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Archive for the ‘Political & Economic’ Category

Our Prime Minister’s visit to China during the last week has given a new dimension to the cooperation between the two countries. China has agreed to advance a credit of Rs 3.5 billions (around 50 million USD) over the next three years. “This agreement is of major significance to Mauritius,” said the PM, “as it marks China’s commitment towards Mauritius in this period of transition.”

The PM cherished the nearly trebled Chinese assistance compared to Rs 400 million (around 6 million USD) per year obtained previously.

This financial assistance will be vital in realizing a number of projects related to infrastructural development, which will include the construction of a fishing port, a new dam, a new link road from Verdun (village around the centre) to Terre Rouge (northern village near Port Louis) and a new town at Highlands (near the centre).

Other outcomes of the PM’s visit to the People’s Republic of China comprise promises for massive investment. Already one major group of companies, Shanxi Tianli Enterprises Group, has laid its footprints on the island with significant investment potential. The implantation of this group has necessitated the relocation of several small planters who earned their living for decades on the agricultural plot of land identified for allocation to the group.

In this period of difficult economic situation, with rising cost of living, opportunities like those from China and the discovery of potential hydrothermal sources in the territorial waters of Mauritius (which I mentioned yesterday) can only herald better days ahead. Provided they are managed judiciously.

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Just been listed in the Carnival of Financial Planning – July 12, 2007 Edition. This carnival as stated in the blog “focuses on efficient and sustainable personal financial planning practices that can lead to lifetime financial security”.

You’ll find posts about a wide range of finance issues from budgeting, debt management, estate planning, financial planning, financing a home, financing education, income, investing, retirement planning to savings and taxes.

Have a look and enjoy.

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The Mauritian Finance Minister delivered his budget speech on Friday 15 June. It was his second speech since the “social alliance” (comprising multiple political parties including the Labour party, Parti Mauricien Xavier Duval, Mouvement Republicain, Mouvement Socialiste Democrate and Parti Mauricien Social Democrate) is in power.

He depicted a sound economic management under his ministership, which has resulted in an “early harvest” (meaning early economic recovery) thanks to his so-called bold measures taken last year. He even announced duty remissions on certain electronic devices used mainly by women: hair driers, utensil washing machines, microwave ovens and others.

People were still recuperating when five days later, on 20 June, they ended up in the hypers… only to witness soaring prices of some basic commodities, namely milk – all brands. Some brands which had disappeared from the stalls just before the budget day reappeared out of magic. The price of rice soared too. These rises were explained by “external factors” (appreciation of foreign exchange, drought in Australia, etc), an argument the common people swallowed although somewhat bitter.

Intense parliamentary debates followed the speech during two weeks. They were centered on the foreign direct investments which herald to some extent the “early harvest” as propounded by the minister in spite of contradictory arguments brought by the opposition team. Several questions arose, while members of the government, as could obviously be anticipated, took sides of their colleague minister and defended his policies and strategies with vehemence. “The 2007-2008 budget wouldn’t have been possible without the 2006-2007 (last year’s) budget,” chimed the minister. All to sum up a good budget year ahead, much to the satisfaction of the common people.

The debates ended on Friday last, that is on 29 June. Today it was time for the Automatic Pricing Mechanism panel to deliberate on the price of petroleum products. This panel meets on a quarterly basis to readjust the price of petroleum, no more than 20% change based on current world trend. Guess what? It announced an increase in the price of petrol and fuel oil by about 20%; while diesel increased by about 5%. External factors again (Middle East crisis, strike in Nigeria, high price in the world market), was the explanation given by the Chairman of the State Trading Corporation, the body that imports petroleum products.

Whatever the reason, the public has to pay… or perish. The cascade effects are yet to be anticipated. You can never know how sour a pill is until all the sweet coating is sucked up.

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Budget Day

It was “budget day” today; the presentation of the national budget for the year 2007-2008. It’s a tradition now to have it live on TV and radio. So I rushed back home after work. I didn’t want to miss it. Nobody seemed either as the traffic was particularly jammed this afternoon. I managed to make it just in time. It was exactly 4.30 pm when I set my feet at the doorstep. Sarah had already switched on the TV. I could hear the national anthem nearly drawing to its end. The Parliament was just sitting.

The Minister of Finance shot off for a nearly two-hour speech with an excellent use of sweet expressions amidst some announcements that would otherwise appear sour. That’s the usual scenario at each presentation. And you can see his fellow colleagues applauding him interruptedly at every popular announcement, while the members of the opposition stay silent, serious and attentive.

It seemed to be a continuation of last year’s initiatives and it was hard to single out any new (indeed favorable) measure, except the accelerated corporate tax incentive, and some minor benefits to really needy. More and more public private partnership, implying increased capitalism. No mention of any declared price control, special employment incentives or enhanced security measures for the protection of the vulnerable. Those were some of the “on-the-spot” reactions of a couple of trade unionists who chose to boycott the budget speech. The main opposition party mouthpieces chimed in the same line.

I’m tempted to say that year in year out, the budget presentation is a combination of the same set of nice announcements quite apart from what really happens in practice afterwards. Last year everyone was happy with the income tax incentives as the Minister announced exemption of some 40 000 taxpayers from direct taxation. What ensued afterwards is only to make one lament on the decisions. Many would have preferred direct tax payments than the uncontrolled indirect taxation which nearly doubled prices of some basic commodities, like milk, rice, flour, lentils, butter. The prices increased practically every month, which resulted in a two-digit inflation rate.

We cannot doubt the Minister’s word that the measures aim at curbing deficits and favouring economic growth as the country has started to reap the benefits of tight measures taken last year. Let’s hope this year will be better.

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Although the extraction rate is expected to be higher as compared to last year, the sugar production will be much lower than usual. The higher extraction would not seem to “fully compensate for the anticipated reduced cane production”, as mentioned in the last monthly bulletin of the Mauritius Sugar Industry Research Institute (MSIRI). The harvest is expected to yield around 465 000 tons of sugar this year. It represents a shortfall of some 50 000 tons with respect to our commitment towards the European market under the Sugar Protocol. And we have still to honor another commitment vis-à-vis the USA.

Last year with a production of some 506 000 tons the shortfall was about 18 000 tons. These figures are much less than what was obtained some years back when the production was over 600 000 tons.

But this decrease in production was forecast by the MSIRI. The cane elongation have been observed to be inferior than normal and also with regard to the previous year as stated in the bulletin: “island-wise the cumulative elongation of 162,1 cms for the 2007 crop was inferior to that of the 2006 crop by 21,8 cm (11,8 %) and to the normal by 26,8 cm (14,2 %).

As regards the final extraction the MSIRI notes that “sucrose accumulation is higher than that at the same period last year. Despite the fact that further ripening is heavily dependent on forthcoming weather, indications at this stage are for a higher final extraction rate this year compared to 2006 “.

With the end of the sugar protocol reforms in the sugar sector have become imperative and several acres of land have been converted into residential or commercial estates with the result that less land is under sugar cultivation. This trend is expected to continue as we shift further into the reform process already initiated.

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“Sugar is the most economic and most efficient source of production of ethanol.” That was a statement made by the Mauritian Minister of Agro-Industry at the opening ceremony of the 31st session of the International Sugar Council (ISC) at the International Conference centre at Grand Bay.

The Minister’s statement is pertinent at a moment when our sugar industry is facing new challenges. The Sugar Protocol, which guaranteed a market and a favourable price, is no longer valid. Alternative uses have become all the more imperative if we want to preserve our sugar-based economy. The poduction of ethanol is one such option in limiting the use of fossil fuel which generate greenhouse gases with detrimental impacts on climate change.

“In that context,” said the Minister, “Mauritius along with many other ACP developing countries is currently implementing Multi Annual Adaptation Strategies to sustain the sugar industry in the light of the EU reforms. These strategies that have been put forward are basically aimed at operating the sugar industry on the model of a cluster producing sugar, energy and ethanol in flexi-factories to reduce costs, increase revenue, and optimize use of by-products “.

Participants from 81 countries will continue to reflect on the theme ” Sugarcane – an Engine for Sustainable Development ” until Thursday 31 May.

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At its weekly meeting today, the Cabinet approved the recommendations made by the NPC. The Finance Minister stated it’ll cost more than Rs 3.5 billions to implement the recommendations. He’s is particularly concerned about the payment capacity of small enterprises who are facing fierce competitions and evolving challenges. Although he believes that some sectors can pay more than the recommended amount, he’s been all the time in favour of a compensation based on productivity and capacity to pay rather than on the only inflationary rate index.

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