Executive Summary and 1965. Britain excised the Chagos Archipelago in 1965 and formed the British Indian Ocean Territory (BIOT) together with other islands under the Seychelles. The Seychelles recovered the other three islands that had formed BIOT when it became independent in 1976. The government of Mauritius has consistently claimed sovereignty over the Chagos Archipelago. 4. ECONOMIC GOVERNANCE AND MANAGEMENT 1.42 Mauritius is a small island with few natural resources. It therefore relies heavily on its human resources. This most important asset has helped Mauritius to overcome its natural handicaps and transform its people into additional assets for the country’s economic development. Mauritius has developed into a diversified economy. Its annual growth rates have averaged between 5 and 6 per cent since independence. With a per capita income of more than USD6,700 in 2009, Mauritius has become an upper middle-income country. Good economic governance and management have been pivotal in Mauritius’s success over the last three decades. It has used its resources well and its successes with regard to socioeconomic development are obvious. 1.43 The country is now facing new challenges that need the attention of the government and other stakeholders if the country is to enjoy further success. They include: (i) coping with the changing global economic environment, which requires addressing issues concerning sustaining the growth pattern, and vulnerability to external shocks; (ii) defining and implementing the Mauritius of tomorrow, based on a clear vision of its future and its image, and which needs to be converted into coherent operational strategies aimed at achieving much-needed structural change; (iii) consolidating the economic achievements and their social effects while rethinking and exploring new avenues for diversifying the economy and improving national and regional economic integration; (iv) sustaining high economic growth which is characterised by social, geographic and regional equity; (v) transforming natural handicaps by building on geographical advantages; and (vi) continuously building and mobilising the capacity required for the Mauritius of tomorrow. 1.44 12 Mauritius has addressed these challenges through its economic governance and management system. The sections that follow analyse the ways in which the country has addressed these challenges. They also highlight its achievements and make some recommendations to assist Mauritius in the future. Executive Summary 1.45 Standards and codes. Mauritius has complied with and ratified most of the international and regional agreements and conventions. However, there are some notable exceptions, like the AU Convention on Preventing and Combating Corruption. On the other hand, Mauritius has yet to ratify a number of signed conventions. They include the Southern African Development Community (SADC) MoU on Macroeconomic Convergence. Apart from the fact that Mauritius has not ratified, signed or complied with some of the economic governance and management standards and codes, one of its most important failures is its poor domestication of conventions and agreements. Based on its analysis and findings, the APR Panel makes some recommendations about domesticating and disseminating standards and codes that Mauritius has complied with and ratified. They include: (i) implementing the recommendations of the National Audit Office (NAO); (ii) implementing the recommendations of ICAC and its evaluation mission partners [the EU, the World Bank and the International Monetary Fund (IMF)] on complying with standards and codes; and (iii) building capacity to improve the effectiveness of the relevant national institutions. 1.46 Promoting macroeconomic policies that support sustainable development. The APR Panel recognises Mauritius’s tremendous efforts and successful achievements. They include a sustained average economic growth of between 5 and 6 per cent for the last two to three decades, and significant improvement in the living conditions of the Mauritian people. The APR Panel commends the country for this remarkable transition from a poor and ‘desperate’ country – according to some commentators – to a vibrant, upper middle-income country in three decades. 1.47 With the end of the preferential treatment of Mauritian sugar and textile exports and its easy access to the European Community market, which were the two main drivers of national economic growth, the country had to rethink its growth policy in order to tackle its structural crisis and some unfavourable developments. These include balance of payments, terms of trade, recurrent budget deficits and inflation. The government chose a knowledge-based economy, information and communication technology (ICT) and business process outsourcing (BPO) as its new driving forces to become a duty free island, regional centre and world service hub. This led to important economic reforms that had a threefold strategy. These were to change the business climate, simplify the fiscal system, and open the economy to foreign direct investment (FDI) and foreign competencies. There is no 13