What’s wrong with our tourism industry?

Titbits

By R. CHAND

Tourist arrivals for the first three months of 2012 decreased by 0.2% relative to the first quarter of 2011 and the forecast for 2012 is estimated to be a mere 1.6% increase over 2011. Some of the reasons that were put forward for this below-trend performance are the unfavourable economic conditions prevailing in the Euro zone, the sporting events in Europe and the presidential elections in France.

However, the World Tourism Organization (UNWTO/OMT), a specialized agency of the United ‎Nations and a leading international organization in the field of tourism notes a totally different trend. It points to a healthy growth of international tourist arrivals of 4.6% in 2011 and a 5.7% increase in the first two months of 2012. Demand remained strong in both advanced and emerging economies destinations, despite economic constraints in many of the source markets of Europe and North America. This has led Mr Jean Cyril Monty in his article dated 22nd June in L’express to ask : « On souhaiterait donc comprendre comment deux pays qui ont tant de similitudes et d’attraits au niveau touristique ont cependant des résultats si différents, notamment en ce qu’il s’agit des touristes venant d’Europe. Pourquoi le secteur touristique mauricien, malgré les centaines de millions de roupies dépensées chaque année pour assurer sa promotion, s’essouffle-t-il, alors que celui des Seychelles a le vent en poupe ? »

Indeed Seychelles experienced a growth of 8.8% in tourist arrivals in the first semester of 2012 and registered an increase of 5.3% in the number of arrivals from Europe. Mauritius registered a 2.7% decrease and an equivalent 2.7% fall in arrivals from France, our leading market. What’s wrong with our tourist industry?

The World Economic Forum’s 2011 Travel & Tourism Competitiveness Report shows in its rankings for sub-Saharan Africa that Mauritius remains the highest-ranked country in this region at 53rd overall, but dropped 13 places in the rankings since the last assessment in 2009. The drop in rank is attributable to declines across most areas measured by the Index, and particularly those measuring the quality of infrastructure, including transport, tourism, and ICT infrastructures. Surprisingly, we are ranked 110^th in cultural resources. Is it not timely now to reassess the potential of our tourism sector?

Sociologist Malenn D. Oodiah argues that “il faudra repenser notre modèle touristique pour qu’il puisse donner les résultats escomptés. Le tourisme mauricien subit actuellement un télescopage de plusieurs dynamiques/facteurs : un déséquilibre structurel, une image brouillée de la destination, un glissement vers le bas de gamme et la braderie, l’attractivité et la compétitivité de la destination, la réorientation stratégique et la diversification des marchés.” Mr Christian Lefèvre in Business Mag of 6-12 June 2012 seems to share this view especially with regard to tourism promotion: “Le marketing touristique doit faire sa révolution pour mieux répondre aux changements et effectuer une surveillance concurrentielle et stratégique, ce qui plus que nécessaire… Le MTPA aujourd’hui est dépassée et obsolète… »

It will not be the bungled slogan « Mauritius : c’est un plaisir » or the shopping fiesta that will give our promotion campaign a coherent and effective strategy! Many have jumped on the bandwagon of tourism promotion without a clear understanding of what promotion is all about. The industry is set to indulge in some heavy-duty soul-searching!

New forms of tourism are emerging in the place of traditional tourism –more innovative, specialized, “greener”, customized and experience-oriented. A new type of tourist is driving it: more educated, independent, conservation-minded, respectful of cultures, and insistent on value for money. To remain competitive, tourism destinations and industry players alike must adapt. For many, the challenge is to “reinvent” tourism, to accelerate the segmentation of tourism products and the creation of new types of tourism products.

Cultural tourism, for example, is also a significant and growing sector, attracting relatively affluent and educated visitors. Several countries have undertaken a repositioning of their cultural services and are developing innovations aimed at promoting culture, diversifying tourism in the country and increasing the length of stays through, for example, better packaging and promotion of available cultural experiences and events. We have enormous untapped possibilities of offering unique cultural experiences through innovative tourist villages that can be made to reflect the essence, beliefs, and way of life of the Mauritian cocktail of cultures.

Innovation is the key element to survive and compete in a dynamic and radically changing environment — copycats will not do. We have to provide the right kind of experience with that essence of authenticity. We need people to innovate and build on our unique cultural strengths. It is not possible to consider innovation in tourism without acknowledging the need to mobilise the local population. The industry must develop these innovative strategies for employing its comparative advantages to achieve a competitive edge. A new roadmap which takes into account the new realities and new business models based on long-term sustainability is long overdue.

* * *

The Sliding Rupee

It is now clear that the rupee is finally depreciating. During the last week, the US dollar weakened somewhat against the euro following the Spanish bank bailout and the Greek elections, but the US dollar has continued to strengthen vis-à-vis the rupee.
Since the position of the Governor of the Bank of Mauritius (BOM) on preserving the rupee’s value is well known, the possibility that the decision to go for depreciation would have been forced upon the Bank by the appointees of the Ministry of Finance on the Monetary Policy Committee (MPC) cannot be ruled out. If confirmed, this would vitiate a key objective of the monetary Policy Committee which is to provide full transparency and clarity in monetary policy decisions.

The BOM may have been compelled to this change of course and to justify the purchase of euros and dollars under a Reserves Restitution Operation, by claiming that it needs to build up foreign exchange reserves as per the SADC criterion of an equivalent of 6 months’ imports. The internationally accepted short-term liquidity criterion is only 3 months. And the BOM is making a show of resistance by insisting to pass on the costs of sterilizing the reserves build-up to the Ministry of Finance. To offset the injection of additional rupees required to buy euros and dollars in the monetary system, the BOM has to remove the same amount of rupees from the monetary system by selling BOM or government securities. This means it loses more interest that it gains on the additional foreign currency reserves, since the domestic rate of interest is much higher than the very low interest rate on foreign currencies. The BOM wants the Ministry of Finance to compensate for the net interest foregone, threatening that it might run a loss this year as a consequence.

The market’s sentiment is that the Central Bank is deliberately exaggerating the need for sterilization, as current economic conditions might well be consistent with monetary easing, i.e., more rather than less rupees in the monetary system. The MPC is pressing for depreciation, since it openly recognizes an increasing misalignment of the rupee, but there is much unease about the way it is being done. The wider public is not at all clear whether nominal rupee stability is still being pursued, or that the weakening rupee now signals a change in exchange rate policy. Added to the recent controversial MPC appointments, this obfuscating approach to exchange rate adjustment poses a serious threat to the credibility of monetary management. It is necessary to restore market confidence by demonstrating that BOM’s exchange market interventions, other than for smoothing volatility, are guided by clear economic objectives, with proper reference to key indicators such as the real effective exchange rate (REER). The conduct of exchange rate policy is too important to be seen as an ad hoc process.

While the BOM may have obsessively focused on maintaining interest rates and stabilising the rupee to contain inflation, it has also alerted to the dangers of relying unduly on a falling rupee to stimulate economic activity. Improving the rupee’s external competitiveness in markets beset by a severe crisis and dampening global growth will offer scarce prospects of reviving demand, and provide limited relief to exporters’ bottom lines. As the Mauritian economy retreats from a real estate and construction boom, some of its fundamental weaknesses are being exposed, including the insufficient levels of capital to support heavy debt burdens. Under-capitalization is a characteristic trait of family businesses, and our private sector will have to face hard choices if the looming crisis deepens. Lowering interest rates and weakening the rupee will be partial palliatives to address the inevitable need of enterprises for buttressing their capital base.

* * *

Service to Mauritius and the Capacity Building Programmes

To address some of the obstacles of the lengthy recruitment process and skill shortages in the civil service, the Service to Mauritius (STM) and the Capacity Building Programmes were developed and managed by the Ministry of Finance (MOF). The STM was devised to recruit researchers, outstanding university students and skilled professionals with hands-on experience in scarcity areas relevant to Mauritius. The STM Programme covers a period of 6 months to one year and may be extended for another year. Interns are paid a stipend equivalent to the starting point of graduates in the public service, plus travel expenses, but are not be entitled to an end-of-year bonus and are not guaranteed any employment in the public service.

The Capacity Building Programme designed for providing services in different areas of scarcity was announced in the Budget Speech 2008/2009 in an attempt to improve the functioning of government organizations in the context of the new PBB and to overcome problems in relation with recruitment delays. The Programme aims to build capacity across the public sector through the use of consultancy services to reinforce capacity constraints at the implementation level for specified periods of time, where the lack of technical expertise has been recognized and needs to be filled in urgently.

Some Rs 200 million have already been spent on these Programmes over the past three years and no mid-term review has yet been carried out. It will interesting to have an idea of the exact cost to the economy to date of the implementation of STM and Capacity Building Programmes – the number of foreign consultants recruited so far, their nationality, their salary and qualifications and experience, conditions of contract and details of assignment. It seems that there were some loopholes in the bidding documents/recruitment process such that the Public Procurement Office had to rescind its decision and advised that henceforth all procurements under the Capacity Building Programme should be under Consultancy Services (performance bonds, validity period, evaluation and interim reports). Has there been any performance evaluation of the consultants’ work? Has the objective of the capacity building been met, namely in building capacity at the level of our different ministries?

In the present context of increasing unemployment among highly qualified Mauritian graduates, these schemes should be re-examined as well the schemes to provide short-term placements/attachments to foreign students.

---

* Published in print edition on 29 June 2012