Seychelles is an island nation located off the eastern coast of Africa in the Indian Ocean with a population of 95,800. 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 has designated Seychelles as a “high income” country, its wealth is not evenly distributed. According to the United Nations Development Program’s Human Development Report for 2016, Seychelles has a Gini coefficient of 46.8, indicating a high level of income inequality.
Seychelles experienced a socialist coup 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 nthe 21st century. After defaulting on interest payments due on a USD 230 million bond in 2008, the Government of Seychelles (GOS) turned to the International Monetary Fund (IMF) for support. To meet the IMF’s conditions for a stand-by loan, the GOS 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 has experienced economic growth, lower inflation, a stabilized exchange rate, declining public debt, and increased international reserves.
According to the Central Bank of Seychelles, real GDP grew by 4.1 percent in 2018, down from 4.3 percent in 2017. The IMF forecasts slower growth of 3.4 percent in 2019. Drivers of economic growth include fisheries, tourism, and construction. However, heavy reliance on the tourism industry makes the overall economy vulnerable to external shocks that can affect the European, Middle Eastern, and Asian countries from which most tourists travel.
Despite GOS 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 dive 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 September 2016, the opposition coalition Linyon Demokratik Seselwa (made up of the four opposition parties: the Seychelles National Party, the Seychelles Party for Social Justice and Democracy, the Lalyans Seselwa, and the Seychelles United Party) won the legislative elections for the first time. Before the elections, the ruling Parti Lepep (now also called United Seychelles) held all 25 directly elected seats in the national assembly and an additional seven proportionate seats, leaving just one seat for the opposition. Currently, and for the first time since the return of multi-party democracy in 1993, Parti Lepep (United Seychelles) does not have a parliamentary majority, holding only 14 of 33 seats.
Table 1: Key Metrics and Rankings
|TI Corruption Perceptions Index||2018||28 of 180||http://www.transparency.org/research/cpi/overview|
|World Bank’s Doing Business Report||2019||96 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2015||65 of 141||https://www.globalinnovationindex.org/analysis-indicator (Ranking not available for 2016-2018)|
|U.S. FDI in partner country ($M USD, stock positions)||2018||N/A||http://www.bea.gov/international/factsheet/|
|World Bank GNI per capita||2017||$14,170||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|