How to Improve Export Competitiveness in Mauritius

How to Improve Export Competitiveness in Mauritius Marilyn Whan-Kan

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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.

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

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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

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

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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)

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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

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Policy Measures to increase productivity and competitiveness in Mauritian exports • Human Resource Development and Skil s Development- Social partnership: col aboration between employers, workers and the state to determine skil needs and effective ways to meet them. – Benchmarking future skil needs: have surveys of skil needs benchmarked against competitor countries to identify skil 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

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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

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Policy Measures to increase productivity and competitiveness in Mauritian exports • Diversification, quality improvement and technological upgrading • Diversification: -products or activities requiring more skil s 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

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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.

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

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