Mauritius Breaks Out of Africa’s Poverty : Free Export Zone Works Economic Wonders for Tiny Island

In the bad old days of this island, when sugar was king, jobs were scarce and people with means were moving away, Professor E. Lim Fat often visited his kin in the Far East.

During his travels, the Mauritian academic-capitalist asked himself, as he watched the unfolding economic wonders of Hong Kong, Taiwan and Singapore, why those countries were racing toward high-tech prosperity, while his country was stuck in the pre-industrial mud, cursed by unemployment and dependent on sugar cane.

“It struck me so hard. I said to myself, ‘Look at what those chaps are doing! If they can do it, we can do it,’ ” the professor recalled.

Home from one of his vacations, Lim Fat put his thoughts into an academic paper. It turned out to be a pivotal document in the history of his remote homeland.

In it, Lim Fat argued that Mauritius--an island nation smaller than Rhode Island, with 1 million people and isolated in the Indian Ocean about 1,300 miles from the African mainland--could become Africa’s Hong Kong.

He called on Mauritius to adapt an idea that the Far East had wrested from the Irish: a free zone for generation of exports. He asked his government to create a zone where foreign investors would pay no income taxes or duties, where they would be allowed to take all their profits home and where they would have easy access to the abundant resource that was threatening to sink Mauritius: unemployed people desperate enough to work for one-quarter the going wage in Hong Kong.

The government here did as the professor prescribed, and Lim Fat’s holiday musings have become the holy writ for an economic miracle. Lured by the zone, textile entrepreneurs have flocked to this island, bearing sewing machines.

In the last decade, Mauritius has been transformed by manufacturing-fueled growth of a kind that is all but unknown to the floundering economies of sub-Saharan Africa.

Has Upscale Worries

The government here says that unemployment, which ran at 23% six years ago, no longer exists. The economy has been growing by 5% to 7% annually for four years. This compares to negative growth in the countries of sub-Saharan Africa. In manufacturing, the rate of growth here since 1980 has been nearly double that of the United States.

As nearby Africa wrestles with declining food production, unpayable foreign debts and long-playing tribal wars, this subtropical island of white beaches and towering volcanic mountains has been propelled by prosperity toward worries that are decidedly upscale.

A senior politician complained recently of a “crisis” that many mainland African leaders would likely find incomprehensible. Ray Virahsawmy, a member of the Mauritian parliament and chief whip of the ruling party, lamented that “ever-increasing material consumption” was threatening “the Mauritius soul.”

While Mauritius may now exist in a different economic world from that of mainland Africa, it is a world to which those poor countries aspire. Officials show up regularly for tours of the free zone.

They attend seminars on how free enterprise and foreign investment, if liberated from government corruption and red tape, can work wonders. At least 10 countries in black Africa have or are planning to establish zones similar to the Mauritian model. Mauritian entrepreneurs are in demand across Africa as consultants.

What this island nation has succeeded in doing is precisely what the World Bank, the International Monetary Fund and Western donor countries, including the United States, have prescribed for all of sub-Saharan Africa: shifting from dependence on export of primary commodities to a mixed economy based, in part, on small-scale manufacturing.

About 30 African countries have signed on in recent years for this free-market cure, which demands radical currency devaluation, reduced regulation of business and politically risky budget cuts.

Sickness Is Worse

Yet, according to an analysis last month by the United Nations, most of Africa has little to show for its pain. It remains more dependent on primary commodities, such as coffee, cocoa or oil, than any other region. Prices for these commodities have slipped as foreign debts continue to mount. At the same time, per-capita food production is falling and personal income has declined 4.2% in the past two years.

The U.N. study concluded that, despite “courageous and commendable” reforms, Africa’s economic sickness is worse now than it was three years ago.

The conspicuous exception to that grim diagnosis is here, where tens of thousands of sewing machines are humming, where new industrial ventures are cutting diamonds, making surgical gloves and designing jewelry, and where politicians are free to fret about the burden of too much wealth on the national psyche.

It would be a mistake, however, to view Mauritius as part of black Africa. In a number of important ways, the relevance of this island as a role model for the world’s poorest continent is limited. For starters, most of its inhabitants are not Africans.

More than half are descendants of indentured laborers who were brought here from India by the British in the 19th Century to raise sugar cane. The rest is a jumble of races whose forebears came from Africa, China and Europe.

There are no indigenous Mauritians. The island was ruled first by the Dutch, then the French and finally by the British before it gained independence in 1968 as a member of the Commonwealth. Before the island was discovered in 1627, its most notable inhabitant was the flightless, slow-witted dodo bird. Dutchmen and their dogs quickly rendered it extinct.

Mauritius now has ethnic and religious politics, but it has none of the ancient tribal hatreds that continue to foment massacres and wars in parts of Africa. The government here has no foreign enemies, no indigenous rebel movement and, therefore, no need for an army. Unlike nearly every country in black Africa, this island has an effective birth-control program. It has cut annual population growth to less than 1%.

Has a Free Press

Most significantly, perhaps, the Westminster-style government, in contrast with the dictatorial regimes that dominate much of black Africa, is actually beholden to voters.

There is an active opposition party and a free press that, on occasion, refers to Prime Minister Aneerood Jugnauth, a principal architect of the economic boom, as a “mule.”

Among the 47 countries in Africa that have gained their independence in the past three decades, Mauritius is the only one where leaders have been removed in peaceful elections.

The people of this country acknowledge their profound differences from mainland Africa, but they say there is much that the continent can learn from prosperity here.

“The mentality toward business is different here. It is something that has to be adopted in Africa. There, the politicians want to control everything,” said Phillipe Chan Kin, a former senior official in the Ministry of Trade and now an executive with Textile Industries Ltd., a Hong Kong firm that is one of the largest employers on the island.

“You won’t get investors investing in a country where they don’t have anything to say,” said Chan Kin. “I don’t see a Hong Kong investor putting in his money and not being able to control his business.”

Indeed, the performance thus far of export zones in mainland Africa has been dismal. According to Chan Kin, chairman of the Mauritius Export Processing Zone Assn., all of the duty-free zones in Africa together “produce less than one-third of what we export here.”

Mauritian business leaders talk endlessly about government-sanctioned corruption that they say hobbles Africa’s efforts to attract foreign investments. World Bank figures, which show that sub-Saharan Africa has by far the lowest level of new foreign investment in the world, support their claims.

“Paying off people takes a lot of time, and the export business has to operate very fast. Businessmen, of course, are prepared to bribe. But they are scared in Africa about when it is going to stop,” said Lim Fat, 67, the retired engineering professor who now owns three shirt-making factories here.

A Working Democracy

Lim Fat, who has traveled widely in Africa and has worked as a consultant in several West African countries, said that in any given African country, “The No. 1 and No. 3 in the Ministry of Trade may be in my pay, taking a manageable 5% of my profits. But what about No. 2? He may slow me down to the point where I can’t make any money.”

Echoing the sentiments of a half-dozen leading businessmen interviewed here, Lim Fat said that the biggest advantage in Mauritius is that it is a working democracy.

“Our prime minister is smart enough to realize that if he creates jobs, he will be reelected. If he does not, he will be kicked out,” Lim Fat said.

The Mauritius miracle, however, has relied as much on good timing as on smart government. In the early 1980s, when unemployment was out of control and one-fifth of the population was trying to emigrate, textile entrepreneurs in distant Hong Kong were getting skittish about eventual passage to Chinese sovereignty. They looked abroad for cheap labor and a stable political environment. Mauritius was desperately trying to attract investors.

A mutually beneficial marriage was made shortly after the 1982 visit to Hong Kong of a Mauritian trade delegation led by Prime Minister Jugnauth.

Besides fortuitous timing, Mauritius has 25,000 ethnic Chinese citizens, descendants of shopkeepers who fled China around the turn of the century. About three-quarters of foreign investment in the zone comes from Hong Kong.

“The Hong Kong investor who comes here does not feel so much like a stranger as he would in Africa,” said Chan Kin, the former trade official who manages a Hong Kong textile firm here.

“He sees Chinese faces, he eats Chinese food, his wife has someone to talk to.”