Mauritius as a Success Story for FDI: What Strategy and Policy Lessons can Emerging Markets Learn?

This study uses a policy approach to examine the role of Foreign Direct Investment (FDI) in the ‘Mauritian economic miracle’ years of 1970-2000. In the early stage of industrialization, the Mauritian government turned the island into an Export Processing Zone. The objective was to attract foreign direct investors in the textile and clothing industry who would then export the finished manufactured products to European and North American markets. This study analyzes how the spillover and linkage effects between FDI, productivity, domestic investment, and exports impacted economic growth. The results indicate that it was FDI stock, rather than FDI inflows, that led to the growth success. In addition, it was the heavily FDI-driven export sector which was the driving force of economic growth. The study also highlights the challenges that Mauritius faced during its development path, lessons that emerging countries can learn and policy recommendations on how to reposition Mauritius going forward