Right to Information

Editorial

The allegation was made this week that SICOM (State Insurance Company of Mauritius), a large public sector insurer and pension fund, would have acquired an unfinished building in Ebene Cybercity from a promoter, allegedly politically connected, for a sum of Rs 600 million. SICOM has come out with a public statement that a part only of the deal money has been paid out in this case and that there is no illegality involved as this type of investment forms part of the company’s normal investment activity.

The company’s investment committee knows best how to avoid getting into conflicting situations, what its investment priorities are and how these should be efficiently managed so that its policy holders and pensioners get the best value-for-money without incurring undue risk. Interested members of the public fully trust the investment committee of SICOM, which should ideally have been comprised of high class investment professionals, to do its work diligently so as to get the best returns for them without jeopardizing their capital contributions towards insurance policies and pensions.

When this piece of information broke out in public, the impression it created was that the promoter making his way with an unsolicited bid would have walked away with what was referred to as a ‘jackpot’. It was also being alleged that SICOM’s involvement in the deal would actually have been calculated to derive the needed financing support to the project subject of the sale to SICOM while it is still in its construction phase. According to SICOM, this is not the case.

It is the normal practice of serious financial institutions to be doubly on the alert when doing financial transactions with what international standard setters call ‘politically exposed persons’. We believe that SICOM would have taken the necessary precautions so as not to expose itself if that was indeed the case.

However, an accumulation of suspicions of wrong-doing, whether justified or not, especially when it concerns public bodies, can undermine confidence. It is better to let institutions do the work they are intended for in all serenity. One of the ways of getting to the required level of serenity is to proclaim the coming into force of the Right to Information Act. Not only will the coming into force of this legal disposition keep institutions disciplined in whatever they do with public money in terms of complying with laid down rules and procedures. It will also give to all who are entitled the information they need to form a clear opinion as to whether the decision-makers have acted within the precincts of law or not. It will limit rumours of wrong-doing where there is no foundation upon facts of such rumours. It is dangerous to let stray cases of suspicion bring the whole edifice into disrepute.

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Beware Economic Changes operating at the Global level

In the 1980s, in the context of international liberalisation of trade, there began a movement known as offshoring. It concerned the moving of work and jobs by international companies to places outside their countries of origin. Wages in the countries to which operations were “offshored” were far below what the companies had to pay workers in their home countries. A number of well-known European and American manufacturers shifted their manufacturing activities to places like China to reap benefits of huge wage differentials which prevailed at the time. Loss of jobs in this context in the advanced countries led to an outcry against globalisation.

In the 1990s, following liberalisation of international trade in services, there took place a migration of services from the West to other countries to cash on the wage differential. A variety of activities moved out. They were referred to as “outsourcing” and included the migration overseas of an array of services relating mostly to IT and Back-office work. They concerned a variety of activities from software programming, call centres, data management to providing medical diagnoses online in real time. We employ here in Mauritius some 15,000 people in the ICT sector, a lot of it in the call centre activity.

This was the international context in which several emerging economies thrived. With time, however, wages have been rising fast in these economies. The gap between the West and emerging economies in terms of wage differentials has been closing fast. But the diminishing labour cost differential is only one of the factors causing currently a reversal of the offshoring and outsourcing activities. Activities are going back to the West also because of technological advancement. A lot of work that used to be entrusted to labour before is being automated in the developed countries, cutting down sharply the share of labour cost in total cost of production. Cheap labour is therefore becoming less relevant in keeping down cost of production.

International companies engaged in offshoring and outsourcing are also realizing that the distance between their home markets and their remote places of production overseas represents a risk in their supply chain. Natural disasters, geopolitical tensions and rising transportation costs are acting to deter offshore production. Many Western companies have been busy shifting back their production to their home countries. The companies are also realising that by keeping production offshore, they are becoming less efficient at developing and integrating the fruits of their research and development into their products. They need to keep production and R&D close together in their home markets to derive the full benefits of innovation which is otherwise getting stunted. The only reason an international company will keep producing overseas is where the concerned country has a big enough internal market of its own with consumers enough to buy up production intended for that specific market. So while China and India will qualify for continued production in view of the relatively big home demand, Mauritius with its rather small internal market will not.

This new reversing trend of production implies that advanced countries which have come to depend on externalisation of their activities will become increasingly less dependent on such externalisation. Jobs will move back to the home markets and this is happening already. This situation indicates that countries which compete hard on factors other than labour will resist the changes taking place. Which will be those countries? They will be those who, like South Korea, can endow their workforce with world-class skills and training. They will also be those which make business stick to them by having sensible regulation. Mauritius could have developed an edge if we had spent some time putting in place this kind of state-of-the-art skill base and generated the skill flexibility in our labour force to move on with a changing global stage. Not having paid enough attention to these details could come to command a high price.

* Published in print edition on 25 January 2013