Monday, June 29, 2009

Protecting People

By December 2008, Rama Sithanen had produced about 6% more inflation in 1276 days than Federation II did in 1755 days. Or if you prefer, he had already clobbered the population with the same high rate of cumulative inflation of the previous government in 1051 days. Interestingly, his 1051th day as finance minister turns out to be May 20, 2008: all the poverty that was created had, as a matter of fact, little to do with the current global crisis. And in terms of average inflation the bean-counter has been protecting the poor by making their worst enemy 70% bigger.

Tuesday, June 23, 2009

Taming the Rentseekers Within

To kickstart a real transformation, Dodoland should make the following quote by leadership guru Robin Sharma a mandatory mantra for our headline-grabbing policymakers and business captains:

Refuse to do the same thing you did yesterday. Shake things up. Confront your limitations. Refuse to be average. Commit to being breathtakingly great in all you do. And that's what you'll become.

Sunday, June 21, 2009

Once a Tiger, Always a Tiger

Yep. I am looking at a 16-year span in the life of Panthera Tigris:

Period I (1987-1996): Exports increased by 2.86 times while the Singapore dollar appreciated by 50% with respect to the USD. In fact, exports and the Singapore dollar rose every single year.

Period II (1997-2002): Exports keep on increasing to reach 3.78 times their 1987 levels in 2002 while the Singapore dollar is about 22% lower than its 1996 level but is still close to 18% higher than its 1987 mark. Of course, during that period, Singapore went through two major and real storms: the Asian crisis and the SARS outbreak.

And at the end of 2008 the Singapore dollar was almost back to a 20-year high while exports increased by an additional one-third over its 2002 levels.

Friday, June 19, 2009

CSO Should Publish Inflation by Income Levels

Just like a number of countries do. In South Africa, for example, they have estimated that the rate of inflation for the poor is about 3% higher than headline inflation. If that's the case here too, then the rate of inflation experienced by the weakest segments of our population has been, on average, 11.5% every year from July 2005 to December 2008. That's almost 6 times the British target if you were wondering.

What Did You Do When Mauritius Began to Degenerate?

In a column in Mail & Guardian, Prince Mashele, head of crime, justice and politics at the Institute for Security Studies in South Africa, mulls the engagement of the young generation and the affluent society in the change process. What he suggests is that if we do not challenge the status quo to stop the perversion of our homeland, we will only have ourselves to blame. No matter how high the walls of gated communities, no matter how networked, ultimately everybody will be affected should citizens' slide into disillusion and helplessness not be halted.

Tuesday, June 16, 2009

Are They Crazy or What?

The people in Singapore that is. Can you imagine that since 2004 their currency has appreciated by about 20% with respect to the American dollar? Have they become mentally unbalanced? Do they now think that it's too hard being a global player? Have they suddenly decided that they will not have an export industry anymore?

Nope. Nope. Nope. World-beaters Singaporeans, as the above graphic shows, have actually exported 36%* more in 2008 than they did four years before despite a constantly appreciating currency. And all of this has happened quite painlessly. Shouldn't we send our cry babies on a study tour there?

*At 2006 prices.

Monday, June 15, 2009

How to Fix our BOP Problems

That's kind of simple and, no, we don't need to depreciate our rupee as one ex-Governor has again been suggesting. We just need to reduce imports and increase exports. First, imports.

In 2008, we imported for Rs8.5 billion of fish and fish preparations, Rs3 billion of milk, Rs2 billion of vegetables and fruits, Rs1.5 billion of meat, Rs6 billion of road vehicles and Rs24 billion of petroleum products. That just doesn't sound right. If you recall, our exclusive economic zone is more than a 1,000 times larger than our land area or if you prefer each Mauritian can be supported by 1 square kilometre of sea (although it would make more sense to speak in terms of cubic kilometres, right?). So am positive we can cross that one out in a few years. There is a milk project underway so imports should decrease there too. As far as vegetables go we could adopt a few of Kreppalloo Sunghoon's recommendations: subsidise fertilizers, remove VAT on agricultural machinery and create a land bank to optimise the use of arable land. Likewise I am sure we can do something about all the meat we're bringing over from abroad by getting Rodrigues into the loop. Finally, we can reduce both the amount of fuel and road vehicles we import by having a sufficiently comfortable public transportation system. Having it run till 2 a.m. everyday will also make our economy more dynamic.

As far as exports go we should favour those that will provide meaningful jobs to a maximum of our fellow citizens. We don't need entrepreneurs of the sweat-shop variety whose greed knows no bounds.

Mr. Speaker, Sir, I now commend the Bill to the House.

P.S: BOP = Balance of Payments.

Sunday, June 14, 2009

What Could He Have Done?

To avoid the 22,660 jobs that were lost between 2001 and 2004 in the export-oriented industries. Very little I'm afraid. If he gave away the amount MEXA has recently asked to try to save each job that would have cost Rs8.6 billion.

No, there is not much Rama Sithanen could have done against the industry dynamics that swept our textile industry in those 4 years with two years accounting for over 80% of those job losses.

How do I know that? Well for one, about twice more jobs were lost in 2006 when he was in the driver seat than in 2005 when he was there only as from the second half of that year. For another more than 5,000 jobs were shed in 2008 the year of the so-called bumper crop. And finally he wasn't able to hold back the British Investor, was he?

Friday, June 12, 2009

Vivement un Effet Boule de Neige

Dans le sillage des allégations d'irrégularités à la municipalité de Port Louis, le Mauricien rapporte les propos stimulants de Raouf Khodabaccus, président de la commission de la Santé publique:

"Le système qui a prévalu ces 25 dernières années est pourri".

Si la majorité des Mauriciens transcende la politique partisane pour briser l'omerta qui ronge le système, le terme ser sintir fera place à des politiques qui nous feront retrouver le sourire.

When Exotic Can Be Toxic

The following insights from the current edition of the Economist should provide some food for thought for westoxicated minds who have yet to emancipate themselves from exotic theories, that is those fads, when they are not mere drivel, that fail reality check day in day out:
  • Cheap currencies serve as a subsidy to exports, but also act like a tax on imports;
  • For small, open economies, it makes sense to tie currencies. Even Milton Friedman, a fervent advocate of floating exchange rates, thought so.
The insights may sound commonsensical, but it does not mean that they must not be drilled into the minds of our policymakers over and over.

Thursday, June 11, 2009

Tax Reform Falls Flat On Its Face

That's what we need to conclude when we consider the solidarity levy of between 3.4% and 5% on profits and 1% and 1.5% on turnover that Sithanen has included in his recent budget. There is also the 2% CSR. And the higher-than-what-they-ought-to-be petrol pump prices. So the real tax rate for corporates and for individuals is getting closer to where it was before Sithanen dismembered our progressive tax system and screwed up our long-term financial plans. And when an independent study warned that he got his tax policy basics wrong he dismissed their findings with typical arrogance.

These new taxes also kind of puts into perspective one of the two pieces of wisdom he posited that anyone aspiring to become Minister of Finance should have: know the effect of taxation on growth rates. Things actually unfolded differently: he moved to a flat tax and the average growth rates of the current government will be the worst in decades. Li mem meyer!

Gripped by Delusion

In their latest analysis, Morgan Stanley's Qing Wang and Steven Zhang debunk the propaganda of China-bashers and cry babies:
  • Since July 21, 2005, the renminbi has appreciated against the US dollar by slightly over 20%;
  • The renminbi is the only currency among the major emerging market economies that has not depreciated against the US dollar in the 12-month period ended May 2009.
Of course, we are referring to nominal exchange rates because exporters could not care less about the statistical bunkum of real exchange rates. Both their exports and imported inputs are priced in the rates they get from foreign exchange dealers.

Monday, June 8, 2009

Le Fétichisme "Républicain"

Un récent rapport sur la réforme éducative en France remet l'"école républicaine"dans une perspective moins fantaisiste:

"Les petits Français sont peu capables d'innover, à cause de leur éducation. La raison est double. Le modèle républicain est très inégalitaire, malgré les apparences ; il s'avère par ailleurs incapable de former correctement les élites aux nouveaux défis des entreprises".

Il n'est guère étonnant qu'en subissant l'hégémonie des médias français les Dodolanders finissent par confondre l'art de la rhétorique avec la faculté de réfléchir pour de vrai. Little France a donc intérêt à accélérer l'implémentation de l'International Baccalaureate afin que les futures générations de Mauriciens puissent "think outside the box" et répondre aux défis de la mondialisation.

Unemployment Rate Has Stayed in Double-Digits

Since Rama Sithanen returned as Minister of Finance. This is my conclusion after I looked at the cmphs data from our highly-esteemed CSO and made a few adjustments to the Mauritian Labour Force series so that they make a bit more sense. Here is how and why I modified the data:
  1. I calculated the 2002 data as the 2001 figure plus the increase of the previous year (7,300) because I believe that the people who opted for VRS are likely to return to the labour force
  2. I obtained the 2006 and 2007 figures by adding the average increase for 2004 and 2005 (10,800) to the data for 2005 and 2006. This is more in line with the expected increase of about 10,000 each year (a 0.8% growth rate for a population of about 1.25 million) instead of the increase of 500 for the year 2007. The adjusted data are shown in the chart on the left.
I then added the foreign workers to arrive at a revised number for the total labour force before subtracting the total employment numbers to come up with the adjusted unemployment rate figures.

So what do the new figures look like? Much higher than the official figures (the CSO is also looking into the matter). For instance the rate for 2008 is more like 10.4% instead of 7.2%. We also see that Sithanen's reform has increased the jobless rate from 10.3% to 11.7%.

A couple of years ago Ramgoolam said in parliament that we needed to add 2% to the unemployment rate to get the real unemployment rate. Now it's more like 3%.

Sunday, June 7, 2009

Les Râleurs Professionnels

Dans l'entrevue qu'il accorde à l'express du jour, Amédée Darga, Président de Enterprise Mauritius, débusque deux "conneries":
  • "Depuis le lancement du Stimulus package, il y cinq mois, seules 25 entreprises sont venues nous voir. Soit une par semaine en moyenne, c’est trés peu, il n’y a donc rien de grave. Et ça, personne ne le réalise. Nos entreprises ont plus de résilience qu’on ne le pense. Nos entrepreneurs sont plus battants qu’on ne le croit. Et ceux qui accourent pour réclamer l’aide du gouvernement, finalement, sont des exceptions";
  • "Beaucoup de patrons cherchent à mettre la pression, ils vont voir des journalistes, leur racontent qu’ils sont au bord du gouffre, et les journalistes écrivent ça. C’est de la manipulation ? Je n’ai jamais vu d’entreprise sérieuse où tout a basculé en deux mois. Ça, c’est de la connerie".
Le drame c'est quand la "connerie" devient conventional wisdom et influe sur les décisions stratégiques du pays.

Friday, June 5, 2009

How Large A Sacrifice is Rs10,000?

For our Ministers as announced in the last budget. Well, to find out we should take a look at their take home pay. A good place to start is for the Finance Minister to make available the total amount of pay and per diem he has received since July 2005. He can do that for his colleagues in the cabinet too so that they don't feel left out. Then we can get a better idea.

The other thing to consider is to switch from a per diem basis to a refund basis. That is Ministers should first make their expenses and then get refunded afterwards. A third suggestion would be to give the per diem in rupees so that we align the interest of our globe-trotters with that of the common woman. These might have, had they been in place for at least a decade, restrained one ex-central banker from blurting out dim-witted prescriptions about depreciating our rupee with an annoying frequency.

Thursday, June 4, 2009

Ala u Fini

Ramgoolam abitie dir ki li pu fini MMM. Le 1er mai linn azute ki li pa pu bizin fini parti Berenger parski parti la pe fini par li mem. Byen sir linn fer sa komanter la apre ki linn fer Ptr vinn enn mezon de retret pu bann ansyen MMM. Resaman Boodhoo inn dir ki li pu fini Ramgoolam. Mo ti kwar c ski Sithanen inn fer depi zulyet 2005.

Sowing the Seeds of Chaos

It is hard not to wince when watching politicians compete in a surreal contest to claim toxic policies. Tell me how can one be proud of:
  • turning Dodoland into Casinoland with betting and gaming houses sprouting everywhere;
  • stimulating FDI and economic expansion through land speculation;
  • depreciating the rupee persistently so that Mauritians subsidise fat cats;
  • outsourcing policymaking to the World Bank;
  • contemplating road tolls when prohibitive taxes collected are being squandered?

Tuesday, June 2, 2009

The Illusion of Growth

The 5.3% percent growth rate Mauritius clocked in 2008 has to be taken with a big grain of salt. See, that's expressed in rupees and the picture changes quite a bit when you instead compute it in USD: -5.15%. That relatively large contraction is due to the 10% we lost with respect to the American currency. Singapore's corresponding number is 1.24% or a little better than the 1.1% it made in local terms thanks to an almost stable exchange rate with the USD in 2008.

Ramgoolam's Argument is Flawed

The Prime Minister is still talking while I write this down. I checked a bit earlier for about 20 seconds and couldn't bear listening to his pathetic speech. He was saying that we cannot compensate workers for the rate of inflation because otherwise that will cause inflation. In essence he is echoing what the president of the MEF said in Le Defi+ a few weeks back. What Navin is failing and has failed to understand is that it's not the workers of this country who caused the double digit inflation but his incompetent finance minister who depreciated the rupee, removed subsidies and kept prices of fuel artificially high.

If he wants industrial relations to improve in this country he should order the bean-counter to stop violating article 5.2a of the Bank of Mauritius Act for a start. Besides, high inflation which is synonymous with increasing poverty has known to throw governments out of office.

Monday, June 1, 2009

Greed Coefficient

That's what the above graphic could help you calculate for some of the people who call themselves entrepreneurs but who probably would have done better as rivals of Bianca Castafiore. So what do we see? The British pound was worth 20 rupees in 1985 but twice as much when Basant Roi took over. By the time his contract was not renewed the pound had gained an incredible Rs23.11.

I think MEXA cry babies should come forward and tell us how big a pile of money exporters made over the last 24 years.