Report No. 3127-MAS Mauritius D1L Urban Sector Memorandum March 1981 Urban Projects Department FOR OFFICIALUSEONLY Document of the World Bank This document hasa restricted distribution and maybe used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Transcript
Report No. 3127-MAS
Mauritius D1LUrban Sector Memorandum
March 1981
Urban Projects Department
FOR OFFICIAL USE ONLY
Document of the World Bank
This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may not otherwisebe disclosed without World Bank authorization.
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Currency
Annual Average 1 Rupee 1 US$Annual Average = 1 US$ = 1 Rupee
1970 0.1562 6.4017Feb. 1980 0.1308 7.6443
Measures
Hectare (ha) = 2.47 acresArpent = 1.043 acres
Glossary of Abbreviations
CEB = Central Electricity BoardCHA = Central Housing AuthorityCWA = Central Water AuthorityCSO = Central Statistical OfficeDBM = Development Bank of MauritiusDWC = Development Works CorporationEPZ = Export Processing ZoneGOM = Government of MauritiusGDFCF = Gross Domestic Fixed Capital FormationMATIM = Mission d'Amenagement du Territoire
a l'ile MauriceMCI Ministry of Commerce and IndustryMHC = Mauritius Housing CorporationMOW = Ministry of WorksNPDP = National Physical Development PlanPADCO = Planning and Development Collaborative OverseasRDA = Regional Development AuthoritySCB = State Commercial BankSSE = Small Scale EnterprisesTDA = Tea Development AuthorityTPT = "Travail Pour Tous" (government work programs)
FOR OFFICIAL USE ONLY
MAURITIUS
URBAN SECTOR MEMORANDUM
Table of Contents
Page
SUMMARY AND CONCLUSIONS ....... ................. ..................... i
I. CONTEXT ........................................................ 1
A. Demographic Characteristics .................... ... 1........ B. Economic Situation ....... ........................... 2C. Employment..5C.Emlymnt .............................................................5D. Household Income and Expenditure ..... ..................... 5
II. URBAN DEVELOPMENT ....... ................. ...................... 10
A. Land ..................................................... 11B. Basic Needs and Service Standards ......................... 12C. Current Urban Profile . .................................... 14D. Government Response: the National
Physical Development Plan (NPDP) ......................... 15E. Strengths of NPDP ......................................... 19F. Finance and Implementation Constraints ..................... 20
III. HOUSING ........................................................ 24
A. Housing Stock, Production and Need ........................ 24B. Investment in Housing ..................................... 27C. Rent Controls ............................................. 28D. Housing Finance and Effective Demand ....................... 29E. Role of the Public Sector ................................. 30
IV. URBAN DEVELOPMENT STRATEGY AND INSTRUMENTS ......... .. .......... 33
A. Elements of a Comprehensive Strategy .......... .. ........... 33B. Plan Implementation and Finance ..... ....................... 34C. Employment ................................................. 38D. Housing .................................................... 41E. Immediate Priorities ....................................... 45
This report is based on the findings of a mission which visited Mauritiusin August 1979 and further work during preparation and appraisal of the UrbanRehabilitation and Development Project (Report No. 3100-MAS). The missionconsisted of Messrs. N. Lethbridge, F. Kahnert, J. Courtney, Ms. J. Kozlowski,and B. Gouveia and Mr. H. Levinson (Consultants). Mr. Z. Shalizi and Ms. S.Snell assisted in the writing of the report which was prepared by Mrs. B.Blake and Mrs. Parul Paka, edited and compiled by Betty Davis.
This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.
Table of Contents (Continued)
Page
Tables
1.1 Income Distribution, 1979 ................................. 61.2 Absolute Poverty Level .................................... 81.3 Relative Poverty, 1979 .................................... 81.4 Expenditure Distribution, 1979 ............................ 92.1 Land Prices ............................................... 133.1 Housing Need 1978-1992, Various Assumptions .... ........... 263.2 Housing Needs/Income Distribution and Affordable Costs .... 31
Annexes
Annex 1 Employment in MauritiusAnnex 2 Working Papers Available in Project File
Map
IBRD 15592 Mauritius
Chart
Inequality of Incomes 1975 and 1979 (WE 22394)
(i)
SUMMARY AND CONCLUSIONS
1. Mauritius is a highly urbanized and densely populated island witha well-developed and well-distributed infrastructure and service network.Sixty-five percent of its 940,000 residents live in urban settlements whichnow cover 8% of net usable land and which are beginning to encroach on economi-cally vital sugar-producing land. Because expansion of any particular landuse must be at the expense of an existing use, urban development, overalleconomic development, and spatial development in Mauritius are interrelatedto a far greater degree than for many economies. Past development of land,infrastructure, basic services and shelter, and future opportunities forgrowth of employment and production, point to a single overriding concern inthe immediate- and longer-term: systematic and controlled servicing ofoptimally located new residential and industrial sites.
2. The five-city conurbation of which Port Louis is the heart houseshalf of Mauritius 940,000 residents (418,000). This ratio has remainedstable since 1962 indicating that rural-urban migration is not a major pheno-menon. Another 15% of the population (122,000 persons), live in the proposednine primary and secondary growth centers.
3. Government's explicit policy of income redistribution throughspending on basic services must receive much of the credit for the low levelof absolute urban poverty in Mauritius, and for the relatively high leveland accessibility to the poor of basic urban and social services. Theabsence of a large backlog in demand means that future investment requirementcan focus on new demand.
4. For different reasons, backlog is not a problem in the sheltersector. About 80% of existing stock is of sound construction and about 75% isless than 20 years old; there is no evidence of an obvious or large housingshortage. Investment in residential construction, 80% private, has risen tovery high levels in recent years (13% of aggregate domestic demand and 35% ofinvestment) because of the increasing adoption of cyclone-proof buildingstandards, increased construction costs, and the tendency to invest in newbuilding rather than in maintenance of existing stock--a tendency fostered bya lack of alternative investments for domestic savings and by rent controls.The rate of investment is undoubtedly higher than warranted by current economicconditions, and lack of housing credit and high construction cost have limitedthe poor-s access to new housing.
5. Thus, for urban services and shelter, the issue is how to providefor new growth, particularly for the poor. In the case of services, theconstraints are budgetary, institutional and political, whereas for shelter,they are mainly locational: where the growth should take place. Despitestagnation in the sugar revenues in the late 1970s following a period ofhigh sugar prices, the Government has maintained high levels of spendingon subsidies of basic food stuffs and basic urban services which have
(ii)
contributed heavily to a financing gap and a balance of payments deficit ofalarming proportions. Current expenditure on social services accounts for44% of the total; subsidies on food and water for 10%. Prospects formaintaining present relatively high levels of services depend on identifyingnew sources of revenue, particularly local property taxes and other revenuesbased on user charges. But district councils outside the main conurbationwhere most new growth will be occurring have no power to tax and increasesin user charges, for example for water, are politically unpopular.
6. In the housing sector, while reducing inequities of governmentsubsidy and inefficiencies for rent control are important issues, theconstraint for future provision of housing is primarily one of land. ThePort Louis conurbation is fully developed if not overcrowded and expansionto adjoining areas threatens to encroach on some of the good sugar landsThe most cost-effective locations for new residential development in terms ofincremental infrastructure costs, particularly water, are located away fromthe main conurbation.
7. The land constraint applies equally well to sites for new industrialdevelopment, which must bear the brunt of absorbing 120,000 new entrants tothe labor force between now and 1990, and of sustaining economic growth.Growth is expected to be less than 1% this year with a slow rise thereafter.Prospects for growth in sugar and tourism, both important sources of growth inrecent years, are limited. Despite the need to reduce economic dependency onsugar, it will remain vital to the economy--it generates 70% of exportsand 30% of employment. Therefore, sugar land, now 58% of total usable land,must be protected.
8. Pressure on land from industrial and residential developments hasalready driven up the price of unserviced land at a rate faster than anyitem in the economy. Land prices in parts of the conurbation are 10-15 timeshigher than in 1967, and the price of agricultural land suited to urbanizationis approaching that of already developed land in Port Louis. Eighty per centof the land is privately owned and ownership is highly concentrated. Thefinancial resources for conversion to non-agricultural uses are unlikely tobe available if most of this land must be publicly purchased.
9. GOM½s response to the competition for scarce land has been todevelop a 60-year physical development strategy for the island (1972-2032),recently adopted by Government in the form of the National Physical Develop-ment Plan (NPDP). It has met with widespread approval and the support ofalmost all interest groups, including the private industrial sector. Itprovides long-term locational guidance, sound land use criteria, snd a pre-ferred land use configuration as well as valuable economic and physicalplanning data and a set of recommendations. Major recommendations include adesignation of protected agricultural and tourist areas, limits on growthalong the axis of the main conurbation, and designation of three major and sixsecondary centers to absorb 434,000 of the estimated 660,000 increase inpopulation from 1980 to the year 2032.
(iii)
These nine growth centers would quadruple in size and their share of populationwould double over 1972 levels, while the Port Louis conurbation would increasein population by two-thirds and its share would drop to 45% of the totalpopulation.
10. If implementation of the NPDP is not accelerated soon, its recommen-dations will be overtaken by events. For example, employment in Port Louishad in 1979 already reached the recommended ceiling of 110,000. But access tothe report by other ministries has been restricted, and planned governmenthousing and water investment are not directed to the recommended growth poles.Since annual government budget allocations are made by sectoral ministries andsince virtually all urban social services are centrally administered byparastatals or ministries, in the absence of a concerted effort to disseminatethe NPDP and integrate economic and spatial planning, government spending willcontinue to reinforce the spatial status quo.
11. A further constraint to realization of the NPDP goals is the limitedautonomy of the councils governing the nine growth centers designated forrapid growth to meet new demand with locally generated revenues. Even atpresent these authorities cannot afford to employ the staff nor operatethe equipment necessary to perform their limited functions. The centraliza-tion of urban services administration and the financing of these services andof local government budgets through general revenues preclude any effectivefeedback which would permit investment to lead and pace local development.
12. This report presents five main strategic or policy recommendationsto respond to the situation described above:
(a) better coordination of economic and physical planning;
(b) local government should be given adequate revenue-generatingauthority to manage growth;
(c) land control and urban financing mechanisms should be designedto recover a greater share of development and operating coststhereby reducing government deficits;
(d) GOM should establish or develop one or more institutions toacquire and develop land for urban uses;
(e) GOM should reduce subsidies to the housing stock, improveaccess of the poor to housing, and encourage better use ofcurrent housing stock.
13. A series of specific actions to carry out these recommendationsare also proposed:
(a) integration of physical and economic planning under one ministry;
(iv)
(b) creation of an NPDP implementation cell;
(c) specific government investments in growth centers;
(d) develop or establish a land developer agency and/or a land bankagency;
(e) matching of revenue authority with expenditure responsibilityat central and local government levels;
(f) increasing local government revenues;
(g) use of export industry to disperse employment location;
(h) improved industrial estate management;
(i) specific measures to realize the potential for creation ofemployment and output of export industry and of smallenterprises;
(j) a range of transport-related measures including improvements topublic transport, alleviation of congestion in Port Louis, improvedlabor productivity in the port, airport expansion, and directingnew highway investment to support new growth centers.
(k) a range of housing sector reforms, primarily elimination ofgovernment subsidies, increasing the government housingcorporation mortgage rates to conform with market rates,increasing the volume of mortgage lending, particularly tolow- and middle-class groups, and discarding universal single-family occupancy as a goal in favor of better maintenance andextension of current stock, which will require rent controlreform.
14. The report closes with a summary of proposed World Bank strategyin the urban sector in Mauritius and how related technical assistance canpromote implementation of coordinated urban land development. The proposedfirst project includes measures to increase mortgage credit to low-incomegroups, to implement sound and replicable practices for the provision ofutilities, urbanized land and housing in existing and designated growthcenters while reducing government housing subsidies, to improve public trans-port and transport planning, to establish a Plan Implementation Cell, andto carry out an island-wide reassessment of property values. Technicalassistance in the course of this project can lay the groundwork for creationof a land developer agency, establishment of land development policies, reformof local government, and can identify and prepare a follow-on investmentpackage intended for external financing based on development of an NPDP-designated growth center. Employment-related issues such as improvement inport management and industrial estate management could also be addressed.
I. CONTEXT
A. Demographic Characteristics
1.01 Mauritius is an island community of 940,000 persons living in anarea of 720 square miles yielding a population density which is one of thehighest in the world. The population is of varied origin. According to1972 statistics, its composition is as follows:
European and Creole 28.4%
Hindus ) : Indo-Mauritians 52.4%Muslims) noMarins16.5%Chinese : Sino Mauritians 2.7%
100.0%
A small number of the Franco-Mauritians (Europeans) own almost all the sugarplantations, run most of the hotels and importing houses, and are moving intothe manufacturing sector. Indo-Mauritians (Hindus and Muslims) work mainlyon the estates, own small plantations and staff most of the civil service.Creoles of mixed blood work in the port, as fishermenpand in the serviceindustries. Much of the retail business is run by those of Chinese origin.
1.02 The 1972 Census gave the population as 826,199 with a household sizeof 5.3 (with 2.5 adults and 2.8 children per household). People under 20 yearsof age accounted for 53% of the population, a proportion which is projected todecline to 39% by 1995. As a result it may be calculated that the householdsize will fall to 4.0 by 1995: 2.5 adults and 1.5 children. 1/ Estimated1980 population is 940,000 and continued steady growth at the current rateof 1.9% yields 1.1 million in 1990 and 1.3 million in 2000. 2/
1.03 Originally, population growth was due to imported labor for sugarplantations and in some early years deaths exceeded births. Not until afterthe Second World War was there any noticeable rise in the natural rate ofpopulation growth. Eradication of malaria and improved health services meantthe crude death rate fell from 28 per thousand in 1945 to 11 per thousand in1960. Population grew by 3% from 420,000 in 1945 to 645,000 in 1960. At thattime, projections suggested that the population would be 3 million by 2000 anda family planning effort was launched. This has been highly successful: thepercentage of women of childbearing age participating in the family planning
1/ These figures yield the following straight line trend in household size:
1972 1978 1984 1990 19955.3 5.0 4.5 4.7 4.0
2/ Sources vary in their projections: see Working Paper 1.
program rose from 2% in 1966 to 20% in 1970 and 32% in 1973. The birth rate,nearly 50 per thousand in 1950, had fallen to 25 per thousand in 1975. From1960 to 1976 the population has increased by only 1.9% per year reaching856,500 by 1975. The gross reproduction rate has fallen from 2.87 to 1.67.
1.04 Gross densities are around two persons per acre, but excluding landunder sugar cultivation and other undevelopable land (such as mountains),densities are very high at 25 per acre. Almost 50% of the population (47.5%in 1972) lives in urban-designated areas, the five municipalities which makeup the Port Louis-Plaines Wilhems conurbation (Port Louis, Beau Bassin,Phoenix-Vacoas, Quatre Bornes, Curepipe). This ratio has hardly changed since1962, indicating that rural/urban migration is not a major phenomenon. On theother hand, creation of job opportunities in and around Port Louis hasbeen accompanied by increased commuting. About 40% of the Port Louis workforce are commuters. Although the 1972 census showed no signs of populationmovement away from the municipal areas, it is probable that some has occurredsince then. Land outside these areas is cheaper and not subject to tax andnew employment is to be found around rather than in the conurbation. This hasresulted in the establishment of a few shanty settlements.
1.05 Despite the reduced rate of population growth, absolute growth willcontinue to create demand pressure for jobs, services and land in Mauritius.These pressures are likely to be felt, particularly over the next ten years,because household formation and labor force growth still reflect earlier andhigher rates of overall population growth. Therefore, in the medium term,demand for jobs, urbanized land and services, both industrial and residential,will grow faster than the population, and demographic projections point to thestrategic importance of employment creation and the provision of new housingand urban services on an island-wide basis.
B. Economic Situation
Evolution Since 1970
1.06 Mauritius is an exceedingly open economy: imports are about 73% ofGDP. Sugar is the dominant sector in terms of exports (almost 70%), employ-ment (about 30%), land use (58%) and as a source of public revenue and privateinvestment. Over the last ten years or so the country has successfully pur-sued policies of industrialization through export promotion, welfare programsand social services. The basis for these measures has been high sugar product-ivity and a period of high sugar prices in the early 1970s. Lower relativeprices for sugar during the late 1970s in the face of continued high governmentspending on diversification and services have created a severe financing gapand a balance of payments deficit of large proportions.
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1.07 Since 1976, the economic situation has been dominated by problemsof external payments imbalance and overall fiscal deficits. In large partthese circumstances have been caused by the failure of domestic expenditures,and in particular government expenditure, to adjust to changed externalconditions. Government expenditure continued to grow even after the sugarsector stagnated with a concomitant relative decline of government revenues.To finance these deficits, now running at about 15% of GDP, monetary policyhas been dominated by the need to persuade commercial banks to absorb debt,thereby limiting commercial bank credit to the private sector.
1.08 The ratio of consumption to GDP fell to about 60-69% during thesugar boom, but has since increased steadily to more than 77% in 1979. Ofthis, government consumption as a percentage of GDP has increased from about12% in 1974 to almost 20% in 1978 and for the first time foreign borrowing hasbeen used to finance current expenditure.
1.09 Government spending has risen rapidly during the past ten yearscompared to revenues and to GDP. In 1972 current expenditure was about 24% ofGDP and in line with revenues; by 1979 current expenditures reached almost32%, and revenues 27%, leaving a current account deficit of 5%. Overall,including capital expenditure, government deficit is about 53% of totalexpenditure. Current expenditure on social services accounts for 44% of thetotal; subsidies on food and water alone account for 10%.
1.10 Revenues derive principally from import duties (31%) and incometaxes (including corporation tax), sugar export taxes and some non-taxrevenues (principally fees and licenses). Revenues from the personal incometax (which is very progressive) and non-tax revenues are a declining proportionof total receipts and so government programs are being increasingly financedfrom non-progressive and non-user-related sources and from borrowings.Although the total tax burden is high (at around 25% of GDP), netting outsubsidies on water, food and fertilizer reduces it to about 21%. Propertytaxes, which accrue to municipal councils, have also declined markedly and,as a result, municipal services are increasingly financed from general taxrevenues.
1.11 The continued growth in aggregate expenditure is also explained bythe maintenance of high levels of investment in Mauritius. The ratio of GDFCFto GDP which had been typically around 18% until 1971, increased during thesugar boom to reach 40% in 1976 where it has remained, with a modest increasesince (1979 estimate: 41%).
1.12 The composition of investment has reflected the stagnation of sugarand agriculture and increased spending on government services and housing.The share of investment going toward agriculture has declined to about 6%while that for residential construction increased from about 20% in 1972to a present level of 35%. Total investment in buildings (residential andnon-residential) now accounts for about half of GDFCF (48%) and indicatesa lack of alternative, attractive investment opportunities and a shift fromtraditional structure to cyclone-resistant structures. The share of investmentgoing to manufacturing, about 26% in 1974-76, has since declined to about 20%.
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1.13 GOM's capital budget includes projects implemented by regularministries and those carried out by parastatal bodies such as the DevelopmentBank of Mauritius (DBM), the Central Electricity Board (CEB), the CentralWater Authority (CWA) and the Central Housing Authority (CHA). Between1973-74 and 1977/78, capital expenditure increased by 283% in current termsand 120% in real terms. Public capital expenditure as a percentage ofGDP has also grown; the ratio rose rapidly and now stands at 11% of GDP (or30% of GDFCF), compared to an average of 7.3% in the early 1970s. The propor-tion of transfer to parastatals in the capital budget has increased from aless than 20% average in the early 1970s to over 30% currently, reflectingincreasing dependence on central government for both loans and grants.In the case of CWA, subventions are also made from the recurrent budgetto cover its operating losses.
Current Situation
1.14 In October 1979, GOM resorted to an IMF standby arrangement whichincluded a 23% devaluation and reductions in food subsidies, governmentspending and increased revenue measures (primarily through trade taxes). As aresult, the 5-year plan (1980-85) has been abandoned and a new 2-year plan hasbeen prepared. Growth is expected to be less than 1% this year and to riseslowly thereafter. These severe economic problems were exacerbated by aparticularly savage season of cyclones in the summer of 1979-80 in whichextensive damage was caused to housing, infrastructure (mainly sewerage) andto food and sugar crops.
1.15 A reassessment of public spending priorities is under way butgovernment resources remain severely constrained. On the revenue side thereis a need to reduce the dependency of public expenditure on volatile earningsfrom sugar and measures to link revenue authority (or source) more directlyto expenditure type and responsibility are being examined. An obvious areafor reassessment of government spending will be in housing policies, given thehigh prevailing rates of investment in housing and the need to reduce overallpublic spending.
1.16 In the longer term, the island's progress will be determined by itssuccess in: (i) diversifying exports and production to depend less on sugar and(ii) in absorbing an additional 120,000 new entrants to the labor force betweennow and 1990. Thus, the development of Mauritius is contingent on its abilityto successfully oversee a major effort at employment creation, while prudentlymanaging the public budget and external payments balance. In an island withlimited unused land, sound economic management is impossible without soundland use management, especially given the need to develop more land for urbansettlements and nonagricultural production without displacing the currentlyindispensable sugar production.
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C. Employment 1/
1.17 The Mauritian labor force has grown rapidly since the early 1960s,reflecting the high population growth rates following the end of the SecondWorld War. The current labor force growth rate of 3.3% p.a. will continue to
prevail until the impact of successful family planning efforts is felt in the
mid-1980s. Labor force growth is expected to slow to an average of 2.5% p.a.
between 1985 and 1990. The labor force as a proportion of total population,
33.3% in 1975, will then be about 39.4% for a total labor force of 424,000 in
1990, an increase of 121,000 (or one third) over 1979. Annual additions to
the labor force will be heaviest from 1980 to 1985 when they will average
11,000 p.a. declining to an average of 10,300 p.a. during the second half of
the decade.
1.18 Concern with the employment problem has grown pari passu with the
entry into the labor force of the large post-war cohorts and the worsening
unemployment situation. The 1960s started out with registered unemploymentof no more than 2,000 to 3,000, but from 1962-63 it started rising inexorably,
reaching an early peak exceeding 18,000 by 1967 and double that in 1972.Unemployment declined from 33,100 in 1972 to 15,400 in 1977 because ofaccelerated export processing zone (EPZ) manufacturing and rapid increases in
construction employment as well as in transport, storage and communicationsemployment. Since then, the slowdown in economic activity has again raisedthe unemployment level to about 23,000 or some 7.2% of the estimated labor
force as of October 1979.
1.19 The analysis in Annex 1, Sections IIA and IID indicates that pros-
pects for increased output and employment in sugar and tourism, both importantsources of growth in 1970-75, are limited, as are opportunities for expanding
employment in the government, services or construction sectors. Hence, in themedium- and long-term future, employment growth opportunities lie predominantlyin urban industrial expansion. Among other things, this will require provision
of suitably serviced land.
D. Household Income and Expenditure
1.20 In Mauritius average income per capita in 1979 was Rs 5,900 (overUS$1,100 at the pre-devaluation exchange rate). Household income distributionis shown in Table 1 and Figure 1.1. In 1979, average household income wasabout Rs 2,770 per month, with a median of almost Rs 1,000 per month. Incomeis thus relatively concentrated at the top end, with the top decile receiving
almost 40%. The absolute poverty household income level based on World Bankdefinitions (see Tables 1.2 and 1.3) is Rs 500 per month (1979) which includes
almost 12% of households; the relative poverty level is Rs 770 per month(1979), about 34% of households. These percentages are quite low by comparisonwith other East African countries as well as by international standards and
are borne out by findings of relatively high levels of provision of basicneeds, social services, urban services and education. That this is so owesmuch to explicit government policy of income redistribution through governmentspending.
1/ See Annex 1 for a detailed analysis.
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1.21 Despite the skewed income distribution, household expenditurepatterns demonstrate a much less skewed pattern of consumption than in otherAfrican countries. Table 4 shows expenditure distribution by income group,and demonstrates remarkably low and consistent expenditures on housing andutilities by all income groups in part due to the level of government subsidieson water and sanitation and housing, including indirect subsidies through rentcontrol. However, expenditure is rather high for transport and food.
1.22 The implications of income and expenditure patterns in Mauritius arebest understood in light of the provision, availability and access of urbanbasic and social services described in Chapter II, Section B. Nevertheless,as they stand they provide evidence that despite some need to extend access toservices, existing consumption levels are by and large adequate and accessible.Investment requirements will therefore be mainly determined by the need tomaintain or improve standards for new households rather than to eliminateexisting backlogs in any sector.
(a) Food per person per month (Rs 40.4) times average householdsize (5.0) yields food per household per month times adjustmentfor non-food expenditure (2.5, based on Table 1.4) yieldsabsolute poverty level of Rs 500 per household per month.
-(b) Based on World Bank minimum diet data, daily minimum diet foradult women is 2,200 calories per day, and 55 grams proteinper day.
Table 1.3: RELATIVE POVERTY FOR 1979
GNP per capita at market prices = Rs 2,772/monthSavings, debt = Rs 471/month
Total Personal Income = Rs 2,301/month
1/3 TPI = Rs 767
Relative Poverty Estimate for 1979 is Rs 770 hh/month.
/a Derived from 1979 income distribution deflated by the Consumer PriceIndex (1975 = 100, 1979 = 146), to 1975 incomes and the 1975 FamilyBudget Survey, Central Statistical Office.
/b Medical, personal, education and reading, recreation, animal food, other./c Debt, savings and investments, interest, litigations, remittances.
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II. URBAN DEVELOPMENT
2.01 Based on current Mauritian administrative definitions of urban andrural areas, Mauritius is already well urbanized. Nearly 50% of the populationlives in five municipal areas which together constitute the single conurbationof Port Louis - Plaines Wilhems (see Map). But these figures understate thelevel of urbanization in the island as a whole. A highly developed and denseroad network combined with very short distances provides good access to urbanareas in an environment where incomes and standards of urban services differlittle across the entire country. Futhermore, within the agricultural sector,the predominance of sugar means that virtually all agricultural employment isbased on wage labor, rather than on rural subsistence farming or tenancy, and istherefore similar in essence to urban employment. The latter, which accountsfor all the remaining employment on the island, consists of nonfarm activitiesin manufacturing, government and services and is concentrated in Port Louisbut is not confined to it. Although rural to urban migration is not signi-ficant, 40% of Port Louis work force commutes from surrounding areas, princi-pally the other municipalities, and industry is moving into non-municipal areasin search of labor while low-cost industrial space lies vacant in Port Louis.
2.02 The distinctions between the urban and rural sectors are moreadministrative and financial than functional or economic. Local governmentis administered by municipal councils in the five municipalities 1/ while inthe rest of the island it is done by three district councils comprising of 98village councils. Only the municipal councils can raise revenue throughproperty taxes. Although these taxes are low and finance only 17% of municipalcouncils- expenditure, their presence, combined with the greater availabilityof land outside the municipal councils boundaries, has contributed to aspillover of urban development into district council areas, where much of themost productive land uses in sugar and tourism are to be found. These develop-ments have undermined any real functional distinction between urban and ruralareas. The present artificial administrative distinction is preserved at thecost of considerable losses of potential revenue (see paras 2.28 and 4.14).
2.03 The discussion which follows therefore draws little distinctionbetween urban and rural sectors. Rather it concentrates on the spatial,institutional and administrative implications of growing settlement needsin an already urbanized and integrated island economy, which must perforcecontinue a process of rapid development of non-farm activity if it is tomaintain existing average levels of income and welfare. Thus all futuredevelopment will entail urbanization and it is in this sense that the termis used in this report.
1/ The five municipalities are: Port Louis (city council), Rose Hill,Quatre Bornes, Phoenix-Vacoas and Curepipe (municipal councils).
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A. Land 1/
2.04 Land is finite, limited and valuable in Mauritius, as aneconomic resource and as an essential requirement for human settlement.Total usable area is estimated at around 420,000 acres, about 80% privatelyowned, 20% public owned. Sugar accounts for the single largest use at about58% and urban settlements and roads are about 8% (see Working Papers 2 and 3,Table 1). Ownership is concentrated, particularly on sugar lands where 21estates (less than 0.1% of sugar owner/planters) own 60% of all sugar land,which accounts for 44% of all private land and 35% of all land on the island.
2.05 There is little flexibility about future land use because of thescarcity of prime agricultural land and because of the importance of maintain-ing current sugar production. Continued expansion of the current metropolitanregion around Port Louis and Plaines-Wilhems would encroach on some of thebest sugar lands, particularly in lower Plaines-Wilhems, since little existinggovernment land is suitable for urbanization. Demands for new urban land hasbeen estimated at about 1,150 arpents a year. 2/
2.06 The continuing growth of the urban population and economy, and theexistence of a private monopoly on the land available for conversion fromagricultural to settlement uses has contributed to the rapid increase in landprices, which has been faster by far than the increase in the price of anyother item in the economy. Land prices have increased more than tenfoldin Port Louis and Floral between 1967 and 1978 and as much as 16 timesin Goodlands, Curepipe, and Quatre Bornes. 3/ Even in the predominantly ruralarea of Rose Belle, the increase has been 400% compared to an overall increasein the cost of living index of about 290% in the same period (see Table 2.1).In 1979, the average cost of land to government, including marginal and ruralland, was Rs115,000 per per arpent. Land peripheral to urban areas cost anaverage Rs 175,000. The financial resources for conversion to non-agricul-tural uses are unlikely to be available if most of this land must be publiclypurchased. Furthermore, regulations controlling land transfers are unneces-sarily complex and slow, thereby creating further inflexibility in the landmarket. Therefore, some mechanisms to stabilize the price and to regularizethe release of land has to be sought if balanced growth and development are tooccur.
1/ Working Papers 2 and 3 give details on land, housing and the buildingindustry.
2/ 1 arpent = 1.043 acre; see: Sections D and E, "National Physical Develop-ment Plan," following.
3/ See Working Paper 2.
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B. Basic Needs and Service Standards 1/
2.07 Overall, health and nutrition standards in Mauritius are good. Riceand flour subsidies make these staple items readily available to all incomegroups. According to the minimum diet prepared in the Ministry of Health,all food groups are represented in consumption. There is no evidence ofwidespread or localized malnutrition. Health facilities and doctors aregenerally available throughout the island and their services are free.
2.08 Education standards are also high. Mauritius has attained virtuallyuniversal enrollment for the first six years of basic education, concomitantwith a drop in the size of the population in this age group. This has beenaccomplished by a steady expansion and improvement of public school facilities.Literacy is almost universal (91%) and secondary and tertiary education enroll-ments are high by comparison with countries of similar size and developmentpotential.
2.09 Virtually all the population has access to piped and safe waterprovided by three major systems: Port Louis, Mare aux Vacoas and localdistrict systems. 2/ The Central Water Authority, created in 1971, is respon-sible for control, development, distribution and conservation of all waterresources, 3/ but as a matter of public policy provides water at heavilysubsidized rates. The current annual subvention is about Rs 57 or 3% of thetotal government expenditure and 4% of public revenue. Data for 1972 indicatethat some 25% of the population had direct house connections and 56% hadstandpipes less than 100 meters from their houses. Evidence on what hashappened since then is conflicting. Estimates suggest that between 40%and 60% of households now have house connections. Although 99% of the popula-tion has good access to piped water supply, consumption and the benefits ofsubsidy are highly skewed toward those having house connections. Only about16% of total domestic consumption is from public standpipes. Average percapita consumption from standpipes is only 10% of the house connectionconsumption rate. 4/
1/ Housing needs are dealt with separately in Chapter III.
2/ Working Paper 6 provides a detailed description of the water/sanitationsector and discussion of the major issues.
3/ The CWA is also technically responsible for sewerage but in factmaintenance and management is carried out by the Ministry of Works.
4/ This suggests that current subsidy patterns actually worsen income distri-bution, contradicting somewhat the opening statement. Nevertheless, thefact remains that access to water is almost universal and that some poorfamilies, particularly in the municipal areas where connections are mostfrequent, do benefit from cheap water.
Table 2.1: LAND PRICES (Rs 'OOO/Arpent)
Consumer Downtown Plante Verte N. End of Curepipe Goodlands, Rural Rose Hill
Price YearPt. Louis Roche Bois labu QateFc Marginal FlorealIndex Port Louis Bornes (Village Land)
Source: Government Valuation Division - typical average prices paid by GOM
for acquisition of residential and public use land.
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2.10 Water pricing has long been an issue between the Bank and GOM.Various attempts to raise tariffs have been made and failed on grounds ofpolitical acceptability. GOM now under the increased pressure of a largebudget deficit and spending ceilings agreed with the IMF and has now raisedtariffs drastically as a first step toward service pricing on a sound economicand financial basis.
2.11 The transport system of Mauritius is entirely road oriented. Theisland is covered by a network of some 1,100 miles of mainly bituminized roadsimplying a road density of 1.4 miles per square mile, one of the highest inthe world. As a result of the sharp and accelerating growth in motorization--13% in recent years--a number of roads, particularly in the built-up areas inand around Port Louis, have reached their capacity limit and are becomingcongested. Outside the built-up area, traffic volumes quickly taper off, androads are uncongested.
2.12 Bus transport directly affects the daily life of a quarter of thepopulation and accounts for half of all passenger transport. Ten bus companieslicensed by the Road Transport Licensing Authority own a fleet of some 1,200 1/buses. The quality of service is poor with long waiting times during rushhours for passengers in and around Port Louis and low frequency of service andlack of reliability for passengers in outlying areas. This is of particularconcern in light of stated government strategy to disperse economic activitiesto outlying areas.
2.13 Since bus companies suffer from financial difficulties due to lowfares and poor management and from labor problems, GOM established a NationalTransport Corporation in April 1979 to operate public transport. The intendedscope of direct government involvement in the operations of the bus industryis not yet clear. 2/
C. Current Urban Profile
2.14 The factors described above and the conditions described in ChapterI allow the following characterization of urbanization in Mauritius. In spiteof the high concentration of urban development and population in Port Louis -Plaines Wilhems, it can be argued that because the island is small and its roadnetwork widespread the urban/rural distinction is not significant for policyor administrative purposes. The general availability of urban and socialservices and infrastructure, the very short distances between populationconcentrations combined with a dense road network and the prevalence of wagelabor throughout the economy are further evidence reinforcing the generalimpression of an almost entirely urbanized island.
1/ Of these only about half are running at any given time.
2/ See Working Paper 5 for further details on the Transport Sector and alsoWorld Bank Transport Sector Memorandum (February 1980).
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2.15 Despite the continued importance of sugar to the economy, futuregrowth in Mauritius in terms of population and output will be basicallyurban in character, requiring an expansion of suitably serviced urban landthroughout the island. Inefficient bus services have contributed to a laborshortage arising in Port Louis given the social preferences for establishedsettlement patterns, which show a more even geographic distribution than jobopportunities. Already employers are expanding in increasing numbers outsidePort Louis and the municipalities where skilled labor is more accessible andwhere property taxes are not levied. The resulting pressures to convertnon-urbanized land to urban uses are reflected in the rise of the relativeprice of land. 1/ It is this competition for scarce land which is at theheart of the National Physical Development Plan.
D. Government Response: the National Physical Development Plan (NPDP)
Objectives and Priorities
2.16 Land use planning and settlement patterns have been given thespecial attention they deserve in overall development planning and economymanagement in Mauritius. Over the last five years GOM, with French technicalassistance, has been developing an overall physical development strategy.This strategy has recently been adopted and by GOM in the form of the NationalPhysical Development Plan (NPDP). The NPDP is well documented and highlyresearched. Its assessment of the physical potential of the island to accom-modate different economic activities and settlement patterns is good, andalthough our analysis is based on some slightly different assumptions, inparticular about population and labor force growth rates, we have littlereason to argue with the plan's general thrust or conclusions. It has alsomet with widespread approval throughout the island and from almost all interestgroups, particularly from the private industrial sector.
2.17 The Plan is based upon four main objectives derived from the uniquecharacteristics of Mauritius:
(a) coping with population growth;(b) protecting high-quality agricultural land;(c) controlling industrial development; and(d) preserving the physical environment.
1/ This has got to the point where in and around Port Louis - Plaines Wilhemsand particularly in Goodlands, Centre de Flacq and Rose Belle prices foragricultural land to be converted to urban uses are approaching those inPort Louis. Outside the Port Louis CBD, the highest land values are tobe found in the Curepipe and Quatre Bornes high-income residential areas.
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2.18 The Plan presents a strategy designed to meet the spatial needs of1.6 million Mauritians in about the year 2032. The focus is appropriately onthe size of the target rather than on the particular year it will be reachedsince a higher probability can be attached to the accuracy of the former.Projections imply not only a virtual doubling of the total population but alsoa tripling of the number of households and a two-and-a-half-fold increase inthe labor force which must be provided with serviced urban land for bothemployment and housing.
2.19 The country depends on sugar, in which it has a comparative advantageinternally. Sugar will remain the key economic activity in the economy forthe foreseeable future, although its relative importance will decline. Sugarland and production are therefore at a premium and their sacrifice to competingland uses must be held to a minimum over the coming years. Therefore, protec-tion of high-quality agricultural land is the keystone of the plan whichrecommends two policies to ensure that:
(a) high quality agricultural land should be fully exploited,including both small amounts of land not in use at presentdue to lack of irrigation and lack of anti-erosion measures,and land made potentially available through destoning;
(b) other development should be diverted to land of loweragricultural potential.
2.20 As noted elsewhere agriculture cannot provide enough jobs for new-comers to the labor market. The present labor force in sugar productionhas reached a plateau which will not be exceeded, even with agriculturaldiversification. Rather, the outlook is for a gradual decline in employmentin the agricultural sector. Emphasis must therefore be placed on the stimula-tion of industrial activity. Port Louis, as a port, as an administrativecenter and as an established urban area is becoming overcrowded, overloadingthe existing infrastructure and services, while excess capacity exists in therest of the island. Port Louis' growth is constrainted by its geographiclocation, and its traditional residential hinterland, lower Plaines-Wilhems,is located in an area of very high agricultural potential. Future industrialdevelopment needs to be diversified and the Plan proposes that this would bebest achieved by designating a few areas in which such growth can be plannedfor and accommodated, at minimum infrastructure cost.
Areas Designated for Growth
2.21 The Planrs key proposals follow directly from these considerations:
(a) designating zones in which agricultural land will be protected;
(b) organizing industrial development;
(c) limiting future growth along the Port Louis - Plaines-Wilhemsaxis;
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(d) creation of three major growth centers and the designation ofcertain other small towns and villages for moderate growth;
(e) providing for transport policies which allow good access togrowth areas; and
(f) protecting the three main coastal tourist regions and areasof beauty.
The choice of locations suitable for designation as growth centers rests uponthe following criteria:
(a) the presence of an existing urban center to act as a nucleus;
(b) remoteness from the Port Louis - Plaines-Wilhems axis to avoidexacerbating the problems of that area;
(c) a desire to spread urbanization evenly around the island andto capitalize on existing settlement patterns, preferencesand infrastructure; and
(d) suitability for accommodating new industrial development.
2.22 Following critical examination of a number of possibilities, thePlan proposes three major urbanization nodes:
While the growth proposed for Flacq may appear highly ambitious, we believeit to be possible, in the long run, given the policies of restricting growthin the urban axis and many of the existing village areas, and given Flacq'salready rapid growth rate. In addition, some smaller secondary centers havealso been selected for induced growth:
It is intended that GOM plans and policies should be directed to supportthe growth center strategy by ensuring that housing, employment and investmentprograms for public utilities, social, education, health and other serviceswill keep pace with the planned growth of these centers.
2.23 As the main port as well as the capital city, Port Louis has attrac-ted a disproportionate share of the island's development. It has reachedthe physical limits of its areas and is hemmed in by mountains and some ofthe best agricultural land. Thus, the Plan proposes that the number of jobsin the Port Louis area should rise no higher than 100,000 by the end of thecentury and later to 110,000 as a limit. Recent evidence indicates thatemployment in Port Louis was already approaching this figure in 1979, 1/ andtherefore that Plan implementation must begin soon if it is not to be over-whelmed by events. In addition to Port Louis proper, it will also be necessaryto restrict growth in the larger Port Louis - Plaine Wilhems conurbation andto relocate activities that do not need to be sited there. The "terminal"population and growth figures proposed in the NPDP for the conurbation are:
Population('000)
Terminal Growth1972 a/ (c.2032) Factor
Port Louis 158 250 1.58Beau Bassin, Rose Hill,Quatre-Bournes, Le Reduit 135 200 1.48Vacoas, Phoenix, Curepipe 125 250 2.00
a/ As noted elsewhere, the NPDP population estimates differ from those usedgenerally in this memorandum.
1/ See Table 4 in Annex 1. Classified employment in Port Louis is 39,900and unclassified employment most of it in Port Louis is 52,000 making a
total of 92,000. Employment in Upper and Lower Plaines-Wilhems wouldadd an additional 21,000.
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E. Strengths of NPDP
2.24 This report makes little attempt to evaluate the detailed proposalsand provisions of NPDP. We therefore neither endorse nor reject the detailedspatial recommendations it makes. There are a number of reasons for this. Inan island as small, we doubt the usefulness of arguing about concentration ordecentralization in the face of urban expansion in any event; eventually thetwo will be largely indistinguishable. The Plan is based on long, detailedand painstaking research which would be impractical and counterproductive tosecond-guess. Selected review of this research and data showed it to becompetent and professional work: and there is no reason to doubt its reali-ability. Its major goals are undoubtedly sound: land used for activitiesgenerating foreign exchange earnings (i.e., sugar land and tourism land) mustbe safeguarded; the search for land required for substantial new urban growthmust perforce imply a degree of dispersal of urban production activitiestoward areas with the lowest opportunity cost.
2.25 Of three possible broad alternatives, (i) concentrating futureurbanization within existing settlement boundaries; (ii) directing urbangrowth to less productive but higher development cost land such as mountainslopes; or (iii) dispersed, but concentrated development in nodes; only thelast is analyzed in detail by the Plan. Thus, it is conceivable that theremay be limited scope for further pursuing some developments of the first twotypes. However, the general supposition that new urban development will becheaper if dispersed around the island rather than concentrated in Port Louis- Plaines-Wilhems is supported by the existing transport network's charac-teristics, 1/ by existing urban development trends, and by evidence thatinfrastructure investment costs (especially water, see Working Paper 6) willbe lower if urban development is directed to areas other than the existingconurbation. Agglomeration economies are unlikely to be a significant factorin so small an island, particularly given the fact that distances to exportmarkets for industrial goods dwarf any internal distances.
2.26 The actual, detailed locational patterns recommended in the NPDPare less important than its highlighting of the large, island-wide and exclu-sively urban demands which will be made on land particularly over the comingten or more years. In an island the size of Mauritius, objectives such asdecentralization, concentration or suburbanization belie the reality thatconsiderable urban development will occur in various parts of the island,
1/ Transport investment requirements are usually crucial determinants of thegood sense or otherwise of dispersed development strategies. In Mauritiusdispersal will not require major new transport infrastructure investment.The island is well served by a dense network of roads. The greatestroad capacity and traffic volume is in and around Port Louis, which isthe only area where any noticeable congestion occurs. Existing roadconstruction and improvement schemes will do much to alleviate thiscongestion and will generally provide adequate capacity for double thepresent traffic volume, anticipated by 1992 (without decentralization).Elsewhere in the island, roads are not used to capacity and allareas are well connected. (see also Transport Sector Memorandum,February 1980, and also Working Paper 5).
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controlled or not. Thus, the importance of redirecting economic activities toparticular parts of the island can be exaggerated. The immediate questionwhich this raises is more about how to provide new urban land in variousparts of the island rather than where.
2.27 The NPDP is simply a physical plan and provides long-term locationalguidance, a set of sound land use criteria, and a preferred long-term landuse configuration. It is a good example of this type of plan and providesinvaluable physical planning as well as economic planning data and a good setof recommendations. However, it lacks an implementation framework, detailedarticulation of priorities, phasing, complementaries, costing or implementationand maintenance responsibilities. These are matters which must be addressed,given the undoubted future demand for urban land, whatever final or detailedland use mosaic is envisaged. Implementation of the NPDP, a part of it or anyother physical plan in a rational, coordinated and strategic manner will beimpossible until these other issues are resolved.
F. Finance and Implementation Constraints
2.28 In general, all institutional and administrative practices areeither neutral with respect to the spatial organization of activity or militateagainst dispersal. Almost all public sector administration and finance inMauritius is centralized. Local government expenditure, which depends oncentral government grants for revenue, accounts for only 8% of total publicexpenditure. Central, parastatal organizations are responsible for: waterCentral Water Authority (CWA), electricity, Central Electricity Board (CEB);public housing, Central Housing Authority (CHA); and Mauritius HousingCorporation (MHC). Main roads, sewerage and drainage are administered bythe Ministry of Works; and education by the Ministry of Education. With theexception of CEB, all urban services depend heavily on the consolidatedcentral government budget for development and recurrent funds. Land usezoning regulation and planning control is the responsibility of a planningboard, advised by the Ministry of Housing. The Ministry of Housing is alsoresponsible for land value assessment within the municipal areas.
2.29 Thus, although the National Physical Development Plan has beenadopted, access to it is restricted and planning by various government agenciesproceeds independently of it. For example, neither CHA's nor MHC-s housingdevelopments favor growth poles identified in the Plan and the CWA investmentplan bears no relation to it. In fact, physical planning in Mauritius is notadequately linked to economic planning, at least formally. This lack ofcoordination in practice is perpetuated by its location in different ministries.
2.30 Nevertheless, the impact of the Government sector on the economyis large and pervasive. Recent GOM policy and expenditure patterns have beendominated by an emphasis on employment creation and by policies to maintainand expand social services, particularly education, health and nutrition. Asa result, the country has one of the best levels of public and social servicesin a developing country, but also high levels of government expenditure, and
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recently, large and widening government deficits. The public revenue base isnarrow and limited, with almost 30% being directly dependent upon sugarearnings and an even larger share indirectly dependent upon sugar-relatedactivities. Almost no revenues are levied on an expenditure-specific basisand almost all of public sector finance is dependent on annual appropriationsthrough the central budget. This is particularly true for public spendingwithin the urban sector, where even the main parastatals, CHA and CWA, and thelocal authorities depend on the central budget for recurrent subventions.
2.31 As a result of subsidized social spending financed from the generalaccount and allocated annually, there is little financial link between demand,as might be revealed by user fees or earmarked taxes, and investment or recur-rent spending. Hence, there is no basis for rational, sectoral or regionalinvestment planning on a long-term basis. Furthermore, subsidies are notallocated to specific region or income groups and therefore tend to reinforcethe status quo of settlement patterns. The effect of these factors, parti-cularly on the types of programs and levels of subsidy which characterize thebudget, is to create strong centripetal forces.
2.32 Local authorities also depend on the central budget. 1/ There arefour kinds of local authorities, all under the Ministry of Local Government:
(a) one city council - Port Louis, and four municipal councils -Beau Bassin/ Rose Hill; Curepipe; Quatre Bornes andVacoas/Phoenix;
(b) three district councils - Pamplemousses/Riviere du Rempart;Moka - Flacq; Grand Port - Savanne,
(c) ninety-eight village councils; and
(d) five parish councils in Rodrigues.
1/ Total local authorities expenditure represents 2% of GNP which is wellbelow the percentage in most countries. Total estimated recurrentexpenditure of urban authorities in 1979/80 amounted to Rs 85 million.This expenditure was financed by Rs 14.9 million from rates, Rs 10million from other minor local taxes and other sources of income andRs 60.5 million from government grants, this dependence has increaseddramatically as shown below:
1971/72 1979/80
Rates and other taxes 42% 18%Other Income 22% 11%Total from own sources 64% 29%Government grants 26% 71%Deficit unfinanced 10% -
Total 100% 100%
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Local authorities have functions assigned to them by statute. 1/ There isconsiderable overlap in functions among district and village councils. Byinternational standards the functions of local authorities are rather limitedeven in the case of city and municipal authorities. Despite this, somepowers are not exercised at all and others only to a limited extent. Fewof these functions are backed by the detailed enabling legislation and regula-tions which are commonplace elsewhere.
2.33 The powers to levy local taxation are well-defined for urban authori-ties but are vague for district and village councils. Thus only Port Louisand the municipalities levy property or local taxes. However, urban author-ities are faced with an erosion of their tax base which has not been revaluedfor over ten years. 2/ Exemptions from rates have been granted on agriculturalland, schools, clinics, sports facilities, development industries, religiousinstitutions and practically every parastatal body. Government property isalso exempt from rates but the Government offers a grant in lieu of rates,though in some cases local authorities do not receive this because of the percapita limits placed on Government grants-in-aid.
2.34 District Councils who have no power to tax and within whose jurisdic-tions almost all future urbanization will occur 3/ are entirely dependent onCentral Government. Their total expenditure in 1979/80 was Rs 16.5 million,of which Rs 0.7 million was financed by minor local taxes and income and Rs15.8 million or 96% by government grants. Village councils are financed bysmall mandatory subventions from the Government grant to District Councils.In fact it is doubtful whether, without considerable modification of the law,it would be possible for districts and villages to levy local taxes.
2.35 One result of these financial problems is that the standard ofperformance for existing services is not at the level which local authoritiesconsider necessary. Local authorities cannot afford to employ the range ofstaff expertise nor operate the equipment necessary to perform their functions.They are unable to employ the accountants, engineers, town planners andmedical officers of health, health inspectors, and others that they need. Inmany cases their plant and vehicles are inadequate in number and old. Localauthorities cannot pay competitive salaries for the posts that are funded;vital posts remain unfilled and thus much local work lacks expert direction.Furthermore, local powers are too limited to permit coordinated and soundenvironmental planning. This situation has led the Government to retain for
1/ Cleaning and lighting of roads, construction and maintenance of urbanroads, parks, garbage removal, etc. Details may be found in WorkingPaper 7 on Local Government.
2/ A valuation of urban land has now (1980) been completed.
3/ It is true that as urban land use has expanded so the Municipal Councilboundaries have changed. This is not a suitable mechanism with which tomanage the urbanization process in any event since administrative andfinancial responsibilities follow development rather than plan, controlor lead it. Furthermore, it cannot be relied upon at all if new develop-ment is to be channelled to non-contiguous growth poles.
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itself or for ad hoc bodies, services which would normally be more suitablymanaged by local authorities, for example, housing, social services, environ-mental health services and sewerage.
2.36 The degree of centralization described above is neither surprisingnor necessarily inefficient in such a small island economy. It has tended toconcentrate activity, stifle incentives for local initiative and resourcegeneration, and block adequate feedback from changes in service deficits whichis needed to guide investment and expenditure programming and financing. Theimpact is particularly powerful given the relative size and broad coverage ofthe government sector, and the emphasis given to income redistribution throughgovernment expenditure. The expenditure pattern which results tends toreinforce existing spatial concentration since spending is allocated toservices rather than people and flows disproportionately to those alreadybenefiting from existing service and distribution systems. 1/
2.37 The distinction between municipal and district councils is anexample. While district councils are allocated a much lower services budgetper capita than municipal councils and lack of independent revenue raisingpower, almost all new housing, in particular high rental housing, all tourismdevelopment, and a very considerable amount of existing and new industrialdevelopment in fact lies in these districts and just outside municipal areas.Thus the very districts whose low tax rates are attracting development are bythe same token those which lack the resources to expand services commensurately.Moreover extension of development in parts of these districts, which lie justbeyond municipal boundaries, preempts other more efficient land uses consistentwith the NPDP. Thus the existing financial setup encourages extension of theexisting conurbation rather than true dispersal but without providing resourcesto service these extensions. DWC and CHA, could, with improved efficiency andmanagement, perform adequately as contractors but they are not suitablyconstituted or staffed to undertake the planning and coordination of investment,nor to assume the risk of supervising procurement and letting of contractsrequired to carry out regional land development. As part of its reassessmentof overall public spending priorities and responsibilities, GOM should payparticular attention to establishing mechanisms for financing and implementingland development consistent with the recognized long-term economic growthrequirements.
1/ Other social spending such as rice subsidies and the TPT program areless spatially significant. Even though the programs are general ratherthan specific their impact on consumption and availability of servicesand welfare are beneficial.
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III. HOUSING
3.01 High prevailing rates of investment in housing and the need toreduce government spending make housing an obvious area for policy reassess-ment. The crucial role played by housing as a determinant of urban settlementpatterns means that housing policies are also a powerful tool in physical planimplementation.
3.02 The housing sector in Mauritius displays a number of anomalies.As a result of remarkably high levels of investment in housing in recentyears, annual production is now within reach of supplying the estimatedaverage medium-term need of about 9,000 units p.a. However, the rate ofinvestment in residential construction is undoubtedly higher than currenteconomic conditions in the island allow or than should be maintained over thelonger term. Standards of construction are also high, in part a reflection ofthe need to ensure against cyclone damage. There is almost no specifichousing credit available and this, combined with high standards of new construc-tion, has severely limited the poor-s access to new housing. In many cases,housing is constructed from current savings and the rate of constructiondetermined by current income rather than by debt servicing capacity. Morethan 80% of all housing production and finance in Mauritius is through theprivate sector.
A. Housing Stock, Production and Need
3.03 Census figures for 1960 and 1972 indicate a housing stock of 39,500and 123,300 units respectively. This implies an average annual productionrate of about 7,000 new units for the period and a higher production rate whenreplacement is included. Estimates for 1979 based on official buildingpermits put the housing stock at around 150,000 units, implying an averageannual production since 1972 of about 4,000 units, though in 1978 and 1979production rates appear to have returned to the higher level experienced in1960-1972. The production figures since 1972 are underestimated to the extentthat they are based on official building permits which do not distinguishbetween single-and multi-household structures and exclude improvements orextensions to buildings and unofficial construction. The NPDP estimates that35,000-40,000 units were built between 1963 and 1971 without official permits,i.e., 4,000-5,000 p.a. On the other hand, figures based on permits indicateintended rather than actual construction and in this sense tend to overestimatehousing stock. Taking these two effects together we have assumed the stockestimate of 150,000 units to be broadly accurate.
3.04 On the basis of the 1972 housing stock and population figures, theaverage number of persons per dwelling unit stood at about 6.4 or 1.2 familiesper unit which is consistent with census figures and NPDP data. About 53% ofthe stock is owner-occupied, 14% is company housing and 33% is rented (mainly
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in Port Louis/Plaines-Wilhems). About 80% of the stock is of sound construc-tion and about 75% less than 20 years old. On the face of it, Mauritius doesnot suffer from an obvious housing shortage, given the official figures onhousing production and the assumption that the above cited rate of unofficialconstruction was maintained throughout the seventies.
3.05 Three assessments of housing need (Belgian Overseas ConsultingBureau, PADCO, and MATIM) all put future housing needs at about 10,000 unitsper year between now and 1990. These estimates are highly sensitive to boththe trend in household size and the assumed replacement need. They arefurther complicated by the existence of short-life structures in the stock,which have been particularly vulnerable to depletion by cyclones. 1/ Owingto destruction from cyclones and to housebuilding booms before 1970 and againsince 1976, the housing stock is relatively young. Of the current stock of150,000 units about 35,000 units are short-life (constructed from metal sheetwalls and roofs) which under local conditions may be assumed to have only a20-year life, and only about 40,000 of long-life structures were built priorto 1960, implying an annual replacement need of 2,300 units. 2/ Depreciationon the remaining stock will be low for at least the next 20-30 years.
3.06 Demand arising from new household formation depends on populationgrowth, household size, and households per dwelling unit. All demand estimatescited above assume average household size to decline to 4.0 by 1990 (from acurrent estimate of 5.0) and that future construction would be on the basis ofone household per dwelling. Both are probably unrealistic assumptions, andwhen added to replacement need, as calculated, yield large annual needs risingfrom about 8,400 units now to about 12,400 units in 1990/91 before droppingagain (see Table 3.1, estimate B).
3.07 In estimating realizable housing production targets, both the declinein household size to 4.0 in 1992 and the efficacy of planning for universalsingle-family single-plot occupancy in Mauritius, given its obvious landconstraint, can be questioned. We have assumed household size to decline to4.0 by 1992 as projected, but a constant ratio of 1.2 households per dwellings(with no assumption on the dwelling to plot ratio). This may be taken as amiddle target for production needs if current standards are not to deteriorate,and yields an annual requirement of around 9,000 units (estimate C in Table 3.1).
1/ Past replacement of cyclone damaged short-life structures between 1960 and1979 is one reason to assume rather low rates of replacement need in theperiod up to 1990. For example, 40,000 units were destroyed by CycloneCarol in 1960, 13,000 by Gervaise in 1975, and about 2,500 in 1979/80.
2/ 20-year life stock of 35,000 provides an average annual replacement rateof 1,750 plus between 500-800 for depreciation on old long-life buildings.
Table 3.1: HOUSING NEED 1978-1992, VARIOUS ASSUMPTIONS
Housing Need at 1.2 TOTALSb
/a Average at 1 Dwelling Dwellings Replacement /c /d /eYear Population- HH Size Households per House per house Need AL- B - C-
/a Excludes Rodrigues./b Units should be interpreted as dwelling units rather than individual single family houses./c A: Assumes constant densities - i.e., 6.03 persons per housing unit./d B: Assumes declining household size and one unit per household for all new demand./e C'. Assumes declining household size and constant ratio of dwelling units to houses (1.2).
Source: Mission estimates.
4/18/80
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Table 3.1 also calculates need based on low assumptions of constant householdsize (estimate A) and high assumptions based on one house per family (estimateB). The estimates range from 5,400 (well within current production capacity)to an average of 10,330 per annum, all showing a peak in need in 1990/91.This is broadly in balance with the expected rate of growth in demand.
B. Investment in Housing
3.08 That production and need for housing are more or less in line isa happy distinguishing characteristic of Mauritius compared to economies insimilar circumstances and at similar income levels. It springs from two mainfactors: the remarkable deceleration in the population growth rate, and thevery high levels of investment in residential construction, particularly inrecent years. Before 1976 residential construction stood at about 23% of GDFCFbut by 1979 it had risen to about 31% in current prices. During the sameperiod overall investment rose to about 40% of GDP, hence the share of invest-ment in residential construction grew from about 4% of domestic aggregatedemand in 1970 and before, to 13% in 1979 in current prices. This is one ofthe highest rates of investment in housing in the world. A recent analysis ofhousing investment by country, and income and population growth rates suggeststhat even in fast growing middle-income countries this ratio seldom risesabove 6-8%. 1/ On this comparative basis Mauritius seems to be overinvestingin new housing construction, even though this level of investment appears tobe necessary to keep demand and supply in balance (para. 3.04 and 3.07).
3.09 There are a number of reasons for the unusually high levels ofhousing investment in Mauritius, even though the data available does not allowassigning quantitative values to the significance of each. Prior to CycloneGervaise overall housing stock was the product of fragmented policies, under-taken under crisis conditions. Such policies tended to exacerbate the problemby ensuring that a relatively high proportion of the stock (over 50% accordingto the 1972 survey by MATIM) consisted of relatively short-life units (i.e.,corrugated metal with a 20-year life span in a marine climate). Since 1976the bulk of new units is reported to have been produced to higher standards(i.e., of concrete) to ensure greater hurricane resistance and longer struc-tural life. 2/ In addition, over the last 10 years unit costs of concrete
1/ See "Basic Needs in Shelter," Anthony Churchill, April 1979.
2/ Data on the differences in the costs of construction of corrugatedmetal and concrete units before or since 1976 are not available.
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dwellings have risen five times compared to a 2.7 increase in consumerprices. 1/ Another reason for the high levels of housing investment appearsto be that with the decline in opportunities for and returns to alternativeinvestments since 1976, housing has become a primary focus for savings, byboth large and small savers. A third reason is rent controls which encouragehigher levels of investment in new housing for middle- and upper-income groupsrather than lower levels of investment in maintenance or improvement ofexisting units for lower income groups.
3.10 Most (70%) of the new housing investment has been directed outsidedesignated municipal areas. The reasons for this include current rent controllegislation and the local property tax structure. Rent control legislationprohibits increasing rents beyond their initial levels and therefore removesall incentive to invest in maintaining or improving rental units, most ofwhich are concentrated in Port Louis and lower Plaines-Wilhems. In addition,the fact that property taxes are only charged within the municipal areas tendsto discourage housing development within municipal boundaries.
C. Rent Controls
3.11 The Landlord and Tenant (Control) Ordinance No. 13 of 1960 regulatesthe freedom of a landlord to fix rents and obtain possession. The Act coversresidential accommodation and business or commercial premises and does notdistinguish between them, The Act has the effect of freezing all rents at thelevels prevailing in 1960 or when the premises were first rented, if later.The Act covers the private and public sectors and has powerfully influencedthe housing market: directly, because about 30% of the stock is rented (46%in the municipalities as a whole and 61% in Port Louis and indirectly throughthe incentive effects on new construction. The act is seen as an integralpart of the overall housing and welfare policy.
3.12 Among the results of the rent control legislation the followingare apparent and important. Current household expenditures on housing (seeTable 1.4) is artifically low. In the lowest income groups only 11% is spenton housing and services. This percentage falls to 7% among the rich with anoverall average of 9%. This is an extraordinarily low figure when compared to
1/ A ratio commonly used to assess whether construction costs are within anormal range is that the cost of one square foot of building is equivalentto .01% of per capita GNP. In Mauritius since 1970 building costs haveranged between 1.5 and 2 times this amount and now stand at about Rs 90sq. foot: a ratio of .0153. The NPDP explains this as a result oflowered productivity due to the structure of the construction industry,i.e., a large number of very small firms with impaired capacity forefficient building and unfamiliarity with the currently preferred con-struction material: concrete. These factors require review to bringcosts down particularly so that housing becomes more affordable by thelower income groups. (See Working Paper 3).
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most developing countries and so long as it prevails it will be impossible to
provide government financed owner-occupied housing for the lower income groupswith any realistic cost recovery. The pervasive presence of extremely lowrents will continue to introduce marked distortions, particularly an absenceof investment in terms of either maintenance or improvement to the existingrental stock (primarily in the municipal or urban areas), which will thereforesuffer from accelerated depreciation and deterioration. Another effect of thevery low level of rents is that families can afford to concurrently rent anexisting house and, over a long period of time, build a new, better house.This is rather inefficient use of the existing rented stock which also con-strains its rate of expansion. Rent control also tends to freeze land usepatterns which have become increasingly suboptimal. Income tax on rents andproperty tax assessments are held lower than they otherwise would be, thepremises continue to stand on property which if developed optimally, mightgenerate greater national and local revenue.
3.13 The need for some reform of rent control legislation is by now well
accepted in Mauritius. Nevertheless the political sensitivity of the mattermakes radical or quick reform unrealistic and unlikely. Proposals have beenmade for introducing a phased increase in rents to allow landlords an adequaterate of return based on current market rental values less the capital appre-ciation of their property. 1/ We believe the system suggested would proveimplementable, since implied initial rent increases would not be large.
D. Housing Finance and Effective Demand
3.14 Finance for house construction is dominated by private, noninsti-tutionalized sources of savings and self-help or self-managed construction.Only 18% of housing finance derives from the public sector (CHA and MHC) anda further 20-30% from formal borrowing through commercial banks and insurancefunds. The market is thus divided into three distinct categories: one, thevery poor who live in dilapidated rent-controlled premises or without adequateshelter with only limited access to inadequate public housing programs andwith no access to formal credit for housing; two, the rich; and three, alarge middle group dependent on retained savings. This middle group tends tobuild, usually over 4-8 years, on subdivided serviced land purchased on amonthly payment arrangement. As noted earlier, this arrangement suggeststhat building permits issued are not an accurate guide of the additions to theactual housing stock in any given year. Further pressure is placed on theexisting stock by the fact that rent control legislation allows such familiesto rent and build over long periods of time, thus over-consuming land andbuilding.
1/ See Working Paper 4.
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3.15 In these circumstances, estimating the effective demand for housingis difficult. Current investment levels demonstrate a very high level ofdemand and consumption but national expenditure data, distorted by rentcontrol, indicate that households spend less than 8% of income on shelter 1/which is inadequate to explain current levels of investment. Table 3.2 illus-trates what effective demand would be given the assumptions about stock,replacement and growth discussed above, assuming financing at 12% for 30 yearsand housing expenditure at 30% of income. 2/ The table shows that the bulkof demand comes in the low- to middle-income ranges of Rs 500-1,500 per month.Even with these financing assumptions, total investment requirements forhousing would amount to Rs 411 million only, whereas in 1978 actual investmentin housing was Rs 606 million. This demonstrates the extent to which currentinvestment in housing in Mauritius is unusually high. It is unlikely thatMauritius can continue to sustain these levels of housing investment, par-ticularly given short- and medium-term economic circumstances of the country.
E. Role of the Public Sector
3.16 Government housing programs consist of cyclone relief housing,Central Housing Authority (CHA), and credit through the Mauritius HousingCorporation (MHC). The Sugar Industry Labor Welfare Fund also provideshousing to sugar workers entirely in nonmunicipal areas. The total number ofhouses built by the Fund by 1976 was 3,614. Their current program is addingabout another 700 units over three years, at average prices of about Rs22,000. Houses are sold on a tenant purchase basis, with no interest, over 40years.
3.17 CHA originally established in 1960 as a policy-making agency. How-ever, following cyclone damage in 1960 and 1975, its role changed to one ofhouse construction for cyclone victims and it has been prevented from pursuingits original mandate. CHA's current program calls for the construction of4,000 houses. Not only has the program become an impossible fiscal burden butimplementation has been poor. Since 1975, when a program of 8,000 publichousing units was called for, only 2,000 have been completed. In olderestates, lack of funds and management capacity has resulted in poor maintenanceand a rapid deterioration of the environment. Recent cyclones have underminedthe under-maintained sewerage systems and rehabilitation is now urgent inestates in Port Louis. CHA housing has traditionally been rented. at low rents,
1/ In part, this is statistically explained. In computing the NationalAccounts, the contribution of dwellings is only increased each year bythe market rental value of new housing constructed that year because ofrent control. Obviously the figure will decline over time as a proportionof GDP and is misleading. Very little new rental housing is constructedand the returns to owner-occupation will of course be rising.
2/ Data from the MHC reveals average income families are prepared to spendin excess of 30% of income on housing debt service.
Table 3.2: HOUSING NEEDS/INCOME DISTRIBUTION AND AFFORDABLE COSTS
ASSUMING 30-YEAR REPAYMENT at 12%
MonthlyPercent of Housing Payment Annual Buildable
Income Group % of Cumulative at 30% of Housing Principal Total sq feet % of 750 sq
Rs/month Households % Income Need Rs Rs mil Rs 90/sq ft foot House
/a Average income calculated as Rs 6,880 (Parento method).
/b This figure should be equivalent to GDFCF in residential construction. Rs 411 million represents almost
70% of current GDFCF in housing of about Rs 600 million. Down payments and owners' equity explain the
difference.
Notes:
1. GDFCF in residential construction in 1978: Rs 606 million.
2. Average cost of new housing in 1978: Rs 81,000.
3. Average size of new housing in 1978: 1,020 square feet.
Sources: Tables 1.1 and 3.1, and Working Paper 3.
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not even sufficient to cover water charges. The decision has been recentlytaken to sell rather than rent CHA housing, although again at subsidizedprices and gradually to reduce the CHA-s program and therefore direct govern-ment participation in house construction, management and marketing. Emphasiswill be placed on ensuring adequate loan finance to poor households to buildself-managed housing implying an expanded role for MHC.
3.18 MHC provides two programs: one for disaster relief and one forgeneral mortgages. Disaster relief credits carry an interest subsidy under-written by GOM while the general mortgages are self-financing and based onlong-term borrowing from GOM and the Commonwealth Development Corporation, andothers. Partly as a result of poor performance by CHA, but also following itsown initiative, MHC is now also constructing housing for sale to its clientsrather than simply providing credit. Costs are running at about Rs 80-100 persquare foot. There is considerable overlap between these agencies. Applicantsfor MHC housing and loans conform closely to the national income distribution,but loans have favored higher-income groups. 1/ Average loan size in 1978/79 wasRs 56,000.
MHC National MHC credits 2/applicants distribution 1977/78
The 20% of the market which GOM programs comprise are not therefore parti-cularly targeted toward lower income groups.
3.19 The current economic position of Mauritius as well as recent cyclonedamage has persuaded GOM to reformulate its housing programs and policies. Inparticular dissatisfaction with the slow production and rising costs of theCHA program, together with increasing evidence of a vibrant self-managed andself-help construction sector, have persuaded the authorities to emphasizefinance rather than construction for public housing. Government housingprograms, as well as building permits for housing and other construction, donot now conform to any general or national land use plan or policy.
1/ This is not the result of discrimination by MHC, but rather a reflectionof the fact that lower income groups, less accustomed to becoming indebted,often do not complete application forms and finalize mortgage arrangements.
2/ These figures are not strictly comparable to cumulated applicants sincethey apply only to one year.
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IV. URBAN DEVELOPMENT STRATEGY AND INSTRUMENTS
A. Elements of a Comprehensive Strategy
4.01 The preceding chapters point toward the need for Mauritius to formu-late an urban development strategy which is consistent with implementation ofthe NPDP (or a variant of it) and with the pursuit of economic developmentgoals to increase industrial exports, reduce central government deficitspending and improve the balance of payments. The projected doubling of thepopulation before it reaches equilibrium and the inevitable requirement foradditional manufacturing or urban jobs make the introduction of effectivepolicies for efficient use of scarce resources, particularly land, an urgentnecessity.
4.02 Such a strategy must respond to the following key conditions whichappear to us to be of major importance:
(a) In spite of reduced population growth, the existing cohortstructure implies sustained high rates of new householdformation and labor force growth for the next ten years(almost twice the rate of population growth). Employmentin Port Louis has already nearly reached the recommendedceiling (para. 2.23).
(b) Most new employment will need to be in manufacturing(para. 1.19).
(c) Government deficit spending must be curbed (paras. 1.07-1.10).
(d) The island-s small size and strict land constraint meanthat land management is unusually important to the overallwell-being of the economy. Given the lack of rural to urbanmigration and the considerable past investment in urban andsocial services, future urban growth will be in and aroundexisting settlements which are dispersed around the island.This means that the problem is rather one of managing a dispersedurban growth process and therefore of incentives and controlthan of catching up with demands of existing but underservicedurban populations (paras. 2.06-2.10).
(e) Pressures on the land market stemming from demand forurbanization in a context of oligopolistic land ownershipand other inflexibilities in land use (land transfer regula-tions, rent control etc.) have led to very high land pricesand place a premium on regularizing this market by guidingthe rate and location of land use conversion and minimizingspeculation (paras.2.04 and 2.05).
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4.03 Six main strategic or policy recommendations would best respond tothese conditions, and which we recommend to GOM for consideration:
(a) economic and physical planning should be more fullyintegrated in light of the unusual importance of land usemanagement in Mauritius;
(b) the dispersed nature of existing and future urban growthin Mauritius suggest that administrative, financial orfiscal distinctions among urban and other areas shouldbe phased out, regardless of whether they are in existingmunicipal council or district council areas;
(c) explicit and specific measures should be introduced forcontrolling land and financing urban development, as partof government efforts to reduce central deficit spendingand to provide a clear link between financing andprovision of urbanized land and services;
(d) the strategy should include establishing an institutionalframework and mechanisms to allow a land developer capabilityon the scale required;
(e) direct and subsidized government investments in housingshould be reduced while extending access of low incomegroups to housing finance and loans;
(f) better use should be made of the existing rental stockand reforms to rent control legislation should be examinedso as to encourage greater investment in maintenance andimprovement or extension. Standards must also beexamined to ensure that owner-occupied housing for lowincome groups is also available, particularly in growthcenters.
A number of specific actions for carrying out these recommendations are dis-cussed below under three general headings: Plan Implementation and Finance,Employment, and Housing.
B. Plan Implementation and Finance
Coordination of Physical and Economic Planning
4.04 The current fragmentation of planning into physical planning,economic planning and sector-specific investment programming (for example, bythe ministries is counter-productive, yielding little spatial coordination ordirection to the development of the island. As a first step a physical andeconomic planning coordinating unit might be established in the Ministry ofPlanning. Not only is economic planning devoid of spatial considerations by
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both it and individual sectoral planning in transport, housing, industriallocation and rural development proceed independently._ Often, and particularlyin the cases of water supply, housing, transport and industrial location,investment decisions contradict the desired spatial distribution of the NPDP.
4.05 In these sectors investment is planned without reference to theNPDP and therefore tends to reinforce rather than to disperse existingconcentrations where the short-term and sector-specific return to investmentare highest but where the associated costs of complementary investment andlonger-run opportunity costs are also highest.
Plan Implementation Cell
4.06 To ensure better coordination, the creation of a Plan ImplementationCell may be appropriate, most probably located in the Ministry of EconomicDevelopment and Planning. Such a cell could be charged with preparation,coordination and supervision of an appropriately phased implementation programfor the NPDP. A permament staff of about four or five specialists would benecessary to carry out planning studies and supervise related work carried outin other ministries and agencies. Broad responsibilities and work programwould include:
(a) design of suitable financial and administrative institutions;
(b) design of a public developer capability;
(c) detailed design and implementation of proposed land controlmeasures.
More detailed task descriptions are to be found in Working Paper 8 (Terms ofReference for Plan Implementation Studies).
Government Investment in Growth Centers
4.07 The predominance of government spending and GOM's willingnessto subsidize infrastructure and social services mean that government can, ifit chooses, take active and powerful steps to promote a policy of dispersalthrough development of growth centers as the NPDP recommends. To do this willrequire active promotion and direction of job opportunities, housing and urbanservice investment. Such a strategy is inevitably risky, requiring considera-ble initial expenditure against an uncertain effect on location preferences.In Mauritius the risks are perhaps lessened to the extent that, albeit unmanagedand unpromoted, the process has already commenced and is facilitated by thequality of the existing transport network and relatively low cost of expandingthe supply of water. The benefits from government investments reinforcingdispersal are likely to be high because land scarcity places a premium onthe coordination of land use development and employment promotion strategies.Current public spending is dominated by low-risk spending patterns and followsrather than leads demand. Government willingness to subsidize could be betterexploited by focusing such expenditure on higher risk locationally specificinvestments which could lead and control the spatial distribution of demand,particularly considering existing spontaneous private sector trends towardsdispersal.
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Land Developer Agency
4.08 Creation of a land developer agency should be considered to coordinateimplementation, channel investment and promote rapid development of distribu-tion centers. Examples of the type of organization suggested include themetropolitan development authorities in India, the Urban Development Corpora-tion in Jamaica, and New Town corporations in the United Kingdom and elsewhere.These organizations are primarily promotional and capital program implementingagencies charged with the coordination of investment and promotion of specificareas. Their primary characteristic is an exclusive concern with promotingthe successful, rapid expansion of a particular area, by attracting privateinvestment to the area, providing a balance of jobs and services, and oversee-ing or executing the implementation of infrastructure. However, an assuredsource of reliable and predictable funds is also a prerequisite. Assetscreated can later be transferred to appropriate agencies for maintenanceand management (e.g., local government).
4.09 GOM is already considering creation of a land bank agencywhich would be empowered to buy and sell land and would be given preemptiverights in all land transactions. The agency would be empowered to acquireunderutilized land throughout the country in accordance with the land usecriteria adopted for the NPDP. Consideration is also being given to introduc-ing measures to create financial base for such an agency, such as a tax onunderutilized land in residential areas and a graduated capital gains tax onall land transactions. A start in the latter direction has already been madewith the introduction of a capital gains tax.
4.10 Although the control of land uses, pricing and timing of releaseby such an agency is crucial, building an institution also able to perform thedeveloper function is equally important. The possibilities of combiningthese functions should be examined. We would recommend that studies beginunder the aegis of the Plan Implementation Cell which would deal with:
(a) the scope for establishing a Land Development Authority;(b) its powers over land assembly, purchase and transfer;(c) the maintenance of services assets created;(d) provision and management of industrial estates;(e) its relationships to the proposed Land Bank Agency;(f) sources of long term funds; and(g) recommended powers and staffing.
Matching Expenditure Responsibility and Revenue Authority
4.11 The marked tendency to consolidate all revenues into a singleaccount and determine expenditure on the basis of annual appropriations hasalready been described. Although there are sound economic, practical andpolitical reasons not to earmark general tax income for specific disbursements,the price to users of housing and urban services should be more closely linkedto actual cost through user fees, on grounds of efficiency, and to allow theincreased local autonomy which dispersed development demands. In Mauritius,public and local government service financing is too centralized, and expendi-ture responsibility divorced from revenue authority. Thus, there is little
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basis for long-term sectoral or local government planning because forecastingavailable resources is extremely difficult and because the link between thecost of services and the extent of their provision is all but lost in thevital areas of public housing, water supply, and local government services.
4.12 These problems occur both vertically among sectors (for example inwater supply, sanitation, and transport) and horizontally among various levelsof government. The fact that in all cases financing derives principally fromthe central budget further confuses responsibilities and capacities forplanning, implementation, maintenance and coordination of urban development.
4.13 An alternative strategy which we would recommend for study by thecell and which would conform to the general economic need to diminish thebudget deficit would be to link more explicitly pricing (or specific taxes) tothe provision of various services and to match income authority with expendi-ture responsibility. Steps are already being taken in this regard in thewater sector with GOM's intention to allow CWA to raise water tariffs. Con-cerning the need to decentralize urbanization, it is in the area of localgovernment where there is most scope for reform. Similar steps should betaken with regard to the provision, implementation and maintenance of centrallyadministered urban services and overall urban land development.
Increasing Local Government Revenues
4.14 About 70% of all local government spending is centrally subventioned,only 18% being recovered from land, property or local taxes by municipalcouncils. Non-municipal local government has no powers to tax. Since almostall urban growth will occur outside the municipalities and should be directedaway-from their boundaries, it will often not be possible even if it weredesirable to annex new developments to municipal councils and thereby continueto recover betterment through local taxation.
4.15 There is considerable scope for increased land, development orproperty taxes on account of the low rates in municipal areas and because notaxes are levied outside these areas, where much of the most productiveland uses are to be found (tourism and housing, not to mention sugar) andwhere future urban growth will occur. Exploiting this source of finance asa basis for urban development should be seriously examined. 1/
4.16 At the same time expenditure responsibilities of the local author-ities should be examined and matched to their revenue authority, therebyreducing or eliminating their dependence on the central budget. Since thefunctions of local administration will be similar in existing, expanding andnewly urbanized areas, the administrative and financial distinctions could beabolished and similar functions as well as financing arrangements bestowed onall local government entities, thereby reflecting more accurately the essen-tially urban nature of all settlements in the country. Once local government
1/ The recent revaluation of urban land may allow a partial solutionto this problem.
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functions were agreed, further study would be required to establish whetherthe property tax alone would be sufficient (with the rate set locally orcentrally) or whether specific revenue-sharing and borrowing criteria would benecessary. Most such reforms would have far-reaching implications. Theeffects of introducing island-wide land or property taxation on production,for example, would have to be examined and adjustments made, perhaps tocompany profits taxes and sugar export taxes on which the government budgetnow depends so heavily.
Summary
4.17 The thrust of the recommendations in this section may be summarizedas taking steps to coordinate and centralize economic and physical planningwhile at the same time starting to functionalize implementation and finance.The recommendation for functionalized implementation and finance should notbe confused with fragmentation: a proliferation of new agencies or localgovernments is not what is proposed. Rather we believe that by establishingspecific mandates and specific financing arrangements, while abolishingartificial distinctions in both the administration and financing of localgovernment and specific sectors, purposeful and integrated urban developmentcan be programmed at less overall cost to the public sector and economy atlarge.
C. Employment
Employment Location
4.18 The key to successful urban development will be the creation ofsufficient and appropriate jobs. The decade of the 1980s provides little hopefor a quick easing of the employment problem. The labor force will increaseby some 120,000 from 1979 to 1990. In addition, several sectors will declineor stagnate. Reductions in agricultural employment in the last two years arelikely to be the beginning of a medium-termi trend. Shortage of sugar-harvestlabor and general efficiency reasons will stimulate mechanization in canegrowing and harvesting, which has just begun. Sugar processing will alsorequire rationalization and the industry itself feels some 4 or 5 of the21 existing factories should be shut down. By 1990, the loss of jobs fromthese developments may reach 5,000 to 6,000. Diversification in agricultureand cultivation of marginal lands is unlikely to significantly stem thisoverall decline.
4.19 Geographically dispersed employment generation, which now receiveswide support from GOM and in the private sector, is desirable for a number ofpertinent reasons, two of which have guided the spatial proposals in the NPDP:the physical constraints on the expansion of the capital and the need toprotect the agricultural and the tourist potential of the island. Exportindustries are the most promising driving force for decentralized employmentcreation, mostly because their cost structure is relatively neutral to loca-tion on an island as small as Mauritius.
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4.20 Industrial dispersal is mainly constrained by pronounced regionalimbalances in industrial infrastructure. For example, of six formal industrialestates in operation with a total equipped area of 64 ha, some 56 ha or 87%lie within the municipal districts. This share is comparable to the estimatedshare of these districts in large-scale manufacturing employment but overall,the conurbation can be estimated to provide roughly 60% of all jobs. Onlyabout 47% of the country's labor force was resident in the same area in 1978.Redressing this imbalance, currently in favor of Port Louis and the adjoiningurban areas, will require a substantial public investment and promotionaleffort in the rural districts. The NPDP provides a good starting point forthe physical framework for this effort.
4.21 Institutional change will also be required. The two main industrialestates, Plaine Lauzun and Coromandel in Port Louis and Plaines-Wilhems, areboth in the public sector and both were developed by the Development Bank ofMauritius (DBM). DBM, however, is clearly unhappy as industrial estateinvestor and manager. Technical and managerial problems abound in bothestates. However, some of the problems, such as the slowdown in industrialinvestments, are outside DBM's control, while others are self-inflicted. 1/DBM has bought land for additional industrial estates in the La Tour Koenigarea (Port Louis) and in Beau Vallon (South) but is reluctant to go furtherwith investments.
4.22 DBM was never designated as GOM's industrial estate agency, has notacquired the expertise to fill this estate management role and probably shouldnot be in this business. Given the crucial function of industrial estates inan industrial decentralization effort, the government should speedily chargeanother institution with this task, possibly as part of a wider regionaldevelopment mandate. This should include encouraging private bodies, such assugar estates, to press ahead with their industrial estates, as long as theyare in line with the spatial development proposals to be adopted by theGOM. This might be considered in the mandate of the Land Developer Agencyproposed above.
4.23 Other institutions and policies need to be coordinated or more sharplyfocused on industrial development if the promise of further industrializationand export processing is to be fulfilled. A plethora of government ministriesand agencies have responsibilities relevant to employment in general andindustrialization in particular. Physical planning is under the Ministry ofHousing, economic planning under the Ministry of Planning. The Ministry ofEmployment handles work permits for foreigners, provides a large part of theDevelopment Works Corporation (a public works contractor) budget, runs theunemployment register and the employment exchanges, and defines trade profi-ciency levels and apprenticeship matters, while the Ministry of Education isresponsible for the actual vocational training. Various other ministerieshandle union matters, Development and EPZ certificates, foreign investmentpromotion, supporting SSEs and tourism.
1/ See Annex 1 for details, especially Chapter IV, para. 128).
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Small Enterprise Development
4.24 Support to small-scale enterprises also needs to be strengthened.Institutional investment finances are now available from DBM and from a smallfund administered by the State Commercial Bank (SCB). But these need to bemore actively promoted, since loan approvals under the DBM scheme have beenfalling in recent years and the SCB fund has only just started to be used afterlong inactivity. Working capital finance for SSEs is in principle availablefrom commercial banks but accounting and security requirements preclude thebulk of SSEs from access to it. Easing of these requirements and an SSEcredit guarantee scheme may be needed to loosen working capital constraints.Moreover, technical assistance and training for SSEs is not now reallyavailable. The small unit in the Ministry of Commerce and Housing forpromoting SSEs has been busy mostly with gathering information on the sectorrather than providing support. A UNDP project under preparation will providesome of the much needed stimulus in this area.
Employment-Related Transport Issues
4.25 Manufacturing and employment are also severely and adversely affectedby inefficiencies in the port and inadequacies in the public transport system.In recent years, the port has been beset with inadequate physical capacity,poor management and bad relations with a well organized, politicized, andaging labor force. The shortage of physical capacity has now been relieved bythe opening of additional deepwater berths and the bulk sugar terminal.However, labor and management problems are less easily dealt with, in parti-cular because of the port's quasi-monopoly on foreign trade.
4.26 The public transport system is second only to the port in its nega-tive effects on industrial efficiency. Its sorry state leads to inordinatelylong commuting times, long waiting and walking times to get to bus stops andfrequent disruptions of work schedules due to bus breakdowns and strikes.Consequently, the public transport system is at least partly to blame for thedifficulties in filling job vacancies in the Port Louis/Basses Plaines-Wilhemsarea and the lack of attraction of the Coromandel industrial estate. Manyenterprises have started company transport systems which are inefficientand costly to the enterprise. Others are beginning to seek relief by movingnew factories into the rural districts, closer to available labor. Whilethis will produce some payoffs to the enterprises through better workerattendance, it does not diminish the need for improvements in public transport.
4.27 As noted in Chapter II, inefficient public transport services arean important constraint on employment and must be improved whatever spatialstrategy is pursued. A Working Paper on transport 1/ reviews these mattersin some detail and specifies the following issues and priorities:
1/ Working Paper 5.
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(a) rationalizing, maintaining, and expanding bus service,including better service to "low-income" groups;
(b) alleviating peak-period congestion in and around Port Louisthrough a continuation of new roads and traffic management;
(c) coordinating highway projects with proposed new developmentssuch as La Tour and growth centers at Flacq, Goodlands andRose Belle;
(d) achieving a better balance between capital and maintenance(upgrading) expenditure on the road system;
(e) improving port labor productivity;
(f) expanding the existing airport, versus building a new oneunless in relation to decentralization objectives the newone is built as part of the overall development of Flacq. 1/
In a word, GOM should not spend any more on improving or extending the presentroad network until 1992 but rather concentrate on maintaining existingroads and improving bus transport.
D. Housing
4.28 Analysis of the housing sector leads to seven main conclusions:
(a) there is excessive investment in new housing in Mauritius;
(b) access to suitable housing is unevenly distributed and excludesthe poor, particularly in the present municipal areas;
(c) owing to an almost total dependence for construction on importedmaterials and the need to build cyclone-resistant housing,building costs are becoming exorbitant, preempting the majorityof the population from being able to afford even modest shelteron conventional terms;
(d) there is substantial building industry capacity; but
(e) lack of institutional credit for housing lowered productivityin the industry, and the rate of house completions particularlyin the informal, self-help or small contractor sector of themarket, as the rate of housing production is determined byavailable savings rather than capacity to borrow;
1/ See Transport Memorandum.
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(f) land cost and availability are major constraints;
(g) rent controls have severely distorted the sector, encouragingover-investment in new housing and under-investment inimprovement, expansion and maintenance of existing stock.
These findings suggest the following strategy which would simultaneouslyattack these major issues:
(a) provision of increased formalized credit for housingdirected toward low income families;
(b) reliance on the private sector for building houses;
(c) measures to lower construction costs, building standardsand streamline land release legislation;
(d) an emphasis on maintenance, improvement and extension ofthe existing housing stock; and
(e) a reform of the landlord/tenant legislation.
4.29 It has been observed already that less than 50% of finance forhousing flows from specific financial institutions and only 18% of this isfinanced through the public sector. The Mauritius Housing Corporation is theonly mortgage credit institution, a major part of its energies are now engagedin implementation of actual housing schemes. Our analysis has suggested thatinstitutional finance is the major constraint for poor and middle-incomefamilies in need of improved housing services and that this constraint limitstheir access to affordable and appropriate housing, and limits the supply,either directly through channeling of investment to high cost housing, orindirectly by slowing down the rate at which lower-income groups can build.Accordingly specific lines of credit should be made available to finance homeimprovement, house extension and house building and channeled specifically topoor and middle-income groups. The MHC is suited and competent to assume thisrole and therefore to handle the bulk of a reformed public housing program.
4.30 To ensure that funds are appropriately channeled we would recommendthat lending criteria include limits on the size of loan and targets forlending to specific income groups. Furthermore, to fully encourage upgradingand consolidation of the existing stock, it would be appropriate to restrictthe use of any such public housing loan funds to improvement or expansion inexisting housing only in the municipal areas, and for new housing outsidethem. This last would also tend to promote the goals of the national spatialplan and could be used as an important instrument in encouraging developmentof specific growth poles.
Reliance on the Private Sector
4.31 A policy which emphasizes the important role of maintenance, improve-ment and extension must clearly depend on self-help or self-managed smallcontracts. Fortunately Mauritius is well endowed with a vibrant and productive
- 43 -
building industry although the trend in recent years toward new, large-volumehouse construction contracts in both the public and private sectors hasfavored the large and more capital-intensive contractors. 1/ Emphasizingexpansion and improvement will tend to lower overall and unit costs and absorblabor. But the fact that the private sector as a whole is capable of providingsufficient building volume (assuming available foreign exchange) and isalready doing so suggests a policy whereby government concentrates more onproviding incentives than on actually producing appropriate housing.
4.32 A number of factors support such a proposal: first is the existingrecord of CHA housing, but second is that as building costs rise, the publicsector is less well equipped to provide "acceptable" finished housing than tochannel credit toward those wishing to build according to their own perceivedneed and income.
Maintenance and Improvement of Current Stock
4.33 Current investment trends in housing have led to rapid new houseconstruction outside municipal areas combined with rapid deterioration ofexisting stock in the municipal areas where most of it is now located andwhere most poor urban households now reside. Current building costs precludeabout 80% of households from being able to afford even a 750 sq. foot dwellingat conventional terms (see Table 3.2). Land costs and supply constraints arean increasing disincentive to new housing. These factors suggest that encourag-ing extensions to existing homes, which the majority of the population couldafford in the existing municipal areas where land acquisition is less of anobstacle should be a priority of housing policy and that considerably moreinvestment in housing should be channeled toward the municipalities. Such apolicy also implies that the implicit target adopted in the new NPDP and othersources of universal single-family occupancy should be discarded, at least inthe municipalities, in favor of maintaining or increasing current occupancyratios. The severe land constraint lends further weight to this conclusion.
Reform of Landlord Tenant Legislation
4.34 Existing legislation has created marked distortions in the housingmarket. It encourages construction of new housing rather than maintenance,improvement or extension of existing housing and thereby accelerates deprecia-tion of existing stock. It also tends to promote overconsumption of housingsince families can afford to build and rent simultaneously over long periodsof time. Current legislation also freezes land use and holds down propertytaxes in the highest urban land value areas of Mauritius, namely the municipalcouncil areas.
4.35 Reforming legislation to allow rents to approach market levels couldhave a number of quite far-reaching benefits. Proposals on this could bedone and phased over time are contained in Working Paper 4. Included amongthese are the measures to maintain existing stock and increase local revenues
1/ See Working Paper 3 for details.
- 44 -
to allow improved environmental services in the municipalities where mostrental housing is located. Reform would also encourage an overall shifttoward extension and maintenance rather than new house construction withinoverall housing investment.
A Strategy for the Public Sector
4.36 The considerations outlined above suggest some specific objectivesand measures for the public sector. A policy is called for which concentrateson providing credit for housing rather than providing housing directly forthe lower income groups, within a general framework which restricts the totalamount of investment in housing. The public sector's leverage over thebehavior of the housing market is clearly limited by its small share. Thismeans a reliance on general incentives and a pursuit of narrowly defined andspecific objectives.
4.37 The main determinant of the flow of investment toward housing isrealizable returns to alternative forms of investment or savings instruments.Given current economic conditions and the general characteristics of Mauritius,housing is bound to remain an attractive form of investment. Therefore theneed for the public sector to subsidize housing production, as opposed toinfluencing its distribution, is highly doubtful. Current or planned invest-ment levels of about Rs 600 million per annum are sufficient to allow produc-tion of enough housing to cover estimated needs, assuming an average newdwelling of 800 square feet. 1/ If more investment is directed toward main-tenance and expansion, then the average size of new housing could rise.This argues strongly against continued subsidization of public housing.
4.38 Furthermore, the need to constrain overall housing investmentsuggests that the costs of such investment should rise and therefore intereston MHC loans should conform to market rates. MHC is now proposing to link itslending rate to the Bank of Mauritius discount rate and to introduce flexibleinterest rate loans. We would strongly endorse this measure on both macro-economic and sector-specific grounds. From the point of view of overalleconomic management, higher costs for housing investment would result, whileMHC itself could increase its volume of lending, attract more savings andchannel funds to middle- and lower-income groups. By placing government-sponsored housing credit on a financially sound footing, recurrent budgetarycontributions to housing could be eliminated: a saving which in 1978/79 wouldhave amounted to Rs 52 million.
4.39 Assuming public housing credits finance could be about 20% ofplanned national annual housing investment, an annual public program of aroundRs 120 million is implied. Lending targets in terms both of the amount ofcredit extended to particular income groups and in terms of maximum loan sizeshould be introduced to control these flows.
1/ Rs 600 million investment, 8,400 units, Rs 90 per square foot yields 793square feet/dwelling.
- 45 -
E. Immediate Priorities
4.40 The recommendations and overall strategy which have been put forwardin this memorandum amount to a long-term commitment to begin implementation ofa physical development strategy by reforming some incentives and administrativestructures. Such policies will take time to become effective even if adopted.Many have long been proposed. For example, an attempt has been made to levyproperty taxes in the district councils but has been found to be politicallyunacceptable. Similar difficulties have occurred with attempts to increasewater tariffs. Without decrying the genuine difficulties posed by pursuingthese policies, a general commitment to them is urgent. Furthermore, webelieve that if adopted as a coordinated package, their political attractive-ness will increase. Thus, local governments increased responsibilities andrevenues would be a quid pro quo for local tax increases; increased availabilityof housing credit to the poor should be part and parcel of reduced CHA subsidiesand improved rental units a corollary. Most of these programs can be introducedin a phased manner over time.
Urbanization
4.41 In conjunction with this sector memorandum an urban project wasprepared for which a loan was approved by the Bank. 1/ This project seeks tolay the basis for carrying out many of the recommendations contained hereinwhich would strengthen institutions for urban planning, development andmaintenance. It would help to establish and implement sound and replicablepractices for the provision of utilities, urbanized land and housing inexisting areas as well as those to be urbanized, reducing where possiblecentral government budgetary support for these purposes. Other objectiveswould be:
(a) to redirect housing investment by increasing the amount andavailability through MHC of credit accessible to the poorwithout increasing and if possible reducing the total amountof housing investment in Mauritius;
(b) to reduce direct government involvement in housing construction,reduce the Central Housing Authority housing constructionprogram and to eliminate over time central government subsidiesto housing;
(c) to improve the efficiency and service standards of publictransport throughout the island and to strengthen transportplanning and implementation capacity of the National TransportAuthority and the Traffic Transport Unit in the Ministry ofWorks; and
1/ See "Mauritius: Urban Rehabilitation and Development Project," StaffAppraisal Report, No. 3100-MAS, (Loan No. 1926-MAS) August 1980.
- 46 -
(d) to provide a basis for implementation of the NationalPhysical Development Plan, and the creation of significantnew employment opportunities on a decentralized basis.
For this last purpose the project will-include funds to provide technicalassistance to a Plan Implementation Cell, as proposed in the previous chapter,and to assist in an island-wide valuation of property.
4.42 In implementing and supervising this project, GOM should continue tobuild upon the policy dialogue which has been begun on both project and policymatters. Other projects, which would provide funds for actual implementationof new urban development on a decentralized basis, could then rapidly beappraised and implemented. Such a project could be based on a growth centersuch as Flacq. To do this, project supervision should include a considerablepreparatory and technical assistance effort on:
(a) creating a land developer agency. A component of theproject--land development at La Tour-Koenig near PortLouis--will provide experience of the type of public sectordeveloper function which needs to be established and couldbe used as a basis for the institutional developmentrequired;
(b) land policies;
(c) local government reform;
(d) identification and preparation of a regional developmentinvestment package (urban and rural) based on an NPDPgrowth center such as Flacq, as a possible package for externalfinancing; this would require establishing priorities andphasing of the developments proposed in the NPDP and exploringpositive relationships between the policy and the RuralDevelopment Program.
A feasibility study will be needed to analyze the impact of the decentraliza-tion policies contained in the NPDP as compared to the rejected options whichmight be more immediately attractive, paying particular regard to:
(a) the spatial distribution of population and the likelihoodof its attainment;
(b) the ensuing distribution of employment;
(c) optimum use of existing infrastructure;
(d) minimum use of good quality agricultural land;
Such a study would make recommendations on priorities for developmentphasing and on attainable annual levels of implementation.
4.43 Project and sector work should also be directed toward developmentand establishing some of the overall policies which need to be articulated.Two of these, the overall public sector housing investment program and rentcontrol legislation, have already been included in the scope of the firstproject as areas of mutual interest where agreement will be reached. Others,prerequisites for a second project of the type envisaged here, would include:
(a) commitment by GOM and publication of its plans,concerning a detailed spatial development strategy;
(b) agreed objectives for local government administration,finance and disbursements and for property tax assessment,collection and distribution;
(c) agreed strategy for transport sector investments;
(d) agreement overall financial or budgetary management ofland development and service provision.
Employment
4.44 The urbanization project just mentioned does not include specificmeasures or components which address employment creation. 1/ To do so in anycomprehensive way would involve export promotion and structural adjustment ona national scale through implementation of policy and institutional proposalsmade in this report.
4.45 Aside from a project component directed at creating jobs, there area number of issues which could be addressed in future project preparation andsector work in the interest of promoting employment. Among these, improvementsin port management and efficiency are urgent and rank high. So does the needto put the management and development of the industrial estates program on aprofessional footing under an institution other than DBM. Since it is a keyvehicle for decentralized development in the island, the industrial estatesprogram might be entrusted to the Regional Development Authority (RDA). Evenif it is not, the RDA should be considered a prime candidate to take on thecoordinating function so sorely required for all employment-related publicaction. An enquiry is also needed to determine whether mini-industrialestates for SSEs could be an appropriate response to the space constraintsthat were identified for SSEs and what complementary action might be neededfor the success of this approach. Finally, marketing and finance efforts mustbe broadened and stepped up, including the provision of export credit insurance.
1/ Except to the extent that a Bus Management Study, included in the project,finds its major justification in terms of reducing the public transportconstraint to employment.
- 48 -
4.46 GOM s own direct employment programs, TPT and DWC, as well as CHAwhich has recently become tantamount, through inefficiency, to a publicemployment program, provide other areas for reform. In sector and projectwork for urban and structural adjustment lending considerable attention needsto be paid to the functions, management and roles of these two corporationsand to improving their productivity and efficiency.
4.47 Other areas with respect to employment which our analysis indicatesmerit further work include:
(a) the need for intensified promotion to attract foreigninvestors, and for some streamlining of the procedureof granting certificates;
(b) the need for assistance in export promotion;
(c) an export credit guarantee scheme which would be valuableespecially to firms entering new markets. The Governmentplans to establish such a scheme in DBM, and is beingassisted by the International Finance Corporation.Details need to be worked out, and a request to financeexperts for this purpose is being made to IFC.
- 49 - ANNEX 1
EMPLOYMENT
- 50 -ANNEX 1
ABBREVIATIONS AND ACRONYMS
ACP Countries associated with the EEC from Africa, the Caribbeanand the Pacific
CSO Central Statistics Office
DBM Development Bank of Mauritius
DC Development Certificate
DWC Development Works Corporation
EEC European Economic Community
EPZ Export Processing Zone
FSN Fond Syndical National, a federation of unions
GDP Gross Domestic Product
ILO International Labor Organization
IRA Industrial Relations Act
MCI Ministry of Commerce and Industry
MOE Ministry of Employment
MOH Ministry of Housing, Lands, and Town and Country Planning
MOL Ministry of Labor and Industrial Relations
MOP Ministry of Planning
NPDP National Physical Development Plan
NRB National Remuneration Board
SSE Small-Scale Enterprise
UNDP United Nations Development Program
- 51 - ANNEX 1
EMPLOYMENT IN MAURITIUS
TABLE OF CONTENTS
Page No.
I. INTRODUCTION
A. The Overall Situation ..................................... 55B. A Historical Perspective .................................. 56C. The Task Ahead ............................................ 58
II. SECTORAL EXPERIENCE AND PROSPECTS 58
A. Agriculture, Especially Sugar ............................. 58B. Manufacturing ............................................. 61
Large-Scale Manufacturing ................................. 61Small-Scale Industry and Crafts ........................... 66
C. Construction .............................................. 68D. Tourism and Related Activities ............................ 70E. Other Sectors, in Particular Government ................... 71
III. POLICIES AND PROBLEMS 75
A. Decentralization of Employment ............................ 75
The Present Picture ....................................... 75Future Prospects .......................................... 79
B. Incentives and Promotion in Manufacturing ................. 80
The Present System ........................................ 80Gaps and Shortfalls ....................................... 81
C. Physical and Financial Infrastructure ..................... 82
Industrial Areas .......................................... 82Transport ................................................. 85Water and Power ........................................... 86Finance ................................................... 87
D. Labor and Productivity .................................... 88
Wage Legislation and Wage Determination ................... 88Cost of Labor, Fringe Benefits ............................ 91Absenteeism and Labor Turnover ............................ 92Training Questions ........................................ 93
- 52 - ANNEX 1
Table of Contents (Cont.)
Page No.
IV. ORGANIZATIONAL AND INSTITUTIONAL ISSUES 94
A. Policy Development and Coordination .94
The Institutions Involved .94An Overall Reform? 97
B. Specific Institutional Issues .98
Marketing and Export Promotion .98Export Credit Guarantees .99The Conduct of the Industrial Estates Program .99Assistance to the Small-Scale Sector .99
TABLES
1 Employment Profile, 1971-1979 .572 Employment in Large Establishments by Major Sector 593 Summary of Sectoral Employment Considerations .744 Employment in Large Establishments, by District
March 1979 .765 Labor Force, Registered Unemployment and Job Vacancies
by District, Beginning 1979 .786 Proposals for Industrial Estates Development by the NPDP. 83
Graph: Employment in Large Establishments by Major Sector1974-1979 (%) .62
Appendix Tables
A. Employment by Subsector in Large ManufacturingEstablishments, as of September 1979 .101
B. Employment in EPZ and DC Enterprises, December 1977-March 1979 .102
C. Subsectoral Employment in Operating EPZ Enterprises . 103D. Small-Scale Manufacturing Enterprises by Subsector in
Selected Districts .104E. Employment Shares by Major Sector (') .105
- 53 - ANNEX 1
EMPLOYMENT IN MAURITIUS
I. INTRODUCTION
A. The Overall Situation
1. Mauritius faces a continuing and increasing employment challenge.The island's labor force has grown rapidly since the early 1960s as aconsequence of the high population growth rates following the end of theSecond World War. Present labor force growth rates in excess of 3% per annumwill continue until the mid-1980s when they should start reflecting thesuccessful family planning effort that began to take hold in the mid-1960s.For the second half of the coming decade, it can be expected that labor forcegrowth will slow to an average of 2.5% p.a.
2. There is some uncertainty over the actual size of the labor forceboth now and even more so in the future. The last population census tookplace in 1972 and the next is being prepared for 1982. We are thus nearingthe end of the intercensal period, where uncertainty of actual population sizeis greatest. Our labor data are estimated by applying ILO estimates ofparticipation rates to the population figures as calculated in paras.1.17-1.19 of this memorandum. The major uncertainties surroundingparticipation rates concern female participation, educational withdrawal inthe relevant age group, international migration and the effect of theintroduction of the national pension scheme on the participation of age groups55 years and above.
3. The Bank's labor force estimates are higher than those used by theMinistry of Planning (MOP) in its preliminary notes on the next plan.For 1980, the difference is just short of 12,000 persons, about one-quarterof it explained by our higher population estimate, the other three-quartersby ILO's participation rate of 35.7% compared to the implied rate used byMOP of 34.8%. For 1990, the Bank's estimate is close to 21,000 persons higherthan the MOP figure, the bulk of the difference, i.e. more than 18,000persons or 87%, explained by our higher population estimate, the rest bya slight difference in participation rates.
4. Even the lower figures of MOP portend a significant aggravation ofthe employment problem. Over the period 1972-1980, MOP figures imply anannual addition of about 8,700 persons to the labor force. For the next tenyears annual additions would rise to about 10,100. Our figures for the sameperiods are about 9,000 and 11,000, with a higher average of 11,700 in thefirst half of the 1980s, declining to 10,300 p.a. in the second half of thedecade.
- 54 -
ANNEX 1Page 2
B. A Historical Perspective
5. Concern with employment is not new to the country and grew paripassu into the labor force of the large post-war cohort and the worseningunemployment situation. The 1960s started out with registered unemployment ofno more than 2,000 to 3,000, 1/ of 18,000 in 1967. Public Works programs andthe bulge in large-scale agricultural employment in 1968 provided sometemporary relief. However, underlying trends reasserted themselves quicklyand the 1967 peak in registered unemployment was surpassed in the spring of1970.
6. Developments since 1971 are summarized in Table 1. Column 3 of thetable shows estimated total "employment" based on our labor force estimates(column 1) minus registered unemployment (column 2) in mid-year. Actualemployment estimates are generated through CSO surveys, which, however, coveronly large establishments. 2/ Column 4 gives averages of these inquiries madein March and September each year to approximate mid-year employment levels inlarge establishments and the last column contains the residual, presumed to beemployment in all other establishments, self-employment, domestic service,etc.
1/ Unemployment data are taken from the unemployment register of theMinistry of Employment (MOE). As usual with statistics based onregisters, there may be underregistration as people do not bother to puttheir names on the list when they know jobs are scarce. Moreover, theemployment register in Mauritius is used almost exclusively by governmentand parastatal bodies to help fill vacancies, which are notified to theMOE at tbe initiative of employers only. The register is thus informedof only a fraction of the vacancies that actually exist, and its use forfinding a job is correspondingly limited. However, there is alsoevidence that the register contains persons not really available foremployment. For example, the MOE reports that in May/June 1979, some564 people were referred to employers and 102 were placed, but mostcandidates failed to report to their prospective employers. Over thesame period, 106 applicants failed to report to the employment exchangesalthough invited to do so by letter and 333 others declined offers ofemployment made to them. See MOE, employment service: "Statisticalreview for period May/June 1979," July 30, 1979, p.2 for details.Registered unemployment is thus a highly dubious figure.
2/ See footnote to Table 2 for an explanation of the coverage.
EstimatedLabor Of whichForce Unemployment Total Large Other
Year (mid-year) (mid-year) Employment Scale /a (residual)
1971 257.7 31.3 226.4 137.0 89.4
1972 263.8 39.3 224.5 144.7 79.8
1973 271.3 28.7 242.6 154.0 88.6
1974 278.2 22.7 255.5 161.8 93.7
1975 286.0 22.0 264.0 168.6 95.4
1976 295.5 19.8 275.7 180.6 95.1
1977 304.8 17.3 287.5 194.6 92.9
1978 315.0 17.5 297.5 196.7 100.8
1979 325.4 22.9 302.5 198.5 /b 104.0
/a Average of March and September estimates of employment in largeestablishments.
/b End-March 1979 estimate.
Source: CSO Bi-Annual Survey of Employment and Earnings in LargeEstablishments, No. 26, September 1978 and No. 27, March 1979.
April 1980
- 56 - ANNEX 1
Page 4
7. In mid-1972, registered unemployment exceeded 39,000 people, almost15% of the labor force (Table 1) despite large increases (approximately18,500) in employment in large-scale establishments in the preceding two yearsincluding massive hirings in the public sector in response to the worseningsituation. By 1977, the success of the EPZ manufacturing enterprises, rapidincreases in employment in construction, and in transport, storage andcommunications reduced the registered unemployment to a little over 17,000or about 5.7% of the labor force. The onset of the economic slowdown in 1977substantially retarded this employment growth, and by October 1979 unemploy-ment rose to exceed 23,000 (about 7.2% of the labor force). Concurrently, the"residual" covering employment in small-scale establishments, self-employment,etc., which had been relatively stable for several years, started rising quiterapidly, suggesting increasing underemployment in this group.
C. The Task Ahead
8. The next section of this Annex examines in some detail the trendsand prospects by major sector. It can be stated that the situation isbecoming more serious, not only because more jobs will need to be created, but
also because some sectors that have greatly helped in easing the problem upto now can no longer be expected to do so. GOM and the construction sectorare in this position. GOM in recognition of these hard facts, has lowered itsemployment targets. Initially, full employment was to be achieved by 1980.This became unattainable and the government now aims at no more than 5%unemployment in 1990, or about 23,000 persons, the same number that wereunemployed in Octobar 1979. To achieve this target, net job creation between1979 and 1990 will have to be about 121,000 or somewhat less if MOP laborforce figures are taken as a base. This takes no account of likely falls inagricultural employment which could add another 5,000 to 6,000 jobs to therequired job creation target. Most will have to come from the large-scalesector and, within that sector, EPZ manufacturing will have to be the maindriving force. By all accounts, the country is facing a daunting task.
II. SECTORAL EXPERIENCE AND PROSPECTS
A. Agriculture, Especially Sugar
9. Table 2 presents the sectoral distribution of employment since1974 in "large" enterprises of 10 or more employees in all non-agriculturalactivities and in farms with harvested areas above a certain size in sugar andtea (see notes to table for details). No other employment statistics arecollected on a regular basis. Depending on the sectoral importance of smallerestablishments, the employment distribution in this table contains biases ofvarying and often considerable magnitude.
Table 2: MAURITIUS: EMPLOYMENT IN LARGE ESTABLISHMENTS BY MAJOR SECTOR
1974 1975 1976 _191L 1978 lq7(
Mar. Sept. Mar. Sept. Mar. Sept. Mar. Sept. tlar. Sept. Mar./C Sept.
Grand Total 156,400 167,200 164,500 172,800 176,700 184,500 194,000 195,200 195,200) 198,200 198,500
/a Includes hunting, forestry and fishing as well as factory employment in sugar and tea.
lb Includes development workers.
Ic Preliminary estimate.
Note: All figures rounded to the nearest 100. Estab]isl;ients covered by the Nail Survey have mir.iiJum acreages in
sugar (25 arpents or more harvested) and tea (at least 5 arpents planted) and employ at least 10 persons on
the day of the survey for all non-agricultural establishments. The response rate usually gets up to about 80-85%
in the six months following the survey. Non-respondents account for some 47 of estimated employment and survey L
results are adjusted upward for non-respondents. See any issue of the survey for further details.
Source: CSO, BI-Annual Survey of employment and earnings in large establishments, various issues.
October 15, 1979
- 58 - ANNEX 1
Page 6
10. Total employment in agriculture can thus be estimated to have beenabout 75,000 in 1978. This figure, however, includes employment in sugarand tea factories and in ancillary activities such as machine and vehiclerepair. Employment in the country's 22 sugar factories, including ancillaryactivities, can be estimated at about 5,800. In the following discussion,these have been excluded from the agricultural employment total, althoughTable 1 includes them.
11. Sugar clearly dominates agriculture with 95% of cultivable areaunder cane, more than half of the land being farmed by the sugar estates.Recent production levels have varied between 665,000 tons (1978) and 690,000tons (1976). Further increases in sugar production to some 800,000 tons perannum are scientifically possible. However, this increase will have to comemostly from intensification and productivity improvements. Little extra landcan be brought under sugar cultivation and the industry is suffering fromincreasing manpower shortages that have lengthened the harvest season andresulted in declining sugar yields. An illustration is provided in Graph 1,which clearly shows the seasonal upswing in the agricultural labor force inSeptember when the harvest is in full swing. In percentage terms, however,this upswing has steadily declined from close to 11% of the March employmentin 1974 to less than 4% in 1978. Seasonal increases in the labor force in1974 were about 6,200 while in 1978 this figure had declined to 2,300 people,clearly indicating the increasing difficulties of hiring sugar harvest labor. 1/
12. To overcome these problems, mechanized cane-cutting and loading,which is used on only a small fraction of estate land, will spread relativelyquickly. About 50% of the land under cane is estimated to be suitable formechanization and apart from initial extra work in destoning, will lead toreduced labor use over time. Additional employment in agriculture throughdiversification and cultivation of marginal lands will probably not compensatefor this fall so that agricultural employment may be reduced by about 3,000 by1985 and a further 2,000 by 1990. This would leave agriculture employing some65,000 people in 1990 or aome 15% of the labor force. In 1978, thispercentage was about 22%.
1/ To some extent, the attenuation of seasonal hirings may reflect GOM'sattempt to stabilize sugar employment by the provision that workersachieving 80% of expected working time during the harvest are entitled toyear-round employment.
- 59 - ANNEX 1Page 7
B. Manufacturing
Large-scale Mnnufacturing
13. Manufacturing other than sugar and tea clearly was the most buoyantpart of the employment picture in recent years. "Large" plants employing 10or more people added nearly 23,000 jobs from 1971 to 1978 (see Appendix TableA). The percentage of total large-scale employment accounted for bymanufacturing increased from 6.9% in 1971 to about 17% at the end of 1978. Ofall the jobs added over the period in large establishments, some 40% were inmanufacturing.
14. Encouragement of manufacturing started in 1963 with the intro-duction of incentives for import substitution and tourist industries throughDevelopment Certificates (DCs--see Section III B). By 1970, it had becomeclear that export processing had to be encouraged if the sector were todevelop further and another package of incentives tailored for exportindustries was introduced. This was called "Export Processing Zone" (EPZ)certificates. The expression does not correspond to a geographical conceptbut simply to a given package of incentives further described in Section III.The introduction of EPZ certificates was eminently successful and by the endof March 1979 employment in EPZ enterprises had reached 19,700. In addition,EPZ enterprises seem to have weathered the shake-out during 1977/78 betterthan DC holders and employment in them has started climbing again recently,though not at the same rates as in the earlier part of the decade (see TableAppendix B).
15. The EPZ enterprises are dominated by the textiles/garments sub-sector which accounts for about 80% of all employment in EPZ enterprises(see Appendix Table C). A distant second is electronics with 7% to 8%followed by jewelry and watchmaking at around 4% of total EPZ employment.In March 1979, these three subsectors accounted for more than 93% of allemployment in EPZ enterprises.
16. There are some general constraints on industrialization in Mauritiussuch as distance from main markets, almost complete absence of local rawmaterials and energy sources and a narrow local market, which the country hasto live with. There are also a number of specific problems analyzed in moredetail in the following sections of this annex, most of which could bealleviated by policy action. Despite these constraints and problems one canbe relatively optimistic about overall prospects for further industrialdevelopment, especially in export processing.
17. One main reason for this optimism is the smallnese of the countryand its weight in international trade in manufactures. Even in the textiles/garments subsector which, by virtue of its overwhelming weight in the EPZindustries, will largely determine the fate of these activities in the nextfew years, the present export volume is only a minute percentage of total
- 60 -
ANNTEX 1
Page 8
HAURITITUS: EPLOYIENT IN LARGE ESTABLISHMENTS BY .JAJOR SECTOR1974-1979 (,)
30
(a) Agriculture(b) Government(c) Manufacturing(d) Construction(e) Public Utilities
40 (f) Business Services(Private Sector)
(g) Trade
30
. (a)
(b)
20
(c)
10 (d)
(e)(f)(g)
I I I I
1974 1975 1976 1977 1978 1979
Source: Appendix Table E.
- 61- ANNEX 1
Page 9
imports of these products and of the total market for them in the main clientcountries. Mauritian exports of EPZ manufactures are heavily concentrated onthe EEC, with some 85% of all EPZ exports in 1977 and, within the EEC, onFrance, which accounted for 35% of total EPZ exports. This suggests thatmarket penetration in EEC countries other than France is well below itspotential and that market penetration elsewhere is even lower. For example,EPZ exports to the United States were a paltry 7.9% and those to almostneighboring South Africa, a negligible 0.4% of the total in 1977. 1/
18. A second conclusion is based on the fact that exports largely goto those countries where much of the foreign investment capital has originatedin response to the EPZ legislation. Investment promotion should therefore bean integral part of marketing strategy, a concept that is accepted in thepublic efforts that are now underway.
19. In addition, there is further potential for vertical integrationin the textiles/garments industry. In 1978, for example, some 34.5% of thewool yarn used in the knitting industry was produced locally. With additionalcapacity being installed, the percentage of locally-produced yarn may reach60% by the end of 1980 but could clearly be further expanded. Other investmentopportunities may already be viable in areas such as printing of fabrics,button and zip manufacture, etc.
20. This relatively optimistic view is supported by other evidence.As Appendix Table B shows, significant numbers of EPZ certificates have beenissued for plants not yet operating, are approved or are under consideration.In March 1979, these three categories together accounted for about 18,000expected jobs or nearly as much employment as is now provided in EPZindustries. Not all of these projects will actually be implemented sinceexperience shows that only about 3 out of 4 applications are finally approvedand that one out of ten enterprises that get certificates will not startoperations. Applying these ratios to the figures in Appendix Table B wouldnevertheless indicate that 15,000 jobs may be forthcoming in the next fewyears from applications already made. Furthermore, discussions by the missionwith entrepreneurs indicated that many of them have expansion plans, some soimmediate that they are advertising for additional workers already.
21. A word of caution should, however, be added. The impact of thepresent budget squeeze, the recent devaluation of the rupee and of therecession fears in developed countries on these plans has not been fullyanalyzed. 2/ While devaluation should, on balance, improve thecompetitiveness of Mauritian enterprises, local value added is typically lowin assembly-type operations so that any improvement would be fairly small and
1/ For a detailed examination of the textile sector and its prospects, seePhilippe A. Forget: "The Mauritian Textile Equation," June 20, 1979.
2/ New EPZ certificate applications received between end-March and end-December 1979 amounted to less than 1,100 new jobs.
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could easily be nullified by other government action or even governmentinaction. Dealing with the specific problems analyzed in the next section,therefore, retains its full importance.
22. These words of caution also apply to the further development ofimport substitution industries generally covered by development certificates,whose prospects look less promising. Employment in these enterprises with tenor more employees stands at about 6,000. This figure includes a number ofcompanies which are not strictly manufacturing enterprises, such as deep seafishing, chicken raising, cold storage and a dry cleaning company with anestimated combined employment total of between 700 and 800 at the end of 1978.The main manufacturing subsectors in which DC enterprises are active arepredictably beverages and tobacco, household articles including furniture,building material supplies, light metal working and repairs, including a shiprepair company employing between 400 and 500 people.
23. Most of these activities follow rather than lead the developmentof the Mauritian economy as they depend crucially on the purchasing power ofthe population. Many of them also depend on customs protection for viability,are subject to price controls and are reported to work below full capacity.Some opportunities for further diversification will be opened up over time asthe economy works its way out of the present difficulties and impressivelylong lists of production possibilities have been completed. 1/ Otherinvestment possibilities depend on changes in cost and price relationshipsbetween alternative outputs for the same basic raw material and imported andlocally produced energy.
24. The latter point is particularly important in further processingof sugar industry by-products, such as molasses and bagasse, which arethe only major local raw materials available. In a country almost totallydependent on imported energy, the production of power alcohol would a prioriappear to be an attractive option and, in fact, a modern distillery isunder construction. However, only part of its output will be power alcohol asit was estimated before the recent devaluation that the cost of production ofpower alcohol from molasses was 70% above the price of imported gasoline atprevailing export prices for molasses. 2/ It is unlikely that the recentdevaluation has turned around these relationships as it increases not only thecost of imported gasoline but also the return to the producer of molassesexports and the cost of a large part of the remaining production costs ofalcohol. Over time, power alcohol production will become economic if gasolineprices rise further, which is likely, or if molasses prices declined drasti-cally, which is unlikely. Some chemicals could also be produced from molassesbut require further feasibility studies, specialized know-how and securemarkets.
1/ See for example "Suggestions for a Brighter Future, 1980-1985," JointEconomic Committee, July 1979, pp. 105-107.
2/ Ibid., p. 47.
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25. With bagasse, the problem is availability, since some 90% of it is
used to produce steam and electricity in the sugar factories. Replacementof bagasse by fuel would not be economic, but about 30% of bagasse could bemade available if daily cane crushing times in factories could be lengthenedand considerable investments made to improve the thermal efficiency ofthe factories. These investments could only be justified by profitablealternative uses for bagasse. Among the alternatives are increased electricityproduction and sale to the national grid, pulp and paper and furfuralproduction. The first of these options would not directly create muchemployment, studies of the second option have all been shelved for technicaland economic reasons, and the third option requires further feasibility andmarketing studies. A particle board factory based on bagasse is ailingbecause of high prices, lack of import protection and general marketingproblems.
26. Some of the DC factories could possibly be encouraged to exportbut many are too small to make individual export marketing practical so thatincentives might have to be applied not only to them but perhaps also to thewell established trading houses to stimulate export sales.
27. Altogether then, the picture for this part of the manufacturingsector is not bright. An analysis of the DCs in various stages of thepipeline supports this conclusion (see Appendix Table B). While 115 DCapplications were in the pipeline at the end of 1978 with expected employmentpotential in excess of 5,000, the quality of this pipeline is open to doubt.Of the DCs issued that have not led to operations by March 1979, ten, for anemployment total of 400, had been signed as far back as 1976 and 1977 so thatlegitimate doubts may be expressed that they will be implemented. Another 275jobs are accounted for by a cement production project, about which doubtsexist. Of the largest category of DCs under consideration, over 1,000 jobsare accounted for by prefabricated building elements and masonry productswhose net employment impact, if they are viable, might be much smaller andpossibly negative. 1/ It would be an accomplishment if half the expectedemployment of DC projects in the pipeline were created over the next fewyears.
28. EPZ and DC enterprises account for less than 24,500 jobs at the endof 1978 out of a total of 33,000 in large manufacturing establishmentsas surveyed by CSO for September 1978. Somewhere in excess of 8,000manufacturing jobs are thus located in enterprises that do not benefit or havenot benefited from either EPZ or DC status. No separate analysis is possiblefor this group of the manufacturing sector with 10 or more employees. It isprobable, however, that they are very akin to the DC enterprises inmanufacturing both as regards sectoral activities and problems.
1/ New DC applications received from end-March 1979 to end-December 1979amount to total job potential of over 2,500 but nearly half this totalis again in prefabricated construction elements.
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Small-Scale Industry and Crafts
29. This leaves the last part of the manufacturing sector those enter-prises with less than 10 employees. Analysis of these small-scale and craftactivities is hampered by severe lack of solid and consistent data and by theabsence of clear concepts. The last industrial census that covered thesesmall establishments was conducted in 1968 and recorded some 3,460 smallmanufacturing enterprises in 7 specific subsectors with a total of 7,460employees or 2.6 per establishment. The population and housing census of 1972also recorded small-scale units, and on the basis of a partial exploitation ofthe census results, a study made in 1974 1/ estimated that, by 1972, employmenthad increased by almost 50% to between 11,000 and 12,000 workers and thenumber of enterprises to over 5,000. These conclusions, however, are open todoubt. In fact the total number of enterprises of this size recorded in the1972 population and housing census was about 10,300 but included some 6,530establishments which were clearly and identifiably not engaged in manufacturingbut in activities such as trade, legal and personal services (barber shop,beauty parlors, etc.). In addition, 1,230 enterprises in the 1972 census arelisted under "other" and could contain significant numbers of non-manufacturingestablishments. Census results would thus suggest that, in 1972, small-scale manufacturing units numbered between 2,500 and 3,800 at the verymost. Corresponding employment figures were unfortunately not made available.
30. Since 1972, only partial and unsystematic information has becomeavailable on the SSE group. In the course of work for the NPDP, MATIMestimated 2/ on the basis of the 1972 census that SSE employment amountedto some 18,200 in 1972, but this figure includes about 5,000 jobs in thesugar factories. 3/ The group that concerns us would thus have employedsome 13,000 in 1972, a figure not too different from the one used in the WorldBank/DBM study cited above and open to the same doubts so much the more so asMATIM states that the census identified only some 1,100 small-scale industrialwork places as opposed to the 3,460 used in the above-mentioned World Bank/DBMreport. MATIM further estimated that employment in the sector has risen to15,000 in 1977 (20,000 if sugar factory employment is included) or by some 13%to 14% over five years at a compound rate of between 2% and 3%.
1/ "Small-Scale Enterprises in Mauritius," January 3, 1975. A joint studyby the World Bank Group and Development Bank of Mauritius, p. 6.
2/ "Esquisse d'une politique a moyen terme d'implantation industrielle,"Cahier No. 4.2, MATIM, October 1977, edited in October 1978, p. 8.
3/ Sugar factory employees are called "artisans," which may explain why theywere included in the SSE or "artisanal" subsector.
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31. The latest available overall estimate was produced in a reportprepared for UNDP in March 1979, 1/ which pitches the sector at 4,000 enter-prises employing in excess of 20,000. It is unknown on what these figures arebased, but there is a presumption the employment figure may have been takenfrom the MATIM report, including sugar factory "artisans." In the absence offurther information, little credibility can therefore be attached to it.Initial notes for the planned strategy during the 1980s use an SSE employmentfigure in manufacturing of 15,000 in 1978, the same as the MATIM 1977 figureexcluding sugar factory "artisans." Remaining quantitative information on theSSEs is limited to a sample inquiry into SSE problems made by the WorldBank/DBM report, 1974 (342 observations), a partial listing of SSEs in some ofthe country s districts undertaken by the MCI (see Appendix Table D), somestatistics developed by DBM on the basis of its SSE loan portfolio and aninquiry into handicrafts conducted in 1974/75. These reports all usedifferent definitions and cannot be matched to provide a coherent quantitativepicture.
32. However, they do provide some information on the sectoral importanceand composition of the SSE group in manufacturing and on its problems. Theindustrial census of 1968 showed that, in terms of employment, SSEs dominatedin wearing apparel (90% of subsectoral total), furniture (80%) and metalproducts (58%) and were also quite important in transport equipment (38%) andfood processing (36%). Overall importance of SSEs in the seven specifiedsubsectors were said to be 42% of total employment; however, this is bound tohave been an overestimate as this would imply large-scale employment in thesesectors of 10,300 in 1968, a figure which is in excess of the 8,300 recordedtwo years later for all large-scale manufacturing (see Appendix Table A).Whatever the relative importance of SSE employment was in the total in 1968,it is likely to have declined markedly since then with the dynamic developmentof the--typically large-scale--EPZ industries. If it is considered thata maximum of 15,000 were employed in SSE manufacturing in 1978, this wouldamount to some 31-32% of total manufacturing employment.
33. The sectoral composition of SSE activities has probably not changedmuch. The, admittedly partial, SSE census started by the MCI (see AppendixTable D) shows wearing apparel still by far the largest subsector activity,followed by furniture, metalworking and transport equipment. It could bespeculated that furniture making and metalworking have gained in relativeimportance over some of the other activities such as food processing andpossibly also transport equipment, which is the only subsector in whichemployment in large establishments has declined between 1970 and 1978 (seeAppendix Table A).
34. On prospects for SSE manufacturing activities, one can hardlybe more optimistic than on the development of large establishments other thanEPZ enterprises. These enterprises cater to local needs and are primarily incompetition with each other rather than with the large-scale enterprises, 2/
1/ Project MAR/79/001/11, report by A. Le Van Chau, consultant, March 1979,para. 3.1.
2/ Ibid. "Small-Scale Enterprises in Mauritius."
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mostly because their products appeal to clients in a different, usually lower,income range. While this client group may continue to increase in absolutenumber, its relative importance will decline as incomes rise. Moreover, ifpolicy action is successful in alleviating specific problems of SSEs, such aslack of finance, management, marketing know-how, shortage of work space andobsolete equipment and production methods, this will improve productivity perworker and slow down employment expansion. It will also bring SSEsincreasingly into competition with the larger enterprises and those that aremost successful in this game will graduate out of the size category.
35. Statistically, SSEs could develop faster than their client groupand its income only if substantial new markets were opened up. Betteraccess to public procurement and new product development might help andso could subcontracting from larger companies. The latter has not muchdeveloped spontaneously, except in some garment operations, but the scopefor it might well be only modest, even if some particular handicaps ofSSEs were removed. Finally, with the exception of activities cateringto tourists, access to export markets raises problems similar to, but moresevere than, those concerning the larger-scale companies set up to cater tothe local market. Expectations such as contained in the preliminary notes forthe plan strategy for the 80s, that SSE manufacturing employment would risefrom an assumed 15,000 in 1978 to 40,000 in 1990, thus appear highlyunrealistic. There is no reason to think that employment in Mauritianmanufacturing SSEs would develop appreciably faster than the domestic economyas a whole.
C. Construction
36. As is so often the case, the construction sector has attractedlittle statistical or analytical interest although it is one importantway for unskilled workers to accede to modern wage jobs. One availableestimate of employment in construction was prepared by MATIM for 1972.On the basis of the housing census, MATIM estimated that some 20,500 peoplewere employed in construction, of which some 2,800 in large-scale enterprises.The preliminary notes for the plan strategy of the 1980s prepared by MOP usethe same total employment in construction in 1972 but with a differentbreakdown. They put employment in large establishments at about 9,600 with10,900 engaged in small-scale construction firms. The different breakdown isexplained by the allocation of 6,300 development workers to the large-scalefigure as reported by CSO for the September 1972 survey (3,300). In the CSOsurveys, development workers are reported under government.
37. Estimates of employment in construction at more recent datesare extremely crude. MKP has put construction employment in 1975 at atotal of 26,400. Some 14,500 is estimated to have been in small-scaleenterprises, which are not covered by the regular CSO inquiries. This figure,however, is based simply on a 10% annual growth rate since 1972, for which nosupporting evidence is provided. One can build another--similarly crude--estimate of construction in employment in small enterprises on the followingassumptions:
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(a) that residential building and maintenance is largely carriedout by small enterprises and the percentage built by largeenterprises has not changed much;
(b) that maintenance, rehabilitation, and unofficial constructionare roughly the same percentage of the total in 1975 as in1972;
(c) that productivity in small enterprises and overall quality ofthe houses built has not changed much over the period.
38. Assuming further, in line with national accounts practice inMauritius, that licenses issued in one year roughly reflect the buildingvolume in the next, we can estimate that between 1972 and 1975 (based onlicenses issued in 1971 and 1974) employment in the SSE construction sectormay have risen by 69% to 18,400, giving a total, inclusive of developmentworkers and large establishments, of some 30,000. Both the base year figureand this one do not allow for that part of the Development Works Corporation(DWC) work force that has engaged in construction. While the Corporationwas in its first year of operation in 1972 and could, therefore, legitimatelybe ignored, this can no longer apply for later years. If we estimate thatabout two-thirds of the DWC workforce was engaged in construction in 1975,total construction employment might have been between 34,000 and 35,000 orsome 13.9% of total employment.
39. If we take one further risky step and estimate 1978 employment inconstruction on the same basis as above, we arrive at some 20,600 workersin SSE construction, 9,700 in large construction firms and a rough estimateof 6,000 development workers and another 5,400 in DWC engaged inconstruction for a total of between 46,000 and 47,000 or more than 16% oftotal employment. This very rapid rise in construction employment isconsistent with the GDP for construction, which portrays boom conditions.Between 1972 and 1975, GDP originating in construction was estimated tohave more than doubled and, by 1978, it was about three times aa high as in1972.
40. The boom is now over, construction employment in large establish-ments peaked in the second half of 1978 and significant layoffs have takenplace as large investments in hotels, industrial and commercial buildingsand public works have been completed. Immediate- and longer-term prospectsare not bright. The budget squeeze and the foreign exchange shortage forbuilding material imports will reduce public spending for some time to come,the rate of residential building, if anything, will decline once reconstructionand repair of recent cyclone damage is over (see Working Paper 3, Housing andBuilding Industry), and it is uncertain whether a possibly stepped-up invest-ment in industrial building and remodeling and rehabilitation of existinghouses will take up the slack.
ANNEX 1- 68 - Page 16
41. Moreover, there is room for substantial productivity improvements,in particular in the DWC and possibly the Development Worker category, becausethe present level of efficiency is extremely low. Employment in constructionwill certainly decline in relative terms from the very high 16% of employmentin 1978 and may decline markedly in absolute figures, at least for a time. Atthe very best, employment by 1990 may be at the same level as in 1978, whichwould then represent some 10.9% of the employment target. This is still inthe upper half of the internationally observed range of construction employmentin the total.
D. Tourism and Related Activities
42. Within overall employment, tourism and directly related activitiessuch as restaurants are a small factor. Direct employment in hotels andrestaurants rose from about 1,100 in 1970 to about 3,050 at the end of 1977(the last date for which a figure is available) and accounted then for 1.6% ofemployment in large establishments. This was after a period of rapid expansionof tourist arrivals from 27,650 in 1970 to 102,500 in 1977, 1/ as well as aquick expansion of hotel infrastructure from about 1,600 beds in 1971 to about3,700 beds in 1977.
43. Numbers of tourists rose by between 30% and 40% p.a. in the earlypart of the decade, but growth fell sharply in 1974 (plus 7.3%) and 1975(plus 2.3%). It picked up in 1976 (plus 24%) and 1977 (plus 10.5%) butwithout reaching the early growth rates and, in the first six months of1978, arrivals actually fell by 2.4% over the same period in 1977. It isnow certain that planned targets for tourism in 1980, including an employmenttarget of 5,000 will not be reached. Had industry followed the projectedemployment expansion of 9% p.a. from 1977 onward, employment would havereached only 3,800 in 1980; it is now bound to be lower.
44. Prospects for tourism until 1990 are subject to a number of specificuncertainties in addition to the volatility of tourism. The relative andabsolute increases in energy prices are certain to have a dampening effect ontourism in the country, especially from the distant countries of origin.Mauritius caters to the upper end of the tourist market and the origin oftourists coming to the country is heavily concentrated in Reunion, metropolitanFrance and the Republic of South Africa, which together account for somne 64%of all tourist arrivals in 1977. Their combined share increased from lessthan 60% in 1970, but it is not certain that they can continue to provide therequired above-average stimulus and, in any case, this makes tourism verydependent on the general economic fate of only two and one-half countries. Itmay, therefore, be desirable and necessary to promote diversification.Whether the recent devaluation will impart new vigor to tourism is stillan open question.
1/ "International Travel and Tourism," CSO, June 1978.
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45. Mauritian tourism is very seasonal with sharp peaks occurringin December/January and in July. At those times, hotels are fully booked,but average year-round occupancy rates are reported to be on the order ofabout 50% (precise statistics are lacking). Expansion thus requires eitherincreases in hotel capacity or, preferably, substantial increases in tourismduring the slack season. Hotel construction and expansion has slowed to atrickle (only one development certificate for a new hotel has been issued forsome time) and promoting the slack season will depend on diversifying intocountries of origin where vacation periods are less heavily bunched in thepresent peak periods or on the promotion of extraordinary events in Mauritiusmuch like the successful annual marlin fishing tournament in early spring orthe sailing competition organized in the fall of 1979. This will requiresubstantial promotion efforts.
46. Finally, concerns are increasingly voiced in various quarters thatoverly rapid tourist development might create social and cultural problemsand thus be undesirable. It could also lead to crowding at the beacheswhich might sap the "luxury" image of Mauritius as a tourist destination.This is one of the reasons why initial thinking on the strategy for the 1980sgoes toward average increase in tourist arrivals of between 5% and 6%.Other reasons are the high capital cost of employment creation in tourism(on the order of Rs 75,000 to Rs 115,000 per job before the recent devaluation)and the need to put increasing emphasis on more highly-skilled jobs 1/ thanthe tourist industry generally provides. Allowing for some productivityimprovements through raising average occupancy rates, employment in hotels andrestaurants in 1990 may range from 3,900 to 4,500 at the most and, therefore,still below the initial targets for 1980.
E. Other Sectors, in Particular Government
47. The remaining sectors, (public utilities, transport, storage andcommunications, wholesale and retail trade, financing, insurance, real estateand business services, government and other community, social and personalservices accounted for an estimated 136,000 jobs in 1978, or some 47.6% of thetotal. Most of these sectors decline or prosper either with populationmovements or some of its age groups (such as educational employment) or areparallel to the general health and development of the economy.
48. The major exception to this rule is most government employmentwhich obeys other criteria. For this discussion, central government, localgovernment and DWC are grouped together, although much of DWC employment and alarge part of the development workers on the government payroll are dealt within the discussion on the construction sector (Section C). Over the last tenyears, public sector employment thus defined has experienced two periods of
1/ Because of increasing educational levels and job aspirations as a resultof free secondary education.
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rapid growth with a period of overall stability between 1971 to 1975. Thefirst period of rapid growth started in 1969 but the bulk of it occurred in1971 when nearly 8,000 people were added to the public payroll for a totalincrease over 1968 in excess of 10,000. During the same period, registeredunemployment rose from about 8,100 in 1968 to nearly 31,900 in September 1971.It is likely that unemployment would have taken on even more drastic propor-tions had the rise in public sector employment not occurred.
49. The period of stability in public sector employment lasted until theend of 1975 and coincided with the drop in registered unemployment below the20,000 mark after a small additional rise to 33,100 in 1972. 1/ Public sectoremployment then started rising, moderately at first but at a rapidlyaccelerating pace since 1977. Since the end of 1975 another 13,000 peoplewere added to the public payroll, and nearly 10,000 since September 1977.These figures partly hide the 1976 "election" bulge when, by March 1977, theDWC had added 7,700 people to its payroll over September 1976 and another1,000 were taken on by the central and local administration. By September1977 some 7,000 of this bulge were no longer on the public payroll. Many ofthem were temporarily released to work in the cane harvest and later returnedto DWC. At the same time, registered unemployment fell to a low of about15,400 in September 1977, doubtless in part because of these mass hiringsby DWC, but then started rising again to over 20,000 by March 1979 and tonearly 23,000 by June 1979.
50. Public sector employment has thus acted to moderate or preventincreases in unemployment but has not shown any downward flexibility whenunemployment fell. Part of the explanation lies in the way DWC employment,the major channel for the "travail pour tous" program since 1972, is handled.All DWC labor, just like the other "development workers" in government orparastatal bodies, can expect to become permanent government employees afterseven years on the payroll, providing a powerful incentive to stay withthe corporation (see Section III for details).
51. There are no hard and fast rules about what is "a reasonable"level of employment in public administration. This is further complicatedwhere a fragile political situation combines with serious employment problemsto pressure the administration into becoming a generous employer of lastresort. Not unexpectedly, the private sector in the country feels thatgovernment employment should be reduced over time 2/ and this may effectivelyhappen over the next few years with the problems facing the country.Altogether this makes it even more important to devise and implement policiesto maximize employment generation in the secondary sector, primarily in exportmanufacturing.
1/ These data refer to the month of September, a peak month for employmentin sugar.
2/ Ibid. "Suggestions for a Brighter Future," Tables 2.II and 2.III,p. 10.
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52. Table 3 attempts to draw together the various sectoral considera-tions. Data for 1990 are based on a series of tentative assumptions and thetable is an illustration of the number of jobs that may be needed in EPZmanufacturing if the job creation target for 1990 is to be reached. Theassumptions underlying the calculation are spelled out in the notes to thetable; they largely reflect the views on sector prospects expressed above.Overall, employment growth rates do not have to reach the rates achieved from1971 to 1979, but growth rates for all large-scale activities may slow onlyslightly and the implied growth rates for employment in all manufacturing atover 13% and for EPZ manufacturing at some 17% remain extremely high: for EPZmanufacturing, these growth rates imply the creation of about 8,500 jobson average per year. This compares to an average of less than 3,300 per annumover the 1971/79 period and a historic peak of EPZ job creation in any twelve-month period of 6,800 from September 1975 to September 1976.
53. Unfortunately, only partial and tentative indications are availableto translate the job creation "target" in EPZ manufacturing into an investmentfigure. The Mauritius Commercial Bank (MCB) has supplied data on totalcapital employed per workplace in 64 EPZ enterprises accounting for just over90% of EPZ employment in mid-1979. Unfortunately, the data had to be takenfrom latest available balance sheets covering various periods between end-June1977 and end-June 1979. It is not clear how many of these companies own theirbuildings and how many work in rented premises. Since a large number renttheir factory and office space, these figures may represent less than half thetotal investment required, and can be illustrative only, since they areheavily influenced by the sector mix of the enterprises covered and theaccounting procedures used. They would also be affected by the devaluationand general inflation.
54. Having said this, total capital employed in these 64 EPZ enterprisesamounted to Rs 33,400 per employed person, or $5,760 at pre-devaluationexchange rates. Subsectoral averages varied greatly among the main activities.For example, the companies classified as "other textiles" had an average of Rs14,900, and the five spinning and dyeing plants an average of Rs 136,700 peremployed person. Rates in wool knitting and skirt and blouse production werewell below the average at Rs 17,200 and Rs 22,100 respectively, while jewelryand diamonds (Rs 81,800) and watchmaking (Rs 58,100) were well above. Itis clear that any vertical integration in textiles, as well as diversifi-cation away from textiles and garments will substantially raise the averageinvestment cost per person employed in EPZ manufacturing.
55. One can thus state that the creation of 8,500 EPZ jobs annuallywill require an investment of close to $50 million per year on the basisof the data supplied by MCB. It is likely that this figure is not drasticallyaffected by the devaluation since most of it represents imported goods andservices. One can further speculate that it probably represents only abouthalf the total investment required because of very partial coverage, if any,of the cost of buildings. Furthermore, it is likely that the average of newinvestment will be higher, due to diversification of EPZ manufacturing and
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Table 3: MAURITIUS: SUMMARY OF SECTORAL EMPLOYMENT CONSIDERATIONS
March Compound Growth Rates1971 1979 1990 1971/79 1979/90
/a Figures for 1990 estimated labor force minus 5% target unemployment, otherdates are actual.
/b Residuals for 1971 and 1979; for 1990, it is assumed that any size over100,000 is more akin to unemployment.
/c Government (including DWC), construction and agriculture.
/d The assumption is that these sectors will grow from 1979 to 1990 at1.28 times the rate at which non-EPZ manufacturing grows, i.e. the samerelationship as obtained from 1971 to 1979.
/e Jobs in non-EPZ manufacturing are assumed to be added at the rate of 800p.a.
Source: CSO.
November 1979.
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further capital integration in textiles, even if we disregard inflation. Ifthe average cost per job were to rise by, say, 50% due to these factors, jobcreation in EPZ manufacturing might easily reach or exceed $150 million, p.a.,not counting inflation.
III. POLICIES AND PROBLEMS
A. Decentralization of Employment
The Present Picture
56. Decentralization of employment opportunities throughout the islandessentially in the industrial sector, receives general support in the country,both in government and in the private sector. The first and major reasongiven usually is the sorry state of the public transport system which leads toinordinate commuting times, long waiting and walking periods to get to busstops, as well as frequent disruptions of work schedules through bus breakdownsor strikes. Many enterprises have started company transport systems which areboth inefficient and costly to the enterprise. Also, the public transportsystem is partly blamed for the difficulties of filling job vacancies in thePort-Louis/Basses Plaines Wilhems area and the lack of attraction of theCoromandel Industrial Estate (para. 2.15). In a country as small as Mauritiuswhere most parts of the island are within commuting distance, it is widelyconsidered that decentralization is an alternative to improving publictransport.
57. Other, pertinent considerations with respect to decentralizedemployment generation are physical constraints on the expansion of capital,the need to prevent encroachment on good agricultural land and the need toprotect the tourist potential of the island. These are some of the moreimportant factors that have prompted and guided the spatial proposals of theNPDP. These are analyzed below for the industrial sector.
58. A spontaneous tendency to decentralize industrial development isperceptible but has not yet challenged the preeminence of Port Louis and, toa lesser degree, of the upper and lower Plaines Wilhems conurbation. Table 4gives whatever hard facts are now available on jobs by district. About 29% ofemployment in large establishments can be fully allocated by district and thebulk of this is in manufacturing. Close to 58% of large-scale manufacturingemployment is located in Port Louis and a further 29% in the Plaines Wilhemsarea. The municipal council areas together account for roughly the sameproportion of other locationally identifiable employment, although thelocational breakdown of construction employment is considerably less meaningfulthan for the other sectors shown in items 1-5 of Table 4.
Table 4: MAL'RITIUS: EMiPLOYMENT IN LARGE ESTABLIS1C0NTS BY DISTRICT, MARCH 1979
Municipal Districts North South East West Not
Upper l,o.wr Riviere ClassifiedPort Plaim- Plai-e Pas:ple- du Crand- Black byLouis Wi IIoe, s Wilhe-as rOUsse R(,spart Port Savanne Moka Flacgq River District Total
13. Grand Total (39,920) (15,490) (8,970) (7,540) (6,470) (11,100) (9,390) (5,600) (13,080) (6,820) (74,150) 198,520
/a Port employment only.7b Most of it in. Port Louis./c Breakdown by district -efers to local goverrment only.7d Breakdown by district refers to private education services (aided secondary schools only), private health services and repair
of motor vehicles./e Includes Riviere du Rempart.If Included in Pamplemousse.Zg Includes Moka./h Includes Savanne.7i Included in Grand-Port.71 Included in Flacq.
Notes: - nothing.not available.
Totals may not add due to rounding to nearest 10. IdProvisional data. X
Source: CSP.April 1980 1-NQ F-'
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59. Another 34% of employment in large-scale establishments can bepartly broken down by district. This reduces the share of the municipalcouncil areas from 87% of employment that can be fully allocated by districtto less than 52% of all large-scale employment that can be fully or partlyidentified by location. The share of the municipal council areas in totallarge-scale employment is somewhere between those extremes, because most ofthe remainder, i.e., central government employment, is heavily concentrated inthe municipal districts, as is financing, insurance and real estate. As forsmall-scale employment, no geographical breakdown is available, but if the1972 census is any guide, the municipal districts had close to 60% of allsmall-scale establishments. Results of the partial MCI inquiries suggest thatthe average employment in SSEs is larger by 1.4 employment units within themunicipal areas compared to rural districts, so that the employment share ofthe conurbation was probably in excess of 60% in 1972 and this may well havepersisted. Altogether, it is not unreasonable to suggest that the Port Louis/Plaines Wilhems area provides 60% or more of the country's jobs with some 47%of the country's labor force resident in this area in 1978.
60. Keeping in mind the limited significance of registered unemploymentdata as explained in footnote 1/ to para. 1.49, Table 5 indicates how seriousthe employment problem is by district, and combines the 1979 estimated residentlabor force, registered unemployment and job vacancies other than those incentral and local governments. The first point of note is that the municipaldistricts taken together have a share in registered unemployment (45.5%)that is only slightly below their share in the resident labor force (46.9%),the difference being accounted for by Port Louis. For most of the ruraldistricts, the shares in labor force and registered unemployment are alsowithin one and one-half percentage points, a difference too small to besignificant. The exceptions are Moka in the east with a share in unemploymentnearly twice its share in the labor force and the numerically very small BlackRiver district whose share in unemployment is less than half its share in thelabor force.
61. Job vacancies other than those in government are between 10% and11% of registered unemployment island-wide. In Port Louis, however, theyaccount for nearly 40%, illustrating that, despite a 5.7% unemploymentrate, it is harder there to hire people than elsewhere. The municipalareas taken together have over 72% of the vacancies, 25 percentage pointsabove their share of the labor force. This difference is so large thatit cannot be explained solely by the quality of data. Among the ruralareas, the South is relatively better off than the north and the east, withthe tiny western region much better off than the rest. Moka in the eastis the place not to be when looking for a job since the unemployment registeramounts to more than 12% of the estimated resident labor force.
Table 5: MAURITIUS: LABOR FORCE, REGISTERED UNEMPLOYMENT AND JOB VACANCIES BY DISTRICTBEGINNING 1979
Municipal Districts North South East WestPlaines Pample- Riviere Grand Black Grand
Port Louis Wilhems mousses du Rempart Port Savanne Moka Flacq River Total
/a District-wise breakdown based on 1978 population distribution and national participation rates from ILO.
/b Average February/April 1979, see Table 3.
/c CSO, March 1979 , exclusive of vacancies in central and local government.
Note: Discrepancies in totals due to rounding.
Source: Central Statistical Office. m
December 1979
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Future Prospects
62. The potential for decentralization is constrained by two main
factors. First, not all activities are locationally mobile for technical,economic or environmental reasons. This includes the port, most directtourist investments, the bulk of agriculture and sugar processing and anyindustrial activity relying on bulky or heavy input from abroad or output forexport, such as those where internal transport would be costly or impractical.Second, the existing pattern of fixed investments mainly in buildings andinfrastructure has tied the location of enterprises that were initially notbound to a specific location. The bulk of the large manufacturing enterprisesfall in this category, as does the university, a significant part of publicadministration and the airport. Spare capacity in existing industrialestates must be considered by analogy as fixing a certain amount of futureemployment, although its amount can be influenced by discouraging or promoting,as the case may be, very labor-intensive or not so labor-intensive activitiestailored to the local employment problem. Other activities mostly directed atthe domestic market, will go where that market develops and will be followersof decentralization rather than leaders. As outlined in Section II of thisAnnex, the main promise for development lies in EPZ manufacturing, mostof which is fairly neutral as to its location on the island. If decentraliza-tion is to be promoted through EPZ enterprises, this will require gearingpublic investment to a spatial policy which could provide the initial stimulusto decentralize employment generation by means of construction expenditure.Further stimulus could come from decentralization of public administration buthow much is an open question, particularly since public sector employmentmight fall or remain stable for some time to come.
63. Proposals for industrial decentralization made by MATIM in the NPDPfollow most of this reasoning. 1/ A program of public and private industrialestates spread over the island is the key to their proposals and this programis presented in more detailed in Part C. However, some general assumptionsneed to be reviewed. Once is that 400,000 jobs will be required in 1992. Itis not clear where this estimate originates, but Bank labor force estimatesshow a total labor force in 1990 of over 446,000. Assuming that a 5% unemploy-ment rate will be tolerated, this means some 25,000 more jobs than estimatedby MATIM will be required some two years earlier than argued by MATIM. Otherassumptions relate to the mix of employment in the primary, secondary andtertiary sectors which is estimated in comparison with past trends in Franceand Reunion with some adjustments for specifically Mauritian conditions. Theunderlying methodology is not spelled out in sufficient detail for a critiqueand its results are open to doubt. It is implied that primary employment willstill be around 70,000 by 1992 when a reduction is clearly under way. Theresults also imply that tertiary employment will rise rapidly as a percentageof the total after 1980 and that employment in manufacturing and constructionwill stabilize at around 35% from 1980 onward. Our previous arguments implythat, were this to happen, the tertiary sector would contain large numbers oflow productivity jobs. Altogether, the MATIM figures underestimate by aconsiderable margin the number of jobs that will need to be created in theprimary sector.
1/ Ibid. Cahier, 4.2, throughout.
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B. Incentives and Promotion in Manufacturing
The Present System
64. Three major tools are used by government in its industrializationpolicy: the Development Certificate (DC), the Export Processing Zone (EPZ)Certificate, and investment promotion consultants in Europe. The DC wasintroduced first and became operative in 1964. DCs entitle their holders tobenefits such as import duty exemptions or rebates on materials and equipment,a 5- to 8-year company tax holiday, income tax exemptions on dividends andfree repatriation of capital and profits. Some protection against competitionfrom abroad may also be granted, and it was reported to the mission that aquota import system to protect all locally-produced goods and some luxuryitems is close to implementation. For certain activities, companies agree inexchange to maintain prices at agreed levels and government approval isrequired for price increases. DCs are available not only for manufacturingbut also for hotels, shipping and fishing companies, etc.
65. To obtain a DC, the initial investment proposed must be at least100,000 rupees and the project must satisfy one or more other criteria, amongwhich a certain level of employment creation (decided on a case-by-casebasis), savings in foreign exchange or the introduction of new and moredeveloped technologies. The application is rejected if none of these criteriais met. Other reasons for rejection are cases where there is no need forincentives, where the proposed product is already produced locally or wherethe enterprise is not considered capable of implementing the proposal.Applications are processed by the MCI and a decision is officially said to bereached within no more than two months. This is disputed by the privatesector, which states that a decision may take many months. 1/
66. The second major incentive scheme is the package under the ExportProcessing Zone Act No. 51 of 1970 and other legislation and regulations. Theconcept of the EPZ is one of bonded factories rather than geographic, so thatan EPZ certificate holder can establish his factory anywhere in the island.The MCI lists some 18 items 2/ as facilities or incentives available to EPZcertificate holders. Some of these are promises of help by government, suchas help in negotiating favorable freight rates with shipping and airlines.Others are questionable, such as the "favorable labor legislation to assistexport industries to meet their export objectives" but the package doesprovide for a wide-ranging array of incentives. These include corporate taxholidays of 10 to 20 years (most are granted at the minimum level), duty-freeimport of machinery, equipment, spare parts and raw materials (with the
1/ Ibid. "Suggestions for a Brighter Future," p. 93.
significant exception of petroleum products), a five-year exemption fromincome tax on dividends distributed and some other, less common, concessionssuch as preferential electricity rates, exemption from harbor handling duesand registration fees on purchased land and buildings, export finance atpreferential rates, etc.
67. EPZ Certificate applications are also processed through the MCI.The position toward them is more flexible than for DCs and rejections occuronly if there is no evidence that an export market exists for the productor if the candidate cannot prove his implementing capability. Applicationsmust state a date for the planned start-up of operations and if, one yearbeyond that date, operations have not started, the Minister can revoke thecertificate. Apparently, little use, if any, has been made of this provision.
68. The third major tool consists of consultants for promoting foreigninvestment in Mauritius. Two are now in operation; one has been active inFrance for some years, and another was engaged in Germany at the end of 1978.A third one will be hired probably in the Benelux or the U.K. This activityis being financed by the EEC. So far, an assessment of the effectiveness ofthese consultants has not become available.
Gaps and Shortfalls
69. There are some general and some specific improvements that canbe suggested to these incentives and promotion efforts. When the EPZ certi-ficates were introduced, the package was quite attractive and was, in addition,bolstered by the ACP 1/ status of Mauritius which put the island ahead of manyof its potential competitors. In the meantime, other developing countriesintroduced export industry incentives and ACP status has been extended to manymore countries, a number of which are geographically closer to the Europeanmarket than Mauritius. The incentives may no longer be better than those ofcompeting countries and, therefore, inadequate to compensate not only for thedistance from main markets but also for other problems specific to Mauritius,such as problems with the port (paras. 81-82), labor absenteeism and lowproductivity (para. 106). An overhaul of the incentive system, alreadyadvocated in the Five-Year Plan 1975-80, is important and urgent.
70. This overhaul of the system should give consideration to merging theDC and EPZ certificate systems into one. Basically, the DC and EPZ manu-facturing enterprises are quite similar. Almost all rely on imported machinery,equipment, spare parts and raw materials, and local value added is often smalland based on simple, assembly-type operations. Parts of the incentives systemare also very similar, such as those relating to repatriation of capital andprofits, company tax holidays or income tax rebates on dividends. There is,furthermore, a strong case for introducing export incentives for DC enterprises,and these could easily be geared to their export performance. Conversely, EPZenterprises might be allowed to sell on the local market, subject to controls.Some of the problems facing DC and EPZ enterprises are also the same, such ashigh labor turnover and consequently high labor training costs, the need forand ability to attract foreign know-how and technicians, etc.
l/ Countries from the African, Caribbean and Pacific regions, associatedwith the EEC.
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71. The review of this incentive system could also be used to remove
some of the discrimination now suffered by small-scale enterprises. Forexample, the 100,000 rupees minimum investment for obtaining a DC effectivelyeliminates most SSEs from DC incentives. And, under present rules, EPZindustries are precluded from providing subcontractors with duty-freematerials. Apart from some technical and economic advice available throughthe MCI and a credit scheme by DBM (paras. 88-89), SSEs do not yet benefitfrom any promotional effort. A recent proposal to create a small-scaleindustry promotion bureau has not yet been approved and is fraught withinstitutional uncertainty and rivalry (paras. 127-128).
72. Entrepreneurs have put forward a considerable number of specificchanges they wish to see made in the revised incentive system, whether or notit merges the DC and EPZ certificates. 1/ The case for a number of these isalso persuasively argued by the UNDP adviser on industrial investmentpromotion in his "Terminal Report," where he also records tentative agree-ments on some changes reached in the subcommittee formed for this purpose bythe working party to the Industrial Development Committee. This tentativeagreement covers a number of the most important points raised by the privatesector but not all, and it does not address the possible merger of DC and EPZenterprises, nor the removal of present discrimination against the small-scalesector. Frequent changes in incentives can be as discouraging to potentialinvestors as inadequacy of incentives. Consequently, this tentative agreementshould be confirmed and implemented as rapidly as possible, but only if it isunrealistic to expect the general overhaul and possible merger of the systemwithin a few months. If it can be done quickly, a little delay is preferableto a partial change now and another one a year or two from now.
73. Finally, on condition that the investment promotion consultantsare shown to be an effective tool, their use should be extended into importantmarkets other than the EEC: the United States, Canada, Scandinavia, theRepublic of South Africa and Japan and possibly Australia are of greatpotential interest.
C. Physical and Financial Infrastructure
Industrial Areas
74. There are at least six industrial estates in operation in Mauritius(see Table 6). Three others may be operational (Mon Desert Alma, Bel Ombre,and Constance), one of which (Bel Ombre) is not included in Table 6 for lackof data. In addition, some industrial concentrations have grown up de facto,mostly in relatively small areas and located in the Plaine Wilhems area.
1/ Ibid., "Suggestions for a Brighter Future," pp. 98-105.
ANNEX 1- 81 - Page 29
Table 6: MAURITIUS: PROPOSALS FOR INDUSTRIAL ESTATES DEVELOPMENT BY NPDP
Additions Planned or RequiredCurrently Existing Initially By 1992Area Employment Area Employment Area Employment
/a Filled./b Partly filled.7H 17 ha presently equipped./d May have started operating.
Source: MATIM - Cahier 4.2: Esquisse d'une politique a moyen terme d'implantationindustrielle, cit. 1977, edited in October 1978.
December 1979
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75. The two most important of the six formal industrial estates,Plaine Lauzun and Coromandel, are in the public sector and both have beendeveloped by the Development Bank of Mauritius (DBM). DBM, without havingbeen designated as such, has acted as the government-s industrial estateagency since 1968 and, in addition to the two developed estates, has purchasedland for industrial development in Beau Vallon (south) and the La Tour Koenigarea (Port Louis).
76. DBM, however, is not happy with its venture into industrial estatesand neither are its clients. While the Plaine Lauzun estate is 96% occupied,Coromandel has leased less than 52% of the available built-up floor space and46% of the land without buildings. There are many reasons why Coromandel hasnot performed to expectations. In addition to the slowdown in industrialinvestment in general, its distance from the residential areas combines withthe bad public transport service to make it unattractive to workers.Furthermore, buildings of three levels were erected when most enterprisesprefer to be on the ground floor and the building standards may have been toohigh, leading to rents that are not competitive with private industrialbuildings in the same area. Other problems, many of them managerial, affectboth Plaine Lauzun and Coromandel. Among these, lack of appropriate criteriafor allocating space consistent with the input requirements of enterpriseshave led to water and electricity supply problems, security and garbageremoval are inadequate, community facilities such as canteens, etc. andgeneral maintenance leave much to be desired. DBM feels that many of theseproblems reflect standard landlord/tenant tensions, but is clearly unhappy asan industrial estate investor and manager. As a result, DBM is reluctant togo ahead with further industrial estate development. This reluctance isfurther encouraged by the inability of DBM, due to the rent control law, toadjust rents upward, although its contracts usually include a rent revisionclause.
77. Such development is, however, the key to GOM's future decentralizedindustrialization policy. Reasonably, MATIM postulates that the largermanufacturing enterprises (50 or more employees) should as a matter of prioritybe located on public or private estates, with the exception of a few environ-mentally acceptable activities that could be admitted to the existing orfuture urban tissue. Table 6 summarizes the MATIM proposals. In addition togeneral comments on these proposals, it must be noted that MATIM uses theconcept of labor catchment areas, not easily reconciled with the administrativedistrict boundaries since they cut across them. Also, MATIM assumes that thenew airport will be built near Flacq and will employ some 3,500 people in1992, and that another 3,300 will be employed in tourist activities in thatarea; both assumptions are doubtful. Furthermore, MATIM defines employment inmanufacturing as a residual by establishing first the primary, secondaryand tertiary shares in employment, as described above, and then deductingfrom the employment target for the secondary sector 10% of total estimatedemployment for jobs in construction. This again, while possibly true island-wide is dubious for given areas within the country. Finally, MATIM makes no
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allowance for the factory space that may become available for manufacturingenterprises, if the suggested closure of up to five sugar mills is actuallycarried out. 1/ These items will need to be considered when deriving anactual investment program from the MATIM proposals shown in Table 6. Theproposals are too small overall and contain regional imbalances; they do,however, constitute a good starting basis on which to build an industrialestate program and provide a wealth of detailed considerations that couldguide GOM's spatial industrialization policy.
78. There are two further gaps in the MATIM/NPDP proposals. Themost important is the absence of any cost/benefit analysis of the industrialestates program proposed. No economic or financial analysis is providedalthough this has to be developed before the program can become operational.Tbe necessary work should be carried out as soon as possible. Secondly, NPDPis silent on the need for work space of the SSE sector. This was identifiedas a serious constraint in the IBRD/DBM study of SSEs in 1974 2/, anddiscussions are now underway for including low-cost industrial workshop areasin the next rural development project of the Bank in Mauritius. Doubts remainon whether such low-cost SSE estates can be successfully implemented, mostlybecause SSEs are intimately linked to their market and rely largely on walk-incustomers. These relationships could be easily and severely disrupted if SSEswere grouped in what are perhaps less convenience workshop areas. It is thusvital to establish whether demand for such mini industrial estates exist, andthis has to be established with respect to various specific locations.
79. While there is no need to review the MATIM/NPDP proposals in closedetail, it must be noted that they are built on the assumption that manu-facturing employment in Port Louis should be constrained and that thisrequires firm governmental policy action. 3/ A firm government positionon these proposals is required for the economic analysis of the MATIM proposalsto proceed. Equally important is a clear decision on the institutional futureof the industrial estates program, a decision that will be given moreattention in Section IV.
Transport
80. Two major transport problems affect industrial and other development:(a) bad performance of the port; and (b) difficulties with the public bussystem. Public transport problems are less intractable than the port problems,as far as individual entrepreneurs go. EPZ enterprises can, to some extent,alleviate public transport problems with their own transport services or bylocating their factories near worker residential areas, although this adds tothe cost of manufacturing and may discourage new investments.
1/ Ibid., "Suggestions for a Brighter Future," p. 45.
2/ Ibid., p. 10.
3/ See MATIM, Cahier 4.2, p. 32.
ANNEX 1Page 32
81. Port problems are much more disruptive of industrial efficiency.Problems with dock labor regularly disturb supply of raw materials to manu-facturing establishments. In the first eight months of 1979, for example, anumber of enterprises had to close down operations for several periods rangingfrom one to three weeks because of raw materials supply interruptions. Toguard against these setbacks, enterprises which usually carry three months ofraw materials stocks are forced to carry up to one year of supplies. Thissubstantially increases costs and risks particularly in an industry asdependent on fashion trends and consumer tastes as textiles and garments.Similarly, delays in shipping output abroad make it difficult to keep deliveryschedules and have led to cancelled orders, refusal to pay or inability tosell the goods for seasonal reasons. Moreover, the unreliability andcongestion of the port have led shipping companies to impose considerablesurcharges for calling on Port Louis, so that, reportedly, shipping costs fromMauritius to London, for example, are 40% above shipping costs from Hong Kongto London.
82. In recent years, inadequate physical capacity of the port, poormanagement and bad relations with a well organized, politicized, and aginglabor force have combined to compound port problems. Shortage of physicalcapacity, partly brought on by the very success of the economy and, inparticular, the EPZ enterprises, is about to be relieved by the coming intooperation of additional deep water berths and the bulk sugar terminal. Laborproblems are less easily dealt with, especially since there is no realalternative to the port for most imports and exports and the port has a quasimonopoly on foreign trade. Average age of the dockers is high at more than 40years and young replacements are difficult to attract. Some of the unrest inthe port was due to the looming release of 1,500 dock workers once the newinvestments come on stream. Agreement on this release has reportedly beenreached with the unions, so that one major source of dispute is now removed.An in-depth diagnosis of labor problems in the port is also underway under ILOauspices and might produce suggestions for improvement when it becomesavailable early in 1980. The importance of improving port operations forfurther manufacturing development cannot be over-emphasized and is probably aprecondition for any further substantial development of the manufacturingsector.
Water and Power
83. The overall constraint on water supply in the island suggests thatindustries requiring large amounts of water should not be encouraged to locatein Mauritius without very careful cost/benefit analyses. Such analyses willbe easier when the in-depth study of water resources and uses, now gettingunderway with French bilateral assistance, becomes available in about oneyear. In the meantime, enough information is available on local waterresources to make sure that longer-term options are not jeopardized. Theseare well assembled by MATIM in the NPDP together with suggestions onprecautions that should be taken in the near future to avoid lasting damage tothe quantity and quality of water resources. In any case, water should not beused for subsidizing industrial activity even when it is a matter of trying toencourage industry to go to the rural districts.
ANNEX 1- 85 - Page 33
84. Similarly, power is not and should not be generally subsidized,since the country depends almost totally on imported energy. This does notpreclude attention to efficiency improvements, pricing policies and managementpractices that could improve availability and cost of electricity to consumers.For example, electricity production from bagasse for the national grid couldbe encouraged, rebates could be introduced for nighttime electricity use,better maintenance of equipment would reduce power cuts 1/ and tariff changesshould be notified to industrial consumers well in advance to permit soundforward costing.
Finance
85. It is beyond the scope of this report to analyze and presentin detail the financial system of Mauritius. We therefore confine thissection to presenting some specific gaps of importance to industrial andsmall-scale enterprise development. These gaps exist in export and long-terminvestment financing and, for SSEs, also in working capital credit.
86. The more serious of these appears to be in export finance. Whilethe well-developed commercial banking system provides short-term exportfinance, government deficit financing has created a shortage of funds.In addition, the government policy of imposing interest rate ceilings onexport credits (10-14% at the time of the mission) has made these creditsunattractive to the banks. Moreover, there is no export credit insurancescheme, which is probably the most serious constraint on greater availabilityof export credit, particularly since some Mauritian enterprises were forcedout of business in the past through non-payment by overseas customers, andbanks are presently unable to place them into receivership to protect theirinterests. 2/ Medium-term export credit is not available because the centralbank does not offer a rediscount facility. This hampers exports of heavysugar machinery produced in Mauritius. Medium-term credit would also help incompeting with foreign sugar machinery suppliers in the domestic market.
87. Long-term investment finance is essentially available on aninstitutional basis only from DBM. A large part of DBM's long-term resourcescomes from foreign borrowings, including from IDA/IBRD. The latest in aseries of loans was approved by IBRD on December 27, 1979. 3/ While it ispertinent to record that both banking and non-banking sources in Mauritiuscite inadequate long-term finance as a constraint on industrial expansion, theseriousness of this constraint is open to question.
1/ For example, there were six power cuts of four to five hours each in thePlaine Lauzun industrial estate in the first six months of 1979.
2/ Legal instruments for receivership do not exist and would require aconstitutional amendment.
3/ See Staff Appraisal Report No. 2544-MAS, November 27, 1979, for detailsof DBM operations.
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88. There is little doubt, however, that institutional finance forsmall-scale enterprises needs to be developed further. DBM also is oneof two sources of investment credit for SSEs and, since 1971, has beenrunning a special SSE credit scheme. This has been quite successful forsome time, but the number of loans has been falling since mid-1977 partlybecause of the slowdown in general economic activity and partly becauseof less vigorous promotion of the scheme. 1/ If specific support measuresfor SSEs are introduced (paras. 122-128), demand for investment financefrom this sector of the economy may be expected to rise.
89. Another scheme for SSE long-term finance is administered by theState Commercial Bank (SCB) on the basis of a Rs 2 million line of creditfrom the government of India, earmarked for the purchase of machinery forSSIs from Indian suppliers. The scheme was dormant for several years becauseof the bureaucratic complexity and delays in loan approval. 2/ Subsequent tosome streamlining in 1979, Rs 300,000 to Rs 400,000 had been committed bymid-1979.
90. In principle, working capital finance is available to small enter-prises from the commercial banks. In practice, security and accountingrequirements of the banks preclude the bulk of SSEs from access to workingcapital credit. Entrepreneurial training and modifications of bankingpractices would be needed to improve the situation. Present reliance ofSSEs on their own profits, friends and the expensive curb market for almostall their working capital and a significant part of investment needs definitelyconstrains their development.
D. Labor and Productivity
Wage Legislation and Wage Determination
91. Mauritius has a complex and comprehensive system of wage determina-tion. It is based on the Industrial Relations Act of 1973 and a series ofsubsequent amendments, complemented by a different system for establishingpublic service salaries and by collective bargaining in a few industries,among which are the important dock and sugar factory workers.
92. For the bulk of non-governmental economic activity, wage scalesare determined by the National Remuneration Board (NRB), one of the institu-tions set up by the Industrial Relations Act (IRA). The Board is composed ofrepresentatives of several ministries, the unions and the private sector. Itnormally acts on the basis of requests for changes or complaints referred to
1/ Ibid.
2/ Both the Mauritian and the Indian governments had to approve each loanrequest.
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the Board by the Minister of Labor and has taken initiatives only in isolatedcases. It follows procedures that include factory visits, job evaluation,worker consultation and public hearings. The Board also considers theindustry's capacity to pay when arriving at its conclusions. Its orders haveforce of law after approval by the cabinet and official publication.
93. The Board has issued over 20 remuneration orders covering allmajor activities excluding the docks and government service and some lessmajor activities such as nursing homes, attorneys and notaries clerks,cinemas, etc. EPZ industries are covered by one order as a group, whileother activities are covered on a sectoral or subsectoral basis. The ordersusually include detailed job descriptions and wage and salary scales relatedboth to skill categories and seniority. They also include a complete listingof all fringe benefits in the activities concerned by the order. In someindustries, notably tea and EPZ industries, separate scales for male andfemale workers were established. Male pay scales are tip to 68% above thosefor females although the average difference is well below that level. Theobjective of thereby creating more female job opportunities may in fact havebeen over-achieved as male unemployment is a serious and growing problem.
94. Numerically, the Board's remuneration orders fix the bulk ofwage and salary scales outside the public sector. However the Board hasvery little room to initiate changes in working conditions and pay rates andhas no part in granting general cost of living increases. The main drivingforces of the system are thus the public service pay awards for general payincreases and collective bargaining which initiates most improvements orchanges in working conditions and fringe benefits.
95. Changes in public service salaries are based on recommendationsmade by a tripartite committee. Representatives of government, the employersfederation and the Fond Syndical National (FSN), which groups the main unions,sit on the committee under the chairmanship of tbe Minister of Finance withthe Minister of Labor as his deputy. The president of the FSN is alsopresident of the Civil Service Union. In recent years, wage and salaryadjustments in the private sector have generally followed the public serviceawards. The National Remuneration Board then updates the relevant part of itsorders when an award is granted.
96. Collective bargaining is limited to a few strongly unionizedsectors. Pay scales are part of the bargaining process only in the docks;elsewhere collective bargaining is limited to conditions of employment andfringe benefits. Conditions in the docks, while atypical, are neverthelessvery important in the system, mostly because the militant dock workers unionis willing to throw its weight behind demands in other sectors. 1/
1/ For example, the dock strike last August, when the sector mission was inthe field, started in support of the demand for official recognition ofthe cane cutters union and continued even after the cane cutters strikehad collapsed.
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97. Changes of employment conditions obtained in an industry tend tospread to the rest of the work force. For example, only sugar has a deathgratuity and sugar and tea industries pay a housing allowance. Generalapplication of these gratuities and allowances is under discussion.Similarly, if the committee studying the introduction of a 40-hour week inthe sugar industry (the 40-hour week is in force in transport) reportsfavorably and it is introduced, it is expected that other industries willfollow.
98. The 40-hour week has produced a wage and benefit level that hasprobably damaged the competitiveness of Mauritius in export markets. Asidefrom the more detailed description of pay and benefits in the next sub-section, a few other features of the system should be highlighted. Perhapsthe most damaging of these is the retroactivity of new benefits or payraises which makes proper costing next to impossible. For examnle, an endof year bonus of one month's pay for full-time employees for the previoustwelve months was introduced at the end of 1975 with retroactive effect. Inmid-1979, some companies were still paying the bank debts they incurred onthat occasion. Similarly, a cost of living increase of some 7-8% became legalin April 1979 with retroactive effect from July 1, 1978, a delay of more thannine months.
99. Another feature creating problems is the extensive coverage ofremuneration orders. Minimum wage systems commonly apply to the lowestwage workers only. In Mauritius, minimum pay is fixed throughout the skillcategories and can go as high as Rs 3,700 per month for a graduate teacheremployed by a non-government secondary school at the top of his or hergrade. This clearly inhabits employers from adequately rewarding orpenalizing good or bad performers on the job, which contributes to theproductivity problems addressed in paras. 101-108.
100. More positively, the system seems to have held industrial disputeslow. From mid-'77 to mid-'78, 33 work stoppages occurred involving some12,300 workers or about 4% of the employed labor force. The length of thesework stoppages was short on average, less than 1.1 day per worker directlyinvolved. l/ No doubt additional days were lost indirectly through disruptionof work in industries not involved in the disputes, but this would not alterthe basic picture. It should be noted, however, that 1977-78 was probably nota typical year since it coincided with a clear slowdown in economic activity.The August 1979 strike in the docks and the cane fields alone must havedirectly lost more man-days than the 33 stoppages in 1977-78.
1/ Annual report of the Ministry of Labor and Industrial Relations 1977-78,Port Louis, December 1978, pp. 11-12.
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Cost of Labor, Fringe Benefits
101. In the first half of 1979, before the devaluation and before thecost of living increase scheduled to take effect from July 1, 1979, but notyet approved at the time of the mission late in August, minimum wages forfactory workers and EPZ enterprises ranged from 10.20 rupees (female workersin their first year) to 17.15 rupees (male worker over 18 years old) for aneight-hour day. 1/ This amounted to a range of US$1.75 to $2.90 and comparesto the reported wage of US$1 per eight-hour day in Sri Lanka, which isembarking on a vigorous promotion of export processing through industrialestates. Earnings for clothing out-workers in Calcutta were at US$1 to $1.30per day early in 1980. Comparison with basic wage rates in other competingcountries in textiles and clothing are more favorable to Mauritius. Figuresfor East Asian countries, relating to 1977, show daily basic wage rates ofUS$4 (Taiwan) to US$6 (Hong Kong) with Korea at some US$3.20. 2/ If pasttrends are any guide, these would now be some 10% to 20% higher and Mauritianfigures are likely to be a bit lower following the devaluation.
102. Basic wage rates are only part of the picture; Mauritian enterprisesfrequently pay higher than minimum wages, mostly to encourage betterproductivity. Unfortunately, actual wages paid to factory workers per day arenot reported by sex of the worker, though the wage difference between malesand females makes this relatively important. The average daily pay in March1979 was about Rs 13.10 in wearing apparel (excluding footwear) manufacturing.At the very minimum, this must represent some 12% more than required byminimum wage legislation 3/ and probably closer to 20% more.
An EPZ worker is entitled to two weeks annual leave and three weeks ofsick leave p.a. if he or she has worked for the company for at least twelvemonths. 4/ There are also 23 paid public holidays. Since control of sick
1/ Ministry of Commerce and Industry, Fact Sheet No. 3, July 1979.
2/ See: "Why the Emperor's New Clothes Are not Made in Colombia", WorldBank Staff Working Paper No. 368, January 1980, p. 106.
3/ This estimate is rough. The minimum assumes that females occupy thesame proportion of employed workers in daily-paid factory employmentthan in the total in the industry and that all males and females areentitled to the top rate of minimum wages. Both assumptions are unlikelyto be correct and actual payments are certainly higher than minimum wagesby a percentage well in excess of these 12%.
4/ Sick leave entitlement in EPZ industries was recently reduced from 21days at full pay and 8 days at half pay to 18 days at full pay andanother 12 days at full pay in case of prolonged illness, all applyingto six-day work weeks and proportionately lower for those working fivedays a week.
- 90 - ANNEX 1Page 38
leave is lax and medical certificates easy to obtain, a worker may be paid for
52 weeks of work while effectively working 43.2 weeks, an increase of 20.4%over basic pay. To this have to be added a 5% attendance bonus to which theworker is entitled if absent for no more than two days per month, one-twelfthof yearly earnings for an end-of-year bonus and a 6% payment into the nationalpension fund, created in 1978. Together, fringe benefits represent about 45%of basic wages paid (not the minimum wage levels). It should be noted thatsome of the benefits accrue only to the stable part of the work force and thispercentage is, therefore, the upper-end of the range.
104. Equally it should be noted that the calculations do not take intoaccount a number of other benefits, either established by law or granted byemployers individually. Gratuities in case of death, benefits for prolongedillness, paid maternity leave, etc. are all established by law and employersoften provide other benefits, such as free or subsidized food, transport,etc., No overall cost estimate of these additional benefits is available butfringe benefits can reportedly reach 60% of basic pay in some cases. 1/International comparisons of fringe benefits are scarce but the Mauritianlevel is bound to be quite generous. For workers in the Hong Kong clothingindustry fringe benefits amounted to only 8% in 1977. 2/ If average basic payin Mauritius is assumed to be 20% above minimum and average fringe benefitsassumed at a low 30%, the cost per eight-hour day in Mauritius stands at someUS$3 to US$4.50. This substantially narrows the wage advantage betweenMauritius and East Asian competitors and brings Mauritian wage costs toa multiple of those in India and Sri Lanka.
105. For the entrepreneurs, wage cost per unit or output is the keyfigure. Again, hard data are difficult to assess. The Boulle/Forget reportof January 1978 3/ stated that the Mauritian clothing worker's productivity isonly about 50% of his counterpart in main competing countries, such as Taiwan.Other spot indications go in the same direction. For example, DBM reportsthat in knitwear, one worker in Mauritius typically serves 14 machines, whilehis counterpart in Hong Kong serves 22. This is not limited to the clothingindustry. In sugar factories, for example, with annual capacity of 50,000tons, it takes 75 men per shift in Mauritius compared to 14 in Hawaii and 22in Australia. 4/ If these pointers are anywhere near true for the averageMauritian enterprise, they bode ill for the competitiveness of Mauritius,despite the partial and perhaps temporary relief from the recent devaluation.
Absenteeism and Labor Turnover
106. Further problems for Mauritian enterpreneurs are the high rates ofabsenteeism and labor turnover -- an average rate of 5% of workers absent on
1/ Mauritius Employers Federation, Annual Report 1978, p. 18.
2/ Ibid. World Bank Staff Working Paper No. 368, p. 106.
3/ P. L. Boulee and P. A. Forget, "The Past, Present and Future of ourExport Processing Enterprises," January 1978, p. 19. A report preparedfor the Government of Mauritius.
4/ Ibid. "Suggestions for a Brighter Future," p. 45.
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any given day. In discussions with entrepreneurs, rates of up to 10% werecited, even in companies that appear to offer above average working conditions.One of the enterprises visited has taken to putting more people on the payrollthan could be possibly employed if all showed up. Universally, absenteeism isdeplored because it lengthens delivery delays and further reduces the utiliza-tion of machinery and equipment, which is already comparatively low due toleave entitlements, public holidays and the lack of two- or three-shifts per24-hour day.
107. Inadequate public transport is also a factor contributing toabsenteeism and is responsible for the difficulties in starting second orthird shifts, since the buses do not run for the necessary extended periods.Other reasons often cited are the inexperience of much of the labor forcewith industrial discipline and fixed work schedules, the system of across-the-board wage increases which provide higher income even to those that arenot particularly keen to give up leisure and a tendency for male employeesto hold more than one job. Discussions with entrepreneurs indicate thatattendance records of females are better than for males which providesanother reason why entrepreneurs prefer females--in addition to prevailinglower wages for females.
108. Turnover rates can also be very high although this is by no meansuniversal. An October 1977 survey revealed a 53% turnover in the garmentsector between 1976 and 1977. 1/ Contributing reasons are either moreattractive or more accessible job opportunities; for example in governmentor parastatal bodies, some shifting among enterprises in search of betteremployment conditions, and the custom for women to stop working when theyget married.
Training Questions
109. One consequence of high staff turnover is persistent and substantialcost of on-the-job training. Many entrepreneurs feel that the governmentshould participate by subsidizing training costs for some years after start-upor significant expansion and would be willing to see a training tax imposedon the wage bill after the initial period in order to finance the effort. 2/
110. Despite the comparatively good and improving education of thework force and the existence of a number of professional and vocationaltraining institutions, there are some specific shortages in qualified manpower.Shortages exist for middle-level managers and foremen and for skilled workersfor maintenance and repair in general and for maintenance of textile machineryin particular, where between 200 and 300 foreign technicians are working inMauritius. A request by the Ministry of Education to train some 150 trainersin industrial skills training was recently approved by the European
1/ Ibid. "The Past, Present and Future of our Export Processing Enterprises,"p. 19.
2/ Ibid., p. 28.
- 92 - ANNEX 1
Page 40
Development Fund. Problems of middle management in weaving and spinningoperations are also to be addressed by a UNIDO/UNDP project now underconsideration. However, the problem is more widespread and middle managementtraining may need to be improved more generally.
IV. ORGANIZATIONAL AND INSTITUTIONAL ISSUES
A. Policy Development and Coordination
The Institutions Involved
1ll. A large number of government agencies are involved in activitiesrelevant to employment promotion in general and industrialization in parti-cular. Overall responsibility for economic planning lies with the Ministry ofEconomic Planning and Development (MOP). However, the Ministry of Housing,Lands and Town and Country Planning (MOH) has the responsibility for physicalplanning and has sponsored the NPDP. This work was carried out in completeisolation from economic planning. While the NPDP provides a good basis fordefining the government-s spatial development effort, it is now imperativethat economic criteria be brought to bear on the NPDP to provide a workablestrategy.
112. While still being largely dependent on the fate of sugar, Mauritiandevelopment has been driven by the growth of industry and exports. Thiswill continue to be increasingly the case. The Ministry of Commerce andIndustry (MCI) is responsible for the conduct of official industrial develop-ment activities. The Minister chairs the Industrial Development Committeewhen it meets at ministerial level. 1/ The committee is charged withexamining all DC and EPZ certificate applications and considering all otherindustrial development matters. In practice, the Minister of Industry appearsto take the decisions, at least on DC and EPZ certificates, and secures directapproval from the cabinet. The committee does not appear to have served astrong coordinating role, even among the agencies that are represented on it.These include the MOP with the Minister as vice chairman of the committee, asubministerial representative of the Ministry of Finance and the managingdirectors of the Bank of Mauritius and the DBM. Lack of coordination betweenMCI and DBM, for example, has come in for criticism and the Ministry ofFinance appears to have more influence on DBM than on MCI.
113. Some ministries of critical importance for the industrializationeffort are not represented on the committee at all. These include theMinistries of Labor and Industrial Relations (MOL), Employment (MOE) andEducation. The Ministry of Prices and Consumer Protection is represented onlyat "Working Party" or "Committee of Officials" level, where DBM is not repre-sented and the different parts of the Ministry of Finance have three
1/ The committee also meets as a Working Party or Committee of Officialsat a lower bureaucratic level and is then chaired by the financialsecretary of the Ministry of Finance.
ANNEX 1- 93 - Page 41
representatives out of the total of eight members. Thus, the composition ofthe committee precludes it from taking the required broad view of industrialdevelopment issues or of acting as a troubleshooter. Nor can the ministriesexcluded from membership get clues that would be useful for their own work.
114. The MOL administers the Industrial Relations Act (IRA) of 1973 andsubsequent amendments. Its technical services deal with conditions of work,labor relations, union registration, factory inspections and general enforce-ment of the legislation. Statutory bodies under the MOL comprise the NRB withthe considerable role in wage determination as described in Section III-D, anIndustrial Relations Commission and a Permanent Arbitration Tribunal. TheMinistry also runs a workers education unit.
115. The MOE's headquarters staff is primarily occupied with processingwork permits for foreigners and providing implementation and policy advice onthe DWC. Work permits for foreigners are issued for one year at a time.Procedures for obtaining such permits are lengthy so that applications forrenewal have to be made soon after the permit has been granted. The ministryalso provides much of the budget of the DWC, serves as a relay between the DWCand the MOP for projects the latter wants to be carried out by DWC andprocesses proposals for employment by the DWC through the cabinet. Theoperational branches of the ministry are the Employment Service and the YouthCareer Guidance Service. The Employment Service administers the unemploymentregister and six employment exchanges. Vacancies are notified to theexchanges mostly by GOM agencies and parastatal bodies but the private sectormakes little use of them. The main reason for this is that the EmploymentService has limited ability to identify suitable candidates for existingvacancies and sponsors applicants primarily because of seniority on theunemployment register.
116. MOE does not collect statistics on employment; this is done by CSOwhich is part of the MOP. CSO also collects much wider information onexisting vacancies than the Employment Service. There appears to be noexploitation of data on vacancies or on forthcoming investments for manpowerplanning and forecasting purposes. The numerically small Youth CareerGuidance Service of the MOE works mostly with secondary schools; it is notclear how their guidance is related to potential skill requirements or eventraining facilities, since coordination with MCI or with the Ministry ofEducation appears to be minimal. Other activities of the MOE relate to theTrade Proficiency Certification Act of 1972 and the Apprenticeship Act of1968. No trade proficiency testing is being done, leaving it to employers toclassify their employees into the minimum wage categories used by the NRB.Only three apprenticeship orders for engineering, tractor and earth-movingtrades have been issued since the Apprenticeship Act became law twelve yearsago.
117. DWC, under MOE, has been initially used to implement the work reliefprogram of GOM. As such, it deserves somewhat more detailed attention. It
- 94 - ANNEX 1Page 42
was set up in 1970 to execute the TPT program with the objective of usingunemployed and under-employed labor for economically or socially beneficialinvestments. In 1974, it was charged with executing the rural developmentprogram under the aegis of the MOP. 1/ With the 1975-80 Development Plan,more emphasis was placed on training by the DWC in administrative, clericaland manual skills 2/ and the organization was expected increasingly to hireyoungsters under 25 years for this purpose. This has not happened. Justbefore the elections in 1977, the DWC was asked to expand employment veryconsiderably by some 6,000 people; since then, it has hired only about 200hard-core unemployed referred to it by the MOE after cabinet approval.
118. Apart from the Rural Development Program, most of the otheractivities of DWC are on projects referred to the corporation by MOE at therequest of MOP. Recently, the corporation has also started to attract somework as a civil works contractor in competition with other enterprises. Thisis still a small part of its operations, mostly because DWC remains quiteinefficient. It is settled with a work force that has found it difficult tofind alternative employment or was hired for political reasons. Thecorporation has high training costs, control of worker attendance has beenlax, although some tightening up is underway, and many employees hold otherjobs while remaining on the DWC payroll. This is in fact very attractive,since the worker becomes "casual" after five years of service and therebyeligible for annual and sick leave and he becomes "permanent" after a furthertwo years, making him eligible for a pension. Minimum pay rates in thecorporation were Rs 16.90 in 1978, which compares well with present scales inindustry. Entitlemant to "casual" or "permanent" status accrues even if theworker is on the job only half the time, making it easy to de other casualwork which can be quite lucrative, especially in the construction trades.
119. DWC workers can be transferred to other ministries, municipalitiesor district councils. In mid--79, their number stood at 3,500. Others maybe delegated temporarily to help in the sugar harvest or for emergencypurposes such as unloading of essential supplies during dockworker strikes,as happened in August 1979. While these are useful functions, it is clearthat DWC's objectives and mandate need to be reviewed and clarified andits methods of budgeting and operating need to be streamlined and made moreefficient. This is particularly true if the DWC is to evolve into acompetitive public works contractor or if the corporation should be calledupon to mount another massive unemployment relief operation, a contingencythat cannot be ruled out in the light of the looming employment problems ofthe island.
1/ Conceived within the philosophy of the TPT Program and partly financedby the World Bank.
2/ See for detailed analysis of the DWC Mandate, etc.: Derek Miles andEric Miller, "A Strategy for the Development Works Corporation of Mauritius,"A Report of a Study Undertaken for the Government of Mauritius, Sept.1978.
ANNEX 1Page 43
120. Actions of other ministries and agencies also have an importantbearing on employment and industrialization. The Ministry of Education hastwo industrial trade training centers and five vocational training centersin the island. The Ministry of Prices and Consumer Protection is responsiblefor price control, which affects manufacturing for the local market. TheMinistry of Foreign Affairs and Tourism promotes Mauritian tourism. Thenewly created National Transport Corporation, the port and airport authorities,as well as the water supply and electricity companies and their policies andperformance, are also relevant.
An Overall Reform?
121. It is clear that opportunities for mismatch and incoherence ofpolicies and interventions, delays and misinformed sectoral actions arelegion, without a further detailed analysis of all these institutions. Itis equally clear that overall policy determination on employment,decentralization, industrialization, etc., on all issues that affect theoverall development of the country, will and should remain the prerogative ofthe cabinet. Coherence and effectiveness is required above all, in theimplementation of these overall directives.
122. It is with these considerations in mind that various suggestions forinstitutional reform have been put forward, ranging from the creation of aCentral Investment and Documentation Office 1/ to that of an IndustrialDevelopment Authority 2/ with varying proposals as to its functions, powersand method of operation. Political considerations and institutional jealousiesand rivalries have stalemated the discussions so far. As a basis for breakingthe deadlock, it might be helpful to secure agreement on the followingpropositions:
(a) reforms and scaled up efforts are now required, in the lightof the worsening international environment for industrialinvestments in Mauritius and the substantial increase neededin industrial employment opportunities to meet employmenttargets, notwithstanding the success of industrial developmentpolicy up to the end of the 1970s as executed by the MCI;
(b) whichever agency, existing or new, is charged with ensuringspeed and coherence of governmental and parastatal inter-ventions, must be accepted by the private sector; to beeffective the private sector should thus contribute todefining its functions and identifying priority areas foraction on a continuing basis;
1/ Confidential report prepared by a technical assistant to DBM; a similarproposal was put forward by MATIM.
2/ Ibid. "The Past, Present and Future of our Export Processing Enterprises,"p. 29; or: "Suggestions for a Brighter Future," pp. 93/94.
- 96 - ANNEX 1
Page 44
(c) success of the effort will stand or fall with competence ofleadership and technical expertise of the staff, this mayrequire shielding from political pressures and from some ofthe usual shackles of bureaucratic life, such as pre-determined salary scales, promotion by seniority, etc.;and
(d) the agency will have to have reasonable backing from thehighest level of government and financial and politicalclout, to force or cajole the bureaucracy into compliancewith its objectives.
123. If these points are respected, the actual institutional arrangementcan be flexible. The search for a solution should start with existing agencies.Purely as an example, one prime candidate could be the MCI together with asuitably enlarged and strengthened Industrial Development Committee, possiblychaired by the Prime Minister. The private sector could possibly be broughtin by some institutional linkage to the existing Joint Economic Committee andby attracting representatives of industry to high level advisory or expertpositions outside the bureaucratic hierarchy. Alternatively, the regionaldevelopment corporation (see paras. 4.08 and 4.10) could be asked to take overcoordinating functions. Whatever institutional solution is ultimately defined,clout could be provided by placing the coordinating body on the critical pathof any policy or investment decision by the public sector that affects thevital parts of the industrialization drive.
B. Some Specific Institutional Issues
Marketing and Export Promotion
124. A series of institutional problems need to be addressed. Ofparamount importance is the strengthening of the export promotion program ofthe country. For industrial exports, the present program is geared topromoting foreign investments for export production in Mauritius (see SectionIII of this annex). While some export promotion independent of investmentpromotion is underway and planned, such as participation in fairs, entrepre-neurial visits to potential markets, etc., the study made by the Irish ExportBoard in 1978 has shown that, internationally, this effort is far below theexport programs of competing countries. 1/ The study has also produced aseries of detailed suggestions for strategic export options, infrastructureimprovements, institutional reform and further investigations needed.It suggests the creation of a Mauritian export promotion authority under theMCI with a detailed set of functions and operating procedures. 2/ This studyprovides a solid basis for initiating an export promotion drive and itsrecommendations should be given priority attention by the government.
1/ Coras Trachtala, Irish Export Board: "Mauritius: Study of ExportPromotion Needs and Requirements," June 1978, p. 16.
2/ See summary recommendations of the study.
- 97 - ANNEX 1Page 45
Export Credit Guarantees
125. One suggestion contained in the Irish Export Board study particularlyemphasized the creation of an export credit guaranty scheme. The absence ofsuch a scheme is hampering exports. Not only have some Mauritian enterprisesgot into difficulties in the past because customers did not honor theirobligations, commercial banks are sometimes reluctant to extend exportcredits without such coverage. Reportedly, some Mauritian enterprises whichare subsidiaries of Hong Kong businesses enjoy such coverage from a Hong Kongcompany and it might be possible to arrange rather quickly for extensionof this scheme to cover all manufacturing exports. In the longer run, aspecifically Mauritian credit guaranty scheme might be implemented; DBM hasproduced a detailed proposal to that effect. 1/
Conduct of the Industrial Estates Program
126. Any substantial development of export processing industries willrequire GOM to make available developed land (and buildings) for industrialuse. DBM, which has acted de facto as an industrial estate agency, lacksadequate staff resources and expertise in estate management and has inadequatepowers to obtain cooperation from the relevant government agencies and toensure adherence of private industrial estate development to overallgovernment spatial objectives. If the program is to be successful, it willrequire substantial promotional efforts and risk-taking through servicing ofland and advance factory construction. DBM cannot and should not be expectedto develop this function which could easily jeopardize its prime missionas a profit-making development bank. Industrial estate development shouldbe entrusted to a separate agency preferably one with a wider mandate ofimplementing the government's spatial policies.
Assistance to the Small-Scale Sector
127. Another important area where some institutional progress is requiredconcerns technical assistance to small-scale enterprises. While some financingis available (paras. 85-90), tephnical assistance is practically not availablenow. Five training centers that have been in existence for some time underthe Small-Scale Industries Bureau of the Ministry of Education have givenmixed results 2/ and are oriented toward cottage industries, such as dress-making, embroidery, basketry, and general handicrafts and leather work. Themain vehicle for promoting SSEs is the Small-Scale Industry Unit in theMCI. With only four professional staff, its activities have been largelylimited to printing literature on some imported equipment, helping entrepreneursto get government permits and financing from DBM. The unit has also beeninvolved in an ongoing SSE survey with the help of Village Development offices.
1/ Confidential memorandum to the Minister of Finance, August 28, 1978.
2/ Jean Neveu: "Results of the Handicraft Expertise," March 31, 1975, p. 16.
- 98 - ANNEX 1Page 46
It cannot mount an active outreach effort and helps only when approached bythe entrepreneur. Early in 1979, UNDP agreed to finance a three-year technicalassistance program to the Small-Scale Enterprise/Artisan sector. Discussionswere still underway at the time of the mission as to where this technicalassistance bureau would be located, in DBM or in the MCI. Given the existenceof the MCI nucleus for assistance to SSEs and on general grounds, it would bedesirable to locate the office in the MCI. In any case, the institutionalhome of the bureau should be clarified as soon as possible so it can startwork.
128. A series of other suggestions have also been put forward forpromotion of SSEs. Among these, the provision of mini-industrial estates isbeing advocated, among others by the MCI, but since many SSEs dependcritically on close relations with their clientele, a customer inquiry needsto be undertaken to establish the desirability of such an investment, thatmight disrupt existing marketing channels if not accompanied by a particulareffort at developing new marketing methods. 1/ Similarly, the MCI feels anSSE research institute might be desirable, but more needs to be known aboutthe sector before the benefits of such a venture can be assessed. Finally, itmight be mentioned that the MCI defines SSEs as enterprises with 25 employeesand investments of up to R 100,000. This certainly makes them individuallyunable to mount export drives, a situation that also obtains for many DCenterprises. 2/ If exports from this sector of manufacturing are to develop,special incentives may have to be created, perhaps in favor of existing exporttrading companies.
1/ The study on "Small-Scale Enterprise in Mauritius", has shown that only5% of the sample of 350 SSEs studied had any market promotion and 80%sold entirely through their workshops.
2/ In any case, these overlap with DC holders which can have as few as 10employees.
TABLE A
MAURITIUS: EIMPLOYIENT BY SUBSECTOR IN LARGE MANUFACTURING ESTABLISHMENTS
DC issued, not yet operating - - 1 - 1 -DC approved, not yet issued - - -DC under consideration - - 1 1 - -
Total EPZs and DCs
In operation 212 25,874 206 26,937 213 28,224
Issued, not yet operating - - 42 6,875 39 6,375Approved, not yet issued - - 51 7,656 - -
Under consideration - - 127 9,049 -
1/ Employment figures not available for 2 companies.2/ Employment figures not available for 1 company.3/ 60 companies operating with expired DCs.4/ No available employment figures for 7 companies.5/ 61 companies operating with expired DCs.6/ No updated employment figures for 17 companies;
employment figures not given for 8 companies.7/ 6 companies operating with expired DCs.8/ Employment figures not available for 2 companies.
9/Employment figures not available for 6 companies.
10/ One company is closed temporarily (Jilmo Col, Ltd.).11/ One hotel is operating temporarily (Eden Roc Hotel).
Source: Ministry of Commerce and Industry and CSO Biannual etc.
TABLE C
MAURITIUS: SUBSECTORAL EMPLOYMENT IN OPERATING EPZ.ENTERPRISES
December 1977 December 1978 March 1979No. of Employment % of Total No. of Employment t of Total No. of Employment Z of Total
Industrial Group Industries Number Employment Industries Number Employnent Industries Number Employment
Model Boats and furniture 2 189 1.1 2 166 0.9 2 159 0.8
Other 9 437 2.5 5 300 1.6 9 346 1.8
TOTAL 89 17,474 100.0 83 18,323 100.0 87 19,702 100.0
Source: CSO, Bi-Annual Survey of Employment and Earninigs in Lar(]e Establishments, September, 1978.
November 1979.
00mcDr
TABLE P
MAtJIIITIUS: SMALL-SCALE MANUFJAlI'URINS ENTERPRISES B SuBsE( ro IS 'ELECTED DISTPI(E I
Port Louis Plaie Wi Ihems Flacq Pa-plto totea Eraod PoorEmplovymet Employ-ent Emoloyment Employment Emplovye-t
No. Tota l Aug. /Establishment Co<. Iotal Avg. /EstaSlSsAoruL Xno. Total Aug. /tstahl ishment No . Tontal Aog.CHstabl i shment No. Total Aug. /E.stablishment
Boat building A repairs 2 6 3.0Bread o-oufacturo I 8 H.n 3 32 1.6 6 64 10.7
Cahi-et oaking 57 339, 5.R 42 290 6.9 2 A 2.0 45 T 4.R
1/ Includes hunting, forestry and fishing as well as factory employment in sugar and tea.2/ Private Sector -- financing, insurance, real estate, and other services.3/ Includes mining and quarrying, development works.4/ Includes electricity, gas, water, transport, communication.5/ Includes wholesale and retail trade, restaurants and hotels.6/ Preliminary.
NB Establishments covered by the Mail Survey have minimum acreages in sugar (25 arpents or more harvested)and tea (at least 5 arpents planted) and employ at least 10 persons on the day of the survey for all X
non-agricultural establishments. The response rate usually gets up to about 80-85% in the six months mD (D
following the survey. Non-respondents account for some 4% of estimated employment and survey resultsare adjusted upwards for non-respondents. See any issue of the survey for further details. x
Source: CSO, Bi-Annual Survey of Employment and Earnings in Large Establishments, various issues.
November 1979.
- 105 -ANNEX 2
WORKING PAPERS AVAILABLE IN PROJECT FILE
1. Population2. Land3. Housing and Building Industry4. Rent Controls5. Transport Implications of Future Development6. Water Supply and Sanitation7. Local Government8. Terms of Reference for Planning Cell
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