R.C.Khushiram
Ex-Director, MOFED
It comes as no surprise to us. The Economic Development Board (EDB) has been saddled with too many objectives. The EDB should focus on the formulation of economic strategy and policy and this task should be entrusted to a dedicated broad-based committee or agency, under the aegis of the Prime Minister’s office.
Why this persistent cacophony every year after the announcement of certain budget measures? Because there is a specially selected coterie of advisers, EDB think-tanks and the Financial Secretary who, some two or three months before the budget day, collects, filters, chooses and finally imposes the budget measures/policies without properly opening the discussions on these measures to a greater group. Neither are these measures/policies analysed by the budget analysts or economists of the over-staffed MOFED. There is no strategic thinking and research, no evaluation and assessment of the impact of the programmes and policies at the national level and proper advice to government accordingly.
Some of these advisers and think-tanks are doing a disservice to the country; they pick out some of the measures/policies from other countries’ budget documents or from IMF papers – like that of Malta or Cyprus on the passports-for-sale measure or the IMF Art IV documents on Negative Income Tax –and these find their way in our budget without serious analysis of its relevance to or impact on the Mauritian economy. And many of the measures/projects are a mere wish-list of line ministries. They cannot be the basis of good policies and measures which can only result from proper analysis. Here are some few examples of such policies/measures that needed further analysis or lacked coherence :
Passports-for-sale : Is it a better alternative policy to the earlier ones on permanent residentship? What will be its impact on the IRS/PDS schemes? There is a price, including reputation risks, have we weighed in all these? Do we have the proper institutions and people to carry out such a measure?
Metro Express: We are developing the Metro; what are the accompanying measures that will be needed to prevent it from being a white elephant given that the road infrastructure is also being improved? Who is doing the thinking and the research?
Industrial fishing: How can we encourage the local fishing industry when we are importing all kinds of fish and opening up our maritime zone to foreign industrial fishing boats?
Tablets for Form IV: You recall this measure which was announced with such pomp in a previous budget without even investigating the practicability or the nitty-gritty of its implementation or at another level whether there was a supporting ecosystem of educational applications and online contents, if it is to become a real force-multiplier.
Negative Income Tax (NIT): They lifted it from Appendix VI on Earned Income Tax Credit (EICT) in the IMF Art IV document of May 2014 to score quick populist wins. No proper analysis was carried out though the IMF had warned that greater attention and resources should be given to policy measures improving labour flexibility, employability and reforming the present ineffective and inefficient social security system and these should precede any NIT measures which should only be considered as a longer-term option. Moreover, most of the countries that have adopted a variant of the NIT have a highly skilled and versatile workforce and have a continual and intensive process of skill formation that enhances workers’ flexibility and employability. Wouldn’t it have been more relevant in our context if we had allocated more resources to empower the worker through intensive training which would have helped him to earn higher wages in future? The counter argument is that the worker’s take home pay was increased and he had the choice either to consume it or invest it to improve his skills. Whatever the arguments, were these properly studied and analysed?
We also have a whole list of the policies and projects which were announced in the budget but not implemented because there were very little research or cost benefit analyses carried out on their viability: Pharmaceutical village, bicycle and motorcycles manufacturers, technopoles at Rivière du Rempart and Rose Belle with 3D printers, the development of Special Economic Zones (SEZ) in Madagascar, Ghana and Senegal (2015), the Gold fund, gold business (that will encompass a wide spectrum of high value-added activities, ranging from refinery of gold, producing gold bars, setting up top-end jewellery processing units, vault facilities and to trading of gold and bullions on our new commodity exchange) …and you name it. Are the advisers proposing these measures/policies genuine policymakers or are they merely taking us for a ride? The above examples will indeed make a great case study for anybody who wants an insight into why many of our policy initiatives and project proposals stumbled or are restricted to “d’effets d’annonce”.