How Our Offshore Treaty Risk Became a Much Bigger Problem

With 640m multidimensionally poor people in India in 2005-6 and the internet making millions a lot smarter it was natural that the pressure to renegotiate the DTAA with Mauritius would increase significantly. So it was sheer stupidity for one bean-counter to flatten our tax structure to a rate (15%) that has caused serious damage to our economy in order to build a facade of low-tax jurisdiction. Besides we never voted for this crap aka Paglanomics or if you prefer Shaitanomics in 2005. Killing our savings culture was not exactly another smart move. Neither was gifting a sunset industry €138m — its weight in the economy was more than six times smaller at the end of 2018 (0.5%) than it was in 2005. Add the severance of the link between what we pay for oil and what it costs on the world market and stupid hire-fire laws to understand why we’re heading into a wall. 

And a few days ago he uttered more rubbish including that without our Global Business (GB) sector — this is where he’s been working for many years — our currency would maybe have been trading at Rs50 to the USD. Scare tactics by Dr. TINAnen. But as the chart shows it took only five years from the inception of that sector for our rupee to lose a quarter of its value and a further five to shed almost another 25% of the average value it had in 1992 — an index of the dollar value of our rupee is used so that when the curve is going down it means our rupee is losing value with respect to the USD, makes it easier to visually estimate its percentage changes and we’ve added two horizontal lines to show two values of our rupee relevant for our discussion here in the format you’re used to seeing it. 

This chart will also help put the myth that Ringadoo was a bad Minister of Finance because he devalued the rupee by 30% and 20% in a better perspective. See our rupee lost 55% of its dollar value between 1992 and 2015 in an economic environment that was incomparably better. In fact we would probably have hit another dismal low had there not been a BoM Governor who knew what he was doing between 2007 and 2014 to resist energetically an incompetent Minister of Finance who when asked why the rupee had been depreciating rapidly replied that it had not depreciated for a long time. For sure current trade imbalances reflect to a great extent the generalised policy-making failure of the past dozen years. Our rupee will enjoy better days as soon as we get our act together. Just like India who had by 2015-6 reduced the number of poor people by 271m.

Who Will Be Better at Tackling Unemployment?

Some people -- who seem to have a penchant for Paglanomics -- have said that whatever Vishnu has achieved before is not doable again because the circumstances are different blah blah blah. But given that Sithanen took over almost immediately -- SAJ presented a budget in between -- from Lutchmeenaraidoo in 1991 we can look at what happened to some of the most important macroeconomic indicators when the ministerial baton was being passed. For an indication of relative skill as the environment was more or less the same. 

For example the rate of unemployment around that period offers some fascinating insights. As the chart illustrates Vishnu decreased the unemployment rate every single year from 14.8% in 1985 to 2.8% in 1990. But the story changes as soon as Rama takes over. Indeed he increased the unemployment rate every single year. From 2.7% to 5.1%. And he increased it with surprising regularity: by exactly 0.6%. Which makes it so easy to remember. 

I've also listened carefully to interviews of the two gentlemen about the economy on radio. Mr. Lutchmenaraidoo comes across as a pleasant, humble and competent person with a serious plan. And Dr. Sithanen the exact opposite.

Why Sithanen Won't Eliminate Poverty

Simply because he's so good at creating it. See, at the end of Ramgoolam's first mandate -- Bheenick and Bunwaree were his Finance Ministers -- there were only 500 more poor people than five years earlier. But at the end of Ramgoolam's second -- I guess you recall who was Finance Minister -- there were an additional 22,000 Mauritians that had been thrown into poverty. That's a staggering 44 times more. Or if you prefer almost 2.5 times the 8,902 votes Sithanen got at the end of his first stint as FM back in the 1995 general elections when his party was routed with a 60-0.

There are only two reasons to create so much poverty. One is you love doing that. The other is you don't have the slightest clue what you are doing. In either case I don't think we want someone with that kind of a skills mismatch to be our next Finance Minister.

Pravind Recaps Shaitanomics

2010: The Year in Review (Q4)

October: Father of test tube babies wins Nobel. Last hurdle preventing the Lutchmeenaraidoo/Sithanen debate cleared. Additional proof that you've been taken for a bean-counting ride presented.

November: Brazil elects first female President. Pamela asked to leave radio. 41% of poll says MMM would take 3 towns. STC's abnormal hedging loss increases by almost Rs2 billion.

December: Simpler process makes Passport Office really cool. Wikileaks reveal purpose of Marine Park. Bunwaree gets opportunity to be bold. Kozelidir Person of The Year 2010 attributed to the Forum page of Le Mauricien for providing a healthy space to the Mauritian Civil Society.

Read the review for Q1, Q2, Q3.

2010: The Year in Review (Q2)

April: Three-quarters of poll not happy with Berenger's performance as Leader of the Opposition. Worst economic management ever shrinks outgoing Finance Minister's political options. MMM implying 2 political dynasties in an alliance is ok, 3 is not. Sithanen dumped to increase Navin's odds of returning as PM. Amnesty International issues statement reminding us that ethnicity has no bearing on economic performance delivered. Indian Minister Shashi Taroor tends letter of resignation at second meeting with Manmohan Singh while here one minister gets ready to meet PM for the eighth time.

May: A former President climbs on soap box to remind partisan crowd son is candidate. One poll finds May 5 race close while another says 22% of voters decide 3 days before election day. Berenger's body language on radio show indicates he has lost the election. Voters give Ramgoolam new opportunity to shrug off neocon label. Bheenick back from the dead as rupee sent to hell. Myth of the strong rupee debunked.

June: Best places to deal in USD noted. Tutu and Shakira set Soweto on Fire. Lawyer says nomination process opaque. Boycott gets new definition. MPC worried inflation might be picking up. Competition Commission reports anti-competitive behaviour. Ways inequality was boosted. Real unemployment rate is 3% higher.

Read the review for Q1, Q3, Q4.

2010: The Year in Review

January: The civil society started the decade unsure about who they would be voting as PM later during the year but clear that Paglanomics had to be stopped. Ramgoolam's pathetic second mandate was analysed along the dimensions he said mattered most to us while Elvis is suspected to have commented on the budget. Tens of billions of rupees of FDI were unable to reduce unemployment to single-digits. The audit report will be late just when we needed it the most.

February: 65% of a poll says Sithanen will not stay on as Finance Minister. Union bosses ask PM not to renew Mansoor's contract. The latter cuts the FS to size while Sithanen's university buddy is said to second-guess Parliament. The real reason behind the HR guidelines is analysed. The share of coal in electricity production is now 49 times larger than when Navin first became PM. He also makes a U-turn to announce that the death penalty will be reintroduced.

March: Titmuss never won any Nobel. Lousy economic polices forces a twice shy Ramgoolam to consider the MSM as a potential ally. The job creation record of the two zinku compared. The PM dissolves Parliament and invites voters to a 35-day campaign.

Read the review for Q2, Q3, Q4.

Paglanomics

In FY 2007/08, it costs Rs155 million to remove 41% of individual tax payers temporarily from the tax net. Temporarily, because they will eventually migrate back to that net as their incomes increase. Hopefully. Compare that to the Rs130 million government collected on interest income in the same year. So it's pretty much I give you with one hand and take back with the other kind of stuff.

In fact government must have taken back far more than it has given when you analyse the numbers. If we divide the Rs25 million difference by the 36,600 tax payers removed from the tax net (2007/08 budget speech) we get Rs683 saving per tax payer. That's assuming that people who got off the MRA net paid tax on their interest income. Some must have. Some for sure didn't.

Others probably moved down a few rungs on the social ladder when they didn't get the 50% subsidy for the SC/HSC fees. It didn't matter if you weren't affected by the latter subsidy because you could still be ripped off with abusive petrol and electricity prices which would also make sure everything else in the economy cost more than it should reasonably have. Or maybe you paid an exorbitant price for a 20-minute air trip. All of that was before a depreciating rupee was thrown in for good measure.

Still surprised that the savings rate is less than 12% these days?