Response to external factors

Labour shortages

Given the labour shortage which industrialists have been facing in recent years in Mauritius, firms would be expected to shift to more capital-intensive production whenever this is profitable. This is confirmed by two firms in our sample, the paint manufacturer and the knitwear manufacturer. It is also interesting to note that these firms report that they have recently been recruiting skilled rather than unskilled labour, indicating that higher capital intensity may require higher skill intensity also.

Interaction with product market conditions

EOEs in the sample keep up with aggregate demand trends overseas and with changing conditions in their export markets. Business newspapers, specialized reports and contacts with customers provide them with the necessary information. In fact regular links with customers are maintained through personal visits, phone calls and written correspondence. The ISEs also maintain regular links with their local customers through personal visits.

Not all firms maintain links with similar firms or competitors. Four firms in our sample do this indirectly through employer or producer associations. The main objective is to exchange information on their respective industries.

Government policies and regulations

The firms in the sample had little to report in this section of the questionnaire. There has been no reaction to changes in the exchange rates of the major currencies used for trade transactions, although hedging is now possible for exporters as the central bank allows them to engage in forward exchange transactions. Similarly, there has been little reaction to the recent reduction in interest rates (an average of 3 percentage points): only one export enterprise, the knitwear manufacturer, reported that it had increased its borrowings to buy more machinery' as it wishes to increase its capital intensity, given the tight labour market conditions.