Wednesday, December 31, 2008

A Sophist Must Die

Will 2008 go in the history books as the year when the Information Age signals the end to the Deception Era? Time will tell.

Until the tide recedes, let Leonard Cohen's A Singer Must Die accompany our transition to 2009:

Now the courtroom is quiet, but who will confess.
Is it true you betrayed us? the answer is yes.
Then read me the list of the crimes that are mine,
I will ask for the mercy that you love to decline.
And all the ladies go moist, and the judge has no choice,
A singer must die for the lie in his voice.

And I thank you, I thank you for doing your duty,
You keepers of truth, you guardians of beauty.
Your vision is right, my vision is wrong,
I'm sorry for smudging the air with my song.

Oh, the night it is thick, my defences are hid
In the clothes of a woman I would like to forgive,
In the rings of her silk, in the hinge of her thighs,
Where I have to go begging in beauty's disguise.
Oh goodnight, goodnight, my night after night,
My night after night, after night, after night, after night, after night.

I am so afraid that I listen to you,
Your sun glassed protectors they do that to you.
It's their ways to detain, their ways to disgrace,
Their knee in your balls and their fist in your face.
Yes and long live the state by whoever it's made,
Sir, I didn't see nothing, I was just getting home late.

Tuesday, December 23, 2008

The Loan of Your Dreams

That would be a government guarantee like the one MK just got. Perhaps you will remember that it was the presence of a government guarantee that enabled the infamous Illovo Deal to go forward.

And it's not just any loan we're talking about here: it's the best you can get in the land for no one should be able to borrow at a rate the goverment does because of its monopolies to print legal tender paper and tax us to death. But it's definitely not a substitute to lapses in corporate governance. 

It appears that Air Mauritius seriously messed up its liquidity with its hedging and has been bailed out with the guarantee. As such we need to know what has happened, who did what and what is the downside so that the decisions which are in the best interests of the citizens are taken.

What's Missing in MK's Press Release

What's in italics in the next sentence. The Company's fuel risk management strategy aims to provide the airline with protection against  sudden and significant increases in oil prices while ensuring that the airline is not competitively disadvantaged in a serious way in the event of a substantial fall in the price of fuel. That's taken from page 50 of the 2007/8 Annual Report of Air Mauritius.

I guess that includes not doing anything stupid to throw the company over a cliff.

Bubble Gum Economics

In the wake of the government's stimulus plan, Paul Krugman has issued a strong warning in New York Times yesterday. Whereas the American economy will hopefully start its stabilisation process some time after July next year, it is very unlikely that the business as usual mode promoting a bubble-to-bubble expansion will be enough to prop up the desired vibrancy. Unless the deep structural challenges are addressed, reversing the nationwide bearish mood will remain an uphill task. Nevertheless, America can rely on its innovation-driven ethos for recovery. Will Dodoland's survival instinct prove resilient in the face of official self-delusion?

Sunday, December 21, 2008

The 5.2% Growth Means Almost Nothing

Especially when used in isolation or by an intellectually dishonest politician. Just like if you were in an operating room as the chief surgeon to do some brain surgery, you wouldn't send the patient home instead just because you thought she had great nail polish, would you? Or would you fly across the Himalayas aboard a plane having only a speedometer on its dashboard? I don't think so.

And what is there to brag about a 5% growth rate anyway? We've been growing at that rate for the past 17 years or so with and without Sithanen in government.

Rapidly Depreciating Rupee Shrinks Economy by More Than 20% in Dollar Terms

There are two ways of computing this. Given that I'm kind of lazy I just compute the rate of return on the exchange rate after grossing up the 25 rupees we needed to make a dollar six months ago by about 1/2 the expected growth rate of 5.2% for 2008. The long way is of course to compute the size of our economy in USD on these two dates and get a rate of return.

So Ramgoolam is absolutely right to say, at least in dollar terms, that we're not in a recession: we're in a depression!

Should Have Called it Paragraph 271 Instead

Because that's what the Economic Stimulus Package unveiled yesterday is really about and the relevant document is last June's budget. Click on the picture below to get an immediate sense of deja vu and to find out why Sithanen has failed here too.

Why Government is Awash With Cash

Because it has been taxing us to death (we've been paying way too much for everything including oil prices since Sithanen returned as Finance Minister in 2005), has cancelled personal exemptions with the dumb flat tax (an independent study recently confirmed that) and has been budgeting billions without actually spending them (Empowerment Fund spent only Rs 400 million over two years instead of the Rs2 billion budgeted and I wonder what percentage of the last three capital budgets has been spent). 

Ramgoolam obviously doesn't know what he is talking about when he's saying that they got all this money from the so-called 'reform'. Or is he taking us for a bunch of idiots?

About the Political Spin on the Rice/Flour Subsidies

Ramgoolam would have us believe that his government has a heart because he has kept these subsidies even though they are costing Rs1.3 billion instead of the Rs700 million they did a few years back. Not exactly what happened. Sithanen in his first bean-counting budget cancelled them but had to quietly reintroduce them after the civil society raised its voice.

We also have to put things in their right perspective. We could do this by looking at how much money is left if we subtract these subsidies from the VAT receipts that government has collected on super-high oil prices from us. Which is what I've done in the graphic above. Turns out government has a billion more left after paying the bigger subsidy.

Saturday, December 20, 2008

50% of the Financial Year Gone Already

So we should expect that half of the six billion rupees -- equally spread across six funds -- that were announced with so much fanfare in the last budget has already been spent. I have a couple of doubts that this has actually happened. Let me briefly explain. 

One of these funds, the Human Resource Development, Knowledge and Arts Fund, was hastily setup to give access to tertiary education to all of those who qualified for it. A few weeks after the budget speech the University of Mauritius announced that admissions had actually decreased by 17%! 

Another billion was suppose to be spent to ensure food security. Well, I only got back some absent looks when I asked someone close to the project back in September to confirm that at least Rs150 million had been spent which would have indicated that they were on track.

And then there's the billion for the ile durable stuff. Can't see really where Rs500 million has been spent since June. 

Do I need to go on?

Data Miners of the World, Unite

Asked about the paucity of statistics while he was implementing the policies that turned postwar Hong Kong into a thriving global financial centre, John Cowperthwaite replied: if I let them compute statistics, they’ll want to use them for (scenario) planning. Asked about some of the measures he would advocate for a turnaround, Nassim "Black Swan" Taleb replied: I don’t like scenario planning, because people don’t think out of the box. I would also ban the use of statistics because unless you know statistics very, very well, it’s a dangerous, double-edged sword.

In one of his latest posts, Sanjay demonstrates how per capita shrinks with a sinking rupee. Statistics are always relative. They depend on the elements factored in their computation, and these are never constant. That's why dogmas such as 1)VAT reduction automatically boosts consumption, 2) exchange rates invariably affect imports and exports and 3) PRB provision is systematically inflationary are all flawed.

As a matter of fact, we do not need statistics that feed trite debates and provide a smokescreen to incompetence. We nevertheless need them to decipher patterns and measure supply and demand to reduce inadequacies and improve flow everywhere.

Friday, December 19, 2008

Less Than 60% Effectively Passed the CPE this Year

How I got that number? Easy, I included the number of students that the press told us back in October were going to take part in these exams, 26,689, instead of the number of students who actually took the exam, 23,664. So that some 3,025 kids did not take the exam which works out to a little over 11%.

They didn't show up for probably some of the same reasons that 30% grown ups don't show up at their CFA Level I Exam. One such reason is fear. Which kind of makes the case to lower the difficulty of the CPE. Of course you realise that overlooking little details like this will make us a lesser nation than we ought to have been.

Why We Are Not a $7,000 Per Capita Country Anymore

Simply because when that number was computed you needed 25 rupees to make a dollar. As today you would need about Rs7.50 more for a greenback that per capita number falls approximately to USD 5,385. Which illustrates an interesting point: as a nation we become poorer when our currency loses value. And it loses value because we don't do the right things and/or we do too many dumb things. Of course we should not read to much into statistics like averages because they don't tell us the whole story. Still, it will be a little while before it reappears in the speeches of our local cherry-pickers.

Majority of Voters Didn't Need The Global Economic Crisis to Fall into A Recession

Indeed, Sithanen and Ali Mansoor had already put them there right after the first of a series of bean-counting budgets back in June 2006 when they "let inflation come loose out of its moorings". The damage is substantial: cumulative inflation for the last 42 months will hit 30% by next week while the more vulnerable voters got clobbered with more than 40% cumulative inflation over the same period. And that's before the mess of the flat tax reform and playing Russian roulette with SC/HSC subsidies to quickly name just a few. 

And unsurprisingly, as the above graphic shows, inflation in the country where both Sithanen and Mansoor studied economics has behaved much better. 

Tuesday, December 16, 2008

Lider Maximo's Last Stupid Move?

Berenger's threat of having MMM MPs collectively resign in January is a desperate and unambiguous sign that the guy has been in politics for way too long and has been leading his party for even longer. That's after he threatened to get us out of the Commonwealth a few years back simply because he did not get an appointment with the then British PM, Tony Blair.

If he thinks he is intimidating the people of Mauritius he and the MMM better think again. If they do resign Ramgoolam should, as soon as that becomes possible, organise bye-elections in the handful of ridings where the MMM managed to get candidates elected in 2005 and be prepared to win all the contested seats. 

Of course the almost super majority Ramgoolam would command would be short-lived: voters would not yet have had a chance to say loud and clear what they thought of the totally crazy policies of Rama Sithanen.  

Friday, December 12, 2008

A Rebuttal to a Vicious Call

Here is an excerpt from the current print edition of The Economist to expose the ongoing twisted propaganda on our monetary stance by some spoiled brats:

"In setting its interest rates, the Federal Reserve worries about growth and inflation. It does not concern itself unduly with the dollar. Policymakers in emerging economies, by contrast, cannot afford that luxury. In countries prone to high inflation, a stable exchange rate helps to anchor prices. Such economies have also usually borrowed in dollars or euros, because their creditors insist on being repaid in hard currency. A precipitous fall in the currency can make these debts insupportable.

For these reasons, emerging economies must often raise interest rates in the teeth of a slowdown in an effort to defend their currencies. This “procyclical” monetary policy damages the economy, inflicting losses on banks and their clients. But it may be the lesser of two evils. Rich countries can afford to treat their currencies with benign neglect. Emerging economies cannot".

Thursday, December 11, 2008

Patrice, Serge, Francois et les Autres

Patrice, Naiade Resorts boss, yesterday said that layoffs are out of the question and hinted that he may even pounce on a couple of hotels in the Seychelles. Serge, Soniawear's managing director said recently that he is confident that he will recoup any losses he might sustain now and then by raising his game. Francois, Miniature Models chief, thought big when he said a couple of years ago that he's gonna remove the little sugar cane he's got and expand because that doesn't earn anything. Kind of refreshing from the crap we're hearing from MEXA these days, don't you think? 

7,707 Failed the CPE Because The Exam is Too Difficult

And the Minister of Education should simply have bell-curved the results to make 5,340 more students pass. This would have brought the pass rate to 90% which is probably a more reasonable number. The other 10% could have been offered a seat in a vocational school to become great manual workers as I suppose we would like great plumbing jobs to become standard in Mauritius in the future.

And students should be given many opportunities to switch streams throughout their lives. In the meantime it's a good idea to have psychometricians start working immediately to bring the exam to the right level.

Wednesday, December 10, 2008


Paul Bérenger est un homme intelligent. Mais il est trop excessif... Par example, au Parlement, mardi, la PNQ sur les gaspillages des fonds publics était très pertinente. Le rapport du directeur de l'audit étant effectivement accablant. Il a reussi a acculer le minstre des finances et le gouvernement avec. Mais je ne sais pas pourquoi il a sorti des remarques personnels sur les cheveux de Ram Sithanen. Outre l'expulsion de l'hemicycle, il donne a l'alliance sociale "enne lezo" qui permettra aux David, Valayden et autres d'utiliser cet incident pour faire diversion. Dommage.

Tuesday, December 9, 2008

Repo Rate Drops by 100 Basis Points Even Though Inflation is Still High

And inflation is still high because back in the second half of 2006 Rama Sithanen and Ramesh Basant Roi issued a fatwa on our rupee after Sithanen removed subsidies on rice and flour in an environment of agriflation and ferocious bean-counting, rapidly rising oil prices and record FDI pouring into Mauritius.

Although inflation came down to 8.3% at the end of last month it's still more than twice the level that would be consistent with the notion of price stability. For instance in the UK it's 2%, at the ECB it is less than 2% (thanks to the Bundesbank) and in Canada it is between 1% and 3%.

Our rate of inflation would have been even lower if Manou Bheenick hadn't been working in difficult conditions: he inherited double-digit inflation and entrenched inflationary expectations from his predecessor and a Minister of Finance who appoints far too many people at the Bank of Mauritius even though he doesn't believe in an independent Central Bank.

For sure appointing Bheenick at the Bank of Mauritius has improved the odds of Ramgoolam staying on as PM after 2010 by containing Sithanen's pathological addiction to robust inflation. These odds can be further improved if the Bank of Mauritius Act is modified so that its Board and Monetary Policy Committee members are nominated in consultation with the Prime Minister and/or if the ultimate Bretton Woods puppet is sacked unceremoniously. The Government Audit Report is the latest of a long string of blunders that could be used as justification.

Friday, December 5, 2008

Top 10 Reasons Why Mauritius Was the Best Managed Country in the World With Berenger as PM

No. 10. Wait till we hear the reason why expensive sports coupes have been purchased for the SIDS conference. Will 20% of the revenue shortfall be footed by senior citizens?

No. 9. We won’t send Buckland and Milazar to represent us in the 100m dash and quarter-miler anymore – we’ll send 2 folks that live closest to the airport as measured by the GPS.

No. 8. Dead bodies of stray dogs have to be routinely avoided on our motorways and main road arteries.

No. 7. An economy that was in the doldrums in the morning is made to roar back with a vengeance in the afternoon. The same economy is pronounced lifeless the following morning.

No. 6. We lose a number of spots in several competitiveness and corruption rankings year after year - Management Guru, Tom Peters is definitely nuts to say that perception IS reality.

No. 5. The response to soaring unemployment has been to change the way it is computed.

No. 4. The two oil shocks of the 1970’s and the Volcker deflation never happened - revisionists are having a ball!

No. 3. Actual bye-election results are not as good as opinion polls.

No. 2. A very strong link between an ethnic wardrobe and delivery of a stellar economic performance has been established. The Royal Swedish Academy of Sciences may be missing something here.

And the No. 1 reason why Mauritius is the best managed country in the world is 

No. 1. Nobody in his right mind would say so!

Berenger is Da Man!

This is what the MMM would have us believe now. They could have a point here when we refresh our memory of how we used to be the best managed country in the world between 2000 and 2005. Are you ready? I am too. So stay tuned!

Tuesday, December 2, 2008

Who Should Get the Top Job at the CEB

That's kind of easy. He should remind Ramgoolam of his one-year old promise of bringing down electricity prices to more competitive and reasonable levels. That's very important because abusive energy prices kills our competitiveness and makes the poor poorer.

A no-nonsense approach should also be preferred over depreciated qualifications. That is he should make sure that the customer is not taken for a ride irrespective of whether oil prices are USD 10 a barrel or USD 150 a barrel like has been happening for way too long now. In other words we need someone like Clency Bibi.

Sunday, November 30, 2008

Mauritian Economy About A Quarter Less Open Than In 1990

That's according to the 'Openness' statistic published by the highly esteemed Central Statistical Office. Defined as the ratio of total merchandise exports and imports to GDP at market prices this yardstick was at 1.07 in 1990 and finished last year at 0.81. That's a decrease of 24.26% if your arithmetic is as rusty as mine and gives you an indication of the competitiveness of some of our exporters. I certainly hope that the Prime Minister and the Governor of the Central Bank use that statistic to ignore the sporadic whining of the usual cry babies from MEXA, JEC and the Ministry of Finance.

Food Crops and Fish Production Down Significantly From Their 2001 Levels

That's right. In 2001 we produced a little over 129,000 metric tonnes of food crops and almost 8,800 metric tonnes of fish. The corresponding numbers for 2007 are lower by a whopping 27% and 33% respectively. In fact the fish production numbers hovered within a narrow range of 8,800 and 9,400 tonnes between 2000 and 2006 before free-falling to less than 6,000 tonnes last year.

Shouldn't that be a cause for alarm in these times of agriflation and given that the eating habits of Mauritians are not exactly world-beaters? I am sure we can do a lot better with the world's 14th largest exclusive economic zone than to include it once in a while in a dumb speech usually appreciated while ingesting some oily gato pima.

Independent Study Says Middle-Class Worse Off With Flat Tax

A presentation of that interesting study confirms what anybody endowed with a little bit of intelligence knew from the start: temporarily removing people from the tax net doesn't make them necessarily better off if they get clobbered with double-digit inflation created deliberately especially if you also mess up their long-term plans carefully crafted with exemptions such as insurance policies, loans and pension plans.

The study by Ms. Kumari Juddoo and her colleagues at the University of Mauritius could certainly catch the attention of the next Finance Minister.

Tuesday, November 25, 2008

Ministers and Growth Rates: The Last 20 Years

This is what I could blog in 18 months when we go to the polls assuming we grow at 5% until then. As the table shows the average growth rate of the current government would barely fall short of 5% and certainly puts the so-called reform-induced robust growth performance into perspective: Sithanen will actually do worse than his first time around when... no reform was implemented.

And should we tag along at 3% instead it would yield the worse-performing mandate as far as that extremely limited economic statistic goes. But of course we won't go to vote in July 2010: it will be the World Cup Stupid!

Sunday, November 23, 2008

Just in Case You Forgot: November is Diabetes Month

Every 10 seconds a person dies of diabetes in the world. 25% of Mauritian suffer or are at high risk of developing that condition which is one of the most common chronic medical problems and a major cause of ill-health. The tragedy is that half of those affected will not even know that they have the disease. With early diagnosis, access to care and awareness the development of diabetes can be prevented specially in children.

We need to create Awareness BIG Time! And it’s the responsibility of each and every one of us. Why not use our students as media and for campaigning during the holiday seasons? This will not only help them find out about a life-long health risk but will also help to cure our affected community.

Our medical system could definitely be computerized instead of the mess of the Bristol card and dossier: a diabetes patient who is also an orthopedic patient at the same hospital has currently 2 dossiers. Having the patient full case history on a computer screen will help speed up the system for the benefit of one and all.

But WHEN are we getting started? Thoughts, action plan and decisions should meet reality within weeks! Our community is Dying!

Saturday, November 22, 2008

The Bean-Counter's Idea of a Trade-Off

As far as average inflation and unemployment rates are concerned we were at point A with the MSM-MMM government and Dr Sithanen quickly took us to point B in two and half short years: 3% more inflation and 1.4% more unemployment. One more reason for the guy to go when you consider that the Phillips curve turned 50 this year.

Friday, November 21, 2008

At Least One Major Arrow Is Missing

From the Education and Human Resource Plan for our country unveiled this week. And that would be from Labour Market to Higher Education in Figure 5 on page 26. If you don't understand why then you could be suffering from... linear thinking and should definitely read this to get rid of that disease. There may be much more missing but the 25-day period given for public comment on the 163-page report spanning a 12-year period is as ridiculous as the recent re-introduction of daylight savings time: it will get us to nowhere.

The plan is available here

Wednesday, November 19, 2008

Welcome to the Big Business Welfare State

I am caught with a sense of déjà vu as I watch Auto execs in America begging for a bailout. Shall we wince or LOL? Does not that remind you of our local cry babies and rent seekers? Give us a competitive (aka junk) rupee or else we sink together! It looks like taxpayers must always subsidise the reckless lifestyle of fat cats.

Sugar does not taste as sweet in my mouth as when I was a kid. Some people do not feel least bothered to preach free market everywhere and reverse affirmative action through the back door.

Warakurna, I think I'd better get back to humming Midnight Oil's anthem:

Some people laugh, some never learn;
This land must change or land must burn.
Some people sleep, some people yearn;
This land must change or land must burn.

Sunday, November 16, 2008

Scandale MCB/NPF: Leçons Pas Apprises

Il y a urgence à modifier la National Pensions Act et la National Savings Act pour une raison capitale. Ali Mansoor se retrouve au centre d’un conflit d’intérêt étant donné l’impact que peuvent avoir les mesures budgétaires sur les marchés financiers. Des mesures qu’il aurait suggérées probablement lui-même comme secrétaire financier. 

Par exemple, la baisse de la taxe corporative à 15% qui a été responsable de l’envolée de la bourse de Port-Louis était connue avant tout le monde de Mansoor qui porte aussi la casquette de président du comité d’investissement du NPF/NSF. Il ne peut pas créer les règles du jeu et être le joueur le plus important à la fois. Mansoor doit donc immédiatement se récuser du comité d’investissement.

Friday, November 14, 2008

Singapore: Not Exactly a SIDS

It already has the world's 44th biggest economy (vs. 129th for Mauritius) and tops all the rankings that really matter so it's kind of silly to call Singapore a SIDS. It is also one of the most open economies so that it should have been hit harder by the record oil prices we've had since July 2005. Still, its rates of inflation since then, as shown above, has been a mere trifle compared to those Sithanen has been consistently throwing at the poor and middle-class over here. And the cumulative rate of inflation is even more revealing for the first 2.5 years since the Labour Party returned to power: 3.4% for Singapore vs. 20.2% for Mauritius. And you can click here to find out or remember what it's like to have the world's busiest port. 

38 years

This is about how long it would take the GDP per capita of Mauritius to reach that of Singapore. Indeed the USD 5,496 figure we clocked last year would attain Singapore's 2007 performance of USD 35,163 if it grew steadily at 5% until 2046.

But this assumes that the incredible south-east Asian tiger would stop growing for the next four decades and wait for us to catch up. A very unlikely event considering that since Sithanen joined politics, Singapore has been growing at 6.5% on average every year vs. our own 5.0%. Singapore's GDP per capita number is already better than those of Spain and Japan and should match Germany's before Brazil hosts the World Cup in 2014.

Monday, October 27, 2008

Singapore to Grow by 3% in 2008

Although it is technically into a recession because its GDP has contracted over the last two quarters. However it is misleading, if not intellectually dishonest, to compare the growth rate for any single year across countries just like you wouldn't "cross a river whose average depth is four feet" to borrow from the author of Fooled By Randomness

No, take a longer view instead. Which is what I did in the graph above which plots the cumulative growth rates of Singapore and Mauritius from a starting value of 100 since about the time Ramgoolam and Sithanen got into politics. By the end of 2007 Singapore had reached 298 or about 30% more than the 229 for Mauritius. Of course, everybody knows that the two island states were definitely not at the same level of prosperity and development back in 1990 which makes the performance of Singapore all the more extraordinary.  

Saturday, October 25, 2008

Reintroduction of Daylight Saving Time Confirms Mauritius Hasn't Got Its Priorities Right

Especially after you consider the government's dumb response when oil prices almost tripled from USD 50 to USD 147 a barrel over the last three years has been to make the purchase of bigger cars easier. Not making a sufficiently comfortable and reliable public transportation system available so that commuters would leave their cars at home is additional proof that we are suffering from a serious breakdown in leadership and management here.

It would also have been better for Ramgoolam to make good on his year-old chess-thumping promise of reviewing the abusive IPP contracts. Speaking about priorities, here is one more: we need to build another reservoir as quickly as possible or we run the risk of a repeat of 1999 when a serious drought halved our economic output. The latter risk, you would have noticed, is an entirely domestic issue: I guess you can call it an internal shock.

Celebrity Meltdown

No matter how hard reality bites the theology of laissez-faire, its blind disciples will cling to it. But when Alan Greenspan, one of its high priests, is gripped with agnosticism, it means that a paradigm shift is definitely in the air. Why has the former Federal Reserve chairman acquired divine status in the first place? Why do we cannonise fellow human beings so promptly today?

Taken in its most ruthless representation, the technology-driven era seems to offer few alternatives: embrace it or ignore it at your own risk and peril. Excess breeds excess. There seems to be no room for the middle path. To meet new spending patterns of consumers for whom time seems to fly, markets started promoting prêt-à-porter. Then came prêt-à-manger. And now, enter prêt-à-penser. Celebrity models, chefs and experts rule our world. The general trend for the last decades has been an obsession with pet theories. Worse, deprived of adequate contextual research, most parts of the developing world have simply internalised what are in fact aberrations. As like-minded people tend to flock together, they end up confusing repetition with self-evident truth.

William Easterly's White Man's Burden and Ha-Joon Chang's Bad Samaritans should provide the elusive hindsight to those who feel fooled and let down. For an even better taste of vintage "lateral thinking" and "thinking outside the box", Nassim Taleb's Black Swan might well be the ultimate pick. There is indeed a heavy price to pay when we let wizardry and punditry cloud our reasoning.

Tuesday, October 21, 2008

The Financial Rescue Program is Not Inflationary

Our optimism regarding the current financial crisis received a boost with the recognition that a more comprehensive and global approach was needed to restore confidence to global financial markets. Interbank lending rates are receding, a very positive development.

Some observers, however, have expressed concern that the bailout program will rekindle inflation as Central Banks “print money” and sovereign governments run large budget deficits. We do not share that worry. Global population and labor force growth have both been decelerating for more than 30 years, a development that is fundamentally disinflationary. As we wrote recently (Inflation is Not a Problem, August 2008), the recent uptick in inflation was the result of an extended synchronized world business cycle. It was already near an end prior to the crisis. The global environment is fundamentally disinflationary.

Inflation is in remission as was confirmed by the latest reading on the CPI for both the US and the Eurozone. The sharp decline in commodity prices, especially oil, will result in negative readings for the headline series. Neither core inflation nor wages were ever a problem.

The decline in inflation will also substantially increase the ability of Central Banks to further slash interest rates which will both help the current financial crisis as well as the spreading global slowdown in economic activity.

Sunday, October 19, 2008

All Kinds of Growth Rates Can Throw You Out of Office

The above table shows the annual growth rate on each of the 4 times that we've changed governments since our independence. The first two times, the voters gave the challengers an opportunity to corrupt absolutely and both events happened after about 14 years with the same Prime Minister in a year of almost identical growth rates. The electorate seemed to have been quite unhappy with their governments since then: it has systematically been giving them the boot.

Thursday, October 16, 2008

Apres Joe-le-Taxi, Here's Joe-the-Plumber

Click below to watch the 3rd and last 2008 Presidential Debate. Well-researched perspectives about the US as you would expect. We can certainly use those to ask corresponding questions about Mauritius.

This is Not Like the Great Depression

Although our optimism that there is light at the end of the tunnel for the current global financial crisis continues to be tested, there is one expressed parallel that is not evident. A major precursor for the Great Depression of the 1930s was the Immigration Reform and Control Act of 1925 which shut the door. Growth in the US population which had averaged nearly 3 per cent per year fell quickly to much less than 1 per cent. Housing starts, which totaled 900,000 in 1926, fell to 300,000 by 1929, the year of the stock market crash. The restriction on the international movements of people paved the way for restrictions on international trade via Smoot-Hawley. The Fed raised interest rates and reduced liquidity to the financial system.

None of the above exists today – a very positive fact. There is grousing about current account deficits in the US and surpluses in Asia but no one is even hinting at imposing restrictions on the movements of people and/or goods as occurred 80 some odd years ago. Be that as it may, it would be a major mistake to have America go on a diet and Asia to binge given the major imbalances in their demographic positions. Asia needs even larger surpluses to help them prepare for their very rapid aging.

Wednesday, October 15, 2008

Ex-Governor's Memory Playing Tricks on Him

This is the impression I got on skimming through an interview of Basant Roi that was published in a newsletter earlier this week. In it the guy who was in charge of the Bank of Mauritius for a little over eight years stated that the independence of our central bank had now been thrown out of the window.

Kind of funny to come from the person who was Governor precisely when the independence of the institution he had been entrusted with was murdered during the MCB-NPF saga before being hanged in the second half of 2006 when the rupee was allowed to freefall despite the record FDI.

And the hansard contains interesting replies that will kind of support the view that when it comes to degrading our institutions Berenger has no match. Except maybe Sithanen.

Today of course is a great day to read a few pages of The Great Crash for at least an extra reason: John Kenneth Galbraith would have turned 100.

Hong Kong Baffles Market Fundamentalists

In a key policy address following the global financial crisis, Hong Kong Chief Executive Donald Tsang states that "the government's role is increasingly important and needs to be redefined ... We should be ready to take decisive action to help stabilize the economy and rebuild people's confidence to ride out the difficulties."

Quite logically, the Hong Kong Monetary Authority (HKMA), the territory's central bank, and the Securities and Futures Commission (SFC) would look for ways to strengthen the city's financial regulatory regime. Among other measures, guess what, Hong kong, one of the champions of global capitalism, is about to establish an advisory Minimum Wage Commission.

Hong Kong has not evolved on the same planned track as Singapore, but they both share the same ideology-free approach to make their vulnerable open economies as lean and nimble as possible.

Tuesday, October 14, 2008

Thanks George, But I Think We'll Pass

I am referring to what looked like an assurance given by the economist and MEXA boss this afternoon on a private radio about the apparent prudence with which the National Pension Fund (NPF) invests workers' money. He was up against Ashok Subron who knows infinitely more about how the economy of Mauritius works than Sithanen and his university buddy, Mansoor, lumped together.

Indeed, standard corporate governance practice suggest that the people of this country be provided with all the information and given the opportunity to make that determination by themselves. That should be relatively easy for the Financial Secretary, who chairs the investment committee of the NPF, to do: the cost of disseminating information is close to zero nowadays. 

Besides, there's a moral obligation for the government to rapidly become more transparent in this and some other areas given that the MCB-NPF scandal is still fresh in everyone's mind. There are also so many great models for pension fund governance. Click here and get ready to say Wow!

Sunday, October 12, 2008

World Not in a Hurry to Borrow from IMF

Or to take any of its phony macroeconomic advice. And that's in spite of IMF Chief's announcement that the loan-shark is "ready to lend quickly... based on streamlined conditionality" three days ago. Indeed, countries have been sidelining the Washington-based institution for some years now and everybody, save Rama Sithanen, knows that its loan portfolio has collapsed from SDR* 70 billion to SDR 20 billion in 3 short years with a single country, Turkey, now representing about 1/4 of that dwindling portfolio.

It also made the first loss in its history last year and that is expected to widen to about USD 250 million next year if its own numbers are to be believed. The IMF has also desperately been trying to appear as a development agency. This has failed too. Blame it on the availability of tons of money and better ideas elsewhere.

*you need about USD 1.50 for each SDR.

Tuesday, October 7, 2008

Wake-Up Call to Corrupt Leaders Issued

This is how Transparency International has characterised the Stolen Asset Recovery (StAR) initiative launched by the UN Office on Drugs and Crime and the World Bank (WB) two days before Samad's post on corruption. The aim of this program is to help developing nations recover funds looted by their leaders and usually stashed away in an account in the west. Estimates of the annual fraud range as high as USD40 billion and that's before factoring in the attendant degradation of public institutions. The 56-page joint report which makes good reading includes three case studies: Nigeria, the Phillipines and Peru.

This initiative comes 12 years after the famous Cancer of Corruption speech of Jim Wolfensohn at the annual meetings of the WB. And isn't it wonderful that we have someone attending the 2008 edition of these meetings in the week-end in Washington? Here is one great opportunity to look at Zoellick straight in the eyes and to announce that Mauritius intends to be the poster child for StAR.

Monday, October 6, 2008

Etienne Doesn't Make the Grades

But Rashid Beebeejaun, who apparently did, reassured everybody when he said that Sinatambou is a bright guy. I found all of that kind of weird because I can't remember what Beebeejaun should be remembered for since he returned to power in 2005. As a matter of fact, I have an extremely hard time recalling what he achieved as a Minister between 1996 and 2000.

If my math is as good as yours that's a full eight years in the cabinet (1/5 of the time since the Union Jack was lowered if you prefer fractions). Granted he did not literally transform his ministerial responsibilities into a job search as one globe-trotting MSM-MMM Minister did. But then again, the latter performance hardly qualifies as a benchmark.

In a similar vein you get the impression by looking at how they work and what they say that Nita Deerpalsing and Cader Sayed-Hossen need at least 800 years each to finally achieve some tangible democratisation of the economy. And of course there is Navinchandra: 8 years as Prime Minister and all that he's achieved in the top job of the land fit comfortably on a stamp.

Saturday, October 4, 2008

Sugar, Already a Small Sector When the Bean-Counter Joined Politics had Shrunk by More than 70% by 2007

When Sithanen was sworn in as Finance Minister in 1991 that sector, as shown above, represented only 9.99% of our economy. Last year it accounted for a mere 2.90%. Unsurprisingly, about 57% of this shrinkage happened in 1999, a year of severe drought. Sugar should keep on shrinking in an erratic fashion thanks to higher growth rates elsewhere in the economy and to increasingly unpredictable weather patterns.

Naturally, your explanation as to why Dr. Sithanen deemed fit to bestow a multi-billion rupee gift to that sunset industry while not finding Rs 100 million for the SC/HSC subsidy is most welcome.

After Massively Creating Poverty, Minister Now Aiming to Kill the Economy

For an open and small economy like Mauritius if there is one concept that we should focus all of our energies on it has to be our competitiveness. Not something Sithanen has on his mind though.

After having made an indecent gift of Rs5 billion to a industry that has been dead for ages, he now seems to want to shut down Mauritius Inc. by not capping how much money government makes on rising fuel prices through VAT.

That's on top of uncompetitive electricity prices that reflect the vested interests of a few rent-seekers and public investments that have declined for three straight years in real terms. Which means that we should expect more misery and trouble until he is shown the exit.

Tuesday, September 30, 2008

Is Wall Street's Meltdown a Blessing in Disguise?

As China, and to a lesser extent India and Latin America, continue to flex their muscles, the American financial debacle is very likely to hasten the demise of the unipolar world that rose from the ashes of the Cold War. However refuseniks of unfettered capitalism elsewhere should refrain from rejoicing too soon. They should instead keep an eye on the response of their local political, business and opinion leaders.

Wall Street’s meltdown has clearly exposed the flaws and fallacies of the anti-regulatory ideology. Ironically, it could also provide a lifeline for the aid industrialists from the International Monetary Fund (IMF) and the World Bank (WB) whose “expertise” has never been so widely the source of contempt, with the exception of few countries like Mauritius, where the WB has even been welcomed to set up office.

Leaders who invariably outsource their thinking unwittingly reveal their incompetence. Alternatively, the words, however presumptuous, of Singapore's Lee Kuan Yew aired on CNN – I am not following any prescription given to me by any theoretician … I work from first principles, what will get me there – typically underpin the leadership behind any iconic country, business or institution for that matter.

To put it bluntly, if a country is really willing to cope with global capitalism, neither the IMF/WB drivel nor any other “adviser” will help. The best consultants may be required for technical assistance, but never for strategy development or a turn around. Vision, foresight and capacity to implement regularly updated policies “will get us there”. Sound macroeconomics (monetary stability and fiscal discipline) are key but without smart microeconomics (synergy between households, businesses and markets) to complement, everything is nothing.

Toxic policies driven by crony capitalism and greed merely inflate bubbles that are bound to burst. Capitalism itself is not the problem but, left unchecked, its excesses can be devastatingly contagious.

Friday, September 19, 2008

It's corruption, stupid!

According to Fernando Lugo, the new President of Paraguay, the fight against poverty goes hand in hand with the fight against corruption. To put it bluntly, GDP growth and job creation alone, no matter how upbeat, do not provide "an antidote to poverty". Why? Because poverty is created, or exacerbated, when "national" prosperity is diverted massively and subtly into the pockets of the "chosen few". How? Through "privatisation" of policies and lullabies filled with distorted data. Should the legislation proposal submitted by the Independent Commission against Corruption to query dubious asset ownership and prosecute offenders be enforced, it could potentially turn out to be a critical disincentive against graft. To be even more effective overseas purchases should also be scrutinised.

Sunday, September 14, 2008

Labour's Think-Tank Mostly Tanks

Indeed, the several MMM and MSM diehards conveniently turned Labour cling-ons only a few years ago just dealt SAJ a trump card for free. The latter can now accept or refuse to celebrate Halloween at Le Reduit next month. He can, for instance, stay on as President and then resign sometime next year to head a MSM-MMM coalition and possibly return as PM in 2010 for 5 years. Or he can stay on as the Head of State until 2013 and happily welcome the Federation III government for its swearing in. He can also refuse a new mandate and throw Mauritius right into an election campaign overnight.

This a major blunder because Ramgoolam could have nominated one of the many loyal Labourites still around instead. And quite surprising too given all the steam he let off, as pictured above, on July 10, 2005. Too bad the think-tank did not have a turbine besides him then. That would surely have brought our electricity prices to more reasonable levels.

Sunday, September 7, 2008

Tourists Target Not Blazing New Trails

The 2015 target of 2 million tourists means increasing the 761,063 arrivals we got in 2005 by a factor of 2.63 or if you prefer by a little over 10% annually for 10 straight years. This has happened in 5 of the last 22 10-year periods ending December 2007 with the last one occurring for the decade ending December 1996. The average of these 10-year growth factors is 2.27 so that if an average history were to repeat itself we would hit that 2 million mark a little later, sometime in 2017. A few seconds after 13h45 on Friday October 11 to be more precise.

Friday, September 5, 2008

Have We Fallen on Our Heads?

Almost fell off my chair when I heard one unconstitutional DPM saying that he was prepared to downgrade his official car from a BMW 540 to a 530 following the recent ruling of the Supreme Court. While he should of course comply with the law (and we hope that he will now rapidly comply with article 5.2a of the Bank of Mauritius Act 2004), I find it totally unacceptable for public funds to be wasted on luxury items like this.

If the Minister wants to buy himself a super car with his own money that's his problem. But he should have gone a little easier with our money. Especially after having imposed a policy of ser sintir on us. Gone are the days, I guess, when the guy who envisioned and implemented free education would hop to his office in his little Hyundai.

Thursday, September 4, 2008

Ladies and Gents, We Have Arrived!

Have we? But for sure we have missed the boat... again! I'm talking about the 2009 OECD’s PISA (Programme for International Student Assessment). I had drawn the attention back in April 2006. That was 11 months before the cutoff date. The next one is in 2012.

It would have be fun for our education system to be compared to those of 67 other countries more than half of which are outside of the OECD (including Singapore, Indonesia and Tunisia). And the results would have provided an independent perspective as to whether signs like the one above should stay where they are. Nevertheless, just in case we have MPs who are also teachers, please start here.

Wednesday, September 3, 2008

LBOI: Rings A Bell?

Probably not. That was part of the disorientation plot along with the 100+ measures presented in the last three budgets that produced little more than robust poverty and acute frustration. LBOI stands for Land-based Oceanic Industry. Now you remember, don't you?

I have to admit that when I heard Sithanen talk about this project for the first time almost three years ago on the radio I was completely mesmerised. Just imagine. He was promising air-conditioners running with cold deep sea water. I even remember dreaming about hordes of unemployed people donning their gear and proudly diving to Stella Maru to place those pipes or whatever you call them.

And to top it all, I was planning to write an article about LBOI to ask whether it would be technically feasible to also place pipes all the way to La Fournaise and Karthala volcanoes. Hey, hey! Air-con and almost free hot water: what more could you possibly ask from life? Three years after we're realising that LBOI was nothing but hot air. This definitely doesn't look good, given that summer seemed to have arrived quite early this year.

Global Schizophrenia

In a bid to overcome a "handicap" as he puts it, French education minister Xavier Darcos is planning to increase school exposure to English language, which he claims is a "key to success". Ironically, Dodoland could claim yet another achievement as probably the only country in the world where the global lingua franca is receding and French language is flourishing. But who cares? We are more competitive than Chad after all. N'est-ce pas?

The Worst Enemy of the Poor

That would be inflation. And the best friend of inflation is definitely Rama Sithanen when you realise that he has created almost as much inflation as the previous government did in 4.75 years (23.90%) in 2.5 short years (20.15%).

The opposition can count on him to make the lives of Labour MPs excruciatingly painful once parliament will be dissolved by everybody's favourite uncle. And that's after his crappy policies pulled Federation II out of the grave Ramgoolam so poetically dumped them into three years ago.

By 2010 cumulative inflation would have reached around 40% with the corresponding rate for the poorest of the poor gyrating around 55% if we use South African estimates. Bring the average growth (4.62% for Sithanen first 30 months vs 4.33% for the 2000-05 government) and unemployment rates (9.08% for the bean-counter's first 2.5 years vs 7.69% for those politicians that apparently gave us the best managed country in the world) into the picture and you confirm that there is no trade-off between inflation and a generalised measure of economic activity.

Something that has always been known to anyone with at least 2 grams of leadership!

Tuesday, September 2, 2008

Maximising Disorientation

Only a crisis, real or perceived, produces real change.
Milton Friedman, 1982

Sithanen wanted to give 'a little shock to the system' by hiring Ali Mansoor as FS who hails from the shock-exploiting Bretton Wood Institutions. He then disoriented the people of Mauritius -- that includes our gullible PM -- with the fallacious Triple External Shock argument.

But his bluff was called more than two years ago and his plan of using shocks as a tool to thrust toxic bean-counting policies down our throats has backfired so that he is now living on borrowed political time. Having said this and given that it's Tuesday evening, let's go to the movies.

Sunday, August 31, 2008

Stuck in the Colonial Model

First, there were slaves working the sugar cane fields and managed with Colbert's little human resource manual. When they were set free and went to hide in what has now become a World Heritage Site workers were imported from India and turned into slaves which, unsurprisingly, eventually led to another inscription on Unesco's list.

Fast forward about 150 years and that model is still very much alive: Mauritian workers in the textile industry have been replaced, but not before being stigmatised as being lazy, by foreign ones in some of the local sweatshops that want profit margins as high as LVMH's. We shouldn't, then, be surprised if 100 years from now we get a new inscription: the textile factory.

Thursday, August 28, 2008

Sign Of The Times

Before the Mauritian "miracle", the "gentil" Mauritian used to stroll with a comb in his pocket and usually some coins too. Now among the many "gentils" Mauritians there are also some Branded Mauritians jaywalking with cutters in their pockets and, if blessed, maybe some coins, but with a dramatically reduced purchasing power, courtesy of a World Bank/IMF-sanctioned virus euphemistically dubbed "competitive" rupee. On a positive note, crime detection has improved considerably, probably with the help of, namely, the "portrait robot" device. We have yet to see a smart and holistic vision on the preventive side. A tag line like "nous voulons montrer que nous prenons soin de nos visiteurs" is far from reassuring. Worse, translated into Morisyen it reads: nu anvi montre nu bann rezidan kuma nu fer fut ar zot!

World Bank As Usual

How much more of the World Bank (WB)'s costly poison can Mauritius afford to take? I don't know about you guys but I find the WB's "stick" Port Louis toll aimed at the "carrot" bus way in line with its long tradition of disconnect from the real world. It's not mere drivel, it's drivel upon stilts!

Good Idea

I totally agree that there should be a commission of enquiry on the Bank of Mauritius. Absolutely. Rama Sithanen and Ramesh Basant Roi have to explain to us why they issued a fatwa on our rupee in the second half of 2006 and that in spite of the record FDI that the finance minister was bragging about.

It would also be a good occasion for them to tell lepep admirab what were their 'accepted range of the rate of inflation during a given period consistent with the pursuit of the price stability objective' as stipulated by the law since Sithanen started counting the beans again in July 2005.

And we can understand why MPs Bundhoo, Varma and Dayal are so insistent about all of this. Indeed, the unconstitutional DPM has created so much inflation during the past 3 years that they are already dreading the answer of their voters in 2010 to the question: 'Are you better off than you were five years ago?'.

Wednesday, August 27, 2008

Telling you Something you Know Already

One item on BBC's news bar this evening was that the World Bank has revised its estimate of how many people are poor in the world from 1 billion to 1.4 billion. That's only 400 million more people or 40% of the previous estimate. Compare that to Sithanen's announcement (paragraph 216 of the 2008-09 budget) that there are 7,157 families living in extreme poverty in Mauritius. Don't you just love the guy's precision? More seriously, to win the battle against poverty we first have to stop the advance of this plague. That's kind of easy: one of the 3 DPMs has to stop showing up at his office.

Saturday, August 23, 2008

What Now

SAJ will not be offered another term as President by Ramgoolam because that will have little bearing on what is optimal for Pravind Jugnauth: share the post of PM with the MMM. Ramgoolam still has a few windows of opportunity of staying on as PM after 2010 left but Sithanen is in a hurry to close each one of them.