The Economic Weather Under Federation 2

Sithanen likes repeating something the Prime Minister said in parliament back in April: In 2005 there was no recession, the sea was calm, the sky was blue and the sun was shining. That statement is not quite true as we've demonstrated before.

Indeed in 2005 our textile industry contracted by 14.7% after shrinking by half that amount in 2004. One of the causes of this severe recession in that industry -- about 25,000 people lost their jobs over a 5-year period -- was the expiration of the 30-year old multi fiber agreement. And given the weight of that industry in our economy (8.1% in 2004) its performance in 2005 was negative enough to drag GDP growth by about 1.2%.

Contrast that with the effect of the global recession that started about a year ago. The fact that it didn't affect Mauritius as much as the textile recession shouldn't have surprised us. Our banks have been churning out record profits and unlike in the US our financial system was not on the brink of collapse.

So, what you have to take away from this is that something affecting one of our main industries can be more devastating to us than a global crisis hitting many rich countries.

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.

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 which 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.

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.