The Formulation of the SME Policy Paper in Mauritius
Jairaz Pochun

• Introduction
• Context
• First Series of Consultations
• New Vision for the Development of SMEs
• Focused Meeting - Recommendations

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The Formulation of the SME Policy Paper in Mauritius
Jairaz Pochun

Introduction

The purpose of this paper is to describe briefly the method adopted in the formulation of the SME Policy Paper in Mauritius, which included in the initial stages the drawing or putting together of bits and pieces, followed, as a second exercise, by a more organized and structured meeting with stakeholders.

Context

The post-independence period was very much characterized by high unemployment (20%) and other economic difficulties resulting from a stagnating agricultural sector in terms of job creation and foreign exchange earnings.

The economic diversification into other areas of productive sectors was the call of the day. Government's decision to consider industrialization as a possible way out of the economic fix did pay off. The industrial policy in fact advocated a two-prong approach to manufacturing for exclusive exports and for the domestic market.

The post-industrialization success of the eighties with full employment and shortage of qualified manpower has necessitated a re-thinking of the industrial policy (commonly described as the second phase industrial development strategy) with greater emphasis on SME development, productivity, quality and competitiveness enhancement.

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This strategy and policy, in so far as SMEs are concerned, aims at consolidation, diversification, modernization, integration and export promotion. SME development with an inward-looking strategy was no longer valid.

First Series of Consultations

As a matter of fact, the first series of consultations really started many years ago. However, policy measures that were introduced at various stages in the past are not to be found in any comprehensive document. They have, in fact, been the outcome of various findings and recommendations of a number of seminars, conferences, workshops and mission reports, organized by local organizations in collaboration with international institutions and consultants. The two leading local organizations, along with the University of Mauritius, were the Small Industries Development Organization (SIDO) and the Mauritius Employers' Federation (MEF), while international institutions included the United Nations Industrial Development Organization (UNIDO) and the International Labour Organization (ILO).

Such recommendations were usually made in the form of short formal reports to the government authorities at the end of meetings. They essentially centred around Government policy and thrust in view of the increasing role that small enterprises were called upon to play in the socio-economic development of the country.

As would be expected, the recommendations invariably focused on:-

• the legal framework with emphasis on definition of the small scale industry;
• fiscal incentives and facilities;
• financial assistance (priority status) and loans;
• institutional support (such as the creation of an apex organization).

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New Vision for the Development of SMEs

The Industrial Expansion Act of 1993 had a slight improvement over the earlier Small Scale Industries Act, 1988, in that the medium sized stratum of the enterprises was highlighted and provision made to upgrade the ceiling on the CIF value of production equipment.

With the multifarious changes following the Uruguay Round and the subsequent establishment of the World Trade Organization, the need to consolidate our outward looking strategy for sustained economic growth warranted for a review of the environment in which SMEs operate.

The National Workshop on "New Vision for SMEs Development" was convened in May 1996 with the following objectives:

• to create an awareness of the role and contribution of SMEs in the economy,
• to take stock of the problems and slow growth of SMEs,
• to look into ways and means of sustaining growth of SMEs.

A call for papers was sent out to all stakeholders, namely entrepreneurs and industrialists, bankers, academics, NGOs, consultancy firms, financing institutions (venture capital), government ministries and departments, the University of Mauritius, research institutes, employers' federations, small entrepreneurs' associations, the Export Processing Zone Association, investment and export promotion organizations, the Chamber of Commerce and Industry, large industries and sub-contractors, etc.

A total of 120 participants attended the two-day workshop at which 18 presentations were made.

The assistance of two international consultants was sought both to give us an insight into the discussion of SME development at the international level, and to lead the workshop discussions. For purposes of arriving at concrete proposals, the participants were organized into three groups in the last session. They were to discuss and make proposals on the following topics:

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1. Policy, Environment and Framework;
2. Support Institutions and Incentives;
3. Technology and Competitiveness.

Focused Meeting - Recommendations

Two weeks after the workshop, one half-day meeting was organized in an isolated hotel resort with a small group of resource persons led by the Director of SMIDO, to focus on the core problems and for screening of the various proposals with a view to formulating specific measures for the growth of SMEs.

The Final Report ("Yellow Book") which also contains twelve selected papers presented at the workshop, has come up with recommendations for action in eight specific areas awaiting implementation, keeping in mind the need for a modern and competitive SMEs sector:-

1. Revised Definition of SMEs
2. Validity of Certificate of Registration
3. Package of Incentives
4. Financial Assistance for Modernization
5. Encouragement of Exports
6. Technology and Quantity
7. Management and Information Technology Training
8. Networking Arrangements