Openness to Foreign Investment
Mauritius is among the most competitive and successful economies in Africa and actively seeks foreign investment. The World Bank’s 2010 Doing Business report ranks Mauritius 17th among the 183 economies covered by the report and first in Africa for the second year in a row in terms of overall ease of doing business. In three years Mauritius has moved from the 49th (2006) to the 17th place (2009). Mauritius is praised in the report for its continued efforts in the past year to improve the business climate with the adoption of a new insolvency law, the establishment of a specialized commercial division within the courts, the easing of property transfers, and the expediting of trade processes. The government’s objective is for Mauritius to rank among the top 10 most investment and business friendly locations in the world.
The World Economic Forum’s 2009-2010 Global Competitiveness Report places Mauritius second in Africa (after South Africa) and 57th in the world in terms of competitiveness. The report lauded Mauritius as “a country characterized by strong and transparent public institutions, with clear property rights, strong judicial independence, and a security that is good by regional standards.”
ECONOMIC REFORM: Mauritius’ economy suffered at the turn of the millennium as longstanding trade preferences in textiles and sugar, which were the foundation of its growth strategy, were phased out. The government which took office in 2005 embarked on a bold economic reform program aimed at opening up the economy, facilitating business, improving the investment climate, and mobilizing foreign direct investment (FDI) and expertise. The reforms have resulted in a strong and balanced growth across all sectors of the economy and have spurred foreign investment to record levels.
Mauritius witnessed three years of robust economic growth between January 2006 and December 2008. In 2008, Gross Domestic Product (GDP) was close to USD 9 billion, with a GDP growth rate of 5.3% and a per capita income of USD 7,000, one of the highest in Africa. However, the Mauritian economy, which demonstrated remarkable resilience in 2008, started to feel the impact of the global crisis at the beginning of 2009, resulting in a decelerated growth rate of 2.8 percent for the year. However, following the recent signs of recovery in the world economy, GDP growth is forecast to recover to 4.3 percent in 2010. By 2011, the economy is expected to return to its pre-crisis growth of more than five percent.
Following the reforms initiated in 2006, Mauritius has attracted more than USD 1 billion from foreign investors. In 2009, FDI is estimated at close to USD 280 million.
BUSINESS FACILITATION: The GOM’s policy since 2005 has been to open the economy and streamline administrative procedures for people to come, work, and live in Mauritius. The Business Facilitation Act of 2006 simplified the business licensing process with respect to starting a business and allowed businesses to start operations within three days of incorporation. Also, residence permits and work permits for foreign investors, entrepreneurs, and professionals have been combined into what is called an occupation permit, which is now processed within three working days.
Conversion and Transfer Policies
The GOM abolished foreign exchange controls in 1994. Consequently, no approval is required for the repatriation of profits, dividends, and capital gains earned by a foreign investor in Mauritius. In general, businesses have no difficulty obtaining foreign exchange.
The exchange rate is market-determined, but the market is dominated by a small number of institutions. The Central Bank occasionally intervenes to stabilize the market. There is convertibility on both capital and current accounts. Settlement can be done in foreign currency, and foreign currency accounts can be opened in Mauritius. There is no legal parallel market in Mauritius for investment remittances.
Mauritius has a well-developed and modern banking system. At the end of October 2009, net international reserves amounted to close to USD 3 billion, representing an import cover of close to 41 weeks. Between June and December 2009, reflecting international trends and reduced domestic imports, the Mauritian rupee appreciated by 8.5 percent against the U.S. dollar, the pound sterling, and the Euro.
Expropriation and Compensation
Legislative guarantees against nationalization exist and are respected. The GOM has never nationalized an industry.
An entity formed through a joint venture between a local company and a U.S. investor, has been engaged in a lengthy dispute (since 2005) with Mauritius Telecom, its cellular subsidiary, Cellplus (now called Orange), and the former Telecommunications Authority, over allegations of unfair competitive practices by Mauritius Telecom and Orange. The case remains in the courts. There has not been any expropriation of private assets in Mauritius thus far.
Mauritius is a member of the International Center for the Settlement of Investment Disputes and the Multilateral Investment Guarantee Agency of the World Bank.
The Mauritian legal system is largely based on English common law and French civil law. A Commercial Court was set up in early 2009 to expedite the settlement of commercial disputes. The domestic legal system is generally non-discriminatory and transparent. Members of the judiciary are independent of the legislature and the government. The highest court of appeal is the judicial committee of the Privy Council of England. Mauritius is a member of the International Court of Justice.
Performance Requirements and Incentives
The investment code is in line with the WTO's Agreement on Trade Related Investment Measures. A foreign investor, a professional under a contract of employment, or a self-employed person may apply for work and residence permits if the following conditions are met: (i)Investor: the proposed business activity should generate an annual turnover exceeding MRs 3 million (approximately USD 93,000) (ii) Professional: the basic monthly salary should exceed MRs 30,000 (approximately USD 925); and (iii) Self-employed: the annual income from the proposed business activity should exceed MRs 600,000 (approximately USD 18,500). An investor may subsequently apply for permanent residence status if his/her business activity generates an annual turnover exceeding Rs 15 million (approximately USD 462,000) during the first three years. In the case of self-employed persons, the business activity should generate an annual income exceeding Rs 3 million (approximately USD 93,000). Foreign nationals can acquire property for business purposes.
Investment incentives are applied uniformly to both domestic and foreign investors. Mauritius offers a low tax jurisdiction: (i) a flat corporate and income tax rate of 15 percent, (ii) tax free dividends, (iii) no capital gains tax,(iv) up to 100 percent foreign ownership, (v) exemption from customs duty on equipment, (vi) free repatriation of profits, dividends, and capital, (vii) no minimum foreign capital required, (viii) 50 percent annual allowance on declining balance for the purchase of electronic and computer equipment; and (ix) an extensive tax treaty network with several countries.
Moreover, the government has set up the Integrated Resorts Scheme (IRS) to attract high net worth non-citizens desiring to acquire an immoveable property of not less than USD 500,000 in Mauritius (within a resort approved by the BOI) for personal residence. The Real Estate Scheme (RES) introduced in 2007 allows non-citizens to acquire a residence with no minimum price set. The investor and his/her spouse and dependents are granted resident permits to live in Mauritiuswhen a residential property is acquired for a price exceeding USD 500, 000. More detailed information on the incentives is available on BOI’s website: www.investmauritius.com
Right to Private Ownership and Establishment
Under the Non-Citizens (Property Restriction) Act, a non-citizen investor may acquire property in Mauritius with the prior approval of the Prime Minister. However, the Prime Minister’s approval is not required when the property is acquired (i) under a lease agreement not exceeding 20 years, (ii) under the Integrated Resort Scheme or Real Estate Scheme for the purchase of a villa, (iii) under the Invest-Hotel Scheme for the acquisition of a hotel room, or (iv) when the investor has obtained approval from the Board of Investment to acquire property for use in his/her business.
Protection of Property Rights
Property rights are respected. Mauritius maintains a sophisticated and impartial legal system based on both Napoleonic code and British common law. The system protects all tangible property. Intellectual property rights are protected by the Copyrights Act of 1997 and the Patents, Industrial Designs and Trade Marks Act of 2002, which are in line with international norms. Mauritius is a member of the World Intellectual Property Organization (WIPO) and party to the Paris and Bern conventions for the protection of industrial property and the Universal Copyright Convention.
The Patents, Industrial Designs and Trade Marks Act of 2002 was introduced by the government, in part, as a response to the rise in the production and trade of counterfeit goods, such as Ralph Lauren shirts. In 2004, Polo Ralph Lauren (PRL) successfully sued local manufacturers and retailers of PRL counterfeit products in Mauritian courts, which resulted in the closure of the counterfeit operations. In December 2008, the Supreme Court ruled in favor of PRL lawyer by ordering Customs to seize PRL products imported by a local businessman without PRL’s authorization. In December 2009, Nike and Adidas lodged a legal action at the Supreme Court against a local businessman, who imported 2,000 pair of shoes suspected of being counterfeit goods. Mauritius Customs has seized the goods and the case will be heard in March 2010.
The new trademark and patent laws comply with the WTO's Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement and protects designs, brands, and technological inventions. Also, the law dictates that well-known international trademarks are protected, regardless of whether they are registered in Mauritius. A trademark is initially registered for 10 years and may be renewed for successive periods of 10 years. A patent is granted for 20 years and cannot be renewed.
The Police, Customs and Judicial authorities have effectively enforced trademark and copyright protection of firms like Polo Ralph Lauren and legitimate distributors of Bollywood films that have established a legal or commercial presence in Mauritius. However, U.S. and European producers and distributors of cinema and software have in general not established any representation in Mauritius and protection of their copyrights and intellectual property is practically non-existent. According to a leading IPR law firm, the police would take action against IPR infringements only in cases where the IPR owner has an official representative in Mauritius because the Court would require a representative to testify that the products seized are counterfeit. According to the police’s Anti-Piracy Unit, IPR infringement could be curtailed substantially if the law is amended to put the burden of proof on the seller rather than on prosecution. The Customs Department also requires right holders or authorized users to register their trademarks and copyrights with its office in order to take action to protect their marks/copyrights at the borders of Mauritius. Application forms for registration can be downloaded from the Mauritius Revenue Authority/Customs’ website: www.mra.gov.mu.
WIPO has recently prepared an Intellectual Property Development Plan for Mauritius, which recommends, inter alia, the revision of some existing legislation to strengthen IPR laws and enforcement. The new legislation has not been finalized yet.
Transparency of the Regulatory System
Mauritius has built its success on a free market economy. According to the 2009 Index of Economic Freedom of the U.S. based Heritage Foundation Wall Street Journal, Mauritius leads Sub-Saharan Africa in economic freedom and is ranked 18th worldwide. With a well-developed legal and commercial infrastructure and a long tradition of entrepreneurship and representative government, Mauritius is one of the developing world's most successful democracies. Mauritius also has a long-standing tradition of government and private sector dialogue which allows the private sector to effectively voice its views on the development strategy of the country. The Joint Economic Council, the coordinating body of the Mauritian private sector, is a key vehicle in this regard.
During the last four years, the government brought significant reform to trade, investment, tariff, and income tax regulations to simplify the framework for doing business. Trade licenses and many other bureaucratic hurdles were abolished.
Companies in Mauritius are regulated by the Companies Act of 2001, which incorporates international best practices and promotes accountability, openness, and fairness. To combat money laundering and terrorist financing, the government also enacted the Prevention of Corruption Act, the Prevention of Terrorism Act, and the Financial Intelligence and Anti-Money Laundering Act.
PUBLIC PROCUREMENT ACT 2006: A Central Procurement Board, established under the Public Procurement Act 2006, oversees all forms of procurement by public bodies. The Procurement Policy Office is responsible for formulating policies and issuing directives for the operation of a transparent and efficient public procurement system. According to the Procurement Act, a bidder or potential bidder can challenge the procurement proceedings of a public body at any stage and request the Chief Executive Officer of the public body to consider his complaint and, where appropriate, take remedial action. Appeals may be brought against the decisions of a Chief Executive Officer to an Independent Review Panel. A simplified two-tier process, therefore, is available to unsatisfied persons to seek remedy.
COMPETITION ACT 2007: In December 2007, the National Assembly adopted a Competition Bill to promote competition, prevent monopolistic pricing, and restrict collusion in consumer markets. The Competition Act 2007 was proclaimed and became effective on November 25, 2009 and the Competition Commission is now fully operational. Monopoly, and more generally, collusion between suppliers are prevalent in the domestic economy. The Competition Commission started its first enquiries in mid-December 2009.
Efficient Capital Markets and Portfolio Investment
Corporate Social Responsibility
The Government of Mauritius has established a policy whereby all profitable firms are required to either spend two percent of their profits on Government-approved activities/programs which contribute to the social and environmental development of Mauritius or transfer the funds to the Government to be used for social investment.
Approved areas of activities include eradication of poverty, vocational training for vulnerable groups, promotion of human rights, support to the disabled and the elderly, women empowerment, small enterprise development, support to vulnerable children and youth, rehabilitation of drug addicts, protection and preservation of the environment, health and nutrition, leisure and sports, and promotion of arts and crafts. All projects are reviewed by a National Corporate Social Responsibility Committee.
Major corporate groups in Mauritius have begun to implement in partnership with Non-Governmental Organizations a number of projects related to social housing, health, education and training, leisure and sports, environmental protection, and sustainable development. There is greater awareness on the part of private companies for the need to be accountable to the community. Firms which undertake corporate social responsibility projects are viewed favorably.
Mauritius has a long tradition of political and social stability and is internationally recognized for its well-established democracy. Inter-ethnic tensions, however, led to four days of rioting in February 1999, following the death in police custody of a popular minority singer. Governments since then have sought to calm ethnic tensions and stress national unity.
Civil unrest and political violence are uncommon. General elections in 2000 and 2005 brought a change in government in each case and passed off without incident. The next general elections are expected to be held in 2010.
In 2009, Mauritius ranked 42nd worldwide and 2nd in Africa (after Botswana), with a score of 5.4 on Transparency International’s Corruption Perceptions Index. The index examines perceptions of public-sector corruption in 180 countries. It scores countries from zero, which indicates the highest level of perceived corruption, to ten, the lowest level. Mauritius is one of only three Sub-Saharan countries to score over 5, indicating that corruption is not seen as a widespread problem.
In 2002, the government adopted the Prevention of Corruption Act, which led to the setting up of an Independent Commission Against Corruption (ICAC). ICAC has the power to detect and investigate corruption and money laundering offenses and can also seize the proceeds of corruption and money laundering.
Bilateral Investment AgreementsIn September 2006, Mauritius and the United States signed a Trade and Investment Framework Agreement (TIFA), aimed at strengthening and expanding trade and investment ties between the two countries. The TIFA Council, comprising of representatives from both governments, held its first meeting in Mauritius in February 2007. The Second Annual Council Meeting took place in April 2008 in Washington, D.C. while Mauritius hosted the Third Annual Meeting in April 2009. Mauritius also has an investment incentive agreement with the Overseas Private Investment Corporation (OPIC), while the first round of negotiations for a Bilateral Investment Treaty (BIT) between the United States and Mauritius took place during the first week of 2010.
OPIC and Other Investment Insurance Programs
Mauritius is eligible for the full range of OPIC's investment insurance programs. It is also a member of the Multilateral Investment Guarantee Agency.
As of September 2009, Mauritius had a total labor force of 569,400, including 357,700 males and 211,700 females. Total employment stood at 527,300, including 21,000 foreign workers, mainly from China, India, Madagascar, Sri Lanka, Bangladesh, and South Africa, and mostly employed in textile factories but also in construction, tuna canning, and hotel and catering sectors. The unemployment rate, which reached 8.5 percent in 2007, fell to 7.4 percent in 2009, representing about 42,100 unemployed.
The GOM administratively establishes minimum wages, which vary according to the sector of employment, through the National Remuneration Board (NRB), and it mandates minimum wage increases annually based on inflation. However, most trade unions negotiate wages higher than those set by the NRB. The NRB issues Remuneration Orders for more than 90 percent of the workforce in the private sector.
In February 2009, the Employment Rights Act and the Employment Relations Act came into force. Their main objectives are to revise and consolidate the existing labor and industrial relations laws which date back to over 30 years and to liberalize the labor market and enhance the effectiveness of collective bargaining. The new legislation also provides for the introduction of a Workfare Program under which workers who have been laid off will benefit from government financial assistance for up to twelve months and opportunities for training to increase their employability.
Wages are low by Western standards but high by most Asian and African standards. Factory workers in export-oriented enterprises generally earn between USD 200-USD 250 per month. Middle managers earn between USD 700 and USD 1,000 per month. Fringe benefits, including transport and meal allowances, paid leave, and bonuses, represent about 25 to 30 percent of the basic wages of employees.
While Mauritius has an active trade union movement, labor-management relations are generally good. Unionized workers, which account for less than 25 percent of the workforce, act responsibly and rarely disrupt business. There has not been a major strike since 1979. Under current legislation, unions have the legal right to strike. However, the government seeks to preempt strikes through a system which promotes settlement through negotiation or arbitration by the Employment Relations Tribunal and the National Remuneration Board.
Workers' rights are protected under the Employment Rights Act 2008. Mauritius participates actively in the annual ILO conference in Geneva and adheres to ILO conventions protecting worker rights.
Foreign Trade Zones/Free Trade Zones
The Mauritius Freeport (free-trade zone) was established in 1992 as a customs-free zone for goods destined for re-export. The government's objective is to promote the country as a regional warehousing, distribution, marketing, and logistics center for Eastern and Southern Africa and the Indian Ocean rim. Through its membership in the Common Market for Eastern and Southern Africa (COMESA), the Southern African Development Community (SADC), and the Indian Ocean Commission (IOC), Mauritius offers preferential access to a market of 380 million consumers, representing an import potential of USD 90 billion.
Situated on 52 hectares of land adjacent to port facilities and a modern container terminal, the Freeport offers 120,000 square meters of world-class infrastructure, including cold rooms, dry storage, an international trade exhibition center, processing units, and office space for transshipment, consolidation, storage, and processing activities. Freeport facilities are also available at the airport. Port Louis is increasingly used by major shipping lines (i.e. Maersk/Sealand, P&O Nedloyd, and MSC) as a regional container transshipment hub.
Activities that can be carried out in the Freeport include warehousing and storage, breaking bulk, sorting, grading, cleaning and mixing, labeling, packing and re-packing, minor processing, transshipment, cash and carry sales, export-oriented port based activities, export-oriented airport based activities, freight forwarding, express courier services, mail order, simple assembly, reshipment, and quality control and inspection services.
By the end of 2009, about 350 Freeport companies were engaged in activities such as re-export, transshipment, minor processing, and assembly. In 2008, the Freeport imported USD 178 million and re-exported USD 302 million worth of goods. Main products re-exported include: machinery and telecommunication equipment (25 percent); apparel and accessories (21 percent); seafood (21 percent); chemical and pharmaceutical products (11 percent); and beverages and tobacco (5 percent). In 2008, the principal export markets for the Freeport were Madagascar, the United Arab Emirates, France, Reunion Island, Spain, and Italy.
The Freeport sources its imports from a wide range of countries, including Hungary, China, India, Finland, Taiwan, France, Spain and South Africa. The main products imported include fish, chemicals and pharmaceuticals, telecommunication equipment, textile fabrics and accessories, ready-made garments, electrical goods, and general consumer goods.
The Freeport facilities for warehousing, breaking bulk, and re-export should be of particular interest to American companies. These services enable businesses to ship containerized goods to Mauritius, warehouse them in secure, low-cost facilities, then break bulk and re-export them in an efficient and timely manner to African and Indian Ocean rim destinations. Modern computerized warehouse/logistics facilities, including cold rooms and processing centers, are provided by the private developers. These include Freeport Operations (Mauritius) Ltd (www.freeport-mauritius.com), Mauritius Freeport Development Co. Ltd (www.mfd.mu), and Froid Des Mascareignes (www.seafoodhub.com). Goods can also be assembled in the Freeport for export to the African and Indian Ocean markets. Current assembly and processing activities in the Freeport include: jewelry and precious stones, slabs from semi-precious minerals, PET plastic bottles, transformation of fish into fillets, aluminum frames and fittings, re-packaging of pharmaceuticals, and reconditioning of second-hand vehicles.
Three U.S. companies are present in the Mauritius Freeport. Amazing Stone Ltd., established in 2005 by a U.S. citizen, is involved in the production of slabs made from semi–precious minerals which can be used for kitchens, floors, bathrooms, walls, and furnishings. The firm, which employs 50 people, imports its raw materials from the region, mainly Madagascar.
Boxmore Plastics (Mauritius) Ltd., which started operations in Mauritius in 2002, is 100 percent owned by Chesapeake Corporation, headquartered in Richmond, VA. It manufactures PET (polyethylene teraphthalate) pre-forms for the soft drink bottling companies in Mauritius, Reunion, Madagascar, and Seychelles. Casamar (Mauritius) Ltd., a subsidiary of U.S.-based Casamar Holdings, Inc., which specializes in the assembly and repair of nylon-braided tuna purse seine nets, opened an office in Mauritius which provides marketing support for its fishing net repair and assembly operations in Seychelles.
The GOM, in collaboration with the private sector, is actively promoting the Freeport as a seafood hub, in particular focusing on the transshipment, processing, storage, distribution, and re-exportation of high value-added seafood products using the modern port and Freeport facilities and logistics. A one-stop shop has been established in the port area to help facilitate administrative clearances related to the seafood industry. Thon des Mascareignes Ltd. (TDM), a leading Mauritian company in partnership with Spanish investors, is operating a tuna loin processing plant with a daily processing capacity of 300 tons for export to Europe and the U.S. for final processing and packaging. U.S. firm Bumble Bee Foods has a tuna supply and processing agreement with TDM.
The Board of Investment, in collaboration with Airports of Mauritius Ltd., plans to develop a dedicated air cargo logistics center at the airport. The land parcelling for this project is currently under way. The main activities targeted include re-export of high value/low volume products, light assembly operations, warehousing, labeling and repackaging, sea-air/air-sea and transshipment cargo, express courier, and freight forwarding services.
Foreign Direct Investment
After several years of decline, FDI picked up strongly in 2006, as a result of significant economic reform measures taken by the government to open up the economy, facilitate business, and improve the investment climate. Between 2006 and 2009, Mauritius has attracted more than USD 1 billion from foreign investors.
The following statistical tables, supplied by the Bank of Mauritius (Central Bank), show inflows of FDI in Mauritius by sector and country of origin (2006-2009).
Foreign Direct Investment by Sector, 2006-2009
|Foreign Direct Investment by Country of Origin, 2006-2009|
Source: Bank of Mauritius* Figures for 2009 are for the period January-September only
Source: Bank of Mauritius* Figures for 2009 are for the period January-September only