Blog: Pravind’s Mantra - Restructure and Modernize

The opposition and the media have not found anything better to say on the policies announced by Pravind Jugnauth to face the Euro Zone crisis and to restructure for the long term resilience of the Mauritian economy than it is a continuation of Rama Sithanen’s stimulus package.

I have gone through the document and listened to the explanation given by the Minister on television. The fact is that this document contains policies and strategies to respond to the Euro crisis and prepare Mauritius for long term resilience, very different from the transient measures of Sithanen’s stimulus package.

We should not also forget that this government has been re-elected under the same leadership and as such, the basic policies cannot be altered. It was on the basis of handling effectively the economy that this government has been re-elected. However, Pravind Jugnauth has laid emphasis on a full public-private sector partnership to steer the economy in such difficult times. The private sector is called upon to contribute Rs 5 Billion to the Rs 12 Billion package.

The private sector is called upon to be the engine for restructuring and modernization of the economy unlike the Additional Stimulus Package which was meant to save jobs and support enterprises on a short term basis. Pravind Jugnauth is trying to address fundamental weaknesses in the structure of our economy and concentrate the bulk of the efforts on long term restructuring of industries and enterprises, preparing them to be more resilient, particularly to recurring external shocks.

This new economic restructuring and economic competitiveness program has rightly identified new markets in the emerging countries like India, China and Russia. These countries can easily fill all our hotels provided that we have a dynamic air access policy. Provision is made to promote Mauritius in these countries. These countries have special needs and our tourism sector is geared towards welcoming mainly European tourists.

Indians and Chinese have different needs, particularly in their food and shopping habits. The duty free paradise concepts will have to take into consideration these needs. Not only, countries like India can provide us tourist but they can also absorb all or excess production in the textile industry and sugar by products, if not all our sugar. India and China has become the largest market for branded goods. I remember a remark of a former Finance Minister of India who later became Prime Minister, Mr V P Singh telling a former Minister of Finance of Mauritius that whatever be the production of Mauritius, it could be just a drop.

Today, balance of trade between India is largely in favour of India. Our entrepreneurs should explore seriously the potential of the Indian market. I was told that Russian businessmen used to import goods made in Mauritius via Europe. It is high time for us to explore that huge market both for tourism and trading. It had come as a surprise to many in Mauritius that Russians used to book the best hotels to spend holidays in Mauritius. It is time to shift from the negative image the Western media have created of these countries.

From the reaction gathered from all sectors including tourism, SMEs, planters, it seems that this program is going to solve all our problems. However, it is wrong to think so. Even the Finance Minister has acknowledged that it is during the implementation phase that difficulties may crop up.

Now the Policy response measures of Minister of Finance to the current EURO crises will be tested alongwith the implementation in the spirit thereof.

The restructuring and deleveraging under the ERCP is the need of the hour but the people designated to manage the package have to appreciate the spirit and assess the need of the borrower. We all appreciate that the entities are facing cash flow issues and the normal approach taken by the commercial banks is that it’s not their problem.

The provisions and steps proposed under the ERCP are appreciable and the Minister should be applauded. The involvement of commercial banks in the package has to be avoided as unfortunately all commercial banks in general propagate their support to SME’s as a marketing tool, but practically the deliverables are not to be stated.

I am sure the Minister is aware of the problems faced by the sector and it’s high time that a revamp of the banking mechanism and functioning is looked into.

The LEMS scheme under the MTSP was also a scheme worth mentioning. We have good state owned financial institutions, which can manage the schemes or else the institutions can be created to manage the scheme. The creation of high profile committees and various layers of approval create road blocks and defeat the purpose.

Under the LEMS, the appraisal is done by the leasing company and submitted to SIC, which again re-appraise the request and submit to MTSP. In this regard, the assessment of the leasing company should be appreciated as they are taking the risk in general and the approval should stop at SIC, as it is a premier financial institution of our country manned by qualified professionals.

It is high time that multiple posts system should be abolished as it does not do well to anyone. The specific schemes launched should be independent and multiple representations by top bureaucrats make it just a procedural formality. The systems and procedures laid down are well defined and the management of any scheme can be well monitored within it. The MAB, Director of Audit and other regulatory and monitoring arms of the Government are well equipped and capable to do their jobs.

The more focused approach towards SME’s is another laudable initiative. The willingness of the commercial banks to really participate in the scheme is to be ascertained. The commercial banks always weigh the risk-security issues in a well defined spirit of the paper and there is no interest of taking any risk. The marketing team of the commercial banks may promise the sky to the prospective customers, but the risk and underwriting team may have something else in store.

In this context, I understand that SBM has really understood the need of the SME sector and is currently in the process of strengthening their SME team by the appointment of a new team leader. The vision is expected to be customer oriented and assessing the requirement and needs.

The restructuring of the DBM loans is also appreciated as it is a practical and humane approach to clean up the balance sheet. It is also heartening to see the involvement of DBM in government programs and hope the closure issue of the same is just a matter of history and we forget it as a bad dream.

The Delocalization issue addressed by the Minister does not synchronize with the general ERCP measures as the same in general will not benefit the economy but rather may be detrimental. The private sector is always aware of its interests and shall delocalize themselves, if felt necessary.

The issue of the problems faced by small planters needs a much more focused attention. The present measures may just offset the current revenue loss faced due to EURO crisis, but there are larger issues which need to be addressed. Otherwise the small planters will die.

The restructuring of the tourism industry and commitment of the Minister to make Mauritius a duty free Island will go a long way in improving the life of one and all. I would suggest that the vision of Air Mauritius towards India and China should become more friendly and accessible as it has a tremendous potential for Mauritius. I understand that even the Minister of Tourism appreciates the untapped potential of India and China.

The provisions in the ERCP to address the cash flow issues of the hotel sector is the need of the hour as the commercial banks and lending institutions  does not address such situations.

The commercial banks also should take a practical approach towards the SME sector and try to understand the problems faced rather than taking the approach of threatening the customers. MCIB unfortunately has become a tool for threatening by the bankers to their clients without understanding the realities of the business.

The ERCP takes care of all the important pillars of the economy in a caring and humane manner. The Minister has just to ensure that the implementers in the system understand the same in the true spirit of the ERCP and take a forward looking approach rather than creating bottlenecks as usual.

I find very capable but very over burdened and tired people who will be mainly responsible. The Minister has announced that he will be personally supervise the implementation committees. He has been Minister of Agriculture, Finance, Deputy Prime Minister and is the Leader of his party and I am sure he is fully aware what is at stake or him personally for his future.

I have observed very positive changes in him. He is open, humble and sure of himself. Very early, he demarcated himself from his MMM’s association, got elected in a by-election, brought his party in the winning team, agreed to be fourth in the hierarchy and serve under Navin Ramgoolam.

I personally believe that under the guidance of Navin Ramgoolam he has the experience and capacity to deliver.