Yogesh Singh (Chairman, MEXA): “Donald Trump’s election will positively impact on the export sector”

For MEXA’s chairman, the inauguration of Donald Trump as the United States President, on January 20, must be seen as an opportunity for the export sector. The latter will nevertheless face major challenges this year, which Yogesh Singh comments.

BUSINESSMAG. After an eventful 2016, what are the priorities of the Mauritius Export Association (MEXA) for this year?

2016 was indeed a very challenging year marked principally by the Brexit, which has severely impacted on our exports to the United Kingdom (UK), our lar-gest market. The latter have considerably declined and this, in turn, has seriously undermined the competitiveness of our products. In 2017, we will have to reverse the situation and put all our efforts in transforming the sector. Our objectives being, first of all, to propel it to the next era of growth and secondly, to be in line with the government’s vision where high emphasis is laid on a revamped and dynamic export manufacturing base.

BUSINESSMAG. There are high hopes for the manufacturing sector. How do you expect to increase its contribution to the gross domestic product (GDP)?

In 2015, the MEXA came up with its Export Strategy, which has identified quite a few innovative and futuristic measures. They will be implemented in 2017 and will enable the sector to generate a 6% to 9% contribution to the GDP in the next ten years. These measures include firstly the Automation and Modernization Scheme which will entail gradual migration from a manufacturing sector that is labor-intensive to a capital-intensive one.

The second measure of our Export Strategy consists of putting into effect an Air Freight Policy revolving around speed to market. We are also going to initiate an innovative E-Commerce Project aiming at rejuvenating the textile and apparel sector. Furthermore, as part of our Export Strategy, we intend to develop a New Industrial Investment Policy to attract foreign direct investment in the export manufacturing and free port sector.

BUSINESSMAG. Donald Trumpwill take over from Barack Obama at the White House in a few days. How far will the trade policies announced by the new US President affect our export industry?

The election of Donald Trump, I dare say, will have a positive impact on the export sector in Mauritius. Trump has reaffirmed his commitment to stop any further negotiations concerning the Trans-Pacific Partnership (TPP). This is indeed a positive outcome for our textile and apparel sector which otherwise would have undergone stronger competition from Vietnam.

Mauritius is currently the fourth largest exporter under the African Growth and Opportunity Act (AGOA) and with the TPP, Vietnam on its own would have wiped out all exportations to the US under the AGOA. We are confident that US buyers will have to follow the policy of their government and review their sourcing strategy from Vietnam, China and Mexico. This will definitely boost the visibility of Africa and the AGOA.

BUSINESSMAG. A lot has been said about the seafood sector last year. How is it faring currently?

The seafood sector has re-gistered a very minimal negative growth in terms of value. This is mainly due to a fall in the cost of raw fish. Nevertheless, the seafood sector has maintained its exports in terms of volume. Overall, the sector is performing well with a boost in processing plant and ship repair activities. We are confident that these will contribute to the port performance and the competitiveness of the country.

Moreover, sustainability has been the key concern for the seafood sector in 2016. No fish, no seafood industry. It is as simple as this statement. The declaration of the Indian Ocean Tuna Commission on the stock of yellowfin tuna in “red zone” has rung a bell. Through the representation of the MEXA, today, the government is much more aware of the importance of sustainability. This will remain a priority for 2017, as the country is relying heavily on the ocean economy as the new emerging sector.

BUSINESSMAG. Government committed itself to boost our exports. Do you feel it is walking the talk?

It is the first time that the MEXA’s proposals have been given so much consideration by the government. Indeed, 9 out of the 12 proposals made to the Minister of Finance have been retained in the Budget, among which are the two main measures, namely the Air Freight Policy and the E-Commerce Project. This is a testimony of the government’s commitment towards our sector. Even if the implementation of these measures is taking time, we are confident that they will become operational as from early this year.

BUSINESSMAG. Foreign direct investment (FDI) figures showed that the manufacturing sector is struggling to attract investment. Why is it so?

In the manufacturing sector, FDI remains a major concern. While in 2014, it amounted to Rs 76 million, in 2015 it has dropped by 68%, amounting to Rs 24 million.

If we want to transform the manufacturing sector to meet the objectives set in the government’s Vision 2030 and that its contribution to the GDP increases by 25%, we need to attract new players who will invest in the sector.

At the MEXA, we cannot understand how Mauritius is having so much trouble to attract FDI. In Indonesia, for instance, FDI in the manufacturing sector is expected to reach a record high of USD 17 billion in 2016. If Indonesia can achieve this, why not us? We need to sit down and devise a strategy on how we can attract FDI. Investors are not waiting for us. They are being approached by so many other countries. We need to go towards them. We have to bear in mind that FDI has a very strong impact on the economic growth of a developing country.

BUSINESSMAG. The textile and apparel sector has been facing tough times since the global slowdown. Is there any other industry which is in a similar situation?

According to the latest figures, I may say that the jewellery sector is in a difficult situation as well. This industry has been under stress since the world economic crisis of 2008 because it produces luxury goods for the luxury market. With further developments in Europe and the possibility of Britain coming out of the European Union, I think the jewellery sector is one of the most fragile of the export market today.

BUSINESSMAG. Is the depreciation of the rand another concern for the export sector?

Indeed, the rand has been depreciating over the last two years and this has had a negative impact on our sales to South Africa. The rand has dropped by 5 to 6%. Nonetheless, we have seen a reversal in 2016 because factories in Mauritius have adapted to the lower prices. Our products are sold to South Africa in US dollars. Besides, the rand has streng-thened over the last few months. Again, this depends on politics in South Africa. I think there is a positive sentiment there. And South Africa is still remaining part of the Southern African Development Community (SADC).

BUSINESSMAG. Mauritius is in talks with India for a Comprehensive Economic Cooperation and Partnership Agreement (CECPA). What would such an agreement mean for local manufacturing industries?

First of all, we are very pleased that the government has reopened negotiations on the CECPA. The potential of this agreement is huge for Mauritius. It is in line with the strategy to diversify both our products and our markets, especially our export markets.

India has a large and growing middle class of about 15 million people, as revealed by recent fi-gures. In addition, it is projected to grow to 20 million people in five years’ time and to 460 million people by 2030. It is a pheno-menal growth in such a short time. Considering this scenario, for Mauritius, the vision is to move into high value manufactu-ring so that the market evolution in India can develop a good synergy with the local export strategy within the CECPA.

BUSINESSMAG. To what extent could the CECPA bridge the gap between Mauritian exports to India and our imports from that neighboring South Asian country?

It is clear that there is a big imbalance of trade between India and Mauritius. Our imports from India amounted to Rs 29 billion in 2015 as compared to 745 million for our exports. So we expect India to open the door for our products, namely those coming from the pharmaceutical industry, high-end textiles, rum and specialized sugars. At present, there is a duty of 12% on the exports from the Mauritian manufacturing sector to India. Yet, with the CECPA, these charges could be reduced to zero, allowing the sector to boom.

Furthermore, with the deve-lopment of its middle class, India is becoming a very important market, particularly now that our international brands have opened shops there. That is where the CECPA makes more commercial and economic sense to the export sector. It will encou-rage our market diversification strategy. We hope that.

BUSINESSMAG. Apart from the Brexit, are there other obstacles the export sector will have to overcome this year?

We believe that Europe is not yet out of the woods and will remain so in 2017. In fact, Europe has been sick as from 2008 with the Eurozone Crisis and ever since then, the situation did not get any better. The downfall of Greece’s economy, Italy’s banking crisis which shook the Eurozone and the uncertainty prevailing in France and Germany prior to the elections to be held this year have added up to the challenges awaiting us. Moreover, the situation which prevails in Europe is having an impact on the euro. Economists are even predicting the euro/dollar parity.

BUSINESSMAG. Do you feel there can be a policy change with Pravind Jugnauth as Prime Minister?

The strength of the Mauritian economy is built on the concept of continuity. Whenever a new government comes in, it always carries on with the economic policies of the preceding one. Another strong factor is the very good working partnership between the private sector and the government. The MEXA will be ready to work withany new Prime Minister.

BUSINESSMAG. Air Mauritius, an important partner for the export community, is still without a Chief Executive Officer. Your views? 

We work with Air Mauritius on two levels. Firstly, to transport our cargo and secondly, as an important means of travel to bring expatriate workers to the country and enable our management officers to travel for business. We do feel that a strong leader is very important, especially for an organization like Air Mauritius, our national airline. We hope that a new CEO is appointed as soon as possible.

BUSINESSMAG.  Your comments on the re-exportation sector.

Re-exported goods are those which are exported in the same condition as imported or after undergoing minor operations which leave them essentially unchanged. Our re-exports stood at Rs 26 billion in 2015, consisting mainly of telecommunication equipment and accessories which represent more than 38% of the products re-exported from Mauritius.

It is to be noted, though, that since the last six months of 2016, re-exports have been decreasing significantly due to a sharp decline in the volume of telecommunication products that have been re-exported.

BUSINESSMAG. More than five months have elapsed since the Finance Minister unveiled the 2016/17 Budget. What is your assessment as regards the implementation of the measures announced?  

There was substance in some of the measures announced in the Budget. The objective was to boost our economy. However, the proof of the pudding is in the ea-ting. The implementation is taking time but we remain confident that the modalities will be finalized very soon. We appreciate the fact that the government has set up a ministerial committee which is closely monitoring the implementation of the budgetary measures. The participation of the private sector is being solicited at different levels and we, at MEXA, are fully collaborating.