, based on comparative advantage and fuelled by trade preference, with sugar, textiles and tourism as the three main pillars of the economy, has given way to a new strategy. we are now building competitive advantage in targeted sectors. the new strategy is based on • the development of a high - tech, innovative financial and business services hub, with new activities such as ict, bpo, biotechnology, as well as financial and medical services, • manufacturing activities such as printing and publishing and light engineering and • restructuring and consoliding the existing sectors, which can adapt to the brave new postwto world. the strategy also provides for the development of mauritius into a regional platform for a variety of activities, ranging from the storage, processing and distribution of seafood, and the repair and maintenance of fishing vessels, to warehousing and distribution. as regards the traditional sectors, their restructuring is in full swing. the sugar industry, hit by a 36 per cent cut in the price of sugar exported to the european union, is undergoing a complete transformation into a “ cane cluster ” producing special sugars, bagasse for electricity generation, and molasses for distillation into ethanol and value added spirits. the dismantling of the multifibre agreement in 2005 forced the textile and apparel sector to downsize. this sector now revolves around a core of firms that have invested heavily in sophisticated design and fabrication machinery which enable mauritian products to reposition away from the commodity end of the market. as for tourism, which was always built on its underlying competitive strength, the strategy is to double its bed capacity to capitalise on the liberalisation of air access. the objective is to attract two million tourists in the next 10 years. this multi - pronged strategy is expected to inject still greater resilience into our economy to enable us to face further external shocks that are beyond the horizon. allow me to dwell briefly on monetary policy in mauritius. over the years, the bank of mauritius, like most central banks on the continent, went through a phased programme of monetary policy reforms. it switched from direct to indirect monetary control. this was in line with the general move towards increased reliance on market forces, economic liberalisation and regulation and away from directives, controls and subsidies. exchange controls disappeared more than twelve years ago. after using reserve money programming and liquidity forecasting as its framework for the conduct of monetary policy for more than ten years, the bank introduced a new framework in december last year

financial intermediaries and microfinance institutions. a country with a less diversified financial sector is more vulnerable to credit risk. a fall in commodity prices, with adverse impact on exports, can rapidly impair bank loans. hence, the need to have a high capital adequacy ratio and prudential ratios on exposure to any single customer. another characteristic of banks in our region is the high operating costs and high net interest margins. this reflects low efficiency. banks with high operating costs need a high spread to cover these costs. what can we do to make our financial sector more resilient? first and foremost, macroeconomic stability should be consolidated. if this is lacking, there is no growth, no rise in incomes and no reduction in the incidence of poverty. an increase in investment is also required. gross domestic investment as a share of gdp is very low in africa. we attract only a marginal share of world fdi to africa, and it tends to go into extractive industries. global investors will only be interested in the rest of our countries in africa if we can offer peace, stability, good governance, the rule of law and the absence of corruption. africa needs to strengthen its financial systems. weak banks should be restructured through measures to address the stock of nonperforming loans and accumulated losses. bank regulation and supervision should be improved through greater compliance with the basel core principles for effective bank supervision. help is at hand as our own experience in mauritius shows. the financial sector assessment program, initiated by the imf and the world bank, aims at strengthening financial systems and providing a comprehensive framework for identifying strengths and weaknesses in a country ’ s financial system. i can confirm that we have used the fsap to good effect to achieve institutional strengthening and to build a more robust financial and banking sector. to stay within the theme of financial systems and financial stability, allow me to share with you some preliminary thoughts, not to say emerging preoccupations, on the quality of fdi. the volume of foreign direct investment flowing into mauritius has increased very fast in recent years, and stood at rs 6. 4 billion in 2006, having risen more than sixfold since 2002. we are doing nicely on this score and i certainly do not want to sound like a carping critic. normally, one would have expected the central bank to busy itself with ways and means of sterilising these inflows. but – and i am not here talking only about mauritius – i am