Blog: Budget 2012 - Towards higher Wage Economy

The vice Prime Minister and Minister of Finance, Xavier Duval has announced something fundamental in his approach to his budget 2012: To make Mauritius a “higher wage economy”. To achieve this objective, we must have a high productivity, high wage, and high efficiency, he has said.

Anything new? I first heard of this concept being debated in a radio interview recently. It was Dr. Ashok Aubeeluck, former director of Budget Bureau who said that he has unsuccessfully fought for a high wage economy. I am happy that the corner stone of this evening budget speech will be to set the balls rolling to make Mauritius a high wage economy. This is in line with the dream of the Prime Minister Navin Ramgoolam to make Mauritius a city state on the Singapore model.

Only two days ago, at the celebrations marking the 117th anniversary of the arrival of the Indian immigrants, somebody mentioned that the wages for an Indian immigrant was Rs. 3 a month. I shudder to think of the conditions of living of those workers and those of the freed slaves. They were sold as beast. Their movement was restricted and controlled. They were imprisoned at the Vagrant Depot if found loitering. They had the Code Noir to cope with.

The speeches of SSR, Ramnarain Jugdambi are still ringing in my ears. They were selling the dream of raising the wages of a worker from Rs. 2.25 daily to Rs. 5. And the famous statement of Sir Gaetan “Solange, amene mo diari” promising full employment in the 80’s.

I was in the corridor of the Ministry of Finance for several years in the 80’s when the conditions of living of the population started to change with the removal of duties on electronic and white goods and “no tax” budgets of Vishnu Lutchmeenaraidoo. He had also started wide consultations with different sectors like NGOs, Trade Unions, Private Sector and government agencies. Government owned companies were created and attention was being focused on the performance of parastatal bodies. Still we remained a low wage economy with thousands of migrant workers with low wages and bad working conditions contributing to create wealth. This evening the opposition will be led by two former finance ministers, Paul Berenger, leader of the MMM, and Pravind Jugnauth, leader of the MSM. Vishnu Lutchmeenaraidoo considered to be the most successful finance minister is today the shadow minister of the MMM and will lead the extra parliamentary opposition. Even the President of the republic, SAJ, had held the finance portfolio for quite some time. What a formidable opposition?

I have known Xavier Duval to be cool, hardworking and efficient. With his experience of successfully holding economic ministries and that of social integration, he is fully prepared and capable of leading us to a high wage economy.

By now, all the measures must have been finalized. The books containing estimates of capital and recurrent expenditure and income must have been published and kept under high security. They will be released once the minister starts reading his budget speech. Preparations for the printing of the speech itself must be ready and the printing will start any moment the minister gives his last green signal.

Only the Prime Minister at this juncture is aware of all the measures to be announced in the budget speech. Nothing can be done without his concurrence and approval. Other ministers would come to know of the contents at a special cabinet meeting before the speech.

This budget assumes a special significance with the government enjoying a reduced majority with the resignation of MSM ministers and MPs. The majority of the government will be tested on the floor. I have no doubt that the budget will be passed by a comfortable majority. The budget is one issue if not passed, government falls.

Still the Prime Minister announced that it will be a responsible budget. Xavier Duval reminded us that this budget will be the 7th consecutive budget under the premiership of Navin Ramgoolam. Other finance ministers were Rama Sitanen and Pravind Jugnauth and now Xavier. The performance of Xavier will not only be compared with the performance of the finance ministers of MMM and MSM but also with those of Labour including Bheenick and Bunwaree.

We should not forget that all the successive finance ministers and government are supported by a highly professional and qualified team of cadres at the ministry of finance.

It was Sir Veerasamy Ringadoo who organized the team. Once you joined the team, you stay there for continuity. They moved only to different institutions formed during the course of time implementing different policies and reforms of successive governments. The present financial secretary has survived three finance ministers. Due credit should be given to them for ensuring continuity and continued growth.

Mauritius is perhaps the only country in the world where such widespread consultations are held in the preparation of the budget. Every sector is given the opportunity to present their demands and memorandum containing their proposals. All their proposals are studied and considered seriously. They help in shaping the budget.

But the reality is that there is very little room for manoeuvre. More than 85% of the budget income is earmarked to pay salaries and wages, subsidies and debt servicing.

Today, the budget is going to be presented against the backdrop of an unprecedented, never ending financial crisis, the crisis of capitalism, of broken capitalism and an uncertain world. Recovery is not in sight.

The decision of the Greek government to put its agreement with the Eurozone countries over its debt rescue plan to the Parliament and to a referendum has put in disarray the whole of Europe. The markets throughout the world have gone down. The value of Euro is plunging.

Revenue from our exports and tourism is already affected. Still till now, we have only suffered the side effects of the crisis. We have continued to post a 4% growth yearly.

Next year also, the growth is expected to be around 4%. An excellent performance but not enough for a high wage economy. We need at least a 6/7% growth.

This can be achieved not only by hard work. The donkey also does hard work, no insult meant to donkeys. Everybody is talking about the non performance of parastatal bodies and government owned companies. Let me highlight that there are highly qualified persons within those bodies. No private body in Mauritius could undertake the road works being done today or the implementation of the sewerage network and the airport. More than Rs. 50 billion is ear marked for these projects. Of course it is for the private sector to do the implementation efficiently.

We should also be aware that highly performing agencies like SBM, SICOM, FSC, BOM, MPCB, MT are among the most performing bodies in the country. They have helped democratize the economy and the development of skills and management. Can we imagine Mauritius without them?

The problem of parastatal bodies is not with the institutions themselves but with decision makers who for reasons known to themselves don’t place the right men in the right place. Nothing wrong with the political appointees as long as they are competent and wise. They helped bring government to power. They can very well run those bodies. There is no lack of competent, qualified and performing persons within the ranks of political parties. Time is right and ripe for decision makers for a close look at those to whom they entrust tax payers money.

Last but not least we have to implement good governance policy, meritocracy and provide equal opportunity to all. They are sine qua non conditions for the country to make a leap forward.

Xavier Duval has asked for six months to gauge his performance and three more budgets to implement government vision for a high wage economy. He himself has said that you cannot distribute wealth which you don’t have. Wealth has to be created.

Who will create the wealth? The traditional private sector? Foreign investors with their FDI? I believe we should ignite the entrepreneurship in the belly of each Mauritian. Entrepreneurship is in our blood. No lip service. A set of real measures to access finance and skills should be provided. And of course we will need a very liberal immigration policy.

We live in a global world and proper conditions should be created for movement of money and man. Being a country of immigrants we should not be hostile to foreign workers. America and Singapore have been built by the contribution of foreign workers to a large extent.

Starting with a wage of Rs.3 a month, we have developed our country to a middle income level of 7,000 dollars per capita income. We have in our belly to go for a high wage economy.