Jocelyn Chan Low: “The IMF will see the pension increase as madness, especially in such troubled times”

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With the announcement of the dissolution of parliament and the date of the general election, Weekly speaks to Jocelyn Chan Low, historian and political observer. He talks about the possible implications of a short electoral campaign, the impact of the proposed pension increase in the face of a looming global financial crisis, and gives his assessment of the economic situation in the country.

The general election is finally here. Were you expecting such a short election campaign?
The dissolution of the National Assembly was expected a few days before the date set for the by- election in Constituency No 7, as it was a risky contest for the regime. And it was also obvious that an election would be held by December 2019 as it would be quite a hard task for a caretaker government to manage through the cyclonic and torrential rain season that starts as from January, especially with the new hazards due to the impact of global climatic change. However, many were expecting that the general election would be held early December. For if you analyse past trends, you’ll see that generally, at the beginning of any electoral campaign, the government candidates are on the defensive at the local level, i.e where it really matters. They face many complaints about the absence of ministers from the constituency, the promises that were never kept, the lack or deterioration of local amenities etc… It takes up from two to three weeks for them to set matters right and reverse the trend. So a short campaign may create trouble for some on the government side too, provided the opposition parties can get organised quickly.

There have been many complaints about holding the election while SC and HSC pupils will be sitting for their exams in many of the schools where polling would have taken place. Do you sympathise with this stand?
Of course I do. I’ve been a teacher at the Royal College of Curepipe at the beginning of my career and I know the stress pupils and parents are in during that crucial period. Besides, many of these pupils have the right to vote. So, an election held in such conditions deprive them of the possibility of making an informed choice, or of participating actively in political life like any other citizen of the Republic. While they are busy with the exams, how can they attend public meetings or even watch and listen to political broadcast on TV/radio? Many times we deplore the lack of political socialisation of our youth but now we are denying an important section of our youth, of our future elite, and many first time voters, the opportunity to be politically socialised. Where are those who said so often they represent the youth, the renewal of politics, blah blah blah… It’s such a shame!  

Why do you think there is such haste?
Possibly the fear of the verdict of the court in Dr. Navin Ramgoolam’s last judicial case. If the leader of the Labour Party wins his case, what would the Mouvement Socialiste Militant/Muvman Liberater (MSM/ML) do with the clips and posters about the coffers etc. already made for the election campaign? It might be very embarrassing to say the least.

I know you are not a lawyer, but you must have discussed this with lawyers: Do you think Ramgoolam is likely to win this case?
The general feeling by those who are aware of the case and the plea of his learned counsel is that he stands a very good chance of winning his case. But the case involves a lot of technicalities and anyway I don’t think it’s fair to comment on an ongoing judicial case. However, there is an issue of a general nature that has to be emphasised. Lawfare i.e the use of legal cases against political opponents by damaging or delegitimising them is becoming a threat to the democratic process in many countries, from Brazil to Tunisia. Fortunately, in Mauritius the Judiciary and the Office of the Director of Public Prosecutions are solid and independent institutions. But we need to have some deep thinking about that problem.

Some newspapers close to government have announced that many MSM members would like to join hands with the Mouvement Militant Mauricien (MMM). Do you see that happening?
Definitely not. If you analyse carefully the strategy of the MMM, it has been crafted very intelligently indeed. To understand what the MMM is up to, we have to look at the general political situation and the weaknesses and strengths of the MMM as well as that of its opponents. Given the unbridgeable gap between the MSM and the Labour Party and given that the Parti Mauricien Social Democrate (PMSD) has rallied behind the Labour Party, the leader of the MMM has a golden opportunity to hold the centre. And as any military strategist will tell you, the one who holds the point of equilibrium of the battle becomes the master of the game. But this can only happen after a three-cornered fight. So there will definitely be a three-cornered fight with the possibility of a hung parliament. In that situation, Paul Bérenger will be in a position to decide who will be the next prime minister.

The talk of the town for the last few days has been the increase in the pension. What is your first reaction to this? An irresponsible and opportunistic move or our elders deserve a more comfortable life?
My first reaction was shock and surprise at the level of demagogy behind the move. For though our elders surely deserve a comfortable life after their retirement, the scale of the promised increase without any indication as to how this will be financed and how it will impact on the minimum wage does show that they are being taken for a ride.  A great many pensioners now believe that the Rs13,500 will be paid in January next year when literally the promise is that this increase will take effect after… 1,825 days! By then, we would have been through a world economic recession in 2020 and this unsustainable electoral promise will be quietly shelved if ever the present team comes back to power. 

Yes, the International Monetary Fund (IMF) is warning us of storm clouds of the next global financial crisis ready to hit us in 2020.  Does this increase make it more difficult for us to weather this storm?
Indeed, as coincidence would have it, just one week before the famous announcement of the pension increase, the United Nations Conference on Trade and Development (UNCTAD) released its Trade and Development Report 2019 on 25 September 2019, which highlighted that the world economy is heading for troubled waters, with a recession in 2020 now a clear and present danger. It revealed that several big emerging economies like South Africa, Argentina and Turkey are already in recession and some advanced economies (including Germany and the United Kingdom) are dangerously close to recession. But the growth deceleration will be more painful in many developing regions, notably Southern Africa, Latin America, South and West Asia and a global economic downturn could push many of these states into debt distress. It is noteworthy that this report only confirms what several analysts like Mark Zandi, chief economist at Moody’s Analytics, or the former number 2 of Wall Street, Georges Ugeux of Galileo Global Advisors, and NourielRoubini, a professor at NYU’s Stern School of Business, had forcefully stated before. That is that the next global financial crisis and global recession will strike in 2020. But more ominously, the UNCTAD report stresses that ‘warning lights are flashing around trade tensions, currency movements, corporate debt, a no-deal Brexit and inverted yield curves but there is little sign that policymakers are prepared for the storm ahead’. One of the most reliable recession indicators is an inverted yield curve for US Treasury bonds and it happened in August 2019…

Don’t you think our policymakers are prepared to face the gathering storm?
It is clear that they are not. How can a responsible finance minister make such promises when the textile industry is in bad shape, as witnessed by the series of factories closing down and the hundreds of workers being laid off, when the tourism sector is witnessing a sharp decline in tourist arrivals and when the sugar industry is in crisis? Significantly, the day after the famous announcement, Statistics Mauritius revised its estimates for the annual growth rate of the economy downwards from 3.9 to 3.8 %. Surely, you cannot prepare the population for the difficult times ahead by making them live in a surreal world.

How bad do the signs of the looming crisis look from here?
The signs are many: The slowdown in growth in all the major developed economies including and more particularly, China; the near recession in several major European countries; the trade tensions and tariff wars between the US and China, among others, leading to a downturn in international trade following weakening global demand; great geo-political tensions in major oil producing areas, etc. But the bigger concern for many experts is that 10 years on from the crisis of 2008, the global economy remains excessively financialised and fragile. Not only has corporate debt increased considerably, but the total level of global public debt has reached its highest level on record; $63,000 billion dollars – $10,000 billion dollars from Europe, $10,000 billion dollars from Japan and $22,000 billion from the US. For Georges Ugeux, former number 2 of Wall Street, as interest rates keep increasing, the budget deficits will simply be unsustainable and he warns that by 2020, the global financial system will witness a tremendous crash, a tsunami of such a scale that the Lehman Brothers case of 2008 will appear trivial in comparison.

What about Mauritius?
We all know that Mauritius is an open economy that is extremely vulnerable to external shocks. It has, on the whole, benefited from globalisation. What will happen as protectionism sets in and as the process of globalisation rolls back remains to be seen. 

How badly is a recession likely to hit us? We survived the 2008 economic crisis almost unscathed. Why should it be different this time?
Mauritius survived the 2008 economic crisis because then Finance Minister Rama Sithanen took courageous measures despite criticism even from some of his cabinet colleagues. But many have warned that such measures – like stimulus packages – might not be as effective as in the past. Also, the incoming crisis may be of a much bigger dimension. Besides, back then, we had a solid banking sector which inspired confidence.  Today, some banks have given huge loans to crooks without good credentials and who finally vanished into thin air. Some of the measures proposed globally may make this crisis even worse for us. For example, some experts are in favour of green policies to get out of the crisis. That may involve tax on aviation fuel with drastic consequences on air fares which will ricochet on our tourist industry. Others, like the UNCTAD for example, are in favour of reining in predatory finance by strict measures. What impact will this have on our offshore financial services sector?

Isn’t our offshore already struggling after the end of the Double Taxation Avoidance Treaty with India?
It is but there are still opportunities in Africa which have not been exploited to the full. The Africa strategy should not be just a catch word. More resources must be deployed in that direction.  But mind you, there are growing concerns among African NGOs and those militating in favour of good governance about the misuse of double taxation treaties.

The IMF had already warned about the cost of pensions to the economy in a country where the greying population makes up a large chunk of the population. How is this international institution likely to react to this act of defiance?
Exactly! They will see this as madness, especially in such troubled times. It runs counter to any reform of the system that is essential in a country with an ageing population. But the IMF may take it as an electoral gimmick, a ploy to win a difficult electoral contest. Indeed, the real issue is whether this measure is meant to be implemented. For the elders, it might in the end be like the famous ‘pirates’ treasure of St François in Rodrigues. Lots of speculation in the press and high expectations everywhere but, in the end, it turned out to be a storm in a teacup. Instead of gold, diamonds and gems, they might end up with a few bones.

One must admit though that the increase in the pension is likely to go down very well with a large section of the population. Is it enough to win the coming election?
You know, a part of the electorate at least is very gullible. Some are even thinking mentally about the purchases they will make with the Rs13,500 as most think they will be paid in January 2020! Of course, the backlash might be tremendous when they find out that what is being promised is that the increase will happen, if ever, in 1,825 days! Everything will depend on how the opposition parties run their campaign. As Sun Tzu wrote in the Art of War, “The opportunity of defeating the enemy is provided by the enemy himself.”  The latest move which can be seen as a desperate attempt to cling to power can also be exploited to the full by the opposition. Besides, if the population is made aware of what is in store for us in 2020, it will be up to the opposition parties to present an economic team – a dream team – that would inspire the electorate that it has the ability and competence to sail the country again through hard times. For this, they must speak the language of truth and not of demagogy.

Some qualified the increase in pension as an electoral bribe. Is it legally challengeable in court?
Can it be? I’m not a lawyer but as far as I understand, the announcement was made before the National Assembly had been dissolved and the electoral campaign was not officially on. And the prime minister could talk about his dreams of an ideal Mauritius even if this meant promising the moon to our citizens.

If we set aside the looming global financial crisis, what is your assessment of the economic situation in the country?
I tend to agree for once with Vishnu Lutchmeenaraidoo: The rate of economic growth these last years is shameful. Mauritius was once seen as one of the few countries that could enter the select club of high-income countries by 2030. But with such a poor growth rate, that target keeps receding. At the same time, the Mauritian economy has been resilient up to now because it used to walk on many legs. But, unfortunately, today these various legs seem to be vacillating – from the textile industry to the offshore financial services sector through the tourism sector and the sugar industry. Moreover, though we tend to focus, rightly, on the huge and increasing public debt, corporate debt also is extremely high. And not only is there a mismatch between education and the industry, but the level of productivity has not increased significantly for decades. On the whole, there has been a lot of talk, a lot of projects about new hubs etc. but in the end, no action!

Coming back to the election, who do you put your money on?
It’s too early to make any predictions as to the results of the general election. As in 2014, everything will be decided during the electoral campaign. We can only hope that out of the ballot box emerges a strong and dedicated leadership with a competent team that will have the capacity to ride us though the dangerous times ahead.

Which of the three potential leaders would you qualify as “strong and dedicated”?
Sincerely, I’m sure many will recognise that Paul Bérenger is the ideal one but that the others also have their qualities… and defects!

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