By Andrew Jack From Financial Times

A short drive from the tatty shop fronts and slow-moving traffic of Vacoas-Phoenix in central Mauritius, Jean-Louis Roule, head of CIDP, a pharmaceutical and cosmetic-testing company, sits surrounded by modern art in a slick first-floor office that would not look out of place in the high-tech centres of San Francisco or Boston.

In a neighbouring unit occupied by Quantilab, dozens of sophisticated machines are silently at work, supporting the company’s growing international reputation as a centre for anti-doping controls and food and drug safety testing.

Such companies in Mauritius’s Biopark offer glimpses of a prosperous and more diversified future. But they remain exceptions at a time when economic growth has slowed and analysts are warning of barriers that may impede renewed expansion.

Gilbert Gnany, chief strategy officer at Mauritius Commercial Bank, forecasts that GDP will expand by 3.8 per cent this year, against an official target of 5.7 per cent for 2015-16. He cautions that the country will need to substantially boost private sector investment to meet such ambitious targets. So far, industry remains cautious.

Some analysts point to structural factors. Since 2010, the World Bank warned in a report this year, growth in Mauritius has slowed while inequality has increased. The report described growth as “disappointing” for the bottom 40 per cent. It called for a restructured education system to be at the core of change.

For much of the period since independence, Mauritius grew strongly, shifting from sugar cane into textiles and fish processing, and then into outsourcing and offshore financial services.

It avoided the disruptions of many of its African peers. Instead there was political stability, relative harmony with the private sector, and an unusually strong social services system offering pensions, free education and health.

The ethnic mix — with a legacy of French as well as British rule, and Indian and European settlers alongside Africans and Chinese — has given the country a strong international outlook. Many of the relatively highly skilled workforce are bilingual in English and French.

But today, the advantages of past decades are waning. One former senior official says: “There are two big myths in Mauritius: free education and free health.” He and others caution that underfunded state provision and inefficient subsidies have resulted in an outdated system.

That helps explain the social focus of the new government which came to power in December pledging a sharp rise in pensions. “We believe that without social peace there is no long-term development,” says Vishnu Lutchmeenaraidoo, the finance minister.

Ministers have called for an emphasis on creating an “Ocean Economy” focused on marine activities, and large-scale infrastructure investment including a series of “Smart Cities”.

“Without social peace there is no long-term development”

– Vishnu Lutchmeenaraidoo, finance minister
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Yet Mr Lutchmeenaraidoo concedes that meeting election pledges and funding ambitious new projects will require increased tax revenues.

Physical infrastructure has lagged behind growth. The M2 motorway that connects BioPark to Port Louis is frequently clogged with traffic, slowed down by traffic lights and roundabouts.

It passes CyberCity, a cluster of modern skyscrapers, which is impressive from afar. But at the foot of the buildings, employees, who have travelled far from home, struggle to find parking spaces and walk on roads with no pavements to buy their lunch from hawkers.

“The road network is now handicapping the economy and discouraging people from investing,” says Gaetan Siew, an architect who is helping co-ordinate the government’s Smart Cities programme.

Human capital will be just as important for future plans. A litmus test for the new administration will be its attitude to immigration. It would aid many in the offshore and financial services sector if foreigners could gain residency, employment and the right own land more easily.

In a small island economy, modest policy changes could provide a large boost — or a substantial setback — in the years ahead.

IMAGE: CyberCity in Mauritius Hope for the future: CyberCity

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