The annual budget
speech of Minister of Finance, Xavier-Luc Duval, reveals a very promising
future for Mauritius. Government confirms its strategy to transform the country
into a business center of excellence.
The Minister has so
far produced excellent results, no doubt he has been voted as the Best African
Minister of Finance for the second consecutive time. As a Chartered Accountant
of high repute (I’ve been lucky to work
along his side for a couple of years), Xavier-Luc has shown a no-nonsense
approach to finance management during his tenure and he maintains his
reputation in this field.
Through this budget
speech, Government lays down its vision of future Mauritius, without casting
its eyes off today’s hardships and the general difficult financial
context. This budget does not simply aim
at devising strategies to tackle external factors or to adjust to the
international situation or keep pace with economic trends. No, this budget aims
at building a new Mauritius. There is an
intelligent mix of bold decisions and prudence.
Delicate issues have been treated with a good dose of sense, logic and
vision.
I won’t go into a
financial or sectoral analysis of this budget (sorry, you might be disappointed) as I believe there is enough
coverage of same in the press and on the internet. I’d rather concentrate on announcements that
may affect those relocating or already residing in Mauritius under a residency
permit. You still can contact me in private
if you need advice (or my opinion) on
other points raised in the budget speech.
Well. Mauritius ranks
among the best business destinations of the world (http://www.doingbusiness.org/data/exploreeconomies/mauritius/). Foreigners living in the country will
confirm that they enjoy, among others:
·
a good business oriented environment,
·
a stable country (political, social and
even climatic)
·
a pleasant population with no signs of
xenophobia against foreigners
·
a well-defined & modern legal
system
·
a low fiscal regime that favors
business initiatives
·
modern work and residency permit
schemes to attract foreign capital & expertise
·
a generally pleasant country with
breathtaking views & world’s best beaches (did I go too far here? No, I don’ think so)
With no
natural resources and the removal of guaranteed quotas on our sugar (and
afterwards textiles) – Mauritius had to find new ways to continue its
development. Different economic activities were introduced; tourism, financial
services, textiles, ICT / BPO, etc.
Foreign investment and expertise were thought to be essential elements
that would ensure a proper development of our island into a world-class
business hub. And it was true!
The introduction of
Business Facilitation Act 2006 and the creation of the Board of Investment led
to unprecedented uplift in both our domestic and international business
sectors. Foreign Direct Investment (FDI) reached interesting peaks, confirming
on their way that Mauritius was appealing to the international community of
entrepreneurs. We had to capitalize on this and we are just doing this. It serves to purpose to attract foreign
investment if we have no vision or strategy for the future. Strategy &
vision, our decision-makers have them.
There were also the dangers that every nation faces when it opens its
doors to foreign investment or inwards migration. Striking the right balance is crucial and in
my opinion, Mauritius is doing marvelously well in this field. We have a selective approach to the immigration
of capital and competence. Of course, no system is fool-proof but is good
enough when it offers a comfortable level of security, both to authorities and
to the common Mauritian. No one would want an invasion of foreign currency to
kill his local money, and neither a massive immigration of expertise to drown
the (highly and/or newly) trained local workforce. On the other side, the selection
process should not be a hindrance to those who are serious about investing,
retiring or working in Mauritius. The
right balance, yes, this is the key to success.
There were
different times (or periods) where we faced serious problems and the dangers of
unfiltered immigration. Of course, these
were teething problems. Clairvoyance, intelligence and improvement had to come
into play and they did.
I love to highlight
the Mauritian team spirit, whenever it appears.
And here, is an opportunity to salute the common efforts made by both
Government and the private sector in turning strategy into concrete
results. Success, because it is, would
not have been possible without participation of banks, management companies,
consultants, financial services and others.
Success is not a
destination in this kind of strategy. It is a milestone which leads to another
one. Government’s objective, as announced in the budget, is to rank Mauritians
as one of the highest income earners of the world. Yes, we can! Before I get
too political or emotional, let’s have a look at the broad measures taken to
further boost the local business environment.
The contribution of
foreigners in the development of Mauritius is not questionable. Mauritians do
not have any problems in sharing their country with non-Mauritians either.
There has been no sign of xenophobia against businesses operated by foreigners
despite the additional competition that they bring to our soil. This excellent
socio-political feature of Mauritius added more sparks to the different schemes
created to attract foreign investment and competence. Government now wishes to
enhance the already avant-gardiste business legislation to support investors,
actual and future.
Many expatriates
and investors have been living in Mauritius without the possibility to own
their residence. In fact, foreigners could only acquire residential properties
classified as luxury through the RES and IRS schemes. The restrictive price tag
(which confirms the luxury status) was not accessible to each and every
expatriate living in the country. We had
to find the right balance in opening residential property to foreigners while
eliminating negative impacts on Mauritian.
Dollars and Euros may put pressure on our small Rupee – so we did not
want real estate prices to catch a high that local people would not be able to
match. Foreigner’s access to real estate
has always been a very delicate issue.
The right balance has been found, in my opinion, again.
Investors holding
an Occupation Permit (having invested a
minimum of USD100,000 in their business) and professional earning more than
USD3,000 a month can now purchase an apartment in any complex having ground +2
floors. This allows expatriates to own a residential property and avoid eternal
rental. Since Mauritians are not too enthusiastic when it comes to high-rise
living (we prefer our garden), it was very intelligent to direct foreigners to
these types of accommodation. On the other side, it was quite a strange thing
to see so many upmarket apartment complexes being built, particularly on the
highway to Phoenix. There are three of them, literally one next to the other. I first thought that these were doomed since
the promoters would never reach decent percentage of occupation through Mauritians.
Government saved them! Lobby or not, I find this move a very intelligent one.
On one side it rewards those who contribute to the success of the country and
on the other one, it helps local real-estate developers in their business.
Another brilliant
announcement: extension of permanent residency to investors. The only way to obtain permanent residency
was through acquisition of villas under the RES/IRS schemes, worth a minimum of
USD500,000. This was a paradox. Investors who put that same amount of money
in developing businesses (and eventually creating employment) did not have
access to permanent residency. Now this
has been corrected. Investors can now apply for permanent residency if they
invested at least USD500,000 in qualified sectors (construction, banking, insurance, real estate development, ICT,
tourism, manufacturing, healthcare, education, and many others).
It is worth mentioning
that Permanent Residency is not actually permanent. It is in fact a residency permit for 10
years, renewable. We should watch how this
affects the Naturalisation scheme which allows investors (+ USD 500,000) who
spend more than 3 years in Mauritius to apply for citizenship. I presume
amendments will follow, as it always does.
As we can see, the
Government is polishing and improving the schemes to further attract foreign
investors. In fact, it going well beyond
that by rewarding those who are already here through a better access to
property. It is even catering for a petty but yet essential point, the age of
dependent children. This has been
revised from 18 years to 24 years old (I
see someone out there jumping with joy)
My observation is
simple: authorities have relayed the usual grievances of expatriates and this
has been tackled in an intelligent manner by the Government. Like any other
things in life, foreign investment should be tamed, understood and kept under
control. Only then we can benefit from
its positive sides and mitigate risks and reduce the dangers. Up to now we have been very careful, working
each step carefully before moving to the next one.
Mauritius has
always survived difficult phases of its life through the vision of its leaders. When sugar cane was hit by the dangers of
commercial extinction, the country introduced the textiles industry. It changed the local social context; women,
usually confined to house chores were leaving their home for work,
unbelievable! And then textiles started
to take the blows (elimination of quotas
and birth of monster China). We had to adjust again, and there came tourism…
and again tourism was hit, we created one of the best financial services of the
world. All the above economic sectors are still operational and blend into the
broader economic picture to make Mauritius a versatile & modern business center.
Minister of Finance
stated that it will take 6 additional budget exercises (6 years) to transform
Mauritius into one of the highest income earners of the world. This is not an
illusion, it is achievable and right now it’s work-in-progress.