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Mauritians on the Move, American Style

Mauritius seeks to move from "preference addiction to global integration"

Mauritius has based its economic growth over the past 30 years largely on the economic advantages of trade preferences from its European partners, but it now seeks a different direction, Kailash Ruhee, the Mauritian ambassador to the United States told a trade conference in Washington this month.

The conference, sponsored by the Carnegie Endowment for International Peace, brought together trade experts and officials from developing countries that have benefited from preferences to discuss the question: are unilateral trade preference programs good for economic development?

Ruhee was invited to speak about the experience of Mauritius. He said those trade preferences, mostly from European partners, might have been important in the past, but today can only be considered as a "stepping stone to global integration in a world of globalization, not a guarantee for long-term economic growth."

Faced with the loss of lucrative trade preferences in the sugar and textile sectors, Mauritius must "graduate from a country dependent on preferences to an economy fully integrated into the global economy," the ambassador told the conference, attended by about 70 people at Carnegie's office in Washington.

But a country like Mauritius needs time to make the transition. This is why Mauritius continues to seek a special derogation from the U.S. Congress that will allow it to use third country fabric in the production of clothing for export to the United States. Mauritius is currently exempt from this benefit, which is offered only to poorer countries under the African Growth and Opportunity Act (AGOA). It is also the reason why Mauritius is pursuing Aid for Trade, a program that will help developing countries ramp up for global competition by receiving funds for infrastructure improvements, airports, ports and to pay for the social costs of globalization.

Without such help, Ruhee said, "we'll have a lot of social and economic problems in Mauritius."

Ruhee said Mauritius is also active in regional trade groups, such as the COMESA, which will give the Africa region more clout and buying and selling power in the global market.

The ambassador said that Mauritius invested heavily in Africa, as the continent has grown to be an important market for the island's textiles and sugar. "A lot of labor intensive activities have been relocated to the continent," he said. "There's investment in sugar in Mozambique and Tanzania because Mauritius has the know-how in sugar production. We're also working in join ventures. Ferny Spinning Mills is in Mali (making garments) for export to the United States."

Other speakers at the conference agreed that the loss of trade preferences won't necessarily be a bad thing for developing countries. "An individual country's own programs for trade liberalization are more important than the loss of trade preferences given by other countries," said Judith Dean of the International Trade Commission, a U.S. government agency.

Changing restrictive trade practices is perhaps one of the most important things a country can do in order to more globally competitive. "The focus should be on domestic competitiveness, such as investing in infrastructure, reducing transaction costs," said Bernard Hoekman, senior advisor, Development Research Group at the World Bank.

"I expect globalization will continue and at a fast face," added Paul Brenton, senior economist in international trade at the World Bank. "China and developing countries will be the fastest growing. Over the next 10 years, China will be bigger in economic size than the United States and will eventually exceed the United States."

Sithanen says Mauritius must adapt to global competition

When Deputy Prime Minister and Finance Minister Rama Sithanen was in Washington last month for the annual meetings of the World Bank and International Monetary Fund, he was on a mission of persuasion.

He sought to convince international donors that Mauritius is committed to reform, to encourage them to develop programs that help poor countries participate in global trade, and to convince American businesses to invest in Mauritius.

He said he told officials here that this is part of a larger strategy of the Ramgoolam government to move the economy away from its traditional dependence on sugar and textiles and toward broader diversification and openness. On the drawing boards are plans to make Mauritius into a regional center for financial services and information and communications technology, as well as hub for medicine, seafood and tourism.

But Sithanen said Mauritius can't accomplish this alone. It will need help from foreign investors, organizations like the World Bank and the International Monetary Fund, and from countries like the United States and the European Union.

During a brief stop in New York before the start of the annual meetings, Sithanen met with legal companies that might have an interest in outsourcing some of their legal work in Mauritius. "This would be a partnership for Mauritius that will add a new dimension to our global business sector," Sithanen said in an interview with Weekend.

"We need to compete with the Philippines and the Caribbean. It is a matter of how to position ourselves. We can offer quality work and the speed of delivery, but the costs of communication is still a problem," he said. "We must work to bring down the cost of communications and must work to create a pool of skilled workers beyond call centers."

In Washington, Sithanen concentrated on two issues. The first was to review the state of the Mauritian economy with donor organizations like the Bank and IMF. These organizations say that Mauritius has made progress in reversing the rate of declining growth, which is now pegged at 5 percent but should be closer to 7 percent; attracting foreign direct investment and reducing the unemployment rate. Progress has also been made in diversifying the economy into new sectors.

"But unfortunately there's some bad news. The size of the budget deficit is still high, and we are spending one-quarter of the budget on servicing that debt. This isn't sustainable," Sithanen said. "In the long term, we'll be paying more for the debt than on education, health and social services. The IMF is encouraging us to control public expenditures and bring down the debt."

He said there are many external events that send shocks into the Mauritian economy "that are beyond our control," such as a drop in international sugar prices, cyclones or spikes in oil prices.

What Mauritius needs to do is "reform the sugar sector, restructure the garment and textile sector and at the same time, we must face competition of new countries on almost everything we manufacture," the deputy prime minister said.

In a meeting with World Bank President Paul Wolfowitz, Sithanen said he made an appeal for the international community to take measures to help middle income countries like Mauritius. "We can't be penalized for our relative success, or we'll lose what accomplishments we've made. There are 6-7 countries in Africa that have done relatively well, and we're all vulnerable to external shocks," he said.

The other issue pursued by Sithanen with Bank, Fund and U.S. Treasury officials was "Aid for Trade." This involves a program in which richer countries help poorer, developing nations broaden their access to world markets.

The concept of Aid for Trade was hatched at Ministerial Meetings of the World Trade Organization in 2005. The aid would not necessarily come from new revenues, but rather from repackaging existing social development aid programs and refocusing them on technical assistance and capacity building.

"Internal impediments prevent many countries from taking full advantage of international trade opportunities, Sithanen said, and richer countries should help them. "We need to promote more trade, investment and economic cooperation among countries in Africa," he said. "But many countries can't realize trade because there are painful costs. If you bring down trade tariffs, you will lose revenue and can't invest in things like education."

He said Aid for Trade would help countries invest in infrastructure that facilitate trade, such as efficient airports and productive ports, but also finance the social costs of trade, such as when textile workers lose their jobs to global competition and must be retrained.

But one the most enduring challenges, Sithanen said, is convincing people in Mauritius that economic reforms can no longer be delayed indefinitely.

"We need to change the mindset," he said. "The days of preferences (for sugar and textiles) are gone, and unfortunately, what it takes to sell our products today is completely different than the way it was done in the age of preferences. The world has changed and we need to adapt."

"People accept the necessity for change, but they don't want it to happen in their backyard," he added.

Wolfowitz to resign from the World Bank

Paul Wolfowitz, the embattled president of the World Bank, has agreed to resign, ending weeks of controversy over a pay raise he arranged for his girlfriend that brought international criticism and sullied the Bank's reputation.

Wolfowitz was a controversial figure at the Bank since being appointed by President Bush in 2005 because of his previous role as an architect of the Iraq war when he was a top official at the Pentagon.

He was essentially forced out by conclusions of a special investigative committee of the Bank that he violated ethics rules in his handling of the generous pay and promotion package of bank employee Shaha Riza. Ms. Riza is known as an outspoken advocate of women's rights and democracy in the Middle East and is Wolfowitz's companion.

Wolfowitz had fought the allegations over the past two weeks and tried to hold onto his job. As the scandal drew media attention around the globe, it threatened the Bank's ability to perform its anti-poverty mission, and caused deep divisions among the institution's staff, many of whom had lost confidence in Wolfowitz's leadership.

The scandal overshadowed the April meetings of the World Bank and International Monetary Fund that were attended by Deputy Prime Minister Sithanen. At a press conference called to discuss African issues, African ministers voiced their support for Wolfowitz, saying he played a key role in promoting development in Africa.

"We think he has done a good job," Sithanen said. "Wolfowitz has been a supporter of reforms in our country."

Sithanen and others said they would accept whatever the bank's 24-member board decided about Wolfowitz's future, and assumed that the Bank's pro-Africa policies would continue under a new leader.

The head of the World Bank is traditionally an American, appointed by the U.S. president, while president of the IMF is a European. Among a handful of names being considered as Wolfowitz's successor is Robert Zoellick, former Deputy Secretary of State and President Bush's former trade chief, according to press reports.

If Zoellick is appointed, this could be good for Mauritius, as he is familiar with Mauritius and its contributions to the African Growth and Opportunity Act. While serving as the U.S. Trade Representative, Zoellick met with government ministers from Mauritius on many occasions and attended the 2003 AGOA Forum held in Mauritius.

U.S. imports of African apparel finally on the rise

After a two-year decline, imports of apparel and textiles from Africa to the United States are now on the rise.

New data from the U.S. Commerce Department show that U.S. imports of textiles and apparel from Africa during January-February 2007 were up 13 percent from the same period last year. But this total is down nearly 30 percent compared to January-February 2005, which represented the peak of U.S. imports just after the end of the Multi-Fiber Agreement (MFA), which removed global quotas on textiles and apparel. After that, imports took a nosedive, dropping to a painful 37 percent in February 2006. Beginning in April 2006, the decline began to slacken with the rate of decline dropping until the new data showed an increase.

"The new data is hopefully confirmation that African textile and apparel exports have finally turned the corner and are now recovering from the increased competition from Asia following the end of the MFA quotas," said Paul Ryberg, president of the Mauritius-U.S. Business Association in Washington, who analyzed the data.

He said the increase most likely indicates that U.S. buyers and importers are showing new interest in African-made garments due to an extension of the third-country fabric provision by the U.S. Congress last December. It may also be an indication that safeguard quotas imposed by the United States on Chinese textiles and apparel have helped by forcing a greater diversity in sourcing of U.S. apparel imports. These safeguards will run through 2008.

Imports from Mauritius also showed a slight rebound in February 2007, showing their first monthly growth since 2003. The increase was just 2.5 percent, and it's not yet clear whether this is a one-time improvement or the beginning of a recovery.

"In the case of Mauritius, I think the increase is due to the fact that the companies that were going to go out of business or move elsewhere are all gone by now," Ryberg said. "So after 4 years of winnowing, we are down to the hard core of companies that are more competitive and are more likely to survive."

The data also shows that the value of Mauritius' apparel exports continued to be greater than the volume of these exports. "This demonstrates the success of the efforts by Mauritius to move "up-market" by focusing on higher valued-added products," Ryberg said.

The trade data also shows another interesting development: Madagascar is fast approaching Kenya and may soon become the second largest apparel supplier in Africa.

In another development, the annual AGOA Forum, in which sub-Saharan African countries gather with U.S. officials to discuss ways to expand trade and investment, will be held in Accra, Ghana from July 18-19. The theme will be how to encourage countries to diversify their exports to take advantage of the broad range of products eligible for preferential treatment under AGOA.

Officials hit U.S. West Coast looking for investment opportunities

Officials from the government of Mauritius made a swing through the West Coast of the United States last month to learn more about trade and investment opportunities with American companies.

Tourism Minister Jean-Luc Duval, Heerun Ghurburrun, director investment facilitation at the Board of Investment, and Vinod Busjeet, trade commissioner at the Mauritius Embassy in Washington joined a larger delegation of African officials on the investment promotion tour to San Francisco and Seattle, Washington. Burundi, Ghana, Lesotho and Uganda were also represented.

"The idea was to educate U.S. corporations about investment opportunities in these countries and to start a relationship and identify souricing opportunities for goods and services," said Bujeet. "For Mauritius, it was a matter of putting us on the map, and enhancing our profile in the United States."

In Seattle, Mauritian officials met with executives of Costco, a large American warehouse store, and talked about Mauritian rum, sugar and jewelry. They also met with executives of Starbucks Coffee, which has 13,000 coffee shops around the globe, about possibility buying their employee uniforms and T-shirts from Africa. A tour was also arranged of the headquarters of Boeing, the airplane maker.

In San Francisco, the delegation met with Landor & Associates, a company that has developed plans to elevate the profile of foreign countries in the United States. They have worked on image "branding" campaigns for India and Germany.

Officials also met with leaders of Google Inc., the online search engine, which wants to develop centers in Africa that facilitate IT access on the continent. Google also expressed interest in putting documents at the National Library of Mauritius and the Archives on the Internet, Busjeet said.

Mauritian officials plan to return in October. "We're at the nascent stage of promoting investment in Mauritius (in the United States)," Busjeet said. "You must be consistent; you can't have just one mission. You must follow-up, so the October visit is important."

Mauritius will be hit hard by global warming

Global warming will have devastating effects on small islands like Mauritius, the Mauritian ambassador to the United Nations told the U.N. Security Council at its first-ever debate on the impact of climate change on peace and security.

Somduth Soborun was among ambassadors from around the world that addressed the April 18 forum, held at a time when experts are predicting that land and water resources will become increasingly scarce, and that that global warming may make irreversible changes in the world's climates and economies.

The day-long meeting, called by the United Kingdom, examined the relationship between energy, security and climate, and involved remarks from more than 50 U.N. delegates representing small islands like Mauritius as well as industrialized countries like the United States that emit large amounts of greenhouse gases.

British Foreign Secretary, Margaret Beckett, said that climate change effects "our collective security in a fragile and increasingly interdependent world."

Speakers stressed the importance of developing a long-term global response to deal with climate change because climate change will not only have serious environmental, social and economic implications but also implications for peace and security.

Soborun told the meeting that small islands like Mauritius are particularly vulnerable to global climate change. The unique features of island eco-system, he said, such as fisheries, coral reefs and mangroves are threatened, as are many economic sectors such as tourism and agriculture. Salt intrusion from the ocean and changes in rainfall patterns are already affecting freshwater resources and agriculture on many small islands, he said.

He called on the international community to set up a special small island developing states fund to help these countries adapt to climate changes. Regional climate observations systems are also needed to help small island countries. Industrialized countries should also help small islands expand the use of renewable energy, including biofuels.

He said Mauritius supports the conclusion of the "Conference de Paris," which calls for creation of a United Nations environment organization.

a m e r i c a n   s c e n e

WEEK-END --- dimanche 27 mai 2007