Competitivenese Strategies for
Small States – Case of
Mauritius
Presentation by
Mrs P. Rampadarath
Where is Mauritius located?
FACTS ABOUT MAURITIUS
Government
Parliamentary
Democracy
Population
1.3 million
GDP
USD 11.5 billion
Economic Growth
(2012)
3.4%
Per Capita Income
USD 8,240
Unemployment Rate
(2012)
8%
Inflation Rate (2012)
4.4%
FDI (2012)
USD 327 M
Literacy Rate
85%
Tertiary Enrollment
Rate
43.4%
Life Expectancy
74 years
Languages
English, French, Creol
International Benchmark
Index of Economic Freedom
2012
8th out of 184 countries
And 1st among 46 countries in
sub saharan africa
World Bank Doing Business
Survey 2012
18th out of 185 countries and
1st in Africa
Democracy Index 2010
24th out of 167 and 1st in Africa
Global Enabling Trade Index
2012
33rd out of 167 countries and
1st in Africa
Human Development Index
2011
77 out of 189 and 3rd in Africa
Global Competitiveness
Index 2012-2013
54 out of 142 countries and 2nd
in Africa
Global Information
Technology Report 20102011
47th Internationally and 1st in
Africa
Mo Ibrahim Index of African
Governance 2012
1st in Africa for the 6th
consecutive year
Relations with other countries
• Mauritius has strong and friendly
relations with the West, Asian
Countries as well as the Eastern
and Southern Africa
• Mauritius is a member of
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African Union;
World Trade Organisation;
Commonwealth;
Francophonie;
Southern African Development
Community (SADC);
– Common Market for Eastern and
Southern Africa (COMESA);
– Indian Ocean Commission; and
– Indian Ocean Rim Association
The main pillars of the economy
over the years
Post
Independence
(1970s) –
Agricultural
based –
Concentration
on Sugar
Industrialisation
(late 1970
throughout the
1980s) Sugar,
textile, Tourism
1990s – Sugar,
Textile, Tourism,
Financial Services;
Freeport
2000s – Sugar,
Textile, Tourism,
Financial Services,
Seafood, ICT/BPO,
IRS
2010 to-date –
Agro-Industry,
Tourism, Financial
Services, ICT,
BPO, Seafood,
Renewable
Energy, Ocean
Economy, Textile
and Fashion
Move since Independence
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Diversification
Setting up of the EPZ in 1970 (huge success in Mauritius)
Surplus labour proved highly beneficial to Mauritius Growth (unemployment dropped to
3% by end of 1980s)
Took advantage of privileged access with EU and the US (accounted for 90% of exports)
Multi-fibre Agreement
Adopted concerted strategy of nation building
Strong and inclusive institutions
High Level of Public Investment in human development(free education and health
services)
Avoided social and political tensions and supported solidarity and equity
Liberalisation and diversification
Duty free access for imported inputs
Tax incentives to firms operating in EPZ (effect of subsidizing exports)
Consistency and stability in approach to economic management
Diversification of political and economic power ensured productive economic policy
Ethnic diversity provided economic linkages with the world
Economic Reform
Strategy
Fiscal
consolidation
and improving
public sector’s
efficiency
Democratise
economy by
promoting
participation
and social
Reform
Policy
Package
inclusion
Improve
Investment
Climate
Improve trade
competitiveness
Facts on the different
sectors
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The financial services - one of the most important economic pillars of the economy
with a sustained GDP contribution of over 10% and an average growth of 4.8% over
the last 3 years.
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Manufacturing is still considered as one of the biggest contributor to national
wealth with 17.7% GDP share and the biggest employer with 15.1% of total
workforce.
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The ICT-BPO industry has proved its importance as a key driver to economic growth
and productivity. It has experienced remarkable innovation over the last 5 years
and has demonstrated its resilience amidst multiple crises. This industry contributes
6.7% to GDP, and employs nearly 17,000 people.
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In 2012, gross tourism receipts was Rs 4.4 billion. Emerging markets, namely
Russian Federation and People Republic of China, registered positive growths of
58.9% and 38.0% respectively. The forecast number of tourist arrival for 2013 is 1
million.
Facts on the different
sectors
• The Mauritius seafood industry has undergone major expansions
over the past three years. The sector's contribution to GDP was
1.3%; total exports amounts to 15% of total goods exports;
cumulative investment till date amounts to Rs. 18 billion; and
provides 6,000 direct jobs and ancillary services to this industry
make up for some 10,000 jobs.
• Agro industry accounts for 3.7% of the GDP and comprises the sugar
cane cluster and non-sugar cluster which covers fresh vegetable
products, fruits, livestock, fisheries and flowers. The employment in
the Agro Industry represents nearly 7.9% of total employment in
Mauritius. The sector has experienced a growth rate of 3.4% in 2011
and is moving towards sustainable through adoption of best
agricultural and environmental conservation practices.
Fiscal Incentives for
Investment
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Abolition of AGOA levy
Tax-free status for global funds which do not require
benefits under our Double Tax Avoidance Agreement
network
Solidarity levies maintained on banks and telecom
operators up to 2014
VAT registration threshold raised from a turnover of Rs2
million to Rs4 million per annum
Modulated excise duty on electrical appliances on the
basis of their energy consumption.
Extension of the VAT Refund Scheme for agro-industrial
and fisheries sector for one additional year 2013
Medical/health insurance premium tax deductible as
from 1 January 2013
Fiscal Incentives for
Investment
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No land conversion tax on the conversion of land
from agricultural use for the purpose of:
a. Setting up a manufacturing company as
certified by the Board of Investment
b. Setting up a power station for generation
of energy using 'green'/renewable sources
c. Construction of a building to be used for
provision of Technical & Vocational
education and Training
Incentives offered to retail shops and restaurants for
the purchase of fitting, equipment and furniture:
a. Financing at the rate of 7.25%
b. Accelerated capital allowances
c. VAT refund within 7 days of claim
For investment above 10 million rupees, 50%
reduction on customs duty on a scheduled list of
items
Strength and
Opportunities
Strengths
• Political Stability
• Open Economy
• High literacy rate – both bilingual and
educated workforce
• Government commitment for change visà-vis a dynamic global business
environment
• Favourable trade agreements
• Strong business climate with favourable
fiscal incentives
• World class tourism industry
• Strategic location
• Good infrastructure
• International connectivity
Opportunities
• Ocean Economy
• Petroleum Hub and liberalisation of
bunkering activities
• Investment in product and design
innovation
• Unexploited regional trade advantages
• Investment in Technology/skills upgrade
• Product/Market diversification
• Attracting potential investors from the
Mauritian diaspora
• Adoption of cleaner production
techniques.
• Optimise on the provision of the EPA
which provide for less stringent rules of
origin for textile and canned tuna and
improved market access in the EU.
• Tapping up-market tourism
Constraints and
Challenges
Constraints
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Significant current threats (energy cost,
global financial crisis, increase in costs of
inputs)
Little flexibility in view of employment
structure
Trade Liberalisation - emergence of low
cost competitive producers
Zero tariff rate through implementation of
duty free island concept
Economy highly dependent on few sectors
that are sensitive to global crisis
Weak technology/innovation base
Insufficient R&D
Product and market concentration
Financial and infrastructural constraints
Challenges
• Elimination of trade preferences:
• After 2015, possibility for AGOA benefits
to be extended to LDCs such as
Bangladesh and Vietnam
• Mauritius will be reverted to the
Generalised System of Preferences (GSP)
Scheme which offers less favourable
benefits than the AGOA.
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Exchange rate fluctuations
Slow pace of restructuring and diversification
Rising costs of air and sea freight
Increase in costs of inputs
Low penetration of new markets
Inequality is rising
Country’s competitive advantage on the
international market is shrinking
Climate change
New Avenues
Ocean Economy
• Mauritius has an exclusive
economic zone (EEZ) of 1.9 million
km2 plus an additional 396,000
km2 co-managed with the
Republic of Seychelles. This vast
extent of ocean represents an area
bigger than the combined land
area of France, Germany, Italy,
Spain and the United Kingdom.
The ocean economy is a promising
economic sector.
• The Government of Mauritius has
a vision to transform the island
into an ocean state by exploring
and
exploiting
the
ocean
resources.
New Avenues Petroleum Hub
• Government is proposing
to invest in the
development of a
Petroleum Hub as another
economic pillar of the
country
• Investment will be made in
the construction of storage
facilities and liberalisation
of bunker activities
Mauritius – an ideal platform for
investment into and trading with
Africa
• The Double Taxation Treaties (‘DTA’s)
• The Investment Promotion and Protection Agreements (IPPAs)
Mauritius has signed IPPAs with 20 African member states. IPPA typically
offers the following:
 Free repatriation of investment capital and returns;
 Guarantee against expropriation;
 Most favoured nation rule with respect to the treatment of
investment;
 Arrangement for settlement of disputes between investors and the
contracting states.
Mauritius – an ideal platform for
investment into and trading with
Africa
• Mauritius being a member of SADC, COMESA and IOR-ARC and a signatory to
all the major African conventions make Mauritius the best offshore financial
service centre for establishing any Africa Fund, Holding Company or a trading
company.
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Benefits are – 0% tax rate on corporate profits.
– A low corporate tax of 15% applies for processing and transformation activities.
– Exemption from Customs duties and VAT on all goods and equipment imported
into the Freeport zone
– Reduced port handling charges for all goods destined for re-export
– Free repatriation of profits
– 100% foreign ownership allowed (No immovable property to be held in Mauritius)
– Possibility to sell a quota of 20% of total goods re-exported on local market.
(normal tax rate will apply)
Way Forward
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Bring down cost of energy as a strategy to remain competitive
Leverage on the Improved Business Climate (promote Mauritius as an attractive investment
destination)
Branding Mauritius
Identify and invest in new growth poles
Identify the right products in the value chain for production in Mauritius
Diversify our market base
Restructuring
Identify niche markets where Mauritius has a comparative advantage that could be turned
into competitive advantages
Invest in intangible assets (logistics, original designs, innovation, packaging, branding, R&D)
Optimise on opportunities emanating from regional and international markets
Comparative advantage has to be based on qualitative factors (technology, creativity,
knowledge and innovation)
Leverage on its location as a gateway between Africa, Asia and Europe
Invest in education
Maurice Ile Durable Vision
Thank you