MAURITIUS Investment Guide
Openness to Foreign Investment
The
Government welcomes foreign investment, especially export-oriented industries.
Tax concessions and other incentives, introduced in 1970 to attract
manufacturers to the export processing zone, have since been extended to
services and to companies in the Mauritius Freeport and the offshore banking
and business center. The Mauritius Export Development and Investment Authority was
established in 1984 to assist investors and promote exports.
Foreign direct investment is governed by the provisions of the Non-Citizen
(Property Restriction) Act 1975. The Government has notified the WTO it does
not maintain any measures prohibited under the Agreement on Trade Related
Investment Measures (TRIMS).
Currency Conversion and Transfer Policies
The Government abolished foreign exchange controls in July 1994.
The Mauritian rupee is linked to a trade-weighted basket of currencies that
includes the French franc, the U.S. dollar, the Deutschmark, the pound sterling
and others. The exchange rate is market-determined. There is convertibility on
both capital and current accounts. Settlement can be done in foreign currency,
and foreign currency accounts can be opened in Mauritius. There is no legal parallel market in Mauritius for investment remittances.
The Mauritian rupee depreciated sharply against major currencies in 1996. The
U.S. dollar reached RS20.82 in October 1996 from RS18.44 in December 1995.
Following interventions in the foreign exchange market by the Bank of
Mauritius, the rupee stabilized; it has appreciated slightly this year. The
Minister of Finance has said he is determined to prevent any further sharp
fluctuations in the value of the rupee.
Expropriation and Compensation
There are legislative guarantees against nationalization.
Dispute Settlement
The US embassy is not aware of any
investment disputes. Mauritius is signatory to the U.N.-sponsored Convention on
Settlement of Investment Disputes, the 1958 New York Convention on the
Recognition or Enforcement of Foreign Arbitral Awards, and the Multilateral
Investment Guarantee Agency (MIGA) of World Bank.
The domestic legal system is generally open, non-discriminatory and
transparent. Members of the judiciary are independent of the Legislature and
the Government. The highest court of appeal is the Judicial Committee of the
Privy Council of the United
Kingdom. Mauritius is a member of the International
Court of Justice.
Performance Requirements and Incentives
The Government offers local and foreign investors the same fiscal and other
incentives if they qualify for the export processing zone certificate or other
related programs. These include exemption from corporate tax and tax on
dividends, free repatriation of capital, profits, and dividends, and no customs
duty or sales tax on raw materials, machinery, spare parts, and on export
products. The incentives are specified in the Industrial Expansion Act of 1993.
Contrary to the practice in many other countries, the export processing zone in
Mauritius is not limited to a specific geographical area; firms eligible for
EPZ certificates can operate anywhere on the island. Incentives do not carry
performance requirements.
Private Ownership Rights
All foreign investment (except those in the Offshore Business Center and on the Stock Exchange) must obtain approval from the
Prime Minister's Office. A foreign investor in export-oriented manufacturing is
permitted 100 percent equity, although the Government encourages local
participation. Foreign participation may be limited to 49 percent for
investments serving the domestic market, and is generally not encouraged in
areas where Mauritius has already mastered the
technology.
Foreign
ownership of services such as accountancy, law, medicine, computer services,
international marketing, and management consultancy, is limited to 30 percent.
Foreign citizens cannot acquire property. However, a foreign investor who has
incorporated a company locally can apply for permission to acquire real estate
in the name of the company. The acquisition must be connected with the
investment and the purchase contract executed in the name of the locally
incorporated company.
Protection of Property Rights
Mauritius maintains a sophisticated and
impartial legal system based on both Napoleonic code and British common law.
The system protects the acquisition and disposition of all property, including
land, buildings, and mortgages. Long-standing legislation, inherited from the United Kingdom, protects patents and trademarks.
Mauritius is a member of the World
Intellectual Property Organization and party to the Paris and Bern Conventions
for the Protection of Industrial Property and the Universal Copyright
Convention.
Assuming the foreign patent has not expired, patents are granted to the
inventor only. Exclusive rights are granted for a period of 14 years and may be
extended for a further 14 years. Trademarks are issued for an initial period of
seven years and are renewable.
Legislation protecting artistic, literary, and scientific work was enacted in
1986 and amended in 1988 to bring the period of copyright protection into
conformity with the Bern Convention. The National Assembly approved a new
Copyright Bill in July 1997 that specifically provides for the protection of
computer software and electronic databases while at the same time extending the
scope of protection of audio and video production. With the new Copyright Act,
which is in conformity with WTO's Trade Related Aspects of Intellectual
Property Rights (TRIPS), Mauritius is now on a par with developed
countries as far as IPR protection is concerned.
Transparency of Regulatory System
Business regulations are generally transparent. Applications for incentives
certificates are screened by a committee chaired by the Ministry of Industry
and composed of representatives of other ministries and Government agencies.
After committee consideration, the application is sent to Cabinet for decision.
Decision on a formal application usually takes six weeks. Approval for an
Offshore or Freeport License normally is done within two weeks as they are
approved directly by the Mauritius Offshore and Business Activities Authority
and the Mauritius Freeport Authority, respectively and do not require Cabinet
approval.
Most foreign firms starting business in Mauritius use existing buildings offered by Government agencies or private
owners. Those who build their own facilities may face delays of six months
obtaining permits for utilities. With regard to work permits, operators have
sometimes faced delays of up to three months in obtaining permits for groups of
foreign workers. Permits for professionals are normally processed within one
month; attention must be given to filling out all forms completely.
Political Violence
Mauritius is politically and socially stable.
Corruption and Crime
Some corruption exists at all levels of Government but does not present an obstacle for most investors.
The penal code provides punishment for giving or accepting bribes. It is to be
strengthened soon by a new legislation, based on laws in Hong Kong and
Australia, establishing an Anti-Corruption Commission aimed at curbing
corruption among “officers of public authority” including ministers, civil
servants, employees of parastatal bodies, and members of government-appointed
boards.
Labor
Mauritius experienced a labor shortage in the
late 1980s and early 1990s but unemployment is now about 5.5 percent. The
Government permits foreign labor. About 10,000 foreign workers, mainly from China, India, South
Africa and Sri Lanka, are employed in textiles, sugar
and construction. Even so, several textile firms have moved their
labor-intensive operations to Madagascar.
Some 10,000 people enter the job market each year, mainly high school
graduates, but also about 700 graduates from the University of Mauritius and overseas universities. Many
high school graduates follow short training courses in computers, electronics,
fashion design, jewelry, hotel, catering, and other technical fields offered by
private training institutions and the Industrial and Vocational Training Board,
set up by the Government in 1988. It is not difficult to recruit workers with
basic secondary education and some technical training. One investor recently
recruited 300 telephone operators and data processing workers for a new
operation in the country's Informatics Park. There is, however, shortage of skills in financial
services and management, especially human resource management.
Labor-management relations are generally good. Labor unions, which account for
less than 25 percent of the workforce, act responsibly and rarely disrupt
business. There has been no major strike since 1979. The Government discourages
strikes through a system that promotes settlement through negotiation or
arbitration by the Permanent Arbitration Tribunal and the National Remuneration
Board.
Workers rights are protected under the Mauritius Labor Act. Mauritius participates actively in the annual
ILO conference in Geneva and adheres to ILO conventions
protecting worker rights.
International Investment Agreements
A number of the double taxation treaties Mauritius has signed include investment protection provisions. Mauritius signed an Investment Guarantee
Treaty with the United
States in 1970. The
agreement is still in force.
The 23
double taxation avoidance treaties between Mauritius and other countries are a major attraction to offshore businesses. As
of June 1997, treaties had been signed with France, U.K., Germany, India,
Sweden, Zimbabwe, Malaysia, Swaziland, Italy, China, Pakistan, Madagascar,
Luxembourg, Botswana, Namibia, Belgium, Russia, South Africa, Indonesia, Sri
Lanka, Singapore, Mozambique, and Kuwait. Treaties with Lesotho, Malawi, Oman, and Vietnam are awaiting signature while negotiations are going on with
four other countries.
Foreign Trade Zones
The Export Processing Zone was established in 1970 to encourage manufacturing for export. There is no formally designated zone, and EPZ companies are located throughout the island.
EPZ companies are exempt from import duties and sales tax on machinery,
equipment, and spare parts, and from corporate tax as well as tax on dividends.
Mauritius is a member of the Southern African
Development Community, the Common Market for Eastern and Southern Africa, the Indian Ocean Commission, and
the Indian Ocean Rim Association for Regional Cooperation, and signatory to the
World Trade Organization, United Nations Conference on Trade and Development,
and the Lome Convention. Mauritius benefits from the GSP schemes of Australia, Austria, Canada, the EU, Japan, Switzerland and the United States.
Foreign Investment Statistics
Foreign direct investment has fallen sharply since the early 1980s when many Hong Kong textile manufactures relocated for
quota reasons. Hong
Kong has been the
leading investor in Mauritius, followed by France. There are only two U.S. investors in the export processing zone (diamond
cutting/polishing and garment manufacturing).
Between 1983 and 1990, annual inflows grew from S1 million to $29 million. By
1993, these leveled off to $14 million as growth in the EPZ and hotel
construction slowed. Cumulative inflows of foreign direct investment over the
ten-year period 1983-1993 amounted to $155 million, with 54 percent destined
for EPZ industries and 24 percent to tourism. Total FDI in 1996 increased to
$33 million, largely as a result of the transfer of funds from a Singaporean
firm for a property development project.
In the EPZ, foreign direct investment fell significantly from an annual average
of $12 million over the period of 1987-90 to $4.6 million in 1993 and $3
million in 1994. It increased exceptionally to $20 million in 1995, largely as
a result of the taking over of two large ailing textile companies in the EPZ
sector by Indian investors, but fell back to $6 million in 1996.
Most recent foreign direct investment has gone into information technology, printing and publishing, pharmaceuticals, light engineering, high-quality garments, and jewelry. India, U.K., and France are the main sources of current investment, followed by Germany and South Africa.
Taxation
The corporate income and branch tax rates in Mauritius are both 35 percent. Companies listed on the Mauritius
Stock Exchange, or subsidiaries of such companies, are subject to a 25 percent
tax on income. A 15 percent tax rate applies to those companies operating in an
Export Processing Zone, clinics, and other government approved enterprises.
Generally, capital gains and dividends are not subject to tax.
For companies registered in the Offshore Business Center after July 1, 1998,
profit is taxed at a uniform rate of 15 percent. Offshore companies registered
before that date may choose to pay tax at any rate between 0-35 percent, or opt
for the new 15 percent rate. There is no withholding tax on dividends and
interest; no tax on capital gains; and no foreign exchange controls.
Stock Market
The Stock Exchange of Mauritius, which opened in 1989, has 41 listed companies.
It is considered as one of the most advanced and active stock markets in
Sub-Saharan Africa.
The SEM-7 provides a benchmark for local and foreign market participants. The
SEM-7 is comprised of the seven largest eligible shares of the official list,
measured in terms of market capitalization, liquidity and investibility.
Foreign investors do not need approval to trade shares on the official market,
with two stipulations: individual holdings in a sugar company of 15 percent or
more need prior authorization, and investment for the purpose of obtaining
legal or management control of a local company is barred.
The Stock Exchange established a computerized depository system. Trades are now
settled on a rolling t+5 basis; plans are to improve to t+3 international
standard.
For more information on investing in Mauritius, see URL: http://ncb.intnet.mu/mic.htm