Mauritius is a small remote tropical island in a forgotten section of the Indian Ocean. From the perspective of current research on the sources of fast economic growth, Mauritius’ endowments would not have seemed particularly favorable for growth back in the 1960s or early 1970s.
The domestic market in Mauritius is tiny, with little scope for exploiting domestic economies of scale. It had rapid population growth in the 1960s and seemed to be at risk of a Malthusian trap. Its main export product at the time, sugar, was subject to all the risks of the international sugar market, not only international price risk but also the risk from devastating cyclones. Its export sector in the 1960s was anything but diversified, with sugar dominating exports. It was thus a natural resource intensive economy subject to the curse of natural resources.
Nevertheless Mauritius grew. By 2001 it had become the paradigm of fast sustainable growth. Looking back over five decades, growth in Mauritius since 1960 can be divided into three broad epochs. During the 1960’s, Mauritius grew approximately 1 percent per year. Starting about 1970, growth rose to 5 percent per-annum, but growth was highly variable until approximately 1982. Since 1982, growth has increased slightly to an average of 6 percent per-annum, but unlike the 1970’s growth has been smooth. Mauritius has not had a bad year since 1983.
The case of Mauritius is widely noted due to its rapid growth. There is general awareness that the Export Processing Zones (EPZ) have been successful and that this must have something to do with fast growth in Mauritius. Output of the export processing zones grew rapidly during the period 1983-1988. This growth spurt was before output rose substantially in other sectors.
There is evidence that the engine of growth started rapidly in the EPZ sector after 1983 and shifted to the service sector during the late 1980s.The fact that growth in Mauritius has continued high and uninterrupted since 1982 is attributable to three facts. One is that output growth in exports and in demand driven services has been remarkably smooth. The second is that much of the growth in exports has been due to growth in total factor productivity during the 1990’s and this appears to be a smoothly increasing process. The third is that Mauritius did not experience a major disruption to its Sugar industry during this period as it had in the 1970’s. In fact, Mauritius’s greater integration with the global economy has if anything reduced rather than increased vulnerability and volatility.
Last Updated on: 19-04-2010