Mauritius

While Arab and Malay sailors knew of Mauritius as early as the 10th century AD and Portuguese sailors first visited in the 16th century, the island was not colonized until 1638 by the Dutch. Mauritius was populated over the next few centuries by waves of traders, planters and their slaves, indentured laborers, merchants, and artisans. The island was named in honor of Prince Maurice of Nassau by the Dutch, who abandoned the colony in 1710.

The French claimed Mauritius in 1715 and renamed it Ile de France. It became a prosperous colony under the French East India Company. The French Government took control in 1767, and the island served as a naval and privateer base during the Napoleonic wars. In 1810, Mauritius was captured by the British, whose possession of the island was confirmed 4 years later by the Treaty of Paris. French institutions, including the Napoleonic code of law, were maintained. The French language is still used more widely than English.

Mauritian Creoles trace their origins to the plantation owners and slaves who were brought to work the sugar fields. Indo-Mauritians are descended from Indian immigrants who arrived in the 19th century to work as indentured laborers after slavery was abolished in 1835. Included in the Indo-Mauritian community are Muslims (about 15% of the population) from the Indian subcontinent.

The Franco-Mauritian elite controls nearly all of the large sugar estates and is active in business and banking. As the Indian population became numerically dominant and the voting franchise was extended, political power shifted from the Franco-Mauritians and their Creole allies to the Hindus.

Elections in 1947 for the newly created Legislative Assembly marked Mauritius' first steps toward self-rule. An independence campaign gained momentum after 1961, when the British agreed to permit additional self-government and eventual independence. A coalition composed of the Mauritian Labor Party (MLP), the Muslim Committee of Action (CAM), and the Independent Forward Bloc (IFB)--a traditionalist Hindu party--won a majority in the 1967 Legislative Assembly election, despite opposition from Franco-Mauritian and Creole supporters of Gaetan Duval's Mauritian Social Democratic Party (PMSD). The contest was interpreted locally as a referendum on independence. Sir Seewoosagur Ramgoolam, MLP leader and chief minister in the colonial government, became the first prime minister at independence, on March 12, 1968. This event was preceded by a period of communal strife, brought under control with assistance from British troops.

Mauritius has one of the strongest economies in Africa, with a GDP of $4.5 billion in 2001 and per capita income close to $3,800. The economy has sustained high 6% annual growth rate for the last two decades--first driven by sugar, then textiles/apparel and tourism, and most recently by financial services. Independent assessments uniformly rank Mauritius as one of the most competitive economies in Africa. With a per capita income of U.S. $3,800, Mauritius is now classified as a middle-income country and ranks, on the basis of the recent Human Development Index for 173 countries, 67th globally, 40th among developing countries, and second in Africa.

Economic growth slowed down in 2001, falling to 5.8% from 9.3% in 1999, mainly as a result of a lower growth rate in the sugar and tourism sector. In 2002, the economy is expected to expand by 4%.

Over the past 5 years Mauritius registered balance-of-payments surpluses leading to a comfortable external reserves position (currently equivalent to more than 9 months of imports), an external debt service ratio of only 7%, and modest single-digit inflation on average. The inflation rate increased from 4.2% in 2000 to 5.4% in 2001. It is expected to reach 6.3% in 2002, owing to the recent increase in the rate of VAT from 12% to 15% as well as large increases in government spending.

However, the rising trend in unemployment and the deterioration in public finances are matters of concern. The unemployment rate rose steadily from 2.7% in 1991 to 9.2% in 2001, representing 48,000 unemployed people. It is expected to reach more than 10% in 2002. The budget deficit increased from 3.8% of GDP in fiscal year 1999-2000 (July-June) to 6.7% in FY 2001-02. As a result of a series of fiscal measures taken by the government, the budget deficit is expected to fall to 6% on FY 2002-03. However, the government's objective is to bring down the budget deficit gradually to about 3% of GDP by FY 2005-06.

While Mauritius relies heavily on exports of sugar, textiles/garments, and tourism, services like Freeport, offshore business, and financial services constitute other pillars of the economy. The offshore sector is playing an increasingly important role in the financial services sector and is emerging as a growth vehicle for the economy. At the end of October 2002, the number of companies registered in the offshore sector reached 20,111. The Mauritius Freeport, the customs duty-free zone in the port and airport, aims at transforming Mauritius into a major regional distribution, transshipment, and marketing center. The Freeport zone provides facilities for warehousing, transshipment operations and minor processing, simple assembly, and repackaging. At the end of October 2002, the total number of Freeport licenses issued reached 940, of which 230 companies were operational, mostly in trading activities.

There has been growing realization on the part of the government that the traditional industries of sugar, textile, and tourism are no longer capable of sustaining further wealth and job creation. Accordingly, the government is giving high priority to the development of the Information and Communications Technologies (ICT) sector with the aim of transforming Mauritius into a cyber island. The Business Parks of Mauritius, Ltd. was set up by the government to spearhead the development, construction, and management of major business and IT parks in Mauritius. It has secured a line of credit of $100 million from the Indian Government for the creation of the first cyber-city at Ebene, which is expected to be completed by December 2003. Already a number of renowned international firms engaged in software development, ICT training, PC manufacturing and call centers, are planning to start operations in the cyber city. Also expected to give a further boost to the development of the ICT sector are the recent operation of the Southern Africa Far East (SAFE) optical fiber cable and the liberalization of telecommunications services beginning January 1, 2003.

Although the near-term outlook for growth is encouraging, the challenges facing Mauritius in the long-term are daunting. On the domestic front, the decline in fertility and the aging of the population will decrease the available pool of labor for the economy, thus reducing the long-term growth potential. Also, before the end of this decade, the trade preferences and the market protection on which Mauritius has built its success will be eroded by the forces of globalizaton, liberalization, and economic integration. The elimination in December 2004 of the global quotas on clothing under the Multi-Fiber Arrangement will expose the local textile sector to competition from other exporting countries, including those in Asia and South America. In the case of sugar, ongoing negotiations between the European Union and sugar-exporting countries and future multilateral liberalization will likely reduce the profitability of the Mauritian sugar industry.

The government has taken a number of measures to prepare the country to face these challenges. With regard to sugar, the government has come up with a 5-year Sugar Sector Strategic Plan (2001-05), which provides for the restructuring and rationalization of the sugar industry, decreasing the number of sugar mills from 14 to 7 and reducing the current labor force of 30,000 by up to 7,000 through a voluntary retirement scheme. As far as the textile sector is concerned, the U.S.-Africa Growth and Opportunity Act (AGOA), which provides preferential access for apparel exports to the U.S. market, is expected to mitigate the negative effect of the elimination of the Multi-Fiber Agreement at the end of 2004. The AGOA also is seen as a good opportunity to diversify the sector by encouraging spinning and weaving operations and promoting regional integration of the local textile industry with other Sub-Saharan countries eligible for AGOA benefits.