經濟學留學essay：Mauritius And Seychelles Different Paths Same Resul毛里求斯與塞舌爾道路不同成就相同

 

Mauritius and Seychelles are two islands (groups of islands in the case of Seychelles) in the Indian Ocean (see map 1). They both share a common history of colonialism both by the French and the British, and have the same ethnic and religious groups with different percentages (Central Intelligence Agency). These two countries, after independence, followed different paths and chose different economic policies: capitalism for Mauritius and socialism for Seychelles. These two policies are completely diverse in terms of economic freedom as Mauritius ranks 12 whereas Seychelles ranks 142 according to the Index of Economic Freedom World Ranking (2011 Index of Economic Freedom). However, both countries succeeded and knew significant changes in their economies. Mauritius, following capitalism, has developed from a low-income to middle-income economy within a relatively a short period of time, with an average annual growth rate of 5,5% over the past 10 years, a per capita income of $5500 today compared to $200 in the late sixties (Sobhe, 30). Besides, between 1973 and 1999, real GDP in Mauritius grew on average by 5.9 percent per year compared with 2.4 percent in Africa (Subramanian and Roy, 8). Seychelles, on the other hand, adapted socialism which René, the former president of the country, called “the Seychelles way”, which put the interests of the people first (CIA World Fact Book 2004, 3). Although it has few natural resources, Seychelles reached a “GDP per capita of $8000 today, a 95% literacy rate …” (Ankomah, 4). So, this country is an example of successful socialism as Ankomah said: “They say socialism doesn’t work, but just four degrees south of the equator, west of the Indian Ocean, an African socialist success” (1).

 

Before dealing with the economic and political features of the two countries, let’s compare them geographically. In terms of size, Mauritius occupies a territory of 2,040 sq km (CIA 2008) whereas Seychelles occupies an area of 455 sq km (CIA 2008). In terms of population, Mauritius has a population of 1,250,882 while Seychelles has only 81,895. Politically speaking, Mauritius is a parliamentary democracy and Seychelles is a Republic (World Factbook).

 

Comparing the two countries economically shows that they are completely different in terms of fiscal, monetary and trade policies. Thus, the political system and the institutions of the two countries are the main factors that led to the success of the Mauritius and the Seychelles. Zafar, while talking about Mauritius’s success said that “this is mainly due to its combination of political stability, strong institutional framework, low level of corruption, and favorable regulatory environment which has helped lay the foundation for economic growth, and its open trade policies which have been key in sustaining growth” (Zafar, 3). Likewise, Ankimah said that Seychelles reached this level “thanks to the SPPF’s free education policy, a free health-care system that works, a housing policy that has seen 11000 of the 25000 housing stock in the country built by the government for the poor, a young enterprise scheme that provides $10000 seed money for people to start their own business, a funeral benefit scheme for all the people, a program to reclaim land from the sea for human habitation, road building and other infrastructural renewal, a splendid public transport system, etc” (Ankomah, 4).

 

1/ Fiscal Policy  財政政策
 

Since they adopted two different systems, Mauritius and Seychelles have two different Fiscal policies. Concerning tax regimes, Mauritius, on the one hand, have created a tax regime which encourages foreign investment. The average tariff for manufacturing was 86,2% in 1980, but it did fall to 30,1% in 1994 (Zafar, 5). Moreover, taxes for both individuals and businesses don’t exceed 15% (Alex, et. Al). There is no tax on capital, or the right of succession which are yet applied in European countries. Moreover, Zafar said that Mauritius has “a competitive tax regime and flexible labor laws to help foster growth of innovative private sector” (16). Besides, Resident individuals are taxed on their gross personal income on a sliding scale from 5% to 35% (Mauritius Revenue Authority), but people who earn less than 18 500 rupees are exempted from taxes. On the other hand, Seychelles has a more rigid tax system which limits foreign investment in the country. It imposes different fees for registration, application and annual fees. International Business Companies pay a registration fee of $100, offshore (Non-Domestic) Banks pay a license application processing fee of $2,000 and an annual license fee of between SR250,000 and SR1m depending on the value of total assets, limited partnerships pay a registration fee of US$200, … (Seychelles Investment Bureau). Hence, the tax regime in Seychelles doesn’t encourage foreign investment as the one in Mauritius.

 

Concerning government spending, Fiscal policy in Mauritius has focused on ensuring that spending remains linked to the resource availability. While there have been fiscal imbalances, there is no history of the government borrowing from the central bank or from aid agencies (Zafar, 14). The world bank report claims that Mauritius’ government expeditures have never much exceeded 20% of GDP and have been used mostly for wage policy, with a small amount devoted to food subsidies (15). This policy was effective in dealing with crises. In 2000s, the government built up reserves that allowed it the freedom to expand fiscal policy in the aftermath of the 2008-2009 global financial crisis (15). Seychelles, on the other hand, spends extensively which creates a huge balance deficit. This was stated by Campling who said that “ ‘the government is determin[ed] not to cut state spending on welfare despite the country’s difficulties’ ” (41). This is mainly due to the public investment in education and social development. Besides, “the infrastructure sector has benefited from significant public investment in the past, resulting in a reliable electricity network and relatively modern communication and transport facilities” (European Committee).

 

2/ Monetary policy 貨幣政策
 

Like the fiscal policy, the monetary policy in Mauritius was designed to encourage investment and competitiveness. Since its creation in 1967, the Bank of Mauritius has been concerned with ensuring the competitiveness of the country’s export and, secondarily, with price stability (Zafar, 15). Under its supervision, commercial banks have been instructed to provide a wide array of financial packages to small and medium enterprises in order to boost private investment and encourage these enterprises to invest in different sectors (sobhe, 34). Additionally, Interest rates have been kept within controllable bounds and internationally regulated through open market operations (34). Moreover, the recently created Monetary Policy Board ensures that there is little interference by the government in the composite membership of the Bank of Mauritius (33).

 

The Central Bank of Seychelles, unlike the Bank of Mauritius, is concerned with promoting price stability, advising the Government on banking, monetary and financial matters, including monetary implications of proposed fiscal policies or operations of the Government; and maintaining a sound financial system (Central Bank of Seychelles). Even if the bank is declared officially autonomous, the Governor of the Bank also held the position of Principal Secretary in the Ministry of Finance (Ministary of Finance) which raises questions about the degree of autonomy it enjoys.

 

3/ Trade policy 貿易政策
 

Trade policy in Mauritius was made to increase the country’s exports and imports and facilitate its enterance to foreign markets. According to a report by the WTO Secretariat on the trade policies and practices of Mauritius, the importance given by this country to export promotion and tourism development and the initiatives it has undertaken recently to make the island a center for regional trade, have transformed the economy (Sobhe, 35). The external trade sector was marked by trade preferences under the Lomé Convention for sugar and the Multi-Fibre Agreement for Garments. Such preferences provided unrestricted access to the European market for Sugar exports and the US market for the export of Garments (34). Since the mid-1980s, the volume of imports and exports of goods grew quite rapidly, at a rate of 8.7 percent and 5.4 percent, respectively per year; the openness ratio (the ratio of trade in goods-to-GDP) increased from about 70 percent to 100 percent over this period, compared with an openness ratio for Africa that stagnated around 45 percent (Subramanian and Roy, 15 -16). Recently, trade increased significantly between 2000 and 2008 as exports moved from $1,7 billion (The World Factbook 2000) to $2,47 billion (The World Factbook 2008), and imports rose from $2,1 billion (The World Factbook 2000) to (The World Factbook 2008). Perhaps the most interesting aspect of the Mauritian development experience has been its openness strategy (defined broadly as its openness to trade and foreign investment (FDI)). (Subramanian and Roy, 15). Economic policy focuses on modernization and diversification, greater market integration and export market and the improvement of total factor productivity, by insisting on technology, development human resources and restructuring of the capital market. According to the report of the WTO, the 1993 Law on industrial expansion is intended to guide the economy through tax incentives to production to higher value added. These measures follow the liberalization efforts in 1985, when Mauritius has ended its quantitative restrictions, removed price controls on all items except those items and reduced the export tax on sugar (Sobhe, 34). The country has also eliminated in 1991 the licensing system for virtually all products, except for a small number of them who remain subject to health checks, veterinary or strategic, and engaged in a concerted effort to align its standards on international standards.

 

Unlike Mauritius, Seychelles opted for a socialist policy restricting trade and exchange. “Seychelles had years of socialist-oriented economic policy during single-party rule, characterized by price, trade and foreign exchange controls, a prominent role for parastatal companies, and robust debt-funded development spending.” (US Department of State). Compared with Mauritius, exports and imports in Seychelles are less important but they knew some increase. In 2002, imports were $403 million and exports $91 million (World FactBook), but it increased in 2008 to $721 million for imports and $424 million exports (World FactBook). since most of the goods are imported, the trade balance has traditionally been in deficit, and it was only partly offset by increased exports of services in the tourism sector(). One of the main industry is the tauna fishery. The European Commission, in its report, claims that “The successful expansion of the industrial tuna fishery in the Indian Ocean since the early 1980s by fleets from the EU and East Asia provided important direct and indirect benefits to the Seychelles economy. Since 1983 agreements were signed with the EC, France and Spain to access the tuna fisheries. An EC agreement enabled fishing in Seychelles’ EEZ for up to 22 French and 18 Spanish purse seiners and provided government with USD 6.7 million in revenue in addition to licence fees”. The location of the Seychelles and its richness in terms of tauna fishery made it benefit from trade preferences with different countries. The EU is the main trade partner of Seychelles; in 2004, it accounted for 77% of Seychelles' total exports (EU remains the main market for Seychelles' canned tuna) and 43% of its total imports.Seychelles’ other key trade partners for imports were Saudi Arabia (16%), South Africa and Singapore (7% each).19 Regional trade amounts to less than 1% for exports and less than 5% of imports (European Commission).

 

4/ Structural transformation 結構轉型
 

From an agricultural economy based solely on the cane, Mauritius has successfully diversified its economic base by developing the textile industry, tourism and financial services. With the development of these sectors Mauritius has experienced a steady economic progress and attracted significant investment. Its economy saw different changes from an agro-based mono-crop culture to a much more diversified export-oriented one (Sobhe, 30). It embarked on a multi-sector reform agenda in 2006 with the objective of improving the competitiveness of the economy (The world Bank’s Website). Economic growth in Mauritius has been principally driven by the three main sectors: sugar, tourism, and the export Processing Zone (EPZ) in addition to financial intermediation which played a more prominent role in the last decade. Two sectors were added recently: financial services, particularly offshore banking, and more. The Export Processing Zone (EPZ) was established in 1970 with the purpose of diversifying exports into manufactures. Although the setting up of the EPZs was conceived as a way of developing a range of manufacturing enterprises, in practice, the EPZ became synonymous with the textiles and clothing industry. Some 80% of investment and exports and 90% of employment in the EPZ sector are from the textiles and clothing industry. (Subramanian and Roy, 8)#p#分頁標題#e#

 

Like Mauritius, seychelles tried to diversify its economy, but its two main sctors are tourism and fishery. The CIA world Factbook states that “growth has been led by the tourist sector, which employs about 30% of the labor force and provides more than 70% of hard currency earnings, and by tuna fishing. In recent years, the government has moved to reduce the dependence on tourism by “promoting the development of farming, fishing, and small scale manufacturing” (African Studies Center). The same source added that “Seychellois have depended upon fisheries for the majority of their protein intake since settlement in 1770. The domestic fishing industry was largely artisanal and in the mid-1980s constituted about three percent of GDP and employed around 1,300 people”. In late 1980s, the state created the Seychelles Marketing Board (SMB) to try to produce “locally/import a fairly limited range of ‘designated products’, which included basic necessities such as rice, sugar, milk, meat products and cooking oil, with the objective of ensuring stability of supply at a stabilised price” (Campling, 51). By the end of the 1980s “SMB included divisions involved in trading, retail, the production of dairy and animal feed, the production, slaughter and processing of poultry, beef and pork, import and trade of building materials, the production of soap, detergents and edible oils, the repacking/ reprocessing of various goods (including coffee, sauces, fruit juices, and jams), fish processing, ship chandling, the cultivation and processing of tea, and export-orientated cut-flower production and prawn farming” (53). Besides, in the same period, the country introduced an agricultural policy to diversify production and increase the outcome.

 

5/Human development indicators 人類發展指標
 

Mauritius has made great progress in the fight for social equity and poverty reduction and it is an exemplary model of development. The country ranks among the middle-income countries in the top and is classified by the UNDP among countries with high human development index in its "Human Development Report 2010". Improvements in human development indicators have been equally impressive. Life expectancy at birth increased from 61 years in 1965 to 71 in 1996; primary enrollment increased from 93 to 107 between 1980 and 1996 compared with 78 and 75, respectively in Africa (Subramanian and Roy, 9). Besides, literacy in 2000 reached the level of 82,9% (The World Factbook 2000) and 84,4% in 2008 (The World Factbook 2008). Poverty was reduced to 10% in 2008 and unemployment to 9,4% according to 2007 statistics(The World Factbook 2008). The following table summarizes the socio-economic indicators of Mauritius based on the 2005 Human Development Report (Sobhe, 36)

 

TABLE3.JPG  表格3

 

Like Mauritius, Seychelles made great improvement regarding the human development indicators as it ranks 57 of 182 in the 2010 UNDP Human Development Index. Seychelles gave huge priority to the health and education sectors as the 2010 budgetary allocation to the health and education sectors represents 5% of GDP, and is also the biggest share of the budget, amounting to 43% (Seychelles economy, 204). According to 2008 statistics, literacy in Seychelles reached 91,8% (World Factbook). In Seychelles, education is free and compulsory from primary to secondary level (age 16) and there is 100% net enrolment for both girls and boys and completion rates are high (Financial Standars Foundation). Besides, tuition and text-books are provided free of charge at public schools. Moreover, Seychelles has a well developed, free, public primary healthcare system, and poverty-related communicable diseases have been successfully controlled over the past decades (Campling, 22).

 

6/ Institutions and political system

Even if the two countries followed two different paths for development, they both succeeded because of political reasons. Mauritius has a democratic system which is characterized by transparency. Indicators of democracy and governance for Mauritius are given in the following table and are adopted from the Human Development Report of 2004 (Sobhe, 35).

 

TABLE2.JPG  表格2

 

The Organization for Economic Cooperation and Development (OECD) places Mauritius on its white list of tax havens. This list identifies those countries that have succeeded, among other things, to meet the fight against corruption. Perry et.al., talking about Mauritius’ secret, claim it is “Good governance [since] the state, run by centrist parties that have peacefully swapped power since independence in 1968, ensures that growth lifts everyone” (Perry, et.al). Besides, Sir Anerood Jugnauth, President of Mauritius, said that “if there is miracle, it is due simply to hard work, discipline and will” (Zafar, 1). Hence, The combination of political stability, democratic stability, rule of law, and quality of judicial institutions sets Mauritius apart from many sub-Saharian African countries (19). Economically speaking, Mauritius is committed to developing and maintaining conditions that are conductive to attractive international business and is playing host to a growing number of significant investments in India, China and Africa. (Moller). Some regulations are so steamlined it takes 3 days to set up a company and $200 a year in fees to run it (Perry). The government development strategy is based on foreign investment (attracted more than 9000 offshore entities) (The World Factbook 2000). In 2005, the government embarked on an economic reform program aimed at opening up the economy, facilitating business, improving the investment climate, and mobilizing foreign direct investment and expertise (US Department of State). Finally, Mauritius has a set of informal and formal mechanisms that guide the interaction between the public and the private sectors, with the result that the private sector plays a seminal role in the policy formulation process (Zafar, 19)

 

Seychelles’s government made the welfare of its people a priority and engaged in a range of policies to attain its objectives. Providing employment is high on the Government's agenda (Campling, 22). The Ministry of Finance is responsible for economic decisions and budgetary policy. Among the most important organizations of the public sector is the Seychelles National Investment Corporation, whose role is to promote economic development in areas neglected by private enterprise or to become a major stockholder in private companies that encounter economic difficulties (Financial Standars Foundation). The most powerful of the state enterprises is the Seychelles Marketing Board (SMB), which is the sole importer of key commodities, exercises controls over other imports, and regulates prices, production, and distribution of most goods and services. The state-owned Seychelles Timber Company has responsibility for reforestation and for operating the government sawmill at Grande Anse. The fishing Development Company controls industrial tuna fishing and the tuna cannery operated as a joint venture with France. Air Seychelles, a parastatal, flies both international and interisland routes, making a critical contribution to the tourist routes, making a critical contribution to the tourist industry. The Islands Development Company (IDC) was established in 1980 to develop agriculture, tourism, and guano production on ten of the outlying islands--guano deposits have since been depleted. However, Despite the government's strong involvement in the economy, it has never imposed a policy of forced nationalization. Rather, the government encourages foreign investment, preferably as joint ventures. In terms of transparency, the Financial Standards Foundations stated, in its report, that Seychelles “is ranked 54 of 180 nations in Transparency International’s 2009 corruption perception index. This is the best ranking of any sub-Saharan African nation except Botswana, Mauritius, and Cape Verde.

 

To conclude, Mauritius and Seychelles are two African Countries that moved forward and exceeded the other Sub-Saharian African countries in terms of economics and social indicators. This progress was achievable due to the institutions and political systems of the two countries which, even if they followed two different policies, made the progress of the country and welfare of the people as their primary objectives. They hence passed laws and policies to improve the economic and social situation of the country. Mauritius focused on economical progress and created a capitalist economy with an open market to attract more investment, whereas Seychelles invested more on the human factor by providing free social services mainly education and health. Both countries ranked high in terms of transparency and low corruption. Hence, if a country is willing to advance, it should first create good institutions and a stable political system, fight corruption and put the country in the hands of people who care about the public interest and uses his position to serve people and not his own benefit.