IBC SWAZILAND - Doing Business Reforms in Mauritius 30052012

7/31/2019 IBC SWAZILAND - Doing Business Reforms in Mauritius 30052012

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Heerun GhurburrunSenior Expert ARCA Consortium

[email protected]

Doing Business no. 1 in AfricaHow Mauritius did it?

Tuesday 29 May 2012

Royal Swazi, Swaziland
mailto:[email protected]:[email protected]


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Mauritius, some key facts

A small sub-tropical island in the Indian Ocean at around 2100 km to

the east coast of Africa and some 870 km to the east of Madagascar

Former French colony (1710 1810) and British colony (1810 1968);Gained full independence in 1968 and became a republic in 1992

Total surface area of 1865 sq. km, with no natural or mineral

resources

Population of 1.2 million inhabitants

GDP at market price of 10.7 billion USD

Import markets (2010)

Asia: 53% (India 22% & China 13%); Europe: 25% (France: 8%);Africa: 12% (South Africa: 8%)

Export Markets (2010)

Europe: 63% (UK 22% & France 17%); Africa: 18%; USA: 11%Improving the Business Climate in Swaziland - Session 1: How Mauritius did it? -29/05/2012 2


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Mauritius, a success story

Mauritius, 1st

in Doing Business in Africa, over the last 6years according to World Banks Doing Business rankings

How Mauritius achieved this performance?

What are the reasons explaining this success?

Is there a secret recipe for success in business climatereforms?

What are the ingredients of this recipe?

Can the Mauritius doing business model be replicated onthe continent?

Improving the Business Climate in Swaziland - Session 1: How Mauritius did it? -29/05/2012 3


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Mauritius Doing Business

Mauritius initiated a bold and ambitious business climatereforms programme in 2005

Phase 1 of the reform programme was implementedbetween 2005 and 2008

In 2007 Mauritius was ranked 32nd

out of 175 countries byWorld Bank Doing Business report and 1st in Africa

Since then, Mauritius has kept this top 1st position in Africa



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Indicator 2005 2011

Economic Growth 2.5 % 4.1 %

GDP per capita 4600 USD 8770 USD

Economic sectors contributing to GDP 5 11Unemployment Rate 9.6 % 7.9 %

Job creation 3000 / year 8700 / year

FDI 94 M USD 325 M USD

Company incorporation / year Less than 8000 Over 40000

Individual businesses registered Less than 20000 Over 100 000



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EconomicFDI

GDP Growth

BusinessGrowth

Diversification

Resilience

Social

Job creation

Wagesincrease

Standard ofLiving

Povertyalleviation

International

Enhanced image Credibility & Trust



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+Economic ImpactDiversified Economic Landscape

AGRICULTURAL

INDUSTRIAL

SERVICES

KNOWLEDGE &

INNOVATIONUSD 20,000by Yr 2020

Sugar

Textile

Sugar

Tourism

Textile

Sugar

Tourism

Financial Services

ICTFreeport

Textile industry

Cane industryHospitality Industry

ICT/BPO

Financial Services

Seafood processing

Logistics services

Real Estate Development

Healthcare & Life Sciences

Knowledge industry

Renewable Energy

* GDP per capita

7Improving the Business Climate in Swaziland - Session 1: How Mauritius did it? -29/05/2012


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+



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+

Source: OECD

GDP Growth (%) 2006 2007 2008 2009 2010 2011

World 4.1 4.0 1.7 -2.1 3.9 3.1

Mauritius 5.6 5.7 5.5 3.1 4.2 4.1

Developed Countries(Japan, US, EU-27)

2.8 2.6 0.3 -3.6 2.5 1.8

Latin America 5.5 5.6 4.0 -2.2 5.9 4.7

Africa 6.0 5.9 5.4 1.8 4.4 3.5

Asia 8.7 9.1 5.8 4.2 8.3 7.2



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+


ICT Industry 2004 2011

GDP contribution Less than 0.5% Over 6 %

No of companies Less than 50 Over 400

No of jobs created Less than 2000 Over 15000

Broadband connectivity Less than 1 Gbps Over 10 Gbps

Development of the flagship Ebene CyberCity infrastructure & services

High growth industry with high export potential

Spill over effects:

Education & Training Building & Construction

New and diversified job opportunities

New supporting business opportunities & services

Modernisation of the economy


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+



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+

36.3

9.1

40.4

227

29.330.6

61.4 56.1

87.7

93.6

240.7

380.6 383.8

293.1

464.9

0

50

100

150

200

250

300

350

400

450

500

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

USD

millions

According to the World Bank report InvestingAcross Borders published in July 2010,

Mauritius is one of the worlds most open

economies to foreign ownership and one of

the highest recipients of FDI per head ofpopulation.

Sources: Bank of Mauritius / UNCTAD / World Bank



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+

Single flat rate of 15% tax on profits for companies Single flat rate of 15% tax on income for individuals

15% value-added tax on goods and services

Low customs duty (over 80% of dutiable goods are zero rated)

No tax on dividends for Mauritian companies

No capital gains tax

No inheritance tax for first line heirs

Low Tax

No exchange control in Mauritius Free repatriation of profits and dividends

The Mauritian Rupee, a convertible currency, linkedto a basket of foreign currencies: USD, euro, poundsterling, rand, yen

CompetitiveFiscal

Policies



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+

Investment ProtectionFramework of bilateral & multilateral

agreements & conventions signed by Mauritius

+ 34 Investment Protection Agreements

+ 35 Double Taxation Agreements+ New York Convention of International Arbitration

Mauritius Member of:

+ United Nations since April 1968, World Trade Organisation sinceJan 1995

+ British Commonwealth, International Organisation of Francophonie

+ World Banks multi-lateral investment gurantee agency (MIGA)

+ OECD Development Centre

+ Africa Regional Economic Comminities (African Union, SADC,COMESA, IOC)

Local legal& judiciaryframework



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Increase in job creation through economic diversification and

with more business opportunities

Increase in wages thereby contributing to uplift the standard of

living of the population

The significant increase in government revenue collectionallowed for an increase in government expenditure in:

Improving overall infrastructure (roads, airport, seaport, utilities, housing)

Providing better access to health and education

Implementing the National Empowerment Programme for povertyalleviation through training, entrepreneurship and access to credit

Increased social contribution of the private sector through their

Corporate Social Responsibility programmes



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International ImpactVisibility, Attractiveness, Competitiveness


Index Global Rank(Mauritius)

Africa Rank(Mauritius)

World Bank Ease of Doing Business 2012 23 / 183 1st

Environmental Performance Index 2010 6 / 163

Fraser Institute Economic Freedom 2011 9 / 141

2012 Index of Economic Freedom 8 / 179

Forbes Survey of Best Countries for Business 2011 19 / 134

Democracy Index 2011 24/ 165

Global Enabling Trade Index 33 / 125

Knowledge Economy Index 2009 64

Mo Ibrahim Index of African Governance 2011 -

International Property Rights Index 2011 38 / 129 2nd

Global Competitiveness Index 2011-2012 54 / 142

Human Development Index 2011 77 / 189 3rd

The A.T. Kearney Global Services Location Index, 2011 36 / 50 4th


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Mauritius at the end of an economic cycle, which was based primarily ontrade preferences

Impact of globalisation on a small island state with the erosion of tradepreferences and more severe competition

Mauritius facing a series of external shocks

Dismantlement of the multi-fibre agreement no preferential market access andentry for low-cost producing countries

36% reduction in the guaranteed price sugar for ACP countries end of Lomconvention

Rising energy costs, with heavy increases in world oil price

Rising freight rates and increase in imports costs to Mauritius

Economic indicators turning red Lower economic growth rate (2.5% in 2005) Lowest in the last decade

Increasing rate of unemployment (9.6% in 2005) Highest in the last decade

Increasing rate of inflation (5.6% in 2005)

High budget deficit (5.5% as a ratio of GDP)

Decreasing investment (falling to 21% as a ratio of GDP in 2005)



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Rising to the challenges: Setting theVision

Position Mauritius as a competitive, global business andservices-based platform with an open economy Create an open, attractive, competitive & resilient economy

Shift from inward looking to one of global competition byattracting foreign capital and facilitating entry of foreign talents,

innovation, knowledge and skills Rationalize, simplify and bolster taxation and fiscal policies

Setup a conducive business environment for doing business inMauritius, improve the investment climate to world standards andgear up Mauritius to be ranked among the top ten countries in

Doing Business Broaden the circle of opportunities to allow all to participate in

the development of the country and to generate economic wealth



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Double GDP per capita from US$5,000 to US$ 10,000 by 2015

Achieve a sustainable annual growth rate of 6 to 8%

Reach an investment rate of more than 30% of GDP

Reform the labour market for more flexibility and competitiveness

Welcome at least 2 million tourists by 2015 Provide a low tax envrionment, with a standard single tax rate of

15%

Make of Mauritius a duty free island by 2015

Double the contribution of SMEs to GDP

Further diversify the economy by creating new investment and

business opportunities



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ECONOMY

&

BUSINESS

BUSINESS

ENTRY

(Simple & Fast)

LOW TAXREGIME

(level playingfield)

FOREIGN

INVESTMENT

(Open policy)

SMEs

(Support &Empowerment)


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Eliminate, Repeal, Abolish

Eliminate incentive-based investment schemes or special regimes (eg. EPZ) Taxand fiscal policies reforms

Eliminate obsolete or useless permits, licences or other clearances

Repeal and abolish outdated or inadapted laws and policies

Relinquish ministerial discretionary powers as far possible: rule-based system

Review, Rationalise, Reengineer and Simplify

Immigration policies Work and Residence permits policies

Property acquisition by non-citizens policies

Building and Development permits policies

Environmental Impact permit policies

Integrate and Innovate Application of the Move data, not people principle Computerisation & Automation

Application of the ex-post control principle Allow to start and then check for compliance

Application of the Self-adherence to Guidelines principle Onus on the business operator tocomply to rules & regulations

Application of the Silent Agreement principle Onus on public officers to deliver on time



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Respond with boldness and embrace radical change through

fundamental reforms Political Will to bring about fundamental reforms

Setting the Stage for Robust Growth (Minister of Finance) Aug 05

Ministerial Committee on Red Tape and Bureaucracy Sept 05

Joint Public/Private Sectors Committee to review investment climate

Sept 05

Rational and objective assessment of the business climate

World Bank Studies

Administrative Barrier Study

Doing Business Report 2006 Oct 05 Investment Climate Assessment Report Jan 06

Consultations and Discussions at various levels (public &

private) Briefs, reports, papers, memorandums



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Setting up the legal framework for the new business

environment

Budget Speech 06-07 (June 06)

Finance Act 2006 (July 06)

Business Facilitation (Miscellaneous Provisions) Act 2006 (July 06)

Transforming the legal framework into an operationalbusiness framework

01 October 2006 : New Business Environment in place and effective

Capacity building & awareness campaigns locally thru media

(tv, radio, press, web), workshops, seminars to communicate andexplain the New Business Environment to all stakeholders

Launching of the Mauritius Opens the World investment

promotion campaign at the international level



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Budget Speech 2006 by Minister of Finance

Outlined the framework for the New Business Environment

Finance Act 2006 01 July 2006

Reforms of the taxation system and new fiscal policies

Business Facilitation (Miscellaneous Provisions) Act 2006 01 Oct 06

Omnibus legislation providing for the legal framework for the reforms ofthe overall business climate in Mauritius

Business Registration Act 2006 01 Oct 2006

Unique business registration number for all companies and businesses to beused by all government services (income tax, customs, VAT, etc)

Amendement of over 30 existing laws

Repeal of at least 4 major laws which have been outdated with thebusiness climate reforms



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Resources, Supporters and Partners: critical success factors to

develop and implement successful reforms

Main driving change agents in the recent reforms in Mauritius:

The Ministry of Finance and Economic Development

Board of Investment (national IPA)

Joint Economic Council (apex body representing the Private Sector)

Partners

All Ministries and para-statal bodies

Private sector institutions and associations

World Bank, FIAS, EU

Supporters

Business Community

Public at large



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Promoting Champions Champions at all level have been identifed, empowered and supported

to push forward the business climate reform agenda

Government

Prime Minister

Minister of Finance & Economic Develompment

Ministries

Permanent Secretaries and high level executives of key ministries

Institutions

Director of Investment Facilitation at the Board of Investment Investment Promotion Agency of Mauritius

Registrar of Companies

Director of the Passport & Immigration Office

Director General of Mauritius Revenue Authority

Private Sector

Director of the Joint Economic Council

Secretary General of the Mauritius Chamber of Commerce & Industry



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Reforms Prior to October 2006 Post October 2006: Business

Facilitation (Misc Prov.) Act

Business Registration Multiple business

identification numbers

Starting a Business (46 days)

Unique Business Registration

Number

Business Start Up in 3 days

Taxation Corporate Tax rate @ 25 % Single flat tax rate @ 15 %

Investment Incentives Investment Certificates issued

to qualify for Investment

Schemes (20)

Investment schemes abolished &

move from incentive-driven to

rule-driven

Business Licensing Separate Building Permit and

Development Permit (between

120 days & 2 years)

Single Building and Land Use

Permit issued within 2 weeks

SME registered within 3 days

Work & Live in Mauritius Separate Work Permit and

Residence Permit (60 days)

Occupation Permit in 3 days

Acquisition of property for

business purposes

Non-citizen Property Acquisition

Certificate issued by Prime

Ministers Office (> 4 mths)

Authorization issued in less than

1 month by the Board of

Investment


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Several legal and regulatory reforms on-going

Extensive use of Information Technology for all government services

Registration of property: from more than 200 days to only 48 hours with therecent Land Administration & Valuation Information Management System (LAVIMS)

E-governance for local authorities

On line submission of corporate and income tax returns

E-Judiciary project (court case e-filing and management)

Setting up of a new Insolvency Unit at the Registrar of Companies

Setting up of the International Arbitration Centre in Mauritius with apermanent representative from the Hague

New labour legislations

Employment Rights Act

Employment Relations Act

Setting up of a new commercial division at the Supreme Court

Licensing of private credit information bureau



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Lesson 1Business Climate reform is not an

option, but a vital necessity

There is no safety net anymore for anyone

No one owes you a living Your destiny lies in your own hands

Planning business climate reforms is important,

but To walk the talk and and make it happen is the

real acid test



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Lesson 2Reforming: not a one-off event, but a process

Unflinching political will and full commitment at thehighest level of the state to move ahead a boldbusiness climate reform agenda

Rational, objective and dispassionate assessments ofexisting business climate situation

Public-Private Dialogue: Consultations anddiscussions

Definition of priorities and allocation of resources

Setting the business climate reform action plan



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Lesson 3Stakeholders

Engage and mobilise all key stakeholders

Share and communicate the business climate

reform action plan Identify, empower and support Champions to

push forward the business climate reform agenda

Build capacity and train people to understand andadapt to the changes in the new businessenvironment



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Build a rigorous project plan for the implementationof the business climate reforms

Define & set specific, measurable, achievable, andtimely objectives

Set clear deliverables in terms of results, outcomesand outputs

Assign responsibilities to project and task owners,with accountability

Allocate resources (finance, people and technology) Define key milestones and performance indicators to

measure progress all way along



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Lesson 5Monitoring & Evaluation

Build monitoring and evaluation mechanisms tomeasure and follow-up progress

Interministerial committee on business climate

Public-Private Steering Committee to oversee andfollow-up the implementation of the business climatereforms action plan

Intensive use of information and communicationtechnologies to computerise and automate processes

Use of project management tools to have a strict andrigorous control on the implementation process

External audits (World Bank)



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Final LessonThe proof is in eating the apple

Adopt a Yes We Can attitude


One that would have the

fruit must climb the tree -Thomas Fuller (1608 - 1661) , English clergyman & historian


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Heerun GhurburrunSenior Expert ARCA Consortium

[email protected]

Doing Business no. 1 in AfricaHow Mauritius did it?
mailto:[email protected]:[email protected]

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IBC SWAZILAND - Doing Business Reforms in Mauritius 30052012

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