“The emergence of South Asian textile powerhouses can pose a big threat”

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Paul Baker is the CEO of Grand Baie-based International Economics Consulting Limited. He reflects on the challenges of Mauritius’ manufacturing sector faces.

What sectors has Mauritius’ cross-continent trade platform enabled growth in?

Mauritius continues to be used as a platform for attracting and channeling FDI into other markets, such as India and mainland Africa, promoting the expansion of its own private sector, especially in sectors such as jewellery, high-end fashion apparel or medical instruments, which are gaining traction. In order to do so, Mauritius has signed a number of Free Trade Agreements (FTAs) and Double Taxation Avoidance Treaties (DTAAs) to achieve a certain degree of competitive advantage.

What challenges does Mauritius need to overcome to break the middle-income trap?

Mauritius cannot exclusively rely on preferential treatment to foster its economic growth, and it currently needs to bring in more innovation to remain competitive. Productivity in the manufacturing sector has declined, and growth has stemmed from labour and capital accumulation with disappointing levels of total factor productivity. The lack of technology and innovation is limiting the economy’s scalability. The erosion of the country’s manufacturing competitiveness has occurred in tandem with Mauritius adopting a stronger service-based economy, with tourism and finance providing an important stimulus to the economy.

How do you see the future of manufacturing in Mauritius?

The manufacturing sector has slowly declined in terms of its economic contribution to employment and the economy, in particular as a result of the erosion of trade preferences in third markets, and the removal of fiscal incentives by the Government. The emergence of South Asian countries as textile powerhouses, including the likes of Bangladesh and Cambodia, poses a big threat to Mauritian producers, especially those in the lower end product differentiation in the value chain. This sector is also challenged to re-invent itself and find new niche markets to exploit. Introducing Industry 4.0 would create a paradigm shift, and is being studied by both the policymakers and industrialists. The issue here is finding the appropriate ways through which to overcome the challenges of size, logistics and transportation costs, and create high value-added products that remain competitive in global supply chains.

Do you believe Mauritius on the path to growth?

Mauritius is moving in the right direction to overcome the above challenges. The wide network of FTAs and investment treaties, and the country’s open and transparent investment climate will be key to attracting technology and skills in order to boost productivity, improve R&D and diversify the economy in the medium term.