ECONOMIC REVIEW UNDERWAY AS ECONOMIC REFORM PROGRAMME CLOCKS 5 YEARS
(Posted 30th October 2013)
Five years ago to the day did President James Alix Michel go on national television to make a ground breaking announcement about a new economic course of action, as the country was coming under the dark cloud of a global financial meltdown and a rapidly spiraling out of control global recession and staring at a major financial default worth over 200 million US Dollars. At the time, President Michel was but 2 years and 3 months into his first elected term of office and the announcements he was going to make were representing a radical break with the country’s past economic policies, a litmus test of sorts even for a seasoned politician, more so considering the direction the country had taken under his mentor and predecessor Albert Rene, who had retired from office in April 2004 at which time an orderly succession took place and brought James Alix Michel to power.
The changes for the Seychelles were instant and massive, as the IMF, in order to approve an economic bailout package, had insisted on dropping exchange controls – which led to the free fall of the Seychelles Rupee, halving its value within a day and subsequently doubling the import cost of every item landed on the archipelago, driving inflation to new unprecedented peaks. From about 8 SR to the US Dollar the value of the currency crashed to 16 RS to the Dollar and thankfully stands today at 12 RS to the Dollar, a sign that the economy has taken the bitter medicine and undergone shift and change to the better.
Deep cuts in the civil service, sale of state assets and fiscal and legal reforms were demanded by the Bretton Woods institutions and the Seychelles had little choice but to go along, as the other option would have been a scenario of a default on a wide scale, wreaking worse havoc on the economy and possibly resulting in outright bankruptcy.
Tourism, one of the key economic pillars, was hit hard when the global recession struck, as the archipelago’s main tourist markets were embroiled in bank closures as a result of the crash in the mortgage market reaching from America, where the card house collapsed, into every banking system around the world. With tourist arrivals falling and the increase in piracy activity in the waters surrounding the islands by Somalis taking ships almost at will, the two factors combined to become a clear and present danger to the very survival of the Seychelles, and something, or several things had to give.
On the piracy front the Seychelles were the first country to aggressively pursue the pirates and engage them at sea, winning several victories which eventually convinced the naval coalition that indeed a change of tack was needed to halt the advance of the Somali pirates deep into the Indian Ocean sea lanes down to the entrance of the Arabian Gulf and in southerly direction as far as he Mozambique channel. The fact that piracy is well near defeated now must surely be credited to the Seychelles having taken the lead in arming ships and fighting back rather than being more concerned with the rights of the pirates than those of the victims.
The second major change was a restructuring of the way tourism was run in the country, giving the private sector a much greater say in the way how the islands were marketed overseas and it was a stroke of good fortunes that one Alain St. Ange was seconded to the tourism board as Director of Tourism Marketing in the first phase of overhauling and restructuring that establishment, before eventually in a second phase changing the board of directors from the ground up while appointing St. Ange as CEO of the STB.
The much hoped for miracle actually did happen, by good fortune and good luck but mostly by developing a vision of a new Brand Seychelles, which received the full support of President Michel and to everyone’s relief the gambit paid off and more than just handsomely.
Visitor arrivals since 2003 give the picture of where tourism was heading, underscoring the need in 2008 to take such drastic action to arrest a downward trend and bring back growth, something which was not only ‘just’ achieved but exceeded the wildest expectations from both private sector and government since then:
2008 158.952 (impact of the global recession when forecasts projected a 30+ percent loss in arrivals)
2009 157.541 (following changes in the management of STB, this projected loss was arrested and reversed)
2010 174.529 (the change in marketing direction and rebranding pays off with a sharp rise in arrivals in 2010)
2013 ytd168.995 (January – September)
Since 2010 every year a new arrival record was established and inspite of conservative forecasts for the present year are the projected results for the full year again pointing to a new peak, as the incredible marketing juggernaut STB created under St. Ange’s leadership continues to impress in particular the new and emerging markets.
While Alain St. Ange was in March 2012 handed the tourism and culture portfolio as cabinet minister, President Michel himself had kept tourism under his direct control until then, another stroke of good fortune helped to turn ailing Air Seychelles around, completing the revival of key components of how the tourism industry interlinked with global markets.
It comes as no surprise therefore that President Michel was in May 2011 re-elected to a second 5 year term with a significantly larger majority compared to his narrow first win in 2006, a clear sign that the people of Seychelles, perhaps grudgingly but nevertheless knowing that their President took the right economic decisions, awarded him with their votes, leaving the opposition at the time in tatters when claims of voting irregularities were flatly rejected by international observers. This was incidentally equally witnessed by this correspondent at the time, who on election day migrated through many voting stations without seeing one single incident of voter intimidation or vote buying as had been alleged by a the election runner ups, who would in the end not even present themselves for the announcement of the results.
Bold decisions often leave only two possible outcomes, one of either gigantic failure or else jubilant victory and it was the latter the Seychelles’ tasted, when the President showed the mettle needed to cut the umbilical cord to the past and embraced a new approach with greater, almost unprecedented economic freedoms. He, supported by a relatively young cabinet, steered the country from the past command economy to a relatively free market regime, proof that even a ruling party can adapt to change when the very survival of it is at stake.
Today, five years down the line, has tourism become the undisputed economic lead sector but that not being enough has President Michel opened new doors with his vision to amalgamate the green and the blue economy, introduce forward looking policies for sustainable use of renewable energies and chart a course ahead for the islands which can see sustained economic growth towards the end of this decade and beyond.
In the morning will President Michel, exactly 5 years since his address on national TV rattled the establishment and the people of the Seychelles with its drastic measures, open an IMF review conference at the La Meridien Barbarons Hotel, taking stock no doubt of the accomplishments of the past 5 years and how the bitter prescription of economic reforms in fact cured the patient to the great relief of the nation, but also looking ahead and outlining what still remains to be done to secure a prosperous future for the Seychelles.
The event will be nationally broadcast by SBC and courtesy of Cable and Wireless will a live stream be made available for interested readers to follow from anywhere around the world, simply by accessing the Live Video Streaming and media information of the day’s events, just click here for the relevant information. Coverage starts at 4.30 GMT/UTC. The Seychelles Islands, truly Another World.
Additionally I have now added the full speech by President James Alix Michel, given on the opening of the workshop earlier this week:
Seychelles Conference on Economic Reforms
Speech by President James Michel
October 31, 2013
Vice-President Danny Faure,
Ladies and Gentlemen,
A nation’s strength, its resilience, is defined by its ability to adapt, to change. Every so often in its history, certain harsh and bold decisions have to be made. They are not necessarily popular. They can cost votes. And their outcome is not necessarily predictable. But such decisions have to be made consciously, bravely and strategically. For the common good and in the public interest.
That is exactly what we did on 31st October 2008. Exactly five years to this day Seychelles took a bold decision. And we began a new chapter in our history.
It gives me great pleasure today to join you in this important conference on Seychelles’ reform experience under the theme “From Stabilization to Sustained Growth: Five years of Successful Reforms and the Challenges Ahead”.
On this day five years ago, I announced to the Seychellois people the new direction that my Government had opted to take for our country. It was not a wild gamble. It was a calculated risk. Without political considerations. Without consideration for my political career. A calculated risk, with – foremost – the welfare of the Seychellois in mind. On that day Seychelles embarked on a journey that would change its socio-economic landscape and lay the new foundation for sustainable growth and prosperity.
Ladies and gentlemen,
As with many journeys, ours was fraught with uncertainty, risk and even fear. Many – and rightly so – were concerned about the impact of measures that lay ahead. Measures of austerity that many governments across the globe had dared not take when needed. The political risks are just too great.
But I knew, without any doubt, that there was only one option and only one way forward. And that was the one that we took. The time had come for a fundamental change; circumstances dictated it.
Domestic policies, with all the good intentions, had led to increased imbalances and significantly weakened the fundamentals. The signs were there for all to see. An over-valued rupee, empty shelves in the shops, a flourishing black market, queuing up to buy $400 for travel overseas … Our resilience against international shocks had been eroded and we could no longer honour our commitments to our international creditors. It was clear that the economic model that had served our country for so long was no longer going to take us where we wanted to go as a nation. Our economy could no longer sustain the socio-economic needs of our people. It could no longer mitigate the effects of exogenous shocks, such as rising food and fuel prices on the international markets. And as these were exacerbated by the 2008 global financial meltdown, we knew that we had to act. Act decisively, and act fast. The time and need to change direction had come.
And I did so, after consulting extensively with local and international partners. I did so, putting all political considerations aside – including my own. I did so, putting the interests of our country and our people first and foremost. Because I had absolute faith in the people of Seychelles.
In my address to the nation on 31st October 2008, I emphasised that the time had come for us all to embrace a new reality – a new beginning and a new economic model underpinned by a modern economic framework. But it wasn’t just about economics. It was about ushering Seychelles into a new era of modernity, profound change, accountability, responsibility and transparency. It was about reassuring the people that, notwithstanding the harsh realities of the macro-economic reform program that we were about to enter into, no Seychellois would be left behind.
My message was also about the need to change our mindset. That as much as Government would look after the needy, the most vulnerable in our society, those who were capable of working had to get up and fend for themselves.
Ladies and gentlemen,
The reform program that my Government has implemented has been – I do believe – one of the most complete and comprehensive macro-economic and structural reform programmes that the world has experienced in recent times. Whilst we are a small nation and to some we may not matter, the widespread recognition of the international community has shown that actually we DO matter.
Seychelles is today respected as a nation which has done the right thing. We have a track record that is recognized by the international community at large, from the multilateral to bilateral partners, rating agencies, as well as commercial financial organizations. We have a track record of implementing appropriate policies. And adhering to them. Our people are respected as a resilient and smart people who found the courage to stand by their Government to make our country a better place, a more prosperous, caring and happier place.
In this regard, I pay tribute to the people of Seychelles. They were presented with harsh choices during consultations that I had with them. They listened. They accepted them and they backed them. The success of our programme is entirely owned by them. And this is what we are saying to the world today: if you have the people’s backing nothing is impossible.
As President of this country, one of my primary preoccupations is how my Government can continue to improve the quality of life of our people; how we continue to create wealth, create jobs and improve the living standards of each and every Seychellois.
This conference will address the many facets of our programme: its success against overwhelming odds, its challenges and the lessons we have all learnt from the reforms. It will also explore policy actions and options on the way forward. It will also focus on growth.
But I am pleased to note that “growth” will not be an end in itself during the discussions. I strongly urge you to focus more on the quality of growth. How can we make that growth inclusive, such that it touches each and every person in our society? What is growth worth, after all, if it does not benefit everyone?
We need to promote inclusive growth that provides equal opportunities, that reduces inequality, and promotes social justice. Growth should not leave any Seychellois behind.
As we focus on the way forward, let us not forget one fundamental pre-condition for sustainable growth, which has been crucial for taking us to where we are today, five years after the introduction of the Reform Programme: that is macroeconomic stability.
We need strong macro policies and we have to continue to pursue our structural reform. Structural reforms are critical to put in place the right environment, eliminate inefficiencies and further modernize our economy. We have reached where we are today because our policies have been well designed. We have pursued our structural reform agenda with vigour and the results are there for us all to see. It is crucial therefore that we maintain the same discipline that we have shown over the past five years.
I would like to take this opportunity today to reassure our development partners that Seychelles remains more than ever committed to a stable and sustainable economy. We will continue to pursue prudent and strong macroeconomic policies. We will continue to further strengthen our economic base. We will continue to build resilience so that we can better cushion ourselves against the impact of international shocks. We will bring down our debt level to a more sustainable target, and in this regard we remain committed to our 50% debt to GDP ratio target by 2018.
In parallel, we need to continue to invest in our people, in the education of our children, in the health of our citizens and in decent housing for our people. I do recognize that achieving fiscal consolidation and the need for investment are often conflicting objectives. However, as our experience has shown in the past five years in working with key institutions like the IMF, the World Bank, the AfDB, and the European Union, to name but a few, we can actually reconcile those “conflicting objectives” when and where there is flexibility, understanding, especially when the spirit of “give and take” prevails.
Ladies and gentlemen,
I would like to thank the IMF for co-organizing this important conference. I thank all international institutions that have accepted our invitation to participate.
Let me also express, on behalf of the people of Seychelles, our utmost appreciation to the IMF, the World Bank, the African Development Bank, the European Union that have been key partners in support of our macro-economic reform program. As much as we had the will to implement our reform program we would not have succeeded without your support. Your financial support has been critical in ensuring the success of our policies, whilst technical assistance has allowed us to modernise our institutional and legal frameworks, and build capacity.
I would also like to thank our bilateral partners that agreed measures to alleviate our debt stock towards them. I would like to express, in particular, my sincere gratitude to Abu Dhabi for extending to us a generous grant, in the aftermath of the introduction of the Programme, which allowed us to weather the storm.
In conclusion, I would like, once again, to thank the people of Seychelles for their indefectible support in the implementation of the Programme. I wish to express my gratitude to Vice-President Danny Faure for driving with such passion the Reform Programme. Thank you Vice-President. I thank the technical teams from all ministries, the Central Bank and government institutions under his leadership for their contribution toward its success. I thank the Minister of Finance, Pierre Laporte. I also want to recognize the efforts and support of all other stakeholders, including the National Assembly, the private sector and civil society in general. We should be especially proud of the fact that our progress has not been at the expense of ideals that we hold dear.
Ladies and Gentlemen,
I now have the pleasure to declare open the conference “From Stabilization to Sustained Growth: Five years of Successful Reforms and the Challenges Ahead”.
I thank you all.