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The Economy 

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

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.
 

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.

'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.'
 

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.

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.
 

The 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.

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.
 

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 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 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.

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. 

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 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.

• 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.

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.

• 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.

• 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.

• 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.

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.
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