Living standards — practice question

Source material: Mauritius’s global reach Mauritius fact file 2019 Tertiary sector as a % of GDP: 76% Total GDP: $14.2 billion Population: 1.26 million Mauritius is an island country in the Indian Ocean. Mauritius’s economy has expanded since it moved away from a primary-sector-based economy and became one dominated by the tertiary sector. This economic growth did more than raise income per head; it also improved healthcare in Mauritius. Life expectancy has risen and the infant mortality rate (number of infant deaths per thousand births) has dropped sharply. Mauritius is famous for many tourist attractions, such as its stunning beaches, and more than a million tourists arrive each year. Visitors from most countries need only a passport to enter Mauritius because a visa is not needed. The tourism industry not only provides many jobs, it also increases tax revenue for the government. Tax revenue from tourism is used to pay for development projects that help the whole population, not only people employed in tourism. There are also over 32 000 foreign firms located in Mauritius. Firms established in Mauritius because of its rapid growth and political stability, as well as the limited regulations needed to start and operate a firm. The government seeks to draw in more investment by supplying high-quality infrastructure. In 2019, the government spent more than $1 billion on infrastructure development. It improved the island’s international airport, seaport, and public transport links across the island. This may lower the cost of doing business in Mauritius and enlarge a firm’s market size. However, critics fear that the money has gone into projects that have helped the economy less than spending on education or healthcare would have done. The government is also searching for fresh sources of economic growth, including greater international trade and foreign investment. International trade is viewed as essential to economic growth. Table 1.1 gives the percentage of international trade to GDP and GDP per head in selected countries in 2019. The Mauritian government supports both inward and outward investment. By country, Mauritius is among the biggest foreign investors in India. Mauritian firms intend to invest in the new Special Economic Zones (SEZs) being established in Kenya. Outward investment allows Mauritian firms to enter new markets in other countries, buy imports at a lower cost and gain greater access to foreign technology. On the other hand, profits earned overseas may not be reinvested in the domestic economy. Any changes in the international economy may also influence possible profits.