The Mauritius Spirit
I was invited end January this year to address a conference in Singapore, analysing the advantages of respectively the Singaporean and Mauritius Double Taxation Agreements (DTA) with India. Not only could I easily confirm that the Mauritius DTA is the better one, but I hope I managed to dispel some very fundamentally wrong perceptions about Mauritius.
As I was scheduled to speak in the afternoon, I could first listen to several speakers before me, all truly knowledgeable tax and legal experts. They explained very well the advantages of using the Singaporean/India DTA. But while doing so, they described Mauritius as a rather undeveloped beach resort area in order to discredit its attractiveness as a financial centre. Their description of Mauritius had clearly not been updated for at least thirty years. Mauritius today is indeed much more than that.
When I first came to Mauritius in October 1983, things were indeed a bit (to say the least) different from today. The airport was already at Plaisance, as today. But arriving and going through customs were a real experience of stamina, both standing in line, waiting one’s turn to explain to a customs’ officer why one wanted to come here on vacation, all this in typical tropical heat.
In 1983, on my way back to the airport, the trip from Curepipe to Plaisance was an adventure on the old road. Not so much in terms of danger, but more in terms of unexpected delays and various natural obstacles.
At the airport, there was one waiting room for all passengers going into the Air Mauritius 747 short version. There were few seats, all taken of course when I walked into the waiting room after checkin.
So most people stood, there was one airconditioning unit, probably working, but insufficient to cool down the air for all waiting passengers. It was not a very happy experience, truly.
Today, after two airport constructions and expansions, we have a very modern airport, with all space needed and air conditioning and duty free shopping (even if very expensive) and coffee shops and restaurants and other services, as in any other modern airport in the world. There are also excellent lounges, both inside the airport facilities or privately run.
The evolution of the airport reflects the very profound evolution Mauritius has lived through since 1983. Or even more so the Mauritius miracle since independence in 1968. Many economists and politicians the world over had predicted the inevitable bankruptcy and failure of Mauritius as an independent State. Not only has Mauritius proven all these doomsayers wrong, but it even prospered notwithstanding the lack of local natural resources.
One figure strikes me in this context. Around 1968, sugar exports, by far the most important industry at that time in Mauritius, generated some 90% of balance of payments receipts. Recently, with roughly similar productions levels and stable selling prices, sugar represents only around 3% of foreign currency receipts. It means that all the other inflows result from “new economy”, new activities generating foreign currency income. This includes of course first textile, then tourism, and later offshore activities, now renamed global business, and more recently IRS and RES projects and their related employment offerings.
All these industries, which appeared since 1980 have of course evolved. Textile, notwithstanding or maybe due to its lack of local raw materials, had to evolve into a niche market. The various manufacturers have so far greatly succeeded, with some ups and downs, mainly by developing quality.
Same can be said for the tourist, i.e. hotel industry. When the Royal Palm opened in 1985 as the first selfproclaimed fivestar hotel, it brought a level of service unknown hitherto in Mauritius. It was an instant success. This induced other hotels to increase and upgrade their offerings and consequently propelled the whole hotel industry to new heights of excellence, and gradually making the name itself of Mauritius increasingly known in Europe.
While there was an episode where prices were a bit out of touch, things have today become more realistic and in line with international practices. In addition, Mauritius can pride itself in having attracted highlyreputed international chains to manage local hotels, bringing their expertise and more diversified clients basis, benefiting the country greatly. The meaningful increase in tourists’ arrivals of some 1.15 M in 2015 compared with 123,820 in 1983 is testimony to the quality offered.
With regard to the offshore (now global business) centre, at the launch of the concept, the activities were initially geared towards International Business Companies (IBC) type concept. However, some firms recognised in the early 1990’s the advantage of using Mauritius as the best conduit to invest into India, by using the now very famous double taxation agreement (DTA) with India. But today, there is much more to this than the DTA with India. There are all links with Africa of course, which are being very well developed, but also with Europe and other Asian countries. Mauritius has risen to become an international financial centre, well regulated and with substance. It is increasingly attracting international asset managers and brokers as well as other players in the financial sector.
In terms of infrastructure and communications, there are now four lanes (even larger entering PortLouis) highways North South on the Island, and far better roads East/West than in 1983. This does not take away however that many Mauritius drivers are taking for granted that they can use these newly constructed roads as racing grounds, resulting in too many unexplainable road accidents, with their resulting human fatalities. Something certainly needs to be done about this.
Phone and internet communications are now of great quality, with a few competing operators guaranteeing and struggling for efficiency and low costs. What seems natural today was not such in 1983. There were then almost no phones outside cities, and international calls had to be routed through an operator who had to call back as soon as the communication was established, when it would not have been forgotten.
International air connections have increased so much, of course to allow for the transportation of tourists but also of increasing numbers of business people travelling to and from the Island. Daily flights to any continent are now available, either directly or through the appropriate connection.
As an added bonus for Mauritius, these developments attract growing numbers of foreigners. This concerns not only retired people or those wanting to benefit from IRS or IRS regime, but increasing numbers of active professionals come to live and work here. As I see it, first these people came to work for existing organisations, bringing their expertise and links to clients to Mauritius. I see now increasingly a second wave of person coming to live here and to deploy their knowledge locally.
These people are an incredible asset to Mauritius. Just to put it in perspective, places such as Geneva, London, Luxembourg, Hong Kong, Singapore and others have known tremendous growth rates over the years, to a large extent thanks to the influx and input of foreigners to the local economy. As an example, the canton (State) of Geneva has a population of close to 500,000 people. Some 40% of these residents are foreigners. In addition, there are almost 90,000 French residents who come daily into Geneva to work. The presence of these foreigners induces changes in attitudes and more openness of the mind within the original local population.
Clearly, Mauritius has entered into the globalisation process and is inevitably absorbed into it. This provides many advantages, but also brings what might be seen by some as constraints. One of those is that the competition is no longer essentially local, but is now worldwide. Especially in the services area, this means that the level of quality expected is much higher than what was tolerated so far. The professionalism, precision, proactive attitude, problemsolving mentality taking charge all these aspects must be further developed with the Mauritius workforce, likely starting at school level.
To further develop its success and its rate of growth, Mauritius must allow and even encourage foreigners to bring their expertise in various fields. Likewise, international groups active locally, even small ones, will regularly transfer their Mauritius employees to their offices abroad, for short and long periods. Such actions will allow Mauritius to follow examples of successful cityStates, as mentioned above.
But I have not the slightest doubt that the progress witnessed these past thirty years will be witnessed again in 2046, when I might be asked to write a followup article at that time.