| the joint mmm-psm electoral campaign presented the pro-
posed cabinet as a highly responsible group, ready to replace labour's
"tired old men" who had ruled since preindependence days. the
electoral manifesto promised to increase employment, raise mini-
mum wages, and provide more welfare. the socialist features of the
program were limited to a wealth tax that would affect only a small
group of the very rich, the nationalization of two money-losing sugar
mills, and the acquisition of a 50 percent share in the hotel industry. |
at the same time, the mmm pledged to promote free enterprise and to
attract private foreign investment.
in the 1982 election the mmm and the psm won all the parliamentary
seats. once in power, the new government concentrated on improving
macroeconomic management and relegated nationalization to a more
propitious time. this strategy of moderation won the mmm support from
a wide spectrum of mauritian opinion (and gained the government
foreign support), but it alienated the party's more radical wing. mea-
sures such as a proposed reduction in rice and flour subsidies and a
contemplated reduction in sugar export taxes caused widespread dissat-
isfaction. |
| personality conflicts and ethnic friction made the situation all
the more difficult. after nine months of mmm rule, paul berenger re-
signed from his post of minister of finance and took most of the mmm
deputies into the opposition. the mmm prime minister, aneerood
jugnauth, amalgamated his (mostly hindu) mmm followers and the psm
to form a new party, the mouvement socialiste mauricien (msm).
in 1983 jugnauth, unable to command a parliamentary majority, called
a general election, in which the msm was allied with the labour party
and with the pmsd. the mmm obtained 46 percent of the
popular vote, but it received only twenty-two parliamentary seats to
forty-eight for the msm and its allies.
members of the alliance shared a dislike for the mmm but otherwise
had little in common. |
| the ruling coalition represented a wide spectrum
of political opinion that was plagued by personal animosities and in later
years by scandals. yet, despite defections, it held together. the govern-
ment's popularity owed much to the increasing prosperity. grants and conces-
sionary loans were increasingly difficult to obtain, and commercial bank
terms hardened. the average interest rate on loans rose from 2.
in october 1979 the government signed a stand-by agreement with the
mf enabling mauritius to draw a total of sdr 73 million over a two-year
period. the agreement
specified a schedule for reducing the fiscal deficit, imposed limits on
government short- and medium-term borrowing, and called for a higher
discount rate and private credit ceilings. emergency relief measures prevented the
government from adhering to imf conditions, but because of the cir-
cumstances it was able to obtain a waiver, and the stand-by arrange-
ments were not interrupted. these agreements contained
detailed fiscal and monetary policy clauses and called for wage
restraint.
the cumulative effect of the austerity measures undertaken in the
early 1980s was quite dramatic. |
bank of mauritius, annual report, various issues.
after a further devaluation, the rupee was delinked from the sdr and
linked to a trade-weighted currency basket in february 1983. the agree-
ment called for a close monitoring of public sector investments, liberal-
ization of the economy, and structural reform. finally, in february 1985
the quotas were eliminated altogether, although some tariff duties were
raised to give additional protection to domestic import-substituting
industries.
there was also a partial relaxation of quantitative credit restraints,
although a complex formula was retained to decide how much credit
each bank would be permitted to extend. |
| the formula gave preference
to export-oriented industry and it discriminated against commercial
credit, thus acting as a restraint on imports. the number of personal income tax brackets was reduced from
eight to four, and the marginal rate applying to the top bracket was
lowered from 70 to 35 percent. tax revenue declined at first; but thanks
to improvements in the tax collection system, the initial dip was largely
made up within two years. one, signed by its chairman, dragoslav
avramovic, a senior adviser to the united nations conference on trade
and development (unctad), found that the sugar export tax penalized
large efficient units and recommended that export taxes be replaced by
a profit tax (see comnmission of inquiry on the sugar industry 1984b).
the other report, signed by the two mauritian members, stated that the
export tax should not be changed (see comnmission of inquiry on the
sugar industry 1984a).30 both reports called for the establishment of a
sugar authority. |
| this recommendation was immediately accepted. this move had been advo-
cated by the owners but opposed by workers, who, however, now
agreed to it on being guaranteed reemployment. measures were also
proposed to facilitate the transfer of land and to foster research and
development.
on the export tax issue, the government moved gradually in the
direction dictated by considerations of efficiency. once again, a
feasible compromise was found between economic efficiency and
political desirability.
export-oriented industrialization
the policy of fiscal balance, devaluation, and wage restraint improved
the competitive position of export-oriented manufacturing industries.
as of 1985 the minimum wage rate for male workers ceased to apply to
epz enterprises, making the hiring of men more profitable. henceforth, epz enterprises
ceased to be an almost exclusive enclave of women workers.
in 1985 the tax regime was changed to encourage the establishment of
more permanent enterprises. in contrast, the 1970 scheme, which pro-
vided a ten-year tax holiday followed by taxation at ordinary rates,
favored short-term projects that would cease operation at the end of the
exemption period. |
| the new scheme eliminated the tax holiday but
limited the profit tax to 15 percent. to encourage the reorientation of
import-substituting enterprises toward foreign markets, enterprises that
sold both at home and abroad were allowed to reduce corporate taxes in
line with the volume of their export business. somewhat par-
adoxically, the growing protectionism in united states and the eec
also worked in of . export constraints, voluntary or
otherwise, imposed on exporters (notably, hong kong) worked
in favor of whose exports did not as threaten the industrial
countries. to be , as mauritian textile and clothing industry
expanded, it too became subject to u. constraints, but retained free
access to eec. foreign capital was readily available, particularly from
hong kong investors who feared the consequences of forthcoming
transfer of over the colony and were attracted to
by the presence of community there.. .. |
| mariah heartbreaker remix |