How to Improve Export Competitiveness in Mauritius

1. How to Improve Export Competitiveness in Mauritius Marilyn Whan-Kan

2. Trends in Competitiveness • Definition of Export Competitiveness: The ability of the country to produce and sell goods and services in foreign markets at prices and quality that ensure long-term viability and sustainability. • Loss of Mauritius’ competitiveness both overtime and relative to its main competitors.

3. Loss in competitiveness overtime • Real wage increases not matched by productivity growth • Evolution of terms of trade

4. Loss in competitiveness relative to competitors • Wages and labour costs • Export prices • Growth rate of manufacturing exports • Share of overall exports in world market • Growth Competitiveness Index compiled by World Economic Forum -Indices of technological innovation, efficiency of financial system, and degree of economic integration of the country with the rest of the world

5. Challenges related to loss of preferential markets • EU to allow all products from LDCs free market access • 2008- Cotonou Agreement on non-reciprocal trade preferences will end • Trade liberalisation in agriculture will affect Mauritius as an exporter of sugar under the Sugar Protocol • 2005- Phasing out of WTO Agreement on Textiles and Clothing

6. Policy orientation to Improve Competitiveness • To improve export competitiveness, one must generally focus on one or a combination of the following measures: • Labour productivity increase (best policy) • Wage rate decrease (not feasible) • Currency depreciation (limited scope as it increases the costs of imported inputs and raises the value of foreign debt denominated in local currency)

7. Policy Measures to increase productivity and competitiveness in Mauritian exports • Macroeconomic stability • inflation: low • Interest rate: low interest rates and international trends in the determination of interest rate levels • Exchange rate: some degree of exchange rate flexibility but at the same time exchange rate stabilisation

8. Policy Measures to increase productivity and competitiveness in Mauritian exports • Human Resource Development and Skills Development • Social partnership: collaboration between employers, workers and the state to determine skill needs and effective ways to meet them. • Benchmarking future skill needs: have surveys of skill needs benchmarked against competitor countries to identify skill gaps in potential areas of comparative advantage. • Co-financing: make the delivery of training more efficient. • Cost effectiveness: prioritize expenditures in training, support and monitoring of training standards by government

9. Policy Measures to increase productivity and competitiveness in Mauritian exports • Reduction in transactions costs and development of infrastructure • Public sector reform- reduce red tape bureaucracy • Privatization of infrastructure- public-private partnerships • Appropriate user charges- cost-reflective tariff levels to promote efficient use of infrastructure services • Government expenditure on infrastructure: invest a given percentage of GDP in new infrastructure • Regional network: cost reduction through use of regional network to develop infrastructure

10. Policy Measures to increase productivity and competitiveness in Mauritian exports • Diversification, quality improvement and technological upgrading • Diversification: -products or activities requiring more skills or value-added -higher quality -technology-based • Quality improvement: -awareness on quality -provision of tax or financial incentives to SMEs -clusters • Technological upgrading: -Tax or financial incentives for SMEs to adopt new technology. -Attract FDI to build competitiveness through technological upgrading

11. Conclusion • A broader social partnership should be used to promote productivity and competitiveness: efforts to ensure the long-run survival of the Mauritian economy must be shared by the government, all employers and workers.

12. END Thank you for your attention E-mail address: marilynwhan@yahoo.co.uk