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The Mauritian Miracle

By Lisa J Walters, on 29 January 2018

By Dr Elena Nikolova, Lecturer in Economics, UCL SSEES

Both Mauritius and my hometown of Varna, Bulgaria are famous for their sandy beaches. Mauritius, for its five-star resorts on the Indian Ocean. Varna, for its breath-taking Black Sea coast. But Mauritius attracts travellers looking for luxury, while Varna (no less beautiful, by the way) – those looking for cheap sun.[1]

Mauritius is slightly richer than Bulgaria, but not by much. Bulgaria’s GDP per capita (in PPP terms, 2010 constant USD) in 2017 was $7, 967.70, while the corresponding figure for Mauritius is $9,822.0 (World Bank). The Mauritian government has set itself the goal of turning Mauritius in an inclusive, high-income country (with GDP per capita above $14,000) by 2030. If communist-era statistics are to be believed, Bulgaria was actually richer than Mauritius until 1990 or so. However, in recent years the gap between the two countries has widened further (Figure 1).

As of 2017, Mauritius is ranked as number 25 in the Doing Business Database, which measures the ease of doing business in a country based on indicators such as how easy it is to get electricity or resolve insolvency (as a comparison, France’s ranking is 31, behind Mauritius). By comparison, Bulgaria’s ranking is 50. Mauritius is also less corrupt than Bulgaria. Transparency International ranks Mauritius as the 50th least corrupt country in the world, while Bulgaria occupies 75th place (this comparison is based on data from 2016). And, Mauritius is a much happier place than Bulgaria: Mauritius is ranked as the 64th happiest country in the world, while Bulgaria’s ranking is 105 (out of 155 countries, 2017 World Happiness Report).

Figure 1:

Source: World Bank and author’s calculations.

What can explain the success of Mauritius? Until 1968, the country was a British colony, with a heavy dependence on sugar exports, when research has shown dependence on primary resources to be linked to increased inequality and poor-quality institutions. Mauritius is a melting pot of ethnicities and religions, when, again, ethno-linguistic diversity has been linked in the literature to poor growth and conflict, particularly in Africa. The island’s geographical location is remote, meaning that accessing world markets and ideas is expensive. Isn’t this a recipe for political and economic disaster?

Not in the case of Mauritius, and the small island may have some lessons for the rest of the world. Ethnic diversity, for instance, has not led to war and poverty. It could be that the small size of the country forces different ethnicities to live peacefully, as they must interact with each other on a daily basis. Strong democratic institutions have ensured that population diversity is a blessing rather than a boon.

Of course, this raises the question where democratic institutions come from. British colonial legacy could be one explanation. But what is crucial is that the country’s politicians have (correctly) realized that growth cannot happen without a democratic commitment. And indeed, political stability and the absence of conflict have attracted many investors who operate in Africa but are based in Mauritius (together with its status as an offshore zone).

The second lesson has to do with education. Both the primary and secondary education system are very competitive, with top students (ranked nationally) after secondary school guaranteed scholarships to study abroad. In 2015, close to 50% of all population aged 20-24 was enrolled in tertiary education, and 23% of these students were studying abroad. What is more, the Mauritius government has recently introduced a Mauritius diaspora scheme which aims to attract highly-educated Mauritians residing abroad to return to Mauritius, which includes, among other incentives, exemption from income tax for ten years.

Finally, rather than turning its small size into a hindrance, Mauritius has embraced it and exploited it through openness. The Mauritian growth strategy takes advantage of what the rest of the world has to offer. When much of Europe is gripped by fiscal austerity, Mauritius is building a new 26-kilometer light rail, in collaboration with the government of Singapore. It has tax treaties with 43 countries, and bilateral relations with China are strong. For instance, China is providing technical expertise to develop the state-owned television station, the Mauritius Broadcasting Corporation, along with interest-free loans.

And of course, those Mauritian beaches are not bad at all, as I can certify from personal experience.

[1] Until 1990, many of Bulgaria’s Black Sea resorts were off limits to mere mortals, and after the fall of communism, hotels were quickly privatized. This was largely done on a ‘piecemeal’ basis and the new owners, unsurprisingly, came from the old (and now new) political elite. Resorts such as Golden Sands became overpopulated and overbuilt.

Disclaimer: The views expressed in this piece are those of the author only (in a personal capacity) and do not reflect those of any organization.

Further reading on Mauritius: Subramanian, M. A., & Roy, M. D. (2001). Who Can Explain the Mauritian Miracle: Meade, Romer, Sachs, or Rodrik? (No. 1-116), IMF working paper

Further reading on Bulgaria: Nikolova, E., & Marinov, N. (2017). Do public fund windfalls increase corruption? Evidence from a natural disaster. Comparative Political Studies, 50(11), 1455-1488.