Mauritius_success.pdf - 5 Mauritius An Economic Success...

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5. Mauritius:
An Economic Success Story
Ali Zafar
January 2011
There is no miracle. It is due simply to hard work, discipline, and will.
Sir Anerood Jugnauth, President of Mauritius
Mauritius is paradise. . .It is beautiful here and we all work together.
M. Rambonee, Mauritian taxi driver
Ali Zafar is a macroeconmist in the World Bank Group. . This paper is part of the Africa Success Stories
project, a World Bank research initiative being carried out by the Office of the Chief Economist, Africa
Region.

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Contents
Abstract
Acknowledgments
Introduction: Anatomy of the Mauritian Miracle
The Growth Story
A well-managed economic regime
A very successful economic trajectory
Favorable international comparisons
The role of total factor productivity
Structural transformation
Improvement in human development indicators
Macroeconomic Management
Prudent, proactive fiscal policy
Monetary policy as an anchor for economic growth
Effective response to economic shocks
Dynamic Institutions and Adaptability to Change
The importance of forging consensus
The nexus between the public and private sectors
A Tale of Three Sectors: Sugar, EPZs, and Tourism
The sugar sector
Import substitution industrialization and restrictive trade policies following the colonial period
The rise of EPZs in the 1970s and 1980s
Post-EPZ economic drivers: tourism, business process outsourcing, and financial services
Business Climate and Investment
Business climate improvement in recent years
The role of foreign direct investment
The Economic Future of Mauritius
References

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Abstract
In spite of its small economic size, low endowment of natural resources, and remoteness from world
markets, Mauritius has transformed itself from a poor sugar economy into one of the most successful
economies in Africa in recent decades, largely through reliance on trade-led development. Real GDP
growth averaged more than 5 percent between 1970 and 2009, while GDP per capita has increased
more than tenfold over the same period. Though its economic success has been the subject of
considerable debate, several key factors were central in bringing about the Mauritian miracle: good
macroeconomic policies, particularly fiscal prudence and a competitive exchange rate policy; strong
public sector and private sector institutions, with exceptionally productive interaction between the two;
a strong, pro-trade orientation and a liberal trade regime; and use of its ethnic diversity to forge a
consensus between the different groups. In parallel to its economic growth, Mauritius has achieved
significant improvements in key human development indicators.
Acknowledgments
The author benefited from the guidance and the insights of many Mauritian policy makers, specifically:
Raj Makoond (Director, Joint Economic Council), Ali Mansoor (Financial Secretary, Ministry of Finance
and Economic Development), Ada Chellapermal (Director, Financial Policy, Ministry of Finance and
Economic Development), Mahmood Cheeroo (Secretary General, Mauritius Chamber of Commerce and