Savings-Killer Misses Elephant in the Room

In April 2017 Sithanen said that the tram express would be a financial disaster because it would fail to cover costs and saddle future generations with debt. This was kind of funny for the bean-counter to say because as the chart shows government has had a revenue shortfall in all the years since 2006 which is the year he implemented his economic snake oil aka flat tax – there’s a flat-tax-related deficit as soon as growth is lower than the promised 8%.

In fact as from 2013 the revenue deficit caused by his regressive tax policies had grown big enough to fully pay for at least one 19-billion-rupee tram every single year – two as from 2016 and three as from last year. So in total there’s enough government money missing over the past fourteen years to pay for at least 10 trams (15 when you add the figures for the first seven years and the sums left over in the other seven).

In the meantime central government budgetary debt has risen by Rs172bn over the same period without any major national problems getting solved. I wonder if future generations will enjoy the terrible mess we’re in as much as we are.

It’s great we’re voting soon. 

Putting the Flat Tax Mess in Perspective

Let us assume that we halve the average 8% growth rate target in 2008 and we reduce it by three quarters in 2009 to account for the Great Financial Recession. That’s a pretty conservative assumption because an average growth rate takes into consideration years that are below average. Let us also assume that the government revenue shortfall generated by the Sithanen flat tax for each year — you’ll have one for any given year if the actual growth rate is less than 8% — is reinvested at a rate equal to the rate of inflation until the end of 2015. Again this is a fairly conservative assumption. 

Then at the end of 2015 the reinvested cumulative government revenue shortfall (RCRS) would have ballooned to Rs114bn. That’s 95% the size of the National Pension Fund at the time. Basically another NPF which would have allowed higher benefits to be paid or from an earlier age or some combination of the two. That would have been concrete proof of an ‘early harvest’ or a ‘bumper crop’. But that’s not the situation we’ve been in. Instead government has been trying for many years to target pension benefits. Rs114bn is also about 70% of the cost of a mass rapid transit (MRT) aka heavy metro system. We don’t need this system for now just like the Lepep tram but we would have been able to afford one. Rs114bn is almost half of our public debt at the end of 2015. This would have given us a better credit rating or at least a more favourable credit outlook. Rs114bn is also exactly six times the cost of changing all the leaking pipes of the CWA. 

But this was in 2015 and given that the Lepep government has maintained the regressive policies and added a few of its own the shortfall has kept on increasing and compounding. Three years later it had exceeded Rs300bn. 

2018: The Year in Review

Q1: Lepep Tram will not be biggest project ever. By-election hints at how return to 40 SMCs would make our democracy more vibrant. Error found in app of Electoral Commission. Reconstruction of great party cannot happen while he's there. Two Nobels didn't get Mauritius wrong. Sithanen toohrooh will grow by Rs300 billion if sanity not brought back to our tax structure. Mauritius turns 50. PJ announces resignation of President, latter has other plans. Calculation of Sithanen toohrooh explained. Road fatalities in Singapore fall by 14%. Next general election is going to be a lot more open.

Q2: Sound management explained. Chuttoo thinks Ivan wants to be kicked out government. The best Kreol dictionary in town. Why we shouldn't legalise pot. Is recruiting at the CEB biased? Recall elections are seriously overdue. More than 30% of World Bank reports never downloaded. Big electoral imbalances almost never last. 24/7 water for all should happen within five years. Putin begins last term with brand new car. Why creating the URA was a mistake. Wasn't 2018 supposed to be the year of the second 'economic miracle'? Some days are way better to present the budget. SEG has at least two more flaws. Another budget to nowhere. Only idiots will love Mars.

Q3: Water is a great role model. When will NASA go to the moon again? Weighing an elephant is no easy task. Sadhguru explains how India is different. Politician taking us for morons. Looks like something is brewing. That sugar has no future has been obvious for more than a decade. 10,000 Yankees died from cocaine addiction in 2016. Sharks want appointment with Minister. World listens as story of Chagos told at the ICJ. Road fatalities may hit all-time record this year. PM makes URA redundant. A framework to analyse decolonisation.

Q4: Pravind al lapes rekin ek enn lapipi danzere. Canada rejects proportional representation. Marx at 200. Shelina eksplik kuma fer zasar lisu. How important is ethnicity in deciding elections? Our roads killed 6,716 in 50 years. Although it promised several one referendum would be a great start. Mauritian voters are quite mature. Why politicians want a dose of PR. Why we lost two decades on electoral reform. Division of votes should become standard parliamentary practice. Doing Business is a misnomer. PM presses ahead with plan to make us a banana republic. Worse than termites.

Road Fatalities in Singapore Fall By 13.5%

In 2017. It was the sixth consecutive year that the number of people dying on the roads there was smaller than the previous one. It's been falling so much that it reached a 37-year low. In fact so much progress has been made in the city-state that more people have been dying on Mauritian koltar for two straight years although Singapore has about four and half times more people.

With one road fatality every 48 hours here since the beginning of year you not only have to expect the Southeast Asian Tiger to have fewer road fatalities for a third year in a row – they had 22 for the first two months of 2018 – but more worrying is that if the remaining nine months are going to be like the first three we should be hitting a 39-year high with about 183 deaths. This would come after four straight years of increase in road fatalities.

Until a few years back the chart above might have been branded unfair to Singapore because of its much larger population. Not anymore after smart policy-makers have understood that recent improvements in policy tools make it possible to save a lot more lives. And that too a lot faster. At a minimum we could drastically increase the number of random and not so random breath tests when and where it matters most. This would not be the stupidest idea we've ever had and make ansam pa les koltar tuy nu fami ring a bit less hollow than having the SMF help destroy Promenade Roland Armand for a tram which is not going to be there for long.

Fakim Digs Heels In, Sues Barclays For Half A Billion Rupees

Not only she didn't resign as PJ had announced but the President has made a couple of fast moves. The first one is to sue Barclays Bank for Rs500m. Fair enough, statements of her infamous credit card were printed in a daily. We learned today that she has instituted a Commission of Inquiry to essentially investigate how Sobrinho got his licences and if she had not behaved properly.

It feels kind of strange for Fakim to ask for a commission to investigate her. What is even weirder is that a President is empowered to appoint a Commission of Inquiry into "any matter of public interest or concern, or into any matter in which an inquiry would be for the public welfare" [see Paragraph 2.2]. Then why didn't she ask for one on the Metro Express and another one on the completely stupid and unpatriotic plan of Collendavelloo to privatise water? Should we also mention that the National Assembly can advise her to revoke the Commission she just appointed [see Paragraph 3.4]?

All eyes are now on the Prime Minister who may use article 30 of our Constitution to institute a tribunal to investigate AGF and suspend her in the meantime with the support of the opposition. 

Sithanen Toohrooh To Increase By Over Rs300 Billion in 2018

That's based on the 8% growth he promised back in 2006 before flattening our tax structure. We never got the 8% in any of the 12 years since he started breaking the economy with so much dedication. In fact we didn't get half of that rate in eight of these years and we haven't clocked 4% in the last seven consecutive years. It's true that he had also promised to make poverty history by 2015 back in 2007 only to recently push back this date to 2026 or 2031. I know people who have started to believe in astrology after listening to his forecasts. Mind you that was before he predicted a 60-0 for the general elections of December 2014.

300 billions is our GDP for the whole of 2010. That's the equivalent of 15 Lepep Trams or very roughly two $5bn Mass Rapid Transit (MRT) systems – the heavy-duty underground. Given that the toohrooh was Rs1.2tn at the end of 2017 it will therefore hit a trillion-and-half rupees before we welcome an election year.

Lepep Tram Unlikely Biggest Project Ever

Kind of obvious if you have listened carefully to some of the numbers used by Minister Bodha on the same day George Chung deemed that the controversial tram project was basically riskless. As you might not have the figures mentioned six months ago to show the savings over two projects – not exactly the same ones – that were initially promoted by the Labour Party are copied in the table below. 

Given that the road decongestion program (RDP) will spend about Rs3 billion every year for a handful of years and that it will not be the first time nor the last that billions will be wasted to fight the traffic Frankenstein – which is growing bigger thanks to policy-making which is very clumsy – it shouldn't take long before you hear Mr. Bodha's successors announce that the RDP has overtaken the tram project.

The thing is that these unnecessary projects – which constitute the silly response to problems caused by a growth in the car pool which has been left unchecked for way too long – will not only make Mauritius weaker but will also make her uglier. It will make her weaker because as Intel has reminded us a car stays idle over 90% of the time and that hardly makes it a productive investment. Especially when you consider all the other problems of having too many of them. This explains why Singapore has been shrinking her number of cars to levels not seen in eight years. Mind you we're talking here about a country which has nine people to every car and a GDP per capita more than five times ours. Here we have like six people to every car and foolishly think that we can handle more. And that too when heavy road-users already describe several parts of our road network as an overcrowded barracoon.

These projects will definitely make Mauritius less attractive. Just ask any of the 270 trees of the Promenade Roland Armand. That's too heavy a price to pay for things that don't qualify as smart development especially when we know that the Bus Rapid Transit is a much better alternative that will immediately bring much-needed relief to road users. We should also start to act as a middle-income country – and soon a fifty-year old – by protecting our world-famous views. Just like London has been doing for more than a century. Which explains why the Leadenhall Building had to be built like a cheese-grater.

The least Pravind Jugnauth can do is to organise a referendum on such an important national issue. Making good on one electoral pledge will not only deepen our democracy it will also help avoid total political disaster in the next general election.

2017: The Year in Review

Q1: iPhone turns 10. Voters elect candidates wisely. Oxfam says income for bottom half hasn't grown for past three decades. Average performance for Mauritius. Countries use PISA to improve education system. Nation surprised to learn than history of Labour Party is larger than two Ramgoolams. Citizens evaluate ministers continuously. Metro Express not needed for now. Parliament goes live and direct. Sumputh resigns after PM finds package shocking.

Q2: Splitting the Sithanen toohrooh. Soornack explains how she made it. Le Pen gets closer to L'Elysee. Who is the fastest footballer? Two really dumb reasons we need party lists. Madhuri at fifty. MK said to fly understaffed planes. The Saint dead at 89. How you know you're not a big cat. Taxpayers handed multi-billion rupee bill. Top tax rates go up by 5%. Fighter jets have own sign language.

Q3: Meet the articulated bus. Referendum legislation can help avoid mayhem. Chester found dead. Singapore knows plenty. How Fowdar can help our democracy. Cleaners earning Rs1,500 per month have reason to smile. World discovers the SJ Theatre. Easy for Mauritius to boost its GDP by half. FPTP system allows general election to have recall component.

Q4: Why Mauritius is not in high-income group. Dead animal should be removed from coats of arms. They should be referred to as 30/3 and 3/5. A woman in the front row. Mauritius finds out she has an MP called Tarolah. Use the two o'clock rule to save lives. Simple tools to understand social contracts. Berenger makes new prediction. Podcast to find out things launched. December 2014 was worse than a 60-0. Look who's worried about inequality. 8 questions for voters. Voodoo economist is back. A plan for Mauritius. 4 out 5 voters don't vote for Boolell. 

Our FPTP System Has a Built-in Recall Election

Kind of. But it happens only when there's a general election. Given that politicians can inflict significant damage to our economy or take totally unpatriotic and completely stupid decisions like privatising water a lot faster voters need to be able to boot them out of office anytime between two general elections. So our excellent FPTP system should be improved by equipping it with standard recall elections -- something which Lalit suggested in early 2014.

We also need referendum legislation so our elected governments can ask for our permission on matters of national interest. For example Lepep campaigned against the Metro Leger but it is now proceeding with essentially the same unnecessary project. It should have organised a referendum to ask for our green light first. Same thing for the idiotic idea of privatising the CWA. It's nowhere to be found in their electoral manifesto. We never voted for it. Lepep cannot go ahead with that project before asking us what we think. We are not children. As they found out in Barkly recently.

Of course you realise that party lists and double candidacies are totally incompatible with recall elections. These two contraptions prevent us from deciding which politicians -- some might be inclined to shoot others -- we want to keep out of parliament. It's like a football game without a red card. Or one where selected players show a brown card to the referee to stay on the pitch after being shown a red one. Not a bad idea to make a list of the parties who are in favour of double candidacies so we can avoid them like the plague. Plus there's a by-election soon. So let's start: Rezistans ek Alternativ, ...

Collendavelloo Whisked Away After Making Insensitive Remarks

That was in Barkly on Monday when he said that opposing parties could eventually sit around a square, round or oblong table but that he preferred one which is karé karé. As the clip shows no one on his side found that funny. The residents of Barkly present at the meeting were not in a laughing mood either. It couldn't have been otherwise when we know that some of them had just been through the traumatising experience of seeing their houses demolished. For the Lepep tram which we don't really need.

It's not exactly the first time the Minister makes controversial statements. He's the same politician who wants to privatise the CWA because he doesn't like its hotline. 

PM Fails To Convince We Need A Tram

Here are some of the reasons he recently put forward in favour of the controversial project:

1. You would stop using your bike. Hmm, riding a bike keeps people in shape. In Edinburgh bus corridors double up as bike lanes.  And here's what the rush hour looks like in Copenhagen where 45% travel by bike to school or work.

2. You would stop travelling by bus. Ok, so the tram will be a door-to-destination service. Interesting. To say the least.

3. Won't need to wake up early to wait for a bus God only knows when it's arriving. And not being sure you'll have a seat. How will we get to a tram station if we don't live near one? Schedules can be improved, posted at bus stops and bus routes reassigned accordingly. We can also reserve 20% of the front seats of buses for people over 60. Buses can be very comfortable too.

4. You will know when you arrive at your destination. Again these can be fixed by penalising buses that are late for no good reason. Significantly curbing the unchecked growth of private cars won't hurt either.

5. You won't be stuck in traffic anymore. There's traffic everywhere now and at hours we never had it before. A proof that our transportation policy is too primitive. Blame it to a great extent on a car pool that's growing in an uncontrolled fashion.

What Does Singapore Know That We Don't?

Plenty. Let's take their transportation policy for example. Why have they been removing cars from their roads for three straight years? Btw, this has brought back the car pool there to levels not seen in 8 years. Well they are decreasing the number of cars because it is a very inefficient technology. A car is idle more than 90% of the time. So it's pretty unproductive. And it is costly in so many other ways: time wasted in traffic which could be put to better use, burning fuel, pollution, stress and so on. The so on has to include all the space it uses and the other dimensions of traffic that slow you down.

Now when you look at what is being done here it's hard not to conclude that our transportation policy is being crafted in a very amateurish manner. I was totally horrified to hear my friend Georges Chung – an excellent economics teacher at the HSC level but a rather lousy policy-maker – say that one of the assumptions in the transportation planning involving the Metro Express is that the number of cars would be increasing by 5% every year. He obviously hasn't had a good look at the data – he's not the only one for sure – and apprehended the consequences. And it's not the first time. Indeed he has been a huge advocate of 'competitive depreciation' for many many years even suggesting that it is painless. The relevant data seem to tell an entirely different story.

Nando Bodha appears quite overwhelmed too. He scrapped the point system a couple of years ago. Quite a sloppy decision. He's currently spending billions to decongest the road network. Enlisting the help of the Korean Expressway Corporation is not a proof of mindfulness. They couldn't care less to help you saddle yourself with a prehistoric technology as long as they get paid. One that requires the transformation of our sacred Champ de Mars into a dinosaur park. That too after the obliteration of La School.

We're far better off with a bus rapid system (BRT) and freezing duty-free privileges for a couple of years. It's time for Lepep to hit the pause button. And organise a referendum.

Travayer Transpor Dir Politisyins Kwar Pei La Pu Zot Papa

Referendum Legislation Could Save Lepep From Electoral Mayhem

Beyond satisfying an electoral pledge it would provide it with important feedback on pressing national issues and opportunities to course correct. For example there is a very wide consensus in our country that we don't need the Metro Express just like saddling the CWA with a management contract is an act of zero governance. While it's true that Government can reverse immediately these two crazy decisions without organising a referendum there are other matters of utmost national interest that it would not want to lump together with a general election. These include electoral reform and the full legalisation of abortion.

Lepep has nothing to lose and everything to gain from deepening our democracy with such a legislation. It knows how smart voters are in seeing through all kinds of wicked schemes. Like the one that was put in front of them in December 2014. And of course a referendum organised before the next by-election would steal a lot of the opposition's thunder plus allow Mauritius to strike something off her bucket list.

What an Articulated Bus Looks Like

PJ Increases Top Tax Rates By 5%

In his budget yesterday. Along with a negative income tax (para. 280) of up to a thousand rupees. These should mitigate the growth of the Sithanen Toohrooh and could help reduce inequality. Not a bad start but it won't be enough. The establishment of a National Investment Authority (para. 321) is a good idea to optimise returns of the NPF/NSF and other parastatals and to provide much-needed opportunities for local finance professionals to put their skill set to contribution. It might even improve pension fund governance.

The big negatives include the extension of 8-year contracts to foreign labour in more sectors of the economy (p38). You don't want to do this when the economy -- broken by Dr. Calamity -- is not creating any jobs. At least not before you have a good look at pay ratios and remember that there's so much of unemployment and underemployment here. I didn't see -- haven't really read the budget yet -- anything to freeze the growth of the pool of vehicles. Not too sure you want to give all these fiscal exemptions. For example, is the minuscule tax rate for exporting companies going to apply irrespective of their size? After the rubbish of 'competitive depreciation'? Does the CMT need that?

Hopefully there will be some big improvements in these plans before the Finance Act is passed. Like scrapping the Metro Express project. And a massive reduction of nonsense.

Poll Finds Nobody is Satisfied With Lepep

11 out of the 12 participants were not satisfied at all. They have many reasons not to be.

Why Mauritius Has No Money For Capital Budgets

It's not really because of the capital projects undertaken by the previous Government namely the new airport terminal and the ring road. And the sums that may be needed to rehabilitate them. The main reason is the regressive flat tax and the extensive damage that has been done to the economy to keep it at 15%. There was 927 billion of GDP missing at the end of 2016 -- aka the Sithanen toohrooh -- and if we assume that government would have reduced its revenue as a share of GDP to 15% it's missing 139 billion rupees. If it kept it at 20% then there's 185 billion rupees of government revenue missing.

What can you buy with Rs185 billion? Something like the Dubai metro or the one considered by the city which pioneered the bus rapid transit (BRT). But we don't need that kind of metro although we should have been able to afford it were it not for a massive ministerial skills mismatch. We don't need a scaled down version of the Metro Leger either simply because the flat tax has placed our public finances on an unsustainable track. There are better and urgent ways of handling the traffic Frankenstein.

Even more urgent is to restore some sanity to our public finances. Not a bad idea as how can Lepep deliver an economic miracle in year 4 when it cannot organically generate money for capital budgets 12 months before?

Metro Express Shouldn't Have Been A Burden

At a cost of Rs18 billion. If we had grown at the 8% promised by one bean-counter for eliminating top tax brackets. As we've shown before the 11-year cumulative GDP shortfall at the end of 2016 was over Rs900 billion. If we assume government had reduced its revenues as a share of GDP to 15% -- there was no good reason to do that though as 20% is not high given the stage of development we were at back in 2006 -- then there's about Rs139 billion of government revenue missing. As the chart shows the revenue shortfall for our government between 2006 and 2010 -- which is roughly the second mandate of Ramgoolam -- was already enough to pay for the Metro Express. This assumes government kept these monies in a drawer instead of investing it. By the way we're talking 100% government financing here. 100% cash financing. 

The other things that the chart tell us is that we could have financed at least one Metro Express in each of the four years starting in 2013. And more than three since Lepep took over. Or if you will with the 139 billion missing in its till over the last eleven years because of the Sithanen flat tax government would have been able to finance close to 8 Metro Express. Or 4 Metro Leger of Ramgoolam vintage with enough money left to change 78% of the leaking pipes of the CWA.

Wake up Mauritius! We're not in the middle-income trap. We're in the flat tax trap! It's a lot worse but we can get out of it a lot faster. 

Metro Express Not Needed, For Now

We should do it now otherwise it will cost more later I hear you say. The correct yardstick is its share of GDP otherwise we're blindsided by money illusion. Besides there are better choices. The first one is obviously to beef up the number and quality of buses -- fitting a number of them with catalytic converters will also improve air quality -- on our roads. And improving their schedules. Plus letting congestion pricing do a little bit of its magic. After making cars more expensive. Especially the larger ones. While making the smaller hybrid ones even cheaper. This should improve flow. And GDP. But not as much as restoring progressive taxation. Which should be the topmost priority.

Not sure whether a metro should run between Port-Louis and Curepipe. When it will be the right time to do it we might find it obvious to exclude these two cities.