“Ti Cretin” was the nickname given to Pravind Jugnauth by Paul Berenger at the beginning of February 2010. We have been trying to give our new Minister of Finance the benefit of the doubt while he found his feet and Ali Mansoor tried to cast his World Bank spell over him.
It is now clear that Pravind is committed to turning Mauritius into a “Duty Free Island”. He has acknowledged that this will lead to a short to medium term reduction in tax revenues. But he believes it will be more than made up for in the long term by the creation of a new pillar of the economy by turning Mauritius into a shopping paradise. He is convinced that one of the major benefits will be to force our industries to be more globally competitive. However, he has conceded that residual duty will remain on certain items to protect local manufacturers.
Interesting. Pravind used to accuse Sithanen of being an “ultra-capitalist”, and he sort of was, but the latter refused to implement the former’s duty free island policy when he had his fingers in the till. In fact, eliminating trade barriers comes straight out of the Anglo-American neo-capitalists’ handbook. The thing is that US, the free market champions out to heal a sick world, are unwilling to take their own “medicine”. So, sorry Pravind, that makes you look like a rather naive hypocrite.
A few questions then:
- What will be the “residual duty” on clothing? If I were the owner of Habit, Peace Angel, IV Play, etc, etc, I would really like to know the answer. These role models of Mauritian creativity cannot hope to compete with the economies of scale of China and the low wages of Bangladesh. If the residual duties are not high enough then we can say goodbye to our local brands.
- Who will do the shopping? Current tourists already benefit from “Duty Free” prices, although this a misnomer as what they are really getting is a VAT refund (a perk for everyone rich enough to travel the world). I suspect that most tourists do not have much space in their luggage for many more purchases should import duty be eliminated too. So will we be relying on a new breed of international tourist shopper? But surely the costs of flying to Mauritius outweigh any duty free savings? The new airport, the government says, will turn Mauritius into a transport hub. But if you look at how many planes overfly our island this appears more that a little unrealistic.
- How competitive will the prices really be? Already there are numerous goods imported duty free, IT equipment for example. However, I would never by a laptop or mobile phone in Mauritius. The models sold here are out of date and the prices are significantly greater than those in Europe. The reasons are simple. Manufacturers use countries like Mauritius to dump their old stock and those Mauritian businesses who are exclusive importers for major brands rob the population massively marking-up the prices. Yes, that is how many Mauritian conglomerates make such astronomical profits. And yes, sole distribution rights are anti-competitive and unassailable barriers of entry to new businesses.
- What will happen as a result of reduced tax revenues? This one is simple: either the government will have to borrow even more, or services will have to be cut. This means that a certain section of the population, those who have medical insurance and send their children to private schools, will benefit from cheaper prices for luxury goods. At the same time, the poor will have to be content with ever decreasing standards in public hospitals and state schools. Is this how you democratise the economy?
In conclusion, I cannot agree with Berenger’s nickname for our Minister of Finance. Calling him a “ti Cretin” is an insult to cretins. Prime Minister Ramgoolam, why on earth did you accept the bribe from the President and appoint his son to the most important post in government? Do you share the his idiotic dream? Turning Mauritius into a duty free fantasy island will result in a nightmare. As the MSM website rightly says: if this project comes to pass, it “would have changed the socio-economic destiny of the country”.
Of course, the whole lot of them are worse than cretins because they have forgotten a couple of minor details. These are the regional commitments that Mauritius has made to SADC and COMESA. For example, the SADC countries are now a free trade area with fewer duties on transactions between member states. Convergence criteria for fiscal policies are also taking us towards monetary union. All this means that our neighbours will be extremely unhappy with us if we unilaterally eliminate all our import duties. Aren’t permanent secretaries supposed to brief new ministers about such matters? Or are they just as incompetent? More importantly, when is Mauritius going to act like a team player in the region instead of an aloof prima dona? If we uplift other countries in Africa then we will have created many grateful customers for our goods and services.