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The view from Washington

Congress hands Mauritius a golden opportunity on textiles

While greatly preoccupied by the financial crisis on Wall Street, the U.S. Congress managed to hand Mauritius a long-awaited victory that will help the country's ailing textile and apparel industry.

Lawmakers on Friday passed a bill that would again allow Mauritius to use fabric from a third country source in the production of clothing that is exported to the United States under the African Growth and Opportunity Act (AGOA). This is an important concession, as it will help factories in Mauritius attract more U.S. apparel buyers who want to benefit from duty-free treatment of their clothing purchases under AGOA.

Before the end of global quotas on textile and apparel products several years ago, Mauritius and other apparel producers in Africa benefited from AGOA's duty-free preferences and apparel trade to America skyrocketed. But since the end of both global textile quotas and expiration of the first so-called third-country fabric derogation for Mauritius in 2005, textile trade between Mauritius and the United States fell more than 50 percent.

The action on Friday by the Congress offers Mauritius several opportunities.

First, it is a boost to efforts in Mauritius to restore the country's competitiveness in the textile trade as it works to achieve so-called vertical integration of its apparel sector, meaning that all phases of apparel production can be done on the island.

Second, it buys precious time for Mauritius, as the country moves to restructure its economy and readjust to the reality that textiles and apparel will no longer be the giant economic engine that it once was. Surely Mauritius will always have an apparel industry, but in the years ahead it will become more specialized, smaller, more mechanized, more efficient and less labor-intensive. The government of Mauritius would be wise to use the next four years until this U.S. derogation expires in 2012 to execute the transition to the next economic phase, and also prepare apparel workers for new jobs.

Third, it gives a big marketing boost to made-in-Mauritius textiles and apparel. Mauritian firms can now more effectively market their products to U.S. buyers with the incentive of offering duty-free treatment to these exports. This will make Mauritian products more cost competitive and likely lead to more contracts with American apparel buyers. This in turn will keep the remaining textile companies in business and preserve the jobs of thousands of workers - at least for the next several years.

"The strategy should be to add this third-country fabric eligibility to all the marketing efforts. It ought to be part of every manufacturer's sales brochure and it should be highlighted at apparel shows," said Paul Ryberg, a Washington attorney who worked with the Mauritian Embassy to win the derogation. Ryberg is also president of the Mauritius-U.S. Business Association.

Ryberg noted, however, that the derogation would not likely bring back jobs or contracts that have been lost over the past four years. "Let's be realistic, that business has disappeared. But over this time, the Mauritian industry has moved upmarket and it won't recover the low-level production that has now moved to China and elsewhere. But it will help attract top-rung (high-end) production."

Fourth, the third-country fabric provision will help the Mauritian apparel industry by giving it access to a greater variety of fabrics. Ryberg cited the case of a major U.S. golf shirt maker that wants to shift some of its shirt production from Jordan to Mauritius if it can get duty-free treatment under AGOA. "They picked Mauritius out of all of Africa because Mauritius had the highest-quality production," he said.

There is a downside, however. As part of the negotiations over the final passage of the bill, Mauritius had to agree to support the repeal of what is called the commercial availability provision. This will likely hurt manufacturers of denim, such as the new RS Denim factory which was built in part in the expectation of increased sales opportunities in supplying denim to poor countries in Africa. With the repeal of this provision, there will be fewer opportunities to sell Mauritian denim to these customers, Ryberg said.

In many ways, passage of the derogation was helped along by the U.S. financial crisis. Congress was scheduled to have adjourned for its legislative year last week, but lawmakers stayed in Washington to consider several financial bailout bills for Wall Street. That extra couple of days opened the window for passage of other legislation, including this trade bill.

Ryberg, joined by Ambassador Kailash Ruhee and Trade adviser Vinod Busjeet were key players in pushing through the legislation for Mauritius. But another key person was Peter Craig, who passed away last month at the age of 60. Craig served as trade adviser at the Mauritius embassy for 14 years, and he was instrumental in securing both the passage of AGOA in 2000 and also in approval of the first third-country fabric designation for Mauritius in 2004.

During Craig's time in Washington, the United States became the largest single-country destination for Mauritian exports, outpacing France and the U.K.

Craig worked on the early stages of renewing the derogation before he returned to Mauritius two years ago. This derogation should somehow be named after him.

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Felix Ah-Kee :

“Mauritius can become for the biofuels industry what Singapore is for the petroleum industry”

Felix Ah-Kee, a professional engineer now living in Hawaii, left Mauritius in 1971. Since then, he has developed an expertise in alternative energy resources, most notably the generation of electricity and the development of bioethanol from sugar cane. As head of his own consulting firm, Ah-Kee has traveled the world on various energy projects, from Brazil to Guyana to Fiji. In 1991, the government of Mauritius hired him as a consultant to the Mauritius Sugar Authority to help implement the Bagasse Energy Development Programme. He has also worked on the privatization of the sugar industry in Madagascar. Most recently, Ah-Kee was a consultant to Gamma Civic, the civil and building engineering firm in Beau Bassin, on their waste to energy project, and to SUDS (Societé Usinière du Sud) on the sale of carbon credits to the World Bank for their bagasse energy project. In the following interview, Ah-Kee speaks with Week-End Correspondent Pamela de St. Antoine about the potential for developing alternative energy in Mauritius.
Week-End: You have worked as a consultant in Brazil and other places on projects related to renewable energy. As you know, Mauritius is producing an increasing amount of electricity from renewable resources, such as bagasse, which is a byproduct of sugar cane. From your perspective, what are the advantages to Mauritius in further developing renewables as part of the national energy plan, and do you think these alternate energy sources will be a long-term solution to the island's dependency on foreign oil imports?
Ah-Kee: Mauritius already generates over 20 percent of its electricity from renewable sources, which is a remarkable achievement for an island nation. The Bagasse Energy Development Program, started in 1990, has improved the financial outlook of the sugar industry by creating a new source of revenue from electricity. Earlier in the this decade, at a time of severe oil shortages and prolonged drought in Mauritius that caused the hydropower plants to shut down, the sugar industry's powerplants came to the rescue of the fledgling textile and tourism industries by preventing blackouts from occurring. Like the airliner that did not crash, this important contribution of the sugar industry did not make the news headlines. I envision Mauritian companies creating large sugar can plantations in Mozambique, Tanzania or Madagascar to produce ethanol for export to Mauritius. “Flex” cars which are in widespread use in Brazil can run on 100 percent ethanol without gasoline. General Electric Corp. has commercialized a turbine that can use ethanol to generate electricity. The government's policy of weaning Mauritius from oil imports is a realistic one. The technology already exists to make this objective achievable within a decade,
Week-End: The international demand for alternative fuels has been growing due to the high prices of petroleum. Could exporting bagasse be a new market opportunity for Mauritius?
Ah-Kee: Bagasse is a fuel that is best consumed locally. Mauritius should concentrate on exporting services, know-how and entrepreneurship. It can become for the biofuels industry what Singapore is for the petroleum industry. Singapore does not produce a single drop of oil, but yet is a major player in the international oil industry. SUDS, a Mauritian company, is developing a large sugar cane plantation in Tanzania to produce ethanol for a European customer. My Brazilian company, Clean Energy do Brasil, has teamed up with Emineo, a Mauritian engineering firm and with IRRIMEC, a South African firm founded by Gilbert Maingard, a Mauritian, to develop several large sugar cane plantations to produce ethanol for the South African market. This “Mauritian Mafia," as we are affectionately called by our South African counterparts, is poised to play a major role in the development of the South African ethanol industry.
Week-End: What is the potential for development of other renewables, such as solar, wind power and hydropower?
Ah-Kee: Mauritius may be able to produce a limited amount of wind power at certain locations. The installation of micro-hydro powerplants may marginally increase the total hydropower generation capacity. I would like to see more widespread use of solar water heaters to reduce the amount of electricity that is being used in heating water for homes, businesses and hotel resorts.
Week-End: : What resources — from international development organizations or richer countries in Europe or the United States — exist to help Mauritius finance development of renewable energy technologies?
Ah-Kee: Brazilian, U.S. and European financial institutions are eager to finance the development of renewable energy projects. The challenge for developers is to find good projects that are bankable. Mauritius may potentially benefit from current research in ethanol technology. Brazil is working on improving the efficiency of fermentation and distillation processes. In the U.S., the next-generation cellulosic ethanol technology to convert grasses, including sugar cane leave into ethanol, is close to commercialization.
Week-End: How might the government of Mauritius better educate consumers about the importance of energy conservation?
Ah-Kee: I like the fact that the government's support of energy conservation is not limited to words. Through programs such as the CEBs's National Energy Savings Campaign, the government is making it possible for households to buy energy-saving light bulbs. I would like to see increased financial incentives to install solar water heaters.
Week-End: : U.S.-Mauritius trade has developed in new directions under the African Growth and Opportunity Act (AGOA), especially in the textile and apparel trades. But there are challenges to selling in the U.S. market, such as high freight costs and large distances. How might Mauritian businesses increase their trade with America, and take greater advantage of the benefits offered under AGOA?
The U.S. market is an extremely tough market to compete in. While AGOA ensures that African firms will be able to compete on a level playing field, success is by no means guaranteed. For Mauritius, the best oppotunities may be found in high-value market niches. Mauritian firms wanting to do business in the U.S. must develop strong sales and marketing skills, and must compete for business just as any American individual or firm has to do in order to prosper in the highly competitive American economy. There is a strong presence of American firms in South Africa and in Singapore. Mauritian firms should seek opportunities to work with them in Asia or in Africa.
Week-End: : In 2004, the U.S. government set up the Millenium Challenge Account, an innovative initiative that provides aid to poor countries that assure good governance and economic freedoms and make investments in their people. Although Mauritius does not qualify for aid, as its income levels are too high, how might the island's private sector still benefit from the MCA?
Ah-Kee: Under the Millennium Challenge Corporation initiative, the United States will deliver billions of dollars in aid through U.S. firms to help some of the poorest countries, including some in Africa. These countries may potentially include Madagascar, Tanzania, Mozambique, Malawi and Benin. For certain projects, U.S. firms may be interested in subcontracting opportunities.
Week-End: : You are a professional engineer with your own consulting firm in Hawaii. What was your career path that led you out of Mauritius and to the United States? Do you still have strong ties to the country?
Ah-Kee: In 1971, after obtaining a diploma in sugar technology from the University of Mauritius, I set out for the Democratic Republic of Congo where I worked as a chemist in a sugar factory for two years. I later obtained a bachelor's and a master's degree in chemical engineering from Louisiana State University and from the University of Houston. I then went to work for the sugar industry in Hawaii. In 1981, I earned an MBA from Harvard Business School, and in 1991, at the invitation of Sir. Aneerood Jugnauth's government, I became a World Bank consultant and assisted the Mauritius Sugar Authority in implementing the Bagasse Energy Development Program,. At that time, I decided to start my own international consulting business in renewable energy. Since 1991, I have met and worked with every agriculture minister in assignments for the Mauritius Sugar Authority. I have maintained strong family as well as business ties to Mauritius. Recently, I have been a consultant to Gamma Covanta Energy Ltd, and also to CTSav in arranging the sale of carbon credits to international buyers. In August this year, I was on a mission in Mauritius for the United States Trade Development Agency, and helped prepare projects in food security for which USTDA might be interested to provide4 financial or technical assistance to Mauritius.
Week-End: : You are an American citizen and thus will be voting in the presidential elections in November. Who is your choice for president, Barack Obama or John McCain? Why?
Ah-Kee :I voted for Ronald Reagan, and for both Bushes, and I will vote for McCain. I like these Republican presidential candidates for their prolife policies and for their views on limited government, free trade and a strong defense.
Week-End: : Many say that the Bush administration has been one of the most supportive U.S. governments in promoting economic development in Africa. In terms of Africa policy, will it make a difference whether Republican McCain or Democrat Obama is in the White House?
Ah-Kee :I expect no difference. U.S. policy towards Africa, especially in regard to aid and economic development, is strongly backed by the will of the American people who are in my view, the most generous people on earth. U.S. government aid to Africa has quadrupled from $1.3 billion in 2001 to more than $5 billion in 2008, and is expected to grow to $8.7 billion in 2010. American private foundations and religious organizations provide hundreds of millions of dollars of additional aid to feed the hungry and cure the sick in African countries.

a m e r i c a n   s c e n e

WEEK-END --- dimanche 5 octobre 2008