The World Bank Presents Policy Notes on Mauritius Trade and Labor

September 24, 2010

PORT-LOUIS, September 24, 2010 – The World Bank office in Mauritius presented today a report including two policy notes on Trade and Labor. While Mauritius is a well-known development success story, growing international competition and a volatile external environment call for continuous reforms. The country needs to increase its productivity to remain competitive and diversify further towards new high-value added sectors and new consumer markets.

“Higher productivity is the result of a variety of factors but is influenced to a large extent by low transaction costs on trade and improved skills of its labor force,” said Constantine Chikosi, Acting Country Director for the World Bank office in Mauritius.

Building on past reforms, especially those implemented since 2006, the report proposed a series of reforms aimed at improving trade and promoting the labor market. On trade, recent policies focused on reducing tariffs and visible non-tariff barriers. Yet, there is still much scope to improve the policy and regulatory environment to support Mauritius as a dynamic global competitor on international markets. The main recommendation is to reduce red-tape, especially at the sectoral level by rationalizing complex procedures, cooperating closely with the private sector and boosting coordination across ministries.

Although the labor market has been functioning relatively well, creating more jobs than the growth of the labor force between 2005 and 2008, the authorities are facing two key challenges. On the high end of the market, skilled labor is still failing to respond adequately to the demand of firms investing in new fields such as ICT and financial services. On the low end of the market, specific groups of workers (aged women, unskilled employees) have found it increasingly difficult to move from declining to emerging sectors over time. The report proposes a series of actions that seek to maintain the balance between the need to create productivity gains and preserve the role of labor as a social stabilizer in the country.

Trade and labor policies are important in themselves, but maintaining the proper balance and synergies in implementation of trade and labor policies is critical for two reasons. First, there is a need to maintain a balance between the competitiveness and social agendas, so that the support in favor of reforms continues over time. Second, trade and labor policies work together in promoting productivity-enhancing reallocation of resources and gains. This causal link goes in both directions: higher skilled labor favors competitiveness that in turn promotes trade, while exporting firms are well positioned to absorb new technologies and competencies and so encourage labor skills upgrade and employment.

Many people in the government, private sector, academia, development partners, and the civil society at large generously provided their views and valuable information for this study.

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