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									                            Government of Mauritius

                   United Nations Development Programme


           Strategic Budgeting in the Government of Mauritius
                                     (Revision B)

                                   [ID 00055329]


                               April 2007 – March 2009




                                 Brief description

The main objective of this project is to support the Economic Reform Programme of the
Government of Mauritius with a particular focus on Strategic Budgeting. It takes into
account the implementation of a full-fledged Programme Based-Budgeting (PBB)
embedded in a three year Medium Term Expenditure Framework (MTEF), as of budget
2008/09, and the priority of increasing the competitiveness of the economy, attracting
foreign direct investment, empowering the poor and strengthening fiscal management, as
pointed out in the 2006/2007 Budget Speech.

The implementation of a full-fledged PBB will be preceded by a few enabling changes
comprising enactment of the new Organic Budget Law; accompanying changes in the
Financial Management Manual (FMM); adoption of a GFS-consistent Chart of Accounts
(COA); revision of the budget formats; and development of a modernized IT system for
Financial Management and Performance Budgets. The preparation or redefinition of
relevant sector policies/strategies for the implementation of Programme-Based Budgets is
a major challenge, and the key sectors are identified: Education & Human Resources,
Health & Quality of Life, Tourism, ICT, Environment, Energy, Agro-industry & Fisheries,
Industry & SMEs, and Social Housing. Finally, the management capacity at level of
ministries and public administration will be enhanced through capacity building and the
development of a strategy for performance management systems.




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UNDAF Outcome(s)/Indicator(s):                       NA
(Link to UNDAF outcome., If no UNDAF, leave blank)


MYFF 2004-2007 Service line: Public administration reform

Expected Outcome: Fostering Democratic Governance in the Republic of Mauritius

Indicator: Government Economic Reform implemented

Expected Output : Strategic Budgeting

Indicator 1: Programme Based Budgeting implemented and system adopted by all
ministers by 2008-2009, and all staff trained in PBB

Indicator 2: Coordination on sector strategies initiated, sector policy/strategies identified
and formulated by key ministries in 2008

Indicator 3: Coordination on PBB targeted activities in the social sector developed by
2009

Indicator 4: HR management related to PMS introduced in 2007/08 in pilot ministries,
staff trained on PMS

Implementing partner: Ministry of Finance and Economic Development (MoFED)


       Programme Period : April 2007 – March 2009             Total budget:         $ 685.900
       Project Title : Strategic Budgeting in the             Allocated resources:
       Government of Mauritius                               Regular (UNDP)        $ 685.900
       Project ID: 00055329                                  Other:(in-kind from MoFED)
       Project Duration: 24 months




Agreed by Government/ Implementing Partner: The Ministry of Finance and
Economic Development
H.E. Rama SITHANEN, Deputy Prime Minister and Minister of Finance and
Economic Development


                                                              Date


Agreed by United Nations Development Programme
Claudio CALDARONE, Resident Representative


________________________________________                      Date


                                                      2
                               TABLE OF CONTENTS




Part I Situation Analysis                                            4

Part II Strategy                                                     6

Part III Management Arrangements                                     28

Part IV Monitoring and Evaluation                                    29

Part V Legal Context                                                 29

Part VI Budget and Project Results Framework                         30




    APPENDICES

   APPENDIX I TORs Lead Economic/Economic Advisor
   APPENDIX II TORs International Consultant for supporting the development of Civil
    Service Human Resources Management
   APPENDIX III TORs International Consultant for the setting up of the Social Register
    of Mauritius
   APPENDIX IV TORs International Consultant in Environment Accounting
   APPENDIX V TORs International Consultant for the Development of Productivity
    Indicators
   APPENDIX VI TORs International Consultant for elaboration of a Tourism Satellite
    Account
   APPENDIX VII TORs International Consultant for the finalization of the Chart of
    Accounts
   APPENDIX VIII TORs International Consultant for the Environmental Sector
    Analysis
   APPENDIX IX TORs International Consultant for Compilation and Analysis of Social
    Accounting Matrix
   APPENDIX X Draft on UNDP/UNEP inputs to the Energy Policy Reform
   APPENDIX XI TORs for Energy Policy for the Republic of Mauritius



                                           3
                                      Part I
                               SITUATION ANALYSIS


1.1 BACKGROUND

Over the past three decades, Mauritius has achieved remarkable progress with sustained
economic growth and significant improvement in the standard of living. Annual rates of
growth have averaged over 5 per cent and per capita income now exceeds
US$5,000. Mauritius has successfully diversified its economic activities, particularly in
agriculture, manufacturing, tourism, and financial and business services. Life expectancy
at birth, adult literacy and income distribution have improved significantly to surpass
average levels for upper middle-income countries. It ranks among the top performing
economies on many fronts. For instance, Mauritius is ranked at the 65th position in the
Human Development Index, out of 177 countries.

Mauritius is, however, facing a sharp transition from dependence on trade preferences to
open competition in the global economy. In view of addressing the resulting
macroeconomic imbalances, the Government of Mauritius has introduced a series of
measures to set the stage for robust growth. In addition, the 2007/08 Budget marks the
starting point of a clear and credible medium term reform programme that will help to
build the strong macroeconomic, institutional and social underpinnings to drive Mauritius
to a new higher growth trajectory of 7-8% and thus achieve the country‟s long term
potential.

The Government economic reform programme thus aims at hiking back the economy to a
higher growth path and making it more competitive, flexible and adaptable by (a) fiscal
consolidation and improving public sector efficiency; (b) enhancing trade
competitiveness; (c) improving the investment climate to rank Mauritius among the Top
Ten most investment- and business-friendly locations in the world; (d) democratising the
economy; and (e) ensuring balanced equitable development. The overall objective is to
double GDP and salary levels in 6 to 7 years and to reach full employment in 3 to 4 years.

1.2 REFORM FRAMEWORK

Mauritius is currently confronting two distinct, but related challenges. The first comprises
the “triple trade shock” – the loss of textile and sugar preferences and soaring oil prices
which have put the balance of payments under pressure and caused growth to slow. The
second, deeper and more intractable, is a radical transformation from low wage sugar-
textiles-tourism exporter to high-tech, globally competitive services hub. Though this
transformation has been underway for a decade or more, the trade shock has added a new
urgency. The fiscal situation over the recent years has deteriorated owing to increasing
expenditures and falling tax revenues. The Central Government outstanding debt has
increased to 57.5% in 2005-06, implying a high level of debt burden. In response to these
challenges, the Government has formulated a 10-year economic reform programme to
return the economy onto a growth path of over 6% in the longer term and for which it is
relying on external resources. The reform programme outlines a string of measures to

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achieve fiscal consolidation and improving public sector efficiency, improve trade
competitiveness and the investment climate while ensuring broader participation and social
inclusion of all sections of society.

The Government of Mauritius, led by the Ministry of Finance and Economic
Development (MoFED), is now introducing a number of initiatives aimed at modernizing
public resources management and improving the efficiency and effectiveness of
government spending. These initiatives include strengthening the strategic budgeting
process, introducing Programme-Based Budgeting (PBB) across the Government, and
modernizing the information systems used in government financial and performance
management. In addition, the Government is undergoing broader reforms and
restructuring, including among others the formulation of sector strategies in key sectors
and the identification of a Para-statal Reform Programme.

MoFED presents the annual budget in a line itemized format segregated into recurrent
and capital budgets. Some years back, MoFED decided to switch over to PBB in what
was perceived as the key feature of the Medium Term Expenditure Framework (MTEF)
initiative. The MTEF initiative had earlier formalized the medium term approach of the
Government in taking revenue, debt and spending decisions. The elements of PBB were
illustrated for select ministries in two documents presented successively in 2004/05 and
2005/06 along with the annual budget presentation. In 2006-07, further development of
PBB was put on hold as reforms initiated by the incumbent government entailed a
paradigm shift in strategic thinking. It was decided to await the crystallization of updated
or new sector strategies before these could be represented through the formulation of
appropriate programs. The break also helped MoFED reflect on ways to enhance the
ownership of programs by the line ministries, a direct consequence of which led to the
emergence of Budget Sector Support Teams (BSST) dedicated to liaising with each of the
line ministries. For budget 2007-08, MoFED is confident of extending the PBB to all the
ministries in line with the vision of “making Mauritius a nicer place for the next
generation to live”. The concerned BSST in collaboration with their respective
counterparts in the line ministries will shortly come out with program proposals. The
accuracy of proposed programmes and their measurable outcomes, sub-programmes and
their specific objectives, intermediate and final outputs and related performance
indicators will however need to be thoroughly examined. The quality of formulated
programmes / sub-programmes may also need to be upgraded through engagement of
sector specialists provided by the external partners. The relevance of PBB is now
unquestionable and more so in the country context as seeking value for money and
eliminating wastage are the top priorities of the government. A fully developed and
operational PBB is expected to set in motion an amicable budgetary process focused at
achieving the critical objectives of the government.

As of 2007, the two main goals of MoFED will be to ensure: (i) sustainable and equitable
socio-economic development; and (ii) efficient and effective use of economic resources.
The emphasis will be on bring changes, achieving national objectives and getting results
whilst ensuring proper management of all public spending, accountability, transparency
and good governance by all line ministries.



                                             5
                                        Part II
                                      STRATEGY

2.1 PROJECT FRAMEWORK

The government of Mauritius is committed to strengthening its governance institutions to
ensure that it effectively and efficiently responds to the demands of a rapidly
modernizing and diversifying economy in a competitive international environment. As
part of this commitment, the implementation of the Programme-based Budgeting (PBB)
will have significant impact on the Government of Mauritius, not only in terms of
ensuring sustainable and equitable socio-economic development, but also structuring a
more efficient and effective use of economic resources.

UNDP‟s development mandate is based on assisting countries to achieve sustainable
human development, and strengthening governance through public administration reform.
These are part of UNDP‟s main priorities and service lines within Goal 1 “Achieving the
MDGs and reducing human poverty” and Goal 2 “Fostering democratic governance
under the Multi-Year Funding framework (MYFF) 2004-2007”, also including service
line 1.4 globalization benefiting the poor, in particular harmonization and alignment of
processes and policies.

As of 2007, UNDP will promote the goals of inclusive participation and responsive
governance but strengthen state capacity to deliver public services, in particular through
the development and implementation of Programme-Based Budgeting (PBB).

2.2 GOVERNMENT ECONOMIC REFORM PROGRAMME

The Coordination with various development partners in engaging them for getting the
necessary assistance regarding the implementation of the Government reform programme
now appears as essential.

The UNDP team will provide assistance to the preparation of an action-oriented Letter of
Development Policy (LDP) that will include a matrix reflecting the commitments of the
line ministries under the Programme-Based Budget (PBB). It will be important to show
the links between policy statements from the ministries and the associated indicators in
the PBB presented to the National Assembly.

The LDP will also provide an assessment of the implementation of the reforms either
announced in the 2007/07 budget speech or supplemented by others that have been
enacted.

2.3 STRATEGIC BUDGETING

The budget 2006/07 launched economic reforms focusing on increasing the
competitiveness of the economy, attracting foreign direct investment, empowering the
poor and strengthening fiscal management. As part of fiscal management reforms, budget
reforms were undertaken in budget 2007/08 with the introduction of an indicative

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Programme-Based Budget (PBB). The Government of Mauritius is now decided to
implement a full-fledged PBB embedded in a three year Medium Term Expenditure
Framework (MTEF), as of budget 2008/09. The implementation of a full-fledged PBB
will be preceded by a few enabling changes comprising enactment of the new Organic
Budget Law; accompanying changes in the Financial Management Manual (FMM);
adoption of a GFS-consistent Chart of Accounts (COA); revision of the budget formats;
and development of a modernized IT system including a Financial Management
Information System (FMIS) under ORACLE FINANCIAL and Performance Budgets under
ORACLE BALANCED SCORECARD (BSC).

The main objectives of this budget reform is to increase efficiency in public expenditure
management (PEM) by applying Programme-Based Budgeting (PBB) that creates better
resource allocation; linking budgets to the sector strategies; upgrading accounting
policies; establishing partnerships with the private sector and independent institutions to
provide select services; introducing the latest technologies and systems to enhance
operational efficiency and to improve service delivery.

2.4 REVENUE PROJECTIONS AND EXPENDITURE ENVELOPE FOR BUDGET PREPARATION

The core functions of the Macroeconomic Division (MoFED Budget Office) should be
redefined as follows:
- Systematic economic and fiscal data collection and evaluation;
- Economic and fiscal analysis;
- Economic and fiscal forecasting;
- Policy options and recommendations;
- Annual budget and medium-term fiscal framework coordination

The broad objective of the UNDP intervention will be to: i) provide advice and technical
support to the Budget Office that provides integrated macroeconomic and fiscal
analytical and projection functions to support the budget process; ii) design, estimate,
build and provide an initial set of projections from a macroeconomic model for
Mauritius; and iii) Train relevant staff in macroeconomic accounting, flow of funds
analysis, and use of the macroeconomic forecasting modeling system.

In line with the above, some specific assistance will be needed to make revenue
projections, prescribe permissible budget deficits and work out the expenditure envelope
for the budget year. This work should be coordinated by the Macroeconomic Division of
the Budget Office (MoFED) in consultation with the Mauritius Revenue Authority
(MRA), Debt Management Unit (DMU) and the Bank of Mauritius.

Moreover, it will be necessary to assist the allocation of the expenditure envelope to the
line ministries as pre-set ceilings for the budget year. The pre-set ceiling should reflect
consistency with the priorities of the Government economic reform programme as
ascertained through various policy announcements, representation from the line
ministries, several pre-budget meetings and need for fiscal prudence among others.

2.5 COORDINATION ON 2007 PUBLIC EXPENDITURE REVIEW

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As Mauritius transitions from commodity sugar-textiles-tourism exporter to innovative,
knowledge based services hub, the Government must address two different sets of issues:
i) removing structural impediments to competitiveness and allocative efficiency; and ii)
developing sectoral strategies for the public sector.

- Removing structural impediments to competitiveness and allocative efficiency: The
FY 2006/2007 budget and subsequently the Government‟s Letter of Development Policy
and reform matrix prepared for the DPL commit the Government to a comprehensive and
ambitious structural reform program covering fiscal consolidation, public sector
management, labor market regulation, investment promotion, economic opening and
democratization, education and environment.

- Sector strategies: Now attention is turning to sector strategies. In the near to medium
term, these must (in the aggregate) respect tight fiscal constraints. Beyond that it may be
appropriate to align public policies and institutional arrangements more closely to the
tenor of macro/structural reforms, for instance redrawing the boundaries between the
public and private sectors. Some sectors of interest are primarily in the public sector
(education, wastewater), while others are private (textiles and clothing, sugar, tourism,
ICT). Within the latter camp, the policy stance ranges from “hands off” in the case of
textiles and clothing, to extensive involvement in sugar and ICT. In all these cases there
is a need to probe the rationale and effectiveness of public policies. For education,
wastewater and transport, the traditional public sector dominance is likely to continue,
though here as well the role of regulators and potential for innovative approaches such as
PPPs needs to be explored.

The Government has approached the development partners to support formulating
strategies and building consensus around the following sectors: i) Education and training;
ii) Social housing; iii) External communications (ports, airports); iv) Road transport
(congestion); v) Sugar; vi) Non-sugar agriculture; vii) Tourism; and viii) Environment

The overarching need will be to develop a consensus in each sector with regard to overall
direction and strategy and expectations for the main actors in the public and private
sectors. Within Government, the consensus will encompass any needs for coordination
between various ministries. For instance, the ICT strategy may require support from the
Ministries of Education & Human Resources and Public Infrastructure.

2.6 ORGANIC BUDGET LAW AND RELATED FINANCIAL REGULATIONS

In the context of the on-going budget reform, a revised Organic Budget Law (OBL) will
be prepared by the Ministry of Finance and Economic Development (MoFED). This law
is the basic law defining the fundamental authorities, the schedule and procedures by
which the Programme-Based Budget (PBB) will be prepared, approved, executed,
accounted for, and final accounts submitted for approval.

The revision of the budget legislation is to deal with the concerns of modern economies
regarding macro-economic management and efficient use of resources. The new OBL

                                            8
will effectively reform the Finance and Audit Act (1973). The main aim of this revised
law will be to significantly improve the public expenditure management framework
making it results-and-performance oriented. It is a quest for a vision of government
action in an increasingly demanding and fast-changing environment. This vision needs to
be shared by all members of the Mauritian civil service and guided by the resolve to
preserve, improve and make public service more efficient.

The revised OBL will lay the foundations for greater modernization of public
management. It will be a vital lever for government reform. Changes in the way the
ministries and parastatal enterprises operate will be gradual. The basis for this will be the
definition of programmes, with measurable goals, and sub-programmes, with specific
objectives, grouping together expenditure by major public policy that will give a clear
picture of the government‟s priorities and the cost and results of its action. Programmes
and sub-programmes will form the new structure for budget approval and the framework
for action by officially designated programme managers. They will need to be given
meaning and substance by clarifying the outcomes and specific objectives set, the results
expected and the verifiable performance indicators used to measure them. It will
considerably improve the conditions for drafting, passing and monitoring the budget.

As a complementary task, it will be requested to undertake a review of Financial
Management Manual with a view to recommending its revision consistent with
Programme-Based Budgeting (PBB) and GFS based reforms of the country‟s accounting
system.

2.7 MAKING PROGRAMME-BASED BUDGETING (PBB) EMBEDDED                   IN A   MEDIUM TERM
    EXPENDITURE FRAMEWORK (MTEF) FULLY OPERATIONAL:

Until a recent period, the failure to link policy, planning and budgeting was the single
most important cause of poor budgeting outcomes in Mauritius. The overall objective of
the new MTEF approach, officially adopted by Government of Mauritius, is rooted in the
effort to address the weaknesses of the budgeting system such as arbitrary cuts in
estimates; separate recurrent and investment budgets; and lack of transparency in the
basis of budgetary allocations. These have generally emanated from the lack of a linkage
between ministries policy objectives and national priorities, and between ministries
budgets and their policies, which usually far exceed the limited national resources. The
MTEF process recognizes the limited resources of the Government within the medium
term, and seeks to achieve greater results from the existing level of resources, by linking
ministries policy objectives to national priorities. This process does not necessarily
generate additional resources. The MTEF is now accepted as the most appropriate
framework for strategic expenditure programming and budget restructuring.

A MTEF has four main objectives: 1) Improving the macroeconomic balance by
developing consistent and realistic estimates of available resources, both domestic and
foreign; 2) Restructuring and rationalizing resource allocation so that priority areas
receive more adequate funding; 3) Improving the basis of the budget by moving away
from the incremental approach to estimating the actual costs of sector activities in
delivering goods and services and integrating the preparation and presentation of the

                                             9
recurrent and investment budgets; and 4) Introducing a forward or medium term
perspective in the planning of policies, expenditures and revenues.
Programme-Based Budgeting (PBB), embedded in a 3-year MTEF, is a new approach
being currently introduced in Mauritius to change the focus of the budgetary process
from an input-based annual activity to a performance-based exercise that will improve the
efficiency and effectiveness of expenditures and lay the foundations for greater
modernization of public management.

The Government of Mauritius is introducing a performance budgeting framework in
2007/08 to improve decision-making by providing better information on how well
government services meet the community's needs. Until 2006/07, the public financial
management system of Mauritius was largely based on an incremental budgeting system,
with a focus on inputs. This approach to budgeting did not provide decision-makers with
the information necessary to make informed decisions about expenditure priorities and to
use the budget as a tool for getting value for money.

The development of Programme-Based Budgeting (PBB) is to improve decision-making
by providing better information on how well Government services meet the community's
needs. An emphasis is put on the “3 E”, that is, “Economy”, “Efficiency”, and
“Effectiveness”: 1) ECONOMY is related to the cost of inputs. It is the acquisition of the
appropriate quality and quantity of financial, human and physical resources at appropriate
times and at the lowest cost concerned and may be assessed through input measures and
comparisons with norms and standards. 2) EFFICIENCY is the relationship between
outputs and the resources used to produce them and is measured by cost per unit or
output. And 3) EFFECTIVENESS is the extent to which programmes achieve their
expected outcomes.

By developing and implementing PBB in the medium term period, the Government of
Mauritius will achieve five objectives to: i) Reform the framework governing public
management in order to make it more results-oriented; ii) Improve efficiency and
effectiveness of government ministries when developing and implementing their
Programmes and Sub-Programmes of activities; iii) Provide more concrete information to
the Cabinet on performance for decision-making purposes and for setting future targets
and priorities; iv) Provide information to help reallocate resources between Programmes
and Sub-Programmes; and v) Help reduce expenditure when necessary.

2.8 REVISION OF THE LEGAL FRAMEWORK REGARDING PUBLIC DEBT MANAGEMENT

Government borrowing authority in Mauritius is spread between several different pieces
of legislation which were introduced at widely differing times. This has resulted in a
situation where the legal authority is dispersed between different parts of the
Government, often under legislation that spans several decades.

A more efficient approach to managing the Government debt would involve centralizing
the authority to borrow in one coherent piece of legislation. This would also give the
opportunity to incorporate more current international best practice regarding debt
issuance and management. New language should include reference to a Debt

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Management Strategy, the Debt Management Unit, reporting requirements for issuing
debt and meeting objectives of the strategy, removing limits on long term debt issuance
while incorporating limits on total debt, an agency agreement with the Central Bank, etc.

2.9 CHART OF ACCOUNTS

With respect to the introduction of Programme-Based Budgeting (PBB) and the
necessary modernization of the FMIS in the Government of Mauritius, revenues and
expenditures will be reported, as of July 1st, 2008, along the international standard
classification defined in Government Financial Statistics (GFS) classification developed
by the IMF. The structure and classification of the Government‟s budget receipts and
expenditures will entirely be revised in order for transactions to be reported in the budget
system in a timely and accurate manner. The new presentation of budget data will
facilitate internal or national comparability and international comparability, which has
assumed increased importance in connection with regional or international programs of
coordinating fiscal policies of government.

The major components of the new Chart of Accounts, to be used as of 2008/09, are
outlined as follows:

   1. A FUNDING CLASSIFICATION provides the sources of funding.

   2. An ORGANIZATIONAL CLASSIFICATION provides the basis for establishing the
      responsibilities for the day-to-day administration of government business.

   3. A PROGRAM AND SUB-PROGRAMME CLASSIFICATION provides the basis for
      recording transactions associated with a specific program that is operating under a
      ministry.

   4. An ECONOMIC CLASSIFICATION provides the basis for recording specific activity
      by the kind of transactions by which the Government performs its functions, and
      the impact outside of Government in the market for goods and services, in
      financial markets, and in the distribution of income. The precise definition of
      items and sub-items and economic groupings within the economic classification
      structure are of vital importance to the costing and analysis of performance budget
      preparations, particularly under a program classification, where cost of services
      being provided is an important performance measure. The item classification
      should be consistent with definitions in the analytical framework of the
      Government Financial Statistics (2001 GFS) Manual.

   5. A FUNCTIONAL CLASSIFICATION of expense is based on the United Nations
      Classification of Functions of Government (COFOG), which is a detailed
      classification of the functions, or socioeconomic objectives, that government
      ministries aim to achieve through various kinds of outlays.

As of 2009/2010, the Minister of Finance and Economic Development (MoFED) will add
or amend the details of the Chart of Accounts as necessity arises and issue the executive

                                            11
regulations, rules and decisions, which will be necessary for the application of the
provisions of the new Organic Budget Law regarding the preparation rules of the budget
and the final accounts.

2.10 FURTHER IT      DEVELOPMENT OF THE         FINANCIAL MANAGEMENT INFORMATION
SYSTEM (FMIS)

The four ORACLE FINANCIAL IT applications (Oracle General Ledger; Oracle
Receivables; Oracle Payables; and Oracle Cash Management) developed in a recent past
and used by the Treasury Department have to be modernized in order to accommodate
the official introduction of Programme-Based Budgeting (PBB) as of the 2008/09 fiscal
year.

The FMIS will also assist as of 2008/09 in the evaluation of programme / sub-progamme
performance, in workload planning, and, more generally, in the monitoring of progress
toward objectives. In general, public sector managers do not have an easy way to identify
measurable outcomes related to programmes, specific objectives related to sub-
programmes, outputs to be delivered to the population and measured by verifiable
performance indicators. As a direct result, too much focus is still placed on financial
indicators and lagging measures of performance while not enough emphasis is given to
critical operational metrics and key performance indicators (KPIs)

ORACLE Balanced Scorecard (BSC) would be the most appropriate software to rapidly
design, deploy and administer performance-indicators-based performance management
solutions. The BSC will support managers in closing the strategy-to-performance gap by
helping them implement sector strategies, align their staff and resources, and focus them
towards a set of common outcomes and specific objectives. Also, with robust reporting
interfaces featuring traffic-light-colored alarms, public managers will quickly be alerted
when actual performance does not meet plans. Moreover, powerful drill-down reports
will allow them to rapidly identify the root-causes.

In 2007/08, the Budget Office will be developing in 10 pilot ministries (G-10 =
Education & Human Resources / Agro-Industry & Fisheries / Public Infrastructure, Land
Transport & Shipping / Health & Quality of Life / Social Security, National Solidarity
and Senior Citizens & Reform Institutions / Information Technology &
Telecommunication / Environment & National Development Unit / Tourism, Leisure &
External Communications / Police Department / Finance & Economic Development) a
new IT application for planning and monitoring programme outcomes, sub-programme
specific objectives, output delivery measured by verifiable performance indicators that
will become fully operational for the execution of the 2008/09 budget.

2.11 PARTNERSHIP AGREEMENT BETWEEN MAURITIUS               AND   SOUTH AFRICA     IN THE
    AREA OF PUBLIC EXPENDITURE MANAGEMENT

As part of the reform measures, the Ministry of Finance and Economic Development
(MoFED) has introduced in June 2007 a Programme-Based Budget (PBB), embedded in
a 3-year Medium Term Expenditure Framework (MTEF), along similar lines to the 1994

                                           12
reforms in South Africa. The main motivations for introducing PBB in Mauritius were
similar to those that led on the same path in South Africa: excessive budget deficits and
debt levels that had severely constrained fiscal space to expand social and development
spending. The PBB aims to change the focus of the budgetary process from an input-
based annual activity to a performance based multi-annual exercise and the new public
expenditure management framework clearly links the funds appropriated by the National
Assembly to verifiable outputs and outcomes.

In this context, Mauritius has recently benefited from short-term technical assistance
provided by the National Treasury of South Africa as well as South African expertise
mobilized by the IMF Fiscal Affairs Department. The assistance from the National
Treasury of South Africa is part of the UNDP “Strategic Budgeting Programme” that is
supporting the Government economic reform programme currently under
implementation. Based on this very successful first collaboration and considering the
need for Mauritius to complete a full operationalisation of the PBB system by 2008/09,
further short-term technical assistance from South Africa would be needed to achieve a
fully fledged PBB and ensuring its effective implementation. The Government of
Mauritius will suggest entering into a partnership agreement for getting technical support
in the following areas: i) Finalisation of a GFS-consistent Chart of Accounts (COA); ii)
Improvement of macroeconomic forecasts in line with PBB embedded in a 3-year MTEF;
iii) Preparation of a new Organic Budget Law (OBL) in line with the development and
operational implementation of our new Programme-Based Budgeting (PBB) system; iv)
Updating of our Financial Regulations in line with the preparation of the new OBL; v)
Preparation of specific training materials on public expenditure management (PEM) /
MTEF / PBB and performance audit; and vi) Organization of PEM training and exchange
programmes.

Considering the numerous requests received by the Ministry of Finance of South Africa
for assistance from French and English-speaking African countries on Public Expenditure
Management and Performance Auditing in the context of South-South Cooperation, such
a partnership agreement would allow the Ministry of Finance and Economic
Development (MoFED) of Mauritius to collaborate with South Africa by providing
assistance to delegates from French-speaking African countries on some of the early
stages of the budget reform process, including PBB.

Another area of collaboration with South Africa would be to develop jointly an effective
Performance Management System (PMS) across the public sector with strong links to the
PBB.

2.12 SYSTEM OF NATIONAL ACCOUNTS (SNA)

2.12.1 Development of productivity indicators for sectors and enterprises for the
       National Pay Council (NPC)

Prior to 2007, wage increase was determined by the tripartite committee comprising
representatives of Government, employers and workers to compensate for the cost of
living on the basis of inflation rate. In April 2007, Government decided that wage

                                           13
increase should take into consideration the “rise in consumer price index, national ability
to pay, national productivity and competitiveness, employment and unemployment rate”.
In this context, in May 2007 Government set up the National Pay Council (NPC)
comprising representatives of Government, employers and workers to make appropriate
recommendations with regard to a national minimum wage and a yearly minimum wage
increase taking into consideration the factors mentioned earlier.

The Central Statistics Office (CSO) has been called upon to compile statistics that will
inform the decisions of the NPC. In particular, CSO will have to develop “productivity”
and “capacity to pay” indicators that would help the NPC to differentiate between strong
and fragile sectors and enterprises and make appropriate recommendations on minimum
wage increases by sector and possibly enterprise.

2.12.2 Environment-Economic Accounting

There is an emerging outcry globally to keep track of environmental issues, especially
with he advent of climate change and its impact on economies. Mauritius, as a small
island, is high vulnerable both in terms of its economy and natural environment. The
limited resources available are vital to sustain the country‟s economic activities and
population‟s needs in general. In this context, a system of Environment-Economic
Accounting is of utmost importance since it will provide a transparent information system
which can be used to identify more sustainable paths of development.

2.12.3 Elaboration of a Tourism Satellite Account for Mauritius

The Central Statistics Office in collaboration with the Ministry of Tourism has decided to
develop a Tourism Satellite Account (TSA), as recommended by the World Tourism
Organisation (WTO). The TSA will provide information on the role that tourism is
playing directly, indirectly or through induced effects in the Mauritian economy in terms
of generation of value added, employment and income.

2.12.4 Compilation and Analysis of Social Accounting Matrix (SAM) with a focus on
poverty

Over the years there has been an increasing demand from users of statistics and public at
large, for reliable estimates of the impact that the country‟s economic and social policies
and external factors have on the standard of living of the population, particularly the
vulnerable groups. To effectively evaluate these impacts the existing instruments are not
enough. In this context, Mauritius needs a Social Accounting Matrix (SAM).

The SAM, which provides for a consistent and convenient approach to organising both
economic and social data for a country, can be used as a basis to evaluate the impact of
changes in the process of economic development on the living standards of different
groups of the population. While it is widely agreed that economic growth is a necessary
condition for sustained improvement in living standards, it is also generally recognised
that economic policy must look into the distribution of benefits arising from growth, with
focus on income distribution, employment, and poverty alleviation.

                                            14
A SAM for the year 1997 has been attempted based on data from the 1997 Census of
Economic Activities and the 1996/1997 Household Budget Survey. For the exercise, the
economy was disaggregated into four institutional sectors, namely Government,
Households (including Non-Profit Institutions Serving Households), Corporations and
Rest of the World. The Household sector was further disaggregated into two categories,
poor and non-poor, using as poverty line the half median value of household expenditure
per capita. However, there is need today for technical assistance to assess the work done
so far and advise on how data gaps can be addressed.

One of the top priorities of government on the social front being poverty alleviation, a
SAM that is geared to measuring and analysing the effects of policy measures and
external factors on the standard of living of the population, particularly the poor, will
have to be constructed.

2.13 CAPACITY BUILDING ON PUBLIC EXPENDITURE MANAGEMENT (PEM)

The Ministry of Finance & Economic Development (MoFED) of Mauritius will develop
in 2007 a three-year training programme that be implemented in close collaboration with
CABRI (Collaborative Africa Budget Reform Initiative). This could be the first
programme under the proposed Regional Multi-Disciplinary Centre of Excellence
(RMCE). It would initially begin as a free standing operation, the training being naturally
taken over once the RMCE is operational. This will serve to demonstrate the type of
practical network based capacity building focused on policy improvements and tied to
overall reform processes that the RMCE is all about.

This training programme for trainers and trainees will initially be composed of 11
modules:

   Module 1: Strategic Planning
   This session will form as an introduction. It will aim to assist participants in
   understanding the complex environment that governments formulate strategic plans.
   It will be an interactive session which will look at the context of strategic planning in
   Mauritius. The module will be structured to give participants a practical learning
   experience which serves at the same time to produce a work product i.e. the
   framework of a Draft Sector Strategy Paper 2008/09-2010/11. This will then be
   completed in their Ministry.

   Module 2: Medium Term Expenditure Framework - MTEF
   After attending this module participants should be able to: 1) Understand the policies
   and principles underlying the MTEF; 2) Understand each stage of the MTEF process
   and how it related to the public financial management cycle; 3) Understand the
   importance of credible baseline budgets; 4) Use the MTEF for policy; 5)
   Prioritisation; 5) Understand the roles of the various role-players; and 6) Implement
   the MTEF in the Mauritian context.

   Module 3: Programme-Based Budgeting - PBB

                                            15
After attending this module participants should be able to: 1) Understand the
differences between traditional line-item budgeting and programme budgeting; 2)
Define programmes, outcomes, specific objectives, activities, outputs and
performance indicators according to specific guidelines from the MoFED; 3)
Allocation of personnel to programmes and activities; 4) Understand the linkage
between planning and budgeting; 5) Understand how budget classification relates to
the chart of accounts; and 6) Implement PBB in the Mauritian context.

Module 4: Costing
After attending this module participants should be able to: 1) Differentiate between
the various costing methodologies; 2) Understand the different types of costs; 3)
Allocate costs to activities; 4) Calculate unit costs; 5) Identify and apply cost drivers;
6) Understand the use of cost/benefit and cost effectiveness analyses; and 7) Apply
costing principles to formulate PBB budgets in the Mauritian context.

Module 5: Measuring and Evaluating Performance
After attending this module participants should be able to: 1) Define realistic
performance targets; 2) Use a framework for measuring performance of programmes;
3) Evaluate programmes and feed information back into planning; and 4) Understand
the linkages between performance management systems and the PBB.

Module 6: Chart of Accounts
This module will be developed once the GFS-consistent 2008/09 Chart of Accounts
(COA) has been finalised. The module will train users of the new chart of accounts on
the background to the implementation of a new chart of accounts; the roles and
responsibilities of role-players; the definitions included in the new chart of accounts;
and the structure of the new chart of accounts.

Module 7: Monitoring, Accounting and Reporting
This module will be developed early 2008 once the new IT budget applications have
been developed under Oracle: ORACLE Financial for the Financial Management
Information System (FMIS) and ORACLE Balanced Scorecard (BSC) for
Performance Budgets.
After attending this module participants should be able to: 1) Understand the
principles of monitoring and reporting; 2) Monitor and account for both financial and
non-financial information; 3) Report on both financial and non-financial information;
4) Understand the importance of integrated financial management systems and data
collection and storage; and 5) Understand the difference between cash and accrual
accounting.

Module 8: Legislative Framework (Module to be developed not before January
2008)
This module will only be developed once the new organic budget law has been drafted
and will focus on introducing participants to the new legislation and regulations, defining
new requirements and the impact on the various role players in the budget process.

Module 9: Performance Audit


                                          16
   The National Audit Office (NAO) has been carrying out project reviews for some 15
   years. However, no assignment has been performed strictly according to Performance
   Audit rules despite the fact that since August 2001 the NAO has been accordingly
   mandated, following the amendment to the Finance and Audit Act (1973).
   As part of the overall training agenda, the Director of Audit will directly be
   supervising the dissemination of the module on Performance Audit, in partnership
   with the UK National Audit Office. This module will emphasize practical on-site
   training for ensuring effective carrying out of Performance audits in actual situations.
   The targeted trainees will be 15 staff from the NOA and 5 from Internal Control cadre
   of the Ministry of Finance and Economic Development (MoFED). This training
   programme should begin from January 2008 and be completed in December 2008. As
   of 2009, the NAO will envisage will organize in Mauritius in close collaboration with
   AFROSAI (French speaking) and AFROSAI-E (English-speaking) regular training
   sessions on compliance audit and performance audit for national and regional trainees
   (Africa region).

   Module 10: Cabinet Ministers
   Familiarization on MTEF/PBB concepts as of January 2008

   Module 11: Members and Selected Technical Staff of National Assembly
   Familiarization on MTEF/PBB concepts as of January 2008

2.14 COORDINATION ON SECTOR POLICIES/STRATEGIES

The planning process at the sector level in Mauritius differs in scope and coverage
between sectors. However, some of the main shortcomings include:
          Individual sector strategies do not cover the entire scope of a ministry‟s
             programmes and sub-programmes of activities: for example, a number of
             different ministries are involved in the cross-sectoral Environmental
             Strategic Plan. However, individual plans of line ministries seldom take this
             engagement into account;
          Focus on results is weak: there are only rudimentary feedback loops to
             enable policy decisions based on implementation progress. In addition,
             there is a common focus on inputs and tracking of activity completion for
             investment projects, but measurable outcomes are not systematically
             identified, nor relevant tracking identified;
          Line ministries are able to develop policy proposals and projects for
             approval by cabinet outside the budget process: this poses the risk that the
             financial implications of these policies and projects are not sufficiently
             analyzed;
          Costing of the plans is incomplete: without fully costing the programme
             and sub-programmes, ministries may implement activities without a clear
             understanding of the plan‟s affordability and effectiveness to achieve the
             stated objectives;
          The medium and long-term costing implications of strategic partnerships
             with the private sector are not fully assessed at the sectoral level.


                                           17
The preparation or redefinition of relevant sector policies/strategies for the
implementation of Programme-Based Budgets (PBB) embedded in an MTEF is a major
challenge of the Government for the implementation of its current Economic Reform.
The 2007 agenda covers 5 key sectors (Education, Health, Tourism, ICT and
Environment) that are expected to experience future growth globally. The sectors of
strength are Tourism and ICT. However, success in strategic development cannot be
defined solely by major achievements in these economic sectors. Other growth enablers
must also realise similar achievements: human capital, productivity, environment,
innovation, cost of doing business and living, quality of life, policy and institutional
frameworks, and laws and regulations. Strategic success requires social development to
complement and parallel economic development. Experience confirms that having an
effective social infrastructure is the key to reaching higher levels of sustained economic
growth.

During the period 2007-2008, the focus will be put on the preparation of sector policies /
strategies that will also include the definition of PBB programmes, with their measurable
outcomes, and sub-programmes, with their specific objectives, and outputs with related
performance indicators in the following priority areas of economic reforms:

2.14.1 Formulation of the Energy Policy (2007-2025)

In order to sustain the objective of becoming globally competitive, Mauritius has to
upgrade its entire infrastructure facilities as well as develop a coherent energy strategy.
The Government policy orientations for the energy sector have been defined in the
document entitled “Outline Energy Policy 2007-2025” (April 2007) which describes the
Government‟s objectives for the energy sector. Government has also committed itself,
inter alia, to adopt by mid-2008 a detailed Energy Policy and Master-plan for the
development of renewable energies.

The definition of the long-term energy policy will need to address the following goals: i)
broaden the energy base of the country so as to reduce dependence on importer energy
carriers thereby limiting the vulnerability of Mauritius to import fossil fuels and their
volatile prices; ii) allow optimal use of local and renewable energy sources by ensuring
that these alternative energy projects are evaluated on the basis of providing benefits to
customers; iii) enhance protection and preservation of the environment, in particular the
reduction of the emission of greenhouse gases; iv) promote energy efficiency in all
sectors of the economy including the transportation sector; v) provide affordable energy
to all sectors of the economy while ensuring the financial sustainability of the electricity
public utility; vi) provide for transparency of projects by Independent Power Producers
and in Independent Power Purchase Agreements; vii) promote economic growth and job
creation by ensuring reliable supply of energy at internationally competitive prices; and
viii) democratize energy supply by opening up the provision of power to new entrants by
developing a transparent and open system that encourages new entrants including SMEs,
to compete to offer energy products and provides for long term Power Purchasing
Agreements to encourage Independent Power Producers (IPPs).

2.14.2 Formulation of the Agro-Industry and Fisheries Sector Strategy

                                            18
Economic activities in the agro-industry and fisheries sector have so far been almost
totally determined by policies emphasizing production for guaranteed export markets and
self-sufficiency goals. Given the challenges currently facing both the predominant sugar
sector as well as the non-sugar sector, and the growing competition facing both the
export-oriented and the import substitution industries, it is becoming increasingly evident
that the survival of the sector will depend on the following factors:
       - at the level of resource utilisation: efficiency/economy of resource use (for land,
       water, labour), conservation and sustainability (for fisheries, forestry and land-
       based natural resources), economies of scale and productivity (land and labour);
       - at the level of the product and production system: product quality, higher value-
       added, diversification, flexibility, product differentiation right-sizing of enterprise
       in terms of labour, research; and
       - at the level of markets: market-led approach in decision making, integrating
       supply chains, market development, international norms and standards for food
       quality and safety.

The objective will be to develop a consolidated strategy for the Agro-Industry and
Fisheries sector (2008-2015) in the context of the Government economic reform
programme, with particular reference to the pillar on trade competitiveness and prepare
implementation plans for each of the sub-sectors focusing on core priorities and
possibilities of early harvest and maximum impact. A particular focus will be put on
immediate short term strategic interventions during the period 2008/09 - 2010/11.

2.14.3 Formulation of the Education Strategy

Mauritius‟ education system has some well known shortcomings: elitism; high attrition
rates; lack of accountability; inadequate maths, science and language instruction;
widespread out of school tutoring; and inadequate resources at the tertiary level.
Instruction is too academic and exam oriented, and students do not receive enough career
guidance. The process of streaming students who fail the CPE into pre-vocational
education at an early age has been widely criticized. Despite some improvement over the
past five years, the quantity and quality of education outputs are not yet able to support
the transition to a knowledge and skill based economy.

Today, the Mauritian Government subscribes to the various declarations related to
Education For All (EFA) as set out in the Dakar Declaration (2000), is committed to
achieving the Millennium Goals for Education by 2015 (UNGASS, 2002), and is fully
engaged in promoting education at all levels from the pre-primary through to higher
education, for sustainable long term development. In 2007, the Ministry of Education and
Human Resources has set as its major objective for Education and Training: “ … building
an inclusive, knowledge based education and training system that promotes lifelong
learning and serves the needs of Mauritius and ALL its citizens for participation in the
global economy” (Indicative Medium Term Expenditure Framework, 2007). This is in
line with the declared policies of the Government as set out in the Government
Programme 2005-2010. The Government of Mauritius declares clearly its firm
commitment of carrying out major reforms in education with a view to providing “World

                                             19
Class Quality education to enable young Mauritians to be employable in new sectors of
the economy to have more fulfilling jobs and also to be competitive at the international
level”. A New Education Agenda has been articulated, encompassing the commitment of
Government towards not just access to education but also Equality of Opportunities to all.
It is an article of faith that Education and Training for All has to go hand in hand with
Quality and Equity.

2.14.4 Formulation of the Tourism strategy

While Mauritius has experienced rapid tourism development in the past twenty years, and
during the last decade the tourism industry has emerged as the fastest growing economic
sector, momentum is slowing and product quality is gradually eroding. Tourism ranks as
the third major industry in Mauritius with annual tourist arrivals of well over 600,000. In
2004 the tourism industry contributed to around 5% of GDP and 19% of gross export
earnings, down from 8.3% of GDP in 2002.

As Mauritius‟s tourism industry teeters between “consolidation”, “stagnation” and
“rejuvenation” there would appear to be several significant policy and investment
decision to make. Four specific tourism areas have recently been highlighted to get
growth back on track: i) expanding air access; ii) shopping tourism (something that
Dubai, Singapore and South Africa have been very successful in developing); iii)
business tourism (hitherto only about 5% of foreign visitors come to Mauritius for
business, conferences or events); and iv) stand-alone integrated resorts along the lines of
Atlantis on Paradise Island in the Bahamas and the Bellagio in Las Vegas.

Mauritius, like other mature island destinations is approaching its carrying capacity for
beach-based exclusive tourism (rather than the mass tourism of southern Spain, Greece or
Turkey) and is looking to diversify while maintaining the quality image it had built
during the initial “consolidation” phase.

2.14.5 Formulation of the Health strategy

Good health is a critical input for reducing poverty, promoting economic growth and
enhancing the quality of life of people. The Government of Mauritius has over the years
made significant efforts in achieving better health and in enhancing quality of care.
Despite financial constraints, the Government continues to maintain the provision of free
health care, from primary health care to hospital care, including the delivery of high tech
medicine, to the ageing population.

However, a major concern is the high prevalence of Non-Communicable Diseases
(NCD). NCDs represent the bulk of morbidity, disability and premature deaths in the
country and are responsible for about 80% of the burden of disease. In 2004, 50.7% of
deaths were due to diseases of the circulatory system. The prevalence of diabetes among
both sexes was 19.3 in 2004. The same year, hypertension among adults aged 30 and
above reached 29.7. The crude prevalence of high cholesterol among adults aged 20 years
and above was 40.1 in 2004. Also, HIV/AIDS incidence in Mauritius, though relatively


                                            20
low1, has been rising, particularly among drug users. It is estimated that there are some
18,000 injecting drug users in Mauritius and that some 13 percent are infected with
HIV/AIDS virus.

The reformulation of the Health strategy will aim at elevating the quality of healthcare
services and the wellbeing of the population and based on five fundamental principles: i)
Health is recognized as a fundamental human right; ii) Health is strongly viewed as a key
component of economic development; iii) Health services will be provided free of any
user cost, at the point of use to each and every citizen of the country; iv) A high-
performing health system will operate in which people have trust and confidence; and v)
Health consumers who are tax-payers will get a “value for money” service.

2.14.6 Formulation of the National ICT Strategic Plan

The objective is to assist the Ministry of Information Technology and
Telecommunications (MITT) in developing a comprehensive 5 year National ICT
Strategic Plan (NICTSP) to implement the Government‟s strategy to make the ICT sector
the fifth pillar of the Mauritius economy, transform Mauritius in a Cyber Island, and
provide equal ICT opportunities to citizens.

The NICTSP will set the framework for Government intervention along the following
main priorities to: i) promote the development of the ICT industry - both domestic and
for exports; ii) leverage the use of ICT: (a) within Government and for Government
services to businesses and citizens (e-Government); (b) by main existing GDP contributor
sectors - ICT sectoral exploitation; and (c) for social development and citizen access to
the Information Society - ICT for social development.

Moreover, NICTSP will provide the framework to accelerate the establishment of the
necessary enabling environment by: i) focusing on the development of ICT manpower
and skill development; ii) strengthening the information security; iii) encouraging the
availability of a robust and reliable telecommunications network, which is competitive at
the international level and is also highly accessible and affordable; iv) encouraging the
deployment of latest technologies and standards in the Mauritian context to sustain a
competitive edge; and v) establishing an appropriate policy, regulatory, and institutional
framework.

2.14.7 Formulation of the Environmental Strategy

The 2007 National Environment Policy defines the mission for the Government‟s work
on environmental management: “To enable our Republic to attain the highest level of
environmental quality as a means to enhance the quality of our citizens, preserve our
natural environment and advance our competitiveness. This will be achieved though
continued innovation and vibrant partnership with all stakeholders”. The NEP identifies
seven key environmental concerns: i) Environmentally sensitive land resources,
particularly in coastal areas, are being increasingly degraded as a result of development

1
    / As at end of March 2006, 2,295 cases of HIV and AIDS have been reported in Mauritius.

                                                     21
pressures; ii) Water resource management needs to be improved to avoid potential water
stress conditions forecast for 2025; iii) Air quality is decreasing as a result of emissions
from fossil fuels and ambient noise is increasing as a result of traffic congestion and
industrial pollution; iv) Biodiversity is threatened by direct exploitation the resources,
destruction of habitats and ecosystems and the introduction of invasive alien species; v)
The coastal zone is experiencing beach erosion, loss of wetlands and water pollution as a
result of development pressures and lack of integrated management; vi) Solid waste
management is problematic because there is limited treatment and disposal facility; vii)
Public health is threatened by environmental risks such as vector-borne diseases,
improper use of pesticides and herbicides, lack of proper waste management and
localized industrial air pollution.

A clear quantitative assessment should be carried out as part of the forthcoming review of
the National Environmental Strategy and Action Plan. Climate change has arisen as the
most significant global problem in recent years and has the potential to significantly
impact on Mauritius in the coming years and decades. Potential impacts of climate
change include: i) Changes in temperatures will affect the agriculture sector, water
evaporations from reservoirs, and will have potentially negative impacts on health,
biodiversity and the tourist sector; ii) Sea level rise will lead to coastal erosion, flooding,
saline intrusion, with negative implications for infrastructure, land resources, water
availability and tourism; iii) Changes in rainfall could reduce water availability and/or
result in flooding and can affect the distribution and frequency of vector-borne diseases;
iv) Changes in ocean temperatures, acidity and circulation will affect fisheries resources;
and v) The frequency of extreme weather events, such as cyclones, is expected to
increase, resulting in increased risks for the population, the infrastructure and the
environment.

2.14.8 Formulation of a new Social Housing Strategy

In April 2002, the Government of Mauritius approved a Housing Strategy for 2002-2006.
The main proposals of the Strategy have included the need to: i) target the lowest income
households and reduce the proliferation of squatting; ii) keep costs of housing packages
to the bare minimum; iii) ensure that due attention is given to the design of housing units,
taking into consideration elements such as the climatic conditions, energy efficiency and
Mauritian social habits, and iv) identify potential land for housing construction under
various land exchange mechanisms.
However, these measures and incentives have, to some extent, failed to achieve the goal
of “Un Toit pour Toi” to each family.

Today, it appears necessary to redefine a new social housing strategy for the various
income groups, including the lower-middle and middle income groups, for the
forthcoming years to help achieve Government‟s objective of providing some 7,000 units
of decent housing accommodation over the next 3 years. Particular emphasis shall be
placed on assessing the roles of the National Housing Development Company (NHDC
implementing Government‟s social housing policy) and the Mauritius Housing Company
(MHC providing mortgage finance to potential house buyers) in implementing the new
social housing strategy, with a view to optimising Government budgetary resources.

                                              22
2.14.9 Formulation of a Industry and SME Sector Strategy

Mauritius has successfully developed an export led industrial strategy which is looked
upon as a model in the region. The manufacturing sector, excluding sugar, remains a
major pillar of the economy, employing 105,300 workers as at end of December 2006
representing some 21.2% of the total workforce.

During difficult times, the necessary support measures and resilience on the part of the
enterprises have helped confront the internal and external challenges. Mauritius is now at
a crossroad having to cope with new challenges of globalisation, trade liberalization and
fast changing trading patterns. The development of a new competitive edge requires
emphasis on enhanced productivity. In future, productivity in the industrial sector will
depend on factors like industrial re-engineering, technology uptake, employment of
skilled workers and professional marketing. The lack of capability in these areas will
have to be addressed. Mauritius is moving into a new era of industrial development and
will need to position itself as a reliable supplier of upmarket products. Many of the small
and medium sized enterprises in Mauritius also have limited capacity to produce high
value products and are thus unable to position themselves in niches markets.

The domestic enterprises have also to endure harsher competition emanating from trade
liberalization at regional level. The COMESA has set zero tariff levels and already some
11 countries have established the free trade regime. The gradual lifting of tariffs within
the SADC, where South Africa is a major exporter in the region, also involves harsher
competition for the domestic enterprises. SMES‟s will need to develop their competitive
edge to sustain increasing competition that emanates from trade liberalization. Besides,
the Government has also envisaged making Mauritius as a duty free island with complete
tariff liberalisation on all imported products.

Trade liberalisation, competition from low cost countries, lean retailing practices,
importance of brands and total package services are now major features in the
international trading environment. In this context, Mauritius has to devise a strategy that
is tuned to these new realities. The only way is to adopt a two pronged strategy approach
based on the following:

   1. Industrial consolidation will involve promotion of: i) Enterprise re-structuring and
      Industrial process re-engineering; ii) Improved response time; iii) Management
      and Design Capacity; iv) Brand development; v) Product development; vi) Market
      diversification and development; vi) Capacity Building; and vi) Productivity and
      Quality Improvement.

   2. Development of new growth poles will pave the way for industrial diversification
      and will focus on sectors with high growth potential that can have a substantial
      impact on the economy. These sectors are as follows: i) Land-based oceanic
      industry; ii) Sea food processing and aquaculture; iii) Pharmaceuticals; iv)
      Clinical research outsourcing; v) Development of branded Rum for export; vi)
      Printing and publishing; vii) Jewellery; viii) Furnitures; and ix) Agro Processing.

                                            23
2.15 COORDINATION ON PBB TARGETED ACTIVITIES IN THE SOCIAL SECTOR

2.15.1 Setting up of the Social Register of Mauritius (SRM)

The Government has recently introduced Programme-Based Budgeting (PBB), embedded
in a Medium Term Expenditure Framework (MTEF), with the aim to reinvigorate
economic growth. A critical condition is to bring the fiscal position under control in order
to enhance the efficiency and effectiveness of government programmes. This is a
precondition for creating the fiscal space that could be used to finance the priority public
interventions in areas such as human capital investment, infrastructure development, and
effective social safety net.

The system to identify the beneficiaries of social programmes in Mauritius needs to be
strengthened. The existing database covers the beneficiaries of social assistance schemes
under the “Ministry of Social Security, National Solidarity, and Senior Citizens Welfare
& Reform Institutions” but is not complete as social programmes run by other ministries
are excluded. The poverty line differs across programmes. Its definition is not based on
best international standards. It does not link income and non-income dimensions of
poverty, it reflects the fragmentation of the social safety net and is at risk of duplication.
The definition of income, also, does not reflect entirely the permanent income concept
that is more relevant for poverty. It is also static in nature and heavily based on ad hoc
welfare assessments to identify the poor. Moreover, the present database does not contain
all relevant information for poverty targeting and does not cover the poor who are not
receiving social programmes.

Targeting of benefits can be improved. Based on an assessment undertaken by an IMF
mission in 20062, social programme targeting needs to be improved using a combination
of proxy means-testing and geographical targeting. Building a unified “Social Register”
will be a first step towards enhancing the targeting of Government programmes. It will
allow managing programmes in an integrated way using a uniform approach to welfare
level definition and targeting criteria. Adjustments to the legal framework, including
definitions of income, will also be considered. In particular a review will be conducted of
possible links between the definition of income in the register and in other pieces of
legislation such as the Tax Code. Moreover, a new regulatory framework will be
developed. This will guide the operations of the “Ministry of Social Security, National
Solidarity, and Senior Citizens Welfare & Reform Institutions” that will be responsible
for the development and management of the Social Register of Mauritius (SRM).

2.15.2 Circular Migration Programme

Circular migration is increasingly recognized as a form of migration that, if well
managed, can help match the international supply and demand for labour, and contribute
to a more efficient allocation of available resources and to economic growth. Migration

2
 / IMF-FAD: Mauritius - Fiscal Adjustment Strategy and Measures to Protect Low-Income Households
(May 2006).

                                              24
flows are driven by a combination of structural forces both in the receiving and sending
country, quality-of-life considerations and social and economic structures that arise to
connect areas of out- and in-migration. On the level of individual and household
motivations more generally, deficiencies in financial and human capital are the main
drivers of this accelerated movement. Especially for those migrating to the European
Union (EU), the opportunity arises to accumulate both financial savings and human
capital.

As one of the solutions to address the medium term unemployment problem of Mauritius,
the Government has decided to set-up a Circulation Migration Programme. The
objectives of this programme are three-fold: i) to enable programme participants to build
their skills abroad and, on their return, find employment in new sectors or start a business
under the SME incubator scheme; ii) to encourage remittance flows and enhance their
development impact; and iii) to harness the intellectual and financial resources of the
Mauritian diaspora, facilitating return migration and encouraging assistance in the
development of the country.

The Empowerment Programme (EP), involving both public and private sector
partnership, has been entrusted the responsibility to oversee the implementation of the
Circular Migration Programme which will amongst others do the matching exercise
between the unemployed and demand for labour in receiving countries. The EP is also
responsible to mount any pre-departure training programme to meet the requirements of
receiving countries. The proposed action plan is the following: i) Development of a
Mauritian pilot with an EU destination country; ii) Profiling exercise for retrenched
workers and identification of potential interested participants and the type of training they
may require; iii) Put in place a system of support that would allow migrants working
abroad to seek and obtain help in the destination state if they are faced with a problem;
iv) The government will help facilitate migrants‟ travel abroad, assist in the identification
of low cost remittance transfer channels, and provide information and assistance in
helping migrants and their families identify investment opportunities in SME projects or
in other productive sectors of the economy; and v) Bilateral negotiations: to look for
increased visa allocations for the Mauritian unemployed with some sort of guarantee or
bond so that migrants return back to Mauritius after their stay abroad.

2.15.3 Secondary Market for Residential Mortgage Loans

It is generally accepted that the development of a deeper market for housing finance
brings many beneficial side effects to a developing country. In particular, by
transforming renters into home-owners, the development of housing markets adds to the
wealth creation opportunities for a country‟s citizens. As homeowners build equity
stakes in their residences, pride of ownership leads to better maintained and more stable
neighborhoods. Homeowners invest in their homes, stimulating demand for a wide array
of ancillary services, including those of contractors, architects, builders, carpenters,
plumbers, electricians, gardeners, painters, estate agents, appraisers, lawyers and bankers.
Sales of furniture and appliances rise. Banks and other lenders are provided with high
quality assets. Capital markets diversification is encouraged. The list of benefits is
clearly quite extensive.

                                             25
UNDP will help the Mauritius Housing Company (“MHC”) to create a secondary market
for residential mortgage loans. A secondary market provides an outlet for banks and other
lenders who seek liquidity for their mortgage portfolios. By introducing a secondary
market for mortgage loans, the total capacity of the system is increased. This increase is
created by providing the link whereby long term investors such as insurance companies
and pension funds can fully participate in the mortgage market. Such investors may not
have been able to participate as fully as they would desire because they lack sufficient
networks to originate the loans themselves. By creating a loan sale market, these non-
bank investors find it easier to invest in mortgage assets. Another benefit of the
secondary market is that it promotes standards for mortgage loans. The result is that
mortgage loans become a more homogenous, standardized product. This transformation
of mortgages into a commodity means that the price comes down, i.e., mortgages become
more affordable for the average borrower.

Having access to a loan sale market will greatly help the MHC to manage its liquidity,
particularly due to a change of government policy regarding guaranteeing the borrowings
of the MHC. Creating a loan sale market will also have social benefits for Mauritius. A
secondary market will clearly make mortgage loans more liquid. Such a market will also
lead to a standardization of terms for mortgages, making mortgage loans more of a
commodity product. Both developments will increase the demand for mortgages by
investors, thereby lowering their cost to the underlying borrower/homeowner. This loan
sale is intended to serve as the blueprint for future transactions, which will ultimately
lead to the creation of a true securitized mortgage market in Mauritius.

2.15.4 Development of Gender-Responsive Budgeting (GRB) activities through the
       implementation of PBB programmes

Gender-responsive budget (GRB) initiatives ensure the realisation of gender equality
goals and improved compliance with the Convention on the Elimination of
Discrimination Against Women (CEDAW). They promote greater accountability for
public resources to the people of a country, especially to women, who are generally more
marginalised than men in decision-making about public money. Therefore, a GRB
initiative always involves a gender analysis of some dimension of the rising and use of
public money. Under the GRB initiative, budgets are made and implemented in
democratic ways to give more voice to women‟s concerns.

A GRB initiative does not aim to produce a separate budget for women. Instead it aims to
analyse any form of public expenditure, or method of raising public money, from a
gender perspective, identifying the implications and impacts for women and girls as
compared to men and boys. GRB initiatives can be based in government, in civil society,
in Parliament, or can span several of these sites. A key instrument for a government-
based GRB initiative is a “Gender Budget Statement” (GBS). A GBS is a report, which
shows how the budget of a government ministry is addressing gender issues.

"Gender-Responsive Budgeting" will be introduced on a pilot basis in the PBB process as
of the preparation of the 2008/09 Budget so that ministries can adopt a uniform approach.

                                           26
On the one hand, three pilot ministries (Education & Human Resources / Social Security,
National Solidarity, and Senior Citizens Welfare & Reform Institutions / Labour,
Industrial Relations & Employment) will get the assistance of the Ministry of Finance
and Economic Development (MoFED) in engendering their PBB exercise for 2008/09.
On the other hand, Gender components will be added in the 2-year MTEF/PBB Training
programme to be implemented as of September 2007 by MoFED with the collaboration
of the Collaborative Africa Budget Reform Initiative (CABRI).

2.16 HR MANAGEMENT RELATED TO PMS, PBB, AND PRB IMPLEMENTATION

Mauritius has introduced Programme-Based Budgeting (PBB) within a Medium Term
Expenditure Framework (MTEF). The Ministry of Finance and Economic Development
(MoFED) is the agency with primary responsibility for this. As part of the PBB process
for 2007/08 staff were allocated to programmes to provide accurate programme costs.
For 2008/09 it is proposed that staff be allocated to sub-programmes. As part of this
further allocation it would be useful for staff from the Ministry of Civil Service and
Administrative Reform (MCSAR) to work in detail with selected ministries to: i) test the
methodology for allocating staff at this level of the budget; and ii) explore the potential
for this approach to provide useful information about how well current arrangements (the
number, location, and skills of staff allocated to a programme, the organizational
structure within which the staff are working, and the support services and other resources
allocated to them) are aligned with the performance required of ministries under the PBB.

Performance management systems (PMS) have already been introduced in a small
number of departments and action is underway to introduce it in some others - but not yet
in all. PMS extends the measurable performance focus of PBB to individual staff at
different levels of ministries and departments. PMS sets up a system under which staff
know what is expected of them (the specific results they are required to achieve and how
this will be measured, the skills they need to do their jobs well, and how they are
expected and required to behave in their work) and individual performance can be
monitored and assessed. This is a vital tool for translating organisational performance
requirements into targets that individual staff can understand and relate to. Introducing
PMS across ministries should now be a priority for this reason.

Based on the current context, the UNDP project is proposing to develop and implement
an action plan aiming at aligning Human Resource Management (HRM) and personnel
management practice to the needs and implications of PBB as follows:

A two year strategy for the development of HRM and personnel administration in the
civil service should be approved by the high level steering group for civil service and
administrative reform. This plan should include: i) a firm timescale for the
implementation of PMS in all ministries and departments [10 Performance Management
Systems (PMS) to be introduced in 2007/08 (2 in 2007 and 8 in 2008 and 2009) in pilot
ministries], and specification of other matters required to be addressed as (or before)
PMS is introduced; ii) the integration of training and implementation arrangements
(including performance reporting arrangements) for PBB and PMS; iii) priorities for
Civil Service wide HR initiatives in 2007/08 and 2008/09; and iv) a commitment to

                                            27
periodic analysis of existing data on the number and relevant characteristics of people
employed in the civil service generally, and in particular sectors and ministries. MCSAR
with the assistance of PRB and MoFED will be responsible for implementing these
activities.

Comprehensive and considered input is provided to the Pay Research Bureau (PRB) on
matters that could be included in the 2008 PRB report. Such input to include, for
example, input on performance related pay and the increased scope this may provide for
the civil service to compete selectively for the most talented people without increasing
pay levels across the board, non-pay rewards for performance, selective delegation of
personnel decision making authority by the Public Service Commission and MCSAR,
adopting a more investment-based approach to the training and development of staff,
employment arrangements for Ministry personnel and HR staff, moving schemes of
service to a competency based approach and decreasing the current focus on seniority and
formal pre-entry qualifications as the basis for advancement, increasing the number of
specialist HR staff to enable and support the implementation of new HR approaches,
expansion of lateral entry/contract employment arrangements, and future timing of PRB
reports. MCSAR with the assistance of MoFED and the Public Service Commission will
be responsible for implementing these activities.

Comprehensive and practical implementation plans for recommendations that may be
included in the 2008 PRB report. These plans will identify potential risks and how these
would/will be managed (e.g. through monitoring, reporting, and audit mechanisms).
MCSAR with the assistance of PRB and MoFED will be responsible for implementing
these activities.


                                Part III
                       MANAGEMENT ARRANGEMENTS


The programme is led by the Ministry of Finance and Economic Development (MoFED),
which requires technical advice and assistance in specialist areas. For this purpose, a
team of UNDP consultants will provide coordinated technical inputs and advice at
various stages of the programme. The technical cooperation will be nationally executed
and implemented by the MoFED with support provided by the UNDP as part of the
integrated programme on “Strategic Budgeting in the Government of Mauritius”. The
UNDP country office in Mauritius will support the Ministry of Finance and Economic
Development for the implementation of the technical assistance as needed (County Office
support to NEX). The UNDP technical cooperation team within the MoFED currently
consists of the Lead Economist / Economist Advisor, and also includes a team of
specialists on different sectors: Social Register Reform, Civil Service Human Resources
Management, Circular Migration, Environmental Accounting, Development of
Productivity Indicators, Secondary Market for Residential Mortgage Loans, setup of a
Tourism Satellite Account.




                                          28
The Ministry of Finance and Economic Development is responsible for ensuring that the
necessary legislative, policy, procedural and human resource development changes are
implemented across federal ministries and autonomous agencies at the time required,
with the advice and guidance of the advisory support team.

The Lead Economist/Economic Advisor will work under the overall guidance of the
Financial Secretary / Director (Budget). He will be responsible for providing targeted
assistance as well as building capacity of counterparts at the MoFED and at the line
Ministries. He will also advise on international best practices in public finances, and meet
the national priorities, specificities, and challenges as they arise.

The overall objective of the technical assistance by the UNDP Lead Economist /
Economic Advisor will be to consolidate and integrate the reform initiatives. This will
include continuous improvement in Programme-based Budgeting (PBB) and performance
measurement/ reporting by all ministries and concerned parastatals; further development
of capacities in implementing the Government economic reform program; effective
implementation of PBB FMIS (Oracle financials) and Performance measurement (Oracle
Balanced Scorecard); strengthening the functions of the MoFED Budget Audit;
implementing the new methodology for performance audit of programmes and sub-
programmes.

The Lead Economist/Economic Advisor will ensure that there is effective coordination
between related project teams and other government agencies, as well as other
collaborating bodies.

Execution will be done through Country Office support to NEX.


                                   Part IV
                         MONITORING AND EVALUATION

The Economic Advisor will submit a 6-month progress report to the MoFED and to the
UNDP Country Office on the implementation of “Strategic Budgeting in the Government
of Mauritius” and the eventual re-engineering measures to be taken. He will also advise
on future directions to take to ensure a sustainable and revised budget approach in
Government and submit to that matter a Final Progress Report with its findings,
conclusions and recommendations.


                                      Part V
                                  LEGAL CONTEXT

The project document shall be the instrument referred to as such in Article I of the
Standard Basic Assistance Agreement between the Government of Mauritius and the
United Nations Development Programme (UNDP), signed by the parties on 29 August
1974. The host country-implementing agent shall, for the purpose of the standard Basic
Agreement, refer to the Government Cooperating Agency described in the Agreement.

                                            29
                                                                Part VI
                                                BUDGET AND PROJECT RESULTS FRAMEWORK
Key activities (2007-2009)                                                Year 2007    Year 2008    Year 2009    Budget description   Total
Activity 1: Strategic Budgeting                                                                                     71200 / 71600
Lead Economist/Economic Advisor                  Months     24 x
                                                            10.671,33 +
                                                            allowance        155.000      130.000       37.000                         322.000
Civil Service Human Resources Management         Week       5.000             15.000       15.000                                       30.000
Social Register of Mauritius (SRM)               Mission    7.500              7.500       22.500                                       30.000
Chart of Accounts                                Mission    3.500              3.500        3.500                                        7.000
Sec. Market for Residential Mortgage Loans       Months     12 x 2.000                     24.000                                       24.000
Circular Migration                               Mission    30.000                         30.000                                       30.000
Rodrigues Activity                               Lump sum                                  12.000                                       12.000

Sub-total                                                                    181.000      237.000       37.000                         455.000
Activity 2: Central Statistic Office
component                                                                                                           71200 / 71600
Environmental Economic Accounting                Mission    10.000                         10.000                                       10.000
Development of Productivity Indicators           Mission    15.000                         15.000                                       15.000
Elaboration of a Tourism Satellite Account       Mission    10.000                         10.000                                       10.000
Compilation and Analysis of Social Accounting    Mission    30.000                         30.000                                       30.000
Matrix (SAM)

Sub-total                                                                                  65.000                                       65.000
Activity 3: Energy Policy Reform                                                                                    71200 / 71600
Renewable Energy                                 Mission    32.400            32.400                                                    32.400
Carbon Finance                                   Mission    22.300            22.300                                                    22.300
Electricity Sector                               Mission    71.300            71.300                                                    71.300

Sub-total                                                                    126.000                                                   126.000
Others                                                                                                                 74500
Miscellaneous                                    Month      300                2.700        3.600          900                           7.200
ISS                                              Year       5%                15.100       15.700        1.900                          31.200

Sub-total                                                                     17.800       19.300        2.800                          39.900

TOTAL                                                                        324.800      321.300       39.800                         685.900




                                                                            30
       6.2 Project Results Framework

    Intended Outcome: Fostering Democratic Governance in the Republic of Mauritius

    Indicator: Government Economic Reform implemented

    MYFF Service line: Public administration reform

    Partnership strategy: The programme is led by the Ministry of Finance and Economic Development
    (MoFED), and a team of UNDP consultants will provide coordinated technical inputs, technical advice
    and assistance in specialist areas at various stages of the programme. Execution will be done through
    Country Office support to NEX.

    Project title and number: Strategic Budgeting in the Government of Mauritius. ID: 00055329

 INTENDED          INDICATORS           TIME                  INDICATIVE ACTIVITIES                           INPUTS
  OUTPUTS                              FRAME                                                                  UNDP:
                                                                                                            US$ 685.900
                                                  - Coordination with various development partners in
          Programme-Based               April     engaging them for getting the necessary assistance        Lead
                                        2007      regarding the implementation of the Government
STRATEGIC Budgeting                       –       reform program;
                                                                                                            Economist/
          implemented and                                                                                   Economic
BUDGETING system adopted by             March     - Policy framework + Coordination and Monitoring
                                                                                                            Advisor
                                        2009      on “Trade and Competitiveness Development Policy
          all ministers by                        Loan” (DPL 1 / DPL 2 / DPL 3);
          2008-2009, and all
                                                  - Revenue projections and expenditure envelope for
          staff trained in PBB.
                                                  budget preparation;                                       Lead
                                                  - Government coordination on 2007 Public                  Economist/
                                                  Expenditure Review;                                       Economic
                                                  - Partnership agreement with Ministry of Finance
                                                                                                            Advisor
                                                  South Africa;
                                                  - Preparation, execution and monitoring of
                                                  Performance Budgets, including the definition of          Expert on
                                                  measurable outcomes and verifiable performance            Chart of
                                                  indicators, the budget transfers to selected parastatal   Accounts
                                                  bodies getting a grant from the 2007/08 Budget, and
                                                  the preparation of required technical guidelines;
                                                  - Preparation of technical guidelines (PBB / Program
                                                  evaluation / Output costing / Capital projects);
                                                  - Organic Budget Law and related Financial
                                                  Regulations;
                                                  - Revision of the legal framework regarding Public
                                                  Debt Management;
                                                  - Chart of Accounts and related COA Guidelines;
                                                  - FMIS further IT development for processing
                                                  quantitative data (Oracle Financial) and qualitative
                                                  data (Oracle Balanced Scorecard - BSC) relating to
                                                  PBB activities;
                                                  - System of National Accounts (SNA): Development
                                                  of satellite accounts relating to Environment,
                                                  Productivity and Tourism;
                                                  -Capacity building on public expenditure
                                                  management (PEM).



                                                       31
Coordination on       April   -TOR and formulation of the Energy Policy;            Lead
sector strategies     2007    -TOR and formulation of the Education strategy;       Economist/
initiated, sector      –      -TOR and formulation of the Tourism strategy;         Economic
                      March   -TOR and formulation of the Health strategy;
policy/strategies                                                                   Advisor
                      2009
identified and                -Compilation and Analysis of Social Accounting
formulated by key             Matrix (SAM)                                          International
ministries in 2008.           - Formulation of the ICT Strategy;                    Experts/
                              - Diagnostic of the Environmental sector and          Consultants
                              reformulation of the Environmental Strategy;          in different
                                                                                    Sectors

                                                                                    UNDP, in
                                                                                    collaboration
                                                                                    with UNEP
                                                                                    (Energy
                                                                                    Policy)

Coordination on       April   - Setting up of a Social Register of Mauritius        Lead
PBB targeted          2007    (SRM);                                                Economist/
activities in the      –      - Secondary Market for residential mortgage loans;    Economic
                      March   - Circular Migration;
social sector                                                                       Advisor
                      2009    - Gender budgeting through PBB programmes‟
developed by 2009             implementation;
                                                                                    International
                                                                                    Experts/
                                                                                    Consultants
                                                                                    in different
                                                                                    Sectors

HR management         April   - 2 Year Strategy for the development of HRM and      Lead
                      2007    personal administration in the Civil Service;         Economist/Ec
related to PMS         –      - 6 Performance Management Systems (PS) to be
introduced in                                                                       onomic
                      March   introduced in 2007/08 (2 in 2007 and 4 in 2008) in
2007/08 in pilot                                                                    Advisor
                      2009    pilot ministries (MoFED, MoEHR, MoHQL,
ministries, staff             MoAIF, MoITT, and MoPILTS);
                              - Mapping of PMF pilot ministries staff to the need   International
trained on PMS                                                                      Experts/
                              of existing PBB programmes;
                              - 2008 PRB report and implementation plans;           Consultants
                              - Capacity Building on PMS and PBB.                   in different
                                                                                    Sectors




                                  32
                                        APPENDIX I

            Terms of Reference for the Lead Economist / Economic Advisor


BACKGROUND

The Ministry of Finance and Economic Development (MoFED) of Mauritius presents the
annual budget in a line itemized format segregated into recurrent and capital budgets. Some
years back, MoFED decided to switch over to programme-based budgeting (PBB) in what
was perceived as the key feature of the MTEF initiative. The MTEF initiative had earlier
formalized the medium term approach of the Government in taking revenue, debt and
spending decisions. The elements of PBB were illustrated for select ministries in two
documents presented successively in 2004/05 and 2005/06 along with the annual budget
presentation. In 2006-07, further development of PBB was put on hold as reforms initiated by
the incumbent government entailed a paradigm shift in strategic thinking. It was decided to
await the crystallization of updated or new sector strategies before these could be represented
through the formulation of appropriate programs. The break also helped MoFED reflect on
ways to enhance the ownership of programs by the line ministries, a direct consequence of
which led to the emergence of Budget Sector Support Teams (BSST) dedicated to liaising
with each of the line ministries. For budget 2007-08, MoFED is confident of extending the
PBB to all the ministries. The concerned BSST in collaboration with their respective
counterparts in the line ministries will shortly come out with program proposals. The
accuracy of proposed programs and their outcomes, outputs and related performance
indicators will however need to be thoroughly examined. The quality of formulated programs
may also need to be up graded through engagement of sector specialists provided by the
external partners. The relevance of PBB is now unquestionable and more so in the country
context as seeking value for money and eliminating wastage are the top priorities of the
government. A fully developed and operational PBB is expected to set in motion an amicable
budgetary process focused at achieving the critical objectives of the government. These
priorities are being relentlessly pursued for increasing citizen benefits and creating more
fiscal space as ministry wise budgetary ceilings are shrinking in response to measures
undertaken to contain the burgeoning public debt. New challenges are foreseen in reaching
agreement over relative ministry wise priorities and budgetary ceilings. A fully developed
and operational program based budgeting is expected to set in motion an amicable budgetary
process focused at achieving the critical objectives of the government.

DUTIES AND RESPONSIBILITIES

Pivoted on program based budgeting, MoFED wishes to develop a budgetary system
reflecting high camaraderie between the Ministry of Finance and Economic Development,
the line ministries and parastatal bodies wherein both share mutual concern for constraints
and appreciation of operational freedom.

PRINCIPLE FUNCTIONS


                                              33
    Under the overall guidance of the Financial Secretary (FS), the economic advisor will
    perform the following functions:

-   Make revenue projections, prescribe permissible budget deficit and work out the expenditure
    envelope for the budget year. In so doing, he will have consulted the Mauritius Revenue
    Authority (MRA), Debt Management Unit (DMU) and the Macroeconomic Unit (MU) of the
    MoFED;

-   Assist allocation of the expenditure envelope to the line ministries as pre-set ceilings for the
    budget year. The pre-set ceilings would reflect consistency with government priorities as
    ascertained through various policy announcements, representation from the line ministries,
    several pre-budget meetings of the Minister and need for fiscal prudence among others;

-   Constantly review and modify as required the policy framework, strategic programs and
    performance indicators of the line ministries in close collaboration with the BSST and the
    line ministries. In this context, the Advisor will sustain the evolution of program based
    budgeting by building capacity at MoFED and the line ministries through regular
    presentations of the concept. The Advisor will also act as the chief coordinator with various
    external partners in engaging them for getting the necessary assistance;

-   Recommend the number, types and contents of documents to be submitted to the National
    Assembly during the annual budget presentation. The recommendation on contents inter-alia
    would include the depth of costing details, the extent of analysis and the length of
    information lag;

-   Undertake a review of Financial Management Manual with a view to recommending its
    revision consistent with program based budgeting and GFS based reforms of the country‟s
    accounting system.

    DURATION OF APPOINTMENT

    The appointment of the Lead Economist/Economic Advisor will be for a period of 12 months
    from the effective date of appointment. During this period the appointee will be eligible for
    annual leave and will accrue such leave at the rate of 2.5 working days for each full month of
    continuous service, i.e. thirty (30) working days per year (annual leave should be taken
    during the period of the contract).

    The appointment of the Lead Economist/Economic Advisor will expire automatically after
    twelve (12) months from the effective date of appointment, and unless an extension is
    requested by the Ministry of Finance and Industry and is agreed on by the Budget Advisor/
    Team Leader.

    Other specialists will be recruited on the following sectors: Social Register, Civil Service
    Reform, Circular Migration, Chart of Accounts, National Accounts, Environment.



                                                  34
    DELIVERABLES

-   The Advisor will detail the fiscal stance of the government leading to the setting of the
    expenditure envelope by drafting a Cabinet Memorandum;

-   The Advisor will justify the pre-set ceilings determined for the line ministries by drafting an
    information paper for the Cabinet;

-   The Advisor will be responsible for documenting the various elements of program based
    budgeting of the line ministries and devising training modules;

-   The Advisor will list recommendations on the set of documents and their contents to be
    presented at the conclusion of the annual budget process;

-   The Advisor will provide a report of his review of the Financial Management Manual of the
    Government of Mauritius.

    COMPETENCIES

-   Ability to communicate effectively with staff at all levels of the organization;

-   Ability to work and adapt well with people of different national, ages, cultural, gender,
    religious and racial backgrounds;

-   Ability to work independently, multi-task and work and well under pressure;

-   Maintain confidentiality and discretion when dealing with sensitive issues;

-   Ability to make timely and quality judgments and decisions;

-   Able to work in a team, organize work and projects.

    REQUIRED SKILLS AND EXPERIENCE

-   Post-graduate qualification in economics and public finance;

-   A minimum of 15 years practical experience in implementing technical cooperation
    programs and providing technical advice at the international level;

-   Strong team leadership capabilities, including the ability to work with different line
    ministries and parastatal bodies, to identify management needs and expectations, and to
    relate these to developing recommendations for an efficient and comprehensive public
    expenditure management system;

-   An ability to identify new needs and risks during the implementation of the economic
    reform programme and to advise on appropriate responses which ensure that the existing

                                                   35
    quality and integrity of the public expenditure management system is preserved and
    improved;

-   Capability to design and run training activities in budget formulation, public expenditure
    management and analysis;

-   Fluency in English and French.




                                               36
                                    APPENDIX II


                        TERMS OF REFERENCE FOR SUPPORTING
                         THE DEVELOPMENT OF CIVIL SERVICE
                     HUMAN RESOURCE MANAGEMENT IN MAURITIUS

1 - BACKGROUND

        The Government of Mauritius has recently embarked on an overall strategy to
reinvigorate economic growth. As part of this strategy the authorities intend to restructure
the economy to become competitive on international markets through important reforms that
help move away from low value-added sectors to new sectors in which the country has
comparative advantages. Strengthening the economic and social infrastructure is paramount
to achieving this target. A critical condition is to bring the fiscal position under control and
enhancing the efficiency and effectiveness of government programs. This is a precondition
for creating the fiscal space that could be used to finance the priority public interventions in
areas such as human capital investment, infrastructure development, and effective social
safety net.

The government has recently embarked on reforms aimed at introducing Program-Based
Budgeting (PBB) embedded in a Medium Term Expenditure Framework (MTEF).
Recognizing the need to move to multi-year budgeting and to introduce clearer links between
development objectives and the budgetary process, reforms of the public financial
management system to introduce a programmatic approach have been planned. These
reforms are being accompanied by measures to strengthen the budget preparation, execution
and monitoring systems to allow a move towards result-based budgeting. This not only will
allow enhancing fiscal control and pursue efficiency in the delivery of public services, but is
also key to improving the allocation of public funds, shifting expenditures to productive
items, including an effective social sector and targeted social safety net.

At the same time, some aspects of existing and long-established personnel management
practices and requirements have been identified as significant factors that could limit
progress and achievement because of rigidities and inefficiencies associated with existing
arrangements, and the lack of modern, supportive, best-practice systems and capacity in areas
such as performance management and strategic human resource management.

Performance management systems (PMS) have been introduced in a small number of
departments and action is underway to introduce it in some others. PMS has the potential to
extend the measurable performance focus of PBB to individual staff at different levels of
ministries and departments by setting up a system under which staff know what is expected
of them (the specific results they are required to achieve and how this will be measured, the
skills they need to do their jobs well, and how they are expected and required to behave in
their work) and individual performance can be monitored and assessed.




                                              37
Even with the introduction of PMS, however, many features of current human resource
management (HRM) arrangements in the country will still be incompatible with the central
concept on which PBB (and New Public Management reform generally) is based. This is the
concept that managers (and the organizations they lead) should have the ability and authority
to manage for required results, and should also be accountable for the achievement – or
otherwise – of those results.

2 – DEVELOPING HUMAN RESOURCE MANAGEMENT                    IN THE    CIVIL SERVICE     AND
SUPPORTING PBB

Dramatic restructuring of existing HRM arrangements is not necessary and not appropriate at
this time. Instead, real and lasting change can be achieved over time in a series of planned
incremental steps which are owned, controlled, and implemented by agencies and officials of
the Government of Mauritius (GoM). Key agencies involved will include the Ministry of
Finance and Economic Development (MoFED), the Ministry of Civil Service and
Administrative Reform (MCSAR), the Pay Research Bureau (PRB), and the Public Service
Commission (PSC).

In the short-term, the goals of the change process will be to:
 get a better alignment of HRM practice with the implications and requirements of PBB
 introduce elements of performance management and discretion into HRM practice in a
    responsible and controlled way; and
 demonstrate by example that it is possible to create a new kind of HR function in a core
    Ministry (MoFED), and the positive contribution that such a function can make to the
    achievement of organisational results

To this end, action plans have been developed in three related areas: Aligning HRM and
Personnel Management practice to the needs and implications of PBB, Mapping of staff by
position (not actual staff) to the needs of existing PBB programmes, and Developing the
HRM capacity of MoFED.

3 - TASKS AND OUTPUTS

An international consultant will be recruited to support the change process, and the timely
and effective implementation of the action plans that have been developed.

In her/his work, the international consultant will work closely and collaboratively with
officials in key agencies and with other relevant stakeholders in the country.

In particular, the expected outputs of the international consultant‟s work will be:
1. Review, and make comments and suggestions on, draft work plans and other material
    prepared by GoM officials for submission to the PRB, project steering committees, senior
    management, and Ministers;
2. Provide advice and assistance to the project of mapping staff in selected ministries by
    position (not actual people) to the needs of existing PBB programmes;



                                             38
   3. Provide high quality input (informed by international practice and experience) to the
      development of a 2 year HRM development strategy for the civil service, to the
      development of comprehensive and considered input to the 2008 report of the PRB, and
      to the development of comprehensive and practical implementation plans for
      recommendations that may be included in the PRB report;
   4. Provide advice on specific HRM practice issues as required (the development and
      implementation of PMS across the civil service; the format of special reports to the
      Public Service Commission on candidates for competitive promotion; and options for
      linking PMS to decisions on progression and promotion, and on the potential contribution
      of 360 degree input to performance appraisal);
   5. Contribute to the development and operation of the HR function in MoFED by
       providing draft role descriptions for HR team members;
       brokering opportunities for placement and exchange with the HR units of public
          organizations in relevant countries like Australia, New Zealand, etc.;
       providing input on the development of work plans and personal development plans;
       providing input to scheduled reviews of the staffing establishment for the function;
          and
       providing „1 on 1‟ support and advice to HR team members on their areas of
          responsibility.
   6. Prepare mission reports with relevant recommendations after each mission.

This schedule of expected outputs may be varied from time to time after discussion and
agreement.

   The international consultant will be engaged for a period of one year but will not work
   continuously during this time. Instead, he will:

      Visit the country four times during the year, at agreed times, for periods of up to three
       weeks; and
      Provide other inputs between visits on a desk analysis basis as required.




                                                39
                                       APPENDIX III

                        TERMS OF REFERENCE FOR THE SETTING UP
                    OF A “SOCIAL REGISTER OF MAURITIUS (SAM)”



1 - BACKGROUND

        The Government of Mauritius has recently embarked on an overall strategy to
reinvigorate economic growth. As part of this strategy the authorities intend to restructure
the economy to become competitive on international markets through important reforms that
help move away from low value-added productions to new sectors in which the country has
comparative advantages. Strengthening the economic and social infrastructure is paramount
to achieving this target and will entail, among other measures, bringing the fiscal position
under control and enhancing the efficiency and effectiveness of government programs. This
is a precondition for creating the fiscal space that could be used to finance the needed priority
public interventions in areas such as human capital investment, infrastructure development ,
and effective social safety net.

The government has recently embarked on reforms aimed at introducing Program-Based
Budgeting embedded in a Medium Term Expenditure Framework (MTEF). Recognizing the
need to move to multi-year budgeting and to introduce clearer links between development
objectives and the budgetary process reforms of the public financial management system to
introduce a programmatic approach have been planned. These reforms are being
accompanied by measures to strengthen the budget preparation, execution and monitoring
systems to allow a move towards result-based budgeting. This not only will allow to
enhancing fiscal control and pursue efficiency in the delivery of public services, but is also
key to improving the allocation of public funds, shifting expenditures to productive items,
including an effective social sector and targeted social safety net.

2 - SETTING UP A SOCIAL REGISTER OF MAURITIUS (SAM)

The system to identify the beneficiaries of social programs in Mauritius needs to be
strengthened. The existing database covers the beneficiary of social assistance schemes, but
is not complete as other social programs run by ministries different from the “Ministry of
Social Security, National Solidarity, and Senior Citizens Welfare & Reform Institutions” are
excluded. Also the present database does not contain all relevant information for poverty
targeting and does not cover the poor who are not receiving social programs.

The current system has many weaknesses. It does not link income and non-income
dimensions of poverty, it reflects the fragmentation of the social safety net and is at risk of
duplication. It is also static in nature and heavily based on ad hoc welfare assessments to
identify the poor. The definition of income, moreover, does not reflect entirely the permanent
income concept that is more relevant for poverty.




                                               40
    The poverty line differs across programs. Its definition is not based on best international
    standards. No unique method is used to define income, equivalence scales, asset evaluation.
    These and other factors differ across programs leading to uneven targeting.

    Targeting of benefits can be improved. Based on an assessment undertaken by an IMF
    mission in 2006, social program targeting needs to be improved using a combination of
    proxy means-testing and geographical targeting.

    Building a unified “Social Register” is a first step towards enhancing the targeting of
    programs. It would allow to manage programs in an integrated way using a uniform approach
    to welfare level definition and targeting criteria.

    In order to build such a system, there are several dimension to be considered:

-   At the technical level, the computer system should be enhanced to enable the integration of
    all existing social program databases through the use of a single identification code.

-   At the statistical level, analyses need to be developed to assess the links between household
    and individual characteristics and welfare and income indicators. This is required to adopt a
    scoring system that would assign specific weights to each individual and household variable
    (e.g. demographic and employment characteristics, assets, quality of housing, etc) to
    determine an estimated income level to be compared with the self reported income.

-   At the operational level, new manuals should be developed to guide the compilation of
    certification forms by all potential social beneficiaries. Individuals receiving their social
    benefits need to be asked to recertify while new ongoing certification has to be allowed for
    those who want to be considered for program eligibility.

    Adjustments to the legal framework, including definitions of income, should also be
    considered. In particular a review should be conducted of possible links between the
    definition of income in the register and in other pieces of legislation such as the Tax Code.

    Moreover, a new regulatory framework should be developed. This would guide the
    operations of the “Ministry of Social Security, National Solidarity, and Senior Citizens
    Welfare & Reform Institutions” that will be responsible for the development and
    management of the “Social Register”.

    As a first step, the Social Register should include all social program beneficiaries and be
    expanded to other poor individuals through a combination of self-registration and poverty-
    map-based outreach activities at a later stage.

    3 - TASKS AND OUTPUTS

    The international consultant will assist the “Social Register Working Group” in building a
    Social Register along the lines indicated by the government medium-term priorities
    embedded in the MTEF process. The following key areas of priority are identified:


                                                  41
1. Measures directed at cyclical and structural poverty reduction, whether or not conditional
   on participation to human capital accumulation programs;

2. Programs aimed at retraining workers made redundant in sunset sectors to enhance their
   employability.

In her/his work the international consultant will liaise with the members of the “Social
Registry Working Group” and with the other relevant stakeholders in the country, to
articulate specific solutions to help achieve a better targeting and higher efficiency in the
social safety net programs.

In particular, the expected outputs of the international consultant‟s work will be:

   Provide assistance in the form of ad hoc notes and provision of materials in identifying
    best international practices in social protection reform, with particular focus on setting up
    a Social Register;
   Review and adjustment of the legal framework relating to social protection;
   Review and make proposals for the development of a new regulatory framework aiming
    at guiding the operations of the Ministry of Social Security;
   Assist the setting up of a Social Register to be developed and managed by the Ministry of
    Social Security;
   Provide training and toolkits for social safety net assessment and reform through
    presentations, seminars, and distant-learning instruments;
   Provide assistance in defining performance indicators, relevant data sources, and
    monitoring systems for assessing the effective targeting of social safety net programs and
    help the Social Registry Working Group disseminate these results;
   Assist twice a year the Social Register Working Group in evaluating the implementation
    and performance of selected budget programs relating to social protection (outcomes,
    outputs and related performance indicators) in the context of the preparation of the
    Interim Performance Report (January) and Annual Performance Report (July).

The international consultant will be hired for a period of one year, she/he will perform desk
analyses upon request by the coordinator of the “Social Register Working Group” nominated
to supervise the work. She/he will visit the country on the request of the authorities for short-
periods to be briefed on policy and technical developments and discuss the work agenda.




                                               42
                                       APPENDIX IV


                            TORs
        ENVIRONMENTAL-ECONOMIC ACCOUNTING FOR MAURITIUS



1. Project Justification

There is an emerging outcry globally to keep track of environmental issues, especially with the
advent of climate change and its impact on economies. Mauritius, as a small island, is highly
vulnerable both in terms of its economy and natural environment. The limited resources
available are vital to sustain the country‟s economic activities and population‟s needs in
general.
In this context, a system of Environment-Economic Accounting is of utmost importance since
it will provide a transparent information system which can be used to identify more
sustainable paths of development. To that effect, the Government of Mauritius has the firm
intention to consider resources accounting which fits well in the setting up of an integrated
system of Environment-Economic Accounting.

2. Objective

The key objective of the project is to develop and implement a system of environment-
economic accounting in Mauritius.

3. Requested services

The services of a highly experienced international consultant will be required to develop and
implement a system of integrated environment-economic accounting in Mauritius. In
particular, the consultant will carry out the following tasks in 2 missions:

Mission 1: 3 weeks

Review existing reports on the environment as well as existing institutional and regulatory
systems for the application of an accounting system in Mauritius;

Review existing data on the environment including data on the cost of various mitigation
measures / per sector that have been funded and completed ( State or private) for a first
assessment of data on costs of loss and/or pollution and required investment;

For missing data or data gaps, develop some specific criteria and/ or modelling instrument to
be followed case by case in order to determine the value of various natural assets (renewable,
non renewable, etc.. ) as well estimate any expected return of investment on conservation
and/or mitigation measures taken;



                                              43
Develop accounting methodologies appropriate for the local context, for the various resources
and sectors such as water, coastal zones, air/atmosphere/climate and land use among others;

Make recommendations about how to implement the accounting methodologies proposed,
particularly with regard to data collection (including institutional arrangements) and
compilation;

Devise an Action Plan for the implementation of the system indicating the time frame and the
resources needed in terms of staffing, equipment, software, etc;

Assist and facilitate the data collection and compilation process. Along the way, provide on-
the-job training to all staff appointed (around 8) to carry out this activity. Develop a TOR for
each of them so that the work can proceed as planned.

Mission 2: 4- 6 weeks (to be undertaken after obtaining the necessary data for compiling the
Environmental Economic Accounts but no later than 6 months after the first mission)

Take stock and evaluate the data collected and available;

Develop the Environmental Economic Accounts for the country. In the process, on-the-job
training should be given to local staff (CSO, Ministry of Environment, Ministry of Finance &
Economic Development as appropriate) on practical aspects of data compilation, analysis and
interpretation of the accounts. At the end of the project, the staff should have the necessary
expertise to carry out the work on their own;

Disseminate information on the accounts to key Decision Makers, including those from the
Ministry of Finance and Economic Development, the Ministry of Environment and the various
other relevant institutions involved in environmental issues.

4. Deliverables

The following deliverables are expected by the consultant:

A report at the end of the first mission highlighting the activities carried out and including an
Action Plan for the implementation of the Environment-economic accounting system;
The Environmental Economic Accounts developed for the country - at the end of the second
mission;
A final report summarising the tasks carried out, the problems encountered and any
recommendations for future action.

5. Profile of the consultant

The accounting system requires the services of a highly experienced international consultant
well conversant with National Accounts and Environmental-Economic Accounting;




                                               44
The consultant should possess an advanced university degree, masters or above, in any of the
following disciplines Statistics, Economics, Environmental Economics, Environmental
Statistics, Environmental Sciences;
He/She should have a strong statistical training and quantitative background;
He/She should have proven experience in the development of a similar system in any country;
He/She should have relevant experience in skills transfer and building local capacity;
He/She should be fluent in English.




                                            45
                                       APPENDIX V

                 Consultant in the Development of Productivity Indicators

Background
Prior to 2007, wage increase was determined by the tripartite committee comprising
representatives of Government, employers and workers to compensate for the cost of living on
the basis of inflation rate. In April 2007, Government decided that wage increase should take
into consideration the “rise in consumer price index, national ability to pay, national
productivity and competitiveness, employment and unemployment rate”. In this context, in
May 2007 Government set up the National Pay Council (NPC) comprising representatives of
Government, employers and workers to make appropriate recommendations with regard to a
national minimum wage and a yearly minimum wage increase taking into consideration the
factors mentioned earlier. The Central Statistics Office (CSO) has been called upon to compile
statistics that will inform the decisions of the NPC. In particular, CSO will have to develop
productivity and “capacity to pay” indicators that would help the NPC to differenziate
between strong and fragile sectors and enterprises and make appropriate recommendations on
minimum wage increases by sector and possibly enterprise.

Labour productivity, capital productivity, and total factor productivity (TFP) indices
Productivity indices for the total economy
Employment-based labour productivity, capital productivity, and TFP indices are available for
the total economy.

Productivity indices for sectors
Employment-based labour productivity indices are available by sector while capital
productivity and TFP indices are available for “Manufacturing” and “EPZ” only. CSO can
compute capital productivity and TFP indices for the remaining sectors. The Perpetual
Inventory Method (PIM) will be used to compute capital stock. Data required are data series
on investment and price deflators by type of assets (building, and machinery and equipment)
as far back as the 1940s. These data are available at CSO; in case of data gaps, some
reasonable assumptions can be made.

Productivity indices for enterprises
No productivity indices are available for enterprises.
Computation of employment-based labour productivity for enterprises will require production
accounts and employment data of all individual enterprises. Currently, data for all enterprises
are not available at the CSO. It is proposed to work out the indices for large enterprises (to be
defined) as a first step and to extend the computation to “other than large” if needed. While
employment data are already available, Income Tax database of the Mauritius Revenue
Authority (MRA) will have to be tapped to meet the data needs for the computation of
production accounts of individual enterprises. In this respect, an institutional agreement for
data sharing will be worked out between CSO and MRA by 30 September 2007.
As regards capital and total factor productivity indices, computation at enterprise level will not
be possible mostly because of lack of long data series on investment of individual enterprises.
While capital stocks may be available from accounting records of enterprises, they may not be


                                               46
comparable, as enterprises may use different accounting methods when computing
depreciation of fixed assets. For instance, some enterprises may calculate the depreciation of a
piece of equipment based on a service life of 10 years while others may assume a service life
of 5 years for the same equipment. Also, some enterprises may compute the depreciation
based on the book value of the equipment while others may use the current value.

Economic productivity indicators as computed by the National Productivity and
Competitiveness Council (NPCC)
The NPCC computes economic productivity measures, defined as the “gross output” or “value
added” per unit value of input. The input can be wage expenditure, materials consumed,
capital employed, all inputs, or conversion input (wages and salaries, and depreciation). The
NPCC also computes gross output and value added per worker, and return on investment
measured by profit/loss per unit value of capital employed.

Economic productivity indicators for the total economy
The CSO can compute the above indicators for the total economy using available data on
production accounts based on the Census of Economic Activities (CEA), employment and
capital employed.

Economic productivity indicators for sectors
The CSO can compute the indicators for sectors using available data by sector on production
accounts based on the CEA, employment, and capital employed. Capital employed will be
compiled as indicated above at paragraph 2 of "productivity indices for sectors".

Economic productivity indicators for enterprises
Computation of productivity indicators at enterprise level would require profit and loss
accounts and balance sheets of enterprises. Such data are currently not available at the CSO.
Again, Income Tax database of the MRA will be tapped. All indicators, except those on
capital employed as data computed by enterprises are not comparable as mentioned above at
paragraph 3 of "Productivity indices for enterprises", can be worked out for the large
enterprises (to be defined), once the institutional agreement between CSO and MRA is in
place.

Description of Responsibilities
Technical assistance required
CSO is envisaging computing labour, capital productivity and TFP indices, and economic
productivity indicators for the total economy, sectors and large enterprises, as indicated above.
No major methodological problems in connection with the computation of the statistics are
expected. However, technical assistance will be required on the improvement of available
productivity indicators and development of more targeted indicators for determining
productivity-related wage increases.

Activities to be undertaken by the Consultant
The specific terms of reference of the consultant are:
(i) Assess the suitability of the productivity indicators compiled and to be compiled by CSO
for determining productivity-related wage increases;


                                               47
(ii) identify other indicators that are more suitable for determining wage increases based on
“rise in consumer price index,
national ability to pay, national productivity and competitiveness, employment and
unemployment rate”;
(iii) develop appropriate methods for the computation of the identified indicators;
(iv) identify possible data sources, and make proposals on the development of new data
collection instruments if need be;
(v) compute, analyse and interpret the various indicators, indicating their relevance for wage
determination;
(vi) train CSO staff (about 6-8 officers) in the process – the training to be built around
practical aspects of the work should include the computation of the newly-identified
indicators, the analysis and interpretation of the various indicators, and their relevance for
informed decision by the NPC. By the end of the training, CSO staff should be familiar with
the various processes and be able carry out the work independently.

Deliverables
The following deliverables are expected from the Consultant:
(i) A report highlighting activities carried out and problems encountered, as well as any
recommendations for future actions.
(ii) A set of indicators suitable for determining wage increases based on “rise in consumer
price index, national ability to pay, national productivity and competitiveness, employment
and unemployment rate”, together with the relevant methodological and analytical report.

Competencies
The consultant should be highly experienced and knowledgeable in National Accounts and
Productivity analysis. He/She should
(i) have a strong statistical and quantitative background;
(ii) have proven experience in the development and analysis of productivity indicators and in
the setting up of similar system of
wage determination in any country;
(iii) have relevant experience in skills transfer and building capacity.

Qualifications
Have a post-graduate university degree, masters or above in Statistics or Economics
Have a minimum of 15 years experience in National accounts and Productivity analysis




                                             48
                                        APPENDIX VI


                    Elaboration of a Tourism Satellite Account for Mauritius


1 - Justification

The tourism sector has been a key factor in the development of Mauritius during the past
decades. During the period 1977 to 2007, tourist arrivals rose from 103,000 to around
900,000 and tourist earnings from R 210 million to around R 38,840 million. With
Government policy to attract two million tourists in 2015, the sector is being called upon to
grow significantly in the coming years. Statistical information collected so far does not fully
capture the effect of the sector on the economy. Consequently, government and other
stakeholders may not receive the accurate and necessary information for effective public
policies and business operations.

In order to assess the role that tourism is playing in Mauritius, the Central Statistics Office in
collaboration with the Ministry of Tourism, Leisure and External Communications has
decided to develop a Tourism Satellite Account (TSA), as recommended by the World
Tourism Organisation (WTO). The TSA will provide information on the role that tourism is
playing directly, indirectly or through induced effects in the Mauritian economy in terms of
generation of value added, employment and income.

A TSA for the year 1997 has been attempted based on data from the 1997 Census of
Economic Activities and the Survey of Outgoing Tourists carried out in 1996 and 1998. The
ten tables as recommended in the WTO manual “Tourism Satellite Account: Recommended
Methodological Framework” have been filled in as far as possible using available data.
However, there is need for technical assistance to assess the work completed so far and to
advise on how data gaps problems be addressed.

2 - Objectives

Technical assistance is required to assess the work completed so far and to advise on the
possible improvements as concern data quality, data sources and coverage; and to build
capacity to construct, analyse and interpret the Tourism Satellite Account.

3 - Activities to be covered and outputs

The services of an international consultant will be required for tasks to be carried out in two
missions as follows:


Mission I: 2 weeks
   (i)     Review the work done so far on the TSA
   (ii)    Assess the methodological approaches used


                                               49
   (iii)      Identify data gaps and make proposals on how they can be addressed, including
              development of new data collection instruments, if need be
   (iv)       Set up appropriate methods for the elaboration of the TSA

Mission II: 3 - 4 weeks (to be completed after obtaining the necessary data for the
computation of the TSA, but not later than 6 months after the first mission)

           a. Take stock and evaluate the data collected
           b. Construct a TSA for the country, and analyse and interpret the set of tables.
           c. Train local staff (10 officers from CSO and Ministry of Tourism, Leisure and
              External Communications) on the data collection and compilation procedures, and
              on the analysis and interpretation of the TSA.

              The training will be built around the practical aspects of the compilation of the
              complete set of accounts as recommended by WTO, and of the analysis and
              interpretation of the tables. By the end of the training, CSO staff should be able to
              collect the necessary data, compile the TSA, analyse and interpret the tables on
              their own.

4 - Deliverables

The following deliverables are expected from the consultant:
   (i)    A report at the end of the first mission highlighting activities carried out during the
          mission, and work programme of activities to be completed by local staff before
          the second mission.
   (ii)   A Tourism Satellite Account for the country and a report covering methodologies
          used and an analysis of the TSA tables at the end of the second mission.
   (iii)  A final report highlighting activities carried out and problems encountered, as well
          as any recommendations for future actions.

5 - Profile of the Consultant

The consultant should be highly experienced and knowledgeable in National Accounts and
Tourism Satellite Accounts. He /She should
       d. have an advanced university degree, masters or above in any of the following
          fields: Statistics, Economics, Tourism or related field.
       e. have a strong statistical and quantitative background
       f. have proven experience in the elaboration of Tourism Satellite Accounts
       g. have relevant experience in skills transfer and building capacity
       h. be fluent in English.




                                                 50
                                          APPENDIX VII

                  FINALIZATION OF THE CHART OF ACCOUNTS
                      Draft TOR for a preliminary 1-week mission - June 2007

    1. CONTEXT

    The Mauritian authorities have recently decided to adopt a government-wide program-based
    budgeting (PBB) system within a Medium Term Expenditure Framework (MTEF). The recent
    initiative to introduce program budgeting and MTEF has recognized the need to use the MTEF
    for overall strengthening of budget management. The Ministry of Finance & Economic
    Development (MoFED) is planning to introduce a number of reforms to the budget
    formulation and MTEF process which include:

       Adoption of the newly developed Performance-Based Budgeting (PBB) system in all
        ministries through the use of a new structure of programs with activities. (A total of 94
        programs has been identified by all line ministries for 2007/2008);
       Development and implementation of a rolling 3-year MTEF (2007/2008 - 2009/2010) in
        line with the overall macroeconomic framework endorsed by key development partners;
       Preliminary “Public Expenditure Review” in a number of key areas (MTEF process;
        Education; Environment, ICT, Tourism and Transports);
       Preparing or updating sector strategies for all key Government activities in line with the
        recommendations of the 2007 Public Expenditure Review (PER);
       Update of the Budget Classification and preparation of a Chart of Account (COA) for the
        fiscal year 2008-2009; and
       Operational preparation of the Civil Service Reform (CSR) and the Public Enterprises
        Reform, both to be implemented as of July 2007.

    In order to successfully implement the reform program, the Ministry of Finance and Economic
    Development (MoFED) has set up a COA working group, chaired by the Accountant General
    and composed of representatives from the Budget Department and the Treasury Department,
    to modernize the current budget classification (revenue and expenditure) and prepare a new
    2001 GFS-consistent chart of accounts to be used for the preparation of the budget 2008/2009.

    The major components of the 2008/2009 Chart of Accounts are outlined as follows:

- Funding Classification will provide the sources of funding.

- The existing Organizational Classification prepared by the Ministry of Civil Service and
Administrative Reform provides the basis for establishing the responsibilities for the day-to-day
administration of government business.

- The existing Program Classification prepared by the Budget Department (MoFED) provides the
basis for recording transactions associated with a specific program that is operating under a


                                                 51
ministry. 94 programs have been identified so far by all ministries for the preparation of the budget
2007/2008. This is already a major shift in the reform process.

- A 2001-GFS-consistent Economic Classification will provide the basis for recording specific
activity by the kind of transactions by which the Government performs its functions, and the
impact outside of Government in the market for goods and services, in financial markets, and in
the distribution of income. The precise definition of items and sub-items and economic groupings
within the economic classification structure will be of vital importance to the costing and analysis
of performance budget preparations, particularly under a program classification, where cost of
services being provided is an important performance measure.

- A Functional Classification of expense, which is a detailed classification of the functions, or
socioeconomic objectives, that government ministries aim to achieve through various kinds of
outlays will provide an additional basis for budget reporting.

    The 2008/2009 Chart of Accounts will also have to integrate a geographic dimension.

    During his one-week mission in June 2007, the international consultant will assist the COA
    working group in finalizing the preparation of the 2008/2009 Chart of Accounts that will
    include cash expenditure transactions involving purchase of Non-Financial Assets, cash
    expenditure transactions involving purchase of Financial Assets, and cash financing
    transactions involving Liabilities. Eventual anomalies in the draft Economic Classification
    will have to be rectified.

    The Treasury of South Africa will be funding the fees of the international consultant and
    UNDP will be funding travel expenses and related daily subsistence allowances (DSA) for this
    one-week mission.




                                                   52
                                      APPENDIX VIII


DEVELOPMENT PARTNERS                  BUDGET        SUPPORT       UNDER       THE     PUBLIC
EXPENDITURE REVIEW:



   ENVIRONMENT SECTOR ANALYSIS IN THE CONTEXT OF THE
ECONOMIC REFORM PROGRAM OF THE GOVERNMENT OF MAURITIUS


CONTEXT OF INTERVENTION

Mauritius‟ environment is under high pressure as the economy is expected to grow
significantly, contributing to the erosion of land and soils, water, and the coastal zone.
Compelling preoccupations are: i) beach erosion and unplanned development of prime coastal
areas with adverse effects on marine and tourism development; ii) degradation of watersheds;
iii) insufficient capacity for hazardous waste treatment, recycling and disposal; iv) inadequate
air standards for emissions in industrial, and transport sector, and capacity to control air
pollution in general; and v) insufficient knowledge and awareness on the impacts of climate
changes on the ecosystem and appropriate adaptation measures to be implemented in the
medium to long term.

Government‟s policy objectives for the preservation of the environment, as outlined in the
National Environmental Strategy 1999-2010, aim at controlling pollution, promoting clear
technology, education people to be environmentally conscious, conserving resources and
protecting the local and global environment. Significant progress has been made in the
implementation of the Strategy.

However, environmental problems related to land use planning, water availability and quality,
the increasing pressure on the coastal zone, and solid waste and wastewater management still
needs to be addressed. In this regard, the National Environmental Strategy are being reviewed
and a new national environmental policy is being developed for the medium term. Also, the
Environmental Protection Act (2002) is being revisited to ensure that environmental standards
stimulate desirable behavior, innovation and business opportunities. In addition, enforcement
of environmental laws is being decentralized to local authorities.

ENVIRONMENT SECTOR ANALYSIS

During the public expenditure review to take place in April 2007, the international consultant
is requested together with his/her national counterparts from the Ministry of Environment &
National Development Unit (MoE&NDU) to:

   Assess the needs and analyze the challenges faced by the MoE&NDU in reviewing the
    “National Environment Strategy (1999-2010)” and “Action Plan” in order to bring it in
    line with the Economic Reform Program

                                              53
   Identify gaps in the national strategy and advise on how to fill them, including identifying
    areas where further TA may be needed, and offer guidance as of to strengthening and
    implementing both national strategy and action plan.

   Identify the current Environment sector priorities and take stock of ongoing environmental
    and pipeline projects engaged with development partners in line with the 2006/07 Budget
    Speech and commitments taken with donors (e.g. 2006-2009 Development Policy Loan,
    etc.);

   Help the MoE&NDU with the preparation of a road map to complete the design and
    implementation of the Environment sector reforms. Particular areas of concern identified
    by MoE&NDU officials include:

    -   Assessing the revised MoE&NDU MTEF structure of programs, including the
        definition of outcomes and the choice of outputs with their relevant performance
        indicators (quality; efficiency; effectiveness) for the preparation of the 3-year 2007/08
        - 2009/10 performance budget;

    -   Preparing a 1st draft MTEF Guidelines for the Environment sector;

    -   Making specific complementary recommendations on sector issues in areas where it is
        needed.

   Make a brief assessment of the training needs at the institutional, systemic and individual
    level (Capacity Building / Skills development / etc.);

   Prepare a work program and suggest specific training activities for the MoE&NDU staff
    assigned to MTEF performance budget preparation;

   Draft terms of reference for additional technical assistance in areas where it might be
    needed.

   Review and evaluate the “Environmental Protection Act” and make recommendations to
    ensure that environmental standards stimulate desirable behavior, innovation and business
    opportunities.

   Review and evaluate the process of enforcement of environmental laws which is currently
    being decentralized to local authorities;

                                  ______________________




                                               54
                                           APPENDIX IX

                      Compilation and Analysis of Social Accounting Matrix
                                Request for Technical Assistance


                                            Justification
1. Over the years there has been an increasing demand from users of statistics and public at
large, for reliable estimates of the impact that the country‟s economic and social policies and
external factors have on the standards of living of the population, particularly the vulnerable
groups.

2. To effectively evaluate these impacts the existing instruments are not enough. Thus
additional credible instruments are needed. In this context the country needs a Social Accounting
Matrix (SAM).

3. The SAM, which provides for a consistent and convenient approach to organising both
economic and social data for a country, can be used as a basis to evaluate the impact of changes in
the process of economic development on the living standards of different groups of the
population. While it is widely agreed that economic growth is a necessary condition for sustained
improvement in living standards, it is also generally recognised that economic policy must look
into the distribution of benefits arising from growth, with focus on income distribution,
employment, and poverty alleviation.

4. A SAM for the year 1997 has been attempted based on data from the 1997 Census of
Economic Activities and the 1996/1997 Household Budget Survey, taking on board all domestic
accounts from goods and services to capital accounts, as well as the rest of the world accounts.
For the exercise, the economy was disaggregated into four institutional sectors, namely
Government, Households (including Non-Profit Institutions Serving Households), Corporations
and Rest of the World. The Household sector was further disaggregated into two categories, poor
and non-poor, using as poverty line the half median value of household expenditure per capita.
However, no impact analysis was carried out.

                                             Objectives

5. One of the top priorities of government on the social front is poverty alleviation. A SAM
that is geared to measuring and analysing the effects of policy measures and external factors on
the standard of living of the population, particularly the poor, will have to be constructed.

6. Technical assistance is required to construct such SAM; to analyse, interpret and use the
matrix and most of all to build capacity thereon.

                                      Working arrangements




                                                  55
7. To take on board all the latest developments with respect to policies which may impact
directly or indirectly on poverty, a technical committee comprising representatives from the
following ministries/organisations will be set up:
           (i)     Central Statistics Office (CSO) – as team leader
           (ii)    Ministry of Finance and Economic Development
           (iii) Empowerment Programme
           (iv)    Decentralised Cooperation Programme
           (v)     The Social Register working group

8. The technical committee will ensure that the SAM delivers the expected results and will, at
the time of the mission, define exactly the policy measures on which impact assessment will be
carried out.

9.     CSO will provide the consultant with the following:-
     (i)   Office space, when necessary
     (ii)  Necessary documents and available data

                              Activities to be covered by the Consultant

10. The specific terms of reference for the consultant are:
          (i)     Review the work done so far on the SAM
          (ii)    Assess the methodological approaches used
          (iii) Identify data gaps that could possibly be addressed at the next round of the
                  Census of Economic Activities and the Household Budget Survey, and make
                  proposals on the development of new data collection instruments, if need be
          (iv)    Set up appropriate methods for the construction of a SAM geared to impact
                  analysis on the standard of living of the poor
          (v)     Construct the SAM using available data and make reasonable assumptions
                  where data are missing, and using a standard spreadsheet software
          (vi)    Assist in using the SAM as a tool for modelling the impact of policy measures
                  with a focus on poverty alleviation

                   The computer software to be used for modelling is EVIEWS or STATA.

                (vii) Train local staff (about 5 professionals from the Central Statistics Office -
                CSO) in the process. Training to be built around practical aspects of the work
                should include the construction of the SAM, and the measurement of the impact of
                policy measures, the analysis and interpretation of the results using the software
                EVIEWS or STATA. By the end of the training, local staff should be familiar with
                the various processes, including the use of the software EVIEWS or STATA and
                be able carry out the work independently.

                                      Deliverables and outcomes

     11. The following are expected from the Consultant:



                                                   56
       (i)     A report highlighting activities carried out and problems encountered, as well
               as any recommendations for future actions.
       (ii)    A SAM for the country geared to measuring and analysing the effects of policy
               measures and external factors on the standard of living of the poor, and a report
               covering methodologies used and analysis carried out.
       (iii)   CSO staff trained, knowledgeable in the various processes and in the use of
               EVIEWS or STATA, and capable to carry out the work on their own.


                           Profile of the international Consultant

12. The consultant should be highly experienced and knowledgeable in National Accounts.
He/She should
      (i)     have an advanced university degree, masters or above in Statistics or
              Economics
      (ii)    have a strong statistical and quantitative background
      (iii) have proven experience in the Construction of SAM and using it to carry out
              impact analysis
      (iv)    be knowledgeable in EVIEWS or STATA
      (v)     have relevant experience in skills transfer and building capacity
      (vi)    be fluent in English.

Experience in impact analysis related to poverty, or a background in policy development and
monitoring with respect to poverty would be an added asset.

                                   Duration of the mission

13. The duration of the mission will be around 8 – 10 weeks.



                                                                           18 September 2007




                                              57
                                          APPENDIX X

                        UNDP / UNEP inputs to the Energy Policy reform

                                        Renewable Energy

Following is proposed to be done by the RE expert.

Proposed work programme


1. Assessment and Role of Renewable Energy in Mauritius Energy Policy 2007-2025

a) Current use of renewable energy in Mauritius
This will involve compilation of the data on existing use of renewable energy in Mauritius, with
focus on major resources (wind, solar and biomass), and based visits to relevant departments and
available information from literature. Any gap, will be estimated based on inputs from experts in
Mauritius.

b) Assessment of renewable energy resources in Mauritius
The assessment will be done based on available information about resources of various renewable
energy options in Mauritius. Any gap in information will be estimated using inputs from experts
in Mauritius. The focus will be on technically accessible resources, which will be an input for
renewable energy plans in Mauritius.

c) Potential contribution from renewable energy
      Based on available information on renewable energy resource data for Mauritius, possible
potential contribution during the policy horizon will be worked out. Since contribution from
renewable energy depends on the technical feasibility, economic and financial feasibility of
various types of renewable energy, and policies to promote renewables, some scenarios under
possible policies will be presented.

      Implementation plans will be drawn up and strategies suggested for the proposed plan.

      Renewable contribution to power sector, and to other end uses (for example heating,
through solar water heaters, biogas) will be explored.

2. Environmental aspects of renewable energy use




                                                 58
Environmental benefits of the suggested renewable energy contribution will be brought out. This
also be input to environmental economist, who will be working on environmental issues as per the
TOR.

3. Renewable Energy Policy

Suggestions will be made for possible mechanisms in Mauritius. This will also be input to
Environmental Economist, who is expected to work on green taxes and incentives as per TOR.

4. Renewable energy (biofuels; ethanol and biodiesel) potential in transport.

This will be input for transport economist, who will be looking at the transport sector in details.

5. Preparation of a draft report, including plan of action for renewable energy.

Consultant proposed: Jyoti Prasad Painuly; UNEP Risoe Centre on Energy, Climate and
Sustainable Development (URC)

Electricity sector

Ea Energy Analysis proposes the following methodology regarding the electricity Sector, as part
of drafting a Long Term Energy policy for Mauritius, based on the Outline of Energy Policy 2007
– 2025

Proposed work programme and methodology

1. Collection of the necessary technical/financial data regarding the existing power plant,
including efficiencies, ramping possibilities, fuel usage, O&M costs etc. All plants are to be
included both CEB and IPP.

This task includes 1 well prepared visit to Mauritius for 2 specialists with visits to CEB and some
IPPs. Important to agree on key contact persons for later communication on data etc.

Output: Field report on a) general situation in the electricity sector, b) operational state of power
plants and basic assessment of investment need, and c) data catalogue
Resource: 10 mandays

2. Collection of basic grid data, including common bottlenecks.



                                                   59
Output:Basic overview of existing grid and planned changes. Sufficient for modelling purposes
with most important restrictions to operations.

Resource: 2 man/days

3. Modelling the electricity system in the BALMOREL Electricity optimization model. The
model works as a Least Cost Dispatch model, based on the GAMS modelling language (See
app 1).

Output: A wide variety of output data and presentations including tables on power plant economy,
fuel consumption and costs, CO2 balances, consumer economy and overall economy.

Resource: 12 man/days

4. Developing a “Catalogue of technologies and fuels” including BAT technologies for new
plant of suitable size, probably 20 – 100 MW for the steam technologies. The catalogue
includes relevant technical and financial data. The catalogue comprises 5-8 technologies with
focus on Coal, Bagasse, Coal&Bagasse, Wind, MSW and Solar technologies.

Output: Catalogue with basic technical and financial data of relevant technologies to be included
in model.

Resource: 4 man/days

5. Development of three “Optimal Investment Scenarios” toward 2025. The scenarios will
differ regarding a) the decommissioning of existing plant 2)wished percentage of renewables
in the future fuel mix and 3) the amount of capital available for new investments.

For each investment scenario the overall costs per produced kWh is calculated based on projected
fuel costs, possible CDM (Carbon financing)and other funding and the major risks are described.
The overall costs plus a reasonable risk premium must be covered in order to design appropriate
investment programmes with suitable incentives for IPP´s.


Output: Scenario report
Resource: 5 man/days

6. Using all above analysis including 2 consulting meetings with local stakeholders appointed
by the Ministry to develop a Plan of Action comprising:
           a. Availability of BAT technologies


                                                 60
           b. Investment plan describing where and when new plants should be commissioned,
              and possible sources of finance
           c. Pricing philosophy and long term framework for PPA, in order to get Least Cost
              Dispatch and reasonable consumer protection
           d. Incentives for increased renewables in electricity production on existing and new
              plant, with focus on Bagasse, MSW and Wind.

Includes one visit to Mauritius for two specialist. Meetings with officials are important in order to
receive feedback on critical assumptions and especially on design of prising policy for PPA and
appropriate sources of finance.

Output: Draft final Plan of Action for the electricity sector.
Resources: 17 Man/days

Time and Resources for Electricity sector

The work can be accomplished within a timeframe of 5 months, and the Ea experts are available
from the month of july 2007. The project kickoff can be delayed 3 months without consequence
for the offer.

The task can be solved within the framework of 50 Mandays, including the two visits to
Mauritius.

Experts from Ea Energy Analysis will be Kaare Sandholt, Jesper Werling and Hans Henrik
Lindboe (CV´s)

Critical Factors (electricity sector)

The most critical factors for the success of the task are probably a) availability of trustworthy data
regarding existing power plants and b) availability of local stakeholders for necessary comments
on the developed investment scenarios and the draft Plan of Action.




                                                    61
Carbon Finance

1. As per TOR;

 Under the Economic and Financial Analysis inputs will be provided;
To estimate revenues from carbon financing under the various options as well as the size and
source of cross-subsidisation to promote clean technologies and energy saving.
It would involve examining the carbon finance possibility of various energy supply options in the
Mauritius, and estimation of revenues based on the applicability of carbon financing. The options
to be examined will include;

      a). Clean fossil fuel technologies, that may have been proposed by power sector experts and
      included in the Energy Plan 2007-2025.
      b). Renewable energy technologies that have been proposed by Renewable Energy Expert
      and included in the Energy Plan 2007-2025.

   2. Energy and Electricity Mix, including targets for carbon credits.

Inputs will be given to the Energy Policy Expert through scenarios for Electricity, Renewable
Energy and carbon financing, who will also get inputs from other experts to prepare the integrated
Action Plan.

        Set up a policy framework that would promote the inclusion of Clean Development
         Mechanism (CDM) options for new generation capacities that will result into additional
         and measurable CO2 emissions reductions from business-as-usual scenarios.
        Make an estimate of the total amount of CO2 emissions reductions that could be
         achieved within Kyoto Protocol‟s First Commitment period based on the technical
         potential for implementation of CDM projects both at the supply and demand-sides of
         energy sector in the island. Provide monetary value to these reductions based several
         scenarios for CDM‟s Certified Emissions Reductions (CERs).
        Propose recommendations on how the Power Utility would incorporate any new market
         mechanisms to be introduced post-Kyoto with respect to future CO2 emissions
         reductions that could be achieved in the energy sector in Mauritius.
        Assess the potential for implementing transport CDM projects in the island given the
         current guidance available from the CDM Executive Board on how to implement CDM
         projects in this sector.

Consultants proposed: Samil Kamel, Karen Olsen, and Jørgen Fenhann, URC


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                                         APPENDIX XI


                              EUROPEAID/ 119860/C/SV/multi

LOT N° 4:
REQUEST N° 2007/141137/1


SPECIFIC TERMS OF REFERENCE
Energy Policy for the Republic of Mauritius, 2007-2025

1.0 Background

1.1 The Mauritian Economy
The Republic of Mauritius has set an ambitious objective to move away from a „preference
based‟ economy to one which will be globally competitive. In order to achieve this objective,
it has embarked on a major programme of reforms with the following main thrusts:

   (i)     the opening up of the economy to encourage and attract investment, know-how and
           technology;

   (ii)    the overhauling of the present investment environment through the Business
           Facilitation Act so as to place Mauritius within the top 10 countries in the Doing
           Business Report; and

   (iii)   the re-structuring of the economy through the re-engineering of existing sectors
           such as sugar, tourism, textile and encouraging the emergence of new cluster of
           activities around the Seafood Hub, Duty Free Shopping, Knowledge Hub,
           Information and Communication Technology, Integrated Resorts Schemes, etc.

In order to sustain the objective of becoming globally competitive, Mauritius has to upgrade
its entire infrastructure facilities as well as develop a coherent energy strategy. In this respect,
the outline of an energy policy for the horizon up to 2025 has been prepared by Government in
consultation with stakeholders such as the Ministry of Finance and Economic Development,
the Ministry of Agro-Industry and Fisheries and the CEB amongst others. The background
document used to prepare the TOR includes the Multi Annual Adaptation Strategy for the
Sugar Industry which has already been submitted to the EU.

1.2.       Current Policy Orientations on Energy
The Government policy orientations for the energy sector have been defined in the document
entitled Outline Energy Policy 2007-2025 approved by Government in April 2007 and which
describes the Government's objectives for the energy sector as follows:


                                                63
   Limit our vulnerability to imported fossil fuels and their volatile prices
   Promote economic growth and job creation
   Democratize energy supply
   Secure affordable energy to the customer
   Ensure the financial sustainability of the power sector.

The above objectives shall be achieved while setting real targets in terms of reduction in the
use of fossil fuels and in the emission of green house gases arising from energy consumption.

In the Outline of an Energy Policy 2007-2025, Government has committed itself, inter alia, to
adopt by mid-2008 a detailed Energy Policy and Masterplan for the development of renewable
energies. The Terms of Reference define the tasks to assist the Government in designing its
long-term Energy Policy.

1.3. Current Issues and the Regulatory Framework in the Energy Sector

1.3.1 Present situation
Mauritius is reliant on imported sources of energy to more than 90%. From a broader
perspective, the consumption of fossil fuels by the emerging giants China and India are
pushing the prices thereof to higher levels, while the ongoing geopolitical situation in the Gulf
States is having significant impacts on the price of oil. The high reliance on fossil fuels,
therefore, bears economic risks for Mauritius.

The environmental dimension is integrated in the energy matrix of the country. Energy
accounts generally for about 80% of all greenhouse gas emissions in Mauritius. It is known
that greenhouse gas emissions are at the root of climate change and air pollution. In its
position, as a Small Island Developing State (SIDS), it is in the interest of Mauritius to help in
the reduction of greenhouse gas emissions. Energy policies which until recently merely
demand driven without any incentive for energy efficiency, were unsustainable.

While global energy consumption is increasing at about 1% annually, the increase in
electricity consumption is at a sustained rate of 5%; there are, therefore, challenges for the
country to meet future electricity demand.

As Mauritius is an island State, it does not currently have the benefit of interconnection
facilities; this constraint adds to risks for security of supply in case of severe problems.

To be competitive in a globalized world economy, Mauritius has to encourage greater
competitiveness in the energy sector. There is, therefore, a need to eliminate any monopolistic
situation, be it public or private as any quasi monopoly will not be conducive to stimulating
fair and competitive energy prices, energy savings and diversified investment. The right policy
has, therefore, to be formulated to encourage competitiveness in the sector.

Greater investment to improve energy efficiency and to develop renewable energy can result
in economic growth and job creation. As Mauritian products need to be competitive

                                                64
internationally, it is important that policies are designed to impact positively on energy
intensive sectors of the economy.

In devising the energy policy, the social dimension needs also to be taken into account,
particularly, when specific measures are designed and implemented for the vulnerable groups.

1.3.2 The electricity production landscape in Mauritius
The electricity production landscape is characterized by the CEB and the various Independent
Power Producers (IPPs).

The Central Electricity Board is a parastatal body responsible for the production of 51% of
electricity requirements of the country and is by virtue of the Electricity Act 1939, as
amended, the sole agency for transmission, distribution and commercialisation of electricity.
To meet the electricity requirements of the country in 2006, the CEB used some 190,000
tonnes of imported fuel oil, comprising the 380 cst and 180 cst types, and 430,000 tonnes of
imported coal burned in power plants operated by IPPs. The balance was met from local and
renewable sources, namely bagasse, which is a by-product of sugarcane processing, and hydro.

Independent Power Producers which are, for the time being, private generators from the Sugar
Industry, produce about 49 % of electricity requirements of Mauritius. The electricity
production of IPPs is bagasse and coal based, imposing severe constraints on the CEB in terms
of dispatching, given the technology of bagasse–coal plants which allow them to be used as
base-load plants only.

The situation has evolved with the coming into operation of a new IPP plant in the south of the
country on the premises of Savannah Sugar Milling Company as from April 2007, which has
impacted on the energy mix in that the percentage contribution of coal has increased, whilst
the efficiency with which bagasse is used will also be improved during the next crop season.

The performance of Mauritius in terms of renewable energy sources for electricity production
to the tune of. 22% in 2006 already places it well above even many developed countries.

Since all bagasse currently produced in Mauritius is already used in energy production, the
increase in electricity production there from in absolute terms will be caused mainly by gains
in efficiency of boilers in the IPPs. Moreover, there are new varieties of sugar cane which can
produce 25% more fibre than current ones and these would also help to increase the amount of
electricity produced from bagasse.

1.3.3 Electricity Demand
Total electricity generation in the island in 2006 was 2091 GWh. Hydro contribution was only
77 GWh, which was below the average hydro generation in a normal year of 100 GWh; the
remaining was from thermal, out of which 993 GWh was from heavy fuel-oil in diesel plants,
6 GWh from kerosene in gas turbines for peak lopping and emergency conditions, 720 GWh
from coal and 296 GWh from bagasse. The coal and bagasse-based electricity from IPPs
totalled 1,016 GWh. It may be noted that this included one coal based IPP.



                                              65
The forecast of the CEB shows that in 2013 about 3092 GWh of energy would have to be
generated to meet demand, with a peak power demand of more than 500 MW, compared to
367 MW in 2006, while the maximum night load demand is expected to increase from 175
MW in 2006 to 227 MW in 2013.

The current regulatory framework consists of the CEB Act, 1964 and the Electricity Act 1939,
as amended, and the new Electricity Act 2005 which is yet to be proclaimed. Other relevant
legislations pertaining to the Sugar Industry are the Sugar Industry Efficiency Act, as amended
in 2007, and the Environment Protection Act 2002.

Relevant policy documents include, but not limited to the following:

     Outline Energy Policy 2007-2025
     Utility Regulatory Authority Act 2004
     Presidential Address 2005 and Budget Speech 2006, outlining the Economic Reform
      Programme for the next 10 years
     Multi-Annual Adaptation Strategy 2006 – 2015
     White Paper for Environment Policy 2007
     National Environmental Strategy 1999
     Port Masterplan 2002-2025
     Integrated National Transport Strategy Study 2001
     Consensus Paper on Transport 2006
     National Development Strategy, Ministry of Lands and Housing, 2003
     Current Outline Planning Schemes, Ministry of Lands and Housing

2.0 Description of the Assignment

2.1 Objectives
The objective of the assignment is to prepare a draft long-term Energy Policy for the
Government of Mauritius. The definition of a long-term Energy Policy should take into
account the Government's objectives for the energy sector as spelled out in the document
„Outline of the Energy Policy 2007-2025’. The consultant shall make use, as appropriate, of
international best practices in defining recommendations for Mauritius, including the EU’s
Energy Policy adopted in 20073 and international commitments (i.e. the Kyoto Protocol and
other).

The definition of the long-term energy policy will need to address the following goals:

(i)    broaden the energy base of the country so as to reduce dependence on imported energy
       carriers thereby limiting the vulnerability of the Republic of Mauritius to imported fossil
       fuels and their volatile prices while factoring in a reasonable trade off relating to the
       costs of such a policy relative to the risks;


3
 Cf An Energy Policy for Europe, Communication from the Commission to the European Council and the
European Parliament, 10 Jan 2007

                                                66
(ii)  allow optimal use of local and renewable energy sources by ensuring that these
      alternative energy projects are evaluated on the basis of providing benefits to consumers;
(iii) enhance protection and preservation of the environment, in particular the reduction of the
      emission of greenhouse gases;
(iv) promote energy efficiency in all sectors of the economy including the transportation
     sector;
(v)     provide affordable energy to all sectors of the economy while ensuring the financial
        sustainability of the electricity public utility;
(vi) provide for transparency in the implementation of projects by IPP‟s and in Independent
       Power Purchase Agreements;
(vii) promote economic growth and job creation by ensuring reliable supply of energy at
       internationally competitive prices; and
(viii) democratize energy supply by opening up the provision of power to new entrants by
       developing a transparent and open system that encourages new entrants including SMEs,
       to compete to offer energy products and provides for long-term Power Purchasing
       Agreements to encourage participation of Independent Power Producers (IPPs).

Given the limited global oil reserves, it is important to chart out an energy policy and
formulate strategies for the short-to-medium and long term that would reduce, as far as
possible, the reliance of the country on imported oil for electricity production and
transportation. However, any such policy needs to be balanced and should factor in long term
fuel prices after removing volatility as well as risks.

In this regard, it is considered that the policy framework should be multi-pronged, in keeping
with the constraints that the country has, in terms of its geographical location, availability of
other less volatile and better distributed reserves of fossil fuels such as coal, energy resources
available locally and the availability and competitiveness of technologies in the marketplace
for their conversion into electricity and for use in transportation and industry.

In view of the above, the Energy Policy is expected to cover the following:-

       (i) an energy sector vision up to 2025;
       (ii) strategic priorities for Government to take timely decisions with a view to ensuring
                security of energy supply;
       (iii)improved legal and regulatory framework to promote private sector investment in an
                open, competitive and transparent manner in line with best international practice;
       (iv) policies to address environmental and social impacts related to the energy sector that
                are explicit, transparent and costed with a direct link to the green taxes required to
                pay for such subsidies;
       (v) state-of-the-art technologies to achieve efficient energy use taking into account their
                overall economic and financial viability and external costs; and
       (vi) Awareness about the issues/options/challenges and ensure all stakeholders
                participation for sustainable development.

2.2. Issues to be addressed in the elaboration of the Energy Policy

                                                   67
The issues that will need to be addressed in the context of this assignment comprise the
development of an Energy Policy for the Republic of Mauritius and shall include, but not be
limited to, the following:

A. Energy Supply

 (i)        to identify and analyse the challenges, opportunities and threats faced by the main
            islands of Mauritius and Rodrigues in terms of availability, reliability, transportation
            and prices of primary sources of energy;
 (ii)       to formulate the policy and strategic orientations for ensuring the security, reliability,
            diversity and quality of supply, including
             options for the right energy mix and strike a balance between renewable and non-
                renewable sources of energy taking account of costs, balanced risk assessment
                and need to produce energy at internationally competitive prices;
             the role of IPPs in the overall context and highlight the opportunities and threats
                they may represent to the national interest, particularly a proper mechanism to
                ensure an open and transparent system for considering their offers while ensuring
                minimum standards of reliability;
             an assessment of the sectoral energy prices as well as its implication on the
                country‟s international competitiveness; and
             energy pricing strategies based on affordability to end-users and financial
                sustainability of the electricity public utility.

 (iii)      assess the possibility in the very long term of regional power grid interconnection
            taking into account the economic, social and environmental costs;

 B.        Energy Utilisation

   (i)        review the demand and supply matrix and power sector capacity expansion plan up
              to 2025 taking into account the need for green taxes and measures to encourage
              energy conservation;
   (ii)       identify means and ways of introducing demand side management and promote
              research in energy technology as appropriate for the local context including
              Rodrigues.
   (iii)      assess sectoral energy use and advise on state of the art technologies with a view to
              encouraging efficient use of energy so as to maintain the country‟s international
              competitiveness.
   (iv)       propose policies for implementing energy efficiency in the transportation sector
              and power sector to reduce losses in transmission and distribution systems; and
   (v)        develop a policy framework and suggest models for the preparation of an Energy
              Efficiency Bill.

 C.        Electricity Sector

   (i)        assess the potential for rehabilitation of existing generation facilities, including
              potential of efficiency improvements, and their reliability to remain into operation;


                                                  68
 (ii)       determine the least cost economic load dispatching of electricity;
 (iii)      advise on the type, sequencing and timing of new generation facilities and assess
            the cost implications for consumers;
 (iv)       suggest reservation prices based on the above analysis above which IPP proposals
            would not be considered, including a viable, long-term framework for PPA for
            IPPs;
 (v)        propose an investment programme for the new generation facilities based on the
            above analysis with due regard to protecting consumers and ensuring financial
            sustainability of the power utility ; and
 (vi)       to devise incentives for enhanced use of renewable energy or disincentives for
            fossil fuel based electricity generation and explore the potential for improved
            carbon financing

D.       Transportation

 (i)        propose a biofuels policy in line with the outline energy policy;
 (ii)       identify the strategic options for introducing different types of biofuels including
            E10, E20, biodiesel and advise on the best possible course of action taking into
            account the economic/financial aspects;
 (iii)      assess the possibility in the long term for equal taxation of carbon emissions from
            various sources of fuel;
 (iv)       review major aspects of land transport (public and private) and identify policies
            that would enhance efficiency and energy savings in the sector in the short term,
            taking into account social acceptability.
 (v)        chart out a biofuels strategy which will be an integral part of future energy policy;
            and
 (vi)       review relevant aspects of the transport sector other than land transport, namely
            maritime transport and aviation, as applicable in this context.

E.       Environmental Aspects

 (i)        identification of strategic priorities for availability of sustainable energy for end
            users based on -
                     the supply of renewable sources of energy and improved energy
                        efficiency;
                     introduction and/or expansion of existing green taxes to reduce
                        environmental impacts
                     sustainable transport systems;
                     public awareness campaign on efficient use of energy;
 (ii)       to assess the environmental impact of future energy production, distribution and
            use on both climate change and local environment.

F.          Economic and Financial Analysis

     (i)    to assess economic and financial implications as well as environmental cost of the
            various options and issues discussed in A to E above; and


                                               69
      (ii)    to estimate revenues from carbon financing under the various options as well as the
              size and source of cross-subsidisation to promote clean technologies and energy
              saving.

 G.        Institutional and Regulatory Framework

   (i)        Review the present policy and institutional framework in the energy sector based
              on the findings of the study and make proposals for changes therein to enhance
              their effectiveness.
   (ii)       Harmonize and improve the legal and institutional framework with a view to
              clarifying the roles and responsibilities of the different energy agencies and to
              provide high degree of transparency and clarify for private sector participation and
              PPP projects in the energy sector.
   (iii)      Propose institutional and regulatory changes (and if necessary legislative action) to
              ensure an open, transparent and competitive process for seeking and selecting
              private sector involvement in the production of energy products while making
              suggestions for a viable, long-term framework agreements ; and
   (iv)       To propose guidelines on how the Regulatory Body, to be set up under the Utility
              Regulatory Authority Act 2004, may carry out its due diligence to assess the
              viability of new projects, submitted in fulfilment of Government policy objectives,
              and their impact on tariffs while safeguarding the interests of all stakeholders,
              including taxpayers and consumers.

 H.           Masterplan / Action Plan

   (i)        develop a practical and coherent masterplan / action plan for the period 2008 -
              2025 based on economic, financial, social and environmental sustainability; and
   (ii)       the plans shall provide definite specific, measurable, achievable and realistic
              targets for the short, medium and long term i.e. for years 2010, 2015, 2020, 2025,
              2050 in relation to, among others:

                            Energy and Electricity Mix, including targets for carbon credits
                            Promoting efficiency in the transportation sector and
                             implementation of biofuels (including ethanol) policy
                            Implementing the Energy Efficiency Bill
                            Construction of new power plants

In so doing, the Consultants shall review targets set in the Outline Energy Policy 2007 to 2025
and adjust them, if necessary. A specific Action Plan shall concern the key energy issues to be
addressed for the island of Rodrigues.

2.3. Methodology
The Consultant shall detail a methodology appropriate to the assignment when submitting its
offer. The methodology shall be finalised at inception stage in consultation with the Client.
The methodology shall include:



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     Understanding of Terms of Reference
     Detailed Approach to the Assignment
     Proposed manning schedule
     Inputs in Mauritius and Home Office
     Proposed timetable for the assignment

The consultant shall take due care in the elaboration of the energy policy so that all
stakeholders, both governmental and non-governmental, are widely consulted at the various
stages. These stakeholders shall include, besides the relevant Ministries and parastatal
organizations involved in the energy and transport sectors, all relevant organisations in the
private sector, IPPs, research organisations, Non-Governmental Organisations as well as
regional stakeholders in the energy sector.

Throughout the process, the Consultant shall use participatory approaches to consult
stakeholders. This shall include an initial workshop with stakeholders on the scope and issues
of the study as well as a seminar on the draft conclusions and recommendations. The
Consultant shall submit their final recommendations and their implications to Government in a
final workshop.

3.0          Expertise Required

The indicative team of experts required for the assignment is shown in the Table below. The
team shall comprise five experts to be provided for by the Consultant with additional
specialists provided by UNDP/UNEP in three areas. The proposed CVs of specialists provided
by the latter as well as their workplans are attached for information and may be subject to
change.

The Consultant shall propose five experts, including a Team leader. The Team Leader shall be
a Category I Expert with at least 15 years of experience in the energy sector, including at least
3 years of experience in policy making.
The other experts shall be Category II experts with at least 10 years of experience in their
respective fields, including at least 1 year of international experience.
All experts will have at least a recognised certificate for Proficiency in English (written and
spoken).but the responsibility for the final report lies with the team leader .
The Consultant may propose variation to the composition of the team and persons days of
each expert, while respecting the overall length of the assignment.

Previous experience in Mauritius or the region is not a requirement but may be an advantage.




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                                                         FRAMEWORK
                                                                               UNDP/UNEP
                                                         CONTRACT
                                                         Person  Estimated
                                                                                   Estimated
                                                         Days    Input
                                                                                   Input
                                                         Outsid  (Person
                                                                                   (Person
           Title                                         e       Days)
                                                                                   Days)
                                                         Maurit  Mauritius
                                                                                   Mauritius
                                                         ius     and
                                                                                   and outside
                                                                 outside
2       1     Energy Policy Specialist (Team              10
                                                                    65                 -
        .     Leader)
3       2                                                     2
              Financial/Economic Analyst                              40                   -
        .
4       3                                                     2
              Environmental Economist                                 20                   -
        .
5       4                                                     2
              Transport Economist/Specialist                          25                   -
        .
6       5                                                 2
              Institutional and Regulatory Expert                    20                -
        .
7       6                                                 2
              Power Systems Specialist                                -               50
        .
8       7                                                 2           -
              Renewable Energy Specialist                                             30
        .
9       8                                                 2           -
              Carbon Credit Expert                                                    20
        .
10            Total Expert Days                                     170               100

     Note: Experts days are working days (normally 5 days/week, unless justified); per diems shall
     be paid for all days on mission outside the country of residence.

     Detailed Curricula Vitae of proposed experts shall be provided together with Consultant‟s
     proposals.

     4.0           Location and Timing
     The assignment should start within July 2007 and be completed within a period of five
     months, with the core work conducted in the first three months. The Consultant shall clearly
     indicate the schedule of the work, including the expected schedule of the inputs for the
     specialists provided by UNDP/UNEP, taking into account the workplan proposed by the latter
     in the Annex.

     With the exception of days foreseen for deskwork, the location for this assignment shall be
     Mauritius. The Team Leader and one other expert shall make provision to visit the island of
     Rodrigues.



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5.0Reporting
The following documents shall be submitted by the Consultant:

                   Deliverables                                  Date due
                                                        (after recruitment of the
                                                               Consultant)
        Draft Inception Report                                    2 weeks
        Final Inception Report                                    4 weeks
        Intermediary report, including                           10 weeks
        economic and financial assessment
        of the short and long-term energy
        options and investment proposals
        Full draft report, including Draft                       15 weeks
        Energy Policy document and
        MasterPlan/Action Plan
         Final Report, including all                            20 weeks
            technical assessments and
            recommendations relating to
            the issues in the ToRs
         Draft Final Energy Policy
            document
         MasterPlan/Action Plan

At all stages shall the reports reflect the work carried out by all experts, including those
provided by UNDP/UNEP. Specific working papers may be requested from experts
throughout the exercise in line with the Terms of Reference.

All deliverables, except for the final report, shall be submitted in ten hard copies together with
soft copies in Word format on CD.

The reports shall be delivered directly to the Permanent Secretary, Ministry of Public Utilities,
the Financial Secretary, Ministry of Finance and Economic Development, the Delegation of
the European Commission and the Resident Representative, United Nations office in
Mauritius and the Ministry of Finance and Economic Development.

All payment requests shall be addressed to the Delegation of the European Commission to
Mauritius, with a copy to the Financial Secretary, Ministry of Finance and Economic
Development.

All reports up to and including the Full Draft Report shall include issues relating to Rodrigues.
For the Final Report only, the issues relating to Rodrigues shall be submitted in a separate
report for onward transmission to the Rodrigues Regional Assembly. The final report shall be
submitted in 20 copies, including soft copies.



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A Steering Committee, chaired by the Ministry of Public Utilities and comprising amongst
others, representatives of the Ministry of Finance & Economic Development, Ministry of
Public Infrastructure, Land Transport & Shipping, Ministry of Environment & NDU, Ministry
of Agro Industry & Fisheries, and the CEB will supervise the project. The Consultants shall
report to the Committee during the study.

The language of the assignment shall be English. The knowledge of French is an advantage
but not a requirement for this assignment.

Should the team prove unable to meet the level of quality required in drafting the study
reports, the consulting firm will, at no additional costs to the beneficiary, provide the
immediate support to the team to meet the required standards.

6.0 Administrative Information
6.1 Facilities
The Ministry of Public Utilities will provide to the extent possible Office Space for the
Consultant‟s team. However, IT facilities are not included under this item.

6.2 Travel and Workshops
The Consultants shall foresee in the reimbursable one return ticket for each expert, with the
exception of the Team Leader for whom two return tickets shall be foreseen. A mission to
Rodrigues shall also be foreseen for two members of the team as part of this assignment.

The Consultants shall also foresee the cost of three workshops.

6.3 Disclaimer
The Consultants will be working on behalf of the Government of Mauritius and shall
acknowledge, in draft and final reports, the financial contribution of the European
Commission and UNDP/UNEP. The reports shall include a standard disclaimer that the views
expressed are those of the consultant and not those of the funding agencies.

7.0 Annex

The following documents are annexed to this request for proposals:

 (i)   The Outline Energy Policy 2007 – 2025 is annexed to this Terms of Reference. All
       other relevant documents and policies will be made available to the Consultants upon
       appointment.

(ii)   CVs and proposed work plan of UNDP experts.




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