Economic and Commercial Diplomacy in Micro-States: a Case Study of the Maldives and Mauritius
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Economic and Commercial Diplomacy in Micro-states: A case study of the Maldives and Mauritius Ibrahim Naeem A dissertation presented to the Faculty of Arts in the University of Malta for the degree of Master in Contemporary Diplomacy July 2008 Declaration I hereby declare that this dissertation is my own original work. Ibrahim Naeem 31 July 2008, Kuala Lumpur, Malaysia Table of Contents Introduction.............................................................................................................................................................. 6 1. Chapter 1 - Economic and Commercial Diplomacy from the perspective of Micro-states ................... 8 1.1. Definitions and Key Concepts ................................................................................................................... 9 1.2. Micro-states and Economic and Commercial Diplomacy ....................................................................... 13 1.2.1. Characteristics of Microstates ............................................................................................................. 13 1.2.2. Foreign Policy in Micro-states ............................................................................................................ 14 1.2.3. Some preconditions for Economic Diplomacy - how well are microstates prepared? ........................ 16 1.2.4. Micro-states: initiatives in economic diplomacy ................................................................................ 17 1.2.5. WTO and Microstates ......................................................................................................................... 19 1.2.6. Microstates and Other Trade Related Arrangements .......................................................................... 22 1.2.7. Foreign Direct Investment: What are the opportunities for Microstates? ........................................... 24 1.2.7.1. What attracts FDI? ......................................................................................................................... 24 1.2.7.2. Promotional Techniques – are they beyond the reach of Microstates? .......................................... 25 1.2.8. Services Sector: A success story for a number of small states ............................................................ 27 1.2.9. Economic Vulnerability - Oil and Food CRISIS ................................................................................ 29 2. Chapter 2 - Maldives: A Case Study of Economic and Commercial Diplomacy .................................. 32 2.1. The Developmental Context .................................................................................................................... 33 2.2. Structure and Institutional setup of Economic and Commercial Diplomacy ........................................... 36 2.3. Structure and Nature of Economic and Commercial Diplomacy ............................................................ 41 2.3.1. Maldives Foreign Policy ..................................................................................................................... 41 2.3.2. Engagement in Bilateral Trade Initiatives .......................................................................................... 42 2.3.3. Engagement in Multilateral Trade Organizations and Initiatives ....................................................... 43 2.3.4. Foreign Investment Policy .................................................................................................................. 47 2.4. Key Issues in Economic and Commercial Diplomacy ............................................................................ 49 2.4.1. Development of the Tourism Industry ................................................................................................ 49 2.4.2. Trade Diplomacy ................................................................................................................................ 53 2.4.3. LDC Graduation ................................................................................................................................. 56 2.4.4. Tsunami Recovery, reducing vulnerability to economic shocks and natural hazards ......................... 60 2.4.5. Foreign Aid ......................................................................................................................................... 61 2.4.6. Oil and Food Price Crisis .................................................................................................................... 64 3. Chapter 3 - Mauritius: A Case Study of Economic and Commercial Diplomacy ............................... 67 3.1. The Developmental Context .................................................................................................................... 68 3.2. Structure and Institutional setup of Economic and Commercial Diplomacy ........................................... 72 3.3. Structure and Nature of Economic and Commercial Diplomacy ............................................................ 76 3.3.1. Foreign Policy and Economic Diplomacy .......................................................................................... 76 3.3.2. Engagement in Bilateral Trade Initiatives .......................................................................................... 77 3.3.3. Engagement in Multilateral Trade Organizations and Initiatives ....................................................... 78 3.3.4. GATT to WTO: Issues and Engagements........................................................................................... 80 3.3.5. Foreign Direct Investment and Economic Partnerships: Policies, and Approach ............................... 83 3.3.5.1. Foreign Investment Policy ............................................................................................................. 84 3.3.5.2. Trade, Investment and Economic Partnership Agreements ........................................................... 85 3.3.5.3. Economic Partnership Agreement (EPA) ...................................................................................... 86 3.3.5.4. Cross-border Trade and Business Development Missions ............................................................. 87 3.4. Key Issues in Economic and Commercial Diplomacy: Bilateral Agreements, Multilateral Treaties and their effects on Key Economic Sectors .................................................................................................................. 88 3.4.1. Indo-Mauritius Double Taxation Avoidance Treaty ........................................................................... 88 3.4.2. The Sugar Sector: Windfall gains from the Sugar protocol ................................................................ 89 3.4.3. Textile and Clothing Industry ............................................................................................................. 91 3.4.4. Tourism and Brand Mauritius ............................................................................................................. 94 3.4.5. Fisheries Sector ................................................................................................................................... 96 3.4.6. Free Port ............................................................................................................................................. 98 4. Chapter 4 - Concluding observations ...................................................................................................... 99 Acronyms and Abbreviations ACP African, Caribbean and Pacific Group of States ADB Asian Development Bank AOSIS Alliance of Small Island States AP-COIL Asia-Pacific Compensatory Oil Finance Facility AGOA Africa Growth and Opportunity Act BPoA Barbados Programme of Action BIT Bilateral Investment Treaties BOI Board of Investment CARICOM Caribbean Community CRNM Caribbean Regional Negotiating Machinery CBI Caribbean Basin Initiative CBERA Caribbean Basin Economic Recovery Act COMESA Common Market for Eastern and Southern Africa CSA Commonwealth Sugar Agreement CECA Comprehensive Economic Cooperation Agreements CCAMLR Conservation of Antarctic Marine Living Resources CBTPA U.S.-Caribbean Basin Trade Partnership Act DER Department of External Resources DTAT Double Taxation Avoidance Treary EEZ Exclusive Economic Zone EU European Union EC European Commission FTA Free Trade Agreement GSP Generalized Preference Schemes GATT General Agreement on Trade and Tariff GDP Gross Domestic Product HDI Human Development Index IPR Intellectual Property Rights IOR-ARC Indian Ocean Rim Association for Regional Co-operation IOTC Indian Ocean Tuna Commission IRS Integrated Resort Schemes ODA Official development assistance FISB Foreign Investment Services Bureau FDI Foreign Direct Investment IMF International Monetary Fund IPPA Investment Promotion and Protection Agreement LDC Least Developed Country LLDC Landlocked Developing Country MTPB Maldives Tourism Promotion Board MNCCI Maldives National Chamber of Commerce and Industry MATI Maldives Association of Tourism Industry MTPA Mauritius Tourism Promotion Authority MFN Most Favoured Nation MGD Millenium Development Goals MEDT Ministry of Economic Development and Trade MOFT Ministry of Finance and Treasury MFA Ministry of Foreign Affairs MTCA Ministry of Tourism and Civil Aviation MIS Mauritius Strategy for the Further Implementation of the Programme of Action for the Sustainable Development of Small Island Developing States NAMA Non-Agricultural Market Access NEPAD New