The Economy
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For
the past 20 years this small Indian Ocean island with
a population of 1.2 million has had an average growth
rate of 5.4%, which far outstrips that of most African
countries. GDP per head has risen from $219 in 1968
to about $10,300 at purchasing power parity, putting
Mauritius in the middle income range. Unemployment is
running at about 6%, with inflation at 7%.
However,
the new Mauritian government, elected last September,
says that its predecessors had taken the economy to
the brink of collapse through financial improvidence,
with an expected deficit this year of 6.5% of GNP. The
new team of Paul Béranger and the present prime
minister, Anerood Jugnauth, was previously in power
in the 1980s, and was the architect of the country's
boom. They stabilised the economy with an International
Monetary Fund (IMF) programme and laid the basis for
the rapid growth of tourism, manufactured exports and
the financial services sector
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In May
2001, the International Monetary Fund (IMF) released details
of its Article IV Consultation with Mauritius praising the
country's strong economic growth. With real GDP expected to
increase by 7.8 per cent over the following year (up 3.6 per
cent from the previous year), the depreciation of the Mauritian
rupee, a successful privatisation programme and several remedial
fiscal actions put into place, the IMF reported that it had
agreed to grant the government's request for technical assistance
to improve the quality of the overall public accounts and
to modernise the financial sector.
The new
government had already announced plans to correct the country's
economic situation.
Despite the high budget deficit, government has plans for
what Béranger says are "massive investments",
mainly in infrastructure, training, housing, and communications.
Mr
Béranger, deputy prime minister and finance minister,
says: "We
are going to move to the next stage of economic development",
that of an "information, knowledge, and services economy",
he says. The aim is a "quantum leap" to "a
knowledge island". Part
of the plan involves creating "cyber cities" which
would help reduce the country's still heavy dependence on
sugar and manufactured exports. The
plan relies on large-scale public spending, with the budget
deficit falling only after several years. But
a continuing high growth rate looks likely to be the payoff.
Last September
Jugnauth's Socialist Militant party and Béranger's
Militant Movement were voted back into power. Their agreement
is that Béranger will take over as prime minister the
year after next. Béranger
started off his career in the British Merchant Navy and was
studying journalism in Paris during the 1968 student upheaval.
When he returned to Mauritius he spent about a decade in the
trade union movement before entering politics.
Since
coming back to power, Béranger says the priority has
been to re-establish law and order. "There was a complete
breakdown of law and order", he says, but the law and
order situation has now been turned around.
The "quantum
leap" relies heavily on government investment, but the
five-year plan is to reduce the deficit from 6.5% to 5% of
GDP. The World Bank has given its stamp to the plan and offered
the country support through an "umbrella" loan.
The
Budget For 2001/2002
In a mammoth
budget speech in June 2001 stamping his authority on the economy,
Paul Béranger had outlined a wealth of development
initiatives under the general heading of an 'Economic Agenda
for the New Millennium'.
Government,
he said, will invest massively in education, training and
Information and Communication Technology (ICT) as well as
in infrastructure and environment to transform Mauritius into
a diversified, hi-tech, high income services and knowledge
economy fully integrated in the new global economic environment.
Capital expenditure will increase by 58% and total expenditure
on education by 34 per cent.
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Mr
Beranger reviewed progress in adopting new legislation,
reporting that in less than a year the
Government had passed the Companies Act 2001, the Financial
Services Development Act 2001 the Trusts Act 2001 and
the Investment Promotion Act 2000. The Board of Investment
was now fully operational, and the other three pieces
of legislation would come into effect later in the year
(see below). Further new pieces of legislation promised
include new
legislation relating to the regulatory functions of
the Mauritius Telecommunications Authority, an Insolvency
Bill, a Securities Bill, a new Insurance Bill and a
Collective Investment Schemes Bill. Legislation would
be introduced to better regulate pension and other retirement
benefit schemes.
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'With
the completion of this reform programme', said the Minister,
'we will have established supervisory and prudential norms
meeting the highest international requirements. We will also
have created the necessary conditions for the integration
of the financial services industry and its sustained expansion.'
Mr Beranger
said that it is the intention of the Government to develop
Port Louis into a major centre for trade, transhipment, warehousing,
distribution and services. The Port Master Plan is being updated
to promote optimal use of land in the port area. It will identify
new activities for exploitation, such as cruise traffic and
harbour front development, as well as requirements for new
port infrastructure. Measures will be taken to strengthen
security and safety in the port and rationalise the storage
and handling of petroleum products. The long-delayed project
for setting up additional storage facilities for petroleum
products at Mer Rouge will be implemented. To enhance operational
efficiency, the Cargo Handling Corporation will enter into
a strategic alliance with a partner of international repute.
The Government,
he said, is concerned about the lacklustre performance of
the Stock Exchange, and will provide the necessary leadership
to find viable and durable solutions and to restore confidence
in the stock market. In this context, the advisability of
listing some state-owned companies will be examined..
To encourage institutional investors to participate in the
Stock Exchange, the Banking Act would be amended to allow
banks to invest up to 10% of their capital base in shares
of listed companies.
The Minister
intended to give the freeport a new boost to enable the sector
to meet fully the high expectations built on it. He applauded
the recent decision by the Shenhzen/Shenfubao Group from China
to invest US$ 6 million in new freeport infrastructure as
a clear indication of the development potential of the freeport.
He promised improved legislation that would provide a framework
conducive to the rapid and smooth development of freeport
activities in the country.
He also
announced a Venture Capital Fund for start-ups in the ICT
sector and other high value-added activities. The Fund will
provide direct investment in shares, up to Rs 250,000 per
project and would
encourage Mauritian entrepreneurs to enter into joint ventures
with overseas partners to benefit from their know-how and
access to markets. The Venture Capital Fund would provide
loans of up to Rs 500,000 per project for equity participation.
The movie
industry also got a boost, with
a package of measures and incentives to allow the take-off
of film-making activities in Mauritius. The
Mauritius Film Development Corporation (MFDC) will be replaced
by a Mauritius Film Commission. It will regulate and co-ordinate
all activities relating to film-making in Mauritius and act
as a one-stop shop for foreign film producers. A
film production scheme will be implemented to provide financial
assistance to Mauritians to encourage them to produce films
and documentaries with local content.
In an
attempt to bring in more revenue, Béranger took some
tough decisions. He raised value added tax by two percentage
points in the budget and, to cover mounting losses at stateowned
companies, raised electricity and petrol prices.
Further
privatisation is on the cards, but due to "nationalist
feelings" Béranger said the government would continue
to hold majority stakes in state-owned corporations. Negotiations
had been recently completed on the sale of a stake of the
telecommunications company to France Telecom and there are
plans to sell stakes in the harbour, water, and electricity
supply utilities.
Not long
after the government announced its economic plans, the Economist
Intelligence Unit issued a report on the country, which concluded
that Mauritius could reach 6 per cent economic growth and
establish a conducive environment for foreign investment as
long as it maintains a low inflation rate. The report stated:
'Economic reforms will be essential during the forecast period
to address the structural weaknesses which the government
has so far managed to ignore, having enjoyed preferential
access to foreign markets and having relied on the depreciation
of the rupee to safeguard export competitiveness ... the government
led by Sir Anerood Jugnauth should introduce a series of reforms
to improve competitiveness, attract foreign investments and
control the budget deficit.'
The country's
highly successful export processing zones are one feature
of the economy the government is not about to change. While
trade unions are increasing their pressure on the zones, no
one in the country questions the concept of these zones, said
Béranger.
The
IT Free-Trade Zones
Soon after
being elected, the Mauritian government had announced plans
to create an IT free-trade zone on the island. Prime Minister,
Anerood Jugnauth, said: 'The year 2001 will be marked by the
relaunch of the Mauritian economy. We want to make Mauritius
an information technology free trade zone with digital parks.'
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The
digital parks will offer all the latest available technological
facilities to meet the needs of IT business, and the
government aims to provide a series of fiscal incentives
to both domestic and foreign businesses operating in
Mauritius, including a 5-year tax holiday. Jugnauth
also announced the launch of an official body to promote
the IT sector in Mauritius as a major centre for foreign
businesses. It is expected that the IT free trade zone
will create thousands of jobs on the island. The government
hopes to emulate the success of its Export Processing
Zone (EPZ) which has established itself as a prosperous
commercial base in relation to India and South Africa.
The EPZ offers a range of fiscal incentives, as well
as duty-free importation and re-exportation.
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E-commerce
adoption in Mauritius is expected to be a catalyst that will
help propel Mauritius to become a service based society. Mauritius
aims to become the regional electronic hub for businesses
and government entities within already established trading
communities such as SADC, COMESA, and it is envisaged that
the Offshore and Freeport sectors will play crucial roles
in terms of attracting investment and providing a logistical
platform for e-commerce.
'As a
country,' says the Government, 'we want to ensure that Mauritian
businesses, institutions and communities at large will have
access to the social and economic opportunities created by
the new technologies, information infrastructure and digital
content. This will result in business growth and development,
new and innovative jobs, improved capacity for communications
and improved ability to extend our reach to other countries.'
The Government
sees Mauritius as possessing a number of crucial advantages
in terms of e-commerce development: 'There is a good telecommunications
infrastructure and a significant number of operators in the
transport, business and financial services, trade and publishing.
The country occupies a key position in the field of logistics
and distribution; an international outlook, a high standard
of education and good linguistic skills are also among our
key assets.'
The Mauritius
government is also planning to implement a 'green visa concept'
which allows Indian companies looking to set up a venture
in Mauritius to bring in as many IT experts as they need without
complicated red tape procedures.
In January
2001 Port Louis, Deputy Prime Minister and Finance Minister
Paul Berenger announced the setting up of an Infocom Development
Authority to promote investments in information technology
and to regulate the sector. He said that the new authority
would take care of both the Mauritius Telecommunications Authority
and the National Computer Board. "Information technology
is the priority of the government," he said.
The Government's
plans were given their clearest expression to date by Paul
Berenger in his budget speech in June 2001, when he said that
the Government's overall objective is to develop Mauritius
into a Cyber Island and a knowledge hub. Government, he said
would marshal the resources and efforts required to fulfil
this ambition. Mr Berenger told Parliament that a line of
credit of US$ 100 million had already been secured from the
Government of India for the implementation of these projects.
In view
of the importance of the project, Prime Minister Anerood Jugnauth
himself is chairing a Ministerial Committee to spearhead the
development of ICT in Mauritius. The three task forces set
up to look into the establishment of a Cyber City, and the
implementation of e-Education and e-Government projects are
reporting on a monthly basis to the Committee.
At the
end of a speech that lasted three and a half hours, the Minister
announced plans for a government-sponsored incubator: 'In
our drive to make of Mauritius a Cyber Island, we are not
ignoring the need to promote Mauritian entrepreneurship. Our
young people are endowed with talent and potential for innovative
ideas in ICT. They need to be provided with the necessary
support and facilities. The National Computer Board will set
up an ICT incubator to promote start-ups.'
The
Cyber-City Project
The Ebène
Cyber City Project is being set up by Business Parks of Mauritius
Ltd (BPML), an associate of Software Technology Parks of India,
whose executives have prepared a fully worked-out business
plan for the establishment of the City. It will comprise a
cyber tower, a business tower, a knowledge complex, a multi-media
complex, a Government administrative complex, common facilities
and residential units.
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new city will have its own direct international connectivity,
and in order to accelerate the development of the Cyber-City,
the Government decided in July to install a satellite
reception station by November to ensure adequate connectivity.
Construction works on both the Cyber City and its road
links are scheduled to start by the end of this year.
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BPML will
also be responsible for the implementation of a business park
at Rose Belle. Already, renowned international firms engaged
in software development, ICT training and call centres have
expressed keen interest to locate their activities in the
Cyber City and at the business park.
The
E-Government Project
In his
budget speech, the Finance Minister followed up on the Prime
Minister announcement of the government plans to create an
electronic interface with its citizens. 'We need to provide
to our citizens and investors alike, 24 hours a day, 7 days
a week, on-line access to government information and services
from anywhere,' said the Minister. 'Each ministry and department
will have its own interactive website accessible through a
common Government Portal. The Government On-line Centre Project
is estimated to cost Rs 40 million. We are at the same time
accelerating the implementation of various computerisation
projects in ministries and departments. In this Budget, I
am making a total provision of Rs 180 million for Government
IT projects.'
Modernisation Of The Legal Structure
Moves
were already afoot under the previous government to modernise
the country's legal structure, partly just to catch up with
competitors, partly to give expression to the decision to
eschew 'offshore' status as such, and partly as a follow-up
to the decision to sign a Commitment Letter to the OECD in
order to avoid 'blacklisting'.
In this
context the Mauritius Offshore Business Activities Authority
(MOBAA), which had been a 'one-stop-shop' for the offshore
sector, and had been the licensing and supervisory authority
for offshore companies (except banks) since 1992 had clearly
outlived its usefulness, as had the various pieces of legislation
which explicitly recognised offshore companies and structures.
All this is being swept away, and according to an official
at the Companies Division of the Mauritius Ministry of Economic
Development, Financial Services and Corporate Affairs, the
new legislation will come into effect in October.
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To
some extent, the changes are cosmetic rather than substantive,
although there is no doubt that the new supervisory regime
will be a lot tougher than the old one. The Financial
Services Development Act 2001 is a particularly complex
piece of legislation, giving very extensive powers to
the new Financial Services Commission which effectively
replaces MOBAA as well as taking on some of the functions
of the Central Bank. |
There
follows a brief assessment of the effects of the new laws,
although note that these general summaries are intended to
give only very basic information and should certainly not
be relied upon for authoritative direction. The new laws are
not always easy to interpret and are not yet in effect. Professional
guidance is absolutely necessary for anyone affected by them.
The
Companies Act 2001
The new
Act replaces most of the Companies Act of 1984, other than
sections dealing with insolvency and public companies, which
will remain in force until new legislation is brought forward
in separate bills. The 1984 Act was the first major revision
of companies' legislation in Mauritius and provided a virtually
complete restatement of the law relating to companies. The
1984 Act used as its basic model the Singapore Companies Act
1967 (as revised in 1970 and 1975). The Singapore Act had
used as its basic model the Australian Uniform Companies Act
of 1961 which was in turn substantially based on the UK Companies
Act 1948.
Since
1984 significant changes in company legislation have been
made in the United Kingdom, Australia, New Zealand and South
Africa. The Government had made piecemeal reforms to companies'
legislation, especially in respect of the offshore sector,
but decided the time had come for a root-and-branch restatement
of the law to adapt it to modern business realities.
The Government's
starting point for the new law was New Zealand company law,
which is widely regarded among English-speaking jurists as
representing the best available compromise between the various
modern trends in corporate legislation, now that English law
has been so influenced by EU law as to be no longer satisfactory
as a model for common law jurisdictions.
The Government
says that the core company law contained in the new Act provides
the basic framework for the incorporation, internal management
and receivership of all companies, what could colloquially
be called provisions for the birth, life and ill health of
all companies, with provisions for the death of the company
being contained in the Insolvency Bill which has yet to be
published. The incorporation and management of exempt offshore
companies continues to be governed by the separate International
Business Companies Act 1994 which deals with the special needs
of that group of companies. This leaves the Companies Act
as a vehicle for providing the core company law provisions
for domestic companies, including companies described in the
Mauritius Offshore Business Activities Act 1992 as "offshore
companies".
Some key
features of the new legislation are as follows:
- The
Act introduces a simple form of incorporation enabling a
company to be incorporated on the filing of a single application
together with the necessary consents from the proposed directors
and secretary and a notice of reservation of the proposed
company name. It will not be necessary to submit a constitution
at the time of incorporation. If a company wants to depart
from the standard requirements set out in the Actl, then,
either on incorporation or subsequently, it needs to file
a separate constitution setting out the departures from
the standard form. The new legislation also recognises the
reality of 'nominee' shareholders by allowing companies
to operate with just one shareholder.
- The
Act does away with the need for a separate objects clause,
and provides that a company has the rights, powers and privileges
of a natural person; this incidentally removes the remains
of the one-time ultra vires doctrine. This would not preclude
a company from stating specific objects in its constitution
if it wished to limit the capacity of a company in this
way.
- The
Act replaces the Memorandum and Articles of Association
by a single constitution, which is no longer required to
be notarised.
- Private
companies will continue to be prohibited from offering shares
or debentures to the public, will be able to dispense with
the holding of company meetings by passing resolutions by
means of entry in the company minute book, and exempt private
companies will not be required to appoint a qualified auditor
or a qualified secretary and will be entitled to file only
a summary statement of accounts with the Registrar.
- The
proposed legislation will retain the distinction between
exempt and non-exempt private companies in the same form
as in the existing legislation.
- The
Act introduces no par value shares and permits a company
to issue shares which are not designated with any monetary
value.
- The
Act incorporates the new procedure of self-purchase and
holding of treasury shares introduced by the Finance Act
1999.
- The
new legislation makes provision for a company to provide
in its constitution for the company to have power to indemnify
or insure its directors, secretary or employees in accordance
with the limitations provided by the Act.
- The
Act contains a requirement that public companies and non-exempt
private companies are required to prepare and present their
accounts in accordance with international accounting standards
and that exempt private companies are required to present
their accounts in accordance with accounting practices and
principles that are reasonable in the circumstances and
having regard to any requirements set out in regulations
made under the Act.
- The
old Companies Act required all companies to appoint an auditor
but relieved exempt private companies from the requirement
to appoint a qualified auditor. The new Act allows an exempt
private company not to appoint an auditor (whether qualified
or unqualified).
- Offshore
Companies are brought under the Companies Act and redesignated
as "external companies". New provisions allow
for the continuation in Mauritius of companies which are
incorporated elsewhere and also provides for the incorporation
of limited life companies.
The
Trust Act 2001
The Trusts
Act 2001 replaces the following Acts which are repealed:
- The
Trusts Act 1989;
- The
Trust Companies Act 1989; and
- The
Offshore Trusts Act 1992.
The following
is a summary of some of the more important features of the
new Act.
The new
Act sets a maximum duration of 99 years for trusts other than
purpose trusts (25 years) and charitable trusts (may be perpetual),
and permits the accumulation of income (limited to 25 years
if immovable property in Mauritius is involved).
A settlor
may also be a trustee, a beneficiary, a protector or an enforcer,
but may not be the sole beneficiary of a trust of which he
is a settlor.
A
transfer or disposition by a non-citizen can not be set aside,
avoided, or otherwise declared invalid or ineffective by virtue
of any rule or law of his domicile or nationality relating
to inheritance or succession or any rule or law of a similar
nature, or any rule or law restricting the right of a person
to dispose of his property during his lifetime so as to preserve
such property for distribution at his death, or any rule or
law having similar effect.
Trusts
are irrevocable notwithstanding
any provision of the Bankruptcy Act, or any other law of Mauritius
or any rule of law of any other jurisdiction or
the fact that the trust is voluntary, and is effected without
consideration, or is made on or for the benefit of the settlor,
the spouse or children of the settlor, or any of them. A
trust shall not be void or voidable, or otherwise invalidated
in the event of or by reason of the settlor's bankruptcy or
liquidation of his property or in any action or proceedings
against the settlor at the suit of his creditors.
However
the Court may declare a trust void, where it is established
that the trust was made with the intent to defraud persons
who were creditors of the settlor at the time when the trust
property was vested in the trustee.
No such action can be undertaken after more than 2 years from
the date of the transfer or disposal of the assets to the
trust.
Notwithstanding
any rule or law relating to enforcement of judgments given
by the court of another jurisdiction, where the law of Mauritius
is the proper law of a trust, the Court shall not vary it
or set it aside or recognise the validity of any claim against
the trust property pursuant to the law of another jurisdiction
or the order of a court of another jurisdiction in respect
of:
- the
personal and proprietary consequences of marriage or the
dissolution of marriage;
- succession
rights (whether testate or intestate) including the fixed
shares of spouses, ascendants and descendants or relatives;
or
- the
claim of creditors in an insolvency.
Protective
or spendthrift trust are allowed for.
The terms of a trust may make the interest of a beneficiary
subject to termination,
restriction
on alienation of or dealing in that interest or any part of
that interest, or
dimunition, suspension or termination, in
the event of the beneficiary becoming insolvent or any of
his property becoming liable to seizure or sequestration for
the benefit of his creditors and such trust shall be known
for the purposes of this Act as a protective or spendthrift
trust.
A purpose
trust must have an enforcer
whose duty is to enforce the trust in accordance with its
terms and purposes.
The settling
of immovable property in Mauritius on a trust of which a non-citizen
is a beneficiary requires the approval of
the Prime Minister under the Non-Citizens (Property Restriction)
Act.
The Act
allows for a protector of a trust to be appointed. His functions
will
be to advise the trustee of the trust. The
exercise by the trustees of any of their powers and discretions
shall be subject to the prior consent of the protector.
The trust instrument may appoint as protector any person of
full age and of sound mind, including the settlor, or any
body corporate, any firm, partnership or group of persons,
whether incorporate or unincorporate. The protector has a
range of other powers and
may also be a settlor, a trustee or a beneficiary of the trust.
The Act
provides for the appointment of a custodian trustee which
shall be a firm, a partnership or a body corporate and who
will act on the instructions of a managing trustee.
The Act
provides for the appointment of a managing trustee having
the role and functions to manage the trust without being vested
with the trust property which is vested in a custodian trustee.
The settlor
or beneficiary of a trust may give to the trustees a letter
of his wishes or the trustees may prepare a memorandum of
the wishes of the settlor with regard to the exercise of any
functions conferred on the trustees by the terms of the trust.
The number
of trustees of a trust shall not exceed 4 of whom, at any
one time, at least one shall be a qualified trustee.
Except
where ordered by the Court or a Judge in Chambers a trustee
shall keep as confidential and shall not be required to disclose
to any person not legally entitled to it or be required to
produce or divulge to any Court, tribunal, committee of enquiry
or other authority in Mauritius or elsewhere, any information
or document in his possession or under his control relating
to:
- the
state and amount or any other details of the trust property;
- the
conduct of the trust administration;
- the
trustee's deliberations as to the manner in which a power
or a discretion was exercised, or a duty conferred or imposed
by the law or by the terms of the trust was performed;
- the
reason for any particular exercise of such power or discretion
or performance of duty or the material upon which such reason
will be or might have been based; or
- the
exercise or proposed exercise of such power or discretion
or the performance or proposed performance of such duty.
However,
these secrecy provisions are heavily compromised by a series
of qualifications in respect of money laundering, international
mutual assistance treaties etc.
In most
respects, the new Act inherits tax privileges granted under
previous acts, and Section 46 of the
Income Tax Act 1995 is amended accordingly:
- (1)
Subject to section 7 and subsections (2) and (3) of this
section, every trust shall be liable to income tax on its
chargeable income at the rate specified in Part III of the
First Schedule.
- (2)
A trust of which
- (a)
the settlor is a non-resident; and
- (b)
all the beneficiaries appointed under the terms of the
trust are, throughout an income year, non-resident,
or hold a Category 1 Global Business Licence or a Category
2 Global Business Licence under the Financial Services
Development Act 2001
- shall
be liable to income tax on its chargeable income at
the rate specified in Part II of the First Schedule.
- (3)
Where a trust which qualifies under subsection (2) deposits
a declaration of non-residence for any income year with
the Commissioner within 3 months after the expiry of the
income year, it shall be exempt from income tax in respect
of that income year.
- (4)
The chargeable income under subsections (1) and (2) shall
be the difference between:
- (a)
the net income derived by the trust; and
- (b)
the aggregate amount distributed to the beneficiaries
under the terms of the trust.
- (5)
Any amount distributed to the beneficiaries under the terms
of the trust shall be deemed to be a charge under section
10(1)(d) and shall be liable to income tax in the hands
of the beneficiaries.
- (6)
Notwithstanding subsection (5), a non-resident beneficiary
of a trust shall be exempt from income tax in respect of
his income under the terms of the trust.
The
Financial Services Development Act 2001
The third
major piece of legislation passed by the Parliament in May
2001, and which is likely to come into effect along with the
other two in October 2001 is the Financial Services Development
Act 2001.
The Act
says it is: to provide for the establishment and management
of a Financial Services Commission to regulate the non-bank
financial services, the establishment of a Financial Services
Consultative Council which will serve as a forum for discussions
of the innovative developments and international trends in
the field of financial services and of a distinct and separate
Financial Services Promotion Agency for the promotion of the
development of the financial services industry in Mauritius;
and to provide for matters connected therewith and incidental
thereto.
The objects
of the Commission are stated to be:
- to
work out objectives, policies and priorities for the development
of the financial services sector and to make recommendations
to the Minister;
- to
study new avenues for development in the financial services
sector, to respond to new challenges and to take full advantage
of new opportunities for achieving economic sustainability
and job creation;
- to
ensure, in collaboration with the Bank of Mauritius, the
soundness and stability of the financial system in Mauritius;
- to
ensure the sound conduct of business in the financial services
sector;
- to
ensure the orderly administration of the financial services
activities; and
- to
elaborate policies which are directed to ensuring the fairness,
efficiency and transparency of financial and capital markets
in Mauritius.
The
Commission is to:
- be
responsible for the administration of the relevant Acts;
- license,
regulate, monitor
and supervise the conduct of business activities in the
financial services sector;
- carry
out investigations and take measures to suppress illegal,
dishonourable and improper practices, market abuse and financial
fraud in relation to any activity in the financial services
sector;
- set
rules and guidance governing the conduct of business in
the financial services sector;
- prepare,
develop and implement a plan for the better integration
of the financial services industry;
- carry
out research, commission studies and disseminate information
in the field of financial services;
- promote
public understanding of the financial system including awareness
of the benefits and risks associated with different kinds
of investment;
- ensure
co-ordination and co-operation between public sector agencies
and private corporations engaged in the financial services
sector;
- establish
norms and standards in order to preserve and maintain the
good repute of Mauritius in the financial services sector;
- establish
and maintain such links and liaison with international agencies
in the field of financial services as may be necessary for
the furtherance of its objects;
- take
measures for the better protection of consumers of financial
services;
- identify
and take measures to prevent and eliminate investment business
abuse;
- advise
the Minister generally on any matter relating to the financial
services sector; and
- do
such acts or things as are incidental or conducive to the
attainment of its objects.
The Commission
is given a suitably wide range of powers, including the ability
to close
the Stock Exchange in various circumstances.
Financial
(non-banking) organisations licensed by the Commission must
keep in
relation to his business activities in the financial services
sector, 'a full and true written record, whether electronic
or otherwise, in the English or French language of every transaction
he makes.' The records must be retained for at least seven
years.
The
Commission will establish compensation funds 'for the purposes
of compensating investors and other persons who suffer or
have suffered financial losses as a result of the inability
or eventual inability by a corporation licensed under the
relevant Acts to satisfy claims arising from any civil liability
incurred by it in connection with services provided, or as
a result of fraud or defalcation by the corporation or any
of its employees or officers, or as a result of the insolvency
of such corporation.'
The
Act establishes two categories of 'Qualified global businesses'
which amount to offshore companies, although there are multiple
restrictions and conditions, and licenses must be obtained
from the Commission. 'Management licenses' will be issued
to companies involved in the provision of services to 'qualified
global businesses'.
The Act
repeals the following existing laws:
- The
Mauritius Offshore Business Activities Act 1992;
- The
Mauritius Offshore Business Activities (Fees) Regulations
1992;
- The
Offshore Insurance Regulations 1992; and
- The
Mauritius Offshore Business Activities (Companies) Regulations
1995.
It also
contains modfications to other existing laws, including the
Banking Act. Certificates and licences issued under previous
laws are in most cases 'grandfathered' into the new regime.
Relevant laws include:
- The
Insurance Act 1987;
- The
Protected Cell Companies Act 1999;
- The
Securities (Central Depository, Clearing and Settlement)
Act 1996;
- The
Stock Exchange Act 1988;
- The
Trusts Act 2001;
- The
Unit Trust Act 1989.
The Act
defines financial
services or financial business activities (which will therefore
be supervised by the FSC) to include:
- Asset
management;
- Collective
investment schemes;
- Custodial
services;
- Factoring
business;
- Financial
service providers and intermediaries;
- Investment
advisory services;
- Leasing
business;
- Mortgage
finance;
- Retirement
benefits schemes; and
- Services
provided by a qualified trustee under the Trusts Act 2001.
Activities
falling under the rules relating to 'Qualified
global businesses' (ie which can have what used to amount
to 'offshore' status) include:
- Aircraft
financing and leasing;
- Assets
management;
- Consultancy
services;
- Employment
services;
- Financial
services;
- Funds
management;
- Information
and communication technology services;
- Insurance;
- Licensing
and franchising;
- Logistics
and or marketing;
- Operational
headquarters;
- Pension
funds;
- Shipping
and ship management; and
- Trading.
Investment in Mauritius
Mauritius
is well served by business and communications infrastructure
and is a dynamic economy; the government actively encourages
foreign investment and offshore activity through the Ministry
of Industry & Commerce. The ministry operates a one stop
shop for clearances and permits; it also provides assistance
in identifying market outlets, joint venture partners, site
locations, and buildings. However, dealings with Government
tend to be somewhat bureaucratic - in this respect the French
'civil code' influence is noticeably to the fore rather than
more free-wheeling Anglo-Saxon business attitudes.
Until
now there has been a very clear distinction between the 'onshore'
and 'offshore' sectors in Mauritius. Foreigners need specific
permission from the Prime Minister's office before they can
own shares in an onshore company, while Mauritians are barred
from taking part in offshore activities. The new legal regime
described above does somewhat reduce these barriers.
There
is a wide range of investment incentives for inward investment.
Free Trade Zones and a Freeport were established in 1992 enabling
up to 100% foreign owned enterprises. Money laundering is
discouraged by the government, as is any trade in guns or
drugs. The Economic Crime and Anti-Money Laundering Act 2000
established an Economic Crime Office.
Although
Mauritius was successful in attracting foreign direct investment
in the 1970s and 1980s, there was a gradual slowing down in
the growth of FDI ever since, partly perhaps due to the complexity
of the various incentive schemes that are available. Adverse
currency movements have also put Mauritius at a disadvantage.
The Government is attempting to simplify and improve the country's
FDI regime, The inward investment process in Mauritius can
be bureaucratic, and after promising a 'one-stop-shop' for
inward investors for some years, the administration finally
launched a bill in Parliament in June, 2000 to create an integrated
agency for inward investment, leading to the creation of A
Board of Investment in 2001.
Annual
FDI flows averaged $22m a year in 1985-90, but declined to
an average of $18m in 1991-1996 and has fallen further since
if capital movements are excluded. The Export Processing Zone,
which had attracted $18m a year in FDI during 1990-92, received
only $1.2m in 1998. It's probable that these figures reflect
increasing international competition in the low-skill, traditional
industries such as garment manufacturing, and underline the
importance of the government's moves to 'skill up', particularly
in the IT sector, which began to take effect only in 1999.
| FDI
from the US has been particularly badly hit: before IBM's
decision to create a regional headquarters in Mauritius
this year, the last known investment was in 1992. |
|
In response
to intense Government activity, over the past nine months
there has been renewed active interest on the part of private
investors, both local and foreign. Between September 2000
and April this year, some 90 new projects were approved by
various ministries for a total investment value of over Rs
2.5 billion. These projects are in the process of being implemented
and are expected to create some 2,500 direct jobs.
For its
part, the Board of Investment (BOI), since coming into operation
three months back, has sanctioned projects of about half a
billion rupees. The BOI is further considering proposals and
expressions of investment interest totalling over Rs 20 billion
in hotel development, ICT and manufacturing, including spinning
mills. These projects alone are expected to create some 7,000
direct jobs and many more indirectly.
Investment
Incentive Schemes
Incentive
schemes for a number of sectors were set up by the Industrial
Expansion Act 1993. Companies benefiting from such schemes
are often known as 'incentive' companies; in many cases, Mauritian
companies which invest in 'incentive' companies can treat
part of their investment as an expense against tax. Some of
the more important schemes are as follows:
Pioneer
Status Enterprise: This is aimed at 'activities involving
technology and skills above the average existing in Mauritius
and likely to enhance industrial and technological development'.
Incentives include 15% corporate tax, exemption from customs
duty and sales tax, and exemption from withholding tax.
Modernisation
and Expansion Scheme: The scheme aims to accelerate the modernisation
of existing enterprises; incentives include exemption from
customs duty and enhanced tax credits on purchase of new equipment,
particularly anti-pollution equipment.
Industrial
Building Scheme: The scheme encourages the construction of
industrial buildings for letting with incentives that include
a 15% corporate tax rate, exemption from withholding tax,
50% exemption from land purchase dues, and the disapplication
of rent controls.
Hotel
Development Certificate: Incentives include 5% corporate tax,
exemption from withholding tax for 10 years, exemption from
customs duties, and loans at preferential rates.
Export
Processing Zones (EPZ)
The Mauritius
Export Processing Zone (EPZ) was set up in 1970, and has become
one of the country's biggest centres of employment, particularly
in the garment manufacuring trade. The EPZ is meant for manufacturers
and food processors who export 100% of their output, although
permission is sometimes available for 10-20% of output to
be sold locally.
In order
to set up in the EPZ, an Export Enterprise Certificate must
be obtained from the Ministry of Industry and Technology,
involving a certain amount of bureaucracy. Once established
in the EPZ, the following incentives apply:
- No
customs duties or sales taxes payable on raw materials and
equipment;
- No
corporate taxes payable and no withholding tax on dividends;
- No
capital gains tax;
- Free
repatriation of dividends, profits and capital;
- 60%
remission of customs duties on buses for personnel transport;
- 50%
reduction in registration fees payable on land and buildings;
- Relief
on personal income tax for two expatriate staff.
Companies
in the EPZ have access to the African Preferential Trade Area
and quota-free access to the European Union.
There
is also an Export Services Zone, providing benefits comparable
to those of the EPZ to companies offering support services
to exporters in the EPZ.
Freeport
facilities were established at the port and airport under
the Freeport Act 1992. Although numerous licenses were issued
under the Act, lack of storage facilities limited take-up
of the benefits for some years. The incentives offered are
broadly similar to those available in the EPZ, see above,
and in addition there are reductions in port handling charges
for re-exports.
The Mauritius Stock Exchange
In 1989
Mauritius set up its own stock exchange under the Stock Exchange
Act 1988. The exchange is regulated by the Stock Exchange
Commission. There is an Official List with about 40 listings
and an Over The Counter Market with about 80 traded companies.
Market capitalisation is about $1.8bn.
Trading
takes place five days a week on an open outcry basis. Electronic
clearing and settlement was introduced in 1997, and a Centralised
Depository System was implemented in 1998 which allows delivery
versus payment (DVP) on a T+5 day rotating basis. The establishment
of a clearinghouse, through the Bank of Mauritius, provides
for a guarantee fund, which incorporates measures for securities
and fund settlement failure. The Stock Exchange in collaboration
with international advisers has also drafted new listing and
reporting rules to ensure greater transparency for investors.
| The
Exchange was recently promoted from the status of 'corresponding
exchange' to that of Affiliated Securities Market within
the Fédération Internationale des Bourses
de Valeurs (FIBV). Mauritius is also a member of the African
Stock Exchanges Association (ASEA). |
|
The market
was opened to foreign investors after the lifting of exchange
controls in 1994; foreigners are limited to individual holdings
of not more than 15% in sugar companies, but are not otherwise
limited unless they attempt to gain legal or management control
of a Mauritian company. Settlement can be made in foreign
currency; there is no capital gains tax and no withholding
tax on dividends from companies on the Official List
In June
2001 the exchange introduced an electronic trading system,
SEMATS, which uses order-matching software. It is hoped that
the new system will give a lift to the exchange, which has
seen only low levels of activity during recent months.
|
