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China: Threat or Opportunity?


Mauritius is so small that wherever you are in the country you are always so close to the port. While in the fashionable talks of the grave issue of climate change this seems like a premonitory statement, it was actually stated as the opportunity the country offers to investors desiring to go there. Vinaye Anchaz, from the University of Mauritius, who presented a paper titled: “David versus Goliath: Mauritius facing up to China”, was speaking of how absurd it was for investors in his country to ask for plots of land close to the ports.

Mauritius is a small resource-poor country. But its nearly 40 year old textile and apparel industry may be the oldest in the Africa.

“It is not like the rest of Africa where this industry took off with the introduction of African Growth and Opportunity Act (AGOA),” Anchaz said.

Anchaz listed a number of figures to show how his tiny country is much better off than the rest Sub-Saharan Africa (SSA), especially in terms of GDP per capital which stands at 4,700 dollars, compared to 598 dollars in SSA.

So while the world looked around to see what hit it, mostly putting the blame on China, Anchaz’s country was prepared enough not to react the same way to globalization and China’s worrying growth. Mauritius had learned from history, he said. The sugar boom of 1973-74 had led to a real appreciation of the rupee, “which eroded the export competitiveness of the nascent EPZ (Export Processing Zone) sector and entailed a massive fiscal and payments deficits.”

Subsequently the country diversified its export base and built economic resilience by means of a series of structural adjustment measures. Anchaz says these measures helped the country fight off “the onslaught of globalization, the erosion of trade preferences and the rise of China.”

If there is any villain in the economy of Mauritius, then it is the United States. With decades of experience in the textile and apparel sector, few countries could have been readier than the small island nation when the American government introduced AGOA. Its EPZ suddenly attracted several investors from Asia. The main reason that had attracted investors in the first place was the AGOA Multi Fiber Arrangement (MFA) which gave the green light for the import of fabric from countries that were not included in the AGOA. In 2005, the US ended MFA, and hordes of investors quit Mauritius. More than 20,000 people, mostly women, lost their jobs, bringing about the concept of feminization of poverty. Mauritius’ exports  declined.

“The non-renewal of the derogation, and not China, is the cause of the decline in our export,” Anchaz said.

Anchaz made this claim in spite of the fact that China had produced nearly everything that the island produced at a cheaper cost. Anchaz adds that China was an insignificant export market for his country, accounting for less than 0.25% of its exports, whereas Chinese products accounted for 11% of Mauritius’ imports.

“China is at present the biggest supplier of manufactured products to Mauritius,” Anchaz said in his paper. Mauritius has more to fear as the US International Trade Commission study of global competitiveness in the textiles and clothing industry has concluded that “China is expected to become the ‘supplier of choice’ for most US importers,” he said.

He however rejected studies that claimed that his country, with no commodity base, would stand to be a big loser in the face of Chinese competition. He said that China’s economic impact in Mauritius had not been as negative as pessimists had expected. He cited his country’s resilience to globalization, structural upgrading of the clothing industry to higher quality products, and export market diversification to Europe and Africa, as factors that had helped his country’s economy.

Written by Ayenew Haileselassie


AEC web site

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