A Political Commentary

CAN WE TRUST PRESIDENT JAMES ALIX MICHEL?

This week President Michel reached the inauspicious 365 days milestone in office, practically ending his honeymoon period abruptly. He gave a more or less unimpressive performance on SBC last Sunday evening with an exposé of what he claimed were his accomplishments to date as well as his plan for the future of Seychelles. Two things were remarkable and noticeable during the interview; namely the frequent use of the word “boom” and the almost anomalous use of hand gestures whilst explaining and illustrating his so called “achievements.”

President James Michel became President when ex- President Rene stepped down prematurely from office in April 2004. Michel was elected President with his own mandate on 27 July 2006 with 53% of the popular vote. Since he has declared that he is fulfilling his party’s (SPPF) wishes, his mandate is in effect the SPPF’s. For all intents and purposes, therefore, Mr. Michel has been in office for 1200 days.

Since his election as the third president of the Republic last year, Michel has introduced some changes albeit more cosmetic than real. There has been some superficial reforms, tax breaks to small businesses, reductions in social security tax on the favoured few in the tourism industry, new publicly funded houses have sprung up, more incentives for the tourism and fisheries industry, and the cottage industry as well as some devaluation (re-alignment) of the currency.

To be fair to the President tourist arrivals have increased and the economy is agitating a bit more fuelled by the black market in foreign currency exchange. The President promised that his reforms will bear fruit 3 to 4 years down the line and we should not expect an economic miracle overnight. Though what type of fruits it will bear remains to be seen.

However, what the President fails to appreciate is that the people of Seychelles have been patient enough with him and his party. When the President was still the Minister of Finance, he together with the infamous former Presidential Advisor Mukesh Valabhji orchestrated a sinister economic invention they aptly labelled MERP. MERP, we were told, would be the answer to all our economic woes. At the time, the President and Mukesh announced that the cause of our economic malaise had finally been identified as “excess liquidity.” Michel even went so far as to claim he would literally burn rupee notes in a bonfire. What we were not told though, was who was the culprit who had created this problem in the first place and why it took the government so long to pinpoint the cause of the problem.

Valabhji claimed too that MERP would “mop up excess liquidity” and that our economic crisis will be over once and for all. He callously stated that we all had to pay an additional tax on everything that we purchased and consumed. Not even children and the elderly would be spared the consequences. As we braced ourselves for the worse, the opposition begged the government to consider at least removing GST on food, especially babies’ food. The government in turn stuck to its gun and told us that we all had to swallow the bitter pill but promised us that it would be temporary. MERP is still with us today and seems to have become a permanent feature rather than a temporary measure. As we continue to suffer in silence,the brunt of MERP, President James Alix Michel, it seems, has now decided to go for broke. The once untouchable officially-fixed rupee exchange rate seems to be chasing the black market rate on a daily basis, which has resulted in a sharp rise of goods that hitherto was shielded by the low official fixed exchange rate and price controls.

Michel has also announced that some 20 new multimillion-dollar hotels are to be built by foreign investors in the near future, justifying his claim of “renewed” investor confidence in the economy during his presidency. However, what Michel seem to have ignored in his claims is that there is no concomitant infrastructure developments to accompany these huge dollar investments, such as water and electricity, which will be needed if the investment is to be sustainable. Let us brace ourselves for acute shortages in electricity and water in the years to come. Michel’s dilemma and his silence on this issue are, however, understandable.

The President has also pointed to an increase in the Central Bank Reserve, $110,000,000, as another of his “economic miracles”. Despite his claim of an increase in foreign exchange reserves Michel has deliberately chosen to ignore the fact that for every credit on a balance sheet there is a debit. In our case, they are greater than the credits and in the form of massive foreign exchange debts, which have to be serviced at great costs and in foreign exchange. These millstones are proving to be heavy to carry. Where in future will we find the money to increase electricity and water supply, let alone maintain the existing infrastructure?

An increase in foreign exchange reserves means an increase of rupees in the economy. The Central Bank in its report for the first quarter of this year has pointed this out. But the facts at our disposal is that the increased foreign exchange reserve Mr. Michel is alluding to is the result of a single investor transferring an astronomical amount of foreign currency to buy real estate, rather than due to renewed economic activity. The danger with this scenario is that the reserves will be drawn down to settle the more pressing import requirements of the moment, such as debt service or fuel. By the time the rupees of the sellers of real estates are spent, the foreign exchange will not be there to pay for the imports that will be in demand. This is akin to a dog chasing its tail. The same applies to the Seychelles University, about which the President seemed chuffed. The money for the Seychelles University is also due to one man. We hope that this time around the SPPF government will treat this gentleman who has brought all this money with respect and dignity and not rip him off and then send him packing as has been the case with many bona fide investors before him.

The President also announced that from now on all our efforts would be concentrated on the fisheries, tourism and financial sector, and the five newly acquired oil tankers, to spur an economic recovery. We hope that the President knows what he is doing for our sake and the sake of our country. His interview with Antoine Onezime did not inspire much confidence and was characterized with a lot of hand gestures, hesitation and stutter.

We must all wish President Michel success in his good intentions as when he does succeed we all win and if he does not we all lose. This is a heavy burden for one man to carry and Seychelles will succeed or fail solely on the decisions that President James Michel are taking from now on. Good Luck, Mr. President!