14 August 2017

IMF Staff Completes 2017 Article IV Mission to Mauritius

  • Real GDP growth in 2017 is projected at 3.9 percent on the back of dynamism in the construction sector.
  • The authorities seek to graduate Mauritius to a high-income economy within the next ten years on the basis of an ambitious public investment program and improvements to the business climate.
  • Attaining the next level of economic development will require Mauritius to use strong and independent institutions to overcome the variety of policy challenges outlined above.

An International Monetary Fund (IMF) mission led by Amadou Sy visited Port Louis and Ebène during July 31–August 15, 2017 to conduct the discussions for the 2017 Article IV consultation with Mauritius.

At the conclusion of the visit, Mr. Sy issued the following statement today in Port Louis:

The Mauritian economy continues to be robust and staff project economic activity for 2017 to remain in line with recent trends. However, Mauritius is facing a challenging environment and vulnerabilities are rising. Options to improve resilience include: (a) rebuilding the credibility of the fiscal anchor and creating fiscal space for infrastructure and human capital investment; (b) tackling inflationary pressures by tightening monetary policy, while modernizing the monetary policy framework to strengthen the policy response to shocks; (c) addressing financial stability risks, and (d) improving competitiveness to support growth.” 

The authorities seek to graduate Mauritius to a high-income economy within the next ten years on the basis of an ambitious public investment program and improvements to the business climate. Attaining the next level of economic development will require Mauritius to use strong and independent institutions to overcome the variety of policy challenges outlined above. Early signs are promising, with both the pending formation of the National Economic Development Board, and the drafting of the Financial Sector Blueprint, important welcome steps towards harmonizing the policy direction and implementation across sectors. Considering Mauritius’ track record of reinventing its economic model, there are grounds for optimism that the country will successfully manage the reform process.” 

Real GDP growth in 2017 is projected at 3.9 percent on the back of dynamism in the construction sector. Tourism and financial intermediation activities are expected to provide support, though at a slower pace than 2016. Domestic demand will continue to be supported by recovering business and consumer confidence, and increased public investment. However, falling sugar production and subdued exports would weigh down on agriculture and manufacturing activity. The capital and financial account has proven resilient in the face of the revised Double Taxation Avoidance Agreement (DTAA) with India, mainly owing to the grandfathering clause.

The fiscal stance remains expansionary. The overall budget deficit stood at 3.4 percent of GDP in FY2016/17, down from 3.6 percent of GDP in FY2015/16, mostly reflecting the underexecution of the capital budget and increased tax revenue mobilization. The primary balance (excluding grants) and the overall borrowing requirement deteriorated somewhat.  Total public debt remained constant at 65 percent of GDP. Staff recommends supplementing the planned fiscal consolidation with additional revenue mobilization efforts to strengthen the credibility of the fiscal anchor. Additional elements of a growth-friendly fiscal consolidation include improvements in public investment and debt management.

Inflation has picked up on the back of supply shocks, but there are signs of further building inflationary pressures. Headline inflation outcomes in the first half of the year surprised on the upside, and more than doubled to 5.3 percent year-on-year in July from 2.3 percent at the end of 2016, mostly driven by higher food and fuel prices, the increase in excises on tobacco and alcohol products. Headline inflation is expected to remain above 5 percent during the second half of 2017 onwards, mostly on account of second round effects.

Monetary policy is accommodative. The Key Repo Rate (KRR) has been kept constant at 4 percent in the last year. Nominal interest rates are at historically low levels, and real market interest rates are negative. The mission recommends tackling inflationary pressures by tightening monetary policy, while modernizing the monetary policy framework to strengthen policy response to shocks” 

The Global Business Sector is under pressure from international anti-tax avoidance initiatives. The authorities are undertaking efforts to address the concerns raised by the OECD and the EU in these matters. Prioritizing the adoption of the Blueprint for the Financial Services Sector, can help the GBC sector transition from a system based largely on tax incentives to one that provides higher value added services.” 

The overall current account deficit narrowed at the end of 2016 to 4.4 percent of GDP, reflecting strong tourism receipts and net income balances. Yet it is expected to widen over the medium-term, due to growing domestic demand, the high import component of the government’s investment program, and planned aircraft purchases. The team estimates that Mauritius’ external position at the end of 2016 was weaker than implied by medium-term fundamentals and desirable policies.  Staff recommends allowing more flexibility of the exchange rate to help address the emerging imbalances, and maintaining reserve coverage at least at 100 percent of the adequacy metric to safeguard external stability.

Mauritius has made great strides over the last decade to top the competitiveness rankings in Sub-Saharan Africa (SSA), but still lags emerging market peers as lackluster productivity and rapid real wage growth in recent years have reduced cost competitiveness.

The recently-adopted Business Facilitation Act is a welcome step to improve Mauritius’ business environment. Broader structural reforms in areas such as the labor market including the promotion of youth and female labor participation in the labor force, higher education and innovation policies will be key drivers of Mauritius’ economic transformation going forward.” 

The mission met with Prime Minister and Minister of Finance and Economic Development, Pravind Jugnauth, Minister of Financial Services, Good Governance and Institutional Reforms, Dharmendar Sesungkur, Governor of the Bank of Mauritius Rameswurlall Basant Roi, other senior government officials, as well as the private sector, academia, and civil society. The mission would like to thank the Mauritian authorities for their excellent cooperation, and the very productive discussions. The IMF stands ready to support the authorities’ reform efforts, including through the provision of technical assistance, and looks forward to a continued and fruitful policy dialogue in the period ahead.

10 August 2017

Mémento: L'île Maurice se modernise

Le gouvernement mauricien se donne-t-il les moyens de réaliser ses ambitions? 

 Numéro Spécial Ile Maurice

03 August 2017

New report by TheCityUK reveals the considerable contribution the UK-based legal and accountancy sector makes to the UK’s public finances

In 2015/16 the UK-based legal and accountancy sector generated an estimated £15.5bn in tax – comprised of taxes borne (£6.4bn) and taxes collected (£9.1bn) – representing 2.5% of all UK tax receipts. This is roughly equivalent to total UK spending on police services. The report underlines Britain’s leading position in Europe as a legal and accounting hub.

According to the report, ‘Total Tax Contribution Study for UK legal and accounting activities’, which was produced by PwC, the sector collectively generated employment of 693,000 across the UK – nearly one quarter (23%) of EU employees in the sector are in the UK. Britain’s premier position as a legal and accounting services employer is trailed by Germany at 21% of the EU’s total sector jobs, then France (10%), Spain (8%) and Italy (7%).

Added together with the significant total tax contribution for the financial services sector, reported as £71.4bn in 2015/16, the estimated total tax contribution for UK-based financial, legal and accountancy services is £87bn.

Miles Celic, Chief Executive, TheCityUK, said,

The legal and accounting sector make a considerable contribution to the UK economy in their own right, and are an essential part of the world-leading financial and professional services ecosystem.

The UK is the leading global hub for legal and accounting expertise and it is vital that we not only preserve that, but we continue to grow it. This expertise isn’t just located in London. Right across the UK, centres of excellence, including Manchester, Bristol and Edinburgh, are adding value to the UK economy. These are also the areas we expect to see the most growth in the coming years as we move through Brexit and beyond.

In 2016, there were nearly 60,500 legal and accounting businesses in the UK with small to medium sized enterprises with fewer than 99 employees making up 99% of all firms.

The report from TheCityUK and PwC is the first such study to cover legal and accounting activities and highlights the importance of these activities to the UK economy.

Total Tax Contribution Study for UK legal and accounting activities

31 July 2017

FSC Mauritius - Publication of FSC ‘Policy Research Series’ - No. 1 (FSC PRG Series No. 1 – July 2017)

The Financial Services Commission, Mauritius (“FSC”) is pleased to announce the publication of the first project for its Policy Research series under the Policy Research Group (PRG) Phase I (2015/16) initiative.

This research entitled “A Feasibility Study of Social Investment in Mauritius” underlines the significance which the FSC devotes to research and development in spearheading its mission.

The authors have assessed the potential for the emergence of social impact investment in Mauritius. The main findings of the study have brought forth valuable insights which could be useful for gearing social impact investment in Mauritius.

A mixed methodology comprising a survey questionnaire and focus group discussion with representatives of Ministries, public sector agencies, fund managers, foundations and commercial banks in Mauritius has been adopted. The findings highlight the need for a social investment market in Mauritius and the importance of social investment as an innovative way to finance projects which have societal and/or environmental impact.

A SWOT analysis conducted has led to the formulation of a number of recommendations such as the setting up of an Interagency Task Force, promotion of social investment culture, building a strong intermediation, consolidating social investment ecosystem on existing framework and paving the way for social entrepreneurship to embrace social investment in Mauritius.

The FSC wishes to thank members of the PRG Selection Committee and the international editorial and advisory council of the FSC Policy Research Series who have worked together with an internally dedicated team to ensure the quality assurance of the research. The report can be downloaded on the FSC website.

Financial Services Commission, Mauritius
31 July 2017

27 July 2017

Mauritius - Audit Committee Forum Paper 5: Guidelines for the Audit Committee’s approach to Information Technology Risk

The Position Papers, produced periodically by the Audit Committee Forum, aim to provide Board directors and specifically Audit Committee members with basic best practice guidance notes to assist in the running of an effective Audit Committee.

26 July 2017

Disputes over the British Indian Ocean Territory: July 2017 update

This briefing describes the main developments since mid-2013 in long-running disputes over the British Indian Ocean Territory (BIOT). In November 2016 the previous UK Government decided not to allow Chagossian resettlement. The status of the Marine Protected Area is contested. The UK and Mauritius have been holding talks on sovereignty. In June 2017, the UN General Assembly voted to ask the International Court of Justice to give an advisory opinion on the issue. The US military base on Diego Garcia is set to continue until 2036. Meanwhile, there continues to be litigation in the English courts.


Between 1968 and 1973 the British Government cleared the entire Chagos Archipelago of its inhabitants, in anticipation of a US military base on the biggest island, Diego Garcia. The Archipelago was made a colony, the British Indian Ocean Territory (BIOT). It subsequently became a British overseas territory.

Two main disputes have arisen from these events. One has been between the Chagos Islanders and the British Government over the legality of their removal and whether they have a right to return. The other has been between the UK and Mauritius about sovereignty over the BIOT. In 1965 the UK undertook that it will cede sovereignty to Mauritius once the BIOT is no longer required for defence purposes.

A May 2013 Library briefing surveyed the origins and subsequent evolution since 1965 of these disputes, including past and ongoing legal cases brought before British, European and international courts. The briefing went on to explore potential ways forward for resolving these disputes by the time of the UK general election in May 2015. This update summarises the main developments over the intervening four years.

November 2016: the previous UK Government decides against resettlement

A fresh resettlement feasibility study has been carried out. It set out three resettlement options: large-scale resettlement; medium-scale resettlement; and pilot, small-scale resettlement. However, in November 2016 the previous Government announced that it had decided not to allow resettlement. The decision provoked condemnation from Mauritius and supporters of the Chagossian cause in the UK, and raised the prospect of further legal action. Since then, there has been debate about the best use of – and motives behind – a £40 million support package for Chagossians and renewed calls for the restoration of the right of abode as a prelude to a change of policy on resettlement.

The Marine Protected Area in limbo?

A Marine Protected Area (MPA) introduced by the British Government around the Chagos Archipelago (apart from Diego Garcia, where there is a US military base) in 2010 was ruled unlawful in 2015 by a Tribunal under the UN Convention on the Law of the Sea. The UK has insisted that the MPA is still in place. The Tribunal was much more equivocal on sovereignty than the Mauritian Government, which brought the case, will have hoped. It declined jurisdiction on the issue but found that the UK’s 1965 undertaking to cede sovereignty to Mauritius when the BIOT is no longer required for defence purposes is binding under international law.

Movement on sovereignty?

In 2015 a Marine Protected Area (MPA) introduced by the British Government around the Chagos Archipelago (apart from Diego Garcia, where there is a US military base) was ruled by a Tribunal under the UN Convention on the Law of the Sea to have been established without proper regard to the rights of Mauritius. Some legal commentators have taken this as tantamount to saying that the MPA is unlawful. The UK disagrees with this interpretation. The Tribunal was more equivocal on sovereignty than the Mauritian Government, which brought the case, will have hoped. It declined jurisdiction on the issue but found that the UK’s 1965 undertaking to cede sovereignty to Mauritius when the BIOT is no longer required for defence purposes is binding under international law.

Movement on sovereignty?

In July 2016 Mauritius said that it would seek a referral by the UN General Assembly to the International Court of Justice later in the year in order to obtain an advisory opinion on sovereignty. Mauritius ultimately held back from seeking a referral and there have been talks between the two governments. But Mauritius said that it would seek a referral in June 2017 if insufficient progress was made in the talks by then. On 22 June 2017 the General Assembly voted 94-15 to refer the issue.

The US military base is extended until 2036

A decision on whether to extend the life of the US military base on Diego Garcia for a further 20 years had to be made by the end of 2016. The decision to do so was announced in November 2016.

Litigation in the English courts

In June 2015 the Supreme Court heard an application for the 2008 verdict of the House of Lords – which ruled that the use in 2004 of Orders in Council to prevent the Chagossians from returning had been lawful – to be set aside. In June 2016 the Supreme Court ruled against the application by a majority of 3 to 2. However, the decision of the previous UK Government against allowing resettlement has led to an application for judicial review of the original ban. Supporters of the Chagossians hope that it will be heard during 2017 but it may not happen until 2018.

The Supreme Court heard an appeal on behalf of Chagossians against the MPA on 28-29 June 2017.

24 July 2017

Uncovering Offshore Financial Centers: Conduits and Sinks in the Global Corporate Ownership Network

Multinational corporations use highly complex structures of parents and subsidiaries to organize their operations and ownership. Offshore Financial Centers (OFCs) facilitate these structures through low taxation and lenient regulation, but are increasingly under scrutiny, for instance for enabling tax avoidance. Therefore, the identification of OFC jurisdictions has become a politicized and contested issue. We introduce a novel data-driven approach for identifying OFCs based on the global corporate ownership network, in which over 98 million firms (nodes) are connected through 71 million ownership relations. This granular firm-level network data uniquely allows identifying both sink-OFCs and conduit-OFCs. Sink-OFCs attract and retain foreign capital while conduit-OFCs are attractive intermediate destinations in the routing of international investments and enable the transfer of capital without taxation. We identify 24 sink-OFCs. In addition, a small set of five countries – the Netherlands, the United Kingdom, Ireland, Singapore and Switzerland – canalize the majority of corporate offshore investment as conduit-OFCs. Each conduit jurisdiction is specialized in a geographical area and there is significant specialization based on industrial sectors. Against the idea of OFCs as exotic small islands that cannot be regulated, we show that many sink and conduit-OFCs are highly developed countries.

21 July 2017

Steven Obeegadoo: 'Fini la culture d’impunité! La démocratie avance à grands pas'

Il est facile d’identifier les dysfonctionnements des partis politiques à Maurice ou ailleurs. Mais les citoyens ne se bousculent plus pour renouveler les structures politiques ou participer aux débats en vue de développer de nouvelles pratiques dans le milieu politique. Steven Obeegadoo, engagé politique de longue date, partage ses initiatives pour favoriser le renouvellement des idées et livre ses impressions sur l’importance de l’intelligence collective au 21e siècle.

19 July 2017

'Occupation: Fraudster. Address: Street of 40 Thieves’ — how Italians mocked UK company rules

When alleged mafia money launderer Antonio Righi wanted to do shady deals out of sight, it was to London, not just Naples, that he turned to hide his trail, according to Italian prosecutors.

Evening Standard

14 July 2017

Rajiv Servansingh: A “failed state” not yet but dangerously close

As we suggest in the title to this paper, it would perhaps be a bit of an exaggeration to state that Mauritius is now a “failed state” as has been intimated by some analysts. However it is our serious contention here that, in the absence of a serious change in the prevailing trajectory, it is to be feared that we would sooner rather than later be joining the infamous category.

Yvan Martial: ‘Nous méritons autant nos bons gouvernements que les pires d’entre eux…

Yvan Martial, journaliste et historien, condamne vertement les agissements anti-sociaux. Les coupables semblent postés dans tous les coins et à tous les échelons. Petits et gros mafias! Les institutions semblent-elles trop timides pour agir? Ou pire ne pas être à la hauteur pour se débarrasser de la pègre? Le peuple doute, chaque jour, un peu plus de pouvoir respirer un air pur sans se sentir matraqué par la drogue, le crime, le vandalisme etc. Ne semble-t-il pas qu’avoir bonne conscience ne fait plus sens?

Mauritius: Appointment of Mr Harvesh Seegolam as Chief Executive of the Financial Services Commission

Pursuant to Section 9 (1) (b) of the Financial Services Act 2017, the Board of the Financial Services Commission, with the concurrence of the Minister of Financial Services, Good Governance and Institutional Reforms, has appointed Mr Harvesh Kumar Seegolam as the Chief Executive of the Financial Services Commission with effect from 14 July 2017.

Consequently, the appointment of Mr. P.K. Kuriachen as Acting Chief Executive of the Commission has accordingly lapsed on 13 July 2017.

Financial Services Commission, Mauritius
14 July 2017

13 July 2017

UK: FCA proposes new premium listing category for sovereign-controlled companies

In February this year the FCA launched a discussion paper (DP 17/2) ‘Review of the Effectiveness of Primary Markets’.  The paper discussed the role of listed primary markets as an important component of the broader capital markets landscape, and the structure of the UK listing regime in supporting that role.

The work on the review continues. However, the FCA is bringing forward a specific proposal for a targeted set of changes to the premium listing regime ahead of other possible proposals arising from the review.  

The proposal will address companies controlled by a shareholder that is a sovereign country.  The proposal aims to enable companies which may the subject of major privatisation transactions to choose the higher standards of premium listing, rather than standard listing.  Andrew Bailey, FCA Chief Executive, said:

Regulatory protections for investors lie at the core of the listing regime. However, it is important that these protections remain well-targeted. Refining the listing regime in this way would make UK markets more accessible whilst ensuring that the protections afforded by our premium listing regime are focused and proportionate.

Sovereign owners are different from private sector individuals or companies – both in their motivations and in their nature.  Investors have long recognised this and capital markets are well adapted to assess the treatment of other investors by sovereign countries.

The rationale for having a distinct category for these companies is to create a new listing option for companies of a distinct type which may wish to access UK markets and choose the higher standard represented by our premium listing regime rather than standard listing. Over the past decade the FCA has given careful consideration to the appropriate treatment within the premium listing regime of companies with controlling shareholders.  However, this consideration largely addressed instances where the companies were controlled by private sector entities. 

The new premium listing category would include the full suite of investor protection applicable to companies in the existing premium listing category with two modifications the FCA considers appropriate for companies of this type:
  • the related party rules would operate on a modified basis: the sovereign controlling shareholder would not be considered a related party for the purposes of the UK listing rules;
  • the controlling shareholder rules  will not apply to companies in the new category in respect of the sovereign controlling shareholder.
These highly targeted modifications to the regime recognise that sovereign countries are different from private sector entities.

In addition, the new listing category will be open to companies who want the listing of their interests in their equity to be in the form of Depositary Receipts (DRs).

The review the FCA began with the DP17/2 discussion will continue, and in due course we will be summarising, in one or more documents, the feedback we have received from stakeholders together with more detailed proposals for reforms, should we consider those desirable.

12 July 2017

Chris Garrod: Will We Need Lawyers By 2050?

My 6 year old son may never have to learn to drive a car. We may at that stage in his life all be driven around in driver-less cars. All thanks to current advancements being made in automation and in artificial intelligence.

That fact alone boggles my mind.

07 July 2017

Mauritius Times: A Depressed State of Affairs

There surely are enough mature persons outside the fold of customary political parties capable of infusing new life into the polity. The question that we must ask is why they have not been willing to jump into the political fray so far. The answer is probably disgust with the way politics has been conducted for a number of years now. The country cannot also wait too long to get out of the backwaters into which it has fallen. Although one could argue that the media has been painting and will continue to paint a picture of poor prospects for the country, highlighting as many bad things as possible with every passing day, the doings of the present government haven’t helped either.

Mrinal Roy: Plummeting standards

In a fiercely competitive market place, pervasive plummeting standards can surely not be the way forward. Falling standards have ordained and scripted a lacklustre economic performance for too long. Last week’s Statistics Mauritius report depicts a grim picture of a faltering economy. As a nation, this is not a record we can be proud of. We owe it to the people and the country to take back ownership of decisions to urgently set things right.

05 July 2017

OECD: Mauritius signs the multilateral BEPS Convention to tackle tax avoidance by multinational enterprises

Today at the OECD Headquarters in Paris, Mahess Rawoteea of the Ministry of Finance and Economic Development of Mauritius, signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the MLI) in the presence of Douglas Frantz, OECD Deputy Secretary-General.

Based on expressed reservations at this point in time, 23 tax treaties would be impacted by this signing. We note that Mauritius issued a statement today, reaffirming its commitment to implement the minimum standards developed in the course of the OECD/G20 BEPS Project into its entire tax treaty network by the end of 2018. Mauritius has committed to modify its remaining tax treaties through bilateral negotiations.

The  MLI is a legal instrument designed to prevent base erosion and profit shifting (BEPS) by multinational enterprises. BEPS refers to tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations. The MLI allows jurisdictions to transpose results from the OECD/G20 BEPS Project, including minimum standards to implement in tax treaties to prevent treaty abuse and “treaty shopping”, into their existing networks of bilateral tax treaties in a quick and efficient manner. It was developed through inclusive negotiations involving more than 100 countries and jurisdictions, under a mandate delivered by G20 Finance Ministers and Central Bank Governors at their February 2015 meeting.

The OECD is the depositary of the MLI and is supporting governments in the process of signature, ratification and implementation. The 69 jurisdictions participating in the MLI and the position of each Party and Signatory under the Convention are available on the OECD website.

Mauritius signs the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting today

Recovering Africa's Stolen Assets: Lessons from the Windward Trading Case

A report by the World Bank’s Stolen Asset Recovery programme found that, while nearly $1.4 billion in suspected corrupt assets were frozen in OECD countries between 2010 and 2012, less than $150 million was returned. Recovering stolen assets is of particular importance for sub-Saharan African countries, given the extent of the looting of public funds carried out by corrupt leaders and officials.

Prosecuting international corruption and recovering stolen assets has proved difficult and time-consuming. Both states from which assets have been stolen, and those where these assets are laundered or stored, have struggled to produce results.

The recently confirmed confiscation and subsequently agreed upon return of stolen assets from Jersey to Kenya - in the context of the investigation of Windward Trading Limited - is  therefore a significant achievement. It may also serve as an example of the kind of innovative legal approach other states, practitioners and the international community can explore to achieve meaningful progress in the recovery of stolen assets.

This event, co-hosted by Chatham House and the Basel Institute on Governance, will invite speakers from Kenya and Jersey to examine how lessons from the Windward case might be applied in other sub-Saharan African countries and in international corruption cases.

Netherlands grows as preferred holding jurisdiction for hosting Indian investments

In recent years both Mauritius and Singapore, and to a limited extent also Cyprus, were the leading jurisdictions for hosting investments into India, but the Netherlands is becoming a good alternative option.

30 June 2017

Mrinal Roy: No Place for Political Dinosaurs

Why do disavowed politicians still cling on to power by every means instead of taking the cue from the people’s vote that it is time for them to go?

Vistra: The New Mauritius-India DTA – Still the Best Route to India

Despite recent changes Mauritius remains the most competitive jurisdiction for investment into India. The realignment has certainly allowed India to retain more by the way of taxes but the Mauritius route is far from being obsolete.