Shouldn't FDI Numbers be Adjusted?

The Finance Minister mentioned in a press conference yesterday that FDI for 2008 was Rs11.4 billion. I just wanted to know whether that figure includes money that left the country in relation to the twin hedging mess at Air Mauritius and the State Trading Corporation. If not what is the adjusted number and who signed the cheque and when.

The other thing I don't understand is how come the cumulative inflation rate from July 2005 to December 2008 is 29.85% although he claims we received some Rs30 billion over the same period. Is there some special economic rule that no one but him is aware of that for every Rs1 billion FDI that we receive we should also get 1% inflation?

Alalila! Devlopma, Krwasans, Mirak...

The United Nations Industrial Development Organisation (UNIDO) has released its Industrial Development Report this week.

It attempts to measure the performance of "countries in trying to break into global markets for manufactured goods and countries that are striving to move up to more sophisticated manufacturing".

As expected Singapore tops the list. Dodoland, despite all the muscle-flexing and hubris of its celebrities, still lingers at the 55th place out of 122 countries tested. Worse, the Competitive Industrial Performance (CIP) Index from 2000 to 2005 indicates that Dodoland is left behind.

Isn't that Weird?

While Obama's first budget is aiming to stop the increasing inequality that has been characterising America since the Reagan days, Sithanen has been doing just the opposite here and shows no sign of slowing down.

Here are three facts to consider how he's been giving relatively more to the rich while impoverishing the middle-class and the poor. The first one is by ending progressive taxation in 2006. That in itself is a highly regressive move and its unfairness has been confirmed by an independent study. It's like a reverse tax revolution: the rich and super-rich hitting the jackpot. The next one is by clobbering a majority of our citizens with too high a rate of inflation. And the final one by not spending public money to solve a few of the problems that seriously exacerbate the "inequality of living conditions" (thanks Krugman!) of too many of our citizens: traffic congestion, non-interrupted water supply and non-competitive energy prices to name just three.

And of course, all of these combine in a vicious manner to bring the fabric of our society closer to tearing.

Stupid Before the Event

For sure if the price of oil had hit USD200 a barrel and stayed there for most of the duration of the derivative contract MK got itself into it would have made tons of money. If we assume the instrument involved has a symmetrical payoff -- we'll know for sure when a fact-finding committee is set up -- it is not difficult to estimate that amount given that Air Mauritius now stands to lose about Rs5.5 billion if oil prices stay about USD65 lower than their USD105 contract price till June 2010. I am getting something like Rs4 billion per year for 2009 and 2010. Does that sound about right to you?

And depending on how the CEO is compensated, he could have taken home a bonus that would have made his outrageous close-to-a-million-a-month earnings pale in comparison. This in turn could explain why it seems that he and the board acted in a way that a prudent person wouldn't by forgetting to ask a very basic question that would have avoided if not mitigated this mess: How much do we stand to lose?

Why the US Teenage Murder Rate Fell More than 50% in 5 Short Years

Instead of going up by 15% as one criminologist had expected. Now, that should interest any serious policy-maker don't you think? Especially those that want to reintroduce capital punishment in Mauritius because that didn't do it for America. To find out how it all happened and to get a handle on a surprising new way of looking at a whole range of problems you should get a copy of Freakonomics - A Rogue Economist Explores The Hidden Side of Everything by Steven Levitt and Stephen Dubner. I read that New York Times Bestseller (the revised and expanded edition) a few weeks ago and enjoyed it quite a bit.

A 3.9% Inflation Rate is Not Low Enough

That comment was issued by an economist in connection with the 2004-05 budget. He further remarked that our major trading partners were clocking rates of inflation of 1-2% with some of them even experiencing deflation.

3.9% is not bad if you ask me but what is more important is that citizens trust that you are serious about combating the worst enemy of the poor. A good way of achieving this is to keep inflation within a target (ideally between 1-3% but 4-6% is not a bad place to start either) and to have the people in charge of fiscal and monetary policies never take their eyes off that target.

Fastforward 5 years and that economist has been Minister of Finance for almost 4 years. So here's a good time to see how he's been doing on the inflation front. Not too well, I'm afraid. As at December 2008, his average annual rate of inflation was 8.53% which is more than twice a level he thought was too high only a few years back. In fact that's 3.5% more than the average annual inflation rate of 5.03% for the previous government (or 70% more if your brain can only think in percentage terms).

And if inflation is so high it's because he's been making blunder after blunder after blunder or if you prefer because he doesn't seem to have even the smallest clue as to how our economy should work. Because if he did he wouldn't have brutally depreciated our rupee in the second half of 2006 at a time when record FDI was coming in the country (FDI is usually associated with an appreciating currency) and he would not have kept gas prices at a level that's killing our competitiveness.

Jobs Turns 54 Today

Think About How the Economy has Been Managed Before You Vote

That was the 2003 invitation of Rama Sithanen to voters in riding no. 7 in the bye-election that sent Rajesh Jeetah to parliament for the first time. He further added in L'express that the real unemployment number was probably 1% higher than the official one because some 10,000 people had been taken out of the computation through the infamous Voluntary Retirement Scheme (VRS).

It will however be more difficult for the voters in next Sunday's bye-election in constituency no. 8 to say loud and clear to the government in general and to Sithanen in particular what they thought of its managing of the economy given that the Labour Party has chickened out of the race.

But not having a candidate in this electoral contest is in itself an unambiguous indication of how bad Ramgoolam thinks things are out there. That was after he gave another mandate to the current President in last October. He seems to be getting quite desperate about his chances for 2010. Panic now appears to be within a stone's throw.

Why China is Unlikely To Use Mauritius As a Base to Hop Into Africa

I'll give you three reasons. The first one is because it's already everywhere in Africa and has been absolutely irreverent in not waiting for the go-ahead from the bean-counter. Google about it when you have two secs. The second one is geography. Africa is not very far from China and that has not changed for a good many years if you ask me. Besides we're only the 15th busiest airport in Africa as far as passenger traffic goes (Tunisia has two airports ranked at 10th and 11th places) while Singapore and Dubai have the 11th and 13th busiest airport by cargo traffic in the World. Finally, we are stuck with the dumbest government in our history which also has more than a little penchant for cronyism.

How Neocons Messed Up America

You get a detailed explanation from Paul Krugman in his 2007 New York Times bestseller entitled The Conscience of a Liberal. I just finished reading the 2009 update a couple of days ago -- which contains a new introduction after he won the Nobel -- and I must say that the analysis in there will sound stunningly familiar to those who know or have figured out how modern Mauritius was really built and why we have been heading in the wrong direction for more than a quarter of a century now. It also contains plenty of ideas to make Mauritius great again. So I would highly recommend it for immediate consumption.

Of course given that it is written by Krugman I have to warn you that you face the risk of seriously improving your writing once you will put down the book.

Plenty to Learn From MK's Hedging Debacle

The breakdown of corporate governance at our national airline has been so total that a case study if not a book should be written about it. One chapter will probably have to cover how the Chief Executive and the board members were eventually and successfully unglued from their seats. For the good of the company and of the country we can only hope that this chapter will be as short as possible.

And it could very well become an international bestseller that would inform a whole generation of business students, politicians, managers, board members and the general public here and elsewhere about how not to run an airline. In the meantime here is something you might wish to sink your teeth into: Jorion's classic book on downside risk can be ordered by clicking on the image below.

How to Write to Our PM

First of all don't cc to anybody else. Because as he told you a few times already he's not going to read stuff that has been copied to other people. Second, be brief: Prime Ministers are usually, but not always, busy people. Third, don't mention that you intend going on a hunger strike because that would make him go absolutely ballistic. But if you can't resist squeezing that in make sure to add a paragraph praising his dad for something the latter did or didn't do. The other thing to... 

Tell you what. Got to run right now. So I think it's easier for you to have a model of how to write to everybody's favourite uncle. Just click on the image below. See ya!

British MPC Turns 10

Actually, that happened in May 2007. And to mark the event the Treasury of Her Majesty inquired and published the interesting report you can download by clicking on the image below. Here's some of the stuff they found.

Since the inception of inflation targeting, inflation in the UK has been low and stable and economic growth has been very stable. It also confirmed that there is not really a trade-off between inflation and growth or if you prefer that inflation is not only the worst enemy of the poor but also an enemy of growth. Which makes it all the more difficult to understand why Sithanen has been producing such a robust amount of it.

Hu is Going to Be Missed?

Am gonna miss the Chinese President for at least one reason: he reduced traffic on our roads to levels not seen in ages. And he did that for two straight days. Simply awesome! What I don't understand is why Navin didn't offer him to stay in Mauritius forever.

It's true there is another solution to our severe traffic problems: provide a pair of escort motorcycles to each motorist.

3 Places From Which Mansoor Has to Resign

Numero uno: Air Mauritius. He's part of the board that's responsible for a hedging mess that's going to dwarf the Rs4.76 billion that government has budgeted to spend on secondary and tertiary education this financial year.

The second place is as Financial Secretary. He has made a mess of Mauritius whichever way you look at it. We are a less competitive and more unequal country since he was handed the job by his university buddy in 2006. And after robust inflation with average growth of the past three years we're now going to get robust inflation with anemic growth with unemployment stuck in the double digits for all intents and purposes. And that's before the damning audit report.

And finally as Chairman of the Investment Committee of the National Pension Fund because he can't make the financial-markets-moving rules and head the country's largest pension fund at the same time. That's a conflict of interest.

Council Saying "All the Generals Should Be Shot"

Click on the image below to download the views of the National Economic and Social Council on the ongoing mess at our national airline.

Bigger Than the Madoff Scandal

Yeah. The STC hedging loss of Rs2.9 billion translates into about 1.1% of our GDP which stood at Rs263 billion at the end of 2008. That a percentage of the US economy would be worth about USD158 billion or if you prefer 3.16 times larger than the USD50 billion Madoff scam. Besides, the STC didn't have to do any oil hedging given that all price increases inclusive of the unfair 15% VAT are passed to us as have been the case for the past three and half years now. Which makes it all the more urgent and necessary to find out how this really happened and why.

We also have to find out precisely what led to the hedging mess at Air Mauritius which is the equivalent of almost 6 Madoffs. Explanations offered so far by both MK and its biggest shareholder have been far from satisfactory.

Labour Party's Easy Options

Here's what Ramgoolam can do to immediately make sure that he'll have to clear his Prime Minister's desk in 2010: present Rama Sithanen as his Minister of Finance again. Also, keeping him as Finance Minister until 2010 without announcing anything will be the equivalent of Navinchandra having to shoot himself in the foot a few times everyday. That could be quite painful for him given that the huge MK and STC bullets comfortably attended the National Prayer Service in Washington beneath his socks. Ouch!

Here's what he could have done two years ago to keep the odds of him staying in the top job for at least another mandate pretty high: 1) sack Rama Sithanen when the latter took the whole country hostage with his resignation-cum-blackmail charade for a whole week after having screwed up the country for 19 months and 2) deliver the kind of mediocre-but-not-toxic performance he did when he was around the first time.

Sacking Sithanen within a few hours of reading this post could certainly help to clear the political air a little bit but will not be enough. Ramgoolam still has to make an about turn in terms of economic policy. The good news is that that's fairly easy to do and he's got enough time to do it. The bad news is that he has surrounded himself with an impressive number of incompetent Judas. And the incompetent Judas will now do what incompetent Judas know best.

A Couple of Tips on How to Pick Your Date for Valentine's Day

The Case Against Oversimplification

The task to represent one's perception of the real world as succintly as possible is never easy. It is a balancing act that must explore grey areas and sort them into a distinct pattern of different pieces connected to each other. In its basic form it is about common sense, in its more elevated form it is about wisdom. All in all, it ought to be everybody's quest.

Alternatively, propaganda is a synthesis of selective information that is meant to capture emotions of the target audience and modify its perception. Propaganda machines master the art of disseminating appealing slogans to twist reality. Their approach is always binary and doctrinaire. Either/or and us/them.

That's why I tend to share the view of Tarun Tejpal, writer and editor of Tehelka:
"The real challenge is to present complex things as complex things, and to urge everyone to read them well and to come to terms with them".

My point is that we must not be put off by texts which seem too congested. We should give them a second and deeper look. Once the gist sinks in, we may or may not agree. Otherwise, we contribute to dumb ourselves down.

Ramgoolam's Invincible Candidate

That would be Rama Sithanen. I mean, here is a great opportunity to allow the voters of No. 8 to give back just a little bit of all the love he's been showering on the beautiful people of Mauritius for nearly four horrible years now. Besides, didn't he write in paragraph C of the rehashed version of the last June budget that his "reforms have saved the economy". And who says that Mauritians have lost their ability to recognise their saviour when they'll see him screaming atop a lorry? But first, he has to perform an extremely complicated task: resign.

Kozelidir's free guide to a successful ministerial resignation

1. Write a letter where you put down a good reason why you are resigning from parliament (shouldn't have too much trouble there: gosh, there are so many!!! Try this one: how I have been fooling Mauritians into paying too much for their petrol prices for the past 3 years!)

2. Drop the letter at Le Reduit. Don't drop it with the Deputy Prime Minister.

P.S: Help may be available to write an exhaustive letter as well with point no. 2.

Hedging Mess Could Exceed Rs10 Billion

If oil prices go where they seem to be going: $20 for a barrel or less. How did I get that huge number which is as big as our average capital budget -- announced but not actually spent -- of the past few bean-counting years? Well, I started by adding the Rs5.47 billion expected loss at MK with the Rs2.9 billion one at the State Trading Corporation (STC). That should give you Rs8.37 billion, right? Then I grossed up MK's loss by one third which is by about how much it should grow to if the distance I am expecting oil to travel over the next little while is indeed covered. So the number I get is Rs10.2 billion.

This is a conservative estimate because I haven't grossed up the STC loss. By the way, I am not buying that part -- there are other parts I'm not buying either -- of the last press conference of the PM that his finance minister didn't know about the hedging mess. Are you?