexible to apply the law when it suits particular conveniences.

As we well know, one exception opens up the door to further exceptions. It may not be in Mauritius’ best interests that one can play with the law as it suits any particular convenience. At this moment when so much uncertainty clouds the global environment, we need not give a signal that our abidance with the law is variable.

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Dependency on oil as fuel

Mauritius has been benefiting from windfall gains due to a steep fall in the price of oil since mid-2014. The international oil price which was heading towards the $200 dollar a barrel earlier fell below $30 a barrel by January 2016. There was a significant glut of oil supply on the market and that was why the price dived down. Since then it has perked up a bit, hovering of late around $50 a barrel.

There was pressure from domestic consumption lobbies for the government not to maintain the price of fuel oil and gas at the level it was before its steep decline on international markets but to align it instead with the prevailing falling international trend. Consequently, the additional amount that was being set aside in a government price stabilisation reserve, started being used up with each price increase in oil delivered.

At its latest meeting on 4th November 2016, the Petroleum Pricing Committee (PPC) decided that despite international oil price having increased, the domestic retail prices of both Mogas and Gas Oil were being maintained at their previous levels. This was made possible by depleting reserves set aside in the past in the Price Stabilisation Account (PSA) of the State Trading Corporation.

According to the PPC, losses amounting to Rs 62m and Rs 85m for two shipments received in October 2016 alone had been absorbed by the PSA short of hiking up the price to reflect the current hike in the international market price. In the one year to 4th November 2016, the PSA had thus absorbed losses amounting altogether to Rs 1,338m due to the local price reduction of oil. If all the reserves accumulated in the PSA were to be depleted someday and international oil price went on an upswing again, consumers would be exposed to rising prices of oil without this safety net.

As it is, we have kept increasing our dependency on oil imports for our various energy needs. In 2015, fall in oil import price brought down the share of oil imports in our total imports to around 15% of the total import bill but it is usually around a fifth of our total imports. Given the scale of our dependency on imported oil and the capricious nature of this market, our objective should be to rationalize and lessen our use of imported oil and other fossil fuels such as coal.

We must guard ourselves against the consequences it may have on the economy were the price to go up again. So far countries like Nigeria and Venezuela which have depended extensively on oil exports have suffered severe budget upsets and social unrest in the wake of the recent falling international oil price.

Importing countries like Mauritius may have identical consequences to face should they go on increasing their appetite for dependency on increased oil imports without increasing their ability (through increased production and exports) to meet the import bills once oil prices soar again. For the moment, we do not know when the international price trend will reverse course and to which extent it might go. Oil exporting countries, on their part, are doing all they can to limit production in a bid to raise the oil price again but we are not there yet.

Anil Gujadhur