For Lokal to be beautiful: Tinkering at the edges won’t do!

Economic Outlook

Anyone who thinks that we can realise the “maker island” by tinkering at the edges of the economy, as proposed by ‘Utopies’, without a decisive rupture with the model of development imposed by the corporates and the ruling elite, is howling at the moon

By Rattan Khushiram

Do we need a whole set of foreign consultants of the Utopies agency to tell us what we already know about our economy? That we need more of local value added, that we have to boost our export markets, more of open economy, etc? Any official document on the economy or its long-term vision will have a whole gamut of policies to restore confidence amongst our local investors and induce them to embark in new emerging sectors and fresh markets. There are also policies to enhance our competitiveness to sustainably move up the value chain, diversify our exports and revamp our export promotion activities with an impetus on market development and brand building, without forgetting the ones for bolstering research and innovation capacity, address skills shortages in Science and Technology, ICT and other emerging sectors.

Profusion of policies, reports, literature

We even have a comprehensive 10-year master plan for the SME sector that encompasses much more than the “maker island” concept of Utopies – one of micro-factories, start-ups and incubators. For example, we already have enough of policies to encourage technopreneurship and local production from local products. Our whole innovation systems are being encouraged to borrow and adopt technologies from elsewhere, as well as investment in developing our own unique advantages and addressing our particular challenges.

There are even proposals to set up a SME Industrial Technology Research Institute, patterned on the Taiwan, South Africa and Singapore technology research institutes, and that will scour the world for cutting-edge technologies and use its own laboratory facilities to assess their appropriateness to local conditions and build pilot versions to demonstrate them to prospective local entrepreneurs. Our leftist and eco-socialist parties are not far behind with a whole palette of programme and strategies for a more inclusive and resource-efficient economy, for more optimal utilization and sustainable use of land and other natural resources, for a “ridge to reef” development of our coastal regions and protection of marine life, agro-industrial production for food security and a thriving fishing industry…

We have been used to such literature which has been piling up over the years. Every new government, carried away by the exuberance of its own rhetoric, comes up with new development programmes and projects, which are more of the same, with some few exceptions. And they keep fiddling while Rome burns. In fact successive governments have not yet wakened up to the critical state that the economy is now in.

Which development model?

It’s all a question of which development model we want to embrace! Utopies does not go far enough in questioning our model of development. There is a lot of reference to the multiplier effect which they believe can be greater. Its report argues that “the multiplier effect will be all the greater as the territory is able to limit the leakage of wealth (imports, income paid to foreign investors, etc). Without this effect, the territory functions a bit like a pierced bucket, which does not manage to keep the wealth that enters and to benefit its local economy.”

We agree but we should delve deeper: the low value of our multiplier has also to do with lack of competition in our constricted market. It is the entrenchment of the oligarchy-dominated private sector corporates or big companies at the heart of the local economy, their hold on economic power and wealth that have thwarted the level playing field by exercising greater control over new opportunities in the economy.

“Markets and free competition are limited by the actions of the oligarchic families who dominate major plantations, financial institutions, real estate, trade and telecommunications,” states ‘BTI 2016 — Mauritius Country Report. Gütersloh: Bertelsmann Stiftung’. They are squashing competition by using the tricks and arts of management to stay ahead. They are gaining control over entire markets and finding new ways to entrench themselves. Many of the large firms have acquired or setting up their own start-ups, thereby diminishing the opportunities in the long-term for other SMEs in promising sectors.

In the tourism sector, for example, the oligarchy-dominated private sector has always skirted the more fundamental debate about the opportunities in the sector, the possibilities and potential of the different market segments and the benefits accruing to different sectors and groups and about developing equity in tourism benefits-sharing. They have ensured that the tourism strategy continue to emphasize on a quality product, concentrating specifically on the upmarket segment with high levels of customer service. That strategy is restrictive by ensuring enclave tourism — hotels become resorts that limit their customers within the confines of the immediate resort environment.

Although tourism development results in the provision of facilities and services, in the case of enclave tourism however these facilities are not accessible to local residents; most of the benefits do not percolate down to the lower income groups, SMEs and low-skilled operators. This type of tourism demand renders them uncompetitive as they are unable to capitalize on the advantages that accrue from the economies of scale and lack the requisite experience to run tourism business along modern management principles.

Challenge: Spread benefits more widely

The real challenge is for small operators to overcome the difficulties in finding an outlet for their products which fail to meet the quality standards of upmarket tourism. Again, their limited resource base makes this objective hard to achieve. At the margin there are however some beneficiaries of the few left-overs for some private owners of some upmarket bungalows, restaurants, handicrafts outlets.

The challenge today is to formulate the sector policies that ensure that the benefits from tourism activity are spread more evenly throughout society. The democratisation of the sector will mean a policy orientation that does not focus uniquely on the upmarket segment but also on the low-to-middle segments. This market segmentation offers us enormous possibilities to revitalize the sector and the satellite activities.

We wish to conclude by engaging our friends of Utopies on this question that tends to cast doubts on the possibilities of boosting the multiplier effect without redefining our model of development. Can we have any hope of strengthening the multiplier effect and boosting local production and exports when:
a) instead of being put to productive use, our strategic land assets are being sold to foreigners (which has accounted so far for around 60% of the FDI inflows during the past years) and,
b) these FDI inflows and the capital inflows from the tax-centric Global Business Sector are the cause of an overvalued exchange rate which contributes to the gradual decline of our manufacturing sector – the so-called Dutch disease.

Anyone who thinks that we can realise the “maker island” by tinkering at the edges of the economy, as proposed by Utopies, without a decisive rupture with the model of development imposed by the corporates and the ruling elite which reinforces plutocratic private interests as opposed to enlightened national interest, a model of development that seeks still freer hands to push forward the corporates’ economic agenda without conceding much of their entrenched interests and leaving crumbs for others, is howling at the moon.

* Published in print edition on 1 February 2019