The Weaver's Tale: Diversification

What does Mauritius have in common with Mallorca? Apart from the fact that both are islands and begin with an "M", their populations are not dissimilar in size and the economies of the two islands are roughly similar in size. Historically, both had an economic reliance on the land: Mallorca on crop farming, Mauritius on sugar.

Tourism came later to Mauritius than to Mallorca, and it was a different type of tourism. In the 1970s a predominantly luxury style of tourism, based on resort hotels, came into being. It was one that benefited the economy in general, but because it was aimed at a more exclusive end of the market and later became all-inclusive, a bar and restaurant sector did not complement the hotels. As a consequence, while the island's macroeconomic status flourished, the local population saw very little evidence of this.

At the same time as Mauritius's tourism was taking off, the government was setting in motion a process of economic development and diversification. Principally, this was a way of shifting the country's emphasis away from the land, i.e. sugar, but the unevenness of the benefits derived from tourism gave the process an added momentum. Furthermore, the government recognised that tourism can be fickle and subject to economic shocks or competition.

Sugar is today far less important but still more important than agriculture is to Mallorca. Tourism and services account for some 70% of GDP. And while industry has fallen back, the process of diversification did reap rewards.

The Mauritian government, through a combination of trade agreements, tax incentives and advantageous investment conditions, created, virtually from scratch, a textile industry. Despite a downturn over recent years, it represents some 7% of GDP. It employs a skilled workforce, it turns out quality product and it supplies the likes of Next and, a Spanish connection, Zara. The industry, and it has contributed as much as 14% to GDP, was built without the island having the natural resources to supply it and so was totally dependent upon the importing of raw material. Nevertheless, it worked.

Where similarities between Mallorca and Mauritius fall down is that one possessed a political class with the foresight to understand the risks inherent to an over-reliance on certain industries. Mallorca, essentially still a single-product island, has never been blessed with governments with sufficient vision to appreciate the dangers posed by a virtual mono-economy. Rather, they have been blinded by the success of tourism and continue to consider it the principal means of economic growth.

Mallorca can boast some textile expertise. Martí Vicens created remarkable textile designs in Pollensa, and they are still evident today. The island doesn't, however, have a great tradition of textiles. There again, neither did Mauritius. I am not advocating that the regional government suddenly weaves a strategy based on textiles, but whether it is skills which do exist in Mallorca or new skills that need to be acquired and new types of business formed, the time is long overdue for a genuine strategy of economic diversification to be put in place.

If there is one thing, and one thing alone, that the new government of President Bauzá should be addressing, it is the economic future of Mallorca and the Balearics, and one that isn't so obsessed with tourism.

There has been some success in diversification, notably with new technologies, but it has been a very small step. A strategy for innovation going forward to 2020, dreamt up by the last administration, has achieved comparatively little, hampered by economic crisis but also by a lack of real energy.

Mauritius shows how with energy and vision a mixed economy can be developed. Textiles were not the only diversification. The island is also a financial centre and has a decent IT industry, one that Mallorca would bite its hand off to have. A small African nation of comparative size to Mallorca has demonstrated how it can be done and how economies do not have to be reliant on tourism and to accept the fate of the consequences of a primary industry, agriculture, in almost terminal decline.

Are the next four years likely to yield anything in respect of real strategic development in Mallorca? You wouldn't bank on it. There may be more of the desperately slow crawl of technological evolution, but something akin to Mauritius's textiles revolution is required. And it won't happen.

(I would like to thank John in South Africa for pointing out the Mauritius experience.)


Any comments to andrew@thealcudiaguide.com please.