Marday Venkatasamy:“Need to further boost the commerce and industry sectors”

Marday Venkatasamy is at the helm of the Mauritius Chamber of Commerce and Industry after an absence of a few years in public life. News on Sunday called upon him to give a broad outlook on the business sector and to formulate suggestions for a better growth of our economy.

What are your perspectives on the current state of our economy?
I can only refer to the outgoing President of MCCI in his presentation of the Statement of the Economy at our General Assembly. “The Mauritian economy is intrinsically linked to the global economy. In 2017, we noticed a recovery in the global economy with stronger business and consumer confidence, pickups in investments, trade and industrial production. Some more than 120 economies have experienced a pick-up in growth – so we can say that we are slowly moving towards a broad-based recovery in the world economy.” In Mauritius, the situation has been similar with a growth rate at market prices of 3.8 percent in 2017, its highest level since 2011. This was largely driven by internal demand. Consumption expenditure grew by 2.7 percent whilst investment grew by 4.6 percent – the highest growth since 2009.

How are things evolving specifically in the commerce and industry sectors?
On the commerce side, the sector has grown by 3.1 percent in 2017, its highest rate of growth in the last five years. The sector’s growth was driven by increases in the internal demand with household consumption expenditure growing by a sustained rate of 3 percent for the last two years. We should not forget that consumption expenditure – whether by households or by Governments – constitute of more than 83 percent of the country’s GDP. The local commerce sector constitute of approximately 14 percent of the country’s GDP on its own, contributing to approximately 0.4 percentage points to the economic growth annually.

On the industry side, we have noticed a growth of 1.4 percent in 2017, after a growth rate of 0.1 percent and 0.3 percent in 2015 and 2016 respectively. Though there has been a modest improvement in the industry growth in 2017, we notice a general decrease in the manufacturing sector share of GDP. At the height of the industrial development, from Independence till 2001 – i.e. for more than 30 years – the sector was growing at an average rate of more than 17 percent annually, reaching 24 percent of GDP. Since then, and with a rapid liberalization strategy, we have noticed an average growth rate of less than 4.5 percent on average and the sector’s contribution to GDP continues to fall, reaching 13 percent in 2017. Both the commerce and industry sectors are today, nonetheless, integrated in a value-chain with spillover effects on different sectors of the economy.

Does it paint a positive outlook?
At the international level, we have noticed that the global economy is regaining momentum and the IMF predicts a global pickup in growth for both 2018 and 2019. Amidst this rebound, growth in the Mauritian economy is expected to pick up slightly with the latest figures from Statistics Mauritius and the IMF forecasts for Mauritius both pointing towards a 3.9 to 4.0 percent growth rate in 2018.

Higher rates of economic growth will largely depend on a renewal in public and private investment with the kick-start of announced large-scale projects such as the Smart Cities, the Metro Express, the Road Decongestion Programme as well as fiscal incentives given to entrepreneurs to invest in high-value added activities. There is thus a need for targeted approaches by our promotion agencies, such as the Economic Development Board (EDB) to attract those investments to the country.

Moreover, demand-side measures such as the introduction of the Negative Income Tax, the National Minimum Wage and the recent reduction of the Key Repo Rate are expected to further boost consumption in the economy – and thus both the commerce and industry sectors.

What about the MCCI analysis?
Our latest analysis through the MCCI Business Confidence Indicator (BCI) itself shows a rise over all quarters of the year for the first time since the launch of our indicator. Entrepreneurs in general remain positive in regards to future economic prospects for the economy in 2018.

Nevertheless, the country is faced with the combination of negative externalities with the effect of climate change and weather disruptions, delays in the implementation of public infrastructure projects as well as persistent uncertainties in the global economy and rising commodity prices.

What advice can you give for a redress or a better growth for our economy?
Our analysis held at the MCCI shows that the Mauritian economy is reaching its potential growth rate, estimated at 4.1 percent for 2018. We are thus in a situation where demand-side policies alone will not be enough for sustained growth in the economy. We need to make use of a number of structural levers to improve our economic potential and the country’s growth rates at the same time. We have thus identified seven key levers which we need to critically address.

Can you elaborate on the seven key levers?
We need to consider the demographics. With a fertility rate of 1.3 currently, according to the United Nations Population Prospects, it is expected that our population would reach 1,800,000 by 2100. We have to consider the following: Incentives in terms of fertility treatments, redefinition of income tax thresholds as well as medically assisted reproduction. 

Where de-industrialisation is concerned, a review of our industrialisation strategy is required. We are thus in consultations with the Ministry of Industry, Commerce, and Consumer Protection (MOICCP) along with our colleagues from the Association of Mauritian Manufacturers (AMM) for measures to enhance and boost strategic local manufacturing sectors.

On the exporting side, we are today proposing a novel approach by using Mauritius as an outsourced manufacturing destination for Indian products in the context of the Comprehensive Economic Partnership Agreement (CECPA).

In terms of air connection, there is a need for further opening of the air access as well as more regular flights to a number of strategic destinations, whether in Asia or Africa. On the maritime connection, we are advocating for an enhanced productivity at the port in order to achieve a minimum of 30 moves/hour.

We are closely monitoring climate change and the environment. We can no longer ignore the effect of violent cyclones and natural disasters which could severely impact our economy if we still have infrastructures that are not resistant enough.

As for our strategic public infrastructure, for the port the MCCI highly commends the Government on the investment impetus which should be culminating with Deep Water Quay, which will put Mauritius with a unique selling position – it will be the only port in the Indian Ocean with such a capacity. 

On the airport, we need to start working on long-term solutions to expand our airport facilities in order to attain our ambitions of becoming a Regional Hub in the Region. 

According to the latest Global Innovation Index, expenditure on R&D in Mauritius represents a meagre 0.18% of GDP, according to the World Innovation Index 2017. In comparison, Singapore’s expenditure is at 2%, France at 2.26% whilst Germany is at 2.84%.

Since 2015, we have advocated for an innovation led economy and are pleased to notice the introduction of the Innovation Box Regime, and the double deduction on R&D Expenses, which are critically important measures. We have also been a strong advocate of the upcoming Industrial Property Bill coming in parliament next week, which should pave the way to the adherence of Mauritius to the Madrid Protocol, the Patent Cooperation Treaty and the Hague Agreement.

We are also in the process of finalising the setting up of an accelerated technology transfer platform at the MCCI, through assistance from the European Union. 

Through a constant policy dialogue and various committees, we have been able to reduce numerous administrative barriers and red tape. Mauritius is today ranked 25th in the World Bank in Ease of Doing Business Report and 1st in the African Region.

However, there are still concerns on the Doing Business Indicators and a number of administrative hurdles. High freight related charges, the procedures for connecting to electricity or to enforce commercial contracts are some of the examples where the Doing Business environment should be further improved.