Executive Summary carefully expressed vision of the Mauritius of tomorrow that captures this pragmatic approach. This vision should include structural changes and operational strategies. Some officials recognise that there is a gap in strategic thinking and planning. Assisting businesses, to enable them to adjust to international markets, seems to be one of the major objectives of economic governance and management, and particularly of macroeconomic policies. 1.48 The ‘very good’ FDI trend in Mauritius should be analysed thoroughly. Export-oriented growth in a free market, which heavy foreign investment supports, may have negative consequences because it is vulnerable and runs the risk of allocating huge resources to salvage export-oriented enterprises (EOEs). It may be better to concentrate on building an integrated economy. Furthermore, there are chronic budget, savings and investment deficits. Mauritius must therefore address the crucial issues of whether the fundamentals of a ‘business-led state’ will coexist with those of a welfare state, and whether such a macroeconomic policy is sustainable. 1.49 The debt issue deserves attention from the government and other stakeholders because of the consequences of high public debt. It is 65.8 per cent of gross domestic product (GDP) and 30.3 per cent of government revenue. Seventeen per cent of public expenditure goes to reducing debt. The debt structure is an important element of domestic debt. This situation may affect development and business prospects negatively. 1.50 1.51 14 Economic democratisation is the cornerstone of the Mauritian development philosophy. Some might see it as a good approach. However, an analysis of the achievements of this philosophy raises doubts about its effectiveness. One cannot get a clear understanding of the socioeconomic forces that underpin the democratisation of the economy, and its Empowerment Programme (EP), without acknowledging the socioeconomic and political fabric of Mauritian society and the chemistry between the ethnic, political and economic dynamics that have led to the ‘business-led’ approach. Based on its analysis and findings, the APR Panel makes several recommendations aimed at filling the gap in strategic thinking and planning and defining structural changes that Mauritius should make to build the Mauritius of tomorrow. These include: (i) operational strategies to achieve the changes that will ensure high, sustained and inclusive economic growth; (ii) addressing the sustainability Executive Summary of a business-led development approach, as opposed to that of a welfare state, in an open and external market-oriented economy; (iii) developing instruments and models for macroeconomic forecasting, regularly updating parameters and basic coefficients; and (iv) making the models more dynamic. 1.52 Implementing sound, transparent and predictable economic policies. The programme that the president of the republic presented to Parliament in 2004 reflected the desire to promote a new model of economic democratisation. Given the economic crisis, the government decided to accelerate the adoption of the reforms and initiate relevant policies within the framework of the 2006 to 2010 multiannual programme, particularly in public finance and tax administration. The objective was to reduce the budget deficit and maintain public debt at a sustainable level, and to ensure sound and transparent management. The most important reform was to provide the government with relevant budget programming and management tools. These included the Medium-Term Expenditure Framework (MTEF) and programme-based budgeting (PBB) in order to promote the efficiency and performance of budget management. 1.53 The government began developing sectoral policies to meet the challenges of the economic crisis, transform the structure of the economy and reconcile social justice with growth. The APR Panel congratulates the government on the efforts it made to acquire these indispensable tools for promoting economic governance. Some sectors have developed strategies, policies and action plans. However, the absence of clear methodologies reflects poor coordination and limited interest in these tools in the process of programming and budgeting for government operations. Finally, including these operations in the MTEF and PBB will cause problems. 1.54 Furthermore, the quality of, and coherence between, macroeconomic policies and the strategies and plans that the sectors developed without involving the social stakeholders effectively, as well as the poor mastery of these tools, remain major challenges to ensuring their relevance and efficiency. There are no macroeconomic projections or logical links with sectoral strategies. This will not guarantee that the economic policies will be predictable or that they will be managed efficiently and transparently. 15