Special Budget: The three priorities of the Budget more jobs, decent jobs and smart jobs

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In the 2016-2017 Budget that he presented on the 29th July 2016, Pravind Jugnauth promised that “some 21,400 youths, men and women will be taken out of unemployment” thanks to the various measures that he announced.

In the 2016-2017 Budget that he presented on the 29th July 2016, Pravind Jugnauth promised that “some 21,400 youths, men and women will be taken out of unemployment” thanks to the various measures that he announced.

In a series of articles to be published in the wake of the upcoming Budget, Dr Rama Sithanen, economist and former Minister of Finance, argues that the credibility of the 2017-2018 Budget will be inescapably eroded if the Prime Minister Pravind Jugnauth continues to announce a plethora of measures that he knows fully well will not or cannot be implemented as amply evidenced by the last two Budgets. The author posits that Pravind Jugnauth should focus on very few key objectives. The goals should be to reignite the engines of growth, diversify, modernise and transform the economy so as to create gainful, sustainable, decent and smart jobs. Especially as the track record of the Government on employment creation is dismal. Dr Rama Sithanen, take on what could and should be done with the forthcoming Budget. Dr Sithanen focuses on the burning issue of jobs.

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The critical importance of job creation (Part 1)

The population has been shortchanged by the Government on employment creation. There has been promises but no actions. Jobs must be at the heart of the economic strategy because of its crucial importance for smart, sustainable and inclusive growth. The objective should be the generation of new employment while also improving the income of existing jobs. Not only is it a key pillar of development but it is a major channel to end absolute poverty, to support the middle class and build shared prosperity. Jobs are important to individuals and families as they are by far the primary source of income. Unemployed people earn no salaries and, as a result, suffer from a variety of associated problems.

We require a concerted, enhanced and sustained effort to create more jobs for the unemployed before things get out of shape. Especially for the large numbers of unemployed and underemployed youth. The key objective is to foster the creation of meaningful jobs that add net value to society and can be sustained in the long term. We must also invest in entrepreneurship development to unlock growth, create jobs and support SMEs. One is heartbroken when our fellow citizens who have invested in human capital find it difficult to integrate the labour market. An unemployed doctor has to accept a job as a nurse while someone with a LLM is compelled to sell vegetables to eke out a living. For every vacancy, there are often more than 50 applicants and many more in the public sector.

Around 20,000 net jobs promised on an annual basis and between 21,400 and 25,500 in 2016

Job creation is the area where more promises were made and where delivery is abysmal. The first Budget of the incoming team was unveiled in March 2015 by Vishnu Lutchmeenaraidoo, followed by the economic vision statement of SAJ in August 2015 and the 2016/2017 Budget of Pravind Jugnauth in July 2016.

The following projections and promises were made by the Government:

  • In its 2015-2019 programme of January 2015, it stated that ‘‘some 15,000 jobs will be created annually’’
  • In the 2015-2016 Budget, Lutchmeenaraidoo declared that “one of the four objectives of this Budget is to steer the economy towards a path of HIGH INVESTMENT AND HIGH EMPLOYMENT. We need to go out of the box to create THOUSANDS OF JOBS AT A RAPID PACE. And this is what this Budget does”.
  • In his ‘second economic miracle’ speech of August 2015, SAJ asserted that “100,000 new direct and indirect jobs will be created within the coming five years (20,000 per annum). In financial year 2015-2016 only, some 16,000 new jobs are being created in these sectors. Over and above those private sector employment perspectives, in the public sector, I can state that more than 7,000 vacancies will be filled in the 2015-2016 period. Moreover, some 2 500 job placements will be effected under the Youth Employment Programme. This makes a tally of 25,500 jobs to be generated in 2016.”
  • In the 2016-2017 Budget, Pravind Jugnauth, announced that “this new era of development will be centered on creating more job opportunities for all… Government will enlist 4,000 persons under the National Skills Development Programme for training in technical skills that are in high demand. We are providing for the training of 1,200 seafarers for cruise jobs and in shipping companies. We are providing for employment of 2,000 unemployed under the YEP. Government will fill 7,200 vacancies and new posts in the civil service. Moreover, we expect that the new policies to boost up economic growth and employment in this Budget would generate some 7,000 new jobs in the short term. With these measures, some 21,400 youths, men and women will be taken out of unemployment.”
Only 300 jobs were created in 2016

The official 2016 figures for the labour force, employment and unemployment were recently published. Against a projection to generate between 21,400 and 25,500 jobs, the actual number of employment created in 2016 is 300. It represents a staggeringly low 1.1% of the forecasts made by the Prime Minister and 1.4% of those of the Minister of Finance.

The data are shown in the table below
  • From 2015 to 2016, the labour force came down by 3,600 from 584,600 in 2015 to 581,000 in 2016. People are being removed from the labour force to be categorised as ‘inactives’;
  • Employment increased from 538,300 in 2015 to 538,600 in 2016, an insignificant rise of 300 net jobs only;
  • Unemployment dropped by 3,900 from 46,300 in 2015 to 42,400 in 2016. The unemployment rate declined not because jobs were generated but because the labour force contracted;
  • An exceptionally high 92% of the fall in the unemployment rate is attributable to the removal of people from the labour force and not to job creation.

 

This is being hailed as a policy success by the Government as the rate of unemployment has artificially come down from 7.9% in 2015 to 7.3% in 2016.


The backcloth to the Budget

The Budget cycle is back. Some are pinning high expectations on the forthcoming Budget to usher in a wave of optimism by reigniting the engines of investment, exports, growth and employment. Others cynically believe it will be more of the same with a “catalogue of effets d’annonce, a futile exercise in spins and hypes and an eyewash” with insignificant impact on the direction, momentum and pace of economic activities except for the usual few measures that will grab the headlines the next day and then quickly fall into oblivion.

The Minister must above all resist the easy temptation of announcing a deluge of measures and a litany of promises, often uncoordinated, lacking coherence, poorly structured and ill-informed and that he knows he will not be able to implement or cannot keep. Even a pedestrian and a cursory review of the objectives of the last two Budgets shows with incredible crudeness the great chasm between what was announced and what has been accomplished. It is a matter of ensuring the credibility, the significance and the relevance of his economic strategy. At this critical crossroad, he simply cannot be all things to all people. He must focus on few key priorities if he wants to rise to the daunting challenges facing our country. And concentrate his time, effort, resources and energy on their realisation.

On a macro front, besides economic growth being lower than forecast, we have not yet seen even the green shoots of the four key strategies announced in the 2015-2016 and 2016-2017 Budgets, which were

  • a wave of modern entrepreneurs. In fact existing ones face significant challenges;
  • more job opportunities for all. In reality, jobs are stagnating;
  • boosting exports. In truth exports are declining;
  • raising investments. Official figures show that investment is low and still falling as a percentage of GDP.

 

At the sectoral level, we are still far from

  • diversifying the manufacturing base. The share of manufacturing in national output continues to head south ;
  • expanding activities in the freeport. Reexports have dipped sharply;
  • reversing the decline in the construction industry after many years of contraction.

On a project basis,

  • there is hardly any news of the production of bicycles and motorcycles ;
  • there is no sign of the refinery of gold and the production of gold bars;
  • the setting up of a pharmaceutical village is still awaited.

On the social front

  • there is no shared prosperity as income inequality is rising;
  • there is no inclusive growth as wealth disparity is widening;
  • the Marshall plan to fight poverty has not even been published, let alone implemented;
  • the CSR is in complete chaos and confusion with the poor being deprived of financial resources destined for them.


Can Pravind Jugnauth restore hope and repair confidence by turning the economic corner?

The government is in a very tight corner

Mid term in its mandate, the predicament is very tough for the Government. People are openly speaking about it while those in office are politically too astute and experienced to be cut off from ground realities. There is no prize for guessing why there is no by election in constituency 7 even if someone who has been PM for 18 years must stay on as a simple Minister in a portfolio without much clout and significance. No award for guessing the reason for the unprecedented closure of Parliament for weeks before the Budget. For many independent observers, the writings are clearly on the wall and unless there is a radical shift in policies, strategies and attitudes and a marked improvement in economic and social performance and outcome, the Government is headed for trouble, if it is not already engulfed in it. The disunity, lack of cohesion and absence of transformational reforms in the main opposition parties, the potential fragmentation of vote in a multi party contest and the putative unattractiveness of some of the alternative political choices may not be enough to save the day. Likely coalition partners will also shy away as public discontent escalates and scandals accumulate. As is well known, more often than not and as aptly demonstrated in December 2014, elections are usually lost by incumbents rather than won by outsiders.

Reality versus perception on the mood of the population

In politics, public perception is reality, even if it may be skewed. And perceptions are critical. Judged on what is seen, heard, exchanged and published on the various channels of communication and by conversations at dinner tables and social events, it is plain there is widespread disillusion and ubiquitous disenchantment among the population. The reasons are a mix of reality and perceptions of reality. Expectations have not been met, aspirations not fulfilled and promises not respected. The reality is that the Government is short on its key deliverables, is doing too many things that are completely contrary to what it undertook in Dec 2014 and has an unbelievable and uncanny capacity for self inflicting wounds and damage. The perceived reality is that it is allowing too many monsters to raise their ugly heads. A climate of deep mistrust and doubt is taking root against those in office. The country seems to be going nowhere and is desperately in need of strong leadership, policy coherence, clear direction and structural reforms to meet the daunting domestic and international challenges and escape the middle income trap where we are mired. The overriding question is whether Pravind Jugnauth can turn the corner after a waste of two and a half years by the Government. The Budget will be his litmus test to ascertain ‘‘the mettle he is really made of’’.

The government forced on the defensive

He faces an immense and a daunting task. The setting to the Budget could not have been more challenging for the Prime Minister from a political, economic and social perspective. Politically, the PMSD has left the Government and is now firmly entrenched in the Opposition and firing with a machine gun on all that moves. Bhadain remains a huge thorn in the feet of the ruling team with highly privileged information, his ferocious attack on his former friends, his capacity to distill suspicions and elevated doubts on issues such as the ‘‘kitchen-controlled cabinet and the mafia system operated by some’’ and his threat to resign and impose a by-election. The LP and the MMM are leaving no stone unturned to robustly criticise the Government and contest the political legitimacy of the PM . Whether these accusations are true or not, many are extremely worried about rising corruption, heightened nepotism, overt amateurism and lack of acumen and growing financial scandals which are undermining the credibility and popularity of the Government even if the PM seems to be earning some kudos for his relentless fight against drugs. There are significant headwinds on the economic front with a low level of investment, disappointing exports, declining manufacturing, falling productivity, lackluster growth and job stagnation or destruction. Socially, some people have had to use the ultimate resort of hunger strike to change the attitude of the Government. Also social cohesion could be threatened by rising income inequality, widening wealth disparity and significant asset and power concentration. Many of our compatriots believe that the ‘‘wealthy, the corporate elite and vested interests’’ are taking a rising and disproportionate share of the cake, leaving only crumbs to the majority. And that a weak and directionless Government is too vulnerable to significant policy capture by these vested interests

Falling unemployment with job stagnation or destruction is a policy failure, not a success (Part 2)

1 - Focusing on the wrong marker of a healthy economy

In the 2015-16 Budget, Lutchmeenaraidoo stated that “Our very first action is to unlock 13 employment-rich megaprojects that will be spread across the country and create thousands of jobs.” 

In his “second economic miracle” speech in August 2015, SAJ asserted that “I am committed to see that job creation is being delivered as forecast (25,500 in 2016). If we need to burn the midnight oil to attain our objectives, we are prepared to go that far.” 

In his Budget 2016-17 speech, Pravind Jugnauth announced that “we are convinced that job seekers must be able to find employment that meet their aspiration.” 

To boost the employment figures, apprentices with the Human Resources Development Council and youngsters in the Youth Employment Program are counted as employed.

One would expect the then PM and the new PM and Minister of Finance to be judged by their own metrics. Essentially whether job creation “is being delivered as forecast and how many job seekers have been able to find employment”. And let us be generous and turn a blind eye on whether 13 mega projects have materialized, midnight oil was burnt and jobs have met their aspirations. Now they are using a completely different evaluating criteria. The Government is celebrating the fall in the unemployment rate from 7.9% in 2015 to 7.3% in 2016. Furthermore, it is saluting the decline in the youth joblessness rate from 26.3% in 2015 to 23.9% in 2016. They are however loudly silent on employment creation.

True, the unemployment rate is among the most closely watched vital economic statistics by analysts seeking clues to the health of the economy. Usually declining unemployment means there are more people in the labour force, more jobs available and more money cycling through our economy. But this time, unemployment actually dipped for a bad reason. Hardly any jobs are being generated and in many cases employment is being destroyed. It is a worrying sign for the economy. As a result, many of our compatriots who are unemployed and are available for work are being removed from the labour force and not counted as jobless because of the subtle, albeit subjective, difference between ‘actively searching ’ and ‘searching’ for a job. Under these circumstances, the unemployment figures are simply not indicative of a healthy and robust economy.

The non-creation of jobs is an absolute disaster. It is an economic and a social time bomb ticking away. We must reignite hopes of a more robust, sustained and job-creating economic recovery to reverse this dangerous trend. We are confronted with six categories of people who are affected by the lack of dynamism in the labour market.

i. those who are unemployed and cannot find a job ; 

ii. people who are underemployed compared to their qualifications and experience ; 

iii. employees who would like to work full-time but have to be satisfied with part-time jobs; 

iv. graduates who have invested heavily in building human capital and are jobless; 

v. youth who are on training and apprenticeships (HRDC and YEP programmes), are included in the labour force but are not sure they will stay on as their employers may not keep them if the economy does not pick up; 

vi. citizens who are so fed up with the lack of opportunities that they stop ‘actively’ looking for a job and are then classified as discouraged worker and inactives. 

2 - Lower unemployment with near job stagnation in 2016

Based on the official figures, the unemployment rate declined from 7.9% in 2015 to 7.3% in 2016, while youth joblessness (16 to 24 years) fell from 26.3% to 23.9% . Some are ex-tolling that 7.3% is the lowest level of joblessness since 2008 when it stood at 7.2%. 

There are some strong policy lessons to draw between 2008 and 2016 to understand the causes of job creation. When one closely analyses the data, we find a very contrasting picture which is disturbing for the objective set by the Government to create around 22,000 net jobs per annum. Put simply, there was significant employment creation in 2008 compared to job stagnation and destruction in 2016. 

The relevant labour force, employment and unemployment figures are shown in the table below 

Same unemployment rate… and very different job creation

 

The difference between the low level of unemployment of 7.2% in 2008 is significant and substantial from the 7.3% of 2016.

i. In 2008, the labour force grew from 527,500 to 531,800, a rise of 4,300 while in 2016, it went down by 3,600 from 584,600 to 581,000. People are being removed from the labour force in 2016 to be included in the cohort of ‘inactives’; 

ii. 10,900 net jobs were generated in 2008. Employment increased from 482,800 in 2007 to 493,700 in 2008 while only 300 net jobs were created in 2016 as employment edged up from 538,300 in 2015 to 538,600 in 2016. There was 36 times more jobs created in 2008 compared to 2016 even if the rates of unemployment are very close at 7.2% and 7.3% respectively; 

iii. Unemployment plummeted by 6,600 in 2008, as the number dropped from 44,700 in 2007 to 38,100 in 2008. The corresponding figure for 2016 is a decline of 3,900 as there was 42,400 unemployed in 2016 compared to 46,300 in 2015; 

iv. In 2008, net employment creation (10,900) was significantly higher than the rise in the labour force (4,300), thus leading to a significant reduction in unemployment by 6,600. It was a very good outcome;

v. In 2016, the fall in unemployment of 3,900 was principally accounted for by a large drop of 3,600 in the labour force and only a small net employment creation of 300. It was a dismal result ; 

vi. In 2008, 100% of the lower unemployment came from job creation. Better some additional 4,300 jobs were generated to absorb the new entrants in the labour force; 

vii. In 2016, 92% of the decline in unemployment is explained by the removal of 3,600 from the labour force and only 8% underpinned by job expansion. 

3 - Fudging the labour force

The table below shows how the labour force was ‘worked around’ to reach a fall in unemployment. 

Workaround of the labour force to lower unemployment

 

The population aged 16 and above rose from 960,900 in 2014 to 968,300 in 2015 and to 975,500 in 2016. It is a growth of 7,400 and 7,200 respectively. While there was a decline in the economically inactives by 1,500 in 2015, there is a huge increase of 10,800 in 2016 from 383,700 to 394,500. This has the effect of ‘fakingly’ lowering the labour force by 3,600 while it went up by 8,900 in 2015. 

Far from the lower unemployment rate being a policy success, it points to a disturbing new trend in the labour market.

i. Overall, only 300 net jobs were generated during 2016, a minuscule share of the 25,000 jobs promised by the Government; 

ii. If we exclude the 800 jobs created for the youth (16-24 years) in 2016, it implies that 500 jobs were destroyed for employees above the age of 25; 

iii. The report admits that some 7,100 persons were classified as inactives in 2016 although they were not working and were available for work. It represents 1,500 more people than in 2015. Had this not happened, there would have been a net job destruction of 1,200 in 2016 compared to the official figure of 300 net employment creation; 

iv. The exclusion of many from the labour force is alarming at a time when we should encourage an increase in the participation rates to address declining fertility and the ageing population; 

v. The definition of being in employment is such that one has to work for only one hour per week to be classified as in employment. This gives rise to significant underemployment and spurious employment; 

vi. To boost the employment figures, apprentices with the HRDC and youngsters in the YEP are counted as employed.


4 - Declining unemployment with JOB DESTRUCTION in the second quarter of 2016

The case of the second quarter of 2016 shows the low unemployment paradox at its worst as it led to significant job destruction. The table below underscores the anomaly in a very simple but compelling manner. 

The labour force in the second quarter of 2016 declined by 8,500 compared to the same period in 2015. However, there is a significant destruction of 5,600 net jobs from 542,600 in 2015 to 537,000 in 2016. Mechanically the unemployment level dropped to 7.4% from 7.8% because of the nexus among labour force, employment and unemployment. However the fall in unemployment is not due to people being shifted from the jobless cohort into the ranks of the employed but to the huge reduction of 8500 in the labour force. This ‘fake’ dive in unemployment is being celebrated!

Falling unemployment with high job destruction

 

5 - Same fudges for the youth unemployment predicament

The report mentions that “youth unemployment went down by 2,300 while the youth unemployment rate decreased by 2.4 percentage points from 26.3% to 23.9%.” 

Again, intuitively, people would think that 2,300 jobs were created for our youngsters. An analysis of the data shows a contrasting situation.

i. the youth labour force dropped by 1,500 from 80,500 in 2015 to 79,000 in 2016; 

ii. the official youth employment increased by 800 from 59,300 to 60,100; 

iii. the youth unemployed decreased by 2,300 from 21,200 in 2015 to 18,900 in 2016, thus bringing down the unemployment rate from 26.3% to 23.9%; 

iv. 65% of the decline in youth unemployment is consequential upon removing 1,500 young people from the labour force; 

also, over 6,000 youth deemed in employment are either under HRDC traineeship or in YEP programme without any guarantee of securing a job on completion of their training or placement. 

The youth unemployment conundrum


6 - Alternative measures to judge labour market performance

In the light of the anomalies of lower unemployment coexisting with job stagnation and employment destruction, many countries are using other more reliable markers of the health of the labour market. In Europe and the USA, the key labour statistics is the number of jobs created and not the unemployment rate. Similar to the metrics set by SAJ, Lutchmeenaraidoo, and Pravind Jugnauth. In addition, some also use the activity rates of the population, the share of employment to the working age population and the level of unemployment plus the number of discouraged workers. On all four counts, the labour market performance in Mauritius for 2016 is worse than 2015. 

i. fewer jobs were created; 

ii. the labour activity rate came down; 

iii. the share of employment to the working age decreased; and 

iv. the number of discouraged workers went up. 

v. Some countries also treat part-time workers, temporary employees and trainees differently from those in fulltime jobs. 

There are no two ways to reverse this alarming trend. This is where rising investment, exports, manufacturing and productivity combined with structural reforms become crucial. They are the key drivers of robust and sustained growth and job creation. 

Revving up the investment, manufacturing, exports, growth and jobs nexus (Part 3)

1 - Raising investment to spur growth and create jobs

The macro economic landscape clearly indicates that we are deep in the middle income trap with a slowdown in economic growth, declining investment and savings, lower productivity, falling manufacturing and export and insufficient job creation. The resilience that we have historically displayed against external shocks is wearing out. The old economy has lost its preferences, new sectors face increasing competition or rising challenges while emerging pillars are not taking root fast enough to compensate the weaknesses of the other engines of growth. This triple challenge must be addressed head on if we are to graduate to a high income economy.

Aerial view of Port-Louis. According to the author, ‘‘no country can generate strong economic growth, rising income and significant jobs without high investment levels’’. [Flying Freaks]

No country can generate strong economic growth, rising income and significant jobs without high investment levels. Investment is also key for technology acquisition, research and development, innovation and productivity. Capital formation is currently largely inadequate to power higher growth. In its policy statement, Government stated that it would arrest the declining trend of investment as a share of GDP. Its objective is to bring it back to around 25 %. However, investment continues its downward trajectory. From 18.9 % of GDP in 2014, it dropped to 17.4 % in 2015 and further fell to 17.2 % in 2016. These rates of investment are very low compared to fast-growing Asian economies and will severely inhibit our capacity to sharpen competitiveness and raise productivity. Worse, private sector investment has declined to a level never seen before. Also, the quality of investment is poor with real estate and property development representing a significant share compared to productive investment that is vital for quality growth and new jobs. Without a minimum of 25 % of good investment as a share of GDP it would be very difficult to achieve a sustained 5 % growth that generates many jobs.

Public sector investment, especially in quality infrastructure, which is vital to spur economic growth, create jobs and ensure renewal and can act as a countercyclical policy instrument to low private capital formation, is on a downward trend. The share of public sector investment to GDP has declined from 6 % in 2010 to 4.3 % in 2016, with implications on the modernization of our infrastructure. The development budget is being axed. There is a disquietening underspending in the capital budget due to major implementation bottlenecks and gridlocks causing either major delays in project delivery or a very slow pace of execution. As a result, the share of actual capital expenditure to budgeted spending has declined from 92 % in 2013 to only 59 % in 2015/2016. This represents a gap of around 2.7 % of GDP that has not been spent to expand and modernize our key infrastructure.

FDI, which is vital for capital infusion, export growth and skills upgrading, is also heading south. Even portfolio investment has declined. The share of FDI to GDP and to investment has gone down while its composition is skewed in favor of unproductive real estate development. Manufacturing, tourism, finance and construction attract hardly any FDI while they were important recipients in the past. Also, the emerging sectors identified for export diversification are not luring much FDI.

Some good recommendations have been proposed and they must be implemented quickly to start producing results. These include the design of an investment code that contains all laws and regulations related to investment and the creation of an intellectual property rights authority. The expansion in the number of investment promotion and protection treaties and their ratification and the signature of more double taxation avoidance agreements will sharpen our competitiveness as a business and investment hub into Africa. We should also revisit our investment incentive framework to support the development and growth of the new pillars that have potential for exports. It is plain that without significant FDI, it would be hard to unlock the multiple opportunities of the ocean economy. We should also channel FDI inflows into the productive pillars of the economy. The bias in the tax incentives for land development is crowding out investment in the productive sectors of the economy.


2 - Rekindling the manufacturing sector as a main economic pillar

Manufacturing should remain a critical engine of growth and jobs. It is also a vital source of innovation and competitiveness and a key contributor to exports and productivity growth. 

There is an urgent need for manufacturing renewal with new responses to cope with the challenges and to unlock new opportunities. Manufacturing is a very diverse sector with distinct groups of industries, each with its own drivers of success. Some are more labour intensive while others rely on technology and knowledge. This distinction must be recognised when designing industrial strategies. 

The industrial base of Mauritius is weakening and the risks of deindustrialization are high. Its contribution to output, jobs, investment and exports is steadily going down. Manufacturing has lost its dynamism with significant impact of job destruction. The strategy laid down by Government is to halt the decline in manufacturing. 

However, it witnessed a negative growth in 2016 thus leading to a further dip in its share to GDP from 15.3 % in 2014 to 14.7 % in 2015 and 13.9 % in 2016. It is impossible under these circumstances for manufacturing to represent 25 % of GDP in 2018. A sound industrial policy and a new package of measures are necessary to revive and renew that sector. 


3 - Revitalising SMEs and reengineering domesticoriented industries 

SME constitutes a key pillar of our economic landscape as it contributes around 40 % GDP and 55 % of employment. It is a major source of job creation and a key instrument in poverty reduction. It also has considerable opportunities in exports of goods and services and higher value addition, especially for the medium-sized and some large domestic oriented companies. Globalization and trade liberalisation have unlocked new opportunities while ushering in new challenges for SMEs and domesticoriented industries (DOE). Currently few SMEs and DOEs can exploit these opportunities and deal with the challenges. In addition, they are under pressure on the domestic markets as they face the effects of competition from abroad, falling tariffs, cheaper imports and even dumping. 

Government must step up its policy to equip SMEs to better meet the challenges of globalization and to benefit from its opportunities. SME/DOE have the potential to contribute to reverse the decline in manufacturing. Policies should aim to

 i) strengthen their competitiveness, 
ii) build up their trade and investment capacity and 
iii) accompany them with effective institutional support structures and incentives. 

Their multiple and complex challenges remain in spite of good intention by all policy makers over the years. To survive and progress, they need to access markets and finance, to acquire better technology for production, to remove cumbersome bureaucratic procedures in doing business, to foster research and development and innovation in product development and improve the quality and standard of their goods and services. 

They must be supported to consolidate their market share in the domestic economy, to supply high value added products to meet the diverse requirements of the tourism sector, to strengthen the ‘made in Moris’ brand, and promote service excellence and best practices. 

We should encourage startups ventures, upgrade human capital and capacity to overcome skills mismatch and enhance productivity and competitiveness. Equally important are access to state of the art infrastructure such as industrial parks and incubators so as to leverage the benefits of clustering. There is necessity to accompany SMEs with low value added to transform and become more efficient with better products and to help high growth potential SMEs and DOI in services sectors such as ICT, digital economy, disruptive technology, financial services, consultancies and renewable energy. 

They should export to the region with a good Africa strategy that includes market intelligence, advisory services, business development and logistics support to tap prospects not only for goods but also, and increasingly, for services. And develop greater synergies and business linkages with the export sector in the value chain through clustering and subcontracting. 

Government should review the current fragmented institutional and incentive framework that characterize the SME/ DOE sector. There are too many duplications, waste, overlaps, lack of coordination, coherence and misalignment. A more coordinated approach is required with a rationalisation of institutional support and a simplification of the schemes and incentives for SMEs. 

We must also ensure a level playing field by protecting them against dumping practices. The difficult question is whether to reintroduce some duties on few key imported sensitive products. We should encourage local purchases and introduce measures to facilitate procurement for goods and services that benefit domestic firms. 


4 - Reversing declining exports and boosting the diversification of goods, services and markets

Export of goods and services is another driver of growth while export and market diversification play an important role in improving resilience to shocks such as Brexit. Our exports need to be globally competitive to take advantage of market opportunities. 

The export sector has to weather four important storms:

i) a decline in export earnings, 
ii) a dependence on a narrow basket of products, 
iii) a reliance of few markets, 
iv) an absence of new players in export. 

There was a significant decrease of 5.3 % in export earnings following on the decline in 2015. The performance of export oriented industries, more particularly apparel, is inadequate to generate higher growth and employment. The share of export oriented industries in GDP fell again in 2016 to 5.2 % of GDP from 5.7 % in 2015 and 5.9 % in 2014. 

It is necessary to build new economic sectors and continue the diversification of the export sector that relies on too few products and sell to too few markets. We have a good insight of the challenges our exporters are facing. A strategy for export development, diversification and competitiveness is essential to adapt to the changing global trade landscape with emphasis on high value added goods and services. We should actively support the emergence of an export oriented SME sector that has the potential for exports of goods and services in regional markets. The criteria to choose the preferred sectors should be trade potential, market diversification and employment generation. There are opportunities to the region in agro business, food processing, ICT and software development, financial technology, business and professional services, maritime logistics, health and tertiary education. A strategy of attracting investment and developing new markets is critical for success while access to finance, mentoring, technology and innovation are important. Furthermore, there is a need to revisit the incentive package to boost exports, to avoid duplication in institutional support and to strengthen skills. These cross cutting issues that impede the development of exports should be looked into to ensure a more integrated and coherent export strategy. We should also ensure that the costs of doing business including freight are competitive.


5- Supporting a dynamic and innovative business and investment climate

We should improve the conducive climate to enable firms to better manage the significant changes happening globally. And reverse the declining trend in productivity to help them innovate, invest, export, drive economic growth. Investing in education, human capital and the development of skills with an emphasis on science, technology, engineering mathematics, and ensuring that what is learnt at educational institutions fit the needs of the labour market is critical. Investing in modern and quality infrastructure and supporting a dynamic and innovative business and investment climate is key to understand and handle the complexities of global supply chain. We should also help firms build their research and development capabilities and knowledge in data analytics and product design. The aim must be to increase job creation in new sectors, support emerging pillars to confront new challenges and help the traditional engines to regain competitiveness and foster renewal. 

Economic transformation and structural reforms to lift growth and create jobs (Part 4)

Finding a new blueprint in global business

Similar to textiles and garment in the mid 90’s, with the end of the multi fibre agreement and sugar in the mid 2000’s, with the phasing out of the sugar protocol, global business has reached the end of a cycle with the erosion of ‘preferences’ and the dramatic changes in the global tax and regulatory landscape. The sector is at a critical point of inflection and the business model invented 25 years ago is creaking. It must be structurally transformed to continue as a main pillar of our economy and generate high paying jobs for our graduates and professionals. However in the face of uncertainty, ambiguity, lack of clarity and considerable pressure from the European Union (EU) and the Organisation for Economic Co-operation and Development (OECD), Mauritius seems to be at pains to produce a roadmap with clear milestones to face these multiple, complicated and complex challenges and to transition from a treaty-based centre to a diversified international financial jurisdiction with substantial economic activities and value creation.

Harvesh Seegolam, Chief Executive of the Financial Services Promotion Agency; Sudhir Sesungkur, minister of Financial Services and Good Governance, and Gérard Sanspeur, Chairperson of the agency. According to the author, there is a plethora of institutions in Mauritius, responsible to promote trade in goods and services, foreign direct investment and global business.

The several challenges are

1. The treaty with India that constituted the foundation of the industry has been deeply modified;

2. India has introduced GAAR in April 2017 to ensure that there are no ‘impermissible ‘ transactions ;

3. We need to find a replacement for the ‘deemed foreign tax credit’, characterised as ‘harmful tax practice’ by the EU and the OECD;

4. Mauritius has agreed to implement the four minimum BEPS standards which include fair taxation and anti-abuse measures in treaties. The principal purpose test and the substance requirements as defined by the OECD/EU must henceforth be met;

5. The EU has already started the process of evaluating various countries to ascertain whether they would be placed on a list of uncooperative jurisdictions. Our GBC1, GBC 2 and Freeport regimes are currently being assessed for ‘potential harmful tax practices’. The critical test is whether our preferential regimes meet the definition of fair taxation of the EU. Another condition to escape being labeled a ‘tax haven’ is the implementation of BEPS.

It is clear we are unprepared to respond to these challenges as we have no articulate strategy with a consistent and new business model, except for motherhood statements and vague generalisation. We should urgently carry out an impact analysis to fully understand how many of the 20,000 structures in our jurisdiction will meet the PPT and LOB tests, what should be done to fulfill these requirements and how do we graduate from where we are to where we would like to be.

While there is no choice than to embrace a new business model, I am extremely worried about the scope,scale,speed and simultaneity of the changes being imposed on global business. Many in the industry believe that almost 80 % of current structures, especially the considerable number of investment holding companies, will not pass the threshold of eligibility imposed by the OECD and the EU. We should evaluate its impact on growth, employment and the balance of payment. Of course, we have to create a new eco system to enhance product offering, quicken market diversification and promote higher valueadded services. However, we should understand that the transition will bepainful and plan accordingly and notbury our heads in the sand.

2 - Adding depth and width to the ICT pillar

The ICT sector which used to post an average of 10 % growth has moderated to around 6 %. There are significant untapped opportunities than can be unlocked to take advantage of prospects in the digitalisation of almost all spheres of human activities. We should accelerate that process of digital transformation as it will raise growth, enhance competitiveness, drive innovation and generate jobs. More competitive bandwidth costs, better connectivity, skills improvement, investment in innovation and R & D and openness to foreign talents and technology are key for the industry to adapt, remain competitive and move to the next level with more higher value added services. Prospects abound in Africa for our ICT firms and engineers in software applications and financial technologies to meet the requirements of banks and mobile phone companies, to help build broadband network and its retail expansion and to collaborate with companies to provide new and innovative products and services in the health, education, agriculture, commercial and other sectors. The third fibre optic and a second backbone to unbundle the local loop should be fast tracked.

3 - Leveraging the potential of the ocean economy

Many countries have leveraged the potential of the ocean economy to transform their economic architecture. Unlocking opportunities in that sector likely represents one of the key game changers for our country in terms of building the next major pillar for economic growth, investment, export diversification, manufacturing and employment creation. There are unprecedented scope for new and high value added activities. We have a roadmap on how to develop the ocean economy based on some key clusters comprising marine services and biotechnology, petroleum, minerals and ocean energies, fisheries, sea food processing and aquaculture, seaport related activities, deep ocean water applications and renewable energy, marine ICT, finance and knowledge. We must develop the right regulatory, institutional and incentive framework and implement a robust promotion and marketing strategy to attract investment, state of the art technology and skills in that space. This could raise the contribution of that growth driver significantly in the next 15 years with considerable indirect, induced

4 - Developing a coherent and effective Africa strategy

Africa holds vast emerging opportunities for growth and diversification. There are prospects for trade in goods and services, tourism, medical tourism, construction, education, global business and distribution and warehousing. There is an obvious window for us to transfer our human capital and expertise as many countries have a shortage of quality professionals such as lawyers, accountants, doctors and engineers andIT professionals. We should also truly position Mauritius as a global business and financial services platform. Even if some progress has been made, we must review the current Africastrategy that looks diffused, fragmented, shallow and opportunistic. Not much has happened in Ghana,Senegal and Madagascar and hardly any money disbursed from the special fund set up for Africa.

We need a better, more coherent and focused entry strategy for a deeper and stronger footprint in clearly defined regions. We simply cannot be all things to all countries in Africa.When human and financial resources are limited, we should not scatter them. An informed analysis of existing and potential gains suggest that Eastern and Southern Africa is probably the most opportune region to focus on, even if we haveto capture opportunities elsewhere in global business and investment. Weshould concentrate on low hanging fruits in traditional areas where we have expertise and competitive advantage and in strategic sectors where we cannot afford to be absent. We should train, coach, groom and motivate middle and top management cadres to work in Africa, ensure better air, sea and digital connectivities, build a stronger partnership between Government and the private sector, have stronger presence on the ground with business savvy diplomats and an effective promotional and marketing campaign in these countries. The aim is to become a competitive business and investment platform for Africa with higher intra-regional trade, more cross border investment, a gateway for financial services and also to emerge as a fintech hub for the region.

5 - Removing the obstacles in the path of robust growth and employment creation

A second wave of deep rooted and coherent structural reforms that matches the seriousness of the challenges besetting the country is required to reverse the declining trends in competitiveness, productivity and investment. It should complement the consolidation of our achievements to ensure the country escapes the low growth trap and delivers balanced, sustainable and shared growth for the years to come. Sizeable investment in quality physical infrastructure and human capital, and commitment to sound economic management will be key drivers of growth and inclusion. With the ageing population, economic growth will be increasingly spurred by expanding productivity. There is an urgent need to remove supply side bottlenecks. The labour market should be reformed to increase participation rates, especially of women and facilitate the transfer of resources from low to high productivity sectors while labour, capital and total factor productivity must rise to sharpen global competitiveness. We must make education, training and skills fit for the economy by resolving the mismatch in the labour market, nurture innovation, research and development, encourage industrial upgrading, enhance technical and economic efficiency and use scarce resources more effectively.
We have to attract foreign skills, talent, technology and capital to accelerate the transition to a high income economy. We should reengineer the public sector, para statals and state owned enterprises so as to lower inefficiencies and strengthen public sector capacity to design, implement and monitor major public infrastructure projects in a timely and cost efficient manner. We have a responsibility to our children to guarantee the sustainability of the pension systems and to revisit the welfare system to make it fairer to the poor.

6 - Rationalising institutional support to better market and promote Mauritius

There is a plethora of institutions responsible to promote trade in goods and services, foreign direct investment and global business. From the Board of Investment to the Mauritius Tourism Promotion Authority and from Enterprise Mauritius to the recently established Financial Services Promotion Agency. The strategy is fragmented, diffused and silos driven and often leads to duplication, overlap and a dispersion of scarce resources that ends up in inefficiency, lack of coordination and misalignment. The message gets blurred and loses its power, consistency and efficacy. With the new challenges at the international level, we need a more holistic, coherent, concerted and focused approach to market, promote and sell the Mauritius brand in width and depth with its several, varied and interrelated opportunities and more importantly to facilitate integration and synergies among them to extract more value and substance for our country. Such rationalization and alignment will be more effective and efficient from an outcome and a cost perspective. An adaptation of the model used in Singapore with the Economic Development Board to bring under one umbrella all institutions that promote our country is the way forward. Of course it should be structured with different directorates to mirror the key sectors of our economy. It can change the image, reputation and brand of our country as stakeholders will immediately see the diversification and the substance of our economy. It should also be responsible for business intelligence and research that would help the country lure more investment and businesses. Our unique position as a gateway between the rest of the world and Africa will be highly leveraged.

7 - Going for a single licensing authority to ease the doing of Business

Mauritius has lost many ranks in the Ease of doing business report. We should reverse this declining trend by quickly implementing the measures recently introduced for business facilitation, especially in areas where weaknesses have been identified. It is also key to revisit the cost of doing business as our competitiveness are being eroded. While progress has been made, it is still the case that entrepreneurs and investors have to hop around too many agencies to obtain licenses and permit and satisfy many regulatory requirements. Using technology and digital facilities, we should rationalize, streamline and simplify the licensing process and jettison administrative red tapes as long as rules and regulations are clear and adhered to. We should be bold and look into the introduction of a single licensing authority to deliver all the administrative permissions. This will of course require delegation of some powers. We have done it in the past and it can be replicated. It will considerably enhance the competitiveness and attractiveness of our country as a good place to do business and to invest.

What fiscal policy to combine economic efficiency (investment, growth & jobs) and fairness (shared prosperity and inclusion)? (Final part)

1.The concerns on rising inequality and widening wealth disparity

Some are questioning the fairness of the fiscal policy of Government. The main reasons for their anxiety are that

i)income inequality has risen as reflected by the deteriorating Gini coefficient;

ii)wealth disparity has widened with greater asset concentration;

iii)the benefits of globalisation and liberalisation but also of openness and the financialisation of the economy is accruing disproportionately to a narrow corporate elite and the wealthiest section of the population;

iv)a significant share of growth and investment is underpinned by real estate development with very few owners capturing the huge gains of land leveraging;

v)a reversal of tax policies has significantly altered the balance between efficiency and fairness away from social justice; vi) a change in policy actions has taken away some key benefits destined for the vulnerable groups.

2.The efficiency and competitiveness aspects of the 2006 reforms

Few have questioned the 2006 reforms because of the flat personal and corporate taxes. However they failed to the unfairness of the previous taxation system, the economic predicament we were in and the context. We had reached the end of an economic cycle with preference erosion and had to face the triple shocks in sugar,textiles and oil. Economic growth was low at 2.3 % with declining investment rates, abysmal FDI and surging unemployment. The budget deficit was rising, public debt soaring and the deficit on the external balance widening. We had to embrace a new economic model.

Taxpayers at the MRA counter. According to the author, the 2006 reforms were essential to unleash growth and employment prospects while being fair to the population.

 The reforms of 2006 were essential to unleash growth and employment prospects while being fair to the population. The direct tax system was such that:

i)it offered opportunities for abuse,evasion and avoidance, leading to inequity and inefficiency. Taxpayers with similar incomes paid vastly different shares of income tax;

ii) most large companies were paying far less than 15 % effective corporate tax because of various incentives and allowances for many sectors;

iii) it was regressive as many SME’s were taxed at higher than 15 %;

iv)  higher income households often paid much less tax than those on lower income as there were around 100 income items that were tax exempt and over 20 types of allowances and expenses that could be deducted to arrive at the chargeable amount;

v) by maximizing the use of tax breaks, taxpayers with income exceeding Rs 500,000 a month could pay only 5 % of their total income as tax. In contrast, others with monthly income of Rs 30,000 typically paid 10 %;

vi)  it contained an anti-export bias, distorted investment decisions and discouraged FDI. The bold reforms , including the 15 % flat personal income and corporate tax, delivered remarkable results within a short span of time in terms of growth higher than 5.5 %, investment close to 25 % of GDP , annual job creation in excess of 10000 , significant rise in FDI, enhanced tax revenues and improved external balance.

3. The fairness and redistributive components of the 2006 reforms

A substantial element of fairness was integrated in the reforms . We enacted a series of measures while refusing to implement others. Thus, we:

  1. raised the income exemption threshold substantially from Rs 85000 to Rs 215000 for a single person. That resulted in 36600 persons or 51 % of PAYE taxpayers from the lower middle and middle income groups being removed altogether from the tax net;
  2.   clawed back some of the benefits accruing to the wealthy and to some corporates through;

a) a solidarity levy on hotel and tourism;

b) a special tax on banks; c) higher fees for the global business sector;

d) an additional tax on IRS ;

e) a new way to charge campement site owners and f) two taxes on passive income-interest and property. All these measures did not affect the middle income groups as they were aimed at the wealthiest 5 % who were net winners from the corporate and personal tax reductions.

 iii) refused to increase VAT or broaden its base with tax on exempt goods such as chickens, fish,meat ,water and electricity which the IMF had suggested to close the fiscal gap;

iv) reoriented subsidies and increased significantly income support for 125000 vulnerable citizens; v) paid 100 % of SC and HSC fees for all needy students instead of 50 % for everybody;

  1. launched an ambitious Rs 5 b Empowerment Programme to unlock opportunities with land for social housing , land for small entrepreneurs, special programmes for women, training and reskilling, assistance for outsourcing, and SME support; subsequently embedded the pro- gramme with a 2 % contribution on book profit to finance the fight against social exclusion;
  2. maintained capital gains tax on large property deals;
  3.   kept land transfer tax, land conversion tax and registration duties for large land transactions; x) retained a minimum alternative tax so that those earning significant dividends and salaries paid; xi) a minimum tax as a share of overall income.

4. Policy reversals in favour of large corporates and the 4 wealthy and against the poor and the middle class

Unfortunately , over the years, two sets of policies have disturbed this efficiency/fairness balance. Many of the fairness components of the reform have been removed by Government while the wealthiest and the corporate elite have received more tax gifts.

  1. taxes on passive income paid mainly by the 5 % of richest households was replaced in 2011 but simply abolished in 2012;
  2. capital gains tax was scrapped on all large scale land transactions;
  3.  the new government has eliminated land transfer tax, land conversion tax ,registration duties and morcellement tax on large real estate property;
  4.  the minimum alternative tax has been removed;
  5.  the very people who were criticising a corporate tax of 15 % have given many companies including large ones converting land into smart city schemes, a zero corporate tax;
  6.  many other enterprises are now eligible for tax holidays with no corporate tax;
  7.   the tax system has been distorted with the introduction of new allowances and we are heading back to the old system that favours tax breaks for few companies and taxpayers;
  8. the CSR contribution has been transformed into a levy on chargeable income rather than book profit, thus depriving 130000 poor people of around Rs 500 m per year that now goes to only about 10 most profitable companies/family businesses;
  9.  the CSR, earmarked for the poor, has widened its scope of intervention into areas that have nothing to do with poverty alleviation such as road safety and security, peace and nation building and leisure.

5.An urgent need to bring back fairness in taxation policies

The overriding question is how to marry social justice with economic efficiency. At one end of the spectrum are those who believe that the system is doing fine and should not be changed and Government must simply give incentives for growth and land speculation, even without job creation. At the other end are those who think we can ignore the challenges posed by global competitiveness and productivity and introduce policies that could discourage investment, entrepreneurship, effort and growth. Where and how do we strike the balance in the middle between economic efficiency and social justice?

To run the next development lap and reach high income status, our country must attract foreign talent, know how, ideas, technology and investment to create jobs, upgrade skills and raise earnings. Whether it is in manufacturing for exports, the ocean economy, financial technologies, global asset management, blockchain technology, the digitalisation of the economy, artificial intelligence, innovation, research and development, etc. We should keep an attractive corporate tax regime to lure these firms and people to our shores.

I believe we should have a holistic approach rather than focus on one single policy action. Some are suggesting a progressive and higher income tax for both personal and corporate tax in replacement of the 15 % flat tax. Or a surcharge after an income or profit threshold. Anyway the flat tax has already been distorted with the introduction of many zero taxes and the reinstatement of further tax breaks.

On balance, I am in favour of maintaining the 15 % corporate tax for economic efficiency and global competitiveness considerations. With very few exceptions. We should however rationalise and eliminate tax breaks and expenditures that simply erode the fiscal base, distort resource allocation and favour some specific interests. The tax should be simple, efficient, ruled based and not subject to abuse. Many countries that want to attract FDI and skilled and talented entrepreneurs have a corporate tax rate ranging between 12.5 % in Cyprus and Ireland,16.5 % in Hong Kong and 17 % in Singapore. A 15 % corporate tax is therefore reasonable. Neither zero nor 25 %.

The personal income tax is more complex and complicated as it is possible to have a progressive tax on paper that is actually highly regressive with hundreds of niches and allowances as was the case before 2006. The share of the labour force paying income tax is low in Mauritius compared to its peer group of upper middle income countries. In terms of fairness, it may be better to have a flat tax that removes many lower middle income households from the tax net and ensures that wealthy people pays a fair share of income in taxation. While it is proportional, it has many features of progressivity through the elimination of tax breaks. That was the essence of the tax reform of 2006.

6. Broaden the tax base with taxes on other income

However there is a strong case for the wealthiest to contribute a fairer share as tax, with minimum adverse effects on effort and entrepreneurship. Economics shows that taxes on ‘passive income’ are less likely to distort choices and resources allocation than taxes on active income. I support a tax on passive income that will exclude the middle income groups and target the 5 % wealthiest of the population. It is good for efficiency and fairness purposes. It can apply to interest, dividends and other incomes after an exemption threshold as it exists in many countries. Ireland taxes some passive income at a higher rate than active income,while in Mauritius we do not tax it at all!

We should also restore land conversion, land transfer tax and morcellement tax on large real estate and land transactions as it was before their elimination. Government has already given away close to Rs 20 b in scarce tax resources for very few corporates with little contribution to the productive pillars of the economy such as agro-based diversification, food security, manufacturing for exports and other high value added activities.

We should also bring back capital gains tax on large real estate and land transactions. This is much fairer and more efficient than raising personal income tax. Alternatively the nation should benefit from the developmental value of these projects through a viable mechanism. It has been done in the past.

Ireland which has a low corporate tax of 12.5 % levies a 25 % tax on some passive income and a 33 % capital gains tax.

Equally we ought to be fairer and coherent on property taxes. It is not equitable for a small house in town to pay property tax while an IRS or RES or an expensive mansion on or near the coast does not. The revenue generated could be distributed to local government for infrastructure development in our towns and villages.

7. Restore their dues to the poor

If we want to help the poor, we should directly help the poor and not expect a universal system to distribute a small share of the benefits to them as is the case in many of our social programmes.

 

  1. the CSR must regain its initial objectives of being pro poor. Over the years its focus has been diluted by a broadening the scope of its intervention away from poverty alleviation, thus shortchanging the vulnerable groups of scarce resources;
  2.   we should reintroduce the CSR contribution of 2 % on book profit to give more resources to the needy. The current formula deprives 130000 poor people of an annual sum of Rs 500 m simply because nobody lobbied for them against powerful vested interests. Inspite of pressure and lobby, I kept book profit as a basis of computation in 2010;
  3.   the Marshall plan to fight poverty and social exclusion must be finalised and quickly implemented to deliver on social housing, infrastructure for the vulnerable, education , training ,empowerment and entrepreneurship so that we win the battle of poverty alleviation;
  4. we must reform the welfare state so that the poor benefits much more from it than they do now. We need leadership and political courage to achieve that objective. A welfare state that gives proportionately more to the rich than to the poor cannot stand the test of fairness and inclusion;
  5. we should consider the merit of a negative tax to support the working poor;
  6.  we must also rationalise the many subsidies so that they benefit mostly the poor. It is a challenging political problem. Resources are required to fight poverty and if they are inefficienty utilised, we shall not attain the objective of fighting social exclusion;
  7. We should continue to invest in education,human capital,technical and vocational training and skills to ensure that a very large majority of our fellow citizens participate in the openness of our economy and are integrated in the mainstream;
  8. We should broaden of the circle of opportunities for SME and other entrepreneurs so that they also benefit from the prospects unlocked by globalisation and new markets. The regulatory framework, institutional support and incentives must be revisited to support their emergence as a powerful contributor to growth,employment and inclusion;
  9. Large corporates should be required to outsource some activities to SME’s so that they can thrive and new entrepreneurs encouraged instead of vertically integrating the entire supply chain at the exclusion of too many stakeholders. If suasion does not work, it should be made mandatory.

8 .Concluding remarks

We have to reform and rebalance the economy to address structural weaknesses and binding constraints that continue to limit the country’s potential for growth. Our resources must also be directed towards the productive sectors that will leverage existing, emerging and new prospects. These are essential to unlock opportunities for higher investment and higher growth that will deliver thousands of productive, decent and smart jobs.

 We must also review fiscal policies to lower inequality and for greater redistribution. Some may think it is about compassion, kindness, generosity, altruism and philanthropy. However, enlightened self-interest dictates that rising poverty, huge income inequality and wide wealth disparity are not in favour of the rich and the privileged elite as it could trigger social and political tensions with impact on the sustainability of growth. It could also affect the social cohesion of the country and make necessary reforms more difficult as they are perceived as pro rich and anti poor.

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Il était attendu au tournant. Le Premier ministre et ministre des Finances a, pendant deux heures, présenté un exercice budgétaire qu’on pourrait qualifier de «social». Retrouvez les points forts du Budget… Voici une compilation des articles sur le sujet.

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