Policy Advice to the Ministry of Finance and Economic Development in Mauritius

The Project at A Glance

International Economics Consulting Ltd. provided Advisory Services to the Ministry of Finance and Economic Development of the Government of Mauritius. This involved three key activities:

Policy Support for the 2017-2018 National Budget formulation exercise; including redesigning the structure of the budget speech document, analysis of pre-budget proposals and providing recommendations, and advice on possible policy options, ensuring alignment with the Vision 2030 Blueprint.
Assessment of Mauritius’ export performance, with a view to developing a new export strategy and action plan for implementation, which required undertaking an overall assessment of Mauritius’s trade performance and identifying economic, policy and institutional constraints hindering growth. Emphasis was placed on key economic, social, and wider drivers of growth.
Monitoring of Brexit and other international events that could potentially impact the Mauritian economy; including a weekly update on the latest news, evaluation of possible preference erosion, and developing strategies to minimise the impact of Brexit and other international events on the Mauritian Economy and its regional initiatives, monthly analytics on key political, regulatory, or economic events, the identification of opportunities that may result from Brexit with policy option proposals, and advice on bilateral cooperation with the UK, EU and other partners.

What We Found

With regard to the third activity, we found that owing to the strong economic, social, and legislative interconnection of the UK with the EU, Brexit would open a “Pandora’s Box”, as no independent state has ever tried to exit the EU. Following its official departure from the EU, the UK will have the right to legislate in all areas where the EU has exclusive competence, including external trade policy. Thus, the UK will be able to adopt its own market access regulations, technical barriers to trade (TBT), and customs procedures, and implement its specific anti-dumping and countervailing measures, among others. This will alter the existing landscape of trade agreements between the UK and the EU’s existing trading partners.
Therefore, Brexit could represent a significant threat, or at a minimum, a significant risk, to businesses. Mauritius, together with Madagascar, Seychelles, and Zimbabwe, is a contracting party of an interim Economic Partnership Agreement (iEPA) with the EU, under the Eastern and Southern Africa (ESA) configuration.
In its relationship with developing countries, the UK, in the policy paper “Future Customs Arrangements,” highlighted its commitment to maintaining the existing market access for Least Developed Countries (LDCs) to the UK, whilst “[aiming] to maintain the preferential access of the remaining (non-LDC) developing countries, including those countries with which we have Economic Partnership Agreements.” It is worth highlighting that the UK is not ensuring the existing level of market access for non-LDCs to the UK, but it will rather “aim to,” do so.

Our Strategy and Impact

Following Brexit, if the UK were to impose Most-Favoured Nation tariffs on all trade, especially with the EU and other countries that currently have preferential access, the effects would be significant.
Based on an assessment of Mauritius’ export potential to the UK, and after benchmarking the competitiveness of Mauritius against its peers, it is found that Mauritius is currently exporting just over a quarter of its potential. In the medium term, there is a significant untapped market in the UK.
Brexit’s impact on trade in Mauritius is, in general, rather modest, measured at less than half of one percent relative to the baseline. Even for the UK itself, the changes are quite minimal, estimated at 2.4 percent at most, and generally less than one percent. Small changes in UK imports explain the limited impacts on Mauritius’ trade. Despite limited consequences on Mauritius’ trade as a whole, some sectors may experience significant changes in export value, including sugar and clothing.

Our Core Solutions

At International Economics Consulting, we build tailor-made strategies for both import and export-oriented business solutions. We carry out sensitivity analysis and prepare detailed resource scheduling and standard performance dashboards to track the implementation process and financial ratio performance of your products and services. We help investors assess the opportunities in different markets, determine the feasibility and viability of projects, and benchmark the wider ecosystem to support business growth. We also assist clients in building economic indicators to analyse the trade flows and identify patterns, trends, and trade complementarity in value chains of goods and services between member countries.