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Mauritius Investment Board interview

Interview with Shamima Mallam Hassan, Senior Director, Board of Investment – Mauritius

By Dave Ramaswamy

AAM: Why are investors coming to Mauritius, and what are key things you are doing to promote investment?

Mauritius is a small island, we don’t have natural resources except for good beaches and the sea. We used that as a basis to initially promote tourism industry. Then, over the years with different challenges, Mauritius had to reinvent itself. Today, we can say that we have a very well-diversified economy. And when investors are looking for a destination, where they want to invest, I think they look for countries that are stable, that have certainty, countries that have predictability. Over the years Mauritius has been able to show that we do have the stability, we do have the certainty that investors are looking for, and we do have an environment that offers predictability. Mauritius has a vibrant economy: we have a stable democracy and a very business friendly environment. And you would see that increasingly over the years we have attracted a lot of investment in different sectors. Initially, we started attracting investment in the tourism sector, to develop that industry; we developed the manufacturing industry because we had preferential market access agreement with the European Union and the US. So, initially some investors from China and Hong Kong – that had export quotas and faced tariffs, established presence in manufacturing. Over the years, as China started to open up – many of them went back to China. The industry then evolved to attract Mauritian companies to invest in the textile sector as a diversification strategy from sugar and tourism. Textile manufacturing in Mauritius then began to face issues, with other countries coming up – countries like India, Bangladesh. Then manufacturing costs in Mauritius started not to be competitive especially for basic products. We had to reinvent ourselves, yet again. Then we started to look at services. And among services, financial services were one of the main sectors where we started. That started with a treaty that we signed with India. And that started to create momentum around offshore and that sector started to get propelled. Then, over the years we realized we cannot put all our eggs in one basket. We could not just rely on India. So, we started to position ourselves as a platform for Africa. And more and more we see in terms of the figures: funds and structures that have been created, over 50% have been created for Africa rather than India. We also developed our free port to be a logistics platform for the region. The geographic position of Mauritius makes it interesting for those who are exporting from Asia to Africa; using Mauritius as their base they have several advantages. If they are in the free port, they have 0% corporate tax, and they don’t pay any import duty when importing products within the free port. They can do product transformation, they can do packaging/repackaging, they can even do manufacturing if they want to export to Africa and benefit from the corporate tax. And they would also benefit if they meet the rules of origin criteria – duty concessions that we have under COMESA and SADC. All these, predictability, the certainty and finally all the advantages that our government has put in place makes Mauritius an interesting place for investors to look at.

AAM: Can you talk about some specifics that investors would find of interest?

When investors are looking at a country, they are looking at a place where they can do business easily. Firstly, the Mauritian government has come up with major reforms where we have made it easy for someone to incorporate companies. Within 1 or 2 working days, you can have an incorporated company. You can incorporate a company that is 100% foreign-owned, you don’t need a local Mauritian partner. No minimum capital is required. And for some sectors you don’t require any clearances – like an Environmental Impact Assessment etc. You can start a business immediately once you get your clearance from your Building and Land Use permit – the activity can really start. That has really helped to propel the industry. The second point that has really helped is the taxation. Whether you like it or not, Mauritius is a low-tax platform. 15% of corporate tax, 15% for individuals, VAT is at 15% which really creates an enabling environment for investors to do business. In addition, we have made it easy for a lot of foreigners to come and work and live. That policy has helped to not only bring in the capital, but also bringing in the know-how, the technology into Mauritius.

AAM: Speaking of tax incentives and speedy business incorporation, are there any financial incentives like tax holidays?

No, we don’t have any tax holidays any more. When we started the Export Processing Zone (EPZ), we did offer investors a tax holiday – where people were given 5- or 10-year tax holidays. Long ago, we have abolished that system. What we have done, and especially starting in 2006 when we did the major reforms, instead of having different schemes – we used to have 20 or so schemes, where you required approval from the Board of Investment before you started business. What we have done is abolished all those schemes. And instead of giving a particular scheme 15%, another one 3%, another one 2% – we have made it a simple platform where we have made it 15% for everybody. No tax holidays, but you pay 15% corporate tax across the board. Except, that there are 2 schemes where today people will get incentives. One is the Freeport – where you don’t pay any corporate tax. And the second is within the offshore sector – it is not 0%, people would pay the tax, but they would have a deemed tax credit of 80% where it could bring down the effective tax that they pay to 3%.

AAM: Some people still consider Mauritius a tax haven, even though from what you said it is a low-tax jurisdiction. They say that Mauritius siphons away money from countries where economic activity takes place. Some politicians in Asia, specifically India, have launched attacks against Mauritius because a lot of stock market inflows are routed through Mauritius structures. What is your response to such charges and how do you counter these arguments? 

If you look at the definition of a tax haven by the OECD, they would look at 3 criteria when they define a country as a tax haven. First of all, jurisdiction will have no or nominal taxes. Second, the laws or administrative practices do not allow effective exchange of information between governments and regulatory bodies. Third, they look at lack of transparency. In fact if you look at those 3 criteria, it is very difficult to say that Mauritius is a tax haven. IF you go to the first of those criteria criteria, we are a low-tax platform. It is not that people are not paying tax. Corporates within the global business are paying tax. They are paying to a maximum of 3% of tax. We don’t have a system where we don’t have any taxation. Second, if you look at the exchange of information, Mauritius has done a lot in terms of exchange of information.  We have signed 9 Tax Exchange Information Agreement and a number of MOUs with different countries and regulatory bodies have also been signed. So, there is a mechanism in place where we exchange information with relevant entities. Whenever there has been a request, and that has been the case with India as well, where that has been any concern about cases or companies, the Mauritius Financial Services Commission (FSC) and even the tax authorities have always addressed that. Third, if you look at the transparency, we have a transparent system. OECD itself has classified us as being on their whitelist, being a transparent jurisdiction. So, I don’t see where – looking at the OECD definition of a tax haven, Mauritius fits into that category of tax haven. If you look at the global business sector today, the number of Know Your Customer (KYCs), the number of procedures have been in place to check the ultimate beneficiary owner – all this is in place in Mauritius.

Over the last 3 or 4 years we have started to engage with the media to counter misperceptions. We need to tell the framework we have put in place in Mauritius. Over the last year to 18 months, we have started to see a change in how Mauritius is perceived. It is a question of education. We started to invite people to Mauritius to see that there is a real economy, real employment being generated. Today, we have 15,000 people working in that sector. It is creating employment, creating jobs and is contributing towards the economy.

AAM: What sectors are attracting the strongest investment interest? Both into Mauritius, as well as using Mauritius as “a bridge into Africa”.

If you look at investment into Mauritius, and the trend within the last 3 to 4 years, real estate has been an important sector that has attracted a lot of investment, a lot of FDI. Real estate – not just residential, but also in terms of office space, mixed-use development. That has helped in terms of enhancing our infrastructure. If you are asking foreigners to come and work and live, you need to have the appropriate infrastructure – in terms of housing, malls, offices and schools. That has created a boost in the construction industry in Mauritius . Besides that we have tried to emphasize services. The Information and Communication Technology( ICT) sector has contributed about 6.8% to the GDP. It has created over 15,000 jobs in Mauritius. Today, we have more than 600 companies that are operating, servicing their global clients out of Mauritius. Data centers, shared services. The education sector has been another sector where we have tried to attract players trying to position Mauritius as a regional hub for education. We want to attract foreign students to come and study in Mauritius rather than to go elsewhere. In the healthcare sector, we have tried to position ourselves as a medical hub and we have attracted hospitals to come and setup – not only for general services but also for very specialized services. Manufacturing is still important – it contributes to 18% of GDP. We have been pushing for more value added manufacturing to come and setup in Mauritius and that includes jewelry, diamond cutting-and-polishing, electronics – parts and components for electronic products. Medical devices is another area where we want players to come in

If you look at the idea of being a platform for Africa, financial services has played a key role for us. Financial Services has contributed to 10% of GDP. So we have worked to Attract foreign banks, attract companies to have their holding, their structures in Mauritius. Most of the leading private equities in the U.S., U.K. are either going to India or Africa. And they are using Mauritius as a platform for their structuring to go into Africa. For the platform into Africa, the free port has also played an important role to provide access to the African market.

And something new that is coming up – is the government of the ocean economies. That came up last year. Mauritius has an Exclusive Economic Zone of 2.3 million square kilometers, and that provides a lot of opportunities for development in fisheries, and in aquaculture. There are several components being identified: (1) Seabed exploration for hydrocarbons and minerals, (2) Fishing, seafood processing and aquaculture, (3) Deep Ocean water application, (4) Marine Services, (5) Seaport related activities, (6) marine renewable energies and (7) ocean knowledge cluster.

AAM: How can the Mauritius financial platform facilitate investment in African agribusiness? Can you give a couple of examples of companies who have been successful doing this?

We are looking to develop strong relationships with African governments. We have been given land for agricultural development in Mozambique. We have invited expressions of interest from companies that would go develop these lands. 2 or 3 companies already going there – one going there for seed cultivation, other is going there for rice, and one going for a project in renewable energy.

Mauritian companies in the sugar sector are evaluating opportunities in Africa. Some of them have setup factories for sugar production in Africa. Others are cultivating sugarcane as well. Olam, headquartered in Singapore, who are big investors in agriculture in Africa, are using Mauritius as a financial platform. Other companies too are using a similar approach for their African agribusiness investments.

Regional Development Company – that is doing agricultural projects in Mozambique, has the Government of Mauritius as a partner.

We have setup an Africa Center of Excellence within the Board of Investment. The goal is to provide information to companies that would like to go to Africa, including the agricultural sector.

What we like to see is more companies do their R&D in Mauritius, do their company structuring and then go to Africa. That gives you the whole package where Mauritius has an important role to play.

AAM: Can you speak a bit about this Regional Development Company and its focus?

Currently, it is operating in Mozambique but also looking at opportunities in Zambia and Tanzania for agricultural development.

AAM: What services does the Board of Investment Provide? E.g. Like single-window investor clearance.

We promote and facilitate investment in Mauritius. Our role is advising and counseling investors into which sectors to consider. Once they have decided on a particular sector, help them with the process and implementation. We help them getting any required permits, we connect them with relevant ministries, we help them with identifying partners, and we help them in identifying land for their projects. We are really a facilitator for the investor. We also help with the Occupation Permit for foreign employees – with due diligence, which is later approved by Passport and Immigration Authority.

We provide Certificates for operating in the Free Port. For residential projects, investors need approval from the Board of Investment.  We have a strong role in policy advocacy to the government.

AAM: What milestones would you like to accomplish in the next three years?

We are constantly trying to attract new players to take Mauritius to the next level. We want to avoid the middle-income trap. We need to create jobs, we need to build a country that is pleasant to work and live. Board of Investment has a very important role in that.