Sunday, May 31, 2009

Minister Damages Island's Reputation

Rama Sithanen has recently been saying that he's trying hard to prevent us from going into the IMF's ICU. That's inconsistent with a bumper crop, don't you think? And that will definitely make potential investors, local as well as foreign, quite edgy because when a country goes into the loan shark's mouth that ain't exactly a walk in the park. Do I need to elaborate on what this irresponsible statement will do to the psyche of the population already severely impoverished by the finance minister?

Of course, how could we not go into the IMF's ICU when that seems to have been the final and only objective of the man who sported the ancestor of havaianas till the age of 16. Indeed he brought in a charge nurse from Bretton Woods, opened an ICU of the riot-producing institutions in Port-Louis, borrowed billions of rupees we don't need from them and has been implementing policies that seem to come straight from a letter of intent which Mauritius never signed and which are designed to bring our country to its knees. Does Ramgoolam know he's the leader of the Labour Party?

Sithanen vs. Sithanen

How does the current Sithanen compare with the Sithanen of the momem meyer vintage? Not too well am afraid. First of all growth has been lower by half a percent every year. Which makes you wonder what has been the effect on our economy of Rs30 billion of FDI we received in the last three years given that only about Rs1 billion FDI poured into Mauritius during the first stint of the Doctor.

Rama has also created a lot of poverty each time he has been around. He has even accelerated the rate at which poverty is created by close to 150 basis points on average every year since July 2005. The memories of savat leponz and gato pima seem to have faded beneath the sands of time.

Saturday, May 30, 2009

Good to Extend, Better to Optimise

Our Exclusive Economic Zone that is. Mauritius recently submitted, jointly with the Seychelles, for an additional 387,000 square kilometres -- that's about 10,000 square kilometres larger than the size of Japan. That would add to the million plus square kilometres we have already but which is underutilised especially when you consider that we imported for about Rs8.5 billion of fish and fish preparations last year.

How large a flotilla would the Rs5 billion Sithanen granted to the dead sugar industry have purchased?

Friday, May 29, 2009

Why Some Mauritian Firms May Go Under

Here are some reasons:
  1. Bosses have been taking out too much money via excessive salaries and other perks such as gas-guzzling limousines
  2. Dividend policies are or have been at unsustainable levels
  3. Products are not competitive enough or haven't changed for ages
  4. Return on invested capital they are seeking are outlandish for the industry they are in
Obviously the last thing these kind of companies need is taxpayers' money. As a country we're better off to let them die. Given that Sithanen has said that there is no guarantee we will ever see the money disbursed via the controversial additional stimulus package again, I suggest a much better route. Provide Rs357,153 -- which is how much MEXA wants for each job it will try to save -- via a combination of grant and loan to each of the workers whose livelihood has been placed in limbo for them to start their own company. That's a much better deal.

The Aid Industrialists And Their Bastards

In a column in Financial Times, Mo Ibrahim, one of the few respected tycoons in Africa, identifies bad governance as a key impediment to nation-building. He is particularly critical of the role of the IMF and the World Bank. He suggests that they merely grant loans according to their mantra: "He may be a bastard, but he is my bastard." There is absolutely no issue of transparency and accountability.

Economic and political elites readily embrace the toxic policies advocated as the bubbles created boost wealth draining. We have here all the elements of thriving crony capitalism. Now, imagine the impact of opening a World Bank office to drive domestic policies. There's a handful of winners, including apparatchiks and useful idiots, but plenty of casualties.

Simon Johnson, a professor at MIT's Sloan School of Management and former chief economist at the IMF, provides us with the modus operandi of the "winning formula" in The Quiet Coup. Unmissable.

Thursday, May 28, 2009

Ransom Established At Rs357,153

Per job that MEXA will save. Sorry, try to save. That's way too much of our good money to throw after unreasonable people don't you think? If government and the bean-counter driving the crazy IMF policies really don't know what to do with our pitaye they should organise general elections right away. That takes too long and costs too much and a government is elected for 5 blah blah blah years you say? OK. No problem. Let's at least organise a bye-election in Belle-Rose/Quatre Bornes then. How soon can that be?

On a more positive note Francois de Grivel has suggested that top management in the private sector reduce their salaries. Maybe he thinks they are too high. Or he got sick of the shameless blackmailing that has been going on. It would also be good to know how the ratio of CEO compensation to that of the lowest paid worker for each company wanting public funds has evolved through time.

P.S: Rs357,153 = Rs2.5 billion/7,000 jobs.

Vishnu Was Quite Lucky

To be Finance Minister beginning 1983 because that coincided with the start of one of the longest uninterrupted economic expansions of the 20th century and most likely the best stretch of favourable international economic conditions our country witnessed since 1968.

1983 was also the 6th anniversary of the implementation of free education so a larger than usual number, for that period at least, of our youngsters with a higher human capital content were getting ready to hit the job market. Population growth was also well under check -- something Mr. Lutchmeenaraidoo had not a great deal to do with.

Still, that doesn't take away anything from the fact that Vishnu has probably been the best Minister of Finance our country has known. Do you think we should come up with a category for bean-counters?

Wednesday, May 27, 2009

The British Investor is Not Going To Singapore

In an interview with Deepa Bhookun yesterday Sithanen mentioned that a British investor was transferring his operations to Bangladesh and India because we had become more expensive, the pound had depreciated, blah blah blah. The Minister told l'express that he had failed to convince the guy to stay even after dangling the additional stimulus package card. No big surprise here.

It's not the first time nor the last that an entrepreneur will shut down her operations and go elsewhere. They will move to other locations which are compatible with the sophistication of their businesses when it's profitable for them to do so. Likewise our government should encourage an economic structure which is appropriate for the extraordinary gifts with which the beautiful people of Mauritius have been endowed. That's too much for Sithanen and Ramgoolam to understand.

Tuesday, May 26, 2009

Economic Kidnapping

That's how you could christen what a few whiners of Mauritius Inc. have been trying to do. Having a neocon as Sithanen as Minister of Finance makes their task incredibly easy. Having a civil society that gets stronger by the day doesn't. Achtung!: you may want to pinch your nose before reading this.

  1. They were asking workers to give up this year's compensation so as to save their jobs.
  2. They were also asking for taxpayers' money so that they don't sack people. But they offer no guarantees that they will not lay off anybody even after receiving our money.
  3. A few had even the indecency of asking for public funds even though they were doing alright. They wanted these handouts just in case they might get into trouble. Which gives you a hint of their entrepreneurial ability.
Naturally they wanted all of this over and above the inequality-creating flat tax and a persistent depreciation of our rupee they already received. They want everyday to be Christmas.

Monday, May 25, 2009

National Poverty Council

That would be a more fitting name for the National Pay Council because it has been an important cog in the wheel Sithanen and Mansoor have been using to cheat the workers of this country. Here's how they've been doing it:
  1. Create a lot of inflation as soon as possible
  2. Add three controversial criteria so that the disconnect between increases in the cost of living and salary compensation is as large as possible
  3. Keep inflation into double digits or high enough for as long as possible
That's despite the conclusion of Sithanen's own masters, the IMF, that increases in the average salary in Mauritius have been about 1/2 the level of inflation. As expected this has soured industrial relations given all the poverty that these retrograde policies have caused. Sithanen's opaque machinery of doling out tons of taxpayers' money to the chosen few has not helped either.

Why the IRS Party Could Be Over

One of the reasons is of course the severe depreciation that our rupee went through over the past 12 months. Let's do the math. Someone who disbursed $1 million last year to buy a Rs25 million villa will certainly be thrilled to find out that this investment at today's rates is now worth only about $788,000. Nah, you tell me. It's not only the money. It's also the lifestyle. Really? What lifestyle? What exactly happens in Mauritius after 18h? And for whom?

In effect, the foreign IRS buyer's interest is aligned with those of a majority of Mauritians. They don't want to see the rupee constantly depreciate and go through wild swings in value. Now, try explaining this to our cry babies.

Smells Like Rotten Tomatoes

Voici ce que rapporte Le Monde du jour dans l'article "Les dangers de la ruée vers les meilleures terres d'Afrique":

"Un rapport intitulé "Accaparement des terres ou opportunité de développement?" appelle à la consultation des populations menacées et à une meilleure prise en compte de leurs intérêts dans les transactions. Il souligne un manque de transparence constant dans les processus de décision et les circuits d'investissement. De quoi alimenter les craintes de corruption ou de transactions contraires à l' intérêt public."

Je vous invite à reporter l'avertissement sur Dodoland avec ses IRS, RES, Tianli, etc. et à méditer sur leur impact tout en intégrant l'étroitesse du territoire et les inégalités criantes.

Thursday, May 21, 2009

How to Calculate Average Growth Rates

Let's do that for the previous government. It's a two-step procedure. First, you download the growth rate data from our highly esteemed Central Statistical Office (CSO) for the years they were in power and add these up. You then divide that sum by the number of years their mandate lasted. Now, given that governments are not sworn in and kicked out at exactly the beginning and at the end of calendar years we have to be a little bit careful with our computation.

The numerator. We add the growth rates for 2001-2004 together and get 17%. Then add half the growth rate for 2005 (because elections happened in middle of the year) and a quarter of the growth rate for 2000 (because recall that when the Federation II took over there was about a quarter of the year left). Half of 2005's growth rate is 1.15% and a quarter of the growth rate for 2000 is 2.43% (9.7%/4). New total: 20.575%.

And the denominator. That's easy. Four years (2001-2004) plus half (2005) plus a quarter (2000). 4.75 years. Got that?

The result: 20.575%/4.75 years = 4.33%. Which is the number I have been broadcasting for over a year now. That number is of course different from the intellectually dishonest 2% growth rate that Sithanen and Ramgoolam have been consistently ascribing to the previous government. They just cherry-picked the low growth rate for 2005 even though they were in power for half of that year!

If we were to follow their own line of reasoning then I guess that Ramgoolam's recommendation to voters is that they only remember 2009's low growth when they go to pick the next government.

Wednesday, May 20, 2009

A Flawed View of Competitiveness

Here's is what competitiveness guru Michael Porter has to say about the growth strategy Dodoland has embraced:

"The most intuitive definition of competitiveness is a country’s share of world markets for its products. It also underpins policies intended to provide subsidies, hold down local wages and devalue the nation’s currency, all aimed at expanding exports. In fact, it is still often said that lower wages or devaluation “make a nation more competitive".

Unfortunately, this intuitive view of competitiveness is deeply flawed, and acting on it works against national economic progress. The need for low wages reveals a lack of competitiveness, and holds down prosperity. Subsidies drain national income and bias choices away from the most productive use of the nation’s resources.

Devaluation results in a collective national pay cut by discounting the products and services sold in world markets while raising the cost of the goods and services purchased from abroad. Exports based on low wages or a cheap currency, then, do not support an attractive standard of living.

Monday, May 18, 2009

Why the Poor and the Middle-class Will Not Rebound When the Recession Ends

Simply because it wasn't the global recession that threw them into the recession back in 2006. Nope. It was Sithanen and his university buddy Mansoor implementing Bretton Wood policies that any Prime Minister with two-and-half grams of good taste would have abhorred.

Another Non-event

That's what Friday's budget is going to be. Just like the previous ones. People are so fed up with the truckloads of lies that Sithanen has been dumping on them with such regularity that they've stopped listening to him for a long time now. And that reduction in interest has also spread to journalists across the board. For instance, many of them didn't even tune in to listen to his carefully choreographed appearance on MBC's Dossier last Wednesday. And it's kind of difficult to blame an overwhelming majority of us who feel this way.

While he certainly did appear quite pathetic on that programme the saddest part of his bean-counting policies is of course the unnecessary misery he has inflicted on the weaker segments of the population while making the richest ones richer.

Sunday, May 17, 2009

The Importance of Sharing

That's some of the nice feelings I take away from reading Patrice Hardy's interview in today's Week-end. The Naiade boss is taking the slowdown in business in his stride and is looking forward to optimise his brand new 4-star hotel in our sister island. He also reports a stable turnover thanks in part to having moved upmarket in the hospitality business.

A few days ago, GFA Insurance announced the sharing of 20% of its profits with its employees. Even CMT's Woo was seen on TV saying it would be indecent for him to go ask for money from Sithanen's controversial additional stimulus package and that he only expects a significant reduction in his profitability.

All of this is in sharp contrast with our professional whiners also known as GLDs (gourma lamin dipin), don't you think?

Did We Need One in the First Place?

An additional stimulus package that is. I don't think so when you realise that our two largest banks have cashed in record profits in 2008: Rs3.7 billion and Rs2.1 billion for MCB and SBM respectively. That's an increase of 53% and 41% over the preceding year and twice their 2005 levels. I've already addressed why our banking industry has been spared (read this). So there's no trouble here unlike what has been going on in the United States and in the UK.

What we need instead is a government that solves problems. And that's the most important yardstick to measure the performance of any country. For instance previous governments did defuse the demographic bomb, implement free education and create the middle class. We need these kind of governments and not governments that have substituted brilliant work with dumb MBC reports.

Guarantees in Politics

They are as likely to be honoured as hyenas promising one morning to become vegetarians or Nosferatu suddenly announcing that he prefers soya milk to haemoglobin. It is funny that the last time such a guarantee was offered the political landscape was almost identical: Ramgoolam was PM and he was made to believe that Federation I was dead. The person offering the guarantee was to get to hole up at Le Reduit had Labour won the 2000 elections.

Surprisingly, Ramgoolam's strategy at that time didn't include some basic scenario planning that would have allowed him to carry on with his mediocre style of leadership for another 5 years. I am not too sure he has gotten any wiser since then. Anybody for some game theory?

Tuesday, May 12, 2009

Depreciating Our Way to Chaos

Rajesh Jeetah once said that the textile industry was not a place for whiners. I couldn't agree more with him especially when you realise that our rupee has systematically been depreciated against the British pound over the last 24 years. That must have been a bonanza for the so-called export-oriented enterprises which saw the pound move from about Rs20 in 1985 to over Rs60 in 2007 as the above graphic shows.

What I don't understand is why some people from that group have been complaining non-stop for at least a decade about a strong rupee and their lungs seem to get larger by the day. What would they have said if they were operating from Singapore where the local dollar has pretty much appreciated against the USD? How would they have behaved if their operations were based in Canada which unlike us don't stigmatise their workers as lazy bones before allowing into the country foreign workers that will work for the smallest possible pay and endure the harshest working conditions deprive their unluckiest citizens of a facade of dignity. Besides if the textile industry has been so bad, why the hell did they stay in there for so long?

The other interesting thing in the above graphic is that we clearly see the consolidation that the industry went through between 2001 and 2005. Bean-counters of course call that a shock.

Talking' Bout a Revolution

Arianna Huffington, co-founder of groundbreaking The Huffington Post, an American internet newspaper launched in 2005 as a progressive alternative to conservative mainstream media, reminds us:

Don't forget: our media culture failed to serve the public interest by missing (with a few honourable exceptions) the two biggest stories of our time: the run-up to the Iraq war and the financial melt­down. We've had far too many autopsies and not enough biopsies. And online news is well suited to obsessively follow a story until it breaks through the static. We need to also remind ourselves that the mission of journalism has always been truth-seeking not, as it has often become, striking some fictitious balance between two sides.

As things stand, it is fair to say that the "two biggest stories of our time", that is "Mauritian miracle" and "reform", have failed media scrutiny too. But reality rarely fails to bite deception.

What's the next verse Tracy?

... people gonna rise up
And get their share
... people gonna rise up
And take what's theirs

Sunday, May 10, 2009

Let the People Speak

Ramgoolam should organise a referendum about whether abortion should be legalised given that he's sticking to his policy of never having any strong opinions about anything except maybe that he should be Prime Minister forever. That's probably about the only way people might miss him if he loses power or his seat in the next general elections.

How to Make the Stimulus Package Less Opaque

Here are a few basic ideas:

  1. All the names of the beneficiaries should be published as well as a snapshot of their financials (including past profits and gross margin, dividend policy, top management's salaries and other perks over a five year period)
  2. Summary of the reasons why taxpayers' money was dished out to them
  3. The names and resumes of the independent financial analysts involved should be made public
  4. The parameters that are going to be monitored have to be available and the circumstances under which the state will pull out
  5. The government auditor should evaluate the program on a monthly basis and its report should be placed on the net
That's a start of course.

Thursday, May 7, 2009

Failed By Their Own Standards

Sithanen's bean-counting reforms were supposed to set the stage for robust growth and reduce poverty. Instead, and as expected, it will produce the worst economic performance in at least a couple of decades. When we go to vote average growth will likely slump to at about 4.26% compared to 4.33% for the medpointers (we are assuming growth rates of 2.5% and 4% for 2009 and 2010) while average inflation is expected to increase to at least 7.87% (if inflation rates for 2009 and 2010 are 7% and 5% respectively) or if you prefer 54% more than the rate Federation II delivered.

More importantly Mansoor and Sithanen have made Mauritius a more vulnerable and unequal country, soured industrial relations and did not solve even one major problem. They have failed miserably.

Monday, May 4, 2009

La république monarchique

Pour ceux qui doutent toujours de la pertinence du journalisme citoyen, Vijaya Teelock, historienne et professeur à la University of Mauritius, apporte une nuance limpide:

"La presse mauricienne est libre, mais elle est aussi victime d'autocensure de la part de ses journalistes. On n’entend pas assez la voix du peuple, les journaux ne reflètent pas les réalités mauriciennes. Et cela doit changer…"

D'autre part, à la question "Pourquoi ne prenez-vous pas la parole plus souvent sous forme d'opinion ?", le philosophe Michel Serres, professeur à Stanford University, répond "La réponse est double : on ne prend la parole aujourd'hui que si on est invité à la prendre. Posez donc la question à ceux qui invitent à prendre la parole".

Vous avez dit "pensée unique"?

Sunday, May 3, 2009

External Factors are Unfavourable Only When Berenger and Sithanen Are in Government, Right?

Wrong. Take sugar for example. It's one of Sithanen's Triple External Shocks and one of the reasons he's put the middle-class and the poor on a strict diet for almost four years now. But sugar was already a small sector back in 2005 -- 4.2% as the above table indicates and close to 2% this year -- so that the initial 5% reduction in the price we sell our sugar at would have reduced growth by about a fifth of a percent. Not a lot you will concur.

Compare that to 30 years ago when sugar represented close to 19% of our economy and was hit by a pretty little thing called Claudette. That led to a sharp contraction in our national production in 1980 with the sugar sector responsible for over three quarters of the 10% decline in output. That year also witnessed the second oil shock with the real price hitting a level that was to be surpassed only last year. And as if that was not enough a new chairman of the Federal Reserve by the name of Paul Volcker took office and stopped targeting interest rates. The latter of course were to go through the roof and plunge the world economy into a nasty recession.

Not A Black Swan Event

Sithanen on the next-to-last page of his additional stimulus package document said that Mauritius was experiencing a Black Swan Phenomenon and has been repeating this lie along with a string of others quite often since December last. Nothing could be further from the truth because for an event to be classified as a Black Swan it must not only have a big impact but it must also be highly improbable.

The mess Mauritius got itself into was highly predictable (we've been writing about this since 2005) and has been essentially the work of two little men: Sithanen who has been collecting blunders on a hugely toxic scale and Navin Ramgoolam who has demonstrated languid leadership at best in failing to stop the bean-counter.

Black Swan event? No. Black Paul event? Yes.