JEC's suggestions

In the light of our comments and further analysis of the stated policies in the 2002/2003 Budget, the JEC would like to make the following additional comments with respect to:

1. the measures which will help to give a boost to investment; and

2. the private sector's concern of the budget deficit of 6%.

1. Measures which will help to give a boost to investment

A - Multi-sector regulatory body for power, water and waste water

The setting up of the proposed multi-sectoral regulatory body for electricity, water and waste water must be accompanied simultaneously by a clear government policy on each of the sectors. For example, all the bagasse energy projects will not be implemented as long as government does not state clearly its policy on the issue. As a matter of fact, projects over Rs 1 billion are lined up.

B - Lower telecommunications cost

The access given to BPML for satellite connectivity should be extended to fiber optic connection through SAFE if we want to attract investment in a significant manner in the ICT sector. We are aware that a number of companies are having discussions with the appropriate bodies to reduce the proposed telecommunications tariffs. Government must take necessary policy decisions which would rapidly bring about substantial reductions in telecommunications costs.

C - Streamlining investment procedures

Streamlining investment procedures will imply that relevant Ministries will focus essentially on establishing policy guidelines in their respective sectors while the BOI will have as one of its important roles to accompany the entrepreneur from start to finish and will be empowered to give all necessary clearances on the basis of these guidelines. The dichotomy between the crafting of policies and the powers of implementation is a fundamental one and a clear strategic decision has to be made now.

D - Equity funds

The stated policy of encouraging the setting up of equity funds will be effective if an appropriate framework is being established to encourage such funds to operate. Furthermore, clear criteria and transparent guidelines with respect to project evaluation (for new projects) and share pricing (for existing companies) are essential to give confidence to entrepreneurs, shareholders and the market.

E - Integration of the economy, specifically the EPZ and non EPZ manufacturing sector

We welcome Government's intention to integrate the EPZ and non-EPZ sectors. This, we believe, will allow for greater interaction between these two important sectors of the economy. It will also ensure that all imported inputs are exempt from custom duty, uniform electricity and water tariffs are applicable and our manufacturing sector becomes competitive at the global level.

F - Revisiting the Non-Citizen (Property Restriction) Act as well as the Landlord and Tenant Act 1999

As mentioned in JEC's memorandum, the private sector is convinced that substantial economic growth can be achieved through the unlocking of the property market and allowing greater and easier access of foreigners to land acquisition, specially within the integrated resort schemes. Similarly the announced revision of the Landlord and Tenant Act 1999 will no doubt give a much needed boost to the property market.

G - Active participation of the private sector in PPP projects

The JEC welcomes the invitation of the Government made to the private sector to participate in the financing of PPP projects namely in infrastructure, ICT and the utilities. The participation of the private sector in PPP projects will also significantly help in reducing the high budget deficit.

In this context, we wish to suggest that a time-table be set for:

• the establishment of the PPP framework; and

• the preparation of a list of projects to be financed under PPP for the FY 2002/2003 and 2003/2004. The list which should be made public will create more investment space and allow for alternative funding of certain items presently provided for under the capital budget.

2. Budget deficit

The budget deficit which is expected to be around 6% of GDP for the FY 2002/2003 is still on the high side. As a result, debt servicing for 2002/2003 would reach Rs 8.3 billion, representing 28% of recurrent revenue. Notwithstanding the risk of revenue shortfall which could well be compensated by under expenditure, we believe that the token provision made for PRB payments in this financial year will become a major item for the financial year 2003/2004.

We would, accordingly, invite Government to consider the following options for the FY 2002/2003:-

i. the re-phasing of some projects; and

ii. the re-scheduling or alternative funding of certain items in the capital budget.

We believe that by taking appropriate policy measures with regard to recurrent expenditure and by postponing some of the capital projects, Government could "save" up to Rs 1 billion in public expenditure. This is equivalent to a reduction in budget deficit by 0.65% of GDP for the year FY 2002/2003, thus bringing the budget deficit to around 5.4% of GDP.

The above measure will show a strong determination of the Government to reduce public expenditure and to ensure fiscal discipline.

Conclusion

The JEC has, over the past few months, highlighted a number of structural difficulties to which the Mauritian economy is confronted. We subsequently have proposed a series of measures which we believe would substantially improve the overall investment climate.

We look forward to playing a very active role in the timely implementation of these measures and strongly wish that all stakeholders put their energy and drive in this joint endeavour to put Mauritius on a more modern and efficient economic path.

JEC
21 June 2002