The island of Mauritius, a tropical paradise in the Indian Ocean known for its sugar fields, volcanic mountains and white beaches, is to receive a $16 million World Bank loan for higher education.

The World Bank gives almost no loans for higher education these days, on the grounds that spending on school education brings greater economic rewards, so the loan to Mauritius shows how well the tiny island is performing. "It is something of an exception," said a World Bank spokesman.

The money will go towards boosting the University of Mauritius and the island's polytechnics. The aim is to upgrade staff and facilities to make the university more appealing to Mauritian students and to improve the quality of its graduates.

In the polytechnic sector, the aim is also to improve quality. But the money will also go towards building up accounting and business, and on links with the private sector.

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A former British and French colony containing an extraordinary mix of races, Mauritius is known for its tourism and sugar trade. But in recent years its economy has expanded.

Today it enjoys a growth rate of 7 per cent. Its per capita income doubled between 1982 and 1993 and now stands at $2,700, while its population, of just over 1.1 million, fell by 1 per cent.

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All of this makes Mauritius a country favoured by the World Bank. It is an island which aspires to be a new economic tiger like some Asian nations, and it is politically stable. What it has been lacking is enough highly-skilled labour. The average worker has seven years of schooling, compared with nine years in Taiwan, Korea and Hong Kong.

Only half of Mauritian children enter secondary school, a low rate when compared with Korea (83 per cent) or Singapore (80 per cent).

Part of the problem has been a lack of money. Spending on education has been dropping. The World Bank hopes that new investment in quality staff for higher and technical education will result in a more productive higher-technology society.

It is envisaged that the loan, which is being matched by a $10.5 million contribution from the government of Mauritius, will produce better trained graduates in the sciences, engineering, technology and management.

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It is also hoped that the expansion of postgraduate studies and research at the university will produce the knowledge needed for the island to become what the World Bank calls "a financial and technological hub in the Indian Ocean".