Mauritius [1 ed.] 9789221113935

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MAURITIUS

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STUDIES ON THE SOCIAL DIMENSIONS OF GLOBALIZATION

MAURITIUS Globalization affects the enterprises and workers of nearly all countries, in goods as well as services sectors.This book is part of a series of seven country studies on the social impact of globalization.

R. Anker, R. Paratian and R.Torres

The seven studies (covering Bangladesh, Chile, the Republic of Korea, Mauritius, Poland, South Africa and Switzerland) are accompanied by a synthesis report (Towards a socially sustainable world economy: An analysis of the social pillars of globalization, Geneva, ILO, 2001), which summarizes the main results of the ILO’s work and discusses a wide range of analytical and policy issues of relevance to all countries participating in the globalization process. The studies as a whole show that governments and the social partners must and can implement a range of labour and social policies which will improve the benefits from globalization while reducing the social costs.

MAURITIUS

The study outlines some recent trends in globalization and social progress, assesses the social effects, and examines a variety of policy issues, including international integration, changing labour market conditions, protection against labour and social insecurities, and labour-management relations.

MAURITIUS Richard Anker, Rajendra Paratian and Raymond Torres

INTERNATIONAL LABOUR OFFICE • GENEVA ISBN 92-2-111393-0

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INTERNATIONAL LABOUR OFFICE • GENEVA

MAURITIUS . . .

PRELIMS

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STUDIES ON THE SOCIAL DIMENSIONS OF GLOBALIZATION

MAURITIUS

Richard Anker, Rajendra Paratian and Raymond Torres

INTERNATIONAL LABOUR OFFICE • GENEVA

Copyright © International Labour Organization 2001 First published 2001 Publications of the International Labour Office enjoy copyright under Protocol 2 of the Universal Copyright Convention. Nevertheless, short excerpts from them may be reproduced without authorization, on condition that the source is indicated. For rights of reproduction or translation, application should be made to the Publications Bureau (Rights and Permissions), International Labour Office, CH-1211 Geneva 22, Switzerland. The International Labour Office welcomes such applications. Libraries, institutions and other users registered in the United Kingdom with the Copyright Licensing Agency, 90 Tottenham Court Road, London W1P OLP (Fax: +44 207 631 5500), in the United States with the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923 (Fax: +1 978 750 4470), or in other countries with associated Reproduction Rights Organizations, may make photocopies in accordance with the licences issued to them for this purpose. Anker, R.; Paratian, R.; Torres, R. Mauritius: Studies on the social dimensions of globalization Geneva, International Labour Office, 2001 Labour market, employment, economic and social development, globalization of the economy, trade liberalization, trend, Mauritius. 13.01.2 ISBN 92-2-111393-0 ILO Cataloguing-in-Publication Data The designations employed in ILO publications, which are in conformity with United Nations practice, and the presentation of material therein do not imply the expression of any opinion whatsoever on the part of the International Labour Office concerning the legal status of any country, area or territory or of its authorities, or concerning the delimitation of its frontiers. The responsibility for opinions expressed in signed articles, studies and other contributions rests solely with their authors, and publication does not constitute an endorsement by the Intenational Labour Office of the opinions expressed in them. Reference to names of firms and commercial products and processes does not imply their endorsement by the International Labour Office, and any failure to mention a particular firm, commercial product or process is not a sign of disapproval. ILO publications can be obtained through major booksellers or ILO local offices in many countries, or direct from ILO Publications, International Labour Office, CH-1211 Geneva 22, Switzerland. Catalogues or lists of new publications are available free of charge from the above address. PDFs prepared by MAGHEROSS GRAPHICS, Switzerland & Ireland

PREFACE

The decade of the 1990s began with the end of the cold war and the first stirring of a growing preoccupation with the social impact of the emerging global economy. In the mid-1990s, with the completion of the last round of trade negotiations which gave rise to the creation of the World Trade Organization (WTO), the newly established credo was that a fresh wave of trade liberalization would translate into a substantial improvement in living standards. The risk that adjustment problems, including in the social and environmental areas, would arise was acknowledged but it was argued that these problems were small and transitory. The World Summit for Social Development in 1995 was a political expression of a more mixed sense of fear and opportunity that globalization was producing. Today the general tone of the debate has sharpened, and public attention has grown ever greater, as witnessed by the WTO Ministerial Meeting held in Seattle at the end of 1999. Concerns are fuelled by the fact that, while some have undoubtedly gained from the globalization process, the economic situation of the majority of the world population has not improved much – indeed, many millions continue to live in absolute poverty. More fundamentally, there is a feeling that many individuals who participate in the world economy are deprived of basic rights, and opportunities are therefore unequal. The creation of a level playing-field among and within countries has emerged slowly as a policy issue. The ILO addressed these controversial issues under the aegis of its Governing Body Working Party on the Social Dimensions of the Liberalization of International Trade, created in 1994. At a fairly early stage, the Working Party came to consider that before speculating on the various types of possible response to the impact of trade liberalization and the globalization of the economy, it would be advisable to gain a better empirical idea of the nature and magnitude of its effects. Hence, the decision was taken to carry out a certain number of “country studies”, chosen to offer a balanced sample of situations © ILO 2001

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and levels of development. These studies were conducted with the participation, on a tripartite basis, of the countries concerned. A synthesis study, drawing on the country studies, was also prepared. A balanced, realistic message emerges from these discussions. On the one hand, in a modern economy characterized by the diffusion of information and communication technology and rapid economic integration, it would be illusory to pursue social objectives under a protectionist trade regime. Open economies are better than closed economies. On the other hand, when implementing open trade and investment policies, governments should not only pay more attention to social issues but also recognize that strengthening the social pillar contributes to raising the economic returns from globalization. The present country study is a first reflection of these rich discussions. A more general lesson emerges from this experience as regards the usefulness of an integrated approach to this issue. All too often, there is a divide between the research communities working on different aspects of globalization. Similarly, compartmentalization exists at the policy-making level and among international organizations. Yet, in reality, economic and social phenomena are interrelated in nature. In an effort to bridge this divide, the ILO Governing Body has decided to renew the mandate of the Working Party as the Working Party on the Social Dimensions of Globalization, and broaden its work programme. This work programme should contribute to developing an integrated framework in three quite concrete ways: • first, by developing a better understanding of the interplay between social and economic factors in the global economy, not only in general terms but also through a more systematic examination and confrontation of national experiences in relation to specific aspects of social protection and rights at work; • second, by applying to this search the unique “prism” which the tripartite structure offers for grasping how apparently contrasting economic and social objectives can blend into a single and sustainable process of development; and • third, by associating more closely other international organizations, and especially those which have an economic mandate. The country studies have contributed to demonstrating that this closer association is not only possible but has great potential – without blurring the respective mandates and priorities of each organization – to help all of them, including the ILO, discharge more efficiently their specific responsibilities. The challenge is, in brief, to ensure that material progress generated by international economic integration goes in parallel with the balanced developvi

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ment of decent work opportunities both within countries and between them. The Working Party has already made a major contribution to solving this equation by initiating the process which led to the universal recognition of fundamental principles and rights at work as one of the prerequisites for such parallel development. By providing empirical evidence as regards their positive impact on sustainable economic development, it should help create a sense of common ownership of these principles and rights among all the organizations and constituents concerned. More generally, it should contribute to forging the intellectual and institutional tools necessary to make the integrated framework a reality.

Juan Somavia Director-General January 2001

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CONTENTS

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii List of abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Part I

Trends in globalization and social progress . . . . . . . . . . . . . . . . . . . . . . . 11 A. Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 B. Labour markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 C. Labour market institutions and industrial relations . . . . . . . . . . . . . . 38 D. Income distribution and poverty . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Part II

Assessing the social impact of globalization . . . . . . . . . . . . . . . . . . . . . . 47 A. Trade and employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 B. Trade and skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 C. Trade and wage differentials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 D. Economic growth, productivity and competitiveness . . . . . . . . . . . . 66

Part III

Policy issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 A. Constraints on public finance, social cohesion and social welfare . . 77 B. Women: Development and equity . . . . . . . . . . . . . . . . . . . . . . . . . . 82 C. Crossroads in development and trade: The challenges ahead . . . . . . 86 D. Regional cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

Concluding remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 Annex 1 Labour market and social dimension information needs for the future . . 101 Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .115 © ILO 2001

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List of figures 1 GDP per capita growth in Mauritius, the DAEs and non-LDC Africa, 1980–97 . . 6 2 Trade openness in Mauritius, the DAEs and non-LDC Africa, 1980–96 . . . . . . 20 3 Exports of sugar, other merchandise and services, 1980–95 . . . . . . . . . . . . . . . 21 4 External debt and external debt service, 1980–96 . . . . . . . . . . . . . . . . . . . . . . . 22 5 Employment by size of establishment, 1982–97 . . . . . . . . . . . . . . . . . . . . . . . . 27 6 Distribution of employment by four major industrial sectors, 1982–97 . . . . . . . 28 7 Unemployment rates by source, 1982–97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 8 Distribution of employment in economic sectors by trade orientation, 1982–97 . . 52 9 Employment in export-related sectors, 1982–97 . . . . . . . . . . . . . . . . . . . . . . . . 52 10 Employment in component parts of export-oriented sectors, 1982–97 . . . . . . . . 53 11 Average earnings in an industry per percentage of women in that industry, 1988 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 12 Distribution of EPZ employment by enterprise size, 1982–96 . . . . . . . . . . . . . . 57 13 Share of high-skilled exports by country or territory, 1980 and 1992 . . . . . . . . . 59 14 Share of “technologically advanced” products in manufactured exports by country or territory, 1980 and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 15 Average real wages in Mauritius’ manufacturing sector, 1968–90 . . . . . . . . . . . 64 16 Labour productivity and unit labour costs in the EPZ, 1982–96 . . . . . . . . . . . . 70 17 Approximate employment in the sugar, EPZ, tourism and finance sectors, 1982–97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 List of tables 1 Social and economic indicators by country, 1980–96 . . . . . . . . . . . . . . . . . . . . . 7 2 Provisions for overtime, overtime pay, severance allowances and termination settlements in EPZ and non-EPZ enterprises . . . . . . . . . . . . . . . . . 15 3 Average rates of effective protection in the manufacturing sector for 1980 and 1990, and the average nominal tariff rate for 1994 . . . . . . . . . . . . . . . 18 4 Top Mauritian export products, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 5 Main destination of Mauritian exports and main origin of imports, 1996 . . . . . . 21 6 External debt and current account balance, 1980–95 . . . . . . . . . . . . . . . . . . . . . 23 7 Foreign direct investment, 1985–97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 8 Labour force and employment in large and other-than-large establishments, 1982–96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 9 Unemployment statistics, 1983–97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 x

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10 Gross enrolment ratios at primary, secondary and tertiary educational levels, 1980–96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 11 Educational level of the labour force, 1983–95 . . . . . . . . . . . . . . . . . . . . . . . . . 33 12 Employed population by length of service and employment sector, 1995 . . . . . 35 13 Hours worked in all occupations and part-time employment in reference week, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 14 Average usual hours of work in main occupation by industry, 1995 . . . . . . . . . 36 15 Trade union participation rate and industrial stoppages, 1981–96 . . . . . . . . . . . 39 16 Minimum wage and actual wage for selected occupations in export industries, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 17 Income distribution, 1975–96/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 18 Employment and percentage distribution of employment in economic sectors by trade orientation, 1982–97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 19 Distribution of employment by employment status, payment system and occupation, 1990 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 20 Employment by industry and occupation, 1995 . . . . . . . . . . . . . . . . . . . . . . . . 60 21 Gross domestic investment and gross domestic savings, 1980–96 . . . . . . . . . . . 67 22 Contributions of capital and labour inputs, and total factor productivity to economic growth, 1967–97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 23 Capital, labour and multi-factor productivity in the total economy, the manufacturing sector and the EPZ, 1982–96 . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 24 Labour costs per hour in the clothing industry by country, 1993 and 1996 . . . . 71 25 Relative annual wages in manufacturing by country or territory, 1985–93 . . . . 72 26 Government spending and revenues: Total expenditure and overall budget balance (as a percentage of GDP) and taxes on international trade (as a percentage of current revenue), 1980–97 . . . . . . . . . . . . . . . . . . . . . 78 27 Social and defence spending by country, 1991–97 . . . . . . . . . . . . . . . . . . . . . . 80 28 Women in the labour market, 1983–95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 29 Policies, programmes and approaches to eliminating gender inequality and discrimination in the labour market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

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ACKNOWLEDGEMENTS

This report is one of a series of seven country studies on the social dimensions of globalization. It is based on contributions from Richard Anker, researcher, and Rajendra Paratian, consultant, with additional input from Raymond Torres, head of the ILO Task Force on the Country Studies on the Social Dimensions of Globalization. Christine Enzler was in charge of data processing and the preparation of the figures and tables, and Tracy Murphy provided secretarial support. Margareta Simons edited the final version and John Dawson compiled the index. We would like to thank Esther Hanoomanjee, formerly principal economist at the Mauritian Ministry of Economic Development and Regional Cooperation, for the background report she prepared for the Task Force in a private capacity.

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LIST OF ABBREVIATIONS

ACP

African, Caribbean and Pacific countries

CMT

cut-make-trim

COMESA

Common Market for Eastern and Southern Africa

CPE

Certificate of Primary Education

CPI

consumer price index

CSO

Central Statistical Office

DAE

dynamic Asian economy

DC

Development Certificate

EEZ

economic exclusive zone

EPZ

export processing zone

ERP

effective rate of protection

ESZ

export services zone

EU

European Union

FDI

foreign direct investment

GDP

gross domestic product

GSP

generalized system of preferences

HSC

Higher School Certificate

IILS

International Institute of Labour Studies

ILO

International Labour Office/Organization

IMF

International Monetary Fund

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IOC

Indian Ocean Commission

IOR–ARC

Indian Ocean Rim Association for Regional Cooperation

IRA

Industrial Relations Act

IT

information technology

ITTC

industrial trade training centre

IVTB

Industrial and Vocational Training Board

LDC

least developed country

MEF

Mauritius Employers’ Federation

MEPD

Ministry of Economic Planning and Development

NRB

National Remuneration Board

OECD

Organisation for Economic Co-operation and Development

PAC

Permanent Arbitration Commission

PRB

Pay Research Bureau

PPP

purchasing power parity

PTA

preferential trade area

R&D

research and development

RESA

Regional Export Services Agency

RO

Remuneration Order

SADC

Southern African Development Community

SC

School Certificate

SDR

special drawing rights

SEZ

special economic zone

SITRAC

State Informatics Training Company

SME

small and medium-sized enterprise

SMIDO

Small and Medium Industries Development Organization

UNDP

United Nations Development Programme

VAT

value added tax

WTO

World Trade Organization

Note: billion refers to a thousand million.

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SUMMARY

It is generally accepted that Mauritius has been a success story in the past decade and a half – the country has even been referred to as an African miracle. Since the balance-of-payments crisis of the early 1980s, real national income has risen by an average of nearly 6 per cent per year and real gross domestic product (GDP) per capita by around 4 per cent per year. Just as impressive, this rapid and sustained economic growth has not been associated with some of the negative aspects of globalization and development experienced by other countries. Evidence suggests that income distribution has improved, while socio-economic benefits such as education, health services and housing amenities now reach virtually everyone. Importantly, Mauritius has a functioning democracy; tripartism, though not fully developed, plays an important role in the country’s policy-making. There is little doubt that international trade and global markets have played an important role in Mauritius’ recent success. Many new jobs, for example, have been created in the export sectors, especially in the garment industry, with the result that the unemployment rate dropped sharply in the 1980s; between 1982 and 1988, new jobs in trade-related sectors represented approximately 20 per cent of the country’s total employment. Mauritius’ success appears to be due, in large part, to the following conditions: • The country’s good social and political climate, which has enabled Mauritius to attract foreign direct investment (FDI) and to take advantage of its outward-looking development strategies. Social stability owes much to the existence of a social safety net and, more generally, to the widespread belief that all segments of the population can gain something from international trade. • The preferential access of its main export products, such as garments, to the European Union (EU) under the Lomé Convention, and sugar, again through © ILO 2001

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a special agreement with the EU. Exports have also been promoted by the Government through an export processing zone (EPZ), which enjoys special tax and financial privileges, although this is now under government review. • Since the 1980s, the export sector has had the advantage of: (a) a semiskilled labour force and high literacy rates; and (b) the availability of an underused female labour force, especially in the garment sector. • The gradual liberalization of import barriers, which smoothed the adjustment of domestic-oriented enterprises to import competition, while continuing to provide substantial government revenues. • The existence of a high savings rate and the rapid increase in the participation rate of women in the labour force. Mauritius has now reached a crossroads in its development. Not only is it expected to lose its preferential trade benefits in the near future, but it is also finding it increasingly difficult to compete with newly emerging low-wage garment-producing countries specializing in low-skilled manufacture, as shown in recent years by the relocation of the manufacture of these products to Madagascar. FDI in the EPZ has also fallen recently. Strains in the labour market linked to international trade patterns have begun to show. Unemployment rose in the 1990s, due, in part, to poor employment growth in Mauritius’ main export sectors; indeed, employment levels in the sugar and garment/textile sectors fell substantially in the 1990s. There are also fiscal strains: the government tax base has been eroded by the reduced tariff rates accompanying trade liberalization (previously taxes on international trade made up the largest share of government revenue). So what can be done to address these challenges? The Government has emphasized the need to increase productivity in the face of globalization, and has envisaged four outward-looking “cylinders of growth”: sugar, garments/ textiles, tourism and skilled labour-intensive services such as international banking. Government objectives are to: (a) move upmarket in sugar and garment exports by investing and upgrading the skills of the country’s labour force; (b) improve Mauritius’ position as a high-quality tourist destination; and (c) develop a financial and high-technology centre for southern Africa (similar, it is hoped, to Singapore’s position in Asia). In order to understand the problems that may arise from this high-productivity strategy, it is useful to bear in mind several considerations: • It is important to maintain social stability, which is a major factor underlying Mauritius’ successful international integration so far, and which implies maintaining the country’s welfare state. 2

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Summary

• It will be necessary to compensate for stagnant revenues brought about by the reduction of import tariffs by increasing tax revenues from other sources and/or altering spending. Whichever methods are used, tax revenues need to maintain their progressive nature, while changing spending means examining Mauritius’ present distribution of social expenditure, which is characterized by a relatively high share (by international standards) going to pensions. • The skill level of the labour force needs to be improved. This will include increasing the number of highly skilled people, if Mauritius is to develop into a high-tech and financial centre. Only 2.5 per cent of Mauritius’ labour force has a university degree at present, which is low when compared with other countries that specialize in skilled labour activities. This also means improving the general quality of education, and in particular reducing the high failure rate of the Certificate of Primary Education (CPE) examination. • At present the Government provides financial incentives to certain sectors and not to others. Since it is always difficult to pick the “right” sector, it might be worth creating more of a level playing-field, where all small and medium-sized enterprises (SMEs) and large businesses in the EPZ have the same tax and credit incentives. Backward linkages between large export enterprises and SMEs also need more encouragement, even though this is difficult in a small economy. • Labour laws and regulations based on tripartite consensus need to be regularly updated. In an era of globalization, where it pays to be adaptable, greater reliance on collective bargaining and less reliance on government intervention in the labour market are recommended. • More gender-sensitive policies need to be considered. By taking into account women’s improved levels of education and their commitment to the labour market, Mauritius could increase its labour market efficiency and international competitiveness. • In view of the difficult policy challenges arising from globalization, there is a need to increase the amount of labour market information available by, for example, conducting more frequent labour force surveys. These policy challenges are difficult. Moreover, decisions will have to be taken in a climate characterized by a certain degree of anxiety. Mauritius, though, does have certain advantages, such as its stable political system, good physical infrastructure, the existence of tripartite institutions, a high savings rate and a relatively well-trained, semi-skilled labour force. The process of regional integration, in particular in the Southern Africa Development Community (SADC) region, might also help diversify export markets, while © ILO 2001

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supporting the upgrading of production. Mauritius needs to take advantage of its current high economic growth to address these issues immediately, since the foreseeable loss of its preferential trade arrangements and the more challenging international economic environment of the near future will make carrying out these policies more difficult. In a recent joint paper submitted to the World Trade Organization (WTO), the Government of Mauritius, together with five other small countries, asked that trade liberalization and trade preferences take into account the vulnerability of small economies, which are felt to be at a disadvantage in today’s globalized economy. Distance from the main markets, vulnerability to large price shocks for often important export commodities and their reliance on a small number of export products (because their economies are too small to develop economies of scale) were some of the factors cited in the paper. Fiji and Mauritius have submitted additional case study papers to the WTO. In the meantime, the country may face a difficult transition period. Unemployment is rising, since, as noted in this report, employment creation in the designated four cylinders of growth is not enough to absorb the expected increase in the labour force. Mauritius needs to pay special attention to vulnerable and disadvantaged groups during this period. Furthermore, the social partners need to be closely involved in social and economic policies and in decision-making. Finally, it is important that Mauritius, a self-confessed welfare state, does not succumb to the “conventional wisdom” of some neoclassical economists, who wish to see the welfare state dismantled and social services privatized.

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INTRODUCTION

Mauritius was basically uninhabited until as late as the seventeenth century, when the first settlers arrived.1 Various waves of immigrants produced a multiethnic, multi-religious society. Sixty-seven per cent of the population originate from the Indian subcontinent (52 per cent Hindu, 17 per cent Muslim), 29 per cent from Africa and neighbouring Indian Ocean islands, 3 per cent from China. Roughly 2 per cent are of European origin, mostly French Roman Catholics (Southern Press, 1997). Mauritius has a land area of only 1,865 square kilometres (approximately two-thirds the size of the smallest state in the United States) and just over 1 million inhabitants (Central Statistical Office [CSO], 1996, Digest of Demographic Statistics 1995). The country only gained independence in 1968, but its democratic institutions are, nevertheless, well established; the ruling coalition is always drawn from an alliance of parties with a diversity of ethnic groups, religions and languages. At independence, Mauritius inherited an economy that was highly dependent on one crop – sugar cane. Economic prospects looked bleak. Virtually all other foodstuffs were imported and there was little growth in per capita income. Its economy had the disadvantages of a small internal market, remoteness from the world’s major export markets, and consequently high transport and communications costs, as well as vulnerability to frequent exogenous shocks, such as fluctuating sugar prices and severe crop damage due to regular cyclones.2 In addition, high population growth was a major concern in the 1950s and 1960s; Mauritius is one of the ten most densely populated countries in the world, with a population density of 559 people per square kilometre (World Bank, 1998). Experts spoke of the Malthusian theory, and warned that this small island might be overrun by people. Mauritius addressed the problem by heavily promoting family planning, with the result that it saw one of history’s greatest drops in human fertility. © ILO 2001

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Figure 1 GDP per capita growth in Mauritius, the DAEs and non-LDC Africa,1 1980–97 (annual growth rate as a percentage) % 10 8 6 4 2

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

–4

1981

–2

1980

0

–6 –8 –10

Mauritius Dynamic Asian economies (DAEs)1 Non-LDC in Africa

–12 The DAEs are the Republic of Korea, Malaysia, Singapore, Thailand and Hong Kong, China. See note 3 on page 9 for a list of non-LDCs in Africa.

1

Sources: ILO Task Force, based on data from World Bank: World Development Indicators 1998; except the data for Mauritius in 1996 and 1997, which come from national sources.

Despite these difficulties, the country’s economic record over the past two decades has been impressive. Mauritius has been described by many observers as “an economic miracle” (Institutional Investor, 1987; World Bank, 1989). The 1998 Report on Competitiveness in Africa (Harvard Institute for International Development, 1998) ranked Mauritius as the most competitive country in Africa. Since 1980, real GDP per capita has grown by 3.7 per cent per year on average, and by 5.0 per cent on average between 1984 and 1997 (figure 1); this compares with the 0.2 per cent per year average for the non-least developed African countries (non-LDCs in Africa3) between 1980 and 1996. By the end of 1997, GDP per capita was US$3,543, the highest in Africa except for Gabon, an oil-rich country.4 The economic system is outward-looking and Mauritius is a member of several international and regional trade agreements. As impressive is the fact that Mauritius’ economic performance has not come at the expense of equity or social justice. Income distribution between households has narrowed since 1980. Social indicators are especially good 6

© ILO 2001

© ILO 2001

54.4

Non-LDC Africa

58.7

77.6

68.4

74.3

70.5

70.3

72.2

69.6

59.6

78.6

69.1

76.2

71.9

72.0

73.5

71.3

88.1

11.2

48.8

11.7

30.4

25.8

25.6

32.0

64.6

6.2

37.8

6.7

14.6

12.2

15.5

20.4

1990

56.8

4.1

34.1

3.8

11.4

9.4

12.6

17.3

1996

98.0

87.8

89.0 87.8

89.0

89.3

98.0

1995

58.9

n.a.

66.0

65.9

n.a.

75.8

61.6

n.a.

80.5

n.a. 100.0 100.0

71.0

83.0

n.a. 88.2

99.0

1990

1995

49.7

n.a.

47.1

85.0

61.0

n.a.

69.6

96.8

n.a. 91.1

46.8

n.a.

69.6

96.8

91.1

100.0 100.0 100.0

89.4

98.0 100.0

1990

n.a. 89.4

97.0

1985

Access to sanitation (% of population)

0.11

6.10

3.49

6.48

4.24

4.47

4.96

0.10

0.45

5.75

7.33

4.59

1.85

8.64

5.63

6.63

0.11

3.57

7.22

6.33

6.29

6.68

6.02

4.22

3.08

7.70

5.50

8.51

6.88

6.01

6.92

1.37

3.30

6.95

9.06

6.27

4.56

9.68

7.30

7.40

Sources: World Bank: World Development Indicators 1998, except the figures for 1996 and 1997 for Mauritius, which come from national sources.

2.60

5.11

8.67

8.45

8.79

7.78

7.76

5.38

1980–84 1985–89 1990–963 1980–84 1985–89 1990–964

Real GDP per capita Real GDP annual annual growth rate (%) growth rate (%)

n.a. = figures not available. 1 Countries for which data are missing for one or more years have been excluded from the calculation of the groups’ aggregated data. 2 1980 or 1982. 3 Real GDP per capita growth rate for Mauritius was 4.6 per cent in 1996 and 3.9 per cent in 1997. 4 Real GDP growth rate for Mauritius was 5.8 per cent in 1996 and 5.0 per cent in 1997.

63.4

Singapore

74.1

71.5

Malaysia

Hong Kong, China

66.9

Korea, Republic of

Thailand

68.5

66.8

Dynamic Asian economies

66.0

Mauritius

19801

1985

1996

19802

1990

Access to safe water (% of population)

Life expectancy at birth Infant mortality rate (per 1,000 live births)

Social and economic indicators by country, 1980–96

Country or territory1

Table 1

Introduction

7

Mauritius: Studies on the social dimensions of globalization

when compared with the rest of Africa (table 1), and Mauritius has the second highest ranking in Africa on the United Nations Development Programme’s (UNDP) Human Development Index (UNDP, 1997). However, this outstanding social and economic performance is not as impressive as that of the so-called dynamic Asian economies (DAEs). Despite the positive role international trade has played in Mauritius’ sustained growth over the past 15 years, there are plausible fears about the globalization process.5 Some fear that competition from low-cost foreign producers resulting from further trade liberalization will jeopardize the markets of domestic-oriented producers. There is also concern that Mauritius will lose some of its markets for garments, the country’s most important export, when the Lomé Agreement with the EU expires in 2000. This could have serious consequences for wage and employment levels. Indeed, employment in export sectors fell in the 1990s and unemployment is now a growing problem. This report focuses on particular dimensions of globalization, notably the increased and rapid integration of national economies, international trade flows and FDI liberalization, and their impact on labour markets. However, partly due to the paucity of relevant data, it is impossible to devote much attention to the other aspects of globalization, such as technological progress, international media and cultural influences, and changes in work organization practices (and their possible impact on employment quality and instability, income distribution and poverty). More specifically, the purpose of this report is: (a) to shed light on the possible links between international trade and FDI, on the one hand, and social progress, on the other; and (b) to dissipate, it is hoped, some of the fears regarding globalization by considering possible avenues of policy that would minimize the negative effects that globalization can have on social dimensions. Part I describes how globalization and social progress in Mauritius have evolved since the early 1980s. Part II assesses the social impact of globalization, and policy issues are discussed in Part III. The annex indicates the new types of labour market and social data available. Mauritius would do well to consider them in the light of current trends and likely future changes in the economy, which are mostly being brought about by the forces of globalization.

8

© ILO 2001

Introduction

Notes Mauritius’ first inhabitants arrived in 1638 and were Dutch. French colonialists, who ruled from 1721 to 1810, established the first permanent society with a distinct social, economic and political structure based on sugar production and the use of slaves, who were brought over from mainland Africa and neighbouring Indian Ocean islands. A new wave of immigrants arrived after the British took over in 1810, especially after slavery was abolished in 1835, as indentured labourers from the Indian subcontinent replaced slave labourers in the sugar-cane fields. 2 Many crops are high risk because of the damage they would sustain from frequent cyclones. Sugar cane, on the other hand, is relatively robust. 3 The non-LDCs in Africa are: Botswana, Cameroon, Congo, Côte d’Ivoire, Egypt, Gabon, Ghana, Kenya, the Libyan Arab Jamahiriya, Morocco, Namibia, Nigeria, Senegal, Seychelles, South Africa, Swaziland, Tunisia and Zimbabwe. 4 Mauritius has the highest per capita income in Africa when based on purchasing power parity (PPP), which takes into account the cost of living. 5 Similar fears about globalization and trade liberalization are found in the press of other developing countries, as well as in developed countries (see Bhalla, 1998). 1

© ILO 2001

9

PART I

TRENDS IN GLOBALIZATION AND SOCIAL PROGRESS

© ILO 2001

11

A. TRADE

Trade and development strategies With the creation of the EPZ in 1970, a mixed strategy of import substitution and export promotion was introduced.1 From 1970 to 1977 Mauritius enjoyed rapid economic growth (GDP per capita increased by about 7.3 per cent per annum on average), thanks mainly to the exceptionally high price of sugar on the world market (1973–75) and to the development of the newly set up EPZ.2 By the end of the 1970s, however, the economy was encountering severe difficulties, due, in part, to exogenous factors. Despite high economic growth and the introduction of two development plans in the 1970s, which had full employment as their priority, unemployment was still high in 1979. Adverse international prices, high inflation rates, budget deficits and a deteriorating balance of payments led the Mauritian Government to accept structural adjustment programmes from the International Monetary Fund (IMF) and the World Bank between 1979 and 1985. The local currency, the rupee, was devalued by 23 per cent in October 1979 and by a further 17 per cent in 1981. These events ushered in a new industrial era – characterized by an export-led development strategy.

The EPZ In Mauritius the EPZ concept is not confined to a single restricted zone/industrial estate or enclave; the Mauritian EPZ is scattered throughout the island, and implies any area (such as factory grounds) from where almost all the goods produced are exported. Mauritius’ Export Processing Zone Act of 1970 provided concessions and incentives to export-oriented industries, similar to other EPZs around the world. The main features included exemption from the payment of import duties on © ILO 2001

13

Mauritius: Studies on the social dimensions of globalization

capital goods; complete exemption from the payment of import and excise duties on raw materials, components and semi-finished goods (except spirits, tobacco and petroleum products); and a corporate income tax holiday of ten to 20 years. For the first 11 to 15 years, corporate tax stood at 50 per cent of the normal rate and thereafter at 75 per cent of the nominal rate. Dividends were tax free for any consecutive five years beginning with the first year of dividend payments. EPZ firms were also protected against double taxation by agreements with a number of countries, including France, Germany, India and the United Kingdom. Other features of the Act were: loans at preferential rates for importing raw materials; electric power at subsidized rates; export finance at lower interest rates; loans of up to 50 per cent of total building costs for a ten-year period; priority in the allocation of investment capital by the Development Bank of Mauritius; the provision of well-constructed factory buildings at subsidized rates; the free repatriation of capital and remittance abroad of profits and dividends to companies with an approved status; and a guarantee against nationalization. In April 1993, the Industrial Expansion Act was passed to cater for various incentive schemes, including the introduction of a new legislative EPZ framework, with the result that the EPZ Act of 1970 was repealed. Now, conditions of employment in the EPZ are governed by section 20 of the Industrial Expansion Act of 1993 and the Export Enterprises (Remuneration Order [RO]) Regulations of 1984. In order to harmonize corporate tax rates throughout the economy, it was announced in the 1998–99 budget that the corporate tax rate for all manufacturing companies, that is, for both non-EPZ and EPZ manufacturing companies, would be set at 15 per cent. To promote better working conditions in the EPZ, in 1990 the Government abolished the double-cut system, whereby if an employee took sick or annual leave one day before or one day after a public holiday, the employee would lose two days’ wages. The 1993 Industrial Expansion Act also removed discrimination regarding overtime, whereby a worker taking annual leave had to work an additional eight hours before being eligible for overtime pay. Under the new legislation, annual leave must be considered as actual work done when calculating overtime. Until 1984, employers were not required by law to give prior notice to employees for overtime work. This was rectified by the RO of 1984, which requires that employers give employees 24 hours’ notice. That an employee may be required to work on a public holiday has been maintained in the Industrial Expansion Act, mainly because the Government and employers believed that the abolition of this clause could seriously jeopardize production. Table 2 shows the differences between EPZ and non-EPZ companies in their provisions for overtime, overtime pay, severance allowances and termination of employment settlements. The most important differences relate to overtime pay: 14

© ILO 2001

Trends in globalization and social progress

Table 2

Provisions for overtime, overtime pay, severance allowances and termination settlements in EPZ and non-EPZ enterprises

Category

Non-EPZ

EPZ

Overtime

Payment based on time-and-ahalf after eight hours of work on weekdays. On Sundays and public holidays, first eight hours of work paid at twice the basic rate, and at three times the basic rate thereafter

Ten hours of overtime per week compulsory. Employer to give 24 hours’ notice regarding overtime. Payment for first ten hours after a 45hour work-week is time-and-a-half. For next five hours, payment is twice the basic rate, and thereafter three times the basic rate. On Sundays and public holidays, first eight hours of work paid at twice the basic rate, and at three times the basic rate thereafter

Severance allowance on retirement at age 60 (applicable for workers who have completed at least 12 months of service)

For workers paid monthly: half a month per year of service. For workers not paid monthly: 15 days per year of service

None

(a) Justified dismissal

For workers paid monthly: one-quarter month per year of service. For workers on a weekly or other basis: eight days per year of continuous service

If the worker has completed at least 12 months’ service but fewer than 36 months: one week per year of service. If the worker has completed more than three years’ service: two weeks per year of service

(b) Unjustified dismissal

Based on court judgement: three months’ wages per year of service, notwithstanding type of employment

Based on court ruling and on three months’ wages per year of service

Termination of employment:

Source: ILO Task Force, based on various Industrial Relations Acts from 1984 and Export Enterprises (Remuneration Order) Regulations 1984.

© ILO 2001

15

Mauritius: Studies on the social dimensions of globalization

overtime provisions are more favourable for EPZ employers, who can demand ten hours’overtime per week from their employees and who have more favourable pay regulations. Otherwise, labour laws in the EPZ are similar to those in other sectors.

Preferential trade agreements Mauritius has benefited from several trade agreements associated with its geographic location (Africa and the Indian Ocean) and development level. It also enjoys tariff preferences, or duty-free entry, on a wide range of products in all the industrialized countries that come under the generalized system of preferences (GSP): • As a member of the African, Caribbean, and Pacific (ACP) countries, Mauritius has preferential access and pricing to EU countries under the Lomé Agreement, which includes the duty-free entry of goods to the EU. Sugar has the added advantage of an import quota to the EU, as well as the internal EU sugar price (which exceeds the world market price). The WTO waiver for the Fourth Lomé Convention expired in 2000, and a new waiver will be required if there is to be a further Lomé agreement. Negotiations for a successive agreement started in autumn 1998. • Mauritius belongs to the Common Market for Eastern and Southern Africa (COMESA), previously known as the PTA (preferential trade area). This is the largest subregional organization in Africa (grouping 20 countries), with a market of around 300 million people. The advantages of belonging to COMESA include having: (a) privileged access to COMESA markets in terms of preferential rates of duty and the complete elimination of tariff and non-tariff barriers by the year 2000; (b) preferences in import licences for intra-COMESA trade; and (c) access to COMESA clearing-house facilities, which are being redefined as the Regional Export Services Agency (RESA) and will provide the following services: an Africa guarantee facility, a fast payment facility and a commercial bank support facility. • Mauritius became a founder member of the Indian Ocean Commission (IOC) in 1984 and of the Indian Ocean Rim Association for Regional Cooperation (IOR–ARC) in March 1997. • Mauritius joined the SADC in 1995.

The problems of small, vulnerable economies: A recent submission to the WTO A joint paper by the governments of Mauritius, Barbados, Jamaica, Lesotho, Sri Lanka and Trinidad and Tobago, entitled “Concerns and problems of small 16

© ILO 2001

Trends in globalization and social progress

economies”, was submitted to the WTO in November 1998. The paper pointed out that some small economies face specific problems when it comes to competing in the global economy. Their distance from the major world markets, and consequent high transport and communications costs, is one problem. So, too, is the fact that their export sectors rely on a small number of products because as small countries they are unable to reap the benefits of economies of scale for a large number of products. The small number of commodity exports are also highly vulnerable to terms-of-trade shocks; and trade-related taxes represent an important source of tax revenues for the governments. However, the WTO does not classify Mauritius as needing special treatment, since the country’s per capita income exceeds the set criterion of US$1,000. As a result, Mauritius risks losing all its trade preferences – including, as discussed above, trade preferences enjoyed under the Lomé Convention, which expired in 2000. The joint paper to the WTO argues that the vulnerability of small economies should be taken into account when assessing the degree of economic development of these countries. The paper warns that “it will be difficult to contemplate for many years to come that these small economies could successfully integrate into the multilateral trading system in the event that existing preferences are abruptly removed”.

Export duty In 1960 an export duty on sugar at the rate of 5 per cent of gross export value was introduced. For decades, it remained a controversial tax, its raison d’être resting mainly on two objectives: firstly, it was seen as an important source of government revenue; secondly, it was intended to promote product diversification by reducing the rate of return of sugar investments relative to other crops, in view of the limited capacity of the world market. In 1975 the sugar export tax was raised to 12 per cent for large estates and then to nearly 24 per cent in 1979, although small sugar producers were exempt, with the rate of duty varying with the tonnage exported. In 1979, an additional surcharge of 75 per cent on the basic tax was imposed to mop up the windfall gains going to the sugar producers following the devaluation of the rupee. By 1982, the sugar export tax accounted for 14 per cent of government current revenue and 9 per cent of total government revenue – current and capital. Through a series of reforms – such as the Sugar Sector Package Deal Act of 1985 and the Sugar Industry Efficiency Act of 1988 – the tax was reduced. As a result, the share of government tax revenue from export duties fell from 16 per cent to 3 per cent between 1983–84 and 1993–94. Since June 1994, the money from export duties no longer goes to the Government; instead, it is now © ILO 2001

17

Mauritius: Studies on the social dimensions of globalization

channelled towards modernizing the sugar industry. Interestingly, export duties have been playing a decreasingly important role in raising government revenues in the DAEs and non-LDCs in Africa (see Part III, section A). In Malaysia, for example, export taxes accounted for roughly 33 per cent of government revenues in 1980 and only 12 per cent in 1996 (World Bank, 1998).

Import tariffs and non-tariff regulations Trade policy prior to the implementation of the IMF/World Bank structural adjustment programmes from 1979 to the mid-1980s emphasized high effective rates of protection (ERP) from imports. This included both quantitative import quotas as well as high tariff rates. Table 3 shows the high effective rates of Table 3

Average rates of effective protection in the manufacturing sector for 1980 and 1990, and the average nominal tariff rate for 1994 (as a percentage)

Sector

1980

1990

1994

Beverages and tobacco Textile yarn/fabrics Wearing apparel Leather Footwear Wood Furniture Paper products Printing/publishing Chemicals Rubber Plastic Non-metal products Iron/steel Fabricated metal products Machinery (excluding electrical) Electrical machinery, etc. Transport equipment Optical goods, watches, etc.

123 77 99 269 158 191 130 131 75 38 125 89 77 154 156 62 179 23 266

182 11 4 8 88 38 241 57 7 21 144 59 48 73 48 3 181 4 9

211 262 723 35 57 29 75 32 37 25 50 43 33 26 35 21 49 37 32

Total

86.24

–

30.14

Note: Not all sectors for 1994 are comparable to 1980 and 1990. 1 Designated as food manufacturing. 2 Designated as textiles. 3 Designated as clothing. 4 Represents average nominal tariff rate. Sources: Milner and Reed (1998) for 1980 and 1990; Lall and Wignaraja (1998) for 1994.

18

© ILO 2001

Trends in globalization and social progress

protection for manufactured goods in operation in 1980, 1990 and 1994. Most rates in 1980 were well above 100 per cent. Quantitative import restrictions were dismantled in the 1980s, and import licences were eliminated in 1991 (except for a limited range of products subject to health, sanitary or strategic controls). Under the 1994 reforms, the three separate import duties – fiscal, general customs and preferential – were combined into a single customs duty and the number of rates was reduced from 60 to eight, with tariff rates substantially reduced in the 1990s. An interesting aspect of the trade liberalization process in Mauritius has been its sustained, but gradual, nature, which has been of enormous benefit to the country. It gave local industries time to adjust to increased foreign competition, which, in turn, helped the Government maintain a steady course.

Trade flows and openness of economy Since settlers first arrived in Mauritius, the country has had considerable dealings in international trade. However, its small population means that its internal market is too small to allow for the efficient production of many goods. And being cyclone prone has meant that Mauritius has never been able to be self-sufficient in food. In 1980, trade openness (as measured by the sum of exports plus imports relative to GDP) was well over 100 per cent. This fell in the early 1980s during the IMF/World Bank structural adjustment years, increased between 1983 and 1990 with the export-led boom and explosive growth of the EPZ to 138 per cent, and decreased in the 1990s as the EPZ consolidated its position (figure 2). It is difficult to draw any conclusions as to how trade openness in Mauritius differs from similar measures in the DAEs and non-LDCs in Africa, partly because of differences in the size of domestic economies and partly because of different developments since 1980. Mauritius’ export sector is highly concentrated in the sense that three subsectors – those of sugar, garments/textiles and tourism – make up the bulk of the country’s export earnings (table 4). Merchandise exports now comprise well over half of Mauritius’ exports of goods and services (approximately 73 per cent on average since 1980). This is lower than the 86 per cent share for the DAEs. While the share for merchandise exports has risen in the DAEs since 1980, it has remained more or less unchanged in Mauritius since about 1990. The sugar industry continues to be a stabilizing force in the country and to play an important role; tourism is on the rise, while the manufacturing/garments sector, which is a significant employer, clearly needs a new lease of life (figure 3). The destination of Mauritius’ exports is also unusually highly concentrated – more than 70 per cent goes to the EU. To a large extent this is due to the EU’s © ILO 2001

19

Mauritius: Studies on the social dimensions of globalization

Figure 2 Trade openness in Mauritius, the DAEs and non-LDC Africa,1 1980–96 (exports plus imports as a percentage share of GDP) % 180

Dynamic Asian economies

160 140 Mauritius 120 100

Non-LDCs in Africa

80

1 See

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

0

notes to figure 1.

Source: ILO Task Force, based on data from World Bank: World Development Indicators 1998.

Table 4

Top Mauritian export products, 1995 (as a percentage)

SITC codes

Sector

% of exports

611 8461 8451 8441 8423 8429 65222 8455 Other 84xx Other 65xx Other 61x All 84xx All 65xx All 84xx and 65xx All 84xx, all 65xx and all 611–620

Sugar, raw Undergarments, knitted or crocheted of wool Jerseys, pullovers, twinsets, cardigans, knitted Shirts, men’s, of textile fabrics Trousers, breeches, etc., of textile fabrics Other outer garments of textile fabrics Cotton fabrics, woven, bleach, mercurized dyed, printed Other outer garments and clothing, knitted Other garment groups (12 groups combined for percentage) Other textile groups (17 groups combined for percentage) Other sugar groups (2 groups combined for percentage) Subtotal for garments Subtotal for textiles Subtotal for garments and textiles

23.9 17.0 11.0 10.0 5.7 2.7 2.7 2.6 3.7 2.2 0.5 52.6 4.9 57.5

Subtotal for garments, sugar, textiles

81.8

Source: ILO Task Force, based on data from Statistics Canada on CD-ROM: World Trade Database, 1997.

20

© ILO 2001

Trends in globalization and social progress

Figure 3 Exports of sugar, other merchandise and services, 1980–95 (as a percentage) % 60 55

Sugar

50 45 40 35

Services

30 25 20

Other1

15

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

10

1 Other merchandise is calculated as the percentage share remaining after deducting the share of sugar from merchandise exports.

Sources: World Bank: World Development Indicators 1997 for the share of services and all merchandise exports; Dabee and Milner (1996) for the share of sugar in merchandise exports for 1980–94; CSO: Digest of Industrial Statistics 1996 for sugar for 1995.

preferential treatment of sugar and garments from Mauritius. Imports are much more widely distributed, with one-third coming from the EU and 12 per cent from South Africa (table 5). Table 5

Main destination of Mauritian exports and main origin of imports, 1996

Country of destination/origin

Imports (%)

Exports (%)

EPZ exports (%)

European Union South Africa United States Other

32.5 12.0 2.5 53.0

75.5 0.8 13.0 10.7

69.7 0.9 18.0 11.4

Source: CSO: Annual Digest of Statistics 1996.

© ILO 2001

21

Mauritius: Studies on the social dimensions of globalization

External debt, trade balance and FDI As shown in figure 4, in 1995 the country’s total debt service was less than 10 per cent of exports, and external debt as a percentage of GDP was less than 50 per cent. These figures are similar to those of 1980 and lower than those of the mid-1980s. Mauritius’ trade balance is negative and has been so almost every year since 1980 (table 6), although FDI has brought in plenty of money.3 The external debt situation in Mauritius between 1990 and 1995 was similar to those of Malaysia and Thailand, and much better than in other non-LDCs in Africa (table 6). FDI has played a crucial role in the success of Mauritius’ EPZ, and, therefore, in its export and economic performance. Table 7A and B (on page 24) give data on FDI flows from 1985 to 1997, as well those for the country’s top five foreign investors.4 In recent years, FDI to manufacturing has fallen, although overall FDI has not decreased. Figure 4 External debt and external debt service, 1980–96 (total debt as a percentage of GDP and external debt service as a percentage of exports of goods and services) % 70

60

50 Total debt 40

30

20 Debt service

10

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

0

Source: World Bank: World Development Indicators 1998.

22

© ILO 2001

Trends in globalization and social progress

Table 6

External debt and current account balance, 1980–95

Country or territory

Current account balance (% of GDP)

External debt External debt (% of GDP)

Total debt service (% of exports1)

1980–84 1985–89 1990–95 1980–84 1985–89 1990–95 1980–84 1985–89 1990–95

Mauritius

–6.81 –0.07 –2.54 49.41 45.65 37.84 18.84 14.82

8.28

Dynamic Asian economies Korea, Republic of

–4.25

4.28 –1.22 n.a.

Malaysia

–8.16

2.41 –5.00 45.40 62.52 39.23 10.17 22.64

8.77

Singapore

–7.59

3.73 12.16 n.a.

n.a.

Thailand

–5.75 –2.05 –6.79 32.17 39.19 35.09 21.89 24.11 13.51

Hong Kong, China

–2.15

Non-LDC Africa

–7.18 –2.84 –2.32 51.84 75.01 81.13 21.61 28.78 23.60

5.52

3.81 n.a.

n.a. n.a. n.a.

n.a. n.a. n.a.

n.a. n.a. n.a.

n.a. n.a. n.a.

n.a.

n.a.

n.a. = figures not available. 1 Total debt service is as a percentage of exports of goods and services. Source: World Bank: World Development Indicators 1997.

While foreign ownership in the EPZ is important, local participation has always been high. Estimates generally place foreign ownership in the EPZ at around 40–50 per cent from its inception (Lamusse, 1989). According to the 1992–94 National Development Plan, the structure of ownership in EPZ manufacturing underwent little change between 1987 and 1991. The substantial level of domestic capital in the EPZ means that Mauritius is less vulnerable to capital flight than other countries where foreign capital dominates.

© ILO 2001

23

Mauritius: Studies on the social dimensions of globalization

Table 7

Foreign direct investment (FDI), 1985–97

A. Average annual inflows Year

1985–90 1991–96 1993 1994 1995 1996 1997

Average annual inflows (US$ millions) Total

Manufacturing

22.0 18.2 15.0 20.0 19.0 37.0 38.0

12.81 18.22 5.4 3.3 23.6 3.1 1.8

Average annual inflows (% of FDI) 1985–90 1991–95

4.5 1.9

Cumulative FDI in manufacturing (US$ millions) 1984–89 1990–97 1

64.2 77.0

1984–89. 2 1990–92.

Sources: United Nations: World Investment Report 1997; Bank of Mauritius, quoted in Lall and Wignaraja (1998), for all figures except for annual FDI flows for 1993–97 which come from United Nations: World Investment Report 1998.

B. Top five foreign investors, 1985–97 (in millions of US$) Country or territory

Total investment 1985–89

1990–97

China France Germany United Kingdom Hong Kong, China

1.9 4.6 3.8 3.6 18.7

1.9 9.1 5.6 4.5 10.0

Total five

32.6

31.1

Sources: World Bank (1994); Bank of Mauritius, quoted in Lall and Wignaraja (1998).

24

© ILO 2001

B. LABOUR MARKETS

Labour force and labour force growth In 1997 the labour force numbered approximately 500,000 (table 8), and had grown by approximately 2.4 per cent per year between 1983 and 1990 (census years) and by approximately 1.9 per cent between 1990 (census year) and 1995 (labour force survey year).5 The rise of women in the labour force is a major reason for this rapid growth. Labour force participation rates for women aged 12 years and above increased from 25.9 per cent in 1983 to 32.2 per cent in 1990 and 36.1 per cent in 1995, owing, in part, to the increased demand of EPZ garment/textile enterprises, which prefer to employ women workers.6 Since 1983, employment growth has differed quite substantially from labour force growth. Between 1983 and 1990, employment grew much faster than the labour force (5.2 per cent compared with 2.4 per cent per year) and unemployment decreased during this period. By contrast, between 1990 and 1995, employment grew more slowly than the labour force as unemployment rose (1.8 per cent compared with 1.9 per cent per year). It is useful to have a rough idea of the number of additional workers Mauritius is likely to have in the future – so as to know how many extra jobs will need to be created each year to avoid rises in unemployment. The simplest approach is to assume that the approximately 1.9 per cent labour force growth rate experienced in the 1990s is continuing. This would imply annual increases in the labour force of approximately 10,000 workers per year. A more widely used approach calculates low-, medium- and high-variant scenarios for estimating the future population size and future labour force projection rates, by both age and sex. The Government’s Vision 2020 report, which follows this approach, predicts that, by 2020, the labour force will consist of 696,000 workers in its medium variant, with women making up 41 per cent. An annual labour force growth rate of approximately 1.5 per cent between 1995 and 20207 © ILO 2001

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Mauritius: Studies on the social dimensions of globalization

will mean annual increases in the labour force of around 8,000 to 9,000 people. As is shown below, these are quite substantial increases relative to employment growth in the 1990s, especially in the export-related sectors of the economy.

Employment by size of establishment Mauritius has a relatively formalized labour market with a majority of people working in large establishments (table 8 and figure 5). Over the past 15 years, however, there has been a steady decrease in the relative importance of large establishments (defined as companies with ten or more employees), especially in the 1990s, which may reflect declining employment levels in the sugar cane and EPZ garment/textile sectors (see Part II, section A).8 Table 8

Year

1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1 Excludes

Labour force and employment in large and other-than-large establishments, 1982–96 (in thousands) Labour force1

355.0 365.1 374.5 383.5 393.0 402.5 411.5 421.4 432.0 439.2 448.8 457.0 467.5 475.2 484.6 496.2

Employment2 Total

Large establishments3

Other-than-large establishments

282.0 293.1 308.5 324.8 350.0 378.5 395.5 406.0 420.8 429.4 437.9 445.9 454.8 460.5 466.1 475.7

197.8 195.8 200.1 214.0 235.4 257.1 272.4 275.4 284.5 289.0 291.0 290.5 292.7 289.2 287.0 287.7

84.2 97.3 108.4 110.8 114.6 121.4 123.1 130.6 136.3 140.4 146.9 155.4 162.1 171.3 179.1 188.0

foreign workers. 2 Includes foreign workers. 3 Average of March and September figures.

Sources: CSO: Productivity and Competitiveness Indicators 1982–96 for all figures, except those for 1997 which come from idem: Digest of Labour Statistics 1997.

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Figure 5 Employment1 by size of establishment, 1982–97 (in thousands) ‘000s 500 Large establishments2 Other establishments

450 400 350

121

300 250

123 131

136

179 188 155 162 171 140 147

115 84

97

108

111

200 150 100

198 196 200

214

272 275 285 289 291 291 293 289 287 288 235 257

50

1997

1996

1995

1994

1993

1992

1991

1989

1988

1987

1986

1985

1984

1983

1982

1981

0

1 Employment includes foreign workers. 2 Data for large establishments are the average of the March and September figures.

Sources: CSO: Productivity and Competitiveness Indicators 1982–96 (unpublished data) for all years except 1997; idem: Digest of Labour Statistics 1998 for 1997.

Sectoral distribution of employment Changes in the sectoral distribution of employment since 1982 are shown in figure 6 for the four major sectors of agriculture, manufacturing and others (mainly services). Agriculture is by far the smallest major sector, with only around 12 per cent of total employment in 1997. It is clear that Mauritius is not typical of developing countries in Africa, where most people work in agriculture. The manufacturing sector comprised approximately 29 per cent of employment in 1997, up sharply from 21 per cent in 1982, although considerably lower than the 33 per cent recorded in 1988. The rise in relative importance of the manufacturing sector since 1982 is due to EPZ growth. A more detailed discussion of the growth in EPZ employment in the 1980s and its subsequent stagnation and fall since 1988 is presented in Parts II and III. © ILO 2001

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Mauritius: Studies on the social dimensions of globalization

Figure 6 Distribution of employment by four major industrial sectors, 1982–97 (as a percentage) % 50 Other 45 40 35 30

Manufacturing

25 Agriculture and fishing

20 15 10

Producers of government services

5

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

0

Sources: CSO: Productivity and Competitiveness Indicators 1982–96 (unpublished data) for all years except 1997; idem: Digest of Labour Statistics 1998 for 1997.

The majority of people in Mauritius (59 per cent in 1997) work in the service industries. This represents a slight increase compared with 1982. The roughly unchanged percentage over the past 15 years is due to a large drop in the relative importance of government employment, and an offsetting large rise in the relative importance of non-governmental services; whereas the Government provided approximately 21 per cent of all employment in 1982, by 1997 this had dropped to only 13 per cent. The Government’s decline as an employer over the past 15 years can be attributed to the almost unchanged number of government employees (58,900 in 1982; 62,000 in 1997) at a time when the total labour force rose by almost 70 per cent.

Foreign labour Until quite recently, there were few foreign workers in Mauritius. In 1990, there were reported to be only 1,000 in total, of whom 600 were in the manufacturing sector. Their numbers increased to 8,617 in 1997 in total, and 7,051 for the 28

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manufacturing sector alone. While they represent only a small proportion of the employment figures (approximately 0.2 per cent in 1990; 1.8 per cent in 1997), foreign workers make up a significant proportion of the manufacturing sector, where, in 1997, they represented 5.2 per cent of employment (and 8.9 per cent of EPZ employment if it is assumed that they all worked in the EPZ).

Unemployment In the early 1980s, the labour market situation looked bleak. According to registration data from employment service centres, unemployment stood at 23 per cent in 1982. However, it was undoubtedly substantially higher, since this source of data underestimates unemployment figures; there are always many jobless people who fail to register at these centres. By 1990, the unemployment rate had fallen sharply, to 2.8 per cent according to official estimates. As shown in this report, this fall in unemployment in the 1980s was due largely to Mauritius’ outstanding performance in exports and to the accompanying growth of employment in the EPZ. In the 1990s, unemployment rose again. Official government estimates indicated an unemployment rate of 6.0 per cent in 1997. According to the 1995 labour force survey, which used the internationally accepted definition of unemployment, the unemployment rate was much higher – almost 10 per cent in 1995. This fluctuating situation is partly due to changes in EPZ employment. Table 9 (A and B) gives the unemployment statistics for 1983, 1990, 1995 and 1997, based on the three available series described in the annex. Figure 7 displays the unemployment rates for 1982–97. Despite differences in estimates, as noted in the annex, several observations can be made: • The unemployment rate was much lower in the late 1990s than in the early 1980s – before the explosive growth of the EPZ, which undoubtedly reduced unemployment levels in the 1980s. • It is clear that unemployment rose in the 1990s, together with the fall in EPZ employment. • Since 1990, unemployment has increasingly affected women, who appear to comprise approximately half of the registered unemployed; now an unemployed person is just as likely to have been employed previously as a first-time jobseeker.

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Mauritius: Studies on the social dimensions of globalization

Table 9

Unemployment statistics, 1983–97

A. Sources of unemployment data Sources/unemployment

1983

1990

1995

1997

71 681 20.2

14 348 3.3

8 420 1.7

10 855 2.1

72 000 19.7

12 200 2.8

24 300 5.1

29 800 6.0

n.a. n.a.

24 400 5.6

47 700 9.9

n.a. n.a.

1. Registered at employment service centres Number unemployed Unemployment rate (%) 2. Official government estimates Number unemployed Unemployment rate (%) 3. Using international definition of unemployment1 Number unemployed Unemployment rate (%)

B. Characteristics of the unemployed Characteristics of unemployed1

1. Women (% of unemployed) 2. Married women (% of unemployed) 3. First-time jobseekers (% of unemployed)

27.0

46.5

7.3

20.1

84.0

48.4

37.7 32.0 23.0 7.3

27.3 26.2 26.2 20.1

n.a.

20.6

4. Age distribution (%) 12–19 20–24 25–34 35+ 5. Long-term unemployed (i.e. unemployed for more than 1 year) as % of unemployed n.a. = figures not available. 1

As reported in 1990 Housing and Population Census and Labour Force Sample Survey 1995.

Sources: table 9A: MEF (1998) for source 1; CSO: Economic Indicators, Issue No. 265 (2 Feb. 1998) for source 2; idem: Labour Force Sample Survey 1995 for source 3; table 9B: CSO: 1990 Housing and Population Census of Mauritius for 1990; idem: Labour Force Sample Survey 1995 for 1995.

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Figure 7 Unemployment rates by source, 1982–97 (as a percentage of the active population) % 25

20

15 Employment services Reported 10

Official

5

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

0

Sources: O CSO: Productivity and Competitiveness Indicators 1982–96 (unpublished data) for all years except 1997; idem: Digest of Labour Statistics 1998 for 1997. ■ Based on employment services data, August. Mauritius Employers’ Federation (MEF) (1988). ▲ Based on responses from the 1990 Population Census and 1995 Labour Force Survey using the internationally accepted definition of unemployment. As reported in CSO: Labour Force Sample Survey 1995 and idem: 1990 Housing and Population Census of Mauritius.

Educational and skill level of the labour force For a developing country, Mauritius has a well-educated population and labour force. Its relatively low adult illiteracy rate (according to World Bank data, approximately 17 per cent in 1995) is similar to the adult illiteracy rate in Malaysia, although it is considerably higher than in the other DAEs: Singapore (9 per cent illiteracy rate), Thailand (6 per cent) and the Republic of Korea (2 per cent). Also, virtually all children in Mauritius attend primary school. However, secondary and tertiary school enrolment rates are much lower than in the DAEs in general (table 10) and just above the rate for non-LDC Africa. Mauritius’ tertiary enrolment rate is much lower than many other developing countries – 6 per cent in 1996, compared with 9 per cent for non-LDC © ILO 2001

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Mauritius: Studies on the social dimensions of globalization

Table 10

Gross enrolment ratios1 at primary, secondary and tertiary educational levels, 1980–96

Country or territory

Mauritius

Primary

Secondary

Tertiary

1980 1985 19902 19963

1980 1985 19902 19963

1980 1985 19902 19963

93 110 109 107

50

49

53

62

1

Dynamic Asian economies

103 101 101 n.a.

55

61

64

n.a.

10

17 n.a. n.a.

Korea, Republic of Malaysia Singapore Thailand Hong Kong, China

110 97 105 101 93 101 93 91 108 108 104 n.a. 99 96 99 87 107 105 102 96

78 48 58 29 64

92 53 59 30 71

90 101 58 58 63 n.a. 30 55 80 75

15 4 8 15 10

34 n.a. 52 6 7 11 14 19 34 19 16 20 13 19 n.a.

32

39

44

Non-LDC African countries

94

98

99 104

46

4

1

5

4

7

6

9

n.a. = figures not available. 1 The gross enrolment ratio is the ratio of total enrolment, regardless of age, to the population of the age group that officially corresponds to the level of education based on UNESCO’s classification of education levels. 2 Data are for 1990 or nearest year available (1988, 1989, 1991 or 1992). 3Data are for 1996 or most recent year available (1993, 1994 or 1995). Source: World Bank: World Development Indicators 1998.

Africa and 29 per cent in the DAEs. In addition, secondary and tertiary schools in Mauritius seem to put little emphasis on technical subjects (Lall and Wignaraja, 1998). Table 11A indicates educational levels for Mauritius’ labour force in 1983, 1990 and 1995, and shows that there was a clear upward trend over this period. Especially worth noting is the large increase in the percentage of the labour force that attended secondary school. Table 11B – where education categories have been reorganized – presents a less rosy picture. It indicates that a substantial proportion of Mauritius’labour force is not well educated: indeed, in 1995 around one-third of the labour force had not completed primary school. One reason for this situation is that approximately 30 per cent of children fail the CPE examination at the end of primary school. The data also indicate that, in 1995, less than one-third of Mauritius’ labour force had completed lower secondary school (GCSE standard) and less than 8 per cent had completed higher secondary school (“A” level standard). 32

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Table 11

Educational level of the labour force, 1983–95 (percentage distribution)

A. Educational level, 1983, 1990 and 1995 Educational level

1983a

1990a,b

1995b

Nil and pre-primary Some primary Some secondary University degree

13.21 49.21 35.41 2.21

8.61; 8.22 46.51; 46.42 42.71; 43.22 2.81; 2.22

6.12 43.82 47.62 2.52

B. Educational level as reorganized, 1995 Educational level

1995c

Less than primary completed

30.51

Primary completed and less than secondary completed

41.11

Secondary completed (GCSE or “A” level passed)

25.81

University completed

2.51

Sources and notes: a CSO: 1990 Housing and Population Census of Mauritius, Vol. VIII: for 1983 and 1990, based on employed people. b Idem: Labour Force Sample Survey 1995 based on labour force data. c Idem (unpublished tabulation based on labour force data from Labour Force Sample Survey 1995). 1 Data are for employed persons. 2 Data are for the labour force.

Mauritius is embarking on the road towards technology-based development without placing sufficient academic focus on scientific subjects. Of those receiving tertiary education, only 15 per cent study scientific subjects, compared with 57 per cent in Singapore. In all these areas, Mauritius falls short of its competitors (World Bank, 1994). It is clear that Mauritius needs to improve its educational system. If Mauritius is to become internationally competitive in high technology and information services as envisaged in the Government’s Vision 2020 publication, it will need to increase the proportion of children completing primary and secondary school, and especially the number of tertiary-level students (in particular those studying technical subjects).

Training Despite government objectives (Bheenick and Hanoomanjee, 1988), according to the 1990 Household and Population Census, of the employed population © ILO 2001

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Mauritius: Studies on the social dimensions of globalization

aged 12 years and over, only 31,558 of a total of 407,618 had any training. However, the number of employed people with training increased by approximately 80 per cent between 1990 and 1995 to reach 57,066 (CSO: Labour Force Sample Survey 1995). A 1993 survey of 946 economically active and 1,391 economically inactive women found that 14.5 per cent had received technical or vocational training (MEDRC, 1995). Technical and vocational training in Mauritius is coordinated by the Industrial and Vocational Training Board (IVTB), which was set up in 1988 as the Government’s executive arm in this field as a joint venture between the private and public sectors. The IVTB operates an interesting levy-grant system: all firms that come under the National Pensions Scheme contribute a levy of 1 per cent of their total wage bill (which is deducted at source) to the IVTB. The IVTB, in turn, refunds up to 75 per cent of the total costs incurred by firms for the training of their workers.9

Government education strategy Education in Mauritius is free, from pre-primary to university, and compulsory up to completion of primary level. However, the quality of teaching inputs and instruction is low. According to the World Bank, a major obstacle to upgrading the quality of secondary education is the poor educational level of the teachers.10 Other problems include: the high drop-out rate at the end of primary schooling; insufficient specialized education and training for the less academically oriented; an examination-focused system that encourages memorizing fact; and an unintended fostering of private tutoring to improve performance in the endof-primary examinations to obtain admission to higher-quality secondary schools. The Government is expected to increase compulsory education to nine years (six years of primary and three years of academic or vocational education). The current curriculum, criticized as being examination oriented at both primary and secondary levels, is under review and is expected to be revised with a new focus on languages, critical thinking, IT, living values, health and physical education, and vocational and technical education.

Employment quality and insecurity It is difficult to find out very much about the extent of employment insecurity in Mauritius – or how it has changed over the past two decades. Labour market statistics throw insufficient light on the issue, especially since most of the relevant information comes from only one source, the 1995 labour force survey. 34

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Table 12

Employed population by length of service and employment sector, 1995 (percentage distribution)

Length of service

Less than 1 year 1–4 years 5–9 years 10–19 years 20 years and above Total

Government services

Public enterprises

Sugar industry

EPZ

Other private enterprises

2.8 18.0 15.1 28.6 35.5

4.6 20.7 20.7 30.2 23.8

3.7 11.1 19.0 25.3 40.9

14.4 49.3 24.0 10.1 2.2

13.3 38.9 19.7 17.6 10.5

100.0

100.0

100.0

100.0

100.0

Note: The median for each sector is in bold type. Source: CSO: Labour Force Sample Survey 1995.

Evidence from the survey is presented below according to three aspects of the labour market that are often related to precarious employment: (a) length of service; (b) part-time employment and hours of work; and (c) the holding down of more than one job. A fourth associated aspect, the extent of employment in small establishments, was covered earlier in section B. Table 12 shows the distribution of the employed by length of service and sector of employment, namely the two export sectors (EPZ and sugar), government services, public enterprises and other private enterprises. The median number of years of service is highest in the sugar industry, and also very high in government services and public enterprises, where the median length of service is ten to 19 years in all three sectors. Length of service is much lower in the EPZ and other private enterprises; the median length of service is one to four years in both these sectors, and about 13 per cent of employees have been with their employer for less than one year. While the data would seem to indicate a high labour turnover in the EPZ, they do not necessarily indicate high levels of job insecurity in these sectors.11 Having more than one job can be a sign of income insecurity, as some workers may need to hold a second job to earn an acceptable income. However, it can also be a sign of initiative among full-time workers seeking extra money. This phenomenon does not appear to be very common in Mauritius. Only 3.3 per cent of the labour force (4.4 per cent of men and 1.2 per cent of women) are reported to have a second job according to the 1995 labour force survey.12 Table 13 gives data on the distribution of the employed by number of hours worked in all jobs during the reference week in 1995, and table 14 shows, by © ILO 2001

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Mauritius: Studies on the social dimensions of globalization

Table 13

Hours worked in all occupations and part-time employment in reference week, 1995

Hours worked in all occupations per week

01 1–30 With: (voluntary absence2) (involuntary shorter hours3) (usual hours) 31–40 41–50 51+

Total number of hours worked in reference week

Percentage distribution

17 400 86 800

4.0 19.9

(15 700) (19 900) (51 200)4 133 900 134 600 63 600

(11.7)4 30.7 30.8 14.6

1 Away

from work during reference week. 2 Examples include illness, vacations and other personal reasons. 3 Examples include lack of work, bad weather, etc. 4 This could be taken as an estimate of usual part-time employment. It may, however, underestimate part-time employment, because the data are for hours worked in all occupations, not in each occupation.

Source: CSO: Labour Force Sample Survey 1995.

Table 14

Average usual hours of work in main occupation by industry, 1995

Industry

Usual/normal hours

Agriculture and fishing Mining and quarrying Manufacturing Electricity and water Construction Wholesale and retail trade Hotels and restaurants Transport, storage and communication Financial institutions, real estate and business activities Public administration Education, health and social work Other services

36.3 31.0 43.7 39.5 42.7 45.0 46.9 44.8 37.7 40.9 34.2 37.0

Total

41.3

Source: CSO: Labour Force Sample Survey 1995.

industry, the usual or normal hours worked in the main occupation during the reference week. Approximately 20 per cent of the employed population worked less than 30 hours in the reference week; this was more common among women 36

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Trends in globalization and social progress

(27 per cent) than men (16 per cent). Just as many people in Mauritius appear to work especially long hours as work part time: 15 per cent worked more than 50 hours in the reference week in 1995, compared with the approximately 12 per cent who usually worked less than 30 hours in the reference week.13 The limited availability of relevant data would seem to indicate that employment insecurity is not as big an issue in Mauritius as in many other countries. But it is not inconsequential. Mauritian policy-makers need to have more regular data on the employment and labour market situation, including, for example, information on types of contract and job mobility as well as on other relevant labour market indicators mentioned in this section. (See annex, which discusses labour market information needs for the future.)

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37

C. LABOUR MARKET INSTITUTIONS AND INDUSTRIAL RELATIONS

Industrial relations context Industrial relations in Mauritius are regulated by two basic labour laws – the Labour Act, 1975, and the Industrial Relations Act (IRA), 1973, which established a number of institutions: the National Remuneration Board (NRB), the Industrial Relations Commission (IRC), the Permanent Arbitration Commission (PAC), the Civil Arbitration Commission, the Civil Service Industrial Relations Commission and the Central Whitley Council. There is also the 1993 Industrial Expansion Act, which, although it does not supersede the Labour Act and the IRA of 1973, brings together the entire industrial sector, including the EPZ and other export enterprise schemes, into one single legal text.

Collective bargaining and unionization Tripartism plays a limited, but important, role in industrial relations in Mauritius. While collective bargaining for resolving conflicts and promoting constructive employer–employee relations is not highly developed at the plant/enterprise level, tripartism plays an important role in fixing minimum wages and other conditions of employment through government boards. The right to organize is legally protected by the Industrial Relations Act of 1973; an employer cannot refuse to engage an employee or dismiss, penalize or otherwise discriminate against an employee who wishes to exercise these rights. The same provisions apply in the EPZ. In 1996, there were 330 registered trade unions with a total of 108,106 members. This relatively high degree of fragmentation is due, in part, to the current law which states that only seven workers are needed to form a union. In 1996, the union participation rate stood at 21.8 per cent. Unions find it especially difficult to organize in the EPZ, where union density is less than 10 per cent. 38

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Trends in globalization and social progress

Table 15

Trade union participation rate and industrial stoppages, 1981–96

Year

Union membership

Unionization rate (%)

Year

Total work-days lost in ’000s

1981 1983 1986 1989 1992 1994 1996

70 478 83 202 102 317 113 160 104 311 107 659 108 106

20.9 23.0 24.0 28.9 23.2 22.5 21.8

1987–88 1988–89 1989–90 1990–91 1991–92 1992–93 1993–94 1994–95

16.5 22.2 5.4 0.3 1.8 4.1 1.4 1.7

Note: Values for 1981–86 and 1989–96 are from different sources and may, therefore, not be entirely consistent. Sources: Ministry of Labour and Industrial Relations, Women’s Rights and Family Welfare (1988) for union membership and unionization rate for 1981–86; MEF: Annual Report 1997 for union membership and unionization rate for other years; Ministry of Labour and Industrial Relations (1998), unpublished data on industrial stoppages.

While this national unionization rate is similar to the rate observed in 1981 (20.9 per cent), it is considerably lower than the peak reached in 1989 (table 15).

Wage-fixing practices Minimum wages are fixed on an occupation and industry, rather than nationwide, basis by the NRB through ROs in 27 private-sector industries; there are about 300 such minimum wage levels at present.14 ROs are updated every year, based largely on changes in the consumer price index (CPI). In general, the lower an occupation’s basic wage, the higher the percentage increase awarded. The NRB, a joint consultative/negotiating body with employee and employer representatives in any given industry,15 is widely regarded in Mauritius as having favoured the emergence of a tripartite spirit among the social partners. It is worth noting that in the discussions on the revision of the labour laws, neither employers nor workers indicated that they wanted to eliminate the NRB, although the social partners indicated that they wished to review its functions. Most employers now pay more than the statutory requirements. Within EPZ establishments, average earnings are much higher than the prescribed minimum wages. For example, in 1995, the average hourly wage in textile and garment factories was roughly three times that of the NRB minimum wage (table 16). © ILO 2001

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Mauritius: Studies on the social dimensions of globalization

Table 16

Minimum wage and actual wage for selected occupations in export industries, 19951

Industry/occupation

Minimum wage (MW) (rupees per hour)

Actual wage (AW) (rupees per hour)

MW as % of AW

20.83

31.50

66.1

14.19 9.92

25.072

56.63

6.18 4.86

17.57 13.48

35.2 36.1

20.22 17.53 15.30

27.25 29.38 23.38

74.2 60.0 65.4

Wholesale, retail trade, restaurants and hotels Hotels Receptionist 15.16 Waiter (1st year) 8.50 Cook (1st year) 11.03 Cleaner 9.36

28.50 21.30 26.31 17.11

53.2 39.9 41.9 54.7

Agriculture Sugar cane plantations Overseer (grade 1) Field worker Male Female Manufacturing Textiles and garments Factory worker (1st year) Unskilled worker (1st year) Sugar factory Fitter/welder (grade 1) Driver (heavy mechanical unit, grade 1) Factory operator (grade 1, 1st year)

1 Wage

rates are for September 1995 and are per hour. 2 Average for all workers. 3 The male rate is used for the minimum wage in this calculation, since most field workers are men.

Source: ILO Task Force, based on data from CSO: Digest of Labour Statistics 1996.

Industrial conflicts The conciliation of industrial disputes is carried out at two levels. In the first instance, all disputes must, by law, be reported to the Minister of Labour and Industrial Relations before any work stoppages or other coercive action can take place. Then, at the second level, the Minister is empowered to refer a dispute to the IRC. Alternatively, or sequentially, cases can be referred to the PAC, but not before a cooling-off period of at least 14 days has elapsed. Under the 1973 Industrial Relations Act, the Prime Minister may declare a lawful strike illegal for a period of 60 days following the date on which the regulations .

40

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Trends in globalization and social progress

are published if he/she is of the opinion that the continuation of the strike will jeopardize the economy. This authority, together with the resulting delays, can make it difficult in practice for unions to strike. The industrial relations system in Mauritius means that there are few strikes (table 15), although 1979 did witness a general strike for a short period in reaction to price increases associated with the structural adjustment programme under way and a major devaluation in the currency. In the 1990s, there were few work stoppages: there were no major strikes in 1995 or 1996, and only 296 workers went on strike in 1995 and 1,795 in 1996. In the EPZ, 1,239 workers went on strike in 1996 (MEF: Annual Report 1996).

Discussions on revising the Industrial Relations Act and labour law Most of Mauritius’ existing labour legislation was put into effect in the 1970s at a time characterized by high and rising unemployment, a weak industrial sector and low levels of non-primary product exports. Over the past two decades, the Mauritian economy has moved from a monocrop-based economy to an export-led industrial and service-based economy. The need to revise current labour and industrial relations laws was recognized in the National Development Plan 1992–94 (Chapter 2, B3), which stipulates that: During the plan period, labour standards will be reviewed and harmonized so as to meet the growing needs of a rapidly industrializing economy. The Labour Act [of 1975] and the Industrial Relations Act of 1973, enacted at the time of high unemployment, will be reviewed in light of the new economic and social environment.

This is also recognized by employers and unions. Many employers feel that the existing provisions are cumbersome (partly due to overlapping ROs), that they inhibit the development of enterprises and that they have a negative bearing on productivity (due to ROs ignoring the role of productivity when fixing wage increases and relying almost exclusively on the rise in the CPI). Employers are also unhappy with the IRA provision that allows for union recognition from a minimum of seven members only, as they feel this fosters fragmentation and hinders collective bargaining (Paratian, 1998). The trade unions have for long been dissatisfied with certain provisions of the IRA, particularly the restrictions on the right to strike (especially the lengthy cooling-off periods and the arbitration procedure). Unions are also unhappy with section 13(1)(d), whereby the registration of a union can be cancelled if it is “about to engage in activities likely to cause a serious threat to public safety or public order” (ILO, 1986). © ILO 2001

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Mauritius: Studies on the social dimensions of globalization

Against this background and the recognition by all concerned of the need to update industrial relations, the Government is considering revising the labour law and the Labour Relations Act. For this reason, it enlisted the help of the ILO until December 1998. It is hoped that the tripartite-based discussions will lead to more collective bargaining with less government intervention and that they will be the cornerstone of Mauritius’ future industrial relations system. The Government’s Vision 2020 publication lends support to this view. It believes that labour laws and the institutional arrangements for redeployment of manpower will determine the ease with which the country can adapt to new challenges. Given the trend towards more workers’ participation in the decision-making process at the firm level, as well as in the ownership of the business, the report foresees an increasing tendency to more interactive consultation between the social partners, less government intervention in the settling of industrial disputes and wage structures, and more support for measures to enhance smooth industrial relations (MEDRC, 1997, Vol. II).

42

© ILO 2001

D. INCOME DISTRIBUTION AND POVERTY

Income distribution Income distribution in Mauritius is relatively equal, particularly when compared with many other countries. According to the CSO Household Budget Survey, 1996–97, Mauritius has a Gini coefficient of 0.38716 and households in the upper/highest 20 per cent of the income distribution bracket receive 7.6 times the income of households in the lower two income deciles. As can be seen in table 17, the most recent measure of income inequality for Mauritius is slightly higher than in the Republic of Korea, similar to that in Singapore but much lower than in the other three DAEs. It is also much lower than in other non-LDCs in sub-Saharan Africa, although it is higher than in north Africa. The income distribution of households in Mauritius appears to have improved over the past two decades. The Gini coefficient was reported to be 0.420 and 0.445 in 1975 and 1980–81 respectively, compared with 0.396, 0.379 and 0.387 in 1986–87, 1991–92 and 1996–97 (table 17). While it would be wrong to infer too much from the small differences across particular survey years because of the imprecise nature of income data from sample surveys (for example, one should not read too much into the very small increase reported between 1991–92 and 1996–97), the data do show that Mauritius’ export-led growth has been accompanied by an improvement in income distribution, particularly up to 1990. It is possible that improvements in the labour market and the large fall in unemployment during the 1980s, as well as the large increase in the women’s labour force participation rate, especially among the less well educated (causing a doubling of income within households, especially among those with lower incomes), were important contributing factors.

Poverty Mauritius has no official data on poverty or social exclusion17 (although, over time, it should be possible to obtain poverty estimates with the help of data © ILO 2001

43

Mauritius: Studies on the social dimensions of globalization

Table 17

Income distribution, 1975–96/97

Country or territory/year

Gini coefficient

Income of upper 20% of households to income of bottom 20% of households

Mauritius 1975 1980/81 1986/87 1991/92 1996/97

0.420 0.445 0.396 0.379 0.387

n.a. n.a. 7.8 6.5 7.6

Dynamic Asian economies Korea, Republic of (1988) Malaysia (1989) Singapore (1989) Thailand (1992) Hong Kong, China (1991)

0.336 0.484 0.390 0.515 0.450

5.7 11.7 n.a. 15.8 10.1

Non-LDC Africa (average) Sub-Saharan Africa (1986–93) North Africa (1990–95)

0.496 0.367

13.8 6.4

n.a. = figures not available. Sources: Mauritius: CSO (1997); Household Budget Survey, Vol. II, 1996/97; other countries: World Bank: World Development Indicators 1998.

from the household income and expenditure surveys carried out every five years). As measured by the World Bank’s US$1 per person per day poverty line, abject poverty is low in Mauritius. There are also government programmes for the poor. If poverty were measured using a typical absolute poverty line such as the one based on the cost for a household of an acceptable basket of goods and services, poverty would be seen to exist in Mauritius, as it does in most countries.18 Measuring poverty and social exclusion in Mauritius, however, would be more than an academic exercise, since social programmes in the future may need to be more targeted than at present, and targeted programmes for the needy require good data. This is an obvious area for improvement (see annex). Although the Government spends more than 30 per cent of its recurrent budget on pensions and other social programmes which are targeted at the needy, and considerable investment has been made in low-cost housing and other social infrastructure and amenities, pockets of poverty remain. As the stresses and strains of modern living catch up with the average Mauritian, 44

© ILO 2001

Trends in globalization and social progress

hardship could become a more common feature. Programmes for immediate, short-term assistance to a larger segment of the population may be needed in the future.

Notes Before the 1960s, the manufacturing sector was small and “King Sugar” reigned. The development strategy in the 1960s changed to one based on import substitution: this included the introduction of Development Certificates (DCs), which provided an array of incentives, such as import duty relief or exemptions on machinery, raw materials and semifinished products; and substantial quota/tariff protection and fiscal concessions for domestic-oriented products. Casting doubt on this import-substitution strategy was Mauritius’ slow economic growth – real GDP per capita was lower in 1969 than in 1959 (Dabee, 1998). 2 The sugar boom of the mid-1970s was instrumental in raising funds to finance the early development stages of the EPZ. 3 One reason why Mauritius’ EPZ-led export boom did not result in a positive balance of trade is that EPZ production and exports are heavily dependent on intermediate imports. According to CSO data, intermediate imports comprised 65–70 per cent of all imports between 1983 and 1990 (CSO: Annual Digest of Statistics, 1984 and 1991), due to the fact that Mauritius’ main manufactured export is knitwear, which requires the import of wool. CSO: Digest of Industrial Statistics (1997) data also indicate that net exports represented only 33 per cent of EPZ production in 1995. 4 According to data from the Ministry of Economic Planning and Development (MEPD) and the Bank of Mauritius (WTO, 1996), about one-half of all FDI has gone to the EPZ (68 per cent in 1987 and 44 per cent in 1990, according to the National Development Plan 1992–94, and 54 per cent according to the Bank of Mauritius/WTO, 1995, for 1983–93), with 24 per cent going to hotels between 1983 to 1993 (WTO, 1996). 5 Direct estimates of the labour force in Mauritius are only available for 1983 and 1990 (from population censuses) and for 1995 (from a labour force survey). 6 The minimum legal age for employment in Mauritius is 15. Some statistics in Mauritius, however, include those working from the ages of 10, 12 or 15. 7 The lower growth rate compared with the simple projection discussed above is due to Vision 2020’s assumptions that there will be: a drop in the adult population growth rate; a fall in the male labour force participation rate, due to longer schooling; and a smaller rise in female participation rates, also, in part, due to longer schooling. 8 It is worth noting that adjustments in the unemployment statistics (see annex), which assume that people reported as unemployed are actually in the labour force, have a direct one-to-one effect on the number of people reported to be working in other-than-large establishments, which increased by approximately 12,200 in 1990 and 23,100 in 1995. 9 Technical and vocational training is provided by a number of institutions, such as the industrial trade training institutions, the IVTB training centres, the Sir Guy Forget Lycée Polytechnique in Flacq and the Lycée in Rose Hill. The sugar industry has its own training system for all grades of employees. In addition, most technical ministries and institutions have their own specialized training programmes. For example, the State Informatics Training Company (SITRAC) is responsible for giving training in information technology (IT); the Ministry of Health for all medical and paramedical training; and the Ministry of Education for educational training. Another important training institution is the Small and Medium Industry Development Organization (SMIDO), which is actively involved in organizing programmes to meet the needs of small and medium entrepreneurs. Some private training institutions approved by the ITVB also conduct training programmes in a variety of fields, while private-sector institutions, such as the Mauritius Employers’ Federation (MEF) and the Chamber of Commerce and Industry, run a number of training programmes in response to their members’ needs. Two industrial trade training centres (ITTCs) provide basic vocational training in several areas, including mechanical engineering, electrical installation, welding and carpentry. 10 “In 1991, only 35 per cent of teachers had a degree ... The remaining 65 per cent were recruited directly into the teaching force, without formal training” (World Bank, 1994). 11 The fact that employment grew very rapidly in the 1980s in the EPZ means that there is a downward bias in the arithmetic average (i.e. mean) length of service in the EPZ, since few workers could have been in their job for more than 20 years and relatively few for ten to 19 years. This truncation bias in the data, however, should not have affected the median number of years in the EPZ, since it is only one to four years. 12 Of course, it is possible that there are many more people with a second job, as some people may not wish to report having more than one job. 13 In order to get a rough estimate of the extent of part-time employment (which is often defined as working fewer than 30 hours a week), the Task Force recalculated the percentage “working fewer than 30 hours” by subtracting those reported to be working these hours for temporary reasons, e.g. illness, vacation, personal reasons, bad weather, etc. According to these calculations, approximately 12 per cent of the labour force usually worked part time in 1995. This percentage is low compared with the situation generally prevailing in the Organisation for Economic Co-operation and Development (OECD) countries, although it is higher than in several European countries, especially in southern Europe (OECD, 1995). 1

© ILO 2001

45

Mauritius: Studies on the social dimensions of globalization Most ROs cover specific occupations in an industry, broadly or narrowly defined: for example, Order 10 covers export enterprises and Order 11 covers factory workers. Because some ROs overlap in their coverage, and a company may be affected by more than one order, the NRB is seeking general uniformity. 15 In the public sector, the regulation of terms and conditions of employment falls under the responsibility of an independent body, the Pay Research Bureau (PRB), which is responsible to the Prime Minister. The PRB is also responsible for wage reviews and recommendations, as well as conditions of service in all parastatal bodies, local authorities and private secondary schools. 16 The Gini coefficient measures the distance between a Lorenz curve (which traces out the accumulative household income distribution) and a 45-degree line (which represents a totally equal distribution of household income). The Gini coefficient ranges from 0.0 to 1.0. The closer it is to 1.0, the more unequal the household income distribution; the closer it is to 0, the more equal the income distribution. 17 Social exclusion is a concept which is similar to poverty in that it identifies the weaker elements in society. It differs from most poverty measures in that it is mainly concerned with identifying people and households that remain in poverty for long periods of time, perhaps generations. 18 See van der Hoeven and Anker (1993) for a succinct discussion on poverty lines. Absolute poverty measures are generally based on a fixed poverty line, where the definition of poverty remains unchanged over time, and consequently it is possible for a country to succeed in lowering its poverty rate. A poverty line is often based on the cost for a household of a basket of food containing a minimum acceptable amount of calories and proteins. This cost is then usually multiplied by a certain prescribed factor to take into account the cost of other necessities such as health care, transport, etc. This factor tends to vary by development level and the non-food items that are felt to be necessary in society – from approximately 1.25 in India to about 2.0 in Latin America and 3.5 in the United States (Billsborrow, Anker and De Graff, 1998). 14

46

© ILO 2001

PART II

ASSESSING THE SOCIAL IMPACT OF GLOBALIZATION

© ILO 2001

47

A. TRADE AND EMPLOYMENT

It is useful to classify industrial sectors into three groups according to their relationship to trade – whether they are mainly export oriented, import competing or non-tradable in nature. Direct employment in the sugar cane industry, the EPZ (mainly garments and textiles) and large restaurants and hotels can be classed as export oriented. These three sectors have been designated as outward-looking cylinders of growth for the future. The Government has designated the financial, business and other services sector as the fourth cylinder, so it seems reasonable to assume that a sizeable proportion of this sector will be export oriented. The import-competing sector can be roughly approximated by non-EPZ manufacturing, and the remainder of the economy can be classed as non-tradable. Table 18 reorganizes CSO employment data by export orientation (export oriented, import competing and non-tradables) and export-related sectors (direct employment in export-oriented sectors plus indirect employment in tourism through backward linkages). Figure 8 shows the tendencies since 1982 in the percentage distribution of employment according to export orientation. Figure 9 indicates employment trends in export-related sectors. Several features of the past 15 years are worth noting. Firstly, the percentage of employment in the import-competing manufacturing sectors stayed basically constant. One possible explanation for this is that trade liberalization was introduced gradually. In the future, however, it is likely that import-competing sectors will face increasing competition from imports as Mauritius continues to liberalize trade and increase regional integration. Secondly, there was a large increase in the percentage of employment in export-oriented sectors between 1982 and 1990, followed by a drop in the 1990s. The main factor determining these differences is the performance of the EPZ. This is clearly shown in figure 10, where export-oriented employment is divided into its main component parts. © ILO 2001

49

50

(1.1) (0.8) 11.3 58.0 32.2 100.0

(0.8) 12.1 59.9 29.6 100.0

(2.5) 36.8 188.5 104.7 324.8

(1.0)

(2.3) (2.3) 34.2 34.5 167.0 176.3 85.4 87.0 282.0 293.1

(3.5)

30.6 (14.3) (13.2)

(2.4) 37.3 184.8 91.2 308.5

(3.1)

(3.1)

99.5 (46.6) (42.9)

1985

28.0 (10.5) (14.5)

(3.2)

82.3 (25.9) (46.1)

86.4 (32.3) (44.6)

1984

80.8 (23.8) (46.5)

1983

Percentage of employment 28.6 28.1 Export oriented1 EPZ (8.4) (8.8) (16.5) (15.7) Sugar5 Tourism (large establishments, (1.1) restaurants and hotels)6 (1.1) Financing, etc. (half of large establishments) (0.8) (0.8) 12.1 11.8 Import competing2 59.2 60.1 Non-tradables3 30.3 29.7 Export related4 Total 100.0 100.0

Employment (in ’000s) Export oriented1 EPZ Sugar5 Tourism (large establishments, restaurants and hotels)6 Financing, etc. (one-half of large establishments) Import competing2 Non-tradables3 Export related4 Total

1982

1987

(4.3)

(1.1)

35.3 (21.6) (10.8)

(0.7) (0.7) 10.5 10.0 55.6 54.7 35.4 37.0 100.0 100.0

(1.1)

33.9 (19.1) (11.9)

(2.6) (2.8) 36.9 38.0 194.6 207.0 124.1 140.0 350.0 378.5

(3.7)

118.5 133.5 (66.9) (81.8) (41.7) (41.0)

1986

(0.9) 9.6 54.4 37.9 100.0

(1.3)

36.0 (22.9) (10.0)

(3.5) 37.8 215.3 149.9 395.5

(5.0)

142.4 (90.7) (39.7)

1988

1990

(8.6)

(2.0)

34.4 (21.1) (9.5)

(1.0) (1.1) 10.0 10.4 55.1 55.2 36.9 37.5 100.0 100.0

(1.4)

34.9 (22.0) (9.8)

(3.9) (4.5) 40.6 43.7 223.7 232.1 150.0 157.9 406.0 420.8

(5.5)

141.7 145.0 (89.5) (88.8) (39.6) (39.9)

1989

(1.1) 10.3 55.6 37.4 100.0

(2.2)

34.1 (20.7) (9.3)

(4.7) 44.3 238.8 160.5 429.4

(9.5)

146.3 (88.9) (40.1)

1991

(1.2) 8.4 58.0 37.3 100.0

(2.5)

33.6 (20.6) (9.0)

(5.1) 36.6 254.0 163.5 437.9

(10.8)

147.3 (90.0) (39.3)

1992

(1.2) 9.1 58.9 36.0 100.0

(2.6)

32.0 (19.3) (8.6)

(5.3) 40.6 262.5 160.5 445.9

(11.8)

142.8 (86.0) (38.4)

1993

1995

1996

1997

(14.6)

(15.5) (16.5)

(3.2)

30.3 (17.9) (7.8)

(1.3) (1.3) 9.7 10.1 59.5 59.6 35.3 35.1 100.0 100.0

(2.9)

30.8 (18.3) (8.1)

(3.5) (1.3) (1.4) 10.8 10.8 59.9 60.1 34.3 34.3 100.0 100.0

(3.3)

29.3 29.1 (17.0) (17.1) (7.5) (7.0)

(5.7) (6.0) (6.3) (6.6) 44.1 46.5 50.2 51.3 270.4 274.3 279.4 285.9 160.4 161.6 160.2 163.2 454.8 460.5 466.5 475.7

(13.4)

140.3 139.7 136.9 138.5 (83.1) (82.3) (79.3) (81.3) (37.0) (35.9) (35.1) (33.5)

1994

Table 18 Employment and percentage distribution of employment in economic sectors by trade orientation, 1982–97

Mauritius: Studies on the social dimensions of globalization

© ILO 2001

© ILO 2001

Sources: Computed from CSO: Productivity and Competitiveness Indicators 1982–96 (unpublished data) for all figures, except sugar and financing for all years, and for 1997. These data come from idem: Digest of Labour Statistics 1998; and idem: Annual Digest of Statistics, various years.

oriented includes EPZ manufacturing; sugar; tourism; half of large establishments in financing, insurance, real estate and business services; and large establishments in tea and tobacco. 2 Import competing includes manufacturing outside the EPZ and outside sugar manufacturing. 3 Non-tradables includes all employment not in export-oriented or import-competing sectors. 4 Export related includes export oriented plus 1.5 times tourism to account for backward linkages to tourism. 5 Sugar includes sugar cane and sugar manufacturing. All employment data are for June except for sugar which is for March. 6 Tourism for 1997 is assumed to be greater than in 1996 by 1,000 (in keeping with the increase between 1996 and 1997 reported in CSO: Economic Indicators, Issue No. 259, 14 Nov. 1997). The above definitions are only approximate. For example, some export-oriented employment in fishery, construction, agriculture and transport is excluded from export oriented; it is uncertain what proportion of employees in large establishments in financing, insurance, real estate and business services are engaged in exports. Some categories are excluded from the totals.

1 Export

Assessing the social impact of globalization

51

Mauritius: Studies on the social dimensions of globalization

Figure 8 Distribution of employment in economic sectors by trade orientation, 1982–97 (as a percentage) % 70 Non-tradables 60 50 40

Exported oriented

30 20

Import competing

10

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

0

Notes: Export related includes export-oriented sectors (see notes to table 18) plus 1.5 times tourism to account for backward linkages to tourism. The above definitions are only approximate. For example, some employment in fishery and transport is exported; it is uncertain what proportion of employees in large establishments in financing, insurance, real estate and business services are engaged in exports. Sources: Computed from CSO: Productivity and Competitiveness Indicators 1982–96 (unpublished data) for all figures, except for sugar and financing for all years, and for 1997; these come from idem: Digest of Labour Statistics 1998; idem: Annual Digest of Statistics, various years.

Figure 9 Employment in export-related sectors, 1982–97 ‘000s

%

200

40

180

35

160

30

140

25

As a percentage of total employment (right-hand side)

120

20

100 15

80

Employment in export-related sectors (left-hand side)

60

10

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

0 1984

20 1983

5

1982

40

Notes: see figure 8. Sources: see figure 8.

52

© ILO 2001

Assessing the social impact of globalization

Figure 10 Employment in component parts of export-oriented sectors, 1982–97 (in thousands) ‘000s 140 Export oriented1 120

100 EPZ 80

60 Sugar

40 Half of large establishments in financing, etc.

20

Tourism

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

0

Export oriented is defined as the sum of EPZ manufacturing, sugar, tourism, half of large establishments in financing, insurance, real estate and business services, and large establishments in tobacco and tea.

1

Sources: see figure 8.

In short, employment (and by implication unemployment) in Mauritius depends, to a large degree, on how well the country competes in international markets. Thus, whereas EPZ exports grew rapidly enough in the early 1980s to absorb the growing number of workers, thereby solving Mauritius’ increasing unemployment problem, this was not the case for the 1990s when EPZ employment fell. And as net employment creation in other export-related sectors was not large enough to absorb the growth in the labour force as well as the drop in EPZ employment, it is not surprising that unemployment increased in the 1990s. Associated facets of the labour market are working conditions and the flexible use of working hours, including overtime. Data on hours of work from the 1995 labour force survey show that export-oriented sectors have relatively high usual hours of work, since: (a) the manufacturing and hotels and restaurants sectors normally work long hours; and (b) 12,000 women in the manufacturing sector (many of whom are in the EPZ) worked more than their usual hours in the reference week (CSO: Labour Force Sample Survey 1995). © ILO 2001

53

Mauritius: Studies on the social dimensions of globalization

This flexible use of working hours implies that employers prefer to adjust working hours rather than hire or fire workers in line with labour needs. In 1987, the University of Mauritius conducted a comprehensive study on health, nutrition and the productivity of workers in the EPZ, which revealed disturbing environmental and social conditions. The survey showed how long working hours and changes in people’s nutritional habits were adversely affecting their health (University of Mauritius, 1988). It would be worth conducting a new survey on this.

Women’s role in trade There is little doubt that, in the past 15 years, women have played a critical role in enabling the successful performance of Mauritius’ export sector, as most workers in the EPZ are women (81 per cent in 1983; 71 per cent in 1995). This reliance on female workers is partly based on: (a) the gender stereotyping of occupations – the main jobs in the garment and textile industries are felt by employers worldwide to be best suited to women (Anker, 1998); and (b) the willingness of women to accept lower pay than men – pay levels in the EPZ are lower than in other sectors of the economy (figure 11). While the demand for female labour by EPZ employers is not the only reason for the rise in the women’s participation rate over the past two decades (other factors such as higher levels of education and decreasing fertility rates are important), it is likely that the demand in the garment/textile sector has increased the number of women workers. This demand for female labour has probably changed women’s aspirations and, therefore, resulted in a permanent increase in female labour force participation rates. The rapid rise in the female labour force has also undoubtedly helped restrain wage increases in the EPZ, thereby having a positive effect on Mauritius’ international competitiveness (see Part II, section D).

Payment system Workers in two of the main export sectors in Mauritius (agriculture and manufacturing) have a less secure payment system than workers in other sectors. Whereas approximately 60 and 58 per cent of agricultural employees and plant/machine operators are paid daily, weekly or fortnightly or by piecerate, only about 25 per cent of all other employees are paid on this basis (table 19). On the other hand, the use of outworkers (the practice of outsourcing work to home-based workers) is not common in Mauritius. In 1997, there were only 848 outworkers in the EPZ, almost all of whom were women (MEDRC, 1998). 54

© ILO 2001

Assessing the social impact of globalization

Figure 11 Average earnings in an industry per percentage of women in that industry, 1988 and 1995 A. 1988 Rupees 120 Non-EPZ industrial groups EPZ industrial groups

Average earnings per day

110 100

All industrial groups: y = –0.68x + 86.57 R 2 = 0.49

90 80

EPZ: y = –0.348x + 70.73 R 2 = 0.40

70 60 50 40 0 10 20 Percentage of women

30

40

50

60

70

80

Source: Kothari and Nababsing (1997), table 3.

B. March 1995 Rupees ('000s) 10

Average monthly earnings

9 8 7

y = – 60.70x + 7800.49 R 2 = 0.53

6 5

EPZ

4

Manufacturing non-EPZ

3 0 10 20 Percentage of women

30

40

50

60

70

80

Notes: Each point represents an industry. Earnings refer to daily earnings in 1988 (Panel A) and to monthly earnings in 1995 (Panel B). In panel B, data points are excluded for the mining and manufacturing sectors, since total employment was only 222, and other activities not elsewhere classified, since this grouping is heterogeneous. Source: CSO: Digest of Labour Statistics 1996. © ILO 2001

55

Mauritius: Studies on the social dimensions of globalization

Table 19

Occupation

Distribution of employment by employment status, payment system and occupation, 1990 Total

All occupations 407 618 Legislators and managers 15 820 Professionals 9 547 Technicians and associate professionals 23 384 Clerks 31 670 Service workers and shop and market sales workers 33 256 Skilled agricultural and fishery workers 17 433 Craft and related trades workers 81 731 Plant and machine operators and assemblers 83 780 of which: machine operators and assemblers 63 930 Elementary occupations 110 322 of which: agricultural, fishery and related labourers 49 000

Self-employed Employee or unpaid family worker Paid by the month

Paid by the day, week, fortnight

Apprentice

60 637 10 452 875

212 718 5 238 8 474

129 795 107 123

3 355 1 9

1 352 587

21 515 29 345

361 1 663

69 49

5 814

23 784

3 463

148

10 950

4 218

2 109

11

17 263

27 676

33 869

2 841

5 260

33 632

44 713

134

545 8 054

22 770 58 763

40 475 43 313

121 72

3 679

16 375

28 856

16

Source: CSO: Digest of Labour Statistics 1994.

Establishment size and trade In the light of the importance of EPZ employment and exports in Mauritius, it is worth investigating how the distribution of EPZ employment by enterprise size has changed over the past 15 years, since this reflects enterprise survival and international competitiveness. Figure 12 gives data on the distribution of EPZ employment by size of establishment from 1982 to 1996. What can be learned is the differing relative fortunes of the largest establishments (those with more than 1,000 workers) and the relatively small, for the EPZ, but not the smallest enterprises (with 101 to 500 workers). During the EPZ boom, the total number of firms grew from 118 in 1982 to 574 in 1990, with rapid employment 56

© ILO 2001

Assessing the social impact of globalization

Figure 12 Distribution of EPZ employment by enterprise size, 1982–96 (as a percentage) % 40 More than 1,000 35 30 501 to 1,000 25 101 to 500 20 15 Less than 101

10 5 1982

1984

1986

1988

1990

1992

1994

1996

Notes: Enterprise size categories are for number of employees. Values for 1982, 1990 and 1995 are connected by a straight line for expositional purposes. Sources: Ministry of Industry and Industrial Technology (1990) for 1982 and 1990; CSO: Economic Indicators for 1982 and 1996.

growth in all categories. However, since employment grew least rapidly in the largest enterprises in the 1980s, they became relatively less important in employment terms. By contrast, during the 1990s, EPZ employment fell – because of increased international competition – in all categories except the largest, where the firms had the financial resources and organizational capacity to upgrade products and increase productivity (see Part III, section C). Enterprises with between 101 and 500 workers (and especially firms with between 101 and 300 workers)1 had the most problems in the 1990s.

© ILO 2001

57

B. TRADE AND SKILLS

This report, as well as others compiled by the Government of Mauritius and other international organizations, stresses the importance of the country upgrading its skills level, so that it can become more competitive in international markets and increase wages and personal incomes. This section looks briefly at the skills level in the Mauritian export sector since 1980, as well as at its prospects for the future.2 According to the recent competitiveness report prepared for the Commonwealth Secretariat (Lall and Wignaraja, 1998), Mauritius’ manufactured exports are almost completely low skilled in nature; only 5 per cent were high skilled in 1992 – up only slightly from 3 per cent in 1980 (figure 13). The same is true of the share of technologically advanced products among Mauritius’ manufactured exports – only 5 per cent in 1992 (figure 14). These percentages are much lower than in the DAEs but similar to those in Bangladesh and Sri Lanka. The generally low skills level of the work performed in the country’s main trade sectors is also indicated by data on the distribution of employment by industry and occupation for 1995 (table 20). A relatively low percentage of workers in the agricultural and manufacturing sectors are managers, professionals, technicians or associated professionals (1 and 5 per cent respectively, compared with 13 per cent for the labour market as a whole). In addition, 65 per cent of workers in agriculture are in elementary3 occupations (compared with 25 per cent for the entire labour market), while 59 per cent of workers in manufacturing are in elementary occupations or work as plant/ machine operators (where many in the garment industry learn their job in three months and do not require high levels of education). Tourism would appear to be average: 12 per cent of workers in the hotel and restaurant sector are managers, professional technicians or associated technicians and 24 per cent are in elementary occupations (compared with 13 per cent and 25 per cent respectively for the labour market as a whole). 58

© ILO 2001

Assessing the social impact of globalization

Figure 13 Share of high-skilled exports by country or territory, 1980 and 1992 (as a percentage)

% 90

1980 1992

80 70 60 50 40 30 20 10

ld W or

Ta C iwa hi n na ,

la ai Th

Si

Sr

ng

iL

ap

an

nd

ka

e or

si ay al M

ng Ba

M

a

a di In

de la

au

rit i

sh

us

0

Note: Data for Bangladesh (1992) and Sri Lanka (1980) are not available. Source: Lall and Wignaraja (1998).

Figure 14 Share of “technologically advanced” products in manufactured exports by country or territory, 1980 and 1992 (as a percentage) %

80 1980 1992

70 60 50 40 30 20 10

Ta C iwa hi n na ,

la nd Th ai

iL an ka Sr

re Si

ng ap o

a ay si M al

di a In

Ba ng la de sh

M

au

rit

iu

s

0

Note: Data for Bangladesh (1992) and Sri Lanka (1980) are not available. Source: Lall and Wignaraja (1998). © ILO 2001

59

60

3.2

65.5

8.4

12.4

4.5

19.2

Clerks

Service workers, shop and market sales workers

Skilled agricultural and fishery workers

Craft and related trades workers

Plant and machine operators and assemblers 17.7

Elementary occupations

27.2

0.5

0.6

0.6

Source: CSO: Labour Force Sample Survey 1995.

25.0

1.7

7.2

Technicians and associate professionals

0.3

3.0

Professionals

0.5

2.7

Legislators, senior officials and managers

% of employment by main occupation

436 295 63 212

All occupations (number)

Agriculture, hunting, forestry and fishing

Total

8.7

3.0

84.0

0.0

2.9

0.0

1.5

0.0

0.0

2 030

Mining and quarrying

13.2

46.2

25.8

0.2

2.4

7.0

2.4

0.8

2.1

125 485

Manufacturing

19.6

9.6

29.5

0.7

0.6

22.2

13.1

4.1

0.6

4 357

Electricity, gas and water

9.8

4.1

79.5

0.0

0.3

3.2

2.1

0.8

0.3

41 825

16.1

2.1

17.2

0.0

46.5

9.4

2.9

0.8

5.0

57 316

23.6

5.1

4.0

1.9

45.1

7.9

1.4

2.9

8.0

14 464

Construction Wholesale Hotels and and retail restaurants trade, repair of vehicles and household goods

17.1

37.2

6.1

0.3

14.0

15.7

7.0

1.6

1.1

27 610

Transport, storage and communications

Employment by industry and occupation, 1995 (number and percentage distribution)

Occupation

Table 20

12.5

3.7

3.8

0.7

1.7

36.6

17.6

10.9

12.5

13 177

14.8

3.2

3.2

1.8

30.5

21.7

17.8

4.8

2.2

26 706

18.7

1.1

0.6

0.7

2.1

7.4

44.8

20.4

4.2

34 099

Financial Public Education real estate administration and health and business and defence services services

63.6

4.0

0.7

3.7

17.1

5.3

2.1

1.8

1.8

26 014

Other services

Mauritius: Studies on the social dimensions of globalization

© ILO 2001

Assessing the social impact of globalization

The predominance of low-skilled manufactured exports is surprising for at least two reasons. Firstly, Mauritius has high income and wage levels, based, in large part, on the export of low-skilled manufactured goods. This is normally extremely difficult to achieve in a globalized economy, where competition from low-wage countries greatly restricts wage rates for unskilled manufactured export products. Secondly, for a developing country Mauritius has a relatively well-educated and trained labour force (see Part I, section B), and so one would have expected its comparative advantage to be in more skilled export products. One possible explanation for these surprising statistics is the country’s move upmarket to relatively high-quality manufactured products within a lowskilled product group (garments/textiles).4 This hypothesis is supported by the fact that a high percentage of EPZ workers have received training in their field. According to a study carried out in the late 1980s covering 140 large firms and 32,200 workers, 70 per cent of EPZ workers received some kind of training (Bheenick and Hanoomanjee, 1988). On the other hand, 95 per cent of this training was in-house and of relatively short duration (only about three months in the larger enterprises, which are committed to training workers according to study team discussions with employers). Evidence presented in Part II, section D, which shows sizeable increases in labour productivity since 1985 in the EPZ, also supports this supposition. The findings above have important implications for other developing countries producing low-skilled exports such as garments, for they imply that wages in low-skilled product groups can be increased yet the industry remain competitive by going upmarket, investing in new plant/equipment and training workers and management. A detailed discussion of these possibilities is set out in Part III, section C. For Mauritius, on the other hand, current export product groups do not appear to provide a firm basis for sustainable development in the future. Already Mauritius is delocalizing lower-quality, lower value added subsectors of the garment industry, such as T-shirts, to neighbouring countries such as Madagascar, because wages in Mauritius have become uncompetitive.5 And, while Mauritius’ success in the 1990s in increasing productivity through investment and training helped increase wages in higher value added garment subsectors, this has been accompanied by lower employment. In short, while unskilled export product groups provide a good point of entry and can be successfully developed to a significant degree by going upmarket and raising skills, they do not provide the basis for sustainable development to higher income levels. It is clear that Mauritius needs to diversify and develop new higher skilled and higher value added export © ILO 2001

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product groups. Indeed, up to now, it has not taken sufficient advantage of its relatively well-educated labour force. This step up to the next product/service level will not be easy, and it is not at all clear which new products and/or services will become important in the future; but it needs to be done.

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C. TRADE AND WAGE DIFFERENTIALS

Wages in large establishments in the main export sectors of sugar cane and EPZ manufacturing are among the lowest in the economy. Among 13 major sectors where earnings are reported in the CSO’s Digest of Labour Statistics for 1997, the EPZ manufacturing and sugar cane sectors have the lowest average earnings for both employees paid on a monthly basis and those paid on a daily, hourly or piece-rate basis (excluding the mining and quarrying sector, where there were only about 200 employees in 1997). Earnings in the wholesale, retail and hotel and restaurants sectors, where tourism is concentrated, on the other hand, tend to be similar to the national average. The data on earnings in the three main export sectors are consistent with the observations made in Part II, section B, regarding the relatively low skills level and low-skilled occupations in the sugar cane and EPZ sectors, and the more average incidence of skilled occupations in tourism. To investigate how international trade and competition may have affected workers’ earnings, it is necessary to look at trends in earnings by sector, according to each sector’s trade orientation. Data on the sectoral distribution of earnings at only one specific point in time (as in the previous paragraph) do not provide convincing evidence as to the effect international trade may be having on wages. International trade models predict that, under certain assumptions, the wages of unskilled workers should rise over time relative to the wages of skilled workers in developing countries, whereas the opposite should occur in developed countries. This forecast is based on the fact that developing countries are expected to specialize in unskilled products and developed countries in skill-intensive products, because of the relative abundance of each type of labour at each development level. To a substantial extent, Mauritius represents a lesser developed country, since its exports use mainly unskilled labour (as shown in Part II, section B). International trade is then expected to alter the © ILO 2001

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Figure 15 Average real wages in Mauritius’ manufacturing sector, 1968–90 (importables relative to exportables) 3.5 Exportables Importables 3.0

Relative wage

2.5

2.0

1.5

1.0

0.5 1968

1970 1972 1974

1976 1978 1980

1982 1984

1986 1988 1990

Source: Milner and Reed (1998).

relative demand for each type of labour at each development level and, consequently, the relative wage rates of skilled and unskilled labour. So what has been happening in Mauritius? Milner and colleagues in a series of papers (Milner and Reed, 1998; Milner and Wright, 1995) have investigated this issue by analysing wage and employment dynamics in import-oriented and export-oriented manufacturing sectors using dynamic panel estimation techniques. This form of analysis indicates the effect of trade on relative wages in different trade-related sectors, as well as on relative wages by skills level. It is based on data on employment, wages, imports and exports from 1971 to 1991 for 25 manufacturing sectors (which are divided into three exportable and 22 importable sectors “on the basis of information about market orientation and the policy regime”).6 A priori expectations were that wages would rise relatively more in exportable sectors, compared with wages in importable and non-tradable sectors. Figure 15 indicates that, during Mauritius’ export-led growth over the past 15 years, wages in importable sectors decreased slightly relative to wages in exportable sectors. 64

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When these authors estimated their model, they found only partial support for their forecasts. Relative wage growth in exportable sectors (as well as employment) was found to have risen in the long run in response to trade liberalization. However, relative wage growth in the exportable sector was unexpectedly found to have fallen in the short term. “Wage changes are dominated by increases in employment which serve to drive wages down. In the long run, the output effects, which serve to increase wages, become increasingly dominant.” Also unexpectedly, relative wages (and employment) in importable sectors rose in both the long and short term. Milner and Wright speculate that the most likely explanation for these results, especially for the short-term fall in export sector relative wages, is that the labour supply was not fixed as trade models assume – since Mauritius experienced a large increase in the labour supply, with many women joining the labour force for the first time to work in the EPZ. These results demonstrate the important role women played in holding back wage increases in the EPZ, with obvious implications for the competitiveness of Mauritius’ exports.

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65

D. ECONOMIC GROWTH, PRODUCTIVITY AND COMPETITIVENESS

Savings and investment rates have been high in Mauritius over the past two decades. Since 1985, the gross domestic savings rate has been approximately 25 per cent of GDP, while gross domestic investment averaged approximately 28 per cent of GDP. As shown in table 21, Mauritius’ high rates of savings and investment were lower than in the DAEs but higher than in other non-LDCs in Africa.

Factor inputs, productivity and economic growth An important policy issue for Mauritius is the extent to which the country’s economic growth rate over the past two decades has been due to productivity growth, since, in the long run, growth in per capita income requires increases in productivity. This issue has received considerable attention from academics and journalists in relation to the DAEs and whether their high economic growth rates were a “miracle” or “myth”. Krugman (1996) concluded in a now famous article (“The myth of Asia’s miracle”) that no miracle had taken place: that the very high economic growth rates over the past few decades in the Far East were due mainly to an increase in inputs (i.e. high rates of investment and labour force growth), and not to an increase in factor productivity. This led Krugman to conclude that Asian growth rates would fall substantially over time, since labour force growth would eventually slow down; and high investment rates would eventually confront reduced returns, especially as once-less-developed economies became more developed. Since Asia’s 1997–98 financial crisis, Krugman’s theory has received considerable attention.7 So, in the light of the above, has Mauritius’ high economic growth over the past two decades been due to growth in factor inputs or to increases in factor productivity? 66

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31.3

26.9

31.6

42.7

23.8

31.7

23.9

Dynamic Asian economies

Korea, Republic of

Malaysia

Singapore

Thailand

Hong Kong, China

Non-LDC Africa

22.3

35.0

29.1

40.7

34.6

35.6

35.0

25.5

Source: World Bank: World Development Indicators 1998.

15.3

Mauritius

20.1

33.3

35.5

48.0

36.6

35.6

37.8

23.9

22.8

33.3

30.2

44.3

34.5

33.1

35.1

21.9

22.4

31.7

23.2

39.8

26.5

24.2

29.1

12.0

22.0

35.0

27.9

40.6

28.5

34.6

33.3

26.6

1980–84 1985–89

1980–84 1985–89 1990–96 1980–96

20.6

33.3

34.0

45.4

31.5

35.5

36.0

26.5

1990–96

Gross national savings

Gross domestic savings

22.5

33.3

29.0

41.7

29.2

31.7

33.0

22.3

1980–96

26.2

30.6

29.0

47.4

34.8

29.9

34.3

20.7

21.3

25.4

29.9

37.1

26.3

30.6

29.8

26.6

1980–84 1985–89

21.2

29.9

41.2

34.9

37.2

37.0

36.0

29.0

1990–96

Gross domestic investment

Gross domestic investment and gross domestic savings, 1980–96 (as a percentage of GDP)

Country or territory

Table 21

22.9

28.8

34.3

39.2

33.3

33.0

33.7

25.9

1980–96

Assessing the social impact of globalization

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Mauritius: Studies on the social dimensions of globalization

Table 22

Contributions of capital and labour inputs, and total factor productivity to economic growth, 1967–97

Assumptions

Contribution to real GDP growth (%)

Initial capital stock in 1955

Depreciation rate

Labour

Capital

Total factor productivity

Zero

4 8

29.4 29.4

66.7 62.7

3.9 7.8

Equals GDP

4 8

29.4 29.4

56.9 54.9

13.7 15.7

Twice GDP

4 8

29.4 29.4

49.0 49.0

21.6 21.6

Thrice GDP

4 8

29.4 29.4

43.1 45.1

27.5 25.4

Note: Since annual real GDP grew on average by 5.1 per cent over the 1967-97 period, this implies that the average annual contribution to growth of total factor productivity ranged from 0.2 percentage points (i.e. 0.039 x 5.1), to 1.4 percentage points (i.e. 0.275 x 5.1), depending on the assumptions. Source: Dabee (1998).

Two recent studies shed light on this question (Dabee, 1988; CSO, 1998, unpublished tables from a project on productivity and competitiveness indicators). Dabee has estimated what percentage of economic growth between 1967 and 1997 was due to: (a) growth of labour inputs; (b) growth of capital inputs; and (c) total factor productivity. Because of the many methodological and data difficulties of this exercise,8 he made a series of estimations based on different assumptions (table 22). He found that capital inputs provided the largest contribution to growth – ranging from 43 to 67 per cent, depending on his assumptions. The contribution to growth from multi-factor productivity ranged from 4 to 28 per cent, depending on the assumptions (with 15–20 per cent the most likely according to Dabee). These percentages are lower than those observed in studies for Asia, when multi-factor productivity typically accounted for around 28 per cent of their higher economic growth rate (Thirlwall, 1994, cited in Dabee, 1998). The CSO (Productivity and Competitiveness Indicators 1982–96, 1997), in its productivity and competitiveness indicators project, estimated multi-factor productivity, capital productivity and labour productivity from 1982 to 1996 for the total economy, the manufacturing sector and the EPZ (table 23). The CSO found that multi-factor productivity for the total economy only increased by 5.6 per cent in total between 1982 and 1996. In the manufacturing sector and the EPZ, multi-factor productivity was estimated to have increased much faster, by 68

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Table 23

Year

Capital, labour and multi-factor productivity in the total economy, the manufacturing sector and the EPZ, 1982–96 (1982=100) Total economy Multifactor

1982 100.0 1983 97.4 1990 102.2 1995 103.8 1996 105.6 Average annual % point change 0.4

Manufacturing

EPZ

Capital

Labour

Multifactor

Capital

Labour

Multifactor

Capital

100.0 98.8 98.4 88.6 88.4

100.0 97.4 98.5 103.8 105.6

100.0 98.9 102.9 126.8 134.7

100.0 107.0 108.3 128.7 136.4

100.0 92.0 97.9 124.9 132.7

100.0 104.1 94.8 132.5 141.1

100.0 116.8 79.8 112.1 120.5

2.1

Labour

100.0 93.1 109.9 155.4 168.5

2.5

Source: CSO: Productivity and Competitiveness Indicators 1982–96 (unpublished data).

approximately 34.7 and 41.1 per cent (or 2.1 and 2.5 per cent per annum) over this period (table 23). When these increases in multi-factor productivity are compared with increases in output, multi-factor productivity is found to represent about 5, 17 and 9 per cent of the increase in output for the total economy, the manufacturing sector and the EPZ, respectively. In short, both the studies above imply that most of Mauritius’ economic growth in recent years has been due to increases in factor inputs. These analyses provide further evidence of the need for Mauritius to raise productivity, upgrade the skills of the labour force and move into higher value added products.

Competitiveness and labour costs Being competitive in the global marketplace is essential for Mauritius because of the openness of its economy. This subsection discusses competitiveness in the EPZ (where virtually all Mauritius’ manufactured exports originate), based on labour productivity and labour cost data. The CSO project (1997) shows the annual labour productivity and labour cost data for the total economy, the manufacturing sector and the EPZ from 1982 to 1996. The data for the EPZ are shown in figure 16. The extent to which growth in labour costs outstrips growth in labour productivity affects competitiveness (although many other elements affect international competitiveness). © ILO 2001

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Figure 16 Labour productivity and unit labour costs in the EPZ, 1982–96 (1982=100) Index 400

350

300 Unit labour cost (rupees) 250 Unit labour cost (US$) 200 Unit labour cost (SDR) 150

Labour productivity

100

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

50

SDR = special drawing rights. Sources: CSO: Productivity and Competitiveness Indicators 1982–96 (unpublished data) for labour productivity and unit labour costs in rupees; MEF: Annual Report 1997 for exchange rates used to calculate unit labour costs in US$ and SDR.

Labour productivity in the EPZ decreased from 1982 to 1986, and then increased rapidly and consistently from 1986 to 1996.9 By contrast, unit labour costs (in rupees) rose every year since 1982 (figure 16). The data would seem to indicate that rising labour costs have had a negative effect on the international competitiveness of Mauritius’ manufactured exports, a point often made by industrialists and economists. The loss of international competitiveness is somewhat misleading, however, as it is based on unit labour costs in rupees. To obtain a more appropriate picture of how unit labour costs may have affected international competitiveness, it is necessary to express labour costs in the international currencies in which exports are priced. This is especially important for Mauritius, since the rupee has depreciated over the past two decades. Consequently, labour costs expressed in US dollars and other hard currencies have grown much more slowly than labour costs expressed in rupees (figure 16).10 70

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Table 24

Labour costs per hour in the clothing industry by country, 1993 and 1996 (in US$, including social and fringe benefits) Country

1993

1996

Mauritius Algeria Bangladesh China Egypt India Jamaica Kenya Madagascar Morocco Philippines Poland Russian Federation South Africa Sri Lanka Tunisia

1.04 n.a. 0.16 0.25 0.43 0.27 0.78 0.23 n.a. 1.06 0.53 0.44 0.57 1.12 0.35 1.54

1.02 1.14 0.31 0.28 0.63 0.36 1.80 0.30 0.29 1.38 0.62 2.10 0.58 1.26 0.41 0.98

n.a. = figures not available. Source: Werner International (1998).

Figure 16 shows the labour productivity and unit labour costs in US dollars, special drawing rights (SDR) and rupees.11 Compared with 1982, by 1990 labour costs expressed in US dollars and the SDR basket of currencies had risen much faster than labour productivity, and unit labour costs expressed in international currencies had correspondingly increased. The mid-1980s then appear to be a period of decreasing international competitiveness in garments/ textiles. Since 1990, however, unit labour costs in US dollars and SDR have remained more or less constant, implying that during the 1990s Mauritius retained its international competitiveness in wage costs. The above analysis does not tell us how Mauritius’ labour costs compares with those of its competitors. It is possible, for example, for a country to lose competitive advantage because of its labour costs even when, expressed in US dollars or SDR, they do not increase. Lower-cost countries may enter the market or competitors may devalue their currency. Indeed, in the past 15 years, many lower-income countries have increased their presence in the garment/textile sector. © ILO 2001

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Table 25

Relative annual wages in manufacturing by country or territory, 1985–93

Country or territory

Wages (US$ per annum) 1985

Mauritius Bangladesh China India Indonesia Korea, Republic of Malaysia Pakistan Philippines Sri Lanka Singapore Thailand Hong Kong, China Taiwan, China

1 063 557 384 1 298 921 3 476 3 375 1 323 1 257 529 7 290 2 422 4 808 3 862

1990

1 904 854 500 1 592 925 9 353 3 240 1 769 1 968 604 10 800 3 523 9 161 10 168

1993

2 998 905 656 1 230 1 128 12 269 4 148 2 030 2 433 738 15 393 4 661 13 220 14 017

Mauritian wages (as % of others, 1993)

– 331.3 457.0 243.7 265.8 24.4 72.3 147.7 123.2 406.2 19.5 64.3 22.7 21.4

Growth rate (annual, %) 1985–90

1990–93

12.4 8.9 5.4 4.2 0.1 21.9 –0.8 6.0 9.4 2.7 8.2 7.8 13.8 21.4

16.3 2.0 9.5 –8.2 6.8 9.5 8.6 4.7 7.3 6.9 12.5 9.8 13.0 11.3

Source: Lall and Wignaraja (1998).

The data on labour costs in US dollars for a number of countries are given in tables 24 and 25. Despite the fact that internationally comparable data on labour costs are notoriously difficult to compile and cross-national comparability is always suspect, a reasonably clear picture does emerge. Mauritius has substantially higher labour costs per hour in the clothing industry than many countries and territories, while having a substantially lower relative annual wage. This means that Mauritius, like other countries in North Africa such as Tunisia and Morocco, has difficulty competing with emerging low-cost, lowwage producers. Global competitiveness at the lower end of the garment market is based, to a large extent, on keeping wage levels low, and a willingness to accept low profit margins. In the case of Mauritius, while it can be argued that there is still room for EPZ firms to cut operating costs further, this is not likely to be enough if the country is to remain competitive with low-wage countries in the downmarket segment of the garment sector. The future for Mauritian garment manufacturers lies in the mid-market and upmarket segments, where competition is based more on quality, variety, design content and a quick response to changes in fashion. To meet these new requirements – as described in Part III, section C – local firms will need to upgrade efficiency, improve 72

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quality control, enhance their design capability and undertake substantial changes to increase their flexibility and reduce lead times. The data indicating rapidly rising labour productivity in the 1990s reveal that Mauritius’ employers are becoming more competitive and are moving upmarket, even though this strategy has been associated with falling EPZ employment.

Notes Between 1990 and 1996, employment fell from 19,256 to 13,716 workers for enterprises with 101 to 300 workers and from 11,745 to 9,910 workers for enterprises with 301 to 500 workers. 2 The ILO Task Force had intended to estimate/measure the skills level of work performed in the Mauritian economy. This exercise would have allowed the Task Force to observe more directly, for example, how the skills level has evolved over time; how the levels of skills differ in trade compared with non-trade sectors; how the skills level of work performed matches the skills level of workers, etc. This exercise would have benefited from ILO technical inputs and would have been based on a new methodology developed originally by the US Bureau of Labor Statistics. Since this methodology had not been applied in the developing world, the ILO had prepared an adapted methodology and a set of notes for this exercise for Mauritius. Unfortunately, due to local difficulties, the ILO was unable to carry out the exercise. 3 The 1988 International Standard Classification of Occupations (ISCO–88) has nine major occupational groups, based in part on skill level. Elementary occupations represent the least skilled occupations. “This major group covers occupations which require the knowledge and experience necessary to perform mostly simple and routine tasks, involving the use of hand-held tools and in some cases considerable physical effort, and, with few exceptions, only limited personal initiative and judgement. The main tasks consist of selling goods in streets, doorkeeping and property watching, as well as cleaning, washing, pressing, and working as labourers in mining, agriculture and fishing, construction and manufacturing” (ILO, 1990). 4 A similar situation would seem to apply in Mauritius’ two other main export earners (tourism and sugar). Mauritius is a high-quality tourist destination, and has among the highest productivity of sugar cane in the world. It is also an important producer of sugar-cane-related products, such as molasses and bagasse. 5 About half the foreign-owned firms in an enterprise-level survey undertaken in 1996 covering a total of 34 enterprises in the Mauritian EPZ mentioned that “they had begun or were considering relocating to other more attractive manufacturing locations in the developing world and Eastern Europe” (Lall and Wignaraja, 1998). Floreal, Mauritius’ largest EPZ company, is reported to have “already transferred almost 40 per cent of its manufacturing from Mauritius, where it has 7,000 workers and entry-level wages of US$150 a month, to nearby Madagascar, where 5,000 workers now make T-shirts for the company at starting wages of US$55 a month. The company is weighing Mozambique, Zambia and Zanzibar for further expansion” (Wall Street Journal, 15 July 1998). 6 The three exportable sectors are: wearing apparel except footwear (ISIC 322); leather products (ISIC 323); other manufacturing (ISIC 390). Milner and Reed (1998) consider textiles (ISIC 321) to be an importable sector, possibly because so many textile products are imported as intermediate inputs for the garment industry. 7 To a considerable degree, Krugman’s position is more balanced than usually presented (as in the main text). For example, Krugman believes that Asia will rebound and do well economically in the long run, since Asia’s fundamentals are sound – high savings rates and excellent human capital. It is only their exceptionally high economic growth rates that, he thinks, are a thing of the past. Stiglitz (1996) concludes that the accomplishment/miracle in Asia was bringing together so many resources and using them effectively (even if growth in total factor productivity accounted for only a minority of Asia’s growth). 8 Some of the difficulties in this exercise are as follows. Firstly, employment data are available only from 1966, and these are only for the number of employees in large enterprises. Yet, as indicated in Part I, section B, employment growth in large enterprises has often differed substantially from employment growth in the labour market as a whole. Secondly, there are substantial annual variations in the number of hours of work per employee as discussed in Part I, section B. Thirdly, Dabee had to “guesstimate” the size of the capital stock in 1955 (see table 22). Fourthly, and perhaps most importantly, estimates of the capital stock in any given year are sensitive to assumptions about the capital depreciation rate. 9 The CSO (Productivity and Competitiveness Indicators 1982–96) attributes the decline of labour productivity in the EPZ over the period 1982–85 to high labour mobility, learning gaps, absenteeism and low levels of efficiency. Growth in labour productivity over the 1986–96 period is attributed to an increased percentage of higher value added products in the textile/garment industries, industrial diversification, better technology, longer working hours, and more productivity consciousness due to recent campaigns. The shift of labour from inefficient firms, as a result of closures, to more efficient ones, also partly explains this improvement in productivity in recent years. 10 Since 1994, the Mauritian rupee has floated freely. From January 1976 until 1983, the rupee was pegged to an SDR (see note 34) basket of currencies, and from 1983 to 1994 to a basket of currencies that better reflected Mauritius’ foreign trade. 1

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11 SDR is an international reserve asset created by the IMF in 1969 and is the unit of account for the IMF (IMF: Survey Supplement on the Fund 1996 – SDR; www.imf.org). The value of the SDR is determined on the basis of a basket of five major currencies. Its valuation is revised every five years, with the weights for each of the five currencies modified to reflect the relative importance of the currencies in international trade and reserves. As of August 1996, the percentage weights, given in brackets, are as follows: German mark (20.6), French franc (11.0), Japanese yen (17.2), UK pound sterling (11.2), US dollar (40.0).

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PART III

POLICY ISSUES

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75

A. CONSTRAINTS ON PUBLIC FINANCE, SOCIAL COHESION AND SOCIAL WELFARE

Constraints on public finance In recent years, Mauritius has had relatively high budget deficits, reaching 5.9 per cent of GDP in 1995/96 and an estimated 3.9 per cent in 1997/98 (table 26). This situation is due partly to stagnant tax revenues from its largest revenue source – international trade. Whereas tax revenues from international trade brought in approximately 5.7 billion rupees in 1993/94 as well as in 1996/97, government expenditures rose from 14.3 billion to 20.1 billion rupees in this period (CSO: Digest of Public Finance Statistics 1997). The declining importance of taxes on international trade as a source of government revenue is shown by the data in table 26. While such taxes accounted for approximately 52 per cent of government revenue in 1980, they only accounted for 31 per cent in 1996/97, down sharply from the 41 per cent observed as recently as 1994/95. It is clear that trade liberalization and a reduction in tariffs have been associated with a relative reduction in government revenues. Even so, the 31 per cent revenue share observed in 1996/97 is well above percentage shares in most other non-LDCs in Africa (table 26). In 1995, taxes on international trade accounted for approximately 1 per cent of GDP in developed countries and Singapore, 6 per cent in the Republic of Korea, 12–16 per cent in Malaysia and Thailand, and 24 per cent in other African non-LDCs. In the light of the fall in the importance of tax revenues from international trade, along with continuing trade liberalization, the Government clearly needs to find new sources of revenue and/or make reductions in expenditure in order to maintain a reasonable fiscal balance. This need was recognized in the budget speech of 1997/98, read out in June 1997, when the Government stressed the importance of undertaking a major reform of the indirect taxation system. Thus, on 26 May 1998 the Government presented the Value Added Tax Bill in Parliament to replace the 16-year-old sales tax. VAT was fixed at 10 per cent © ILO 2001

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78

21.1 23.3 20.3 18.1

17.0 16.3 16.2 17.7

28.5 29.1 30.1 22.9

20.0 27.2 21.0 15.9

18.8 20.5 14.0 15.8

28.7 31.2 29.8 33.8

Dynamic Asian economies

Korea, Republic of

Malaysia

Singapore

Thailand

Non-LDC Africa

32.7

16.1

n.a.

22.0

18.6

n.a.

22.3

1996

1990 1995

1996

1997

3.1

2.3

0.3

5.0

2.9

2.3

n.a.

2.1

0.1

n.a.

–2.8 –3.1 –1.4 –2.8 –3.2

4.5

2.1 10.6 14.3

–4.9 –5.2

2.1

–6.0 –2.5 –2.1

–2.2 –1.1 –0.7

–2.7 –1.7

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

–14.9 –3.9 –1.8 –5.9 –4.8 –3.9

1985

1985

1990

1995 1996

1997

6.5

9.1

6.4

n.a.

3.6

2.0

1.2

n.a.

28.5 22.7 18.9 23.8 25.7

26.2 20.6 22.1 16.4 14.7

6.9

33.0 19.7 17.9 12.3 11.8

15.0 14.2 11.8

20.3 14.5 13.4

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

51.6 48.6 46.3 34.6 34.0 30.6

1980

Taxes on international trade

n.a. = figures not available. Sources: World Bank: World Development Indicators 1998 for all data except: (1) taxes on international trade for Mauritius for 1997, which are from CSO: Digest of Public Finance Statistics 1997; and (2) overall budget deficit for Mauritius for all years, which are from MEF (1998).

27.2 25.4 22.6 22.6

1995

1980

1990

1980

1985

Overall budget balance

Total expenditure

Government spending and revenues: Total expenditure and overall budget balance (as a percentage of GDP) and taxes on international trade (as a percentage of current revenue), 1980–97

Mauritius

Country

Table 26

Mauritius: Studies on the social dimensions of globalization

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Policy issues

and came into effect on 7 September 1998. All food products that were exempt from the sales tax will remain exempt from VAT. The introduction of VAT has been criticized by opposition parties, trade unions, consumer societies and the private sector. Some consider VAT to be regressive, as it has a greater relative effect on the poor than on the better-off. It has also been pointed out that the tax represents an increase of 100 per cent in indirect taxes over a period of two years (Weekend, 17 May 1998). This is in sharp contrast to the reduction in direct taxes over the past two decades: maximum income tax rates were reduced from 65 per cent in 1980 to 35 per cent in 1985 and down to 30 per cent in 1991; the corporate tax rate was reduced from 55 and 65 per cent in 1980 to 35 per cent in 1984, while the EPZ has a flat rate of 15 per cent (MEDRC, 1997). It is not the remit of this report to comment on the types of revenue the Government should be considering. However, it is worth pointing out that, in the light of international experience, such matters are best addressed and discussed with the social partners. Trying to offset falls in revenue by lowering social expenditure could entail risks. It is important that Mauritius maintains its enviable social welfare record, for this has been one of the hallmarks of Mauritian society and of its recent economic development. Better targeting to help the poor would be more appropriate.1 But it is important that Mauritius prepares for the future by improving its education system and international competitiveness – as it plans to do. In this regard, it is worth noting that, according to World Bank data for 1991–95, while a substantial proportion of Mauritius’ government budget is spent on education, this is lower than in the DAEs; conversely, Mauritius spends a much higher percentage on social security and health than the DAEs (table 27).2

Social welfare and social cohesion In government documents Mauritius is referred to as a welfare state. The country has free education, free health services and a free non-contributory oldage pension scheme for everyone over the age of 60. There are also payments to the disabled, pensioned widows, orphans, destitute families with dependants, unemployed heads of low-income households, and low-income households; and around one-quarter of all households receive food aid as well as subsidized rice and flour (CSO: Economic Indicators, Issue No. 265, 2 Feb. 1998). In recent years, social spending has accounted for approximately 40 per cent of government expenditure, with education accounting for approximately 17 per cent, health 8 per cent and social welfare 19 per cent, and with non-contributory pensions comprising around 70 per cent of social welfare expenditure (ibid.). © ILO 2001

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Table 27 Social and defence spending by country, 1991–97 (as a percentage of government expenditure) Expenditure

DAEa 1991–95

Mauritius 1991–1995a

Defence

Education

Health

Social security

1 Includes

Malaysia Korea, Republic of Thailand Singapore Average Malaysia Korea, Republic of Thailand Singapore Average Malaysia Korea, Republic of Thailand Singapore Average Malaysia Korea, Republic of Thailand Singapore Average

11.7 20.0 15.6 26.5 18.5 20.4 18.0 21.3 21.0 20.4 5.6 1.1 7.6 6.8 5.0 5.9 10.0 3.6 3.3 5.7

1996 b

1997b

1.5

10.61

9.61

15.5

16.5

17.4

8.8

8.3

7.9

15.9

18.02

19.52

defence and public order. 2 Indicated as social services and welfare.

Sources: a World Bank: World Development Indicators 1997; b CSO: Digest of Public Finance Statistics 1997.

This emphasis on social protection is particularly important in a small country with so much ethnic and religious diversity, since good social welfare leads to social cohesion which means political stability. Unfortunately, many other countries with a similarly diverse population have not had the good sense to follow such a policy. As stated in the Government’s Vision 2020, it is likely that this concern for social welfare has also contributed to the country’s economic development. The report comments that some people are astonished that Mauritius has achieved so much economic success despite the “burden” of its welfare state. However, it could well be argued that economic success was achieved partly because of the 80

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strength of the country’s welfare system. Free education, social security and health and welfare services have resulted in the high education levels, high health standards, and above all the exceptional social cohesion, which has underpinned past economic development, the report states (MEDRC, 1997). Despite this positive picture, there is growing concern over a number of emerging social problems now facing the country. As elsewhere in the world, drug addiction and drug trafficking, alcoholism, sexual assaults on women, muggings and attacks on the elderly, burglaries, prostitution, domestic violence, divorces and suicides are all on the increase (MEDRC, 1995).3 A multidisciplinary study on social exclusion, prefaced by the President of the Republic of Mauritius, recently addressed this phenomenon (Asgarally, 1997). The cumulative effects of different social risk factors as a result of industrialization and rapid economic growth have brought social exclusion to Mauritius. It is characterized by the reduced ability of individuals, families and groups to control risks and reduce their effects. Some of the problems of exclusion stem from the country’s education system, which is elitist and competitive: the high drop-out and failure rates contribute to reinforcing social inequalities. The new more Western lifestyle that has developed as a result of industrialization has created new needs, which, in turn, have led to the emergence of new forms of exclusion or deprivation. In some cases, ethnic boundaries and linguistic barriers can be perceived as contributory factors to social exclusion or prejudices (ibid.). Unemployment is again a problem in Mauritius (see Part I, section B), which was recognized in the 1998/99 budget speech. Fighting unemployment – and especially long-term unemployment – should be a central policy objective of the Government, partly in order to avoid social exclusion. Whichever programmes or policies are followed to address unemployment (such as short-term aid, public works, and work/training programmes), it is important that active labour market policies, such as enhancing the skills of the unemployed so that they can return to the labour market, feature prominently. The country’s policy-makers need to remain vigilant on the issue of social exclusion as it affects social cohesion. It is, therefore, important to address and monitor social exclusion through appropriate policies targeted especially at groups which might be particularly prone to social exclusion in the more skilldemanding labour market of the future: broken families and households with women as the main breadwinner; people living on outlying islands, cut off from mainstream development; unskilled workers with little education; traditional communities such as fisherfolk, and so on.4

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B. WOMEN: DEVELOPMENT AND EQUITY

Women have contributed significantly to Mauritius’ recent economic development, and in particular to the success of the EPZ. However, considerable labour market inequality remains between the sexes.5 There is clear evidence that more women are becoming more qualified – indeed, more qualified than men in many respects. For example, adult women and men are similarly qualified in terms of the number of years of education completed; enrolment rates at secondary-school level are higher for girls than for boys; girls have higher pass rates than boys in the competitive CPE, School Certificate (SC) and Higher School Certificate (HSC) examinations; and a higher percentage of women workers then men have received training (table 28, top half). In addition, along with Mauritius’ successful population programme, women are marrying later and are having fewer children, which implies that they are in a better position to accumulate experience in the labour market. Despite women’s fast-improving qualifications, they are still discriminated against in the labour market. In 1995 the unemployment rate for women was almost double that of men’s (13.9 per cent, compared with 7.9 per cent, in the 1995 labour force survey). Women are concentrated in a much more restricted set of occupations than men, and the sex segregation of occupations is relatively high in Mauritius, compared with other countries, including the DAEs (table 28, bottom half). Women, for example, are largely excluded from decision-making jobs, as indicated by the fact that they comprise only 18 per cent of administrative and managerial workers. Women also earn less than men. On average, in 1995 female employees earned approximately two-thirds as much as male employees. Interestingly, the higher the percentage of women in an industry, the lower the average earnings in that industry (figure 11, page 55). This relationship is quite strong and holds for the entire economy, including EPZ industries.6 82

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Table 28 Women in the labour market, 1983–951 1983

1990

1995

25.9a 21.6a 81.2a

32.2a 30.2a 64.7a

36.1b 32.9b 70.8d, 2

n.a. n.a.

n.a. n.a.

92.6c 1.00c

n.a. n.a.

n.a. n.a.

49.3c 1.08c

n.a. n.a. n.a.

n.a. n.a. n.a.

1.18c 1.03c 1.21c

n.a.

1.27b

1.38b

0.86b

1.76b

n.a.

0.06b

0.22b

n.a. n.a.

n.a n.a.

0.66b 0.71b

0.62e, 3

0.59e, 3

n.a.

Women’s labour market contributions Women’s LF activity Adult women (12+) LFPR Female % share of LF Female % share of EPZ employment Women’s qualifications Primary school enrolment rate Females (%) F/M ratio Secondary school enrolment rate Females (%) F/M ratio School examination pass rates (F/M ratio) CPE (primary) SC (lower secondary) HSC (higher secondary) Vocational or technical training rates among workers (F/M ratio) Women’s labour market disadvantages Unemployment rate (F/M ratio) Vocational or technical training rates in training, craft and industrial techniques (F/M ratio) Earnings (F/M ratio) Total (median) EPZ (mean) Occupational segregation by sex Index of dissimilarity % of female non-agricultural LF in female-dominated occupations % of male non-agricultural LF in male-dominated occupations % of women among administrative and managerial occupations % of male LF in five largest male occupations % of female LF in five largest female occupations

© ILO 2001

47.6e, 3

14.1e, 3

n.a.

79.3e, 3

68.2e, 3

n.a.

n.a. n.a.

17.8e,4 26.7f, 5

n.a. n.a.

47.3f, 5

n.a. (cont’d on p. 84)

83

Mauritius: Studies on the social dimensions of globalization LF = labour force; LPFR = labour force participation rate; F = female; M = male; n.a. = figures not available. 1 Since 1980, the only years for which labour force data were collected and reported are 1983, 1990 and 1995. 2 For large establishments only. 3 Averages for 41 countries from around the world are: 0.55 for index of dissimilarity (and 0.49, 0.43 and 0.49 for Hong Kong (China), Republic of Korea and Malaysia respectively); 61.4 for male-dominated nonagricultural labour force; 25.0 for female-dominated non-agricultural labour force. A male-dominated or female-dominated occupation is defined as an occupation where at least 80 per cent of workers are male or female (i.e. male/female or female/male ratio of workers exceeds 4 to 1). 4 Average for world, based on 57 countries, is 0.46 for around 1990. 5 Based on a three-digit occupational classification with approximately 300 occupations. The five largest female occupations (as a percentage of the labour force) were: sewing machine operator (15.3); weaving and knitting machine operator (12.7); farm labourer (12.6); shop salesperson (3.2); tailor, dressmaker and hatter (3.2). The five largest male occupations were: farm labourer (11.6); bricklayer and mason (7.3); car, taxi and van driver (2.7); cabinet maker (2.6); freight handler (2.5). Sources: a CSO: 1990 Housing and Population Census of Mauritius, Vol. VIII. b idem: Labour Force Sample Survey 1995. c Ministry of Women, Family Welfare and Child Development (1997). d CSO: Digest of Labour Statistics 1996. e Anker (1998), based on an occupational classification with 75 non-agricultural occupations. f CSO, unpublished tabulations from 1990 census.

Policy-makers need to redouble their efforts to address gender inequality in the labour market. Gender discrimination and inequality represent inefficiency and rigidity – and by implication have a negative effect on international competitiveness. The notion that women are a marginal or reserve labour force (leaving the labour force when unemployment rises and entering it when labour shortages appear) should not be accepted. Rather, efficiency and equity considerations dictate the need to integrate women better into the labour market by providing equal opportunities, such as reducing the sex segregation of occupations and eliminating the “glass ceiling”. There are a variety of ways to improve gender inequality, such as: helping women and men combine work and family responsibilities better (by, for example, improved childcare facilities); improving women’s labour market qualifications (by, for example, encouraging women to study the sciences and go to university); and increasing opportunities and reducing labour market inequalities and discrimination (by, for example, encouraging women to enter traditionally male-dominated occupations). Table 29 sets out the possibilities suggested in a recent ILO book on labour market equality in the Nordic countries (Melkas and Anker, 1998). While each country needs to find its own solutions – ones that suit the particular country and its culture – it is important that answers are found.

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Table 29 Policies, programmes and approaches to eliminating gender inequality and discrimination in the labour market

Ideational changes, including: (a) awareness-raising, and dissemination of information on research results concerning equality in a way that reaches the general public, especially regarding the ability and experiences of women and men in non-traditional occupations; and (b) development of proper communication plans by companies, governments, trade unions and non-governmental organizations to disseminate knowledge on women’s and men’s access to economic power and economic resources. Support for family life, including: (a) development of polices enabling reconciliation of various aspects of life (work, family, etc.) in the context of changing labour markets; and (b) creation of new models where household and family responsibilities are more equally shared by men. Education and training, including: (a) improvement of equality in schools and universities by integrating the gender perspective into education in universities, particularly into education of new teachers; (b) combating sex discrimination in schools; and (c) improving women’s participation in all school subjects, especially in technical and scientific fields. Analysis, including: (a) continuous mapping of the equality situation in society (e.g. pay differentials, occupational segregation, career development, education and training, and implementation of legislation on equality); (b) increased visibility of consequences of all government policies on women and men alike (such as pension, parental and social benefit policies and affirmative action); (c) research on family life, the world of work, the welfare state, power and democracy, and reasons for the persistence of sex inequalities; and (d) research on the impact of rising job insecurity and atypical work. Other strategies for improving women’s position in the labour market, including: (a) combating pay differentials through gender-neutral job evaluation, training and consultation at workplaces and, possibly, comparable-worth exercises; (b) encouragement of women in higher-level positions e.g. through mentoring and, possibly, other affirmative action policies; (c) support for women’s entrepreneurship (such as training, credit and financial support); and (d) support for women’s and men’s entry into non-traditional occupations. Source: ILO Task Force, based on Melkas and Anker (1998), pp. 99–100.

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C. CROSSROADS IN DEVELOPMENT AND TRADE: THE CHALLENGES AHEAD

It is widely accepted that Mauritius has been a “success story” over the past two decades. However, the country can no longer depend on cheap and low-skilled labour to drive its exports and economy to the next level of development, or to provide a sufficient number of jobs of high quality for its workforce. Since 1990, it has become increasingly obvious that employment growth in the large export-oriented sectors is not creating enough new employment and, partly as a consequence, Mauritius is facing increasing unemployment. Against this background, the Government recently spelt out its four-pronged strategy for the future in its national long-term perspective study – Vision 2020. In the next 25 years, Mauritius aims to boost its economy, in the first place by defending and building on those industries that have already contributed to its development, that is, sugar, tourism and EPZ garment/textile industries, and also by adding a “fourth cylinder with the extra power to drive the economy forward into the next [21st] century”. This will be done by providing high-tech offshore financial services for other countries in the region, high-tech computer services for world markets, and high-tech research and exploration services to make possible the exploitation of the mineral and energy resources of the country’s 1.8 million square kilometre economic exclusive zone (MEDRC, 1997). What follows is an assessment of the sectoral priorities conceived by the Mauritian Government and expounded in Vision 2020. This discussion also explains the implications of the Government’s employment-creation strategy.

Garments/textiles The main challenge facing the garment and textile industries is the need to forge a competitive edge. Mauritius can no longer compete with the emerging lowcost producers in Asia, Latin America and Central Europe in terms of low costs, labour intensity and low-skilled production alone. One clear indication of this 86

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problem is that some firms have already relocated their least skilled operations to nearby Madagascar and to labour-surplus countries in the Caribbean. Several preferential trade agreements expire early this century. The MultiFibre Arrangement is expected to be dismantled by the year 2005, and the present Lomé Convention ended in 2000 (although negotiations on a successive agreement began in 1998).

(a) Challenges Moving upmarket and, in particular, focusing on the mid-market segment will require skills upgrading and up-to-date technology so that enterprises can make the most of the increased opportunities arising from trade openness and market growth. For Mauritian firms to compete successfully in mid-market segments, they will need to do the following: branch out into higher value added products and increase productivity and the value added content of exports; have skilled and highly qualified management; introduce production scheduling and quality-control methods; have shorter lead times for product delivery; carve niches in upmarket segments; and build up competence levels in skills and new technologies. EPZ firms need to make improvements in at least three broad areas. Firstly, they need to improve their cost accounting, inventory control and equipment maintenance, so that they can cope with larger market segmentation, quick changes in fashion and shorter production runs in export markets (in this last respect, Mauritian firms are at a disadvantage vis-à-vis their competitors in Turkey, Cyprus, North Africa and the Caribbean, which all have faster delivery times). Secondly, they need to have better access to IT, especially production control systems, particularly in computer-integrated manufacturing, so as to provide management with accurate and up-to-date information on plant operations. Thirdly, they need to improve their human resource management systems – there are high levels of absenteeism and labour turnover in the EPZ, and managers lack awareness of good international practice in the fields of production organization and human resource management (Paratian, 1998). It is worth noting that only a few Mauritian textile groups undertake research and development (R&D), and then only on an ad hoc basis. And, apart from a few large knitwear firms, most companies tend to underutilize their IT (National Development Plan, 1992–94).

(b) Improving human capital Any attempt to diversify into new higher value added and skill-intensive activities requires the introduction of new technologies and the development of © ILO 2001

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skills. Managers, supervisors, technicians and workers, for example, need to learn how to adapt quickly to new techniques and changes in production. New legislation has been introduced at the government level to promote the textile and clothing industries, and to reinforce the spirit of regional cooperation.

(c) Improving productivity, competitiveness and employment Mauritius should be able to meet these challenges if its past performance is anything to go by and due to the fact that many of its garment/textile firms are investing and upgrading by adopting modern management principles and innovative policies. However, this process has important implications for employment, as recent rises in productivity have been accompanied by rising unemployment (employment in large EPZ enterprises fell from 90,700 in 1988 to 81,300 in 1997). It appears that Mauritius’ main source of employment growth in the 1980s – garments and textiles – is now experiencing a downturn.7

(d) Absenteeism Absenteeism has a major effect on labour productivity, quality of output and the ability of enterprises to meet product delivery schedules and so, in turn, on a firm’s competitiveness. Concern over absenteeism prompted the Government to commission a study in the late 1980s from the University of Mauritius to determine the levels and patterns of absenteeism, to inquire into its causes in various sectors of the economy, to look at the possible impact and to propose remedial measures in the EPZ (University of Mauritius, 1990). This was during a period when labour productivity had fallen in the EPZ (see Part II, section D). Three major findings of the study are worth mentioning here: (a) the average rate of absenteeism among EPZ production workers was 9 per cent in 1990; (b) larger establishments were prone to higher rates of absenteeism – 30.4 per cent of small establishments, 35.1 per cent of medium-sized establishments and 51.7 per cent of large establishments had absenteeism rates equal to or in excess of 10 per cent; (c) there was strong evidence of a positive association between labour turnover and absenteeism, suggesting that they were determined, at least in part, by the same causes. Given that more than ten years have now passed since this study was carried out and that labour productivity rose sharply in the EPZ in the intervening period, it is uncertain whether the rate of absenteeism has changed or not. A follow-up study is needed. Overall, the main factors contributing to absenteeism, taking into consideration the wide variations of its manifestation among various sectors, are: the quality of the working environment; excessive overtime work; what are perceived as 88

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unattractive reward-to-effort ratios; a greater preference for leisure in the work– leisure trade-off; the abusive use of sick leave provision, and personal and family reasons (National Development Plan, 1992–94). It seems that these factors are more prominent in the EPZ than in other sectors of the economy.

(e) Foreign workers One way that Mauritian firms have dealt with the high rates of absenteeism and labour turnover has been by hiring foreign labour (see Part I, section B). From the employers’ point of view, foreign workers are more productive than their Mauritian counterparts and so help increase competitiveness. The trade unions have voiced their concern about the plight of foreign workers. Many are reported to be living in very poor housing – overcrowded dormitories usually provided by employers – and their right to organize, join trade unions or to engage freely in socio-cultural activities is said to be unrecognized. Furthermore, there are reports that employment conditions initially agreed upon by the expatriate before arriving in Mauritius are being changed on arrival (Free Democratic Unions Federation, 1996). The Government has imposed restrictions on the number of foreign workers that factories are allowed to employ and have limited the validity of work permits to a non-renewable three-year period (Paratian, 1998). Nonetheless, the number of foreign workers in the manufacturing sector has been increasing virtually every year since 1990. This juxtaposition of a deteriorating situation in the labour market and growing numbers of foreign workers raises an important issue: whether the reasonably common use of relatively unskilled foreign workers for manufacturing jobs should be reduced, or whether Mauritius needs to employ sizeable numbers of foreign workers to maintain its competitive edge. This is a highly controversial issue: many employers feel that foreign workers are more productive and more committed than local workers, whereas some trade unions believe that migrant labour perpetuates low wages. On the other hand, as Mauritius’ exports move upmarket to higher value added and skill-intensive products, lower-skilled foreign workers will become less useful.

Sugar In order to increase productivity, the sugar industry has put in place a comprehensive support structure of research, financing, investment, marketing and insurance.8 Employment in sugar has fallen in recent decades, and future prospects are not good. A recent agreement between the sugar producers and © ILO 2001

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the trade unions, guaranteeing employment for present workers and accepting the need to improve productivity, is indicative of the industry’s poor prospects for employment growth.

Tourism Given the small size and limited resources of the country, Mauritius can only accept a limited number of tourists, particularly if it is to respect environmental and cultural factors. Therefore, for many years now, Mauritius has been promoted as a high-quality tourist destination.9 The Government believes that beyond the limit of 700,000 tourist arrivals, the country will be developed at the expense of its natural environment, the visual quality of its coastal environment and the acceptability of local residents (MEDRC, 1997). Using this limit of tourist numbers, it is possible to obtain a rough estimate of future job creation in the tourist sector: compared with 1997, an additional 11,400 jobs, directly and indirectly related to tourism.10 There are three main ways of increasing tourist-related employment (while maintaining Mauritius’ commendable commitment to its environment and culture): (a) allow a larger number of tourists than at present, and at the same time maintain the environment (if this is possible); (b) encourage a rise in the number of days tourists spend in Mauritius (approximately 10.5 days on average at present); (c) increase the multiplier effect of indirect employment creation through stronger backward linkages with the local economy. The last possibility would appear to be the most promising.

International services The Government has identified international services as its “fourth cylinder” of growth (MEDRC, 1997). These services are expected to comprise three major areas: high-tech offshore financial services, high-tech computer services, and high-tech research and ocean exploration services. The Government wants Mauritius to become a star attraction for these services in the southern African region, drawing on assets such as its political, economic and social stability, its educated labour force, and its good infrastructural support and communication systems. If these services take off, they will create high-quality, high-paid jobs. But the creation of these types of jobs is not a matter of course, especially in the light of the fact that a relatively low percentage of Mauritians have university degrees (see Part I, section B) and the relatively developed nature of South Africa’s economy in these areas (see Part III, section D). 90

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Towards an integrated economy: Linkages of SMEs to the rest of the economy As indicated in Part I, section B, SMEs accounted for an increasing percentage of employment in the 1990s.11 Different incentive schemes exist for domestic-oriented and export-oriented enterprises.12 In general, the schemes for domestic-oriented enterprises are unimportant: Development Certificates (DCs) are issued only under exceptional circumstances, and mostly for projects that are considered to be of significant importance to the national economy.13 By contrast, the Government has created a series of important incentive frameworks for export enterprises, including the EPZ, and a separate export services zone (ESZ).14 All incentive schemes need to be integrated to facilitate the efficient allocation of resources and to allow inter-sectoral linkages. In the early 1990s, the Mauritius Chamber of Commerce and Industry recommended that the Government give genuine domestic market enterprises the same incentives enjoyed by the EPZ in order to provide a broader base for industrialization while maintaining the export-oriented economy (Mauritius Chamber of Commerce and Industry in collaboration with the Mauritius– Munich Chamber Cooperation Programme, 1991). Recent policy instruments introduced by the Government reflect the above concerns and indicate that steps are being taken regarding the development of SMEs. The Industrial Expansion Act of 1993 is one such step towards rationalizing the incentive schemes. SMIDO, which was established by the Small and Medium Industries Development Organization Act of 1993, has among its main objectives the modernization of SMEs and their integration into the rest of the economy (SMIDO: Annual Report 1994/95). There are relatively few linkages between EPZ firms and the domestic economy.15 Backward linkages are constrained by a number of factors, in particular the small size of the economy and the inability of local supply of inputs to meet world standards requirements in quality and punctuality. Cutmake-trim (CMT) subcontracting, for example, although common practice within the garment industry throughout the world, has not been developed as a specialist operation in Mauritius. In terms of encouraging inter-industry linkages, the Government recognizes that more specialization could help increase product differentiation and higher value added, and that economies of scale could be reaped through integrating at the sectoral level, with firms operating in clusters, each specializing in a specific function (National Development Plan, 1992–94). In Vision 2020 a “beehive model” of “full vertical integration” is proposed, which would give SMEs the © ILO 2001

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chance to benefit from economies of scale (MEDRC, 1997). The idea is for only a few firms to be involved in the final assembly operations and in marketing, and for close ties to be developed with a network of smaller suppliers in spare parts, technologies and services. The 1998–99 budget speech put the same sort of emphasis on promoting the development of SMEs, and a number of measures have been announced along these lines, including the setting up of a “National Entrepreneurs’ Bank” to cater for the specific needs of small and medium entrepreneurs, and the construction of industrial estates for SMEs, which in the medium term are expected to expand into “industrial districts”. It would seem that there is consensus among the social partners about the need for an integrated strategy which would bring the non-EPZ sector into the mainstream by building up local linkages between smaller and larger firms. Obviously, however, it will not be easy to accomplish this successfully.

Employment implications of the four “cylinders of growth” This section of the report has been looking at the future prospects for Mauritius in terms of production and employment in its three main export sectors (large EPZ establishments in garments and textiles; large sugar establishments; and tourism) as well as in what the Government feels will become its fourth “cylinder of growth” (financial and other services for the region). Figure 17 shows the growth in export-related employment since 1982 in these four sectors. It is clear that they have not generated much additional employment for almost ten years now, as increasing employment levels in tourism and the financial services have been largely negated by falling levels of employment in the EPZ and the sugar industry. There is little reason to believe that there will be a major spurt in job creation in these four sectors in the near to medium future – and certainly not enough to absorb Mauritius’ growing labour force, which is likely to increase by around 8,000 per year in the next two decades (see Part I, section B). What has become clear is that substantial employment growth will need to occur in other areas if the growing labour force is to be accommodated. Of course, this does not lessen the importance of Mauritius increasing its productivity and competitiveness in its traditional export sectors – as it has been doing in recent years. However, it does seem clear that, in the future, a sufficient number of good-quality jobs will depend more on the following: (a) the growth of SMEs rather than of large establishments; (b) increased backward linkages between export sectors and the local economy; (c) the reform of the many incentive schemes; (d) the diversification of manufactured export 92

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Figure 17

Approximate employment in the sugar, EPZ, tourism and finance sectors, 1982–97 (as a percentage) Sugar (includes sugar cane and manufacturing) EPZ Tourism (large establishments, restaurants and hotels) Financing, etc. (large establishments) Total 1 (sum of the above) Total 2 (sum of the above plus indirect employment in tourism)

% 180

Total 2

160

Total 1

140 120 100 80 60 40 20

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

0

Notes: Indirect employment in tourism is assumed to equal 1.5 times direct employment in tourism (see also notes to table 18). Source: ILO Task Force, based on data from table 18.

products; and (e) the raising of skills levels among the labour force, both management and workers. As in the past, these efforts are more likely to succeed if the Government works closely with the social partners. The Government’s strategy of increasing workers’ skills, as well as upgrading goods and services, is commendable. It is increasingly obvious to everyone in Mauritius that this is the only way forward if the country is to proceed to the next level of development. The strategy in each “cylinder” is correctly geared towards the enhancement of skills. Training to cater for specific needs, skills upgrading and productivity improvements to sustain competitiveness are factors that will assume increasing importance in virtually all spheres of the economy. Capacity-building in human resources to match skills more closely with jobs, strengthening technological capacity and institutional support all need considerable attention if competitiveness in the © ILO 2001

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global market is to be improved. This also calls for the development of quality products to satisfy the ever-changing demand for variety and higher value added products. However, as pointed out above, it is not clear how the Government’s strategy will turn out in the short term, particularly as regards employment creation. Signs of this difficult, hopefully transitional, period are already reflected in the labour market by rising unemployment figures. In the longer term, it is reasonable to assume that Mauritius’ substantial advantages will assert themselves in international markets. They include the country’s political stability, qualified labour force, excellent infrastructure and strong civil society, extensive tripartite consultations, good industrial relations climate, and the strong links between government and business. In any case, Mauritius, by necessity, must remain an open economy, depending heavily on exports and competing successfully in the international marketplace, although an increase in the diversification of products and markets would have the advantage of reducing the adverse impact of exogenous shocks. As noted above, Mauritius should not neglect its domestic-oriented sectors. In this regard, it is important to address the associated issues of linkages and to promote SMEs, perhaps as part of a system of inter-firm networks viewed from the perspective of the extended regional base of the Mauritius market. Then, there is the related question of rationalizing the incentive schemes within the framework of an integrated strategy. Mauritius has little choice but to remain optimistic that it will find new products and services that will be competitive in the international market, and that they will generate substantial employment. Who could have predicted in the late 1970s that Mauritius would have had so many garment and textile sector jobs in the late 1980s? In the meantime, Mauritius may need to look afresh at its social services, without succumbing to the accepted new “wisdom” of many economists who are less than enthusiastic about the social welfare state. It is important that Mauritius continues to: avoid social exclusion among its people; provide free and quality education and healthcare; and involve the social partners in social and economic policy-making. In the short to medium term, this may require policies and programmes to, for example, promote training and create employment.

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D. REGIONAL COOPERATION

The Government has given prominence to regional cooperation, in part to promote the diversification of markets for Mauritian products and as a source of investment.16 The underlying objective is to consolidate efforts in the region so that the country can successfully face the challenges of an increasingly competitive international economic environment. The 1998–99 Budget speech indicated the importance the Government is placing on regional integration. The following policies are due to be adopted: (a) the strengthening of regional integration of the economy through a stronger presence of Mauritian firms and product penetration in the region; (b) the encouragement of Mauritian capital in the region so as to generate a major new source of income, namely investment income; (c) the greater use of marine resources, which extend over 1.8 million kilometres in the Indian Ocean; and (d) an increase in the range of products of skill-intensive industries, so that Mauritius can become a major service provider for the region (Budget speech, 1998–99, pp. 20–21). Today Mauritius entertains the prospect of becoming the Singapore of southern Africa, providing neighbouring countries with industrial and financial services and know-how. To a significant extent this is seen as the basis of its fourth “cylinder of growth”. Mauritius is a member of a number of regional organizations (see Part I, section A). The private sector is keeping track of developments in the region and seems ready to exploit new business prospects. Mauritian companies already have a presence in Madagascar, Mozambique, Côte d’Ivoire and India, and are investigating opportunities in other countries of the region. Investment opportunities exist in neighbouring Mozambique. In 1997, the Government of Mauritius announced that an agreement would be signed with the Government of Mozambique to create a special economic zone (SEZ) of about 100,000 hectares in Mozambique, in the province of Sofala, to allow the © ILO 2001

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Mauritian business community to expand its activities offshore. The initial lease is for a renewable period of 99 years. A committee was set up to look into issues such as investment sourcing, financing and infrastructure, and to identify priority sectors. In 1997 it was estimated that in less than 15 years the SEZ output could be equivalent to as much as 15 per cent of the GDP of Mauritius (Industry Focus, No. 32, May–June 1997). “A Memorandum of Understanding in the fields of agriculture and fisheries” was signed between Mauritius and Mozambique. In addition “a consortium of Mauritian firms is finalizing, primarily on its own initiative, the acquisition of another 80,000 hectares of this land in Mozambique for development projects. One thousand hectares of these lands will be reserved by the promoters for Mauritian small and medium enterprises” (Budget speech, 1998–99, pp. 21–22). So as to give an additional impetus to these initiatives, the Government has proposed to grant a “special incentive certificate to companies investing in member countries of SADC, COMESA, IOC and IOR–ARC”. In addition, “a regional development certificate will be granted to companies which hold at least 35 per cent of the equity in an approved regional development project and repatriate all dividends received from their investment in the region” (Budget speech, 1998–99, p. 22). The SADC Trade Protocol provides a framework for the liberalization of trade in the SADC region. It allows Mauritian suppliers to penetrate the southern African market and diversify its exports and export destinations. This applies especially to garments/textiles products, which currently face barriers in the region, particularly in South Africa. However, through greater regional cooperation, the non-EPZ sector will become more exposed to competition from South Africa, although more openness could enhance competitiveness by encouraging the upgrading of technology, improving quality and productivity, and producing higher value added products.17 Three questions arise from the above. How far has Mauritius benefited, or is it likely to benefit, from these new arrangements? Is the private sector doing enough to reap the benefits offered by intra-regional trade? And can Mauritian SMEs producing goods for the local market compete with South African enterprises and, consequently, with possible short- and medium-term adjustment problems? It is no bad thing to aspire to be the Singapore of the southern African region, and become its services centre or hub, thereby creating a substantial number of high-paying service-sector jobs. However, it is another matter entirely for Mauritius to put all its efforts into this new sector, since it is uncertain as to how successful it will be. Compared with the Asian region: (a) southern Africa is not as dynamic economically, nor as developed in financial 96

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services or information/technology; and (b) South Africa already has welldeveloped financial and information services sectors, thereby reducing the need for a separate regional financial services hub. In addition, as discussed in Part I, section B, it is important to remember that Mauritius will need to improve its educational system and, in particular, increase the number of highly skilled university graduates if this fourth cylinder is to succeed.

Notes One area where social spending in Mauritius is high is in pensions. Firstly, Mauritius provides a pension for all citizens from the age of 60, which is unusual. Secondly, Mauritius’ population is ageing rapidly. Government projections estimate that the percentage of the population above the age of 60 will increase from 8.5 per cent during the period 1995–2000 to 18.8 per cent during the period 2025–30, and Vision 2020 estimates that the worker-to-pension ratio will fall from 7.5 in 1995 to 3.5 in 2025 (MEDRC, 1997). Thirdly, recent international studies of labour force participation rates of older people, based on data from over 170 countries (Clark and Anker, 1993, for 1980; Clark, York and Anker, 1997, for 1990), indicate that in 1980 Mauritius had the lowest participation rate for men aged 65+ in the world, compared with what was predicted by a multiple regression equation, which included social, demographic, economic and policy variables; in 1990, Mauritius still had an unusually low participation rate in this regard, although no longer the largest negative unexplained residual in the world. The main reason for the difference between the 1990 and 1980 results for Mauritius is that participation rates for older people increased between 1980 and 1990 – an unusual pattern, as participation rates for older people decreased throughout the world over that period. 2 Mauritius has extremely low defence expenditure, compared with the DAEs. 3 The social and economic impact of the Mauritian economic transformation has been examined elsewhere. The movement of labour from agriculture to industry has created numerous conflicts and important changes in the conditions of the rural population. Social values and habits governed by the former plantation system have clashed with values emanating from the new order established by industrialization. The homogenization of the labour force depersonalized rural workers and made them more and more dependent on enterprises to which they cannot become personally attached. At the same time they have lost the traditional protection afforded by the community – kinship and personal relations – that typified the social structure of the plantation (Paratian, 1994). 4 Child labour is not a major problem in Mauritius, and there is no evidence that sizeable numbers of children work in either hazardous or intolerable conditions, or that any children work in export industries. This is in sharp contrast to the situation in the rest of Africa, the region with the highest incidence of child labour. On the other hand, child labour does exist in Mauritius, according to both official government statistics (5.2 per cent of 12- to 14-year-olds in 1995; CSO: Labour Force Sample Survey 1995) and ILO estimates (3.0 per cent of 10- to 14year-olds in 1995; ILO, 1997b). In addition, according to the CSO data, approximately 60 per cent of child workers worked more than 41 hours per week in 1995; there are areas where there is, relatively speaking, a concentration of child workers, such as in Rodrigues where about 15 per cent of 10- to 14-year-olds are reported to have worked in 1995. It would appear that the little child labour that does exist in Mauritius is due, in large part, to the high rate (approximately 30 per cent) of children failing the CPE examination at the end of primary school (at approximately 12 years of age). Government plans to extend compulsory education to nine years (see Part I, section B) should help eliminate any remaining forms of child labour, which is important if social exclusion is to be avoided and international competitiveness improved. 5 It is probable that the reported female labour force participation rate in Mauritius is underestimated, since it is common for women workers to be under-reported because of problems associated with the often ambiguous concept of labour force activity, along with inadequate survey and/or census questionnaires and training (see Anker, Khan and Gupta, 1988). This possibility is raised in an analytical report published by the CSO for the 1990 population census (CSO: 1990 Housing and Population Census of Mauritius, Vol. VIII, Analysis Report), which concludes that the participation rate of women was under-reported and that a more correct adult female participation rate was approximately 37 per cent, compared with the reported rate of approximately 32 per cent. 6 Each 10 per cent increase in the percentage of women workers in an industry is associated with a roughly 10 per cent decrease in average earnings in the industry. Thus, for example, in construction and transport, and storage and communications, where women make up only 12 and 25 per cent of the workers, respectively, average hourly earnings are approximately double those in the EPZ, where women comprise 71 per cent of the workers. 7 The limited prospects for employment creation in the garment/textile sector are spelt out in Vision 2020: “The textile sector will and should remain an important pillar of our economy in 2020 although the number of people employed will continue to fall as a result of productivity improvement and gradual movement to the high-end market” (MEDRC, 1997). 1

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Mauritius: Studies on the social dimensions of globalization Cane yield per hectare is one of the highest in the world. Mauritius also ranks among the world’s ten leading sugar exporters, with annual production averaging 630,000 tonnes over the past ten years, supplying, as of 1994, as much as 70 per cent of the world market for special sugars. It also holds the largest sugar quota in the EU market among the ACP cane-producing countries. In addition, as a result of the signing of the ACP Special Preferential Agreement between the ACP sugar-producing countries and the EU on 1 June 1995, in order to compensate for the EU refiners’ deficit, Mauritius is able to access the EU market with an additional annual quota of 85,000 tonnes at a preferential price equal to 85 per cent of the ACP guaranteed price under the Sugar Protocol (MEDRC, 1997). 9 For example, Mauritius does not allow charter flights. 10 This estimate is made using the following elements: (a) the ratio of the upper limit of tourist arrivals to number of tourist arrivals in 1997 (700/540 – 1.0); (b) the number of people directly employed in large hotel and restaurant establishments in 1997 (15,425); and (c) the estimated number of people indirectly employed in tourism in 1997 using a multiplier of 1.5 (CSO: Economic Indicators, No. 259, 14 Nov. 1997, mentions above 1 as a multiplier and Vision 2020 mentions a multiplier of less than 1). This gives an additional 11,400 tourism-related jobs [(700/540 – 1.0) x (15,425 + 15,425 x 1.5)]. 11 There are official government definitions of SMEs. The Small Scale Industries Act of 1988 defines small-scale industries as those which employ up to 50 workers and are engaged in the manufacture, processing, or preservation of goods and services, and whose investment in plant and machinery does not exceed 500,000 rupees. The 1993 Small and Medium Industries Development Organization Act took into account medium enterprises as well, and defined SMEs as enterprises engaged in manufacturing and using production equipment which does not exceed 5 million rupees or such other sum as may be prescribed (SMIDO: Annual Report 1994/95). 12 Schemes include: export enterprises, pioneer status enterprises, strategic local enterprises, industrial building enterprises, modernization and expansion enterprises, and SMEs. 13 According to CSO: 1992 Census of Economic Activities, there were 126 large non-EPZ manufacturing establishments with DCs and 21 with pioneer status certificates. 14 Unlike the EPZ, where full foreign ownership is possible, foreign ownership in the ESZ is normally limited to 30 per cent. 15 The Commonwealth Secretariat, in a recent report on the export competitiveness of Mauritius, equally draws attention to constraints related to the absence of interdependent linkages among SMEs: “In Mauritius, SMEs, scattered around the island, do not constitute ‘industrial districts’ in terms of network characteristics. They tend to be isolated from each other – there is no division of tasks among them, no exchange of ideas, information, skill or goods, and no long-term relationships of co-operation and trust among entrepreneurs that can lead to specialization. They do not pool skill, knowledge, services and intermediate goods, and, partly as a consequence, suffer from high costs, risk, credit and marketing problems” (Lall and Wignaraja, 1998, p. 13). 16 One of the main recommendations of the 1996 Commonwealth Secretariat report is that: “The regional market is less important to Mauritius than the global market but, with the reforms underway in South Africa and the impact these could have on the regional economy, this clearly is a market which should be nurtured” (Commonwealth Secretariat, Aug. 1996, p. 14). 17 Other regional initiatives being encouraged include the SUBEX Fair, which is part of a regional programme involving the main economic operators from the Indian Ocean region, namely, Mauritius, the Comoros, Madagascar, Réunion and Seychelles; and TECHMART Africa, an international business forum to promote direct contacts between project promoters and technology seekers, particularly from Egypt, Ethiopia, Ghana, Kenya, Mauritius, Namibia, Uganda, Zambia and Zimbabwe, and foreign investors and technology suppliers from developed and developing countries (Industry Focus, No. 32, May–June 1997). There is also the Mauritius Offshore Business Activities and the Mauritius Freeport Authority. The former was set up in July 1992 to attract investment in offshore activities and to provide a onestop shop for interested parties. The Authority is the centre and the channel through which all public-sector agencies act in business matters. The only exception is offshore banking activities, which are governed by the Central Bank. 8

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CONCLUDING REMARKS

This conclusion contains some general observations on Mauritius’ experience and the challenges it faces regarding the social dimensions of globalization. The summary at the beginning of this report presents a more complete description of the results and conclusions of this study. There is little doubt that the country’s success in recent years has been due in large measure to globalization. Employment, FDI and value added grew rapidly in the export-oriented sectors such as garments and tourism, and this helped stimulate economic growth and reduce unemployment. Out of necessity an open economy, Mauritius entered the globalization game early – to its advantage. During the 1980s, it also benefited from being a favoured destination for many Hong Kong, China, garment companies seeking investment alternatives in case of difficulties over the transfer of sovereignty to China in 1997, as well as for countries wanting preferential entry into industrialized markets. Being an early entrant made it easier for Mauritius to introduce trade liberalization gradually, and, as a result, import- competing manufacturing sectors suffered relatively little disruption. To a substantial degree, Mauritius’ ability to take advantage of trade opportunities is due to social and political factors. The country offers a welcoming environment for foreign investment, in part thanks to its democracy and stable political and industrial relations’ atmosphere. This welcoming environment can, in turn, be traced to the fact that Mauritius is a welfare state, which has emphasized social cohesion and human capital investment in healthcare and education. Mauritius’ future, though, is less certain. The economic path that helped it become an upper middle-income country is reaching its limit. Mauritius needs to adapt and develop more high-skilled export goods and services than it is doing at present.

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The Government’s development strategy, laid out in its recent Vision 2020 publication, is outward looking, with an emphasis on export-oriented sectors of the economy. Several aspects of this strategy, of which the future is uncertain, have been discussed in this report. There will be a need for a renewed injection of FDI, with its accompanying package of management, technology and marketing skills and international connections, outside the traditional sectors of garments/textiles and tourism. A shortage of highly skilled workers, such as in IT, might arise since, although Mauritius has a reasonably well-educated population, few people have been educated to tertiary level. It is uncertain how important regional trade will become, partly because the southern African region is not very dynamic. It is not clear how easy it will be to encourage the development of SMEs and increase linkages between smaller and larger enterprises. In the meantime, Mauritius may be in the early stages of a difficult, and hopefully, transitory period to a higher development level, characterized by increasing uncertainty among enterprises, rising unemployment and possibly growing inequality and social exclusion. It would be wise for Mauritius to address these difficult social, economic and labour issues now, while economic growth is high, rather than waiting and being forced to take hard decisions at a later date when macroeconomic conditions are less favourable. Since social welfare, social cohesion and stability are among Mauritius’ greatest assets, policies during this transition period should address the problems of social exclusion and long-term unemployment, as well as assist SMEs, which are now employing an increasing proportion of the labour force. At the same time, Mauritius needs to take into consideration new economic and labour market conditions by, for example: (a) reforming labour laws and regulations so that they can adapt to the constantly changing social and economic environment to ensure that social dialogue assumes increasing importance; (b) reducing gender inequalities in the labour market; and (c) collecting new, regular and up-to-date labour and social data. Successfully meeting these criteria should be possible if tripartite dialogue and participation in decisionmaking take place. It is important that Mauritius does not lose sight of its strengths and uniqueness as it competes in the global economy.

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ANNEX I

LABOUR MARKET AND SOCIAL DIMENSION INFORMATION NEEDS FOR THE FUTURE Mauritius has a well-established and credible statistical system that publishes in a timely fashion a wide range of statistics in annuals and special issues/ reports. Despite this, there are large gaps in labour market and social dimensions data. Therefore, the present data-gathering system needs to be developed further in order to reflect better the changing labour market and social conditions in Mauritius, which are partly due to globalization. At present, for example, labour market information in Mauritius is too heavily dependent on data from large establishments. Data on poverty do not exist. There is a need for more frequent labour force surveys. The most recent survey was conducted in 1995. For earlier labour market data, one is dependent on population censuses. It will be increasingly important in the future to have up-to-date labour force and labour market data. Unemployment (which is now estimated/projected each year based on information from other sources, such as employment in large enterprises and registration at unemployment service centres) is becoming a problem in Mauritius. It is important to have up-to-date unemployment statistics that are directly measured in surveys as in other countries, and to know which groups are unemployed for a long time, since long-term unemployment is an indicator as well as a cause of social exclusion. It is also important to measure more regularly labour market aspects which are likely to take on greater significance in the future, especially those measuring insecurity among workers (such as labour turnover, precarious employment, hours of work, the holding of more than one job, part-time employment which may affect productivity). These types of data are best collected using labour force or household surveys; censuses are not cost-effective and are not the best way to collect accurate labour force and labour market data, because their range © ILO 2001

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makes it difficult to maintain data quality. Establishment data do not easily allow an analyst to relate labour market data to household characteristics, nor do they allow one to measure or analyse labour market phenomena, such as the holding of more than one job, unemployment or previous employment. There is a need to measure poverty on a regular basis and to identify households with relatively high poverty rates. Firstly, in light of the fact that the government budget is increasingly under pressure, greater targeting of spending on the poor may become necessary. This would require detailed and up-to-date data on poverty. Secondly, it is of critical importance that Mauritius avoid social exclusion among its people, and good poverty data would enable policymakers to identify problem groups needing assistance. A simple first step would be to use available income and expenditure surveys to measure poverty. For monitoring/measuring poverty on a more regular basis, it would be necessary to conduct a regular poverty-oriented household sample survey, and/or institute appropriate rapid assessment data collection systems, which are being increasingly recommended as a less costly alternative (Bilsborrow, Anker and De Graff, 1998). More frequent surveys of small establishments need to be carried out and/or a small establishment data collection system needs to be set up, since the most recent small establishment survey dates back to 1992. Not only has the number of workers in small establishments been increasing rapidly in recent years, but these workers are probably now poorer and encounter more problems, particularly vis-à-vis working conditions and job insecurity. Also, SME development programmes are more likely to be successful if they are based on recent data reflecting the problems and high failure rates of SMEs. There is a need for special and/or ad hoc surveys and studies. Some possibilities are: • Because replies to the questions measuring unemployment in the most recent labour force survey and census, are, according to the CSO, hard to believe, an ad hoc survey, together with qualitative investigations of the nature and meaning of responses to questions and concepts on unemployment, would be useful. • Studies and surveys focusing on survival strategies and social exclusion of poor households would be useful for policy-makers. • A study of women’s labour market aspirations and difficulties would be of value. As pointed out in this report, in the past few decades the number of women in the labour market has greatly increased, and their commitment and qualifications have also improved; despite these changes, women still face discrimination and inequality in the labour market. Policy-makers need 102

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•

•

•

•

•

information on how best to increase gender equality and improve labour market efficiency. A survey investigating working conditions in the EPZ would be useful. The most recent survey on this, by the University of Mauritius, dates back to the 1980s. Measuring and analysing the skill/preparation requirements of the work in different occupations would be useful. While it is generally accepted that Mauritius needs to upgrade the skills of its labour force to compete successfully in the global economy, it appears that, at present, Mauritius’ export sectors do not take full advantage of the reasonably high educational and skills level of its workers. A survey investigating labour-related problems in export-oriented enterprises that might be affecting productivity would be worthwhile. For example, absenteeism and labour turnover associated with employee poaching deserve attention, as they have a negative effect on international competitiveness. Studies of small enterprises and the informal sector are recommended, as an increasing number of people are employed in these fields, so better documentation is called for. Longitudinal and panel surveys would provide valuable statistics and contribute to an improved understanding of important issues that are longitudinal in nature, such as social exclusion, labour turnover and labour/ occupational mobility. One common sampling approach uses an overlapping, rotating sample design, whereby a certain percentage of households or individuals are changed each new survey round.

Unemployment estimates The Task Force found three published sources of unemployment figures. These unemployment rates are reported in Part I, section B, in table 9 and figure 7.

(a) Employment estimates based on records from employment service centres of unemployed people who register for assistance The main advantage of this data source is that it is the only annual data series available for the 1970s and 1980s. Its main disadvantage is that, as in other countries, this type of data source underestimates unemployment (as it identifies only a subset of the unemployed). © ILO 2001

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(b) Unemployment rates based on information provided by individuals in response to questions from the 1990 Census and the 1995 Labour Force Survey The main advantage of this source is that it provides an estimate of unemployment according to the internationally accepted definition of unemployment (i.e. an unemployed person must have been without any work in the reference week, and must say that he or she has been available for work and has actively looked for work in the reference week in response to survey or census questions). This unemployment rate for 1995 is reported in the 1997 ILO Yearbook of Labour Statistics. Actively seeking work by going to an employment service centre (see (a) above) is only one way of looking for work; only 17 per cent of those reported as unemployed in the Labour Force Sample Survey 1995, for example, had registered with an employment exchange (CSO, 1997).

(c) Official government unemployment rates These differ from (a) and (b) above. For 1990 (the census year) and 1995 (the labour force survey year), after analysing the results, the CSO made a downward adjustment of the reported unemployment levels, according to the internationally accepted definition of unemployment (see (b) above) – by roughly one-half (CSO: 1990 Housing and Population Census of Mauritius; idem: Labour Force Sample Survey 1995), although a detailed explanation of the reasons for this adjustment for the 1990 census was not, to the Task Force’s knowledge, provided. The rationale for making a downward adjustment for 1995 was that many people reported as unemployed in the 1995 survey were not felt by the CSO to be unemployed, according to the international definition of unemployment (i.e. people without work, available for work and actively searching for work). The CSO reduced the number of people reported as unemployed in the 1995 survey according to the international definition in the following way: • Unemployed first-time jobseekers who were actively searching for work for more than one year were excluded from the unemployment figures. (They made up 21 per cent of those reported as unemployed.) Half were assumed to be employed in work which they did not report in the survey and half were assumed to be inactive (i.e. out of the labour force). The stated rationale for these adjustments was the feeling that first-time jobseekers in Mauritius could not have been unemployed for more than one year unless their employment expectations were unrealistic and unreasonable. It is 104

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possible that the CSO felt that these people responded to the interviewer in this way in the hope that they would receive state benefits. • Unemployed people who resigned or retired from their last job were also excluded. (They made up 21 per cent of those reported as unemployed.) Half were assumed to have been employed in work which they did not report in the survey and half were assumed to be out of the labour force. • Unemployed married men (not unemployed married women) who were laid off from their previous job were excluded from the unemployed. (They made up 7 per cent of those reported as unemployed.) They were assumed to have been employed in work that they did not report. This is how official government unemployment rates were estimated for 1990 and 1995. For other years in the 1990s, official government estimates appear to have been based on extrapolations from the official unemployment rate based on data from the 1990 population census (for 1991–94) and from the 1995 labour force survey (for 1996–97), after taking into account, in some way, information on the registered unemployed at employment service centres and employment creation in large establishments in these other years. For the 1980s, official government unemployment estimates appear to be based mainly on registration data from employment service centres. Policy-makers may decide that the groups reported as unemployed, according to the international definition of unemployment based on survey or census questions, do not warrant policy attention and so should not appear in the official unemployment statistics (such as older people who have never been in the labour force who say that they have been unsuccessfully looking for work for many years). However, this implies that more than one unemployment rate should be reported, since the unemployment rate based on the internationally accepted definition should, in any case, be reported. For example, first-time jobseekers who have been unemployed for more than one year (and who have been omitted from the official unemployment statistics in Mauritius, as noted above) are common among the unemployed in other countries. In Egypt, where the unemployment rate was reported to have been 10.8 per cent in 1995, 96 per cent of those reported as unemployed were firsttime jobseekers who had been unemployed for an average of 42 months (Radwan, 1998). As already noted in this annex, Mauritius would benefit from: (a) more frequent labour force surveys and consequently more regular direct estimates of unemployment; and (b) focused studies of responses to, and the meaning of, typical unemployment-related survey questions. In short, Mauritius needs to develop further its collection and dissemination of labour market and social dimensions information data. Given the excellent © ILO 2001

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staff and proven track record of the CSO, there is little doubt that this would result in a more relevant and useful system. In this respect, the ILO could provide valuable technical assistance.

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BIBLIOGRAPHY

Anker, R. 1998. Gender and jobs: Sex segregation of occupations in the world. Geneva, ILO. —; Khan, M.E.; Gupta, R.B. 1988. Women’s participation in the labour force: A methods test in India for improving its measurement. Geneva, ILO. Asgarally, I. (ed.) 1997. Etude pluridisciplinaire sur l’exclusion à Maurice. Rapport final, 1997. Mauritius, Présidence de la République. Bank of Mauritius. 1996–97. Annual Report: 1996, 1997. —.1997. Monthly Bulletin. Bhalla, P. 1998. The social impact of globalization: What are the perceptions? ILO, unpublished. Bheenick, R.; Hanoomanjee, E. 1988. Mauritius: Towards an industrial training strategy. Port Louis, Ministry of Economic Planning and Development (MEPD). Billsborrow, R.E.; Anker, R.; De Graff, D. 1998. Poverty monitoring and rapid assessment surveys. Geneva, ILO. Bunwaree, S. 1997. Gender, education/training and development in Mauritius, Office of the United Nations Resident Coordinator for Mauritius, Discussion Paper Series. Port Louis, United Nations Development Programme. Central Statistical Office (CSO), 1991. A computerised manpower model for Mauritius. —. 1984, 1991, 1995, 1996. Annual Digest of Statistics. —. MEPD. 1978, 1982, 1983. Bi-annual Digest of Statistics, Dec. 1978, June 1982, Dec. 1983. —. 1983. Bi-annual Survey of Employment and Earnings. —. 1996. 1992 Census of Economic Activities, Vol. I (Small Establishments and Itinerant Units), Vol. II (Large Establishments). —. 1990. 1985–1986 Collection of Statistics of Economic Activities, Vol. 1 (Small Establishments); Vol. II (Large Establishments). © ILO 2001

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113

INDEX

Note: Page numbers in bold refer to major text sections, those in italic to figures and tables. Concatenated page numbers (eg 17-19) do not necessarily indicate continuous treatment. absenteeism 88–9, 103 Africa 5–6 see also individual countries; non-LDCs agriculture 36, 96 employment 27, 28, 56, 58, 60 wages 40, 54, 56 Algeria 71 Asia 66, 68, 86, 96 see also DAEs; individual countries balance of payments 1, 13, 23 balance of trade 22, 23 Bangladesh 58, 59, 71–2 Barbados 16 beverages 18 Botswana see non-LDCs, Africa business sector 49, 51–3n, 60 Cameroon see non-LDCs, Africa capital inputs, and economic growth 66–9, 67–9 Caribbean 87 see also individual countries chemicals 18 child labour 974 China 5, 24, 71–2 collective bargaining 3, 38, 41–2 see also industrial relations © ILO 2001

communications 36, 60, 976 Comoros 9817 competitiveness 69–73, 70–72, 88 computer services 86, 90 Congo, Republic of the see non-LDCs, Africa construction 36, 60, 976 Côte d’Ivoire (Ivory Coast) 95 see also non-LDCs, Africa Cyprus 87 DAEs (dynamic Asian economies) 72, 82 economic growth 6–7, 8, 66 education 31, 32, 79 income distribution 43, 44 public finance/expenditure 23, 78, 79 savings and investment 66, 67 social indicators 7, 8 trade 18–19, 20 see also Korea, Republic of; Malaysia; Singapore; Thailand; Hong Kong, China data, labour market and social dimensions 3, 101–6 debt, external 22, 22–3 defence 60, 80 dismissals 14, 15 dynamic Asian economies see DAEs 115

Mauritius: Studies on the social dimensions of globalization

earnings see wages economic growth 1, 6, 6–7, 8, 13, 66–9, 67–9, 80–81 education 1, 31–4, 36, 60, 79, 80, 81 primary 3, 31–4, 32–3, 83 secondary 31–4, 32–3, 82, 83 university/tertiary 3, 31–4, 32–3, 85 see also skills levels; social welfare; training Egypt 71, 9817, 105 see also non-LDCs, Africa electricity 36, 60 employment 49–57 creation 1, 25, 90, 92, 94 decline 8, 57, 57 growth 25–8, 26, 56–7, 57, 92 insecurity 34–7, 35–6, 101 and occupation 56, 58, 60 policy issues 92–4 sectoral distribution 27–8, 28, 50–53, 58, 60 see also individual sectors and size of enterprise 26, 26–7, 56–7, 57 status 40, 56, 58, 60, 82, 83 termination 14, 15 enterprise size, and employment 26, 26–7, 56–7, 57 EPZ (export processing zone) 2, 13–16, 19, 21 competitiveness 69–73, 70 delocalizing of subsectors 61, 735 employment 26–7, 29, 35, 35, 49, 50, 53–4, 53, 56–7, 57, 88, 92, 93 foreign direct investment 2, 22–3 industrial relations 38, 41 policy issues 3, 86–9, 103 productivity 61, 68–9, 69–70 taxation 2–3, 13–14, 79 training 61 wages 39, 54, 55, 63, 65, 735, 82 women 82, 83 working conditions 14, 15, 16 see also manufacturing ESZ (export services zone) 91 116

Ethiopia 9817 ethnic composition, population 5 EU (European Union) 1–2, 8, 16, 19, 21, 21 Europe 5 see also individual countries European Union (EU) 1–2, 8, 16, 19, 21, 21 exploration services 86, 90 export processing zone see EPZ export sectors 1–2, 19 wages 40, 63 see also individual sectors export services zone (ESZ) 91 export-oriented sectors 49, 103 employment 49, 50–53, 53 wages 64–5, 64 export-related sectors 49, 50–52, 53 exports 19, 20–21 skills levels 58, 59, 61 taxes 17–18 see also trade FDI see foreign direct investment Fiji 4 financial sector 36, 50–51, 52n, 53, 60, 93 financial services 2, 49, 86, 90, 92, 95–7 fishing 28, 36, 52n, 56, 60, 96 footwear 18 foreign direct investment (FDI) 1–2, 8, 22–3, 24, 100 see also investment foreign workers 28–9, 89 forestry 60 France 5, 91, 14, 24 furniture 18 Gabon 6 see also non-LDCs, Africa garment/textile industry 2, 99 competitiveness 71–3, 71, 88 employment 1–2, 8, 25–6, 49, 54, 88, 92 policy issues 2, 86–9, 91–2, 96 skills levels 58, 61 trade 1, 18, 19, 20, 21 wages 39, 40, 61, 72, 736 gas 60 © ILO 2001

Index

GDP growth 1, 6, 6–7, 8, 13, 66–9, 67–9, 80–81 gender see men; women Germany 14, 24 Ghana 9817 see also non-LDCs, Africa globalization, social impact v–vi, 8, 47–74, 99 see also individual subjects government employees 28, 28 government services 28, 35, 35 health services 1, 36, 60, 79, 80, 81 see also social welfare Hong Kong, China 24, 84n, 99 see also DAEs hotels 36, 40, 49, 50, 53, 58, 60, 63, 93 see also tourism hours worked 35–7, 36, 53–4, 101 human capital development 87–8 Human Development Index 8 hunting 60 illiteracy 31 ILO (International Labour Organization) v–vii, 42, 4513, 732, 103–4, 106 sources 6, 15, 20, 40, 41, 733, 84, 85, 93, 974, 104 import-competing sectors 49, 50–52 import-oriented sectors 64–5, 64 imports 21, 21 restrictions 2, 18–19, 18 taxes 3, 13–14, 18–19, 18 see also trade income 1, 94, 61 distribution 1, 6, 43, 44 see also wages income tax 14, 79 see also trade taxes; VAT India 5, 14, 4618, 59, 71–2, 95 Indonesia 72 industrial relations 38–42 collective bargaining 3, 38, 41–2 conflicts 39, 40–41 © ILO 2001

revising legislation 41–2 trade unions 38–9, 39, 41, 89–90 wage-fixing practices 39 see also labour law infant mortality 7 information, labour market and social dimensions 3, 101–6 insurance 51–3n International Labour Organization see ILO international services 86, 90, 92, 95 investment domestic 66–9, 67–8 Mauritian, abroad 95–6, 9817 see also foreign direct investment iron 18 Ivory Coast see Côte d’Ivoire Jamaica 16, 71 jobs see employment Kenya 71, 9817 see also non-LDCs, Africa Korea, Republic of 31, 43, 77, 80, 84n see also DAEs labour costs 69–72, 70–72 see also wages labour force 25–6, 26, 92 labour force participation rates 2, 25, 43, 54, 83, 971 5 labour inputs, and economic growth 66, 68–9, 68–9 labour law 3, 14–16, 15, 40–42 see also industrial relations labour market information 3, 101–6 Latin America 4618, 86 law, labour see labour law leather 18, 736 leave, from work 14 length of service 35, 35 Lesotho 16 Libyan Arab Jamahiriya see non-LDCs, Africa life expectancy 7 117

Mauritius: Studies on the social dimensions of globalization

machinery 18 Madagascar 2, 61, 71, 87, 95, 9817 Malaysia 18, 22, 31, 59, 77, 80, 84n see also DAEs manufacturing 18, 19, 24, 36 competitiveness 69–70, 72 employment 27–9, 28, 49, 51n, 53, 53n, 56, 58, 60 payment systems 54, 56 productivity 68–9, 69 skills levels 58, 59, 61 wages 40, 55, 63–5, 64, 72 see also EPZ; individual industries Mauritius see subject entries men 35, 37, 40, 82, 105 migrant workers 28–9, 89 minimum wage 39, 40 mining 36, 60, 63 Morocco 71, 72 see also non-LDCs, Africa mortality, infant 7 Mozambique 735, 95 Namibia 9817 see also non-LDCs, Africa Netherlands 91 Nigeria see non-LDCs, Africa non-LDCs (least developed countries), Africa 93 debt 22, 23 economic growth 6, 6–7 education 31, 32 income distribution 43, 44 public finance 77, 78 savings and investment 66, 67 trade 18–19, 20, 77 see also individual countries non-tradable sectors 49, 50–52 older people, labour force participation 971 optical goods 18 outworkers 54 overtime 14, 15, 16 Pakistan 72 118

paper 18 part-time employment 35, 36, 37, 101 pay see wages payment systems 54, 56 pensions 3, 79, 971 Philippines 71–2 plastic 18 Poland 71 policy issues v–vii, 2–4, 13, 34, 61–2, 75–98, 99–100 constraints on public finance 77–9, 78 employment implications 92–4 export processing zone 3, 86–9, 103 garment/textile industry 2, 86–9, 91–2, 96 information gathering 3, 101–6 international services 86, 90, 92, 95 regional cooperation 95–7 revising legislation 41–2 small and medium-sized enterprises 3, 91–2, 94, 102–3 social welfare and social cohesion 79–81 sugar industry 2, 86, 89–90 tourism 2, 86, 90 Vision 2020 (MEDRC) 25, 33, 42, 457, 79–81, 86, 90–92, 971 7, 988 10, 99 women 3, 82–5, 102–3 population statistics 5 poverty 43–5, 79, 101–2 primary education 3, 31–4, 32–3, 83 see also education printing 18 private enterprises 35, 35 productivity 2, 61, 66, 68–71, 68–70, 88–90 public administration 36, 60 public enterprises, employment 35, 35 public spending 3, 77, 78, 79, 80 publishing 18 quarrying 36, 60, 63 real estate 36, 51–3n, 60 regional cooperation 95–7 repair services 60 © ILO 2001

Index

Republic of Korea see Korea, Republic of research services 86, 90 restaurants 36, 40, 49, 50, 53, 58, 60, 63, 93 see also tourism Réunion 9817 right to organize 38 see also industrial relations rubber 18 Russian Federation 71 sanitation 7 savings 2, 66, 67 second jobs 35, 101–2 secondary education 31–4, 32–3, 82, 83 see also education sectoral distribution of employment see employment self-employment 56 Senegal see non-LDCs, Africa service, length 35, 35 service sector 21, 27–8, 28, 36, 49, 60 see also individual services severance allowances 14, 15 Seychelles 9817 see also non-LDCs, Africa shoes 18 Singapore 31, 33, 43, 59, 77, 80 see also DAEs size of enterprise, and employment 26, 26–7, 56–7, 57 skills levels 3, 58–62, 59, 63–4, 93, 103 see also education; training small economies, problems competing 16–17 small and medium-sized enterprises (SMEs) 3, 91–2, 94, 102–3 social cohesion 1–2, 80–81 social dimension, information 101–3 social impact of globalization see globalization social indicators 6, 7, 8 social welfare 79–81, 80, 94 see also education; health services social work 36 © ILO 2001

South Africa 21, 21, 71, 90, 96–7, 9816 see also non-LDCs, Africa Sri Lanka 16, 58, 59, 71–2 steel 18 storage 36, 60, 976 strikes 39, 40–41 see also industrial relations structural adjustment programmes 13, 18–19 sugar industry 5, 19, 459, 734, 988 employment 2, 26, 35, 35, 49, 50–51, 53, 89–90, 92, 93 exports 1–2, 13, 16–19, 20–21, 21, 988 policy issues 2, 86, 89–90 productivity 89–90 wages 40, 63 surveys, labour market 3, 101–6 Swaziland see non-LDCs, Africa Taiwan, China 59, 72 tariffs see trade taxes taxation see income tax; trade taxes; VAT tea 51n, 53n technology 2, 33, 58, 59, 86, 90 termination of employment 14, 15 tertiary education see university/tertiary education textile industry see garment/textile industry Thailand 22, 31, 59, 77, 80 see also DAEs tobacco 18, 51n, 53n tourism 19, 49, 58, 63, 734 employment 50–51, 52n, 53, 90, 92, 93 policy issues 2, 86, 90 see also hotels trade and employment 49–57 impact of liberalization v–vi, 1–2, 8 and skills levels 58–62 and wage differentials 63–5 wholesale and retail 36, 40, 60, 63 see also exports; imports; individual subjects trade agreements 1–2, 4, 8, 14, 16, 17, 87, 96, 988 119

Mauritius: Studies on the social dimensions of globalization

trade balance 22, 23 trade openness 19, 20 trade taxes 2, 16–17, 77, 78 exports 17–18 imports 3, 13–14, 18–19, 18 see also income tax; VAT trade unions 38–9, 39, 41, 89–90 see also industrial relations training 33–4, 459, 61, 82, 83, 93 see also education; skills levels transport 18, 36, 52n, 60, 976 Trinidad and Tobago 16 Tunisia 71, 72 see also non-LDCs, Africa Turkey 87 Uganda 9817 UN (United Nations) 8, 24, 32n unemployment 13, 29–31, 81 decrease 1, 25, 29, 30–31, 43 increase 2, 25, 29, 30–31, 53, 88, 94 statistics 29, 30–31, 458, 101–2, 103–5 women 29, 30, 82, 83 unions see trade unions United Kingdom 91, 14, 24 United Nations (UN) 8, 24, 32n United States 21, 4618 university/tertiary education 3, 31–4, 32–3, 85 see also education VAT (value added tax) 77, 79 see also income tax; trade taxes

120

Vision 2020 (MEDRC) 25, 33, 42, 457, 79–81, 86, 90–92, 971 7, 988 10, 99 vocational training see training wage-fixing practices 39 see also industrial relations wages 61 differentials 63–5 and gender 40, 54, 55, 65, 82, 83, 85 minimum 39, 40 payment systems 54, 56 sectors 39, 40, 54, 55, 61, 63–5, 64, 72, 72, 735 6, 82 and skills levels 61, 63–4 see also income; labour costs watches 18 water 7, 36, 60 women 35, 54, 82–5 education/training 34, 82, 83, 84, 85 hours worked 36–7, 53 labour force participation 2, 25, 43, 54, 83, 975 labour market inequality 82, 83, 84, 85 policy issues 3, 82–5, 102–3 unemployment 29, 30, 82, 83 wages 40, 54, 55, 65, 82, 83, 85 wood 18 working hours 35–7, 36, 53–4, 101 World Trade Organization (WTO) v, 4, 16–17, 454 Zambia 735, 9817 Zanzibar 735 Zimbabwe 9817 see also non-LDCs, Africa

© ILO 2001