Dear Valued Investors,
National Budget 2014 themed “Building a Better Mauritius - Creating the Next Wave of Prosperity” was presented on Friday 8 November 2013, by Honourable Xavier-Luc Duval, GCSK, Vice Prime Minister and Minister of Finance and Economic Development.
Highlighting the objective of Mauritius to graduate to high income status in the coming years, the 2014 Budget sets the stage for achieving a growth rate of 3.8% to 4% in 2014. In fact, the massive capital outlay that Government plans to spend on modernising the country’s physical infrastructure signals an underlying ambition to achieve the high-income goal within six years.
It is noteworthy that the 2014 Budget manages the fine balance of keeping the estimated public sector debt of 54% on track for the 50% GDP ratio target of 2018 and the budget deficit at an estimated 3.2% of GDP. The macroeconomic fundamentals remain sound, with Mauritius in the enviable position of contained public spending.
The economy will rest on a stronger foundation. The modernisation of the country’s physical infrastructure as well as the enhancement of the soft infrastructure, the provision for research and innovation, the unlocking of the investment potential for higher growth, the empowerment of the human capital, the inclusion of SMEs in the mainstream of business, the introduction of housing schemes for greater comfort of citizens, the improvement of the investment climate, the promotion of new pillars and the consolidation of established economic sectors are clear signals of an ambition to realise a growth rate that will allow all to ride a new wave of prosperity.
The soft infrastructure is further improved by BOI’s responsibility to implement a series of measures to build our effective investment climate into a truly world-class one. In particular, a Fast Track Committee chaired by the Financial Secretary will expedite the processing of permits for all big impact projects, potentially unlocking MUR 20 billion worth of investments.
A centralised online system will radically improve the delivery of Building and Land Use permits, ensuring delivery within 14 days after which a silent agreement principle would apply. In addition, several measures have been announced to further ease the application process for Occupation and Residence Permits, including the waiving of bank guarantees and the setting up of an online system by end of 2013.
With the Build-Mauritius plan in place, the country can aspire to new and higher value-added pillars of the economy. The economic architecture is laid for the development of an Ocean Economy to take advantage of the 2.3 million km2 maritime zone of Mauritius, particularly in view of petroleum and mineral exploration. This can potentially be a game changer for our economy. In addition, upcoming investments of some MUR 6 billion in Deep Ocean Water Applications will boost growth.
The architecture is also in place for Mauritian companies to do business in Africa. Following the setting up of BOI’s Africa Centre of Excellence (ACE) last year, the creation of a Mauritius Africa Fund of MUR 500 million now further supports outward investment to the continent, providing up to 10% equity participation from Government. A series of BOI-led marketing initiatives will entrench the position of Mauritius as the investment platform for Africa. Six international conferences in focal African cities and one in Mauritius with CEOs of investment promotion agencies will increase high level networking opportunities among area experts, local businesses and Mauritian service providers. ACE is given the responsibility to develop a placement programme of Mauritian talents on the continent. In addition, through trade-enhancing measures such as substantial freight rebates on exports to Africa, the Mauritian Freeport sector should also further benefit after last year’s removal of taxes on exports to Africa.
Economic activities in the Green economy also become clearer with solar and wind energy commitments, incentives for small planters to cultivate biomass for energy production as well as a number of bottom-up initiatives such as P.E.T bottle recycling incentives, the sustainability index of the Stock Exchange of Mauritius and the social bond, among others.
After introducing the film framework in the 2012 budget and expanding the film rebate scheme to 30% in 2013, Budget 2014 makes provision for training our young people for a career in the film industry, whether on the creative side or in the crafts. It is expected that the film industry will contribute some half a billion rupees to the Mauritian economy in 2014 and much more thereafter.
The Budget also addresses the challenge of bolstering growth in traditional sectors such as tourism, financial services, ICT-BPO, manufacturing, agro-industry and, seafood and aquaculture.
Practical measures articulated around stronger marketing, improving air services, filling hotels in low season and improving the tourism product have been presented and should sustain the increase in tourist arrivals and improve the industry’s growth forecasts.
In the global financial services sector, the focus is mainly on strengthening the regulatory framework, new product offerings and a gradual convergence between global and domestic business to enable the former to increase dealings with residents. BOI is given the mandate to set up a joint public-private committee with a special fund of MUR 50 million earmarked for the promotion of the Mauritian international financial centre.
The ICT-BPO sector should benefit from a further reduction in IPLC tariffs, brought down by 80% since 2005, and measures to increase bandwidth and quality of internet. Government’s encouragement to the young IT graduates to move into applications development deserves special mention. The HSC Pro and the Dual Apprenticeship scheme should further address labour requirements for the sector and the skills mismatch.
The manufacturing sector is given assistance in four areas: an investment tax credit scheme for high tech manufacturing; the LEMS FOREX, a scheme providing interest rate relief to manufacturers, is further extended; funds for export promotion are increased; and, the work permits process for export oriented enterprises is fast tracked. Training and payroll incentives are also carried forward through the existing Skills Working Group and Youth Employment Programme. A new Back to Work programme for women is also included. Together with the proposed freight subsidies on exports to Africa, these measures should concretely support export-oriented manufacturing. Similarly, measures for the Freeport this year consolidate the competitiveness of the sector.
For the primary sectors, the general spirit is to provide incentives for the operators to graduate to higher-value production. For example, fishers are provided with incentives to move to caged culture, planters to invest in better equipment in order to improve productivity. The extension of large-scale aquaculture and development of niche products such as pearl and seaweed culture are also encouraged, as is the development of a seed industry, with the creation of the National Plant Varieties and Seed Office.
It must also be highlighted that Budget 2014 provides several measures on research and innovation which can have far-reaching effects on the new and traditional pillars. The ocean economy’s marine biotechnology and knowledge cluster should unleash research in commercial applications with significant growth potential. A series of budgetary measures, including funding of MUR 100 million for research and innovation projects, a high profile National Research and Innovation Advisory Committee and capital allowances for the purchase of patents, will trickle down to our businesses and trigger growth, for example in the emerging biotechnology sector.
Underlying the well-known adage that SMEs are the seedbed of innovation and entrepreneurship, the 2014 Budget also provides for far-reaching measures to boost small enterprises, including preferential financing, encouraging SMEs to tender for Government procurement, providing free websites for on-line presence, and extending the SME refund scheme for participation in international fairs.
With the extensive measures to develop new pillars, bolster traditional pillars and encourage SMEs, Budget 2014 clearly spells out Government’s priority of Economic Growth. Yet, it also unfolds a comprehensive social programme that caters for the most vulnerable and empowers them to integrate the mainstream through education and training, income support conditional on social contracts and the possibility to become home owners. Significant measures are presented for citizen facilitation, middle-income housing, sports and culture, and protection of consumers, including the innovative in duplume rule for consumers of financial services.
It is an ideal time to invest. We hope that you will seize this opportunity and partner with us in building a better Mauritius and creating the next wave of growth.
Ken Poonoosamy Managing Director