FOURTH ANNUAL GENERAL MEETING OF MEXA 1ST APRIL, 2010

SPEECH BY HON. D.GOKHOOL MINISTER OF INDUSTRY, SCIENCE AND RESEARCH

ON THE OCCASION OF THE FOURTH ANNUAL GENERAL MEETING OF MEXA

1ST APRIL, 2010 AT LE SIRIUS, LE LABOURDONNAIS HOTEL PORT-LOUIS



Mr. Ahmed Parkar, Chairman, MEXA
Mrs. Danielle Wong, Director, MEXA
Operators of the Export Oriented Enterprises Sector
Distinguished Guests
Members of Media
Ladies and Gentlemen

A very good morning to all of you. It gives me immense pleasure to be among you on the occasion of the Fourth Annual General Meeting of MEXA. I wish to thank MEXA for giving opportunity to address you.

Last year on this very same occasion, I emphasised the exceptional circumstances through which our economy had to navigate as a result of the global financial and economic crisis. I highlighted the loss of jobs and the negative export growth rate witnessed by the Export Oriented Enterprises (EOE) sector in 2008 and I urged all our private and public sector stakeholders to combine their efforts to chart out the way forward to address the challenges lying ahead.

A year later, I am glad to note that our economy has come out of the worst global economic recession in many decades with minimum adverse impact, achieving a reasonable export performance in 2009 and forging ahead for sustained growth in 2010. Let me seize this opportunity today to pay tribute to the captains of our industry and their employees for this remarkable achievement. I also wish to thank MEXA for its continued support to the business community and for its valuable contribution to our economic development.


Overview of the EOE sector

Ladies and Gentlemen
In spite of the global economic slowdown, the year 2009 has not been unfavourable for the EOE sector with the value of exports recording a positive growth rate of 2.8%. Exports which stood at Rs. 35 billion in 2008 rose to Rs. 36 billion in 2009. The declining trend in employment has also slowed down with EOE labour force standing at a total of about 59,000 as at now. The number of enterprises has stabilised at around 410 with some 36 new entrants. This indicates that our EOE sector still enjoys a high degree of confidence despite the fierce competition from low cost countries.

The Textile and Clothing sub-sector which accounts for 65% of total exports has emerged unscathed of the global financial and economic crisis with a slight increase of 0.1% in export value. This positive performance realised in such a morose international trading environment is an outcome of the new dynamism demonstrated by the textile and clothing sub-sector which is focusing more on quality, creativity, innovation, design, product development and niche marketing. The outlook looks much better this year as our markets gradually come out of recovery. Provisional data available for the months of January and February this year indicate that the value of exports grew by 5.1% compared to corresponding months for last year.

The Fish and Fish preparation sub-sector which employs some 4,000 persons has also witnessed a remarkable growth of 11.5% in 2009 with export of Rs. 7.1 billion as compared to Rs. 6.4 billion in 2008. Two new enterprises have started operations this year. This sub-sector continues to represent high potential for growth and it is important that we intensify our efforts to attract new investment and position Mauritius as a hub in fish processing activities. Information obtained from the seafood operators indicate that year 2010 will be a good year. In fact, exports are expected to increase by another 10% with the seafood enterprises operating at full capacity as a result of stable fish supply.

On the other hand, the jewellery and diamond sub-sector has also recorded positive growth in 2009 with exports to the tune of Rs 2.2 billion as compared to Rs 2.1 billion in 2008. This performance is very encouraging as we know that the luxury goods segment is normally the most affected one in time of recession. The other sub-sectors such as optical goods, toys and sporting goods have performed relatively well in the context of the difficult international environment.

The indicators on our economic performance in 2009 also provide signals that confidence is back after a difficult period. Last year, the economy as a whole has been able to generate 10,000 new jobs and to attract FDI to the tune of Rs 8.5 billion despite the financial crisis. Moreover, the economy’s growth rate is expected to increase to 4.3% this year from the 2.8% registered in 2009. The manufacturing sector is also estimated to pick up in 2010 with a growth rate of 1.7% compared to 0.6% in 2009. On the basis of the performance achieved by the EOE sector in 2009, we firmly believe that 2010 will be a better year for our enterprises with accelerated export growth.

The Textile Forum
Ladies and Gentlemen
The Textile and Clothing sector remains an important pillar of the economy accounting for 4.9 of GDP, 8.9 % of the active labour force, 41.5% of total merchandise exports and 65% of EOE exports. It had to face testing time in 2008 and 2009 with the financial crisis hitting the EU and US, our major export markets.
Enterprise Mauritius (EM) recently organised the Textile Forum to assess the sector with the active participation of the operators of the industry and resource persons from Mauritius and abroad. Specifically, the aims of this forum were to re-examine the key issues facing the sector in the post-crisis era; provide participants with up-to-date insights on trends on the global apparel market, including consumer behaviour, sourcing strategies and evolution of the key markets for Mauritius; and provide a platform to industry operators to brainstorm on the ‘in-factory factors’ that need to be addressed to improve competitiveness. EM is presently finalising a comprehensive report on the Forum and is devising short to medium term Action Plan for the sector. I have to say that we have noted at the forum a high degree of confidence in the sector and the optimism expressed by our operators.

Fashion and Design Institute

Another measure to consolidate and expand the Textile and Clothing sector is the launching of the Fashion and Design Institute in September 2009. The Institute is called upon to provide invaluable support to transform the textile and clothing sector into a fashion industry. It will equally cover design in non-textile sectors such as jewellery, accessories, furniture, and graphics among others. The Fashion and Design Institute aims at developing capacity in design, creativity and innovation to facilitate the movement up the value added of the global value chain. Courses are presently offered at Diploma, Higher National Diploma and Degree levels in Art and Design, Graphic Design and Fashion Textiles. Degree and Masters programmes in Graphic Design, Interior Design and Fashion Design will be delivered in collaboration with British Universities as from September 2010. I am confident that there are a lot of talents which can emerge in this area of exclusive models and high fashion products targeting highly specific niche markets. I believe we can, in the long term, develop a critical mass of such entrepreneurs and propel Mauritius as a regional centre for Fashion and Design.

Other Support Measures

The Government is committed to consolidate and expand the economy and to support the Export Oriented Enterprises sector which provides substantial employment opportunities. The business community is provided with all the necessary conditions to perform better, and to acquire competitive rather than comparative advantages which were based on availability of cheap labour and preferential access.

I would like to stress that to assist our economy to ride over the global economic crisis, Government has put in place the Additional Stimulus Package with an envelope of Rs. 10.4 billion. Within this package, the Saving Jobs and Recovery Programme (SJR), with an outlay of Rs. 3.5 billion, has been of immense help to our enterprises. Under the MASMED Fund, now called the SMSS (Support to the Manufacture and Services Sector) Fund, so far around Rs. 131 million has been spent on schemes designed to develop production and export capability of our enterprises. On the other hand, the MTSP (Mechanism for Transitional Support to the Private Sector) has so far supported 13 companies for an aggregate value of Rs 615m. To enable the acquisition and modernisation of production equipment, enterprises, irrespective of size, are being provided under the three LEMS projects leasing facilities secured by Government. To date, 160 applications have been approved by the various leasing companies for a total loan amount of Rs. 402m. As you can see, Government is committed to support our enterprises to integrate the global value chain and improve their supply side capabilities.

Another measure to support the export enterprises is the setting up of the Export Credit Insurance Scheme (ECIS) which aims at assisting exporters having difficulties in obtaining proper insurance cover to their export sales. COFACE (Compagnie Française D’Assurance pour le Commerce Extérieur) has been selected as the implementing agency for ECIS, and SIC (State Investment Corporation) as the responsible agency. Government has earmarked a sum of Rs. 300 m for this scheme to complement on default claims above the level of primary cover provided by any insurance company. With this scheme in place, the export enterprises can be more aggressive in the market and venture into new export and non-traditional markets as they know that the risks will be mostly covered.

Enterprises themselves now have to demonstrate high competitiveness if they want to survive, forge ahead and improve. Thus, through Enterprise Mauritius, a gamut of measures is put in place to enhance the competitiveness of the EOE sector. These measures are in terms of technology transfer, training and consultancy so as to move upmarket and diversify and to improve capability development. For year 2010, EM has elaborated a programme with an outlay of Rs 340 m to implement its support projects including participation in various trade fairs with a view to consolidate existing markets and penetrate new markets. In particular, around Rs 110m has been earmarked for the textile and clothing sector.



Support from AFD
Ladies and Gentlemen
As you are aware, our country is highly dependent on exports of goods. Exports account for around 30% of our GDP. In order to sustain export development, we have an overall strategy to continuously strengthen the organisational and technical capacity of our support institutions in the export readiness of our economy. In this connection, I would like to mention the grant of Euro 1.5 m that we received last year from Agence Française de Development to implement several projects aiming at building the export capabilities of Mauritius. MEXA itself together with the University of Mauritius has benefited from this source of funding to implement a Logistics Project to build competence in the field of logistics. This project is being carried out in collaboration with the University of Le Havre. I understand that several activities have already been carried out particularly with regard to the training requirements of our operators and the training of trainers and that by completion of the project UoM and MEXA would have acquired the knowledge, tools and techniques to successfully conduct academic and award courses in logistics.

Exchange Rates
MEXA and export enterprises have on a number of occasions voiced concerns about an appreciating rupee which has a bearing on the competitiveness of our products and hence on their profit margin. It is obvious that the rate of exchange of the rupee against major currencies is an important factor influencing exports. But this is not the one and only factor. Operators guided by their own interests would prefer a weak rupee. But Government, having the whole economy in mind, has to balance the interests of exporters with those of other sectors and the consumers. As an open economy we believe that the rupee should reflect the economic fundamentals. And the Government is not insensitive to the plea on our exporters to cushion, wherever possible, against undue volatility of the rupee. In this respect, the Bank of Mauritius has, whenever possible and required, intervened in the market to stabilise the rupee. Thus, the Bank has introduced the Swap Scheme in January this year to hedge against currency fluctuations, and so far some US$ 40 million have been swapped. We have also underscored that enterprises cannot all the time rely on a weak rupee to enhance their competitiveness. Improving productivity, focusing on product development, moving up market and tapping niche markets remain essential conditions to confront competition in the market place.

Sustainable Development

Ladies and Gentlemen
As you are all aware, social compliance is becoming increasingly important whereby our exporters are under considerable pressure from consumers, NGO’s, and trade unions to ensure that their supply chain is clean and ethical and has respect for human rights. Thus, a number of standards have been developed with respect to ethical trade, fair labour, responsible production, organic products and social compliance. Mauritius is a socially compliant country and export companies have to comply with the standards required by customers. In this era of climate change, the adoption of cleaner and more efficient technologies is no longer a matter of choice but a necessity for survival in the global market place. Market trends indicate that buyers increasingly require suppliers to respond to sustainable production, and comply with acceptable standards related to quality, environmental management and good accountability. In particular, the implementation of a green textile strategy will enable the Mauritian textile industry to gain a competitive edge and hence increase its market share.

Outlook for 2010

Ladies and Gentlemen
With all these measures in place to assist and consolidate the export enterprises, I believe that the EOE sector has good prospects for this year and beyond. There are indications that the sector registered for the first two months of 2010 an export growth of 13.5% compared to corresponding period in 2009. In some of our main export markets such as the UK, France and the USA, the export growth rates were to the order of 10 to 30 percent. And given the non-renewal of AGOA benefit for Madagascar by end of 2009, orders meant for Madagascar have been redirected to be manufactured in Mauritius. The EOE growth rate is expected to be positive at 2 % this year.

Conclusion

My Ministry will continue to act as a facilitator to assist export enterprises to better face competition and we will continue to closely work with MEXA so that together en of globalisation and liberalisation.

With these words, let me thank the outgoing President with whom we have worked closely during the course of the year. I looked forward to another year of fruitful collaboration with the incoming president. Thank You
D.G.