Economic Governance and Management Chapter 4 country’s growth patterns and overcoming its vulnerability to external shocks. As the Country Self-Assessment Report (CSAR) indicated, recent experience has shown that “Mauritius, being an increasingly open economy, has suffered the full blast of the effects of the dismantling of the Multi-Fibre Agreement (MFA), the drastic cut in the guaranteed price of sugar under the Sugar Protocol, and the gradual elimination of trade barriers in the wake of globalisation. For instance, the export processing zone (EPZ) sector has lost one-third of its workforce between 2000 and 2006. The annual growth rate ebbed to 2.3 per cent in 2005. In 2003, unemployment was above 10 per cent, its highest level since 1987, and inflation in 2006 was estimated at 8.9 per cent, the highest level since 1994. With the decision of the EU to reduce the price of imported sugar from Mauritius by 36 per cent over the period 2006 – 2009 (representing an estimated Rs4 billion – €103 million – of lost revenue annually), the increasing oil and energy prices and the ongoing food crisis … the challenges currently facing Mauritius are daunting.” 162 379. Some of these indicators have deteriorated with the international financial and economic crisis. They therefore emphasise that it is necessary to address this challenge. 380. The second challenge facing Mauritius is its vision and image. Its vision is twofold: an open and market-led economy; and a knowledge-based and regional, if not world, service centre that will develop Mauritius into a duty free island. It is a beautiful vision, but it is not enough. It is necessary to have a clear vision developed through a process of building national consensus. The vision must then be converted into coherent operational strategies and programmes that will address the necessary and clearly defined structural changes that the vision requires for it to be successfully implemented. This strategic longterm perspective is missing as a guiding principle. 381. The third challenge is to maintain and consolidate the economic achievements and their social effects. The challenge can only be met by rethinking and implementing new ideas for diversifying the economy, so that it is less vulnerable, and by striving for more national and regional economic integration. A related issue is to develop the essential capacity to promote, maintain and develop the knowledge-based economy continuously. 382. The fourth set of issues and challenges is to recover and maintain high and sustained economic growth that is characterised by social, Chapter 4 Economic Governance and Management geographic and regional equity. The Country Review Mission (CRM) noted that Mauritius has achieved an average growth of more than 5 per cent over the last few decades. This is a remarkable feat. However, the current drastic decline in economic growth (see the economic indicators table on p x) shows that the people are losing whatever they gained socioeconomically. Moreover, there are wide social and geographic disparities in the way the national wealth is distributed. This leads to increasing social and geographical inequalities, especially in the case of Rodrigues Island. Planning the use of national land requires a strategy with several growth poles. They should be established so that their activities promote growth in the various regions and ensure that the national economic environment is integrated. 383. Increasing social and geographic inequalities are a latent source of conflict, as was experienced in 1999. This does not auger well for a country that thinks it has managed its sociocultural diversity well, unlike many other African states. Furthermore, the growth it should promote ought to be based on sectors that: (i) are potential growth areas capable of widening the country’s economic base; (ii) involve most of the people; and (iii) can ensure sustainable growth. 384. The country needs to continue its economic reforms. It also needs to ensure that it undertakes them for business profit, to develop the country and to distribute its socioeconomic dividends widely among the people and districts. 385. A related challenge is the issue of sustainable energy. Mauritius needs to increase its reliance on renewable sources of energy and reduce its dependence on, and vulnerability to, imported energy sources with their volatile prices. 386. The fifth challenge relates to the island nature of the country. Mauritius is a small, isolated island. This impedes development to some extent. Mauritius, however, is located between Africa and Asia, is part of Southern Africa and is a member of several African economic groupings. Thus, its position should promote its development instead and offer opportunities to develop a transit economy and even to expand into a commercial crossroad. 387. The sixth challenge is to build capacity continuously, especially the capacity to mobilise resources. The country still depends considerably on foreign direct investment (FDI) for financial and 163