Mauritian economist Kevin Teeroovengadum tells Investor’s Mag that Mauritius needs investments in education, health and technology at the core. “We need a vision that positions Mauritius in this new World which is moving so fast in the evolution of Industry 4.0 and Industry 5.0”, says the economist. He warns that countries, companies and society at large can miss out on opportunities, if they are stuck with past recipes.
What are those paradigm shifts caused by the Covid-19 pandemic that organizations and societies, in general, have yet to fully anticipate?
I recall in an interview well before the November 2019 General elections, I referred to the paradigm shift that we will be experiencing in this decade. And now C-19 is just fast-tracking what was meant to happen. It’s important to understand that the world has been evolving for years, decades and centuries. We have had empires that came and went. Leaders that changed the world in one way or the other. Wars and pandemics that shaped the world. In this decade, we are seeing the rise of China as a super-power, the fact that the USA is going to fall from their long-time leading position to Number 2, and probably in the coming decades to Number 3 behind both China and India. And the rise of technology and AI that are going to radically change everything we’ve known in the past. Changes are happening at a much faster and exponential way. So much so, that countries, companies and society at large can miss on opportunities if they are stuck with past recipes that were successful in the past but won’t be useful for the future.
Harvard economist Dani Rodrik sees the pillars of such a new economic paradigm in the emphasis on employee interests over the interests of companies and capital owners, greater acceptance of economic intervention by the State, and a willingness to accept higher inflation risks in order to facilitate more growth and employment. What do you think?
I think he might be partly right for greater acceptance of state intervention. The irony here, is that over the last 20 years, many of us from the Western World always pinpointed China as an authoritarian-led country both politically and economically. And yet if you see the amount of State intervention globally since the beginning of the C-19 crisis, we are no more in a position to question the Chinese in respect to State intervention. The higher inflation risk is real due to the fact that we have had records of money that have been printed out during the current crisis without any increase in production real outputs. For example, after the financial crisis of 2007/08, the US Fed Reserve injected $3 Billion over nearly 11 years versus nearly $6 billion over the last 18 months. And then we add the current deglobalisation and also the supply logistics problems. All these lead to a perfect storm of high inflation. For too long, we’ve had records of low inflation and today we are seeing the reverse. People need to understand that inflation is a direct tax that hurts daily. As for greater employee interests, I think we will see 2 classes of employees in the future. The next decade will do to cognitive tasks what the previous decades did to physical tasks which will lead to greater income inequality. Already we’ve seen that during this covid crisis, the famous club of 1% globally have become richer, while the bottom 50% have become poorer. This is an issue that needs to be tackled or else we are going to get into social problems globally and that won’t be sustainable.
How are the markets adapting to this New Normal?
There is no generic prescriptive way for all markets and we will find those that are smart will do better. For example, let’s take Dubai that was once a desert village and that managed to position itself as a city-hub for the global elites and we can see how since the beginning of the C-19 crisis, they have made huge strides in pushing money into health-care which is critical if a country or a city wants to be a leader in attracting wealth and talents. On another note, I take China, which has adapted and is relying on its export markets and also on its huge domestic market. In 2019, 170 Million Chinese travelled overseas and since they closed their borders, the Chinese travellers are spending money domestically, creating a boom in their tourism sector.
The consensus today seems to indicate that the fiscal straitjacket of the Maastricht Treaty is obsolete. Most Countries do not hold a budgetary position that avoids “excessive” fiscal deficit, that is greater than 3%, and a gross government debt not exceeding 60% of GDP?
Since the beginning of C-19, we have been hearing the slogan of ‘unprecedented times leading to unconventional measures’. But if we go back over the last 4 decades, we would see that globalisation has been pushed on the back of constantly lowering interest rates and pushing for more debt, be it country, corporates and individuals. So when the interest rates go down, you will be told, it is ok and you can take more debt. But no one seems to be concerned about how to repay the debt. We keep pushing the can down the road leaving the problem to future generations. Having said that, today I believe we have reached the end of the road, as interest rates are all time low and in a number of countries even in negative territory, and therefore pushing more debts is not the solution. We need a radical change of the global economy that we’ve been chanting for over the last decades. The Chinese President calling for “Common Prosperity” is what I also believe we need to focus. We can’t continue with a capitalist system that has become extremist over the years.
How do you assess Mauritius’ economic performance in the face of this pandemic?
Since the beginning of this crisis, I said we had an opportunity to come out stronger with a better economic path, if the Government played the cards of transparency and relied on competent/experienced people. Mauritius has been on fire-fighting mode. Our gdp per capita has gone back to the levels of 10 years ago, our rupee continues to slide, inflation continues to impoverish Mauritians at large, while unemployment keeps rising with especially the alarming rate of youth unemployment. I haven’t seen anything to-date that gives me confidence that Mauritius is on a new and stronger economic path. Frankly, Mauritius has been on a wait/see/hope mode and too often on trial-and-error modus operandi. We wait for external factors for us to ride on, but the new world is only for those who can capture opportunities at the right moment rather.
What should be the economic priorities of Mauritius?
We need investments in education, health and technology at the core. We need to sort out our insatiability of relying on imported food products by producing more locally. If Qatar has managed to farm in the desert and produces salmon fish, we can do far better in ensuring a high degree of food sustainability. We are far from wars and geopolitical mainstream plays for now. Let’s make Mauritius a great place for the diaspora and foreigners to come and retire. But for that to happen, we need an excellent health care and education system as opposed to what we have currently. We need a vision that positions Mauritius in this new World which is moving so fast in the evolution of Industry 4.0 and Industry 5.0. And last but not least, why not get the whole of Mauritius into the Metaverse World, the next global trillion dollar industry?
Mauritius has positioned itself as a hub for many sectors of activity with varying degrees of success? Do you think Mauritius sees itself as more beautiful and attractive than it really is?
Too often, we oversell what we do and without benchmarking ourselves with our competitors, as if we are in a league of ours all alone. I wonder whether it’s our insularity, that prevents us to see beyond our shores. For example, our competitors Seychelles and Maldives were in positive growth mode before 2020, while we ended the year 2019 in negative growth. The same for our financial services sector, while we have been on the EU black-list, other jurisdictions such as Morocco, Rwanda, Dubai, Jersey have made progress in respect to Africa. Take the real estate sector, since 2005 we have struggled to meet the target of 7500 of residential units sold to foreigners by 2015, and achieved a mere 3000 units by 2020, and yet other competitors such as Dubai, Lisbon, Malta, Cyprus have done far better than Mauritius. Look at the phenomenal and growing amount of investments being done in the Tech start ups in Africa or in Fintech, you will see we are no way near being a Hub for Tech and yet authorities and even some of the private sector companies really believe we are a Hub for Africa. It seems there’s a disconnect with reality! We should stop blowing our own trumpet and rather take a reality check. Only then, we can re-position Mauritius for a better future.
The higher inflation risk is real due to the fact that we have had records of money that have been printed out during the current crisis without any increase in production real outputs.Kevin Teeroovengadum
The exceptional situation deserves exceptional measures. What do you think of the role played by central banks during this crisis so far?
Around the world, we have seen Central Banks playing an important role by printing and injecting massive amount of money to keep the global economy afloat. The Bank of Mauritius has done the same. Time will say whether they have been right or not. For now, Mauritians at large are facing the inflationary pressure across all spheres of the income pyramid.
What about the unconventional actions taken by the Bank of Mauritius, like owning a subsidiary like the MIC?
The IMF has already made recommendations to the authorities in respect that BOM should hive off MIC from its balance sheet. I understand the rationale of using BOM’s money via MIC. But I believe by being transparent, a lot of the speculations of where the money of MIC has gone and who has been bailed out, could have been unfounded. At the beginning of the crisis, I said, Government should bail out only those companies that have put in place a restructuring plan and demonstrated how they intend to become efficient in the future. I don’t see any sense in bailing out inefficient companies and inefficient management which is synonymous to “throwing good money after bad”.
Digitization has become a part of everyday life for people and businesses. What impact do you think digitization will have on an economy like Mauritius, especially unemployment?
We need massive amount of money to go in tech and digitisation. Can you believe Mauritians have had to queue up for hours doing their booster dose, when a simple process of online or mobile booking as it has been done months ago in many countries, would have been more efficient. It reminds me the queues that we still find at NTA for registration purposes. We need a strong Ministry of Tech that can instil a strong digitisation of the whole of Mauritius that goes beyond the relooking of government websites. We could have become a reference model and case study given we are a microscopic economy and population. I think many don’t realise what tech can do for us and also what the forthcoming changes being brought by 5G and 6G will do in this decade. As for unemployment, I would have liked to see our authorities pushing our younger generations in this sector. We can’t continue to have so many youngsters doing accountancy, management, and other classical degrees of yesteryears while we are getting in a New World New Normal where we need a workforce with radically new skillsets. Take the example of Mark Zuckerberg who is looking to recruit 10000 youngsters in Europe to help him build his Metaverse. Why can’t we propose the same Mark Zuckerberg, where Mauritius could become his playground to recruit as many young Mauritian talents to build the African Metaverse?
What is your outlook for 2022?
IIn January 2021, I said we won’t be out of the Covid-Crisis anytime soon as the complete global vaccination won’t happen before the end of 2023, and until we get there, we will have to live with various variants, ad-hoc restrictions and lockdowns. 2022 can be a better year, but we will still have a number of turbulences that will evolve around Covid variants, ongoing inflation, the geo-political cold war between USA/China, growing cyberwarfare. The next few years is like an airplane travelling through multiple turbulences and that’s why we need to have the right people in the cockpit who are experienced and who know how to manoeuvre around and through turbulences. Overall for Mauritius, it can be a better year but we won’t be firing on all cylinders economically until such time we have a real economic vision to confront what lies ahead in this New World. We need new people, with radical mindset change to take Mauritius to the next level.