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Economy of Mauritius
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Economy of Mauritius
The economy of Mauritius is a mixed developing economy based on agriculture, exports, financial services, and tourism. Since the 1980s, the government of Mauritius has sought to diversify the country's economy beyond its dependence on just agriculture, particularly sugar production.
In 1961, Professor James Meade painted a bleak picture of the economic prospects of Mauritius, which then had a population of 650,000. All the disadvantages associated with smallness of island states weighed heavily in his conviction that Mauritius was caught in a Malthusian trap and, therefore, if economic progress could at all be achieved, it would be to a very limited extent.[citation needed] Since independence in 1968, Mauritius has developed from a low-income, agriculturally based economy to an upper-middle income diversified economy with growing industrial, financial, ICT and tourist sectors. For most of the period, annual growth has been roughly 4%. This compares very favourably with other sub-Saharan African countries and is largely due to sustained progress in economic conditions; between 1977 and 2008, growth averaged 4.6% compared with a 2.9% average in sub-Saharan Africa. Also important is that it has achieved what few fast growing economies achieve, a more equitable income distribution and inequality (as measured by the Gini coefficient) fell from 45.7 to 38.9 between 1980 and 2006. This remarkable achievement has been reflected in increased life expectancy, lowered infant mortality, and a much-improved infrastructure. Sugarcane is grown on about 90% of the cultivated land area and accounts for 25% of export earnings.[citation needed] The government's development strategy centres on expanding local financial institutions and building a domestic information telecommunications industry. Mauritius has attracted more than 9,000 offshore entities, many aimed at commerce in India and South Africa, and investment in the banking sector alone has reached over $1 billion. Mauritius, with its strong textile sector, has been well poised to take advantage of the Africa Growth and Opportunity Act (AGOA).[citation needed]
With a well-developed legal and commercial infrastructure and a tradition of entrepreneurship and representative government, Mauritius is one of the developing world's most successful democracies. The economy has shown a considerable degree of resilience, and an environment already conducive to dynamic entrepreneurial activity has moved further toward economic freedom. The island's institutional advantages are noticeable. A transparent and well-defined investment code and legal system have made the foreign investment climate in Mauritius one of the best in the region.[citation needed] Taxation is competitive and efficient. The economy is increasingly diversified, with significant private-sector activity in sugar, tourism, economic processing zones, and financial services, particularly in offshore enterprises.[citation needed] The government is trying to modernize the sugar and textile industries, which in the past were overly dependent on trade preferences, while promoting diversification into such areas as information and communications technology, financial and business services, seafood processing and exports, and free trade zones. Agriculture and industry have become less important to the economy, and services, especially tourism, accounted for over 72 percent of GDP.[when?] The government still owns utilities and controls imports of rice, flour, petroleum products, and cement.[citation needed]
Europe and the United States are the traditional export markets of Mauritius; preferential trading deals with partners such as the European Union and the United States in some economic sectors, such as the sugar industry and in textile and clothing sectors, resulted in the significant growth of the total exports of Mauritius, especially from the 1970s to the 1990s. Clothing and textile industry in Mauritius started in the 1970s, when foreign investors (mainly coming from Hong Kong) started setting up firms which would assemble imported textiles into clothing; most of those activities happed in the export processing zones (EPZs). The clothing and textile sector spearheaded the industrialization process in Mauritius; in 2019 it represented around 43% of exports.
The Mauritian economy has undergone remarkable transformations since independence. From a poor country with high unemployment exporting mainly sugar and buffeted by the vagaries of world demand, Mauritius has become relatively prosperous and diverse, although not without problems.
The 1970s were marked by a strong government commitment to diversify the economy and to provide more high-paying jobs to the population. The promotion of tourism and the creation of the EPZs did much to attain these goals. Between 1971 and 1977, about 64,000 jobs were created. However, in the rush to make work, the government allowed EPZ firms to deny their workers fair wages, the right to organize and strike, and the health and social benefits afforded other Mauritian workers. The boom in the mid-1970s was also fuelled by increased foreign aid and exceptional sugar crops, coupled with high world prices.
The economic situation deteriorated in the late 1970s. Petroleum prices rose, the sugar boom ended, and the balance of payments deficit steadily rose as imports outpaced exports; by 1979 the deficit amounted to a staggering US$111 million. Mauritius approached the IMF and the World Bank for assistance. In exchange for loans and credits to help pay for imports, the government agreed to institute certain measures, including cutting food subsidies, devaluing the currency, and limiting government wage increases.
By the 1980s, thanks to a widespread political consensus on broad policy measures, the economy experienced steady growth, declining inflation, high employment, and increased domestic savings. The EPZ with investment principally from China, Hong Kong and Taiwan, and came into its own, surpassing sugar as the principal export-earning sector and employing more workers than the sugar industry and the government combined, previously the two largest employers. In 1986 Mauritius had its first trade surplus in twelve years. Tourism also boomed, with a concomitant expansion in the number of hotel beds and air flights. An aura of optimism accompanied the country's economic success and prompted comparisons with other Asian countries that had dynamic economies, including Hong Kong, Singapore, Taiwan, and South Korea.
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Economy of Mauritius
The economy of Mauritius is a mixed developing economy based on agriculture, exports, financial services, and tourism. Since the 1980s, the government of Mauritius has sought to diversify the country's economy beyond its dependence on just agriculture, particularly sugar production.
In 1961, Professor James Meade painted a bleak picture of the economic prospects of Mauritius, which then had a population of 650,000. All the disadvantages associated with smallness of island states weighed heavily in his conviction that Mauritius was caught in a Malthusian trap and, therefore, if economic progress could at all be achieved, it would be to a very limited extent.[citation needed] Since independence in 1968, Mauritius has developed from a low-income, agriculturally based economy to an upper-middle income diversified economy with growing industrial, financial, ICT and tourist sectors. For most of the period, annual growth has been roughly 4%. This compares very favourably with other sub-Saharan African countries and is largely due to sustained progress in economic conditions; between 1977 and 2008, growth averaged 4.6% compared with a 2.9% average in sub-Saharan Africa. Also important is that it has achieved what few fast growing economies achieve, a more equitable income distribution and inequality (as measured by the Gini coefficient) fell from 45.7 to 38.9 between 1980 and 2006. This remarkable achievement has been reflected in increased life expectancy, lowered infant mortality, and a much-improved infrastructure. Sugarcane is grown on about 90% of the cultivated land area and accounts for 25% of export earnings.[citation needed] The government's development strategy centres on expanding local financial institutions and building a domestic information telecommunications industry. Mauritius has attracted more than 9,000 offshore entities, many aimed at commerce in India and South Africa, and investment in the banking sector alone has reached over $1 billion. Mauritius, with its strong textile sector, has been well poised to take advantage of the Africa Growth and Opportunity Act (AGOA).[citation needed]
With a well-developed legal and commercial infrastructure and a tradition of entrepreneurship and representative government, Mauritius is one of the developing world's most successful democracies. The economy has shown a considerable degree of resilience, and an environment already conducive to dynamic entrepreneurial activity has moved further toward economic freedom. The island's institutional advantages are noticeable. A transparent and well-defined investment code and legal system have made the foreign investment climate in Mauritius one of the best in the region.[citation needed] Taxation is competitive and efficient. The economy is increasingly diversified, with significant private-sector activity in sugar, tourism, economic processing zones, and financial services, particularly in offshore enterprises.[citation needed] The government is trying to modernize the sugar and textile industries, which in the past were overly dependent on trade preferences, while promoting diversification into such areas as information and communications technology, financial and business services, seafood processing and exports, and free trade zones. Agriculture and industry have become less important to the economy, and services, especially tourism, accounted for over 72 percent of GDP.[when?] The government still owns utilities and controls imports of rice, flour, petroleum products, and cement.[citation needed]
Europe and the United States are the traditional export markets of Mauritius; preferential trading deals with partners such as the European Union and the United States in some economic sectors, such as the sugar industry and in textile and clothing sectors, resulted in the significant growth of the total exports of Mauritius, especially from the 1970s to the 1990s. Clothing and textile industry in Mauritius started in the 1970s, when foreign investors (mainly coming from Hong Kong) started setting up firms which would assemble imported textiles into clothing; most of those activities happed in the export processing zones (EPZs). The clothing and textile sector spearheaded the industrialization process in Mauritius; in 2019 it represented around 43% of exports.
The Mauritian economy has undergone remarkable transformations since independence. From a poor country with high unemployment exporting mainly sugar and buffeted by the vagaries of world demand, Mauritius has become relatively prosperous and diverse, although not without problems.
The 1970s were marked by a strong government commitment to diversify the economy and to provide more high-paying jobs to the population. The promotion of tourism and the creation of the EPZs did much to attain these goals. Between 1971 and 1977, about 64,000 jobs were created. However, in the rush to make work, the government allowed EPZ firms to deny their workers fair wages, the right to organize and strike, and the health and social benefits afforded other Mauritian workers. The boom in the mid-1970s was also fuelled by increased foreign aid and exceptional sugar crops, coupled with high world prices.
The economic situation deteriorated in the late 1970s. Petroleum prices rose, the sugar boom ended, and the balance of payments deficit steadily rose as imports outpaced exports; by 1979 the deficit amounted to a staggering US$111 million. Mauritius approached the IMF and the World Bank for assistance. In exchange for loans and credits to help pay for imports, the government agreed to institute certain measures, including cutting food subsidies, devaluing the currency, and limiting government wage increases.
By the 1980s, thanks to a widespread political consensus on broad policy measures, the economy experienced steady growth, declining inflation, high employment, and increased domestic savings. The EPZ with investment principally from China, Hong Kong and Taiwan, and came into its own, surpassing sugar as the principal export-earning sector and employing more workers than the sugar industry and the government combined, previously the two largest employers. In 1986 Mauritius had its first trade surplus in twelve years. Tourism also boomed, with a concomitant expansion in the number of hotel beds and air flights. An aura of optimism accompanied the country's economic success and prompted comparisons with other Asian countries that had dynamic economies, including Hong Kong, Singapore, Taiwan, and South Korea.
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