1. Development Cooperation Forum Enhancing Coherence in Policies Affecting Development Cooperation – The case of a Reforming Economy 13 November 2009 in Vienna

2. Policy Coherence Policy coherence occurs mainly in 3 policy areas, which are fundamental to economic relations: aid, trade and investment policies. My presentation will focus on two of these policy areas which I have combined in one theme Aid for Trade. AFT goes beyond trade policy issue as we need aid to implement reforms designed to promote economic growth that can allow and sustain the opening of the economy. We need a wide development agenda to help countries integrate the world economy.

3. The cost of trade liberalisation Difficult Adjustment Problems when opening the economy Lowering barriers to trade has immediate economic and social costs Loss of employment, loss of customs revenue, closure of non- competitive firms Whilst benefits accrue in the medium to long term If not addressed upfront these can have political and social costs that may lead to a reversal of policies DCs have tight budgets and may not be able to access capital markets to meet the costs of reform The international community need to provide adequate and predictable resources to mitigate these risks

4. What are our Contraints to Trade Liberalisation World economic crisis : Mauritius (Growth rate of 5.0% in 2008 but slowed down to 2.7% in 2009). The Government forced to balance the long-run policy measures with more immediate focus on economic and social consequences from the crisis. There are 0ther serious challenges to economic and social development: climate change, oil prices, food security Reforms are integral part of the MTEF and PBB: need more predictability and multi-year commitments on AFT flow.

5. What the development community can do? Most donors are focusing their interventions on TA and Capacity Building Necessary but not sufficient Need to facilitate effective integration of DCs in the global economy Support to be extended to: Develop comprehensive national development strategies with trade liberalisation at the core. Estimate the adjustment costs and lobby the development community to finance these. A Flexible mechanism needed. Building productive capacity and infrastructure to diversify exports and improve competitiveness Delivery mechanism and access rules to AFT to facilitate implementation of AFT agenda and necessary reforms

6. Some suggestions for greater coherence in Aid policy Need for greater coherence in IFI strategy with respect to regional and global integration initiatives and national development strategies: Rely Field Staff knowledge and observation. Need single or streamlined framework of conditions and manageable KPIs derived from national budget/devt strategy: Burden of conditionalities to be kept to a reasonable minimum as reform is a long term process and progress can only be cumulative Need to have flexible financial instruments similar to those put in place to deal with the global crisis. Consolidate on work that have already been done: Paris Declaration on Aid Effectiveness. OECD work on Policy Coherence for development.

7. Reforms Agenda linked to AFT. At the Governments request, an Aid for Trade mission visited Mauritius in early 2006 to assess the countrys trade competitiveness, facilitate the adjustment from protection to global competitiveness and link to the international communitys AFT initiative. The mission report proposed a mixed of policies and measures to: strengthen competitiveness; move resources out of declining and into dynamically growing sectors; improve the quality and cost of input services such as telecommunications, air transport, and cargo handling; and strengthen transitional support for displaced workers

8. Reform Agenda The core of the reform agenda initiated in July 2006: open the economy to the rest of the world to be achieved over a 10 year period implement wide economic and social reforms that incorporate the recommendations of the AFT mission. These wide economic and social reforms comprise: stabilising macroeconomic fundamentals Improving public sector efficiency Enhancing global competitiveness of industry- ENTERPRISE PROGRAMME Improving business climate to attract FDI Making labour more mobile Providing social safety nets, workfare programmes and widening the circle of opportunities- EMPOWERMENT PROGRAMME Four reform Pillars have been designed.

9. The 4 Reform Pillars Improve fiscal performance and Public Sector Efficiency: Reduce expenditure: Bring the level of primary spending to 20.6% of GDP by 2011, compared to 22.1% in 2008/09 Tax system was revamped (single flat tax on personal and corporate income) Improve Trade competitiveness: Revamp incentives to maintain exports at 65% of GDP over the period 2011, compared to 64% in 2008. Reforms over the ICT regulatory environment: ICT sectors contribution to GDP to 6.7% by 2011, compared to 5.5 % of GDP in 2008

10. Reforms Programs Improve investment climate by implementing strategies to remove obstacles to business operations. Raise Mauritius ranking in the World Banks Doing Business Report to a top 10 position by 2011, compared to 17 (out of 183 countries) in 2009. Business registration and regulation procedures simplified Restrictions on land acquisition by foreigners eased Improve infrastructure -Mechanisms to improve implementation capacity; Widening the circle of opportunity through participation, social inclusion, and sustainability. Empowerment programme for training of redundant Plan for Eradicating Absolute Poverty launched Provide transitional support for unemployed workers; Supply low-income housing;

11. What are our Challenges The challenge is to balance national cost and benefit of being consistent with the economic and policy regimes promoted by aid donor agencies and ensure that adequate aid is received to make such policy coherence sustainable. Increase our export and mobilise sufficient FDI to sustain development and reform process and for knowledge enhancement, technology transfer and innovation, enhancement of managerial skill and creation of high value employment and give a boost to small and medium enterprise. Mauritius need support to integrate its domestic financial market. Mobilise sufficient AFT to sustain reform.