Discussion Brief for the Export Strategy-Maker

Mauritius, an island-State in the Indian Ocean with only 1.2m inhabitants, adopted an export-led growth in the 1970s to cope with the problems of high unemployment, low levels of foreign exchange reserves and high dependency on a mono-crop economy. A system of Export Processing Zones (EPZs) was introduced at the time to provide incentives meant to stimulate FDI and the transfer of know-how and technology into the country.

This initiative proved to be highly successful. Today, over 500 companies operate in the EPZs and employ over 90,000 workers, representing around 30 % of the total workforce. They are involved in a variety of manufacturing activities in sectors as diverse as textile and clothing, jewellery, printing and publishing, information technology, agro-industry, electronics, precision engineering and plastics.

In 2000, the manufacturing sector’s overall contribution to GDP was 25%, of which the EPZs accounted for about half (49 %). In terms of gross earnings, exports from units operating in the EPZs represented 82 % of total domestic exports, thus remaining by far the largest foreign exchange earner of the island. In fact, the EPZ sector registered an average growth rate of 6.4% over the last 5 years, benefiting from the business-friendly environment created by Govern-ment as well as from the support of various institutions, both public and private.

Behind this performance of the Mauritian manufacturing sector lies a network of Government and private sector institutions responsible for the elaboration of policies, for negotiations at international level, for the laying-out of export promotion programmes and for the implementation of agreements and decisions. Through regular contacts, their representatives are capable of monitoring the performance, constraints and opportunities of present and future production activities. Such a close form of cooperation between Government and private Sector institutions is fairly unique, and has been made possible through the devising of structured forms of dialogue between the various institutions constituting the network.

The main bodies which cooperate actively in the realisation of the country’s export programme and performance are as follows:

The Ministry of Industry, Commerce and International Trade develops the national strategy on issues relating to the development of industry and trade. It is responsible for trade policy decisions and, in the fulfilment of this exigency, it operates an International Trade Division which monitors trade treaties of which Mauritius is a signatory-party. This division is also responsible for the negotiation of bilateral or multilateral trade agreements in the interests of local industrialists.

Meetings are regularly held with other institutions concerned with trade and industry matters, with a view to seeking their contribution towards the elaboration of strategies for negotiations, and to ensuring a flow of information, in terms of commercial opportunities in particular, to their stakeholders.

Three para-statal institutions operating under the aegis of the Ministry are directly involved in the support of industrial and trade activities. They are the following: MIDA, EPZDA and SMIDO.

1. The Mauritius Industrial Development Authority (MIDA) 

The Mauritius Industrial Development Authority is a statutory organisation responsible for the promotion of exports of goods and services from Mauritius. As such it advises the Government on matters relating to export development policies. It also holds regular consultative meetings with exporters on a sectoral basis to better understand their needs and discuss the authority’s strategic plan and activities. Through its network of offices in Africa, Europe and the US, vital market intelligence is provided to local operators as well as Government to assist in the decision-taking process.

At a micro level, besides organising offshore promotion missions and conducting market development activities such as market surveys, MIDA assists in the capacity-building process of potential exporters especially SMEs. A personalised service is also provided to foreign buyers wishing to source from the country.

The mission of the Export Processing Zone Development Authority is to act as a facilitator and catalyst in forging the competitive edge of all export-oriented activities. It provides export competency development support through training programmes, consultancy services, and assessment of performance amongst others.

Through its Clothing Technology Centre (CTC), the EPZDA assists garment manufacturers in improving the design and quality of their products as well as in the acquisition of technology. Furthermore, the CTC runs technical training programmes, and it has recently set up a model factory with a view to give hands-on training to those joining the textile/apparel industry.

Also, the EPZDA assists manufacturers in the supply chain management, encouraging the establishment of backward linkages and the clustering of enterprises. Finally, the EPZDA has recently set up a "mauritius-industry" website aimed at being the e-marketplace of the Mauritian textile and apparel industry.

3. The Small and Medium Industry Development Organisation (SMIDO) 

The role of the Small and Medium Industry Development Organisation is to assist small entrepreneurs in setting up their businesses. It provides relevant training and advisory services to SMEs and helps them in their product development as and when required in export development.

The other major institutions involved in the fostering of the country’s export activities are the following:

The Board of investment, which became operational at the beginning of 2001 promotes investment in the Mauritian economic system. It acts as a facilitator and provides a one-stop shop service to both local and foreign investors with a view to ensuring that relevant permits are obtained and that other procedural matters are carried out expeditiously. It has also been given the mandate to co-ordinate the country’s multi-sectoral investment promotional activities, and to thus prevent any duplication in the implementation of programmes.

The Development Bank of Mauritius Ltd. provides concessionary finance to operators of various sectors of activities, including manufacturing, tourism and agriculture. This service is mainly under the form of medium and long-term loans. The interest rates which are applied vary between 9% and 15%, depending on the schemes and the amount borrowed. The Bank has recently set up an Export Development Fund that provides loans at reduced interest rates for marketing and promotional efforts abroad. However, the rate of utilisation of this facility is low, due mainly to lack of information on the fund among local stakeholders.

The DBM used to operate an Export Credit Guarantee Scheme, which was discontinued owing to high premiums. SICOM Ltd, a state-owned insurance company, has recently launched the "Export Credit Insurance Policy" for the benefit of small and needy exporters.

The Mauritius Chamber of Commerce & Industry is the national private sector organisation in charge of the development and enhancement of trade, industry and tourism activities. It defends and promotes the interests of its members through representation and a sustained consultative process, and it is their mouthpiece vis à vis Government. On the other hand, by way of a structured form of dialogue with the public authorities, it participates in the elaboration of the country’s national development policies and strategies, and it is fully involved in the country’s negotiations and economic relations at regional and international levels.

The Mauritius Export Processing Zone Association groups around 175 members of the Export Processing Zones. Its activities are geared towards promoting the interests of its members both at the national and international levels.

Mauritius boasts – and is now well known in Southern Africa for – its positive experience in a structured form of dialogue between Government and Private Sector institutions (for the latter, mainly through the full-time Heads of their respective Secretariats).

Such dialogue finds its expression in the 3 following manners. Firstly, at regular intervals, meetings between the Government Ministers directly concerned with the country’s economic development and the Presidents and Directors of the main Private Sector institutions are held. Such gatherings allow for discussions and decisions on matters of a national dimension, which transcend sectoral considerations. Secondly, the permanent Staff of the main Private Sector institutions sit, as full-fledged Members, on a host of public and para-statal bodies in charge of the running of investment and export promotion programmes, of the elaboration of economic development strategies at national level and, more importantly, of the outlining of strategies and stands to be adopted by Mauritius as its positions during conferences and negotiations in international fora. Thirdly, the country’s core Private Sector institutions are now present in Europe through offices in London, Brussels and Geneva, and their representatives bring their active support to negotiations at the WTO and to the relationship between the European Union and the ACP Group of countries.

Thus, as an example, the Heads of the Mauritius Chamber of Commerce & Industry sit on the Board of the Mauritius Industrial Development Authority, on the Management Council of the Board of Investment, and on the Coordination Committee on International and Regional Cooperation. Furthermore, a regular consultative process is carried out at the level of individual Ministries or Departments on matters of a sectoral dimension.

For a country and an internal market of the (very small) size of Mauritius, duplication of activities can be extremely wasteful, as there are many fields and activities where there would be a high cost and no justification for such duplication. Thus, in either a tacit or an organised manner, many services both in public and private bodies are devised and shared in such way as to ensure and maintain a situation of complementarity between those bodies in terms of role and functions. One must also outline the fact that, owing to the island’s dimension and concentration of administrative functions in and around the capital, interaction between the representatives of the various bodies and structures is relatively easy and frequent.

Furthermore, taking into consideration priorities and the means generally available within private sector institutions, responsibility for the organisation of missions abroad to promote FDI, exports, tourism and offshore activities rests practically exclusively with the para-statal bodies in charge of those activities.

But room for the improvement of the overall functioning of the system still exists. Thus, although the Directors of different sister organisations as well as private institutions are full-fledged Members of the Management Board of MIDA, there does not seem to be as efficient a flow of information between them as may be possible. Also, whilst private sector institutions are represented on the Board of many para-statal bodies, and hence know about their action plans, what they themselves are planning at a given point in time is not always known to the public sector.

MIDA has been successful in adapting its strategy to changing overseas market conditions, as can be illustrated by the case concerning the promotion of exports of the apparel industry. Thus, while since 1986, MIDA had been participating in overseas trade fairs which had been suited the needs of exporters at that time, the Authority decided to set up and organise its own fair (called MITEX) in Mauritius in the early 1990s, as it felt that the time was ripe to position Mauritius as the apparel hub of Sub-Saharan Africa.

The event actually attracted numerous foreign buyers and enabled many local SMEs to acquire marketing skills at minimal costs. However, when the downturn in overseas markets appeared a few years later, MIDA adapted its promotional style and efforts once again in 1996 by moving closer to its markets through the organisation of its own fairs abroad (known as MIATEX). The roving exhibition managed to create the necessary awareness in targeted markets and the event proved to be cost effective.

Likewise with the Trade and Development Act of 2000, a US legislation granting favourable access to apparel items originating in Sub-Saharan Africa as from January 2001, a regional exhibition grouping exporters from Mauritius and other eligible Sub-Saharan African countries was organised in the US with a view to promote export of the aforesaid items from the region into the US. The step to get this promotional exercise to acquire a regional dimension was a necessary one, as MIDA officials were convinced that holding an exhibition of Mauritian companies alone would not have created a sufficient impact.

On the other hand, at a purely local level, although MIDA officials felt that they had reached a fairly large number of SMEs for their overseas marketing activities, the perception among these companies was different. Many representatives of SMEs in fact held the view that MIDA had assisted only large companies. The weakness lied in the fact that the needs of SMEs had not been sufficiently understood. In this regard, a dedicated desk was subsequently set up within MIDA. Using a developmental approach, it caters for those companies wishing to explore export markets for the first time or to penetrate new markets.

Taking into consideration the limitations faced by private sector institutions in Mauritius regarding their financial resources, and the consequential 'division of labour' between individual institutions and bodies of the public and private sectors, the MCCI leaves the conducting of investment and export promotion campaigns abroad (except for very few promotional actions) to the Mauritius Industrial Development Authority and to the Board of Investment. As its representatives sit on the management board of those two para-statal bodies, it has the means to put forward its views to those boards.

Bearing in mind the fact that Mauritius is deprived of natural resources, that the absorptive capacity of the internal market is very limited, and that the country's openness means that much of the development process depends on export activities, the MCCI has in recent years concentrated its efforts on the enhancement of all steps, policies and measures within its means which, in its view, are conducive to the boosting up of investment, of productivity and of export performance in specific circumstances and situations.

Among the several types of initiatives which have been taken to respond to such imperatives, three are of particular importance to the institution: the holding of joint business meetings with business bodies of the region in an endeavour to stimulate trade exchanges and to encourage partnerships and technology transfer, the generation and regular submission of proposals to Government relating specifically to the country's foreign exchange and budgetary policies, to public support services to economic operators and to the evolution of economic structures, and the setting up of an office in Europe meant not only to contribute to the negotiation processes in Geneva and in Brussels, but also to reap all possible benefits for Mauritian business in terms of research and studies, commercial intelligence, and identification of business opportunities.

Such presence in places where discussions and sometimes crucial negotiations take place is also highly beneficial to export development to the extent that it allows for the securing of the elements to be constantly used to sensitise economic operators to the rules, imperatives and implications of WTO membership and to the future incidence of globalisation on both import and export performances.

In the medium term, the maintaining of traditional activities in the agricultural and manufacturing sectors and the constant launching of new initiatives, mainly in the services sector (now representing about 65% of GDP) will have to be carried out in parallel. All such activities will remain export-oriented. In fact, the huge but necessary challenges in years to come will take the shape of the modernisation of the sugar industry’s structures, the gradual opening up of the tertiary sector to foreign investors, the compulsory adjustment to competition from abroad, and the inducement of local investors to both diversify and delocalise in the region and beyond.

Mauritius has benefited from a privileged public-private sector partnership as well as from an active network of trade support institutions (TSIs) which have all attempted to focus on specific sets of services ranging from capacity building, business facilitation, research, through to offshore market development. The sheer small size of the market has ensured that duplication of services vis à vis the TSIs’ clientele has been avoided to a large extent.

With the numerous changes occurring on the international scene, each institution constantly gears up to address the new challenges ahead, and the growing number of consultations among TSIs as well as with private sector bodies translates the determination of all parties to consolidate linkages for the benefit of the country’s trade and industrial development. Such an approach ensures that Government’s policies and action in favour of economic growth are coherent and pragmatic.