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Seychelles

Executive Summary

Seychelles is an island nation located off the eastern coast of Africa in the Indian Ocean with a population of 98,462. Seychelles gained its independence from the United Kingdom in 1976, at which time the population lived at near subsistence level. Today, Seychelles’ main economic activities are tourism and fishing, and the country aspires to be a financial hub. Although the World Bank designated Seychelles as a “high income” country in 2015, its wealth is not evenly distributed. According to the United Nations Development Program’s (UNDP) Human Development Report for 2020, the share of income held by the richest 10 percent in Seychelles amounts to 40 percent.

Seychelles experienced a socialist takeover in 1977, which resulted in a centrally planned economy and, in the short term, rapid economic development. However, serious imbalances such as large deficits and mounting debt contributed to persistent foreign exchange shortages and slow growth that plagued Seychelles through the first decade of the 21st century. After defaulting on interest payments due on a $230 million bond in 2008, the Government of Seychelles turned to the International Monetary Fund (IMF) for support. To meet the IMF’s conditions for a stand-by loan, the government implemented a program of reforms, including a liberalization of the exchange rate regime, devaluing and floating the Seychellois Rupee (SCR), and eliminating all foreign exchange controls. As a result, the country experienced economic growth, lower inflation, a stabilized exchange rate, declining public debt, and increased international reserves, until the COVID-19 global pandemic in 2020.

Drivers of economic growth include fisheries, tourism, and construction. Heavy reliance on the tourism industry, which directly and indirectly contributed to over 60 percent of GDP in 2019, made the overall economy vulnerable to external shocks, such as the COVID-19 global pandemic. In January 2021, the Central Bank of Seychelles (CBS) announced that January – November 2020 tourism revenues decreased by 78 percent. According to the CBS, the economy is estimated to have contracted by 11.3 percent in 2020 compared to 3.0 percent growth in 2019. The IMF forecasts that real GDP will increase by 4.2 percent in 2021. In 2019, the government was on track to reduce the debt-to-GDP ratio to 50 percent by the end of 2021; however, by the end of 2020, the debt-to-GDP ratio had spiked to 99.4 percent, according to the Ministry of Finance. By the end of 2021, the Ministry of Finance expected public debt to increase to 108.4 percent of GDP, prompting the government to re-engage with the IMF on reform negotiations. Despite the government’s attempts to diversify the economy, it remains focused on fishing and tourism. Seychelles’ vast Exclusive Economic Zone (EEZ), which spans 1.3 million square kilometers of the western Indian Ocean, is a potential source of untapped oil reserves and represents potential business opportunities for U.S. companies. Seychelles also has a small but growing offshore financial sector. There is also potential for U.S. investment in renewable energy as Seychelles seeks to reduce its heavy dependence on imported fossil fuels while preserving its naturally beautiful environment.

Seychelles welcomes foreign investment though the Seychelles Investment Act, and related regulations restrict foreign investment in a number of sectors where local businesses are active, including artisanal fishing, small boat charters, taxi driving, and scuba diving instruction. The country’s investment policies encourage the development of Seychelles’ natural resources, improvements in infrastructure, and an increase in productivity levels, but stress that this must be done in an environmentally sound and sustainable manner. Indeed, Seychelles puts a premium on maintaining its unique ecosystems and screens all potential investment projects to ensure that any economic, social, or industrial benefits will not compromise the country’s international reputation for environmental stewardship.

Politically, Seychelles’ first multiparty presidential election was held in 1993, after the adoption of a new constitution. In October 2020 elections deemed peaceful, orderly, and transparent by international election observers, opposition coalition party Linyon Demokratik Seselwa (LDS) won both the presidential and legislative elections. LDS holds 25 of the 35 assembly seats and includes four main parties: the Seychelles National Party (SNP); Lalyans Seselwa (Seychellois Alliance); the Seychelles Party for Social Justice and Democracy (SPSD) and; the Seychelles United Party (SUP). For the first time since the return of multiparty elections in 1993, United Seychelles Party (USP) is not the ruling party and currently holds 10 seats in the National Assembly. Prior to 1993, the United Seychelles Party (formerly the People’s Party/Parti Lepep) was the sole legal party in Seychelles. The next presidential and legislative elections will be held in 2025.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 27 of 180 http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report 2020 100 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2020 NA https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2019 325 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2019 $16,900 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

6. Financial Sector

Capital Markets and Portfolio Investment

Seychelles welcomes foreign portfolio investment. The Seychelles Securities Act ( https://fsaseychelles.sc/component/edocman/securities-act-2007/download?Itemid=0 ) provides the legal framework for the Seychelles stock market. The Seychelles Securities Exchange, now known as MERJ Exchange, has operated since 2012. Listing and trading are available in Euros, Pounds Sterling, Seychelles Rupees, South African Rand, and Australian Dollars. MERJ is an affiliate of the World Federation of Exchanges, a full member of ANNA and a partner exchange of the Sustainable Stock Exchange Initiative. In Q1 2021, there were 47 equity listings with a total market capitalization of $1.244 billion and three debt listings with a market capitalization of $246 million. Portfolio investment in Seychelles is limited by the small size of the economy and banking sector. The buying and selling of sizeable positions may have an outsized impact on the Seychelles Rupee and the economy in general. There are no restrictions on trading by foreigners.

Existing policies facilitate the free flow of financial resources in and out of the economy. The government respects IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions. Foreign investors are able to obtain credit on the local market and through the Seychelles banking system, and a variety of credit instruments are available to both local and foreign investors.

Money and Banking System

Seychelles has a two-tier banking system that separates the central and commercial bank functions and roles. Commercial banks, both domestic and foreign, are regulated and supervised by the Central Bank of Seychelles (CBS). According to the Central Bank of Seychelles Act 2004, the CBS is responsible for the formulation and implementation of Seychelles’ Monetary and Exchange Rate policies. The CBS is the only administrative body responsible for receiving applications for banking licenses, whether domestic or offshore, and issuing the corresponding licenses.

As of March 2021, there were eight commercial banks in operation: Absa Bank, Bank of Baroda, Mauritius Commercial Bank (Seychelles), Nouvobanq, Seychelles Commercial Bank, Al Salam Bank Seychelles Ltd, Bank of Ceylon, and Bank AL Habib Limited. According to a 2016 report by the CBS, 94 percent of Seychellois use banks. Seychelles also has three non-banking financial institutions: the Seychelles Credit Union, a savings and credit cooperative society; the Development Bank of Seychelles, which provides flexible financing for businesses and projects to promote economic growth and employment; and the Housing Finance Corporation, a government-owned company that provides financing to Seychellois for the purchase of land, the construction of homes, and financing home improvements.

Seychelles has a number of laws that govern the financial services sector: Financial Institutions Act 2004, Prevention of Terrorism Act 2004, International Business Companies Act 2016, Anti-Money Laundering and Combating the Financing of Terrorism Act 2020, Beneficial Ownership Act 2020, Data Protection Act, Mutual and Hedge Fund Act 2007, and Central Bank Act 2004. The Seychellois banking sector is generally healthy, though it is limited by small size and reliance on correspondent bank relationships. Due to concerns about money-laundering and illicit finance in the Seychellois financial sector, some local banks have lost their correspondent banking relationship with foreign banks, a phenomenon known as de-risking, making it difficult for local banks to perform international transactions. In 2017, the CBS and the Financial Services Authority visited foreign financial centers to address de-risking. The government is actively working with international experts, including the World Bank and International Monetary Fund, to ensure Seychelles is not perceived as high-risk jurisdiction.

In February 2020, the European Union added Seychelles to the list of non-cooperative jurisdictions for tax purposes as Seychelles had not implemented the tax reforms by the agreed deadline of December 2019 to which it had committed. In December 2019, France added Seychelles to its blacklist of tax havens for not providing adequate information on French offshore entities operating in the island nation’s jurisdiction. On March 5, 2020, the President signed the National Assembly passed the Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) Act 2020 and the Beneficial Ownership (BO) Act 2020. These two pieces of legislation address the deficiencies identified in the 2018 Mutual Evaluation Report of the Eastern and Southern Africa Anti Money Laundering Group (ESAAMLG). In March 2021, the International Trusts (Amendment) Bill 2021 was approved by the National Assembly and the National Anti-Money Laundering and Countering the Financing of Terrorism Committee established that the following laws will be presented to the National Assembly by June to fully comply with the Financial Action Task Force’s (FATF) recommendations:

  1. Re-enactment of the Registration of Association Act;
  2. New Asset Management Framework;
  3. Amendments to the Beneficial Ownership Act, 2020; and
  4. Virtual Assets Service Providers Bill, 2021.

According to the CBS in January 2021, non-performing loans to total gross loans in the Seychelles banking sector stood at 2.65 percent, and foreign currency deposits totaled 11,862 million Seychelles Rupees ($561 million).

A wide range of financial services such as checking accounts, savings accounts, loans, transactions in foreign currencies, and foreign currency accounts are available in the banking system. Foreigners and foreign/offshore firms must establish residency or proof of business registration to obtain a bank account.

Foreign Exchange and Remittances

Foreign Exchange

Since the 2008 IMF reform package, the government places no restrictions or limitations on foreign investors converting, transferring, or repatriating funds associated with investment. Funds are freely converted. Seychelles maintains a floating exchange rate for the Seychelles Rupee (SCR), which fluctuated between SCR 12 and SCR 14.5 to $1 from 2015 to 2019. In 2020, the SCR depreciated by 53 percent with the average rate in January 2020 being SCR 14 to $1 compared to SCR 21.5 in December 2020, due to the unprecedented impact of the Covid-19 pandemic on the tourism sector.

Remittance Policies

Foreign exchange controls were removed in 2008 and foreign investors are free to repatriate their profits and other incomes. The embassy is unaware of any planned changes to remittance policies, time limits on remittances, or use of any legal parallel market.

Sovereign Wealth Funds

Seychelles does not maintain any sovereign wealth funds.

9. Corruption

Ruling with transparency and accountability are stated priorities of the current government. In 2016, the government established the Anti-Corruption Commission of Seychelles (ACCS) under the Anti-Corruption Act, which gives it authority to investigate, detect, and prevent corrupt practices. Seychelles Transparency Initiative (TI), a Transparency International chapter in formation, was set up in 2017. TI’s focus is currently on increasing transparency in tourism, fisheries, finance, and construction. There is currently no legislation protecting NGOs involved in investigating corruption.

The Anti-Corruption (Amendment) Bill ( https://seylii.org/sc/legislation/bill/2020/4 ) was voted on by the National Assembly in 2019 giving the ACCS investigative and arresting powers similar to that of the police. The ACCS has received significant criticism for having only achieved one conviction: that of an ACCS employee who was convicted of extortion, corruption, and unlawful disclosure of ACCS information in 2018 when he demanded money in exchange for providing the ACCS’ evidence to an individual under investigation by the ACCS. In the January 2021 State of the Nation address, the president announced that the board which directs the ACCS would be dissolved and the entity would be restructured through legislative amendments. In March 2021, the ACCS signed cooperation agreements with the Seychelles Revenue Authority, the Central Bank of Seychelles, and the Registrar General’s Office to better facilitate the exchange of information and assist the ACCS’ investigations.

Seychelles signed the UN Convention against Corruption in February 2004 and ratified it in March 2006. Seychelles is not party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

In 2003, the government published the Public Service Code of Ethics and Conduct, the stated purpose of which is to provide guidance to public sector employees on the standards of behavior required of them. The Public Officer’s Ethics Act of 2008 prohibits personal enrichment through public office, defines and outlaws bribery, provides guidelines for avoiding conflict of interest, and mandates declaration of financial assets for public officials including members of the National Assembly. In March 2021, Cabinet approved amendments to the Anti-Corruption Act and the Public Officers’ Ethics Act. The government does not require private companies to establish internal codes of conduct.

Resources to Report Corruption

Anti-Corruption Commission
May De Silva
Chief Executive Officer
Victoria House,
State House Avenue
Victoria, Mahe

Office of the Ombudsperson
Nicole Tirant-Gherardi
Ombudsperson
Room 306, Aarti Chambers, Mont Fleuri, Mahe
+248 225147
ombuds@seychelles.net

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