A ugust 2013
GlobalJ ournal of the Financial Finance Industry MAURITIUS
The Mauritius IFC: A platform for business to Africa
“The Country’s adherence to principles set “The Evolving Challenge and by International bodies makes Mauritius a Hostile Operating Environment for neutral, safe and trusted jurisdiction.” Global IFCs” Hon. Xavier-Luc Duval, Vice Prime Minister and Percy Mistry, Chairman Minister of Finance and Economic Development. Oxford International Associate You have high expectations. We help you rise with excellence.
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Editorial his is the first publication of Global Finance Mauritius, the apex orga nisation of the financial services industry in Mauritius. Our mission is to promote the development of a competitive Mauritius International Financial Centre (IFC) that has substance, is well regulated, and Tefficient. To achieve our goals we have elaborated a strategy that revolves around four prongs: Promotion, Research, Advocacy and Capacity building. GLOBAL FINANCE, the journal of the financial services industry, is aspiring to establish itself as the ideal forum for local and foreign contributors, financial institutions and regulatory bodies to share views and experience, to debate about strategies and options so as to further enhance the competitiveness of the Mauritius IFC, to reinforce its image as a secure, transparent, vibrant and innovation driven jurisdiction. Indeed, one of our major challenges is to counter the negative image that has been projected of the Mauritius jurisdiction, in the Indian press in particular. Allegations of round tripping and tax haven have been hurled at us for years without any rebuttal from us, as we smugly believed that facts will speak for themselves. This is not the case. Facts have to be first communicated. This is why we have revamped our website and we are bringing out this journal so as to open lines of communication with anyone wishing to know more about the Mauritius IFC or wishing to contribute to the dialogue to improve the IFC. This maiden issue has, as would be expected, a relatively higher number of articles on Mauritius. While the Vice Prime Minister and Minister of Finance and Economic Development of Mauritius gives an indication of the government’s vision of the financial services sector, others have described the journey so far, the factors which have contributed to its growth, and the looming clouds of protectionism from the G 8 following the meeting held in June in Northern Ireland. The recurrent theme is that the old model is in its death throes, that we cannot cling on to old cheese forever, and we will have to reinvent the Mauritius IFC by building on its geographic position as the star and key of the Indian Ocean, the pathway to Africa, the most efficient and effective connector between investors and capital scarce sectors globally. But we also have an architect’s perspective on lifestyle trends. I must here acknowledge the contribution of a broad array of experts who responded positively to our call for papers: from regulators, (the Governor of the Bank of Mauritius and the CEO of the Financial Services Commission), to lawyers and bankers (local and international), from investment advisers to academics, from former chairmen of key financial institutions to World Bank officials. It is hoped that the different points of view exposed here, from Washington to Hong Kong, from London to India, from Brussels to Mauritius, will provide enough food for thought and discussions to both local and international players. It is our wish that others who do not know the Mauritius IFC well will obtain a valuable insight. We wish also to thank all the institutions and companies that have supported this initiative and look forward to your feedback to make the publication more relevant to your needs.
Nikhil Treebhoohun CEO Global Finance Mauritius
Global Finance 3 MAURITIUS ContentsThe Mauritius IFC Global Finance Mauritius, the financial umbrella organisation Rubina Jhubhoo 6 Mauritius’ Journey into international Finance Anil Gujadhur 10
Interview: Vice Prime Minister and Minister of Finance and Economic Development 14 Xavier-Luc Duval
Achieving Regulatory Balance in the Changing Financial Landscape Clairette Ah Hen 20
Mauritius: The Financial Crossroads of the World Mr. Rundheersing Bheenick 25
Using a Mauritius Trust/Foundation in International Tax & Estate Planning Assad Abdullatiff 31 List of Double Taxation Agreements signed by Mauritius 36 Mauritius, A Preferred Destination Dr. Dhananjay Keskar 38
An intermediation hub to bridge the funding gap for Africa’s infrastructure Jaya Patten 47
The development of a Yuan Offshore market in Mauritius N. Balakrishnan 51 challenges Investment Promotion and Protection Agreements signed by Mauritius 56 How the rules of the Offshore game changed for ever Georges Chung Tick Kan 57
Editorial Board Disclaimers Designed and printed: Nikhil Treebhoohun The views expressed in this publication T-Printers Co. Ltd Graham Sheward are those of the authors and do Industrial Zone, Coromandel not necessarily reflect the views of Thierry Adolphe Mauritius Global Finance Mauritius, its staff or Tel. (+230) 233 2500 A publication of Global Finance Mauritius. Publications Coordinator members of the editorial board, or st Fax. (+230) 233 7631 1 Floor, Cybertower 1 Toriden Chellapermal their respective institutions. Global Ebène, Mauritius Finance Mauritius disclaims any Website: www.tprinters.mu Administration and Advertising Tel. +230 464 84 09 liability for any material published in Rubina Jhuboo Global Finance Mauritius, Journal of Fax. +230 464 83 88 this magazine. Heveena Chinnarassen the Financial Industry Email. [email protected] - ©All rights reserved. [email protected] Photos Website. www.globalfinance.mu C. Bossu-Picat August 2013 challenges The Evolving Challenge and Hostile Operating Environment for Global IFCs Percy Mistry 60
Tax Information Exchange, The current state of play Rajesh Ramloll 69 FATCA Compliance of financial entities in Mauritius as from 2013 Shanaka Katuwawala 72
Life after shopping, In the eye of the cyclone Gaetan Siew 74 INTERNATIONAL FDI in Least Developed Countries, Problems of Excess? Otaviano Canuto, Milan Brahmbhatt 79 G8 Heads of State Summit: What Happened, and What are the Implications? 83 Richard J. Hay
An end to offshore business? Samantha Seewoosurrun 86 AFRICA Accelerated Programme for Economic Integration Sutiawan Gunessee 91 Regional Treasury Centres for Africa Evolution of International Finance Centres Sridhar Nagarajan 94
banking Global Business Banking coming of age Pratik Ghosh 99 Opening up offshore opportunities across Africa Graham Sheward 103
A ugust 2013
GlobalJ ournal of the Financial Finance Industry MAURITIUS
The Mauritius IFC: A platform for business to Africa
“The Country’s adherence to principles set “The Evolving Challenge and by International bodies makes Mauritius a Hostile Operating Environment for neutral, safe and trusted jurisdiction.” Global IFCs” Hon. Xavier-Luc Duval, Vice Prime Minister and Percy Mistry, Chairman Minister of Finance and Economic Development. Oxford International Associate the mauritius ifc
Global Finance Mauritius, the financial umbrella organisation GFM was born out of the common vision of key captains of the Financial Services Industry who felt that there was a need for a unified body which could speak out in a powerful voice at a time when several challenges were posing themselves not only to the Industry but to Mauritius itself as a jurisdiction. Although not the only one, the looming threat of the introduction of the Direct Tax Code, more specifically, the General Anti Avoidance Rule in India, was among one of these.
FM saw the light of day in October can enhance the Mauritius product offering. The 2010 as Global Institutional Investors current membership comprises all the banks Forum (GIIF). It was set up as a non- (through the Mauritius Bankers Association), a for-profit organization, structured as a few institutional investors, Accounting and Audit Gpurpose trust, to regroup the various segments firms, Management Companies, Law practitioners of the Mauritius financial services sector under and the Stock Exchange of Mauritius. Thus, apart one roof with the main objective to represent and from the insurance sector, all other segments of promote Mauritius as an International Financial the industry are represented. Centre of excellence. Whilst Shakespeare did not seem to think that there is much in a name, the The Mauritius IFC decision to change the name of the organisation to Since independence in 1968, Mauritius “Global Finance Mauritius” was taken in August has transformed itself from a monocrop to 2012 as it was felt that the new name would a diversified economy. Figure 1 provides a better reflect the organisation’s membership and snapshot of the growth of GDP per capita composition. (Purchasing Power parity) from 1970 to 2012. GFM also aims to actively represent the finance With no natural endowments – except for industry’s needs and concerns with regards to its physical beauty – it has managed to grow legislation, regulation and other key areas that steadily, often availing itself of opportunities offered by international economic agreements, Figure 1 e.g. the Sugar protocol, the Lome Convention, $15,600 in 2012 GDP Per Capita(PPP) (USD) and the India/Mauritius DTAA. While the 14,000 services sector (IT/BPO, Finance) is emerging as a key contributor to GDP, employment, 8,500 and government revenue, already Mauritius is Ocean State with 1.9 beginning to lay the foundations for becoming square km of maritime space 1,500 an ocean economy as it has a maritime zone of
550 1,600 some 2 million square kilometers. Mauritius was already a vibrant economy before 1970 1980 1990 2000 2010 it created its financial centre to reduce its reliance on Agriculture Diversi ed and sugar, garments and tourism. Today the economy based economy resilient economy - 70% from is well diversified with manufacturing contributing monocrop culture 40 years of sustained growth Agriculture: 4,5% of sugar cane Industry: 23,5% to 19% of value added, financial intermediation to Services: 72% 13 %, tourism 8%, and agriculture 4.5%. (Figure 2)
• Population of 1.3 million - Indian, • Democratic and politically stable The financial services industry has grown rapidly African, Chinese, European origins • Vivid French/English bilingualism • French colony 18thC; British colony • Literacy Rate: 89% in the last decade and is now nearing the end of its years until independence in 1968 first cycle of growth (its infant industry
6 Global Finance MAURITIUS the mauritius ifc
The challenges that lie ahead of Mauritius as an 29% IFC are indeed numerous:
19% 1. Reputational risk arising mainly from 13% erroneous perception of the jurisdiction as 10% 8% 7% 6.50% a tax haven. 4.50% 3% 2. P olicy issues in terms of creating the proper environment for a healthy growth of the industry.
Others*
Services Tourism
Fisheries
Financial
Real Estate
Agriculture
Distribution 3. N eed for diversification of products and
Logistics and Logistics ICT and BPO and ICT Manufacturing markets to ensure continued growth. 4. Need to build the right skill set to support phase) where the ease of doing business the industry. attracted mainly investment holdings and some funds and regional headquarters. Private G FM’s Activities wealth management (trusts, foundations, To tackle these challenges GFM has set up private banking), fund domiciliation (private several Technical Committees to look into the equity funds, limited partnerships, protected following issues: cell companies, collective investment schemes), 1. New Products and market diversification Trading and Freeport, Pan-African revenue 2. India Mauritius DTAA recognition (IT-related business, intellectual 3. Taxation property) and regional headquarters (shared 4. Compliance services – IT, BPO, Finance, Treasury, HR, 5. Regional Treasury Centre Compliance –, procurement, expat services) are 6. Capital Markets some of the elements of the value proposition 7. Africa for business from Mauritius. These are very 8. PR and Communication challenging times for the industry. As a result of its substantial work on key
Global Finance 7 MAURITIUS the mauritius ifc
issues, GFM has become a vital consultation and reputation of Mauritius as an international partner and interacts regularly with government financial jurisdiction. and regulators on all matters concerning the Recent NGO movements in the UK, the industry. It has significantly contributed to a Starbucks scandal and several other occurrences number of initiatives, namely amongst others, to have drawn the limelight on tax arbitrage and the India-Mauritius DTAA, the OECD Peer again on the so-called tax havens. Several onerous Review Report on Mauritius, Legislative Deve regulations are mushrooming and there may come lopments, New Products (e.g. Private Banking and a time where tax arbitrage will be considered as Wealth Management), Market Diversification, a breach of the law. Mauritius more than ever is and FATCA. standing at a crossroads as the global business GFM has also assisted the Financial Services sector has for long thrived on tax arbitrage. But Commission in organizing a brainstorming work every cloud has a silver lining. The move towards shop in October 2012 on the theme of “Build greater substance has already started for quite some ing a competitive Mauritius IFC”. Other actions time now and the result will be more employability have been an awareness programme on the for our youth and a more robust and resilient contribution of the financial sector to the economy economy, as the Mauritian Global Business sector targeting mainly the local press and participation re-engineers itself. GFM has geared itself to in international conferences to project the accompany its members and the policy makers in jurisdiction. this move. For, any paradigm shift results in some To make its voice heard at the international casualties those who cannot adapt to the new level, GFM joined the International Financial environment. Now that most of the low hanging Centres Forum, a cross jurisdictional private fruits have been picked, the industry will have to sector organization participating in the inter push up another gear. national dialogues on financial regulation. It is effectively an advocacy group which meets routinely with multilaterals (eg G20 and OECD), trade bloc (eg EU) and national policymakers to explain the role of IFC activity in promoting economic growth, trade, RUBINA JHUBOO and jobs. Membership offers the opportunity Senior Associate Global Finance Mauritius to participate in the global conversation on financial services and follow the strategies of other firms and centres. The activities for the coming years will there fore revolve around four main pillars: Promo tion, Advocacy, Research and Capacity building (PARC).
Changing Paradigm The challenge facing the Mauritian economy and businesses in the sector is to ensure diversification away from dependence on any one particular geography or treaty whilst at the same time expanding the value proposition within Mauritius from domiciliation and base level administration to an increasingly complex range of financial services and products. In this regard the founders of GFM were driven by a common cause that Mauritius needed to look beyond the low hanging fruit and to cultivate more variety and complexity which would enhance sustainability
8 Global Finance MAURITIUS
the mauritius ifc
Mauritius’ Journey into international Finance Some 25 years his was the beginning considered that ‘offshores’ were ago, the Banking of Mauritius’ “offshore” essentially centres which indulged sector. It was not known in financial malpractices. They Act 1988 gave the at the time how far we were supposed to be the places Bank of Mauritius Tcould succeed as a jurisdiction where ‘unholy’ activities like the authority to into an area that was assumed money laundering and “fixing” licence ‘offshore’ to be the exclusive preserve of of unlawful activities, were rife. It sophisticated financial centres was also assumed that they were banks on top of the that had long been in operation, essentially hosts to fly-by-night powers it already principally in the West. investors of no substance. But that had to license There were examples however had been a perception created of outliers such as Labuan and many years before Mauritius ‘domestic’ banks. Singapore acting as international decided to establish its own On the other side, finance centres (IFCs) which IFC as from the late 1980s in an in the absence of an had set themselves up already attempt to diversify the economy explicit legislation, outside the periphery of the by engaging in the provision of rich countries of the world. The international financial services. administrative steps idea was that Mauritius could Going for services was compulsive were taken at the mobilize the necessary resources for a country like Mauritius which level of the Registrar to man this new area of its deve had little by way of other resources lopment, the more so as the than its educated workforce. It of Companies country was endowed with an hardly could contemplate any to allow for the educated workforce capable thing of the amount of capital incorporation of of being trained up to provide and know-how needed to embark ‘international’ quality professional support that on significant projects in the real an activity of the sort required. sector of the economy. finance companies Our bilingualism in English and Strong reservations were there which would French, the country’s hybrid legal fore expressed in some parts of the not be subject to system combining elements of local community that we should the Civil Code and Common Law not venture out into an area of all the stringent as well as its location in a time activity which certain long-stand requirements zone in between the Far East and ing international prejudices had applicable to the financial centres of the West, qualified as being tainted with ordinary companies, political stability and rule-of- malpractices. It was clear that law, were all seen as cornerstones policy makers had to work hard to such as filing of upon which such an edifice could convince stakeholders that nothing periodic financial be constructed. would be undertaken from Mau statements and ritius as would likely sully our Fear of the Unknown international image. On the one regular audits. This first step was not free from hand, to be competitive interna other sorts of difficulties, one tionally, opera tors in our IFC had of which was about perception. to have at least the same degrees of At that time, just as it is the freedom as that which operators in case today, there was a swathe other jurisdictions hosting offs of opinion in the world which hore business activities enjoyed.
10 Global Finance MAURITIUS the mauritius ifc
On the other hand, for us bank finance companies. The A Track Record of not to be dubbed as a run-of- objective was to keep off any risk Implementing Effective the-mill centre aiding and of contagion between the two Regulatory Compliance abetting in the commission of and to apply distinct tax regimes Over many past years, international financial mal in each case conducive to the Mauritius has had to keep practices, we had to raise the development of international adapting the framework of level of our financial controls as financial business. its financial regulation in the a safeguard against any tempta The decision was taken later face of emerging challenges. tion by operators to employ the on - as the world economy The aim was to avert nasty country to stage up any such further internationalized itself surprises in the regulated malpractices. and Mauritius enhanced its institutions when it was too outward-orientedness in pace late to act. Intensification of A n essential trade-off with international develop financial regulation increased In the beginning therefore, ments - to integrate onshore - operators’ burden of reporting. ‘offshore’ banks were licensed offshore activities. That would The central bank, as regulator in their own right, as distinct involve doing away essentially of banks and deposit-takers, from ‘domestic’ banks due to with differences relating to ensured compliance with ‘core fear of ‘contagion’. That was the tax and regulatory compliance principles’ of effective banking case even within single banks requirements that had been supervision and other (BIS) - which had to keep separate in place so far. In the Banking driven international standards these two lines of activity by Act 2004, it was thus decided for conducting banking means of some sort of an iron or that a single banking licence business. bamboo curtain. Each side had will be granted whether the As early as 2003, a joint IMF- to have separate management bank engaged exclusively in World Bank team carrying out and be subject to distinct international or domestic a Financial Sector Assessment regulatory reporting rules in banking activity or whether Program concluded that Mau keeping with the character of it operated on both fronts. ritius actually complied with the business. Thus, at a time In the process, the quality most of the ‘core principles’ when exchange controls were of regulatory reporting was and that its financial regulation still in operation in Mauritius, increased. Regulatory oversight was in practice even tighter ‘domestic’ banks were required became even more focussed than what it was in certain to keep reporting their detailed than before. Clearly, financial developed countries. On its periodic inflows and outflows liberalization involved a trade- part, the Financial Services of foreign exchange whereas off in terms of closer regulatory Commission (FSC) which was ‘offshore’ banks were exempted and compliance monitoring to created in 2001, focussed on a from this requirement. But to contain risks associated with framework of integrated super safeguard against any undue the more liberal stance being vision of all non-bank financial liberties ‘offshore’ banks might adopted. services undertaken from take, they were subjected to It was realized that Mau within the country. The crea the same degree of scrutiny ritius could ill afford to take tion of the FSC, a one-stop- as regards compliance with a risk on the international shop for the regulation of prudential rules pertaining good standing of its financial capital markets, pensions and to solvency, liquidity, risks sector. Along with financial insurance, global business and taken, currency exposures, liberalization therefore, ade all other non-bank financial etc. In parallel, ‘domestic’ non- quate controls were put in services – all of which had been banking finance companies place to safeguard against regulated by separate bodies in continued to report on their any risk of slipping off. This the past - constituted a step activities with greater rigour essential trade-off between forward towards achieving than what applied to gene opening up the market and consolidated and coherent fi rally passive investment- having sufficient controls in nancial regulation in the holding ‘international’ non- hand has been kept in place. country.
Global Finance 11 MAURITIUS the mauritius ifc
The pace of meetings be quirement. Thus, much before it Reporting Council working to tween regulators and operators was done in many other places, monitor financial reporting and quickened over the years. Mauritian financial regulators disclosure and to promote qua Frequent and regular meetings took initiatives to ensure that lity accounting and auditing of the sort ensured translating financial companies’ accounts services in the country. into practice higher standards of should be drawn up in accor The National Committee on business conduct rules given out dance with International Fin Corporate Governance, on its from time to time by ancial Reporting Standards, in part, was tasked to enforce good international bodies, such as the cluding the implementation of governance at the level of com BIS, FATF, IOSCO, IAIS, as well IAS 39. This approach ensured panies’ boards of directors. On as regional bodies of which greater transparency in financial the side of financial regulation, Mauritius formed part. Mauri reporting by financial institu the prevailing practice of carry tius adapted and applied these tions, bringing out for the appre ing out regular onsite inspec rules to its own environm ent ciation by the public risks and tions of all financial licence with meticulous care. In other related party transactions to holders at pre-determined in respects, Mauritius also took the which individual financial com tervals was being strengthened lead to ensure that the financial panies were exposed. by recruiting more regulatory sector of Mauritius did not fall All this was taking place in staff of good calibre in both the behind rules or standards of an overall environment of rein financial regulatory bodies of market transparency which it forcing transparency and ac the country. There was an all- considered to be important even countability in Mauritius’ cor round consciousness that a rule- where those rules and standards porate sector as a whole. Thus, based country which actually were not an international re there came up later the Financial applied the rules with
12 Global Finance MAURITIUS the mauritius ifc
intelligence would be able to severely impact the working of attract sound business to itself the Mauritius IFC in view of from those who cared for their the fact that Mauritian finance good reputation and standing. operators have concentrated (negligently perhaps) too much The way Forward: of their business around the eliminating sore points DTA. The foregoing shows that It seems negotiations on the Mauritius has always dealt sore points having emerged decisively whenever it has been in the process have reached a necessary to take decisions for dead end at this stage. Now, the the good upkeep of its financial very purpose of a negotiation sector and its international proper is to reach a give-and- image. take rather than an all-or-none ANIL GUJADHUR One black spot however has outcome. Former First Deputy Governor been a much too prolonged There is little point in throw of the Bank of Mauritius, He also discussion between India and ing overboard a mechanism acted as Chairman of the Financial Mauritius over a number of that has served economic fur Services Commission of Mauritius years about the Double Tax therance of both countries and which is the regulator of all non- Avoidance Agreement (DTA) has potential to serve this pur bank financial services In Mauritius. which binds the two countries pose in the future as well. It since as far back as 1983. may have to be recalled that a It appears that some Indian jurisdiction like Singapore has officials would like to revise contributed significantly as a the DTA which they consider finance centre to bring needed has been abusively employed capital into China and that this by certain Indian operators kind of collaboration has not avoiding to pay due taxes stopped despite China having in India by employing the become the world’s second lar Mauritius DTA route. gest economy. They would be having a If the long term is kept in penchant accordingly to revise view, India and Mauritius the DTA wholesale with a view may just as well reach mature to limiting the benefits it confers understandings which should to investors going into India not be seen as undermining each through Mauritius. That could other as their economies move amount to a case of throwing on to further heights. It is in the bona fide baby with the their mutual interest to consider bathwater. that the world tomorrow will The Mauritian side inter be built up around greater prets the proposed revision of transparency and accountability the DTA as being tantamount than what we have been used to to nullifying the core attract so far. iveness of the very treaty itself It is in the nature of financial which has served to channel business that it is confronted huge investment funds into with different types of risks as the Indian economy through it gathers scope. This imposes Mauritius for decades now. on market participants – and The apprehension on the countries - the need to seek Mauritian side stems from the solutions to problems as and fact that such an action would when they emerge.
Global Finance 13 MAURITIUS the mauritius ifc
Interview Hon. Xavier-Luc Duval, Vice Prime Minister and Minister of Finance and Economic Development. “The Country’s adherence to principles set by International bodies makes Mauritius a neutral, safe and trusted jurisdiction.”
ou just came back from a JinFei Economic Trade and Co Ymission to China. How do operation Zone. you assess today the economic We are seeing a growing num ties between China and ber of Chinese tourists visiting Mauritius? Mauritius. In fact, since our China and Mauritius enjoy inaugural flight to Shanghai in long standing bilateral economic July 2011, tourist arrivals figures and cultural relations and from China to Mauritius have diplomatic relations were esta known robust growth. Last year, blished between the two nations the number of tourists arriving back in 1972. Mauritius is also from China grew by 38% to cross among the first few countries to the 20,000 mark. Since January have recognized the ‘One China’ this year, more than 11,000 policy. This relation has been tourists have visited Mauritius nurtured and strengthened with from China, representing a time. growth of 71.9% compared to The trend of business activities between the last year’s performance for the same period. We two nations is indeed a vivid proof of this growing are expecting to double the number of arrivals relation. China is today one of the main trading of the Chinese market compared to 2012, and to partners of Mauritius. Last year, both our imports have more than 40,000 Chinese tourists visiting and exports from and to China increased by over Mauritius by the end of 2013. 25% compared to the previous year. China is also We have also invested in a brand new airport an important FDI contributor to our economy terminal, which will be operational by end of this and we are already home to a number of Chinese year. This terminal is being developed with the companies across various fields of activities. support of the Chinese Government, and could Mauritius is today among the top 3 sources of act as a hub for travellers between Africa, Asia FDI to Shanghai. In fact, as at February this year, and the rest of the world. total FDI to China from Mauritius amounted to around USD 11.8 billion. hat was the Chinese response to your My visit to China shows our willingness to Winvitation to use Mauritius as platform further enhance the economic ties between the to invest in Africa and other parts of the world? two nations. Our strategy is not only to better integrate our In line with the market diversification strategy country in the world economy but also to of the Government, we are increasing our efforts consolidate our position as the prime business in China to attract more Chinese citizens to hub in the region. In fact, our strategic location at consider investment opportunities across various the doorsteps of Africa, our association with the sectors in Mauritius. We are confident that, with Common Market for Eastern and Southern Africa the support of the Chinese Government and (COMESA) and the Southern African Deve busin ess comm unity, business ties between both lopment Community (SADC), our reliable infras countries will reach even greater heights. We are tructure and our sophisticated telecommu also working on the development of the Mauritius nications network together with our skilled
14 Global Finance MAURITIUS the mauritius ifc
and bilingual workforce contribute to make tiations are ongoing with Malawi, Tanzania and Mauritius an ideal bridge for business between Morocco. We are aiming in the medium to long China and Africa. term to increase the number of DTAAs with China is today recognized as one of the leading African countries to thirty. countries with respect to cross border invest In addition, I wish to point out that Mauritius ments, especially with developing countries. The is also engaged to increase its number of IPPAS recent visit that President Xi undertook to Africa which will contribute to establish Mauritius as a is indeed a testimony of the importance that platform for investment flows to Africa. To date, China attaches to the developing world. we have signed 39 IPPAs out of which 19 are with African countries.
“ he India-Mauritius Double Taxation China is today one of the main TAvoidance Agreement (DTAA) is still being trading partners of Mauritius. discussed. Do you foresee any finalization of the agreement and is there a timeline for the Last year both our imports Indian and Mauritian Governments to close the discussions?
and exports from and to China A Joint Working Group (JWG) comprising of increased by over 25 % “ senior officials from the concerned authorities of India and Mauritius was established in August compared to the previous year. 2006 with a view to address concerns expressed by the Indian side on possible misuse of the DTAA. In this respect, Mauritius has, so far, taken several As Africa continues to attract the attention measures including the following: of Chinese investors and traders, we see an - Indian auditors have been allowed to practice increasingly important role for Mauritius to play in Mauritius. A Mutual Assistance in Criminal as the ideal and preferred gateway and access and Related Matters Act has been introduced and centre for the continent. In fact, our interactions provides for requests for judicial assistance. with the business communities in China received - The FSC has signed an MOU with the a very positive response. Indeed, we are already Securities and Exchange Board of India to provide welcoming Chinese business delegations to for exchange of Information. Mauritius following the trip. - Mauritius has agreed to the stationing of an officer from the Revenue Department of India for auritius has signed and ratified Double better exchange of information. MTaxation Avoidance Agreements (DTAAs) - We have agreed to issue Tax residence certi with nearly 40 countries. Are there any new ficate on an annual basis. countries that Mauritius is targeting or which Based on international standards, stringent have expressed an interest to enter into DTAAs? licensing conditions have already been introduced Indeed, Mauritius has so far signed 44 DTAAs to ensure that Indian-sourced funds are not re- in all, out of which 19 are with African countries. invested in India through Mauritius. Government strategy has focused into making We are presently holding discussions with our Mauritius a regional financial and business friends from India on how to address certain centre. We recognize the enormous potential concerns which they have raised with us, inclu of Africa and its rise as an emerging economy. I ding the Limitation of Benefits clause. We have wish to point out that signing of DTAAs remains already concluded a Tax Information Exchange a priority for the Mauritian Government with Agreement, based on the OECD model which is the prime objective to provide a conducive ready for signature and we have also agreed environment for cross border investment flows with India to extend our assistance in the across countries. Mauritius is presently nego collection of taxes. In the course of these dis tiating with a number of countries with focus cussions, we have favoured that both sides can on the African continent. To name a few, nego conclude a win-win package that is mutually
Global Finance 15 MAURITIUS the mauritius ifc
concluded that not only all the elements are in place but it also recognises that Mauritius has in place an exchange of information system which is effective and efficient. Mauritius is also engaging with the United States authorities to conclude a Tax Information Exchange Agreement as well as an Intergovernmental Agreement to become compliant with the Foreign Account Tax Compliance Act and in the process shift to automatic exchange of information. We have a very robust regulatory framework which adheres to the international norms and requirements, with a view to tracking money laundering and combating terrorism financing and has enacted appropriate legislation in this respect. Mauritius will continue to expand its network of treaties with several countries as well as doing its utmost to align itself with international standards and practices. More measures will follow regarding bringing more substance to our jurisdiction. In order to transform our country into a provider of higher value-added services, a wide spectrum of financial products and new laws have been introduced. The recently adopted Limited Partnership Act, Private Pension Scheme and the Foundation Act have broadened the scope of services and activities of the centre. Forth- co ming legislations allowing Limited Liability Partnerships (LLP) and non-treaty based funds acceptable to both countries. We are hopeful enjoying tax free status in Mauritius will further to reach closure on these discussions very soon complement the product offerings of the
and we are optimistic to arrive at a solution that jurisdiction. would be mutually beneficial to both countries. “
hat measures does your ministry intend Mauritius will continue Wto take to enhance the competitiveness of to expand its network of treaties the Mauritius International Financial Centre, especially at a time when International Financial with several countries as well as Centres are facing severe public criticism and doing its utmost to align itself
pressure? Our recognition by the OECD as a white-listed with international“ standards jurisdiction and our adherence to principles set by international bodies such as FATF, IOSCO, and practices. IAIS and IOPS amongst others make Mauritius a neutral, safe and trusted jurisdiction. Mauritius has undergone a detailed peer review by the OECD Global Forum which has assessed whether accounting, banking details of ownership / iden tity information are available. The OECD has
16 Global Finance MAURITIUS the mauritius ifc
Mauritius is equally rapidly emerging as an the BOI has organized several road shows to attractive platform for capital raising for Africa. provide a platform for local operators to explore Mauritius is at this stage laying more emphasis on new markets in Africa and Asia and consider substance in the Financial Services Sector. new sectors such as structuring of vehicles and Mauritius is also developing a derivatives market. financing for mining. Mauritius already meets the Special Data To enhance our position as the platform for Dissemination Standards (SDDS) and is planning investing in Africa, we are further expanding our to move to the SDDS+framework. The subscription network of DTAAs and IPPAs, especially with of Mauritius to the SDDS+ represents a major step key African countries, to give further competitive forward for official statistics in the country and edge to our operators. for those who use these data. Subscription to the Nevertheless, as Government, we clearly standards underscores the strong commitment to understand that we cannot progress without transparency in Mauritius, as well as a significant the full collaboration of the Private Sector. achievement in implementing internationally We have recently implemented the Financial accepted best practices in statistics. Services Consultative Council to that effect. This council has several sub-committees which are hat are the challenges that Mauritius will mostly chaired by the Private Sector. Operators, Whave to face as an International Financial being the first point of contact with clients, Centre and how can these be addressed? are well positioned to provide guidance on the One of the challenges our country will con requirements, such as new products, services, tinuously face is to adapt to changes that are legislations, needed to improve the sector’s
occurring rapidly in the global environment. offering and attractiveness. International norms and standards are dynamic “ and are continuously being reviewed in the light of lessons learnt from different turmoil Mauritius is equally rapidly around the world, more recently we have had the sub-prime crisis and the Euro crisis. Mauritius emerging as an attractive is continuously reviewing its legislation to make platform for capital raising it more in line with international norms and standards. for Africa. In order to establish itself as a regional financial Mauritius is at this stage laying
centre of international repute, there is need for Mauritius to continuously review its strategies more emphasis on substance “ with a view to identify new markets with huge potential. Here we have in mind the potential that in the Financial Services Sector. Africa has in terms of growth capacity.
hat would be your main message to the Wstakeholders of the Financial Industry both local operators and international investors? The Financial Services sector of Mauritius is the linchpin of the economy. This sector has high levels of productivity and offers rewarding careers to our youth. This is why the Government will continue its efforts to encourage more substance and graduate towards higher value-added acti vities in this sector. The Government, through the BOM, FSC and BOI, is ready to provide the Financial Industry full support to achieve further growth in this sector and work is already under way. Since January,
Global Finance 17 MAURITIUS e Financial Services Commission, Mauritius (FSC) - the regulator for nancial services other than banking and global business - has emerged as a strong partner for investments in Africa. Its Vision To be an internationally recognised Financial Supervisor committed to the sustained development of Mauritius as a sound and competitive Financial Services Centre.
Strategic Plan e FSC Strategic Plan 2013-2015 aims at making Mauritius a developed, diversi ed, stable and competitive International Financial Centre in the pursuit of the FSC’s Vision and statutory objectives.
To position Mauritius as a jurisdiction of substance with the right balance between regulation and business development, the FSC has an enhanced and balanced Supervision Framework. e pillars of the Framework are the international norms and principles which have a bearing on our prudential regulation and regulation of conduct. Our Core Values
e FSC is committed to maintain a robust regulatory framework to preserve the good repute of Mauritius. Creating an environment of transparency, stability, and predictability provides the right platform to investors for doing business. e Legislation
• Companies Act 2001 e Financial Services Commission, Mauritius (FSC) - the regulator for nancial • Trusts Act 2001 • Financial Reporting • Protected Cell Act 2004 services other than banking and global business - has emerged as a strong partner for • Financial Intelligence investments in Africa. Companies Act 1999 • Financial Services Act 2007 • Limited Partnership • Insurance Act 2005 and Anti-Money Act 2011 • Securities Act 2005 Laundering Act Its Vision • Foundations Act 2012 • Private Pension Schemes Act 2012 (FIAMLA) 2002 To be an internationally recognised Financial Supervisor committed to the sustained development of Mauritius as a sound and competitive Financial Services Centre.
Strategic Plan International Norms and Standards adhered to: e FSC Strategic Plan 2013-2015 aims at making Mauritius a developed, diversi ed, stable and competitive International Financial Centre in the pursuit of the FSC’s Vision • International Organisation of Securities Commissions and statutory objectives. (IOSCO) principles • International Association of Insurance Supervisors (IAIS) To position Mauritius as a jurisdiction of substance with the right balance between core principles regulation and business development, the FSC has an enhanced and balanced Supervision • International Organisation of Pensions Supervisors (IOPS) Framework. e pillars of the Framework are the international norms and principles principles • Organisation for Economic Cooperation and Development which have a bearing on our prudential regulation and regulation of conduct. (OECD) principles Our Core Values • Financial Action Task Force (FATF) recommendations (AML-CFT)
Assessment programmes and reviews:
Peer reviews [Reports on Observance of Standards and Codes (ROSC)]
Assessment by SADC in the context of the ‘Harmonisation of the Insurance & Pensions Legal Framework’ of all CISNA jurisdictions
FSAP assessment of the jurisdiction in compliance with the Insurance Core Principles (ICP’s) of the International Association of Insurance Supervisors (IAIS)
e FSC is committed to maintain a robust regulatory framework to preserve the Financial Services Commission good repute of Mauritius. Creating an environment of transparency, stability, and FSC House, 54 Cybercity, Ebene, Republic of Mauritius predictability provides the right platform to investors for doing business. Tel: (230) 403 7000 Fax: (230) 467 7172 E-mail: [email protected], Website: www.fscmauritius.org the mauritius ifc
Achieving Regulatory Balance in the Changing Financial Landscape
In all modern he Financial Services S ustaining credibility, economies, the Commission (FSC) was predictability and stability financial sector is set up in 2001 as an The FSC’s enhanced and ba integrated regulator for lanced supervisory framework is subject to regulation Tthe non-bank financial services geared towards the development, and supervision, and - insurance, securities, and pen diversification and improved while the specific sions - and global business sectors. competitiveness of the financial Over the years, the FSC continues services sector, while ensuring objectives and in fulfilling its statutory functions, stability. nature of regulation addressing many of the main Initiatives started under the often vary from issues and tasks confronting it current strategic plan a few country to country, in order to achieve progress and years earlier, are starting to show recognition both internationally positive results and span over two the importance of and domestically. broad areas namely international regulation can never The world has recently expe recognition and visibility and be overemphasised rienced the most severe financial internal restructuring for en crisis of modern times and current hanced performance. as regulatory market conditions, particularly The Organisation for Economic framework can in the Euro zone, are far from Co-operation and Development insure social stability. reassuring. The regulatory(OECD) has always recognised system may not be identical in Mauritius as a trusted, transparent all countries, varying from highly and well-established International integrated, fragmented or any Financial Centre. Despite its thing in between. Whilst there is small size, Mauritius is dynamic, plenty of room for debate about diversified and fully integrated the merits of different regulatory into the world market and has an structures, first and foremost, it efficient system for exchange of is important that confidence of information. all stakeholders in the system is The views of the OECD were maintained. The crisis has also reconfirmed in 2012 when the presented regulators with an FSC signed the International Or opportunity to effect significant ganization of Securities Com changes such that operations can missions (IOSCO) Multi lateral be at a greater level of efficiency Memorandum of Understanding once into the post crisis period. (MMoU) which sets out an inter To this end, the FSC, while foste national benchmark for cross- ring the integrity, stability and border cooperation, critical to health of the financial services combating violations of securities sector, has embarked on a number and derivatives laws and, pro of initiatives that will contribute vides a common understandin g in paving the way for the moder amongst its signatories about nisation and development of how they will consult, cooperate our financial markets and of the and exchange information for se Mauritius International Financial curities regulatory enforcement Centre (IFC). purposes.
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To qualify as a signatory, the knowledge to implement the regimes across the financial regulator has to undergo standards as they emerge. The services sectors engender coun screening by the IOSCO with FSC plays a more active role in terproductive regulatory arbi regard to legislation related to IOSCO as an active member of trage which can be avoided by the exchange of information the Committee 1 - Accounting, a balanced and cost-benefit with foreign authorities and Auditing and Public Disclosure analysis approach to regulation. obtain certification of its ability and in CISNA (Committee of to implement information ex Insurance Securities and Non- Regulation changes based on the MMoU. Bank Financial Authorities), As an integrated regulator, The signature is a major step the regional grouping of regula the FSC ensures that its system forward toward enhancing our tors of SADC (Southern Afri is able to deliver a stable international cooperation and it can Development Community) equilibrium of prudential and was only made possible after member countries. Through conduct supervision. The FSC amendments were brought to this regional cooperation, the not only looks at the safety and the existing legislative frame FSC hosts attachment pro soundness of institutions with work to facilitate information grammes and visits from repre a focus on risk, governance, exchange (including banking sentatives of African regulators capital and liquidity amongst information), technical coopera interested to learn about the others, but also emphasizes on tion and investigative assistance. Mauritian experience. Sharing how consumers are impacted The IOSCO is not only the of knowledge and expertise by the actions of financial standard setter for securities contributes to the building institutions. The overarching regulation but also the leading of relationships and harmo objective remains delivering an international policy forum for nisation of supervisory mecha effective regulation. securities regulators. Becoming nisms to regulate the non- Effective regulation requires a signatory testifies the fact banking financial and global strong powers, best-practice that the FSC meets the interna business sectors and hence rules and standards, appropriate tional standards expected of a achieving regional economic skills, a flexible risk-focused Securities regulator. Our expe development. approach to supervision, and rience, since then, has shown acceptance by regulators, go how cross-border coopera Delivering on our vernment, and the community tion and exchange informa objectives generally of the need to take tion for securities regulatory enforcement action against ins enforcem ent purposes, among Framing the operating titutions and individuals who signatories, are useful to environment do not comply with the law. To combating violations of secu The experience of the past few this effect, the powers of the rities laws. years has shown that the choice FSC were increased with the The regulatory agenda for of methods, priorities and timing view to improve compliance financial services are now being for execution are important. with the Code of Corporate set at an international level. As Overzealous regulation stifles Governance and reporting. The a member of the IOSCO, the entrepreneurship and a dis enabling Acts under which the International Association of proportionately high risk weight FSC operates mandate it to take Insurance Supervisors (IAIS) due to overestimated risks cons action against not only the and the International Orga tricts economic growth. The licensees but also individuals nisation of Pension Supervisors FSC endeavours to provide the acting on behalf of the licen (IOPS) which are standard right platform to investors for sees. A circular letter was issued setters for Securities regulators, doing business by striking the this year to remind directors of Insurance supervisors and right balance between relevant licensees and reporting issuers Pension regulators respectively, and fair rules and enforcement of their duties and obligations the FSC closely monitors the whilst striving to keep the cost under the law. The FSC is discussion and developments of compliance to a reasonable continuously reinforcing its re to ensure that we have the level. In addition, differing gulatory skills and approach
Global Finance 21 MAURITIUS the mauritius ifc
and building on its capacity is sent to the firm or individual, other jurisdictions. While it is to regulate and supervise. as quickly as practicable. Such acknowledged that cost of staff The Global Business Licence investigations may include, re is problematic (and finding is an important clearance to quest for documents or infor good quality staff is difficult) as ensure only the right businesses mation and interviews of wit well as a significant component operate in our global business nesses and subjects. The firm to the supervisory costs, the sector. Appropriate screening or individual who is subject FSC has improved significantly is performed at licensing so to investigation may make its effectiveness and efficiency as to allow only fit and proper written or oral representations. through capacity building and businesses to function within Following the investigation work, by streamlining its structure the regulatory purview of the there is an internal legal review of and processes. While most FSC. On this token, a harmo the case before an enforcement stakeholders are familiar with nized Code on the Prevention decision is made. While in most the Board, the Chief Executive of Money Laundering and cases, the FSC does not publicise and other members of the FSC’s Terrorist Financing and a Guide its investigations, the outcomes management team, many do to Global Business were issued may be made public where not understand the way the at the beginning of 2012. While appropriate. organisation operates and the the Code ensures a coherent importance of examiners / com understanding of the AML/ Surveillance pliance officers as drivers of the CFT (Anti-Money Laundering As the regulator, we cannot effectiveness of the organisation. and Combating the Financing compromise on regulatory The FSC is the whole team of of Terrorism) compliance by standards or the exercise of individuals who works as one all licensees, it also provides surveillance. During the pre to deliver on the vision and that operators in the Mauritius vious year, the FSC reinforced preserve the reputation of the jurisdiction understand their both its onsite and offsite sur Mauritius IFC as a safe and obligations at all times and veillance and increased en transparent jurisdiction. observe good business practices. forcement actions. The FSC adopts a risk-based supervisory Communications and consumer Enforcement (RBS) framework which ensures protection Whilst some regulators adopt that the limited resources are In its business model, financial an enforcement-led approach efficiently allocated to the most inclusion and consumer pro and direct a significant portion risky businesses, in view of tection is viewed as one of the of resources to enforcement maximising the desired impact. pillars of financial stability and activities, other regulators are The RBS framework also allows development. The FSC adopts more geared towards work done for continuous monitoring of a comprehensive approach in ‘prevention’ rather than ex- risks through effective tracking to consumer protection as an post enforcement actions. The and reporting systems. More important complementary role FSC adopts a prevention model over, systemic risks posed to prudential regulation in with greater emphasis on a by companies are regularly mitigating risks. This includes robust licensing framework and monitored through researches maintaining a conducive regu continuous supervision. The and studies. Furthermore, latory environment in terms FSC endeavours to prevent and the FSC operates in a matrix of laws and regulations which identify problematic issues early formula leveraging on project provide adequate protection to in the regulatory process. management techniques to consumers. In terms of regu However, despite a stringent ensure right mix of skills in the lation of conduct, the FSC licensing framework, cases do right projects at the right time. undertakes supervision to en arise when an investigation sure responsible behaviour by has to be carried out. Inves Competitiveness financial institutions. tigators are appointed and, There is a general view that A well-functioning con where appropriate, notice of costs of compliance should sumer protection regime pro appointment of the investigators not be onerous or different to vides effective safeguards for
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retail financial services con Thus, the FSC regularly posts novative international finan sumers while empowering alerts on its website to inform cial centre of repute committed consumers to exercise their le consumers about fraudulent to increasing its value pro gal rights as well as fulfil their operators and issues such as position to clients. This com legal obligations. Under its fair misuse of social networks and mitment is no more evident market conduct regulation, the the internet to commit financial than in the comprehensive and FSC is focusing on the three crimes. As part of its dispute focused consultative process main components that make resolution mechanisms, the that is followed year after year up the market that is people, FSC attends to the complaints in creating the best regulatory processes and products. To of consumers of financial and business environment in ensure the market meets the services. Information collected Mauritius. required standards in terms of forms part of the intelligence conduct, the FSC has embarked gathering process and is use on the competency framework ful in determining future regu for the sector. This entails latory actions. ensuring employees of licen In line with the inclusive sees dealing with consumers and consultative approach to possess the right qualifications, regulation adopted by the FSC, skills and experience. Further regular consultations / com more, it is imperative for all munication with stake-hol operators in the financial ser ders, industry partners and vices sector to abide by a Code professional associations are of Conduct. carried out. Feedback received Clairet t e Ah Hen Chief Executive A consumer protection shows that our ‘Outreach ses Financial Services Commission. regime that relies on full sions’ and current commu disclosures may mean very little nications are perceived as being to consumers that have neither of high quality and positively the capacity to understand the assessed. disclosures, nor the ability to exercise the appropriate choice L ooking forward between the products being The quality of regulation is offered. All financial products a crucial determinant of the contain risks and also offer competitiveness of the financial rewards. The FSC is working on markets to which it is applied. Guidelines for the Advertising Realising balanced regulation and Marketing of Financial is easier said than done. It Products to ensure customers requires continuous effort at are treated fairly when seeking every level. One major question information on financial pro is how consistently regulatory ducts. Service providers must reform will be implemented ensure disclosures are ex globally. If it is inconsistent, plained to the customer in such regulatory arbitrage may con a manner that allows the latter tinue to fragment overall finan to understand the returns, cial system stability. implic ations and risks involved However, what should be and subsequently make infor evident by the current and med decisions. recent changes brought to our The FSC practises proactive regulatory and supervisory regulation aimed at informing framework for financial services consumers of their rights and is that Mauritius remains a how to safeguard their interests. progressive, responsive and in
Global Finance 23 MAURITIUS
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Mauritius, the Financial Crossroads of the World Mr. Rundheersing Bheenick, Governor, Bank of Mauritius, delivered a lecture at the invitation of the Official Monetary and Financial Institutions Forum (OMFIF) in London. His talk examined the early development of Mauritius, the emergence of Africa and the role of small IFCs in the wake of the Cyprus tragedy. Due to space constraints we are reproducing here an extract on the case for small IFCs. The full version is available on the Bank’s website at www.bom.mu.
I. The case for smallI FCs, offshore banking II Cyprus: the knell for IFC’s? and tax planning facilities. There is no denying that the reputation of Small jurisdictions seem to have a comparative small country IFC’s has taken a severe blow in advantage as IFC’s. Historically, partly at least the wake of the Cyprus crisis. Cyprus incurred because of their size which limited other economic direct losses of the order of EUR 4 billion or activities, small states have been more open to the 23% of its GDP. The mind boggles at the thought world. This has allowed them to exploit emerging of our economies taking such a big hit because of niches and embrace global trends more rapidly malfeasance in our offshore banking activity. The than bigger countries. They have proved to be more austerity cure, imposed by the Troika, and the flexible than bigger economies and have adapted population’s reaction to it has added new jargon to more easily to changing circumstances. Both their the language of economic discourse. The thought populations and their GDP are but a tiny fraction of being “cypressed” strikes fear in the mind of of world population and world GDP. Faced with policy-makers in all small countries, not just IFC’s. limited options for development, many sought For most IFC’s, such a possibility is extremely to become Offshore Financial Centres (OFC’s). remote. Some attributed the crisis to the fact that OFC’s are generally defined as small, low-tax the Cypriot banking sector was disproportionate jurisdictions specializing in providing corporate to the size of the economy. This led to the policy and commercial services to non-resident offshore prescription of a quantitative limit on banking companies and for the investment of offshore assets of 3.5 times of GDP, arbitrarily proposed at funds. However, abuse in some jurisdictions has the EU level. With the benefit of hindsight, we can too easily and mistakenly fed the perception that assert that such a limit would not have prevented OFC’s are tax havens. Unsurprisingly, OFC’s are the kind of problems encountered by Cyprus. The the object of constant attack, especially from the truth lies in the fact that Cyprus was excessively OECD and the G20. They seem to have spawned exposed to Greece on the assets side and to Russia a cottage-industry of specialists regularly taking on the liabilities side. potshots at OFC’s. The lesson drawn from the Cyprus episode is We cannot ignore the fact that small country not that IFC’s have to slim down. I would rather IFC’s play an important role as conduits of argue that small country IFC’s need to exercise cross-border capital flows and investments. It is care in the conduct of their business, estimated that as much as half the world’s capital appropriately assess potential sources of risk and flows go through offshore centres. An estimated better manage their asset and liability mix. Both £13-20 trillion is hoarded away in offshore of these points are clearly illustrated in the next accounts. Small country IFC’s, with a little over two tables, which compare Cyprus banking ratios 1% of world population, hold 26% of the world’s and financial soundness indicators, with three wealth, and 31% of the net profits of United States other offshore jurisdictions including Luxemburg multinationals transit through them. and Mauritius. Malta and Luxemburg have 8
Global Finance 25 MAURITIUS the mauritius ifc
times and 17 times of their Table 1: Selected IFCs: Some Key Ratios GDP, respectively, by way of banking assets. But their FSI’s in Table 2 show that they had a % of GDP Cyprus Malta Mauritius Luxembourg more robust banking sector, as International 206 494 170 1,212 reflected for example by their Banking Assets non-performing loans – less Domestic Banking 466 295 112 362 than 0.5% for Luxemburg while Assets it was nearly 16% for Cyprus. Total 672 789 282 1574 The case of Luxemburg provides ample evidence of the solidity of the banking sector of a country Source: FSI Database, IMF; Fitch Ratings Communiqué, Bank of Mauritius even when its banking assets represent 17 times its GDP. The Table 2: Selected IFCs: Some FSIs short story is that the Cyprus Cyprus Malta Mauritius % 2012Q3 Luxembourg episode does have lessons for 2012Q4 2012Q3 2012Q4 other jurisdictions but it has no Regulatory Capital immediate relevance for most of to Risk-Weighted 9.41 14.31 17.20 19.05 them because they do not run Assets their banking and finance the Non-performing Loans to Total 15.51 8.09 3.78 0.34* way Cyprus did. It certainly Gross Loans does not mark the end of the road for solid, transparent, well- Interest Margin to Gross Income 87.81 62.28 65.17 10.42 regulated IFC’s. Non-Interest Expenses to Gross 89.53 45.70 38.61 30.78 III. Mauritius and its Income homegrown model of an IFC. Liquid Assets to 22.37 28.83 16.36 58.13 The Mauritius banking Total Assets sector assets are less than three Liquid Assets to times our GDP, lower than in Short-term 28.17 49.09 25.12 68.63 the sample, and evenly divided Liabilities between domestic and offshore
assets. The FSI’s show a sound Source: FSI Database, IMF * Latest available banking sector, well-capitalised and nearer Luxemburg on most measures with, for example, matter. By the late 1980’s, we of the models that inspired us non-performing loans at less had emerged from the tutelage – not least because our finan than 4%, half the level of Malta, of the Bretton Woods institu cial sector benefited from an and regulatory capital to risk- tions and a bevy of stabilisation increasingly-diversified and weighted assets at 17%, very and structural adjustment pro growing real sector and from close to Luxemburg’s 19%. We grams. The economy was fitter a multilingual pool of profes started on our offshore journey and on the lookout for new en sionals in accounting, law, mana in 1988. An earlier attempt, gines to power the next stage of gement, and finance. Financial a decade earlier when the growth, to add to sugar, export Intermediation today provides economy was about to go into manufacturing and tourism more than 2% of the total intensive care, proposed by a which were all doing well. employment in the country and Caribbean consulting company We drew on different models the trend is on the rise. unashamedly calling itself Tax as we set about developing, in We developed an extensive Haven International, was shot a phased manner, our home- network of Double Taxation down by the IMF which had grown model. This has proved Avoidance Agreements (DTAA) been called in to advise on the to be more resilient than some and Investment Promotion
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and Protection Agreements (IPPA) with several in 1982 and the bigger Indian Ocean Rim countries, both developed and emerging. Our Association for Regional Cooperation in 1995. We strategic location in the Indian Ocean proved to are committed to be an active player in regional be an added advantage which enabled us to carve cooperation. The Bank of Mauritius serves as the a niche in the region. When India started major Settlement Bank of the Regional Payments and economic reforms in the wake of the 1991 balance Settlement System of COMESA. Mauritius hosts of payments crisis, Mauritius which had signed a AFRITAC (South) – the 4th regional technical DTAA with India years earlier, seized the assistance centre of the IMF in Africa. The opportunity to emerge as the largest conduit of COMESA Fund and the Africa Training Institute foreign inflows to India averaging 43% of total of the IMF will soon start operations in Mauritius. inflows into the Asian giant over the past decade. The day is not far when Mauritius will obtain The most important provision in the DTAA observer status in the Eastern African Community between India and Mauritius has been that the and ASEAN. Our vision to become a bridge capital gains earned by a company resident in between rising Asia and Africa is something that Mauritius on disposal of shares of an Indian we have been patiently working on for several company are tax-exempt in India. As a conse decades. A visible outcome is the fact that nearly quence, Mauritius has enjoyed a prominent place half of our GBCs have been used as vehicles for in tax treaty planning of private equity players, investment in Kenya, Mozambique, Zimbabwe multinationals, and global fund houses investing and South Africa. into India. We adopted high standards of rigorously- Our banking sector enforced regulation proposed by the Financial Little did we know how radically we were Action Task Force, the Organisation for Econo going to transform the financial landscape when mic Cooperation and Development (OECD) we adopted in 1988 banking legislation to enable and the International Monetary Fund (IMF). We offshore banking. That was just 25 years ago. We go beyond merely applying those international then had 13 banks, all involved in domestic norms; we are also committed and cooperative banking. By 1998, the numbers had changed to partners in compliance legislation. Our efforts 10 domestic banks and 9 offshore banks. The paid dividends – OECD placed us on its white sector was quite dynamic. By 2002, after some list which means that our jurisdiction has subs consolidation, there were 10 domestic banks and tantially implemented the internationally-agreed 12 offshore banks when there were also 221 tax standards. More recently, we have initiated offshore funds and around 19,350 Global consultations with the US Revenue Authority to Business Licence (GBL) Companies. The offshore become FATCA-compliant. Mauritius has also banks employed around 170 persons and their adopted tax information exchange protocols to assets amounted to 94% of our GDP. In 2005, allow foreign countries to investigate suspected tax evasion. As a small, isolated, island, we lost no oppor tunity to join regional economic groupings. When some of our needs were not met by exis ting bodies, we set about creating others, and two of these are actually headquartered in Mauritius. Mauritius joined the Common Market for Eas tern and Southern Africa (COMESA), having been a founder-member of its precursor, the Preferential Trade Area. We joined the Southern African Development Community (SADC), at the same time that SADC opened its doors to post-apartheid South Africa. We initiated the short process that culminated rapidly in the establishment of the Indian Ocean Commission
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we distinguished ourselves from other OFC’s who scapegoat Mauritius as an expiatory target by introducing a single banking licence. We in their “bring black money back from overseas adopted Segmental Reporting requiring the campaign”. disclosure of financial information on two Teflon-like, Mauritius stoically shrugs off distinct segments of banking activity – Segment these attacks as it does not practice a culture of B for banking business giving rise to “foreign opacity. Mauritius has always been more than source income”, and Segment A for all other willing to share information with the banking banking business. Today, we have 21 banks and tax authorities of partner-countries. That is operating in our jurisdiction, all involved to why attempts from various quarters to qualify varying degrees in cross-border banking Mauritius as a tax haven have not succeeded, activities. Some have extended their footprint any more than veiled threats from OECD to put beyond our shores, setting up operations in the Mauritius on its grey list. Many cling to the view region. Our banking sector assets represent that all IFC’s are tarred with the same brush and around 3 times our GDP. There were nearly perpetuate the myth of Mauritius, the tax haven in 25,000 GBL companies and their deposit base at the Indian Ocean. Mauritius is a global facilitator the end of 2012 represented around 39% of total with unparalleled transparency, and serious banking deposits. There is a long way to go before credentials, and not the answer to round-tripper’s we reach the size of other small IFC’s. dream. Our banks perform well and have proved to be very resilient. They have contributed in no I V. Mauritius - an IFC with a difference small measure to the resilience of the Mauritian The challenge confronting Mauritius now is economy. The robustness of our banking sector perhaps its toughest since it embarked on the is itself the result of prudential measures adopted offshore business a quarter century ago. It is one in a timely manner over the years. The Global thing to be a competitive back-office hub and Competitiveness Report 2012-2013 provides an efficient conduit for capital flows to India a good indication of the health of the sector. It and Africa, but it is quite another to become ranks the Mauritian banking sector 15th out of 144 a significant value-added platform, effectively countries in terms of the soundness of banks, and enhancing South-South trade and investment. 35th in terms of financial market development. In The name of the game now is greater substance the ranking of the African Banker magazine, seven and more value addition. Depressed conditions Mauritian banks figured among the top 100 banks in the crisis-hit West, coupled with slowdown in Africa in 2012. This is no mean achievement if in India, have forced Mauritius to target other we consider that the Mauritian GDP adds up to a markets to grow its export of goods and services. grand total of one-fifth of one percent of African Fortunately, the next growth frontier that is G D P. Sub-Saharan Africa is just next door. Africa has I just walked you through some of the initiatives, definitely turned the corner. measures and policies adopted by Mauritius in its quest to become an IFC of international repute. What does the future hold for Mauritius? Notwithstanding our best efforts sustained Before Mauritius can move up the value chain, over decades to keep our jurisdiction clean, the it needs to recognize its limitations. It is a small Mauritian offshore sector has been constantly country, with limited resources and it needs to do under attack, both from official quarters and things differently. Mauritius cannot afford to be a from unofficial self-appointed vigilantes. India common, garden-variety, IFC, undistinguishable has undoubtedly benefited from increased FDI from a dozen others. It must seek, at all times, to through the so-called “Mauritius Route”. This be increasingly an IFC with a difference. For this has not prevented the DTAA between the two to happen, it needs both scope and scale. To add countries from regular attacks in the Indian press, value, it needs foreign investors not only to invest which often look suspiciously like part of a “dirty- through Mauritius but increasingly with Mauritian tricks” campaign by a competing jurisdiction investors. And for this to happen, we need to show when, that is, they are not being fuelled by holier- substance by bringing both knowledge and seed than-thou Indian politicians on the campaign trail capital on the table. Mauritius can become the
28 Global Finance MAURITIUS the mauritius ifc
private equity vehicle of choice for small- and Mauritius has made major strides during the medium-scale projects in the Eastern and two last decades to become a bigger regional Southern parts of Africa within sectors where it financial centre. Compared to other small IFC’s, has a comparative advantage. we still have a long road to travel to become what The country does not have the know-how or Singapore is to Asia or Luxemburg to Europe. financial clout to finance oil exploration, power We have always strived to live up to the “fit and plants, aluminum smelters or mining projects. proper” image of a reputable jurisdiction. We But, it has already demonstrated that it can be the have tried hard to be a jurisdiction of substance. ideal vehicle for such investments as medium- We can confidently lay claim to be the best in sized clinic in Uganda, a bank in Kenya, a sugar our class, a target that has constantly been in our mill project in Tanzania, a stone-crushing plant sights since the very beginning. We collaborate in Sri Lanka, or textiles in Bangladesh. You do fully with all global stakeholders of the financial not need huge sums of capital to set up a chicken world – OECD, FATF, IMF and the like. Current farm in Madagascar or Mozambique or to offer attacks on offshore jurisdictions coming from the Mauritian savoir-faire to the booming hotel G20 do not pose a particular problem as long as industry of the region. Investors in the big-ticket there is level playing field across jurisdictions and projects of the continent, who tap the myriad of transparency is upheld through well-coordinated large US, European and Middle Eastern private exchange of information. There is no dearth of equity funds, can still find it convenient to use the growth opportunities for the Mauritian IFC from Mauritian IFC platform to package, administer Aspiring Africa next door, and the prodigious and route their investments. But for investors developments expected in Asia. There is increasing looking for diversification from the same old demand for reliable and trusted products and investment themes, and seeking to capture Africa services for efficient tax planning as there is for from the bottom-up, Mauritius can be the ideal better packaging and distribution of investments platform. Mauritian banks are increasingly with greater real sector involvement. Mauritius interested in forming partnerships with small is positioning itself to make the most of these - and medium-sized banks in the East African opportunities. Community but their relatively small size and current Capital Adequacy Ratios mean that they Mauritius: the Financial Crossroads of the need more funding. world? There is a strong case to pool together available Probably not. But quite possibly a financial know-how and seed capital to build the critical crossroad, along with several others, meeting a mass required for larger projects, diversify risks, real need of investors, savers and corporates from and leverage external funding. Mauritius has been all over the world. Not a bad prospect for a country toying with the idea of setting up a sovereign that was exuding such “an air of hopelessness” only wealth fund which could become a source of half a century ago! equity funding for a more aggressive move into Africa. There is scope for increased public-private partnerships, which are still a rare phenomenon on the continent. The African Development Bank has floated the idea of an African Infrastructure Mr. Rundheersing Fund, financed partly from central bank reserves. Bheenick, It will be setting up an office in Mauritius this year. Governor There is truly a ferment of investment and finance Bank of Mauritius activity in, and around, Mauritius. All this leads me to conclude that there are bright days ahead for the Mauritian IFC because it is an IFC with a difference. Its thriving real economy means that offshore activities are only a small chunk of the panoply of activities going on in the country.
Global Finance 29 MAURITIUS
the mauritius ifc
Using a Mauritius Trust/Foundation in International Tax & Estate Planning
Although Mauritius is better known as a gateway for the structuring of investments into India and more and more in Africa, it is also increasingly being used by professional advisers and their high net worth clients as a jurisdiction of choice for private wealth management services. The recent enactment of the Limited Partnership Act and the Foundations Act has widened the choice of structures available to wealth management specialists in the context of private wealth management.
Trusts Versus Foundations raditionally, “trusts” have been the preferred plannin g tool in the context of wealth management planning for high net worth families. A well structured trust can be very effective, allowing for a number of advanced tax and estate planning strategies. Trillions of dollars’ worth of assets are held through trusts worldwide. Trusts have a very long history – indeed the trust idea originates from the medieval times and personal trust law developed in England at the time of the T th th Crusades, during the 12 and 13 centuries. Foundations on the other hand are a new-comer to the world of financial services but are being increasingly considered by practitioners in the context of Private Wealth Management and/or for charitable giving. The Private Foundation finds its origin in 1926, when Liechtenstein created the Family Foundation by the Law of Persons and Companies. Today, there are a number of jurisdictions includin g Mauritius which have enacted a law on private foundations.
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Key Features of rusts are one of the most benefit one or more persons or This ensures that all trusts are Timportant wealth management objects within a class of persons professionally managed. tools used by the Super Rich all provided they are not resident Trusteeship can also be split into over the world. Trillions of dollars’ in Mauritius. This means that a a Custodian and Managing Trustee worth of assets are held through charitable Trust may be set-up, and Private Trust Companies may trusts worldwide. This is because for example, for the advancement be set-up to act as Trustee for a a Trust is able to deal with most of education the client’s children particular Trust or group of related matters that are relevant in PWM provided that the latter are not (underlying) Trusts and which does and which include: resident in Mauritius. not need to be licensed as a Trustee. • Preservation of family property Professional trusteeship and and protection against risk Trust Creation trust administration services • Tax planning (which may A trust may be created by a would generally be provided by include inheritance and / or disposition of property intervivos Mana gement Companies which capital gains) or by will, or by holding property are specifically licensed by the • Avoidance of forced inheritance on trust but shall be of NO effect Financial Services Commission of laws or probate formalities unless created by an instrument Mauritius to provide such services. • Succession & Business Planning in writing. By law, the instrument creating a trust shall contain at Protectors The Mauritius Trust has all least: The Trusts Act allows for the the attributes for use in wealth • the name of the trustee; appointment of a protector to a preservation and management • the intention of the settlor to Trust to advise the trustee of the and has been the cornerstone create a trust, or the declaration trust, and with such additional po of its PWM offering since 1989 of the trustee that he holds prop wers as may be conferred by the when the first Trust Act (which erty on trust; trust instrument. Unless otherwise was an updated and improved • the object of the trust, the bene provided in the terms of the version of the English Trustee Act ficiaries or class of beneficiaries, trust, the protector shall have the 1925) was enacted. In 1992, the as the case may be; following powers: Offshore Trusts Act was enacted • the property transferred or held • to remove a trustee and to to specifically provide for many of on trust; and the duration of the appoint a new or additional the desirable features prevailing trust. trustee; in other offshore jurisdictions. In • to determine the law of which 2001, a new modern and forward Confidentiality jurisdiction shall be the proper looking Trust Act was enacted. The There are no registration or law of the Trust; Act contained most of the desirable filing requirements for a trust and • to change the forum of adminis features prevailing in other offshore confidentiality is enshrined in the tration of the Trust; jurisdictions but also brought about provisions of the Trusts Act. There • to withhold consent from speci a number of innovative features can be no disclosure in the absence fied actions of the trustees either paving the way for Mauritius to of a court order and the Trusts Act conditionally or unconditionally. become an important jurisdiction clearly defines the situations when • that the exercise by the trustees for estate planning. In particular, the Court or the Judge in Chambers of any of their powers and the following are interesting shall make an order for disclosure discretions shall be subject to the features of a Mauritius Trust: or production of any confidential prior consent of the protector. information Types of Trusts Anti-Attack Provisions The Trust Act allows for the Management & Administration The Trust Act includes provisions setting-up of a multitude of trust Every Trust set-up in Mauritius aimed at preventing a trust from types including fixed, discretionary, must have at least one qualified being attacked on the basis of suc spendrift, charitable purpose, trustee which is defined as a ma cession rights, marriage or divorce non-charitable purpose and sharia nagem ent company or such other and insolvency of a settlor or compliant trusts amongst others. person resident in Mauritius as beneficiary. This allows a Mauritius In respect of charitable Trusts, they may be authorized by the Financial trust to be set-up specifically for may also be set-up to privately Services Commission of Mauritius. asset protection.
32 Global Finance MAURITIUS the mauritius ifc the Mauritius Trust Accounts & Records A resident trust is taxable on its number of possible uses, including A Trustee needs to keep pro chargeable income at the rate of 15% but not limited to: per books of accounts (but no per annum. However resident trusts • Accumulation & Preservation of requirem ent for audited financial may apply for a Category 1 Global Wealth statements) and keep its records in Business License (GBC1) which • Succession planning Mauritius. results in such trusts being taxable at • Asset Protection the rate of 0-3%. • Tax Planning Migration/Redomiciliations In addition, such trusts may • Off balance sheet transactions It is possible for a Trust esta avail of the benefits under the va • Corporate finance/asset financing blished under the law of another rious Double Taxation Avoidance • Securitization State to change its proper law to that Agreements (DTAA) that Mauritius of Mauritius. Foreign Trusts may has signed and ratified with a num Although there are a number also where allowed by their proper ber of jurisdictions worldwide of simi larities between trusts and law to have a Mauritian Trustee. leadin g to interesting tax planning foundations, there are also many dif opportunities. ferences. The Foundation arguably Tax Planning Opportunities has all the advantages of a trust The Income Tax laws make a Potential Uses of the Mauritius but very differently to a trust, it is a distinction between resident and Trust legal entity in its own right and can non-resident trusts. On the basis of the foregoing, it therefore own assets directly. This A non-residen t trust is a trust of is thus not surprising that a number is perhaps the most defining cha which the settlor and the beneficiaries of HNWI already use a Mauritius racteristic of a foundation as com are not resident in Mauritius. Such Trust for estate, succession plan pared to a trust and perhaps one of trusts are not subject to taxation in ning and family office services. the key advantages of foundations Mauritius. A Mauritius trust can be put to a over trusts.
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Key Features of oundations are gaining in Registrar of Foundations. TheHowever there is no requirement Fpopularity and appeals in par following particulars extracted from for that member to be licensed. ticular to clients based in civil law its Charter will need to accompany A Foundation also needs to territories where they are less familiar the application for registration: appoint a secretary which needs to with the trust concept. The legal • The name of the Foundation; be an organization licensed by the framework in respect of foundations • The date of the Charter; and any Financial Services Commission of is contained in the Foundations Act amendment made to the Charter Mauritius and have a Registered 2012 and the following are the key before its submission to the Office in Mauritius. features of a Mauritius Foundation: Registrar; Management Companies (MCs) • The purpose and objects of the which are service providers licensed Types of Foundations Foundation; by the FSC to manage and provide The Act allows for Foundations • The date of the Articles, if any, corporate & fiduciary services to be set-up to benefit persons, a of the Foundation and any would generally provide secretarial, class of persons or to carry out a amendments made to them before registered office and professional purpose which may be charitable, its submission to the Registrar; councilor services. non-charitable or both. As is the • Name and address of the founder; case for charitable trusts, charitable • Details of the beneficiaries or the Legal Personality foundations may also be set-up to manner in which the beneficiaries A Foundation duly registered privately benefit one or more persons may be appointed or removed; and issued with a certificate of or objects within a class of persons • The name and address of the registration by the Registrar creates, provided they are not resident in secretary; in law, an entity with specific juridical Mauritius. • The name and address of the personality, enjoying aspects of Council Members; corporate ability. A Foundation Name of a Foundation • The address of the Registered can thus sue and be sued and hold Every Foundation should have Officef o the Foundation; property in its name. a name which has to end with • The period, if any, for which the either with the word “Foundation” Foundation is established. Protectors or a word in a foreign language The Act allows for the appoint which has the same meaning as the Confidentiality ment of a protector or committee of word “Foundation”. Furthermore, Although Foundations need to protectors by a Foundation. It also a Foundation cannot use the word be formally registered, there is no allows the Charter to determine “limited”, “company”, “partnership”, requirement for the Foundation what shall be the powers and duties “Société” or an abbreviation or a Charter to be registered but for of the protector or committee of translation of these words. The minimum information extracted protectors. inclusion of certain words which from it. Information filed in respect suggests, or is likely to suggest the of offshore foundations (i.e. one Anti-Attack Provisions patronage of the Government, founded by a non-resident of The Foundations Act includes a statutory corporation, a local Mauritius) is not available for public provisions aimed at preventing authority or the Government of any inspection. a trust from being attacked on other State requires the consent of the Additionally, confidentiality of the basis of succession rights, Minister of Finance. The Registrar information is enshrined in the Act marriage or divorce and insolvency can also refuse to register names and disclosure is permitted in very of a founder or beneficiary. This which are undesirable or misleading. limited circumstances. allows a Mauritius Foundation to be set-up specifically for asset- Creation of a Foundation Management & Administration protection purposes. A Foundation may be created Every Foundation must have inter vivos or by will. However, a Council which shall administer Accounts & Records a Foundation will not have legal the property of the Foundation A Foundation needs to keep personality unless it is registered and carry out the objects of the proper books of accounts (but no re and been issued with a certificate Foundation. The Council must be quirement for audited financial state of registration by the Registrar comprised of at least one member ments) and keep its records in of Companies which acts as the ordinarily resident in Mauritius. Mauritius at its registered office.
34 Global Finance MAURITIUS the mauritius ifc the Mauritius Foundation Migration/Redomiciliations trust. This means that foundations Conclusion It is possible for a Founda may be more appropriate to hold Initiatives on the regulatory tion established under the law of assets which are “wasting” or front, coupled with the measures another State to make an application subject to volatility in value. In and policies implemented by the to re-domicile in Mauritius as traditional trust structures, careful government and continued inno a Foundation established and drafting of the trust instrument is vation have contributed in making registered in Mauritius. often necessary where the purpose Mauritius the undisputed centre of the trust is to hold a single asset Taxation of Foundations such as a business, or exotic assets for private wealth management Mauritius income tax law makes such as an artwork, an airplane services in this part of the world. a distinction between a resident or a boat. Given the trustee’s duty Foundation and a non-resident to diversify, act prudently, and in Note: This article is intended to provide general Foundation. A Foundation will be the best (financial) interests of the information only. It is not intended to offer, non-resident when the founder is a beneficiaries, trustees are often nor should it be interpreted as offering, legal advice. You must not act upon the matters non-resident and all the beneficiaries nervous about holding such assets. referred to in it without taking specific advice. appointed under the terms of a Foundations may become the charter or a will are, throughout preferred vehicle for such assets. an income year, non-resident in It will be possible to establish a Mauritius. Foundation specifically to hold A non-resident Foundation is such an asset and the Council will exempt from taxation in Mauritius. not be subject to the same duties A resident Foundation will taxable as trustees. The Council’s duty on its chargeable income at the rate will be to ensure the object of the of 15% per annum but can apply for Foundation (namely the holding of a Category 1 Global Business License the asset) is achieved. (GBL1). A Foundation with a GBL1 It is also a much more effective Assad Abdullatiff is the will be taxed at the maximum rate financial planning tool for those Chief Executive of AXIS Fiduciary of 3% and will also be able to access clients who want to maintain more Ltd. Assad holds an LLB (Hons) and benefits under Double Taxation personal control of the assets. an LLM in Business Law. Assad is a Avoidance Agreements (DTAA) Frequently trust deeds will be full member of the Society of Trust that Mauritius has entered with a drafted with an express reservation and Estate Practitioners (STEP), a number of jurisdictions paving the of powers in the hands of the settlor member of STEP Council and past way for interesting tax planning of the Trust (or a third party of Chairman of the STEP Mauritius opportunities. his choice), the most common branch. power to be reserved being that of Potential Uses of a Mauritius investment. Foundation However, case-law has shown Foundations have some of the the danger of settlor reserved attractions of a trust vehicle and can powers, often leading to sham thus potentially be used for purposes arguments and other problems. that trusts are used as described Most importantly, the performance above. However, compared to the by a settlor of a reserved power trust which is a common-law con does not disengage the trustee from cept, the Foundation will appeal to its fiduciary duties. The attraction clients based in civil law territories to using a Foundation as opposed where they are less familiar with the to a trust where the power to direct trust concept. investments is to be reserved is that Because the Foundation is the overriding duty to monitor the an independent legal person, performance of the investment assets may be directly held by a to which a trustee is subject is Foundation unlike a trust where not one to which the Council of a the assets are held by the trustee on Foundation will be subject.
Global Finance 35 MAURITIUS the mauritius ifc
27
29 20 07 01 12 06 05 43
09 04 35 03 42 19 17 10 36 34 37 18 32 08
28
22 41 24 14 38 23 33 31 40
21 15 39 30 02 26 13 16 Mauritius 11
25
Double Taxation Avoidance Agreements Key :
1. Belgium 9. Italy 17. Nepal 25. South Africa** 2. Botswana 10. Kuwait 18. Oman 26. Swaziland 3. China 11. Lesotho 19. Pakistan 27. Sweden (NEW) 4. Croatia 12. Luxembourg 20. Russian Federation 28. Thailand 5. Cyprus 13. Madagascar 21. Rwanda** 29. United Kingdom 6. France 14. Malaysia 22. Senegal 30. Zimbabwe 7. Germany (NEW) 15. Mozambique 23. Singapore 31. Uganda 8. India 16. Namibia 24. Sri Lanka 32. Barbados 36 Global Finance MAURITIUS the mauritius ifc
27
29 20 07 01 12 06 05 43
09 04 35 03 42 19 17 10 36 34 37 18 32 08
28
22 41 24 14 38 23 33 31 40
21 15 39 30 02 26 13 16 Mauritius 11
25
DTAAs awaiting Ratification Key :
33. Seychelles 39. Zambia 1 Russia 34. United Arab Emirates 40. Kenya 2 Republic of Congo 35. Tunisia 41. Nigeria 3 Kenya 36. Qatar 42. Egypt 4 Nigeria 37. Bangladesh 43. Monaco 5 Egypt 38. Republic of Congo 6 Monaco 7 Rwanda* 8 South Africa* Global Finance 37 MAURITIUS the mauritius ifc
Mauritius, A Preferred Destination
A beautiful small A ttractiveness Taxation Avoidance Agreements island nation, recent report of the (DTTA) and also Investment pro Mauritius is a World Bank has placed motion and Protection Agreements Mauritius at number 17 (IPPA). preferred destination among over 150 coun for a growing Atries in the “Ease of Doing Business E conomic growth number of business Report” and the first among African Mauritius is one of the fastest countries. Factors such as social, growing economies and highest community and economic and political stability, GDP per capita in sub Saharan tourists from all modern and reliable infrastructure Africa and is emerging as a fast over the world. available, the sound legal frame growing economic center in the The intentions and work and simple operational frame region. The mono crop economy work make Mauritius an attractive heavily reliant on export of sugar interests of the destination. BOI is a one stop shop has been transformed into a diver people preferring for investors. There are Business sified vibrant economy having Mauritius as a Friendly platforms and setting up business within 3 days is possible. destination are It is an enjoyable place to live and varied in sectors work. The geographical location of such as Banking Mauritius between two fast growing & Financial economies such as Africa and Asia is a distinct advantage. A full Services, Tourism working day in Mauritius has also and Education & a convenient overlap with some Knowledge Hub. working hours of Asia and Europe in the early part of the day and The Government later part of the day in Mauritius has been promoting respectively. Mauritius OECD (Organization for Eco successfully in nomic cooperation and Develop ment) has placed Mauritius on attracting investors, its “white list” which indicates tourists and that the internationally agreed tax knowledge partners standards have been substantially implemented. The financial crisis of & students in these 2009 had only a low adverse impact sectors, respectively. on the economy of the island due to prudent policies and steps that have been taken earlier. The World Bank and other international observers appreciate the sound economic policies which have led to balanced growth and inclusive development. There is a growing list of countries with whom Mauritius has Double
38 Global Finance MAURITIUS the mauritius ifc
pillars such as banking & transparent and well regulated Mauritius. For two decades till financial services, tourism, In system. 2005, the FDI was about Rs one formation & Communication This is a preferred destination billion per year. It jumped to Techn ology and export oriented of Multinationals, International Rs 40 billion in the year 2006. manufacturing. Banks and Financial Institutions, It was Rs 9 billion in 2009 and The contribution of the Global Investment Funds and Rs 14 billion in 2011. The steady Financial Sector to the eco Private Equity Players. Investor stream of FDI continues with nomy in Mauritius is quite friendly environment, 100 % recent figures at Rs 2.7 billion significant. Banking, Insurance, foreign ownership, low tax for the first quarter i.e January Capital Markets, offshore and rate of 15 %, tax free dividend, to March 2013. other Financial intermediary no capital gains tax, free The other prominent sectors components have undergone repatriation of capital, dividend contributing to the thriving the needed changes to keep and profits have encouraged economy are Tourism, ICT, pace with the globalization. a large number of players to BPO, Construction, Textiles & The financial sector contributes make Mauritius a right invest Garments, manufacturing, Ex about 13 % of the GDP and is ment location. These foreign ports, Seafood industry, Health growing at an average rate of firms have shown their con care, Knowledge and so on. over 8 % per annum. Mauritius fidence in Mauritius. Present inflow of tourists is has emerged as an International The reforms carried out in around 94 0000 per year. The Financial Center (IFC) with the financial sector in 2006 sum is expected to double by the a difference based on a solid, have attracted sizeable FDI in year 2020.
Global Finance 39 MAURITIUS the mauritius ifc
Foreigners find Mauritiushas been successfully imple Dubai offers facilities at Dubai attractive for doing business for mented by countries/cities such Knowledge Village (DKV) and various reasons stated above. as Singapore, Dubai, Malaysia, Dubai international Academic Availability of professionals, qua Hong Kong, South Korea, Qatar, City (DIAC). Excellent infras lified persons who speak English and the republic of Panama. These tructure there includes 18 million & French is yet another advantage. countries pose a huge challenge square feet campus. Dubai has The population of multicultural to Mauritius in becoming an attracted 37 branch campuses of origins such as India, Europe, Education Hub. Most of these foreign universities and students Africa, China is friendly. The competitors are not too far from of 137 nationalities pursuing over work culture is moving toward Mauritius and have the early 400 higher education programs. 24x7 economic model needed for mover advantage. The secrets A student hub arranges va the ICT & BPOs. of their success are not difficult rious events such as sports, With all that has been said to understand at all. One can social cultural events for stu above along with an abundance appreciate the 3 major success dents and looks after their visa of natural beauty, greenery, land stories in Singapore, Dubai and requirem ents. Besides the acade scape dotted with mountains, Malaysia. mic institutions, there are about beautiful beaches, tropical forests, Singapore has about a 100,000 450 foreign firms specialising in the island is truly a paradise. students at present and is aimin g the areas of Human Resources, No wonder, the national Coat at becoming a “Global school Research & Development, trai of Arms describes the country house”. The education sector ning and consultancy. Some of as The Star and The Key of market there is estimated at the comm on factors behind these TheI ndian Ocean. And now it US $ 3.7 billion. It is poised to successful education hubs are legitimately wishes to position become a global talent hub by infrastructure, hostel accommo itself as a regional Knowledge attracting more students, faculty, dation, land at concessional Hub. researchers and professionals. price, research infrastructure and They have been building indus funding for research. Towards a Knowledge Hub try relevant capabilities through Mauritius is fast emerging the education programs aligned as regional Knowledge Hub or with various economic sectors. Education Hub and gateway “Universitas 21” has placed to foreign students. There is Singapore at serial number 11 a potential to become a cen among 45 countries in terms Na ter for higher learning and tional Higher Education System. excellence. Offering, open and The parameters on which the distance learning, e-learning to ranking is done are – resources, the rest of the African coun environment, connectivity and tries is a potential growth area. output. Dr. Dhananjay Keskar Amity Institute of Higher Edu Neighboring country Malay Director cation (AIHE) is attracting a sia is not far behind, in terms Amity Institute of Higher Education (AIHE) Mauritius large number of students from of number of students which is Mauritius and African Countries estimated at 90,000 at present. B.E. (Mechanical), MBM (AIM, Manila), Ph.D, FIMA as well as other Asian countries. They have an ambitious aim of Dr. Keskar has 28 years of top And Amity is not the only ter taking the number to 200,000 by level corporate experience. Four tiary institution present in Mau 2020. They have two locations management cases developed by him are accepted by ECCH (European ritius. The Government aims at where the infrastructure is case Clearing House). Dr. Keskar has attracting 100,000 students by available. One is the capital of also been recognised as Fellow by the year 2020. This will require a the country which has Kuala ALL India Management Association. major leap frog from the present Lumpur Education City (KLEC) strength of just around 1500. which spreads over 500 acres and The concept of promoting a the other is Educity at Iskandar country as an Education Hub near Joha Baru.
40 Global Finance MAURITIUS ongratulations to GFM role in enabling these companies for the first issue of focus on their core activities. Our this journal. With the primary role was traditionally to mandate of GFM in take care of our clients’ fiduciary, Cmind, which is to speak on be administrative and compliance half of the industry, we thought requirements. However, over it could be interesting on this the past few years, we have been occasion to ask a few of our consistently adding to this and global business clients to brie we are now very proud to have fy describe the activities they successfully contributed to the are carrying out in Mauritius setting up of more elaborate through their GBC1 and with operations in Mauritius for the help of ABAX. numerous clients. We are convinced that building Beyond the traditional acti awareness on the wide variety of vities of trading and investment Richard Arlove business activities that GBC1s holding, our clients have been Chief Executive Officer of Abax are already carrying out will help using their Mauritius companies dispel misconceptions about the as regional headquarters often Mauritius Stock Exchange, or sector. It can give a broader and providing services to other group providing them with IT services more realistic picture of how the entities, such as the running of and hosting of their servers in attributes of our international sales offices, procurement offices, our data centre. financial centre are helping these providing treasury services, pay Last but not least, we have also companies do business more roll and HR administration and assisted some of our clients in effectively here and in other Intellectual Property services. relocating their own personnel to countries where they operate. We have also been advising Mauritius, as well as in actively While these snapshots do just clients and assisting them to seeking and seizing opportunities ice to our jurisdiction as a well source trade finance or other on the local market as proof of regulated and competitive hub, forms of finance from banks and their being part of the Mauritian they also underscore the ABAX other institutions, to list on the economy.
AFGRI is a leading listed South African its expansion into the rest of Africa just short Group specialised in agriculture and food. The of two years ago. This initiative reached a company is active across the continent where milestone when AFGRI Mauritius Investment it is constantly on the lookout for new business Ltd opened its doors in Black River Business opportunities. AFGRI is focused on the revival Park on 1 June 2013. of the continent’s agricultural sector and is AFGRI has decided to utilise its dormant specifically interested in making a contribution subsidiary in Mauritius to house its expansion towards food security for Africa by expanding its initiatives for the continent. Many international core grain-based footprint across the continent. players have approached AFGRI to become A strategic decision was made by AFGRI their enabling partner into the agricultural to effectively manage its international busi industry of the continent as AFGRI is considered ness from Mauritius. AFGRI established a to be a well-defined, experienced, focused and dedicated business development team to drive integrated operator in the agricultural space.
Global Finance 41 MAURITIUS Access to dedicated funding for the A centralised services function for all AFGRI’s development of the agricultural industry in continental operations may also be set up at a Africa will be enhanced by using the Mauritius future date, should it be considered viable. In the jurisdiction as most of the challenges non- same vein, AFGRI is looking to set up AFGRI investment grade countries face are removed Mauritius Financing, a subsidiary that will and investors can invest in an integrated provide finance to support equipment rental to agriculture business with interests in many farmers in countries where AFGRI does not have African countries. direct lending capability. Mauritius does not have any exchange control In summary, AFGRI realises the untapped regulations. A treasury function will be put in agricultural potential in Africa and recognises place in Mauritius to manage and control the that its presence in Mauritius can help the Group financial assets and liabilities of the combined play a key role in the revival of agriculture on the investments of AFGRI on the continent. continent.
Founded in 2001, Arysta LifeScience is one of out all the Arysta business consulting in Africa. the world’s largest privately held crop protection Arysta LifeScience offers a comprehensive range and life science companies. It focuses on the of solutions for Vector control with a proximity development, marketing and distribution of service all across Africa. The company is innovative, high-quality chemical solutions for engaged with all the major players involved in today’s dynamic agroscience and health and improving health care and its delivery on the nutrition science marketplace. With a focus on continent. emerging countries and niche markets, Arysta Responding to the changing of today’s LifeScience manages a portfolio of more than dynamic market place, Arysta LifeScience is 200 active ingredients. In addition to its Tokyo keenly sensitive to the responsibilities that come headquarters, the company maintains more with delivering necessary and valuable products than 40 offices and subsidiaries that serve 125 around the globe. countries worldwide. In line with its new business model, Arysta As a group, Arysta LifeScience organises its LifeScience Mauritius has been running its offices business in many business units, one of them in Mauritius with personnel at top management, being the Africa and Western Europe business middle management and administrative support unit which is managed from Mauritius. Initially levels. To date, the CEO of the Africa Western created as an investment holding company, Europe Business Unit has relocated to Mauritius, Arysta LifeScience Mauritius Ltd has been and so have the Group Purchasing Manager and reorganised so as to centralise some of the the Head of Sugar Technology. In addition to management, procurement and trading activities supporting the group’s sugar related activities, of the Africa region. the latter will also be collaborating with the local In this business model, Arysta LifeScience sugar sector. Mauritius is the main entrepreneur. It purchases Arysta LifeScience Mauritius has plans finished goods from producers and resells them to integrate the local research and business to the distribution entities, namely but not spheres. The company has made contact with restricted to Arysta LifeScience in South Africa, the Mauritius Sugar Industry Research Institute Kenya, Tanzania and Mozambique. Arysta for collaboration on the development of new Mauritius also purchases raw materials from products. In the same vein, contact has been various sources and countries. Additionally, made with local wholesalers and distributors Arysta LifeScience Mauritius is a hub for all whilst possibilities of collaboration with the public health businesses in Africa and carries Ministry of Health are also being scrutinized.
42 Global Finance MAURITIUS “The quality of the technological infrastructure offered by Mauritius has prompted us to host all our servers and concentrate all our technical activity there.” Hervé Tairou, Founder and CEO of eMoney Solutions, a Mauritius headquartered pre-paid payment solutions provider with operations in West Africa.
As a new era dawns on the African continent, concept to be protected. Consequently, eMoney African entrepreneurs with international know- registered its Intellectual Property centrally in how and expertise are beginning to bring in Mauritius to protect it as well as to license out tailored solutions to real African problems. One its franchise and collect royalties from other such solution has been the introduction of an operators in Africa. innovative pre-paid payment solution in seven West African countries to address the needs of a 2. Investment and business structuring stratum of the population which does not have eMoney Solutions has structured its investment access to banking facilities. The solution proposed in various subsidiaries through Global Business by eMoney enables people to transfer money or to Companies in Mauritius. Aside from making pay utility bills electronically even if they do not business sense and mitigating risk, this provides have a bank account or bank card or not even a a number of financial and fiscal advantages which mobile phone. The operation occurs through must be taken into consideration when looking accredited agents such as the local post-office or at value creation and long term planning for the shopkeepers which utilise a pre-paid card to enable group. Moreover, all the group contracts with transactions on behalf of clients. A commission is accredited agents and partners are entered into paid by the client for each transaction which is by eMoney Solutions in Mauritius. This ensures shared amongst the agent and the operator. that the contracts are governed and protected by eMoney established its headquarters in the Mauritius laws. Mauritius being a recognised Mauritius in February 2011 whilst maintaining and dedicated International Arbitration Centre, operational subsidiaries in most of the countries any dispute arising between the two parties can in which it is active. In the words of its CEO and effectively be resolved locally in a very efficient and founder Hervé Tairou, the choice of Mauritius cost effective manner. has been motivated by its conducive eco-system Furthermore, centralisation of the sales, for business structuring, professional services marketing, and contract management operations and technology-enabled development and de in Mauritius enables the group to recognise its ployment, the access to international banks, law revenue in Mauritius where it is effectively subject firms and accounting and audit practices of world to a maximum tax rate of 3%. The retained earnings standard coupled with the free fow of funds and resulting from this consolidation process allow tax-efficiency. Furthermore, Mauritius enables the group to envisage expansion in other African the provision of shared services in a cost effective, countries. process-optimised manner by bilingual (French / English) professionals. 3. Shared Services The group headquarters is organised as a group The group also runs its back-office and of companies engaged in the following activities in reconciliation activities in Mauritius. This enables Mauritius: invoicing and billing of clients in a timely manner. The availability of bilingual professionals is a major 1. Holding of the Intellectual Property Rights advantage which allows the group to manage a Mauritius currently has the appropriate legal common billing centre for both English and French framework which allows a business idea and speaking Africa.
Global Finance 43 MAURITIUS 4. Server hosting reducing the risks attached to exchange rate Mauritius being well connected to Africa fluctuations. through the SAFE, LION and EaSSy undersea fibre optic cables, the group has decided to take 6. IT Applications Development advantage of this to further enhance its operations The group has an office in Mauritius which through the hosting of its main servers in a data acts as a development centre for its proprietary centre in Mauritius. All Point of Sale terminals are technology platform. connected to these central servers thus ensuring The group has relocated to Mauritius its key accessibility, reliability, security and stability of personnel for the development and maintenance operations. of its technology platform.
5. Treasury Management 7. Employment of expatriates Mauritius offers eMoney Solutions a good Other collaborators who have to roam from platform for its central treasury management. one country to another marketing the services of There is no exchange control on foreign the group and giving technical and commercial exchange on entry and exit, and banks offer the support to clients are also employed in Mauritius. ability to effectively manage sub-accounts in This allows more sophisticated remuneration practically all hard currencies. This allows the packages taking into consideration their personal group to maintain revenue in USD and Euro and circumstances and enabling better wealth actively manage its treasury, thus considerably planning.
Food Lover’s Market is part of the Fruit & Veg Angola and Zambia, and even as far afield as City group which was started in 1993 in South Australia. It remains a family business with Africa by brothers Brian and Mike Coppin. The brothers Brian and Mike still running the day to brothers’ vision was to create a store that would day operations of the company. Their vision is resemble a marketplace of old, where farmers still visible in every store, where freshness and brought their fresh produce from their farms to be value are placed at a premium. They are now sold to the public. The dedication to freshness at applying this successful recipe to a growing list an affordable price has always remained one of the of new markets all over the African continent cornerstones on which Fruit & Veg City is built. and beyond. Ghana, Mozambique, Rwanda The next step in their evolution was the and Uganda have already been identified as creation of a modern eatery where food countries where Fruit & Veg City plans to be aficionados could indulge in a range of gourmet present in a near future. foods. It was this vision that gave birth to the In Mauritius Fruit & Veg City operates 3 Food Lover’s Market, a stylish and modern outlets in a joint-venture agreement with local food emporium which caters for the discerning partner SKC Surat and a 4th outlet in Curepipe customer, the connoisseurs, the professional has been announced. The expansion of Fruit & ‘foodies’ and the regular Fruit & Veg City Veg City locally is a vivid example of a successful customers. integration between global and local business Today there are more than 100 Fruit & Veg City sectors. In Mauritius, Fruit & Veg City outlets stores throughout Southern Africa including employ 240 people. in Mauritius, Namibia, Zimbabwe, Botswana, Fruit & Veg City also hold their Intellectual
44 Global Finance MAURITIUS The quality of professional services available locally together with Mauritius’ sound legal and intellectual property frameworks are the main reasons that have led Fruit & Veg City to have its franchising agreements managed from here. The success in the management of franchising agreements is giving Fruit & Veg City comfort for the further expansion of its franchise network on the African continent and elsewhere. As part of the franchising management duties being done in Mauritius, the invoicing for royalties and consequential debt collection and management for all franchisee companies Property for all African countries except for are executed entirely from the group’s Mauritius South Africa, Namibia and Lesotho in Mauritius. operations.
“The speed with which the government and ministerial departments process applications is dumbfounding.” Craig Silver, CEO of Generator Logic, a custom-built power solutions company operating from the Mauritius Freeport.
Generator Logic is a South-African based for a convenient port city and at the time he group specialised in the manufacture of did his study he looked at possibilities offered custom-built power solutions for an array of by Mombasa and Dar-es-Salaam. In his views, industries. It is South Africa’s most innovative both ports did not compare favourably with and versatile manufacturing supplier of open- Mauritius because of the road freight required ended, weatherproof, sound attenuated, mobile to ship the goods from Johannesburg to either specialised generator sets and ancillary products. Mombasa or Dar-es-Salaam. Also, the favourable The group has been supplying power solutions business environment in Mauritius made the for a wide variety of applications with a range choice an easy one, considering the speed with of power capacities for more than a decade. which applications were processed and licences Generator Logic’s custom-built power solutions obtained. The decision was then made to set up are specially designed for the telecoms, film and the new facility in Mauritius after assessing the entertainment, mining, agriculture, construction logistics advantages presented by the Freeport, and leisure industries. With a strong presence in the ease-of-doing business and the fiscal and non- Central and Southern Africa, Generator Logic fiscal benefits offered. currently supplies into 28 countries across the Mauritius enjoys regular sea freight service to continent. Tanzania, the main market serviced so far by Due to continuous expansion, Generator Generator Logic Mauritius. The slight time differ Logic was looking forward to set up additional ence between Mauritius on the one hand and manufacturing capacity outside of Johannesburg South Africa and Tanzania on the other makes the some years ago. Its CEO, Craig Silver was looking conduct of business between these countries
Global Finance 45 MAURITIUS convenient. Easy access to manual workers at a of the Freeport sector and on the basis of same more competitive rate than in South Africa has Generator Logic is considering expanding further also been a strong point in favour of Mauritius. its Mauritius operations for manufacturing and The Mauritius authorities have decided to export to other countries than Tanzania in East create a very favourable eco-system for the growth Africa, to West Africa and Indian Ocean islands.
“Mauritius has a highly responsive financial framework. The Stock Exchange of Mauritius was responsive, open-minded and fast and the local advisors were well in-touch with the global capital markets scene.” Dr Gachao Kiuna, CEO of TransCentury Ltd, a Nairobi- listed infrastructure investment group covering 14 African countries.
TransCentury Limited (TCL) is an infrastruc ture company based in Kenya, with a track record for delivering unique investment opportunities and executing for success. TCL seeks sectors which display characteristics of under-penetra- tion and inefficiencies whereby it invests to bring financial, technical and managerial capacity into stringent regulatory and legal environment that such sectors. The company’s key focus areas are is critical for professional investors and public the power infrastructure, transport infrastruc- companies such as TCL and its bondholders ture, and specialised engineering sectors. (e.g. anti-money laundering regulations). It was The Group, which as at December 2012 had also chosen for its highly responsive financial revenues of KES 13.5 billion and an operating framework. The Stock Exchange of Mauritius was profit of KES 2.0 billion, is geographically diver responsive, open-minded and fast and the local sified, with major operations in Kenya, Uganda, advisors were well in-touch with the global capital Tanzania, Rwanda, Democratic Republic of markets scene. Mauritius provides TCL a window Congo (DRC), South Africa and Zambia. to the international capital markets, enabling On 8 June 2011, TransCentury made history the company to gain access to vital capital by becoming the first ever Kenyan group to injections with the desired levels of fexibility and successfully close a multi-million dollar Eurobond adaptability. in the International Bond Market, and the very first ever to close a Eurobond that is listed in Africa, by listing its US$75m Eurobond issue on the Mauritius Stock Exchange. On 14 July 2011, TransCentury Limited’s ordinary shares were also listed by way of introduction on the Nairobi Stock Exchange. TransCentury has opted to use Mauritius as a platform for its investments across Africa, as CEO Dr. Gachao Kiuna points out, for its
46 Global Finance MAURITIUS the mauritius ifc
An intermediation hub to bridge the funding gap for Africa’s infrastructure
recall a conversation with New paradigm: Opportunity In a recent Special one of my former colleagues for Mauritius to become an Report of the who was the Treasurer in intermediation hub. Economist on one of the bank’s emerging The global financial crisis Imarket locations in the midst of marked the end of the global Offshore financial reorganisation talks. Having taken banking system that emerged in centres, Mauritius the red eye to have a face to face the aftermath of the 80’s big bang, was branded as meeting with a senior executive, deregulation and globalisation. he was unceremoniously dismissed National and regional regulators the “centre for with the quip, “what’s the fuss, are still beavering to dismember investment in you are not even on the radar institutions they regard as unfit for India targeting screen!”. Being on the radar screen purpose and concocting new set of Africa”. Imagine and having brand recognition are rules and fitness tests for those they paramount. They testify to the regard as systematically important. the nightmare of effort and success of the Mauritian This is no cosmetic change, it is the PR professionals authorities, both public and inherently game changing. As who need to work private, to reinvent the island and the global conglomerate banking set the trajectory for growth in the institution disappears, both the with centres that are new millennium. The challenge is mechanism by which funds flow labelled as money what’s next? The low hanging fruit from investors / asset owners to magnets, or worst, phase is over, what are the next borrowers / fund raisers and the sunny places for stage rocket boosters? drivers of this activity will be As if further headwind was transformed. This is going to be shady investors. needed, offshore centres have joined revolutionary, not evolutionary. bankers as the latest whipping boy. The buy-side of the equation is This is not new. Since biblical times, more fascinating. The wall of the moneymen have attracted an money flowing from global insti ambivalent mix of loathing and tutional investors (Pension funds, respect. The difference this time is Private Equity Funds, Sovereign that they seem to have lost respect. Wealth Funds, and Family Offices) As Governments in the developed is ever present and needs a safe world, irrespective of their political harbour. These investors are increa leaning, endeavour to redress singly keen to show that they have a the global banking eco system, brain and more importantly a heart tax compliance and fairness will too! They have been turned off become a key pillar of this new attractive fancy financial products realignment. These cross currents engineered and underwritten by could offer Mauritius a one-in- financial institutions and rated by a-lifetime opportunity to seize Rating agencies they no longer a strategic position. The global trust. Social responsibility is not a financial crisis of 2008 will usher a fad. At this year’s gathering of the new paradigm. great and the good of the Hedge
Global Finance 47 MAURITIUS the mauritius ifc
Fund industry in Las Vegas, asset managers struggled to the last speaker was Oliver Stone reduce costs as fast as assets and (remember Gordon Gekko, Greed revenues fell post-crisis. Robust is good). He warned about the reporting solutions that allow great divide in today’s society proper risk monitoring and to and the rise of Occupy Wall properly explain them to their street protest in the aftermath of clients are indispensable. No the financial crisis. He remarked, asset manager can be expected “This is the Roman Empire, to have all the best systems or think about the French to have people with the right Revolution!”. skills on the ground in every Risk is being redefined as market. Asset managers will loss of capital. Return of capital look for smart collaboration/ is paramount, more than return partnerships to drive down on capital. Consequently they costs. are increasingly interested in the As part of the soul searching underlying real assets. Sovereign ensuing from the financial Wealth Funds, in particular, will crisis, financial engineering and be a force for change as they complex products activities felt come to terms with their buying like another piñata. Slicing and power and seek direct interaction dicing dodgy US mortgages with investment opportunities repackaged for unsuspecting particularly in private equity. north European pension For the investment manage funds as AAA investment is ment industry, there are massive inherently flawed. However changes on the way too: make no mistake, asset backed • Asia’s wealth represents securitisation techniques will slightly under 75 % that of Eu- have a place in the new financial rope. Yet its asset management armoury required to fund industry is only around a third infrastructure projects. The that of Europe. consolidation in the banking • Since 2000 in the US, emerging system and the concomitant market funds have grown 2.5 shedding of a large pool of times faster than international highly skilled financiers means By design or by default, glo funds and more than 5 times that accessing this talent pool is bal banks are shrinking their faster than US domestic funds. more affordable. With the right balance sheets. Traditional play • Whether driven by regulators offering, there is no reason why ers are moving away from or internal governance, the Mauritius should not be able intermediating in complex demand for increased trans to compete with Singapore or funding deals. There is an parency remains unabated. Dubai to attract the required opportunity for Mauritius to This is one of the reasons why talent and expertise. develop a specialisation as an
Search M O shore M O shore M O shore M O shore M O shore Terms Private Investments Investments Investments Equity India Africa Ratio * 66% 28% 9% 7% 2%
*: Ratio of number of searches for specific terms to holidays (denominator) M: Mauritius
48 Global Finance MAURITIUS the mauritius ifc
intermediation hub for chan Next stage rocket Africa with a great opportunity nelling funds to bridge the gap boosters: Channelling to access funds to finance its for infrastructure funding in funding to bridge Africa’s infrastructure program.” If in Africa. infrastructure gap. deed one shares this view, the Institutional investors around I ran a quick Google search to potential for Mauritius is in the world: get a feel for the positioning of terms of decuples! • Want yield Mauritius as an offshore centre Africa focused funds have • Crave exposure to inflation and in respect to investments been on a downtrend since the linked long term cashflows in Africa. To put it in context, I peak of 2007. It is clear that the • Are increasingly showing used the positioning in Tourism promise of the continent is not preference for access to the un- as the benchmark. being matched by a strong derlying asset This is neither a scientific pipeline of deal opportunities. It • Yearn for confirmation and test nor a robust metric. Never is worth noting that the top reassurance that their capital is theless, it helps to size the three challenges and barriers to contributing to alleviate poverty opportunity. In the words of the growth are not about the and inequality and helping raise Chief Economist of the African investment equation and risk people’s living standard and well Development Bank, “The inter reward (Deloitte 2013 Private being. national financial crisis provides Equity survey); they are:
Global Finance 49 MAURITIUS the mauritius ifc
• Human Capital deficiencies - National Pension Funds Mauritius can offer to solve in companies and Sovereign Wealth Funds this problem. The African • Lack of acceptance of private - These institutions will investment industry has to equity / investment mentality have to play a critical role both be Mauritian ingenuity at its • Governance / Transparency / in terms of raising seed capital, utmost. At the same time it Lack of sophistication. risk transfer and working out offers Mauritius the prospect to The Indian double taxation potential exit strategies to help reinvent itself just in time. treaty has been undoubtedly a sweeten the deals to attract More importantly, Mauritius catalyst. However, what are the private funds. will be able to lessons that have been learnt • Help the industry build on • Service investors struggling from this experience and the the existing back-office service to cope with new and different recipe that can be conceived to infrastructure to front – office realities in the aftermath of the address the African situation. deal making capabilities. global financial crisis. The value proposition from - The upskilling will require • Make a difference to a con- Mauritius needs to be lucid and imported talent and expertise tinent with the largest youth uncompromising: to start with and given the bulge; 60 % of the new entrants • Value-added Mauritius can potential of the Mauritian into the labour market could bring as an intermediation hub labour force there is no doubt not find work last year. • Ability and proven track re- about the locals taking over the Think global, act regional cord to earn and retain the trust relay. and be socially responsible, of the investors community : a Admittedly this is no walk Mauritius will be the radar quality assurance seal in the park. However it’s no screen! • Constructive contribution to different from the major reducing poverty / inequality strategic decisions taken in and be a champion of sustain- the past which have seen the able development. country transform from a mono The success of companies like crop producer to develop first a Google where the obsession is manufacturing base and then a with problem solving rather service sector. than “financial arithmetic” is both insightful and inspiring. Think global, act regional Making it happen will not and be socially responsible be trivial. It will require the The Mauritius brand already Mauritian stakeholders (public exists and is well respected. The J aya Patten and private) to take the lead on challenge is to develop a new Director several fronts. offering that has the potential Jaya Advisory This is by no means an and sustenance to carry the Jaya set up his own financial exhaustive list but to mention a island for the next decades. consultancy after a career in global capital markets spanning over two few axes for development: The World Bank estimates that and half decades in Europe and Asia. • Create the right stakehol currently there is a 50% shortfall He has held various leadership and transactor roles at leading financial der forum and engagement on the spending Africa needs to institutions (Morgan Stanley, Credit with regional and global donor fully bridge the infrastructure Agricole and Lloyds). agencies to design the gover gap. The consensus view is nance structure to provide the that this shortfall is fundable. necessary quality assurance to It’s about creating bankable the investors. opportunities, efficient part Raise seed capital and create nerships between stakeholders Fund of Funds type of vehicles to source funding and clever • P artner with the various risk mitigation and transfer. regional organisations to The innovation should be built engage with the around the talent and skills
50 Global Finance MAURITIUS the mauritius ifc
The development of a Yuan Offshore market in Mauritius
“Everything Changes – Nothing Disappears” – Greek Poet Ovid
“It is only the dreamers that move mountains” – Fitzcarraldo, in the movie, “Ftizcarraldo”, directed by Werner Herzo
I have been living in Hong Kong for the past quarter century and visited Mauritius in October, 2012. My first visit to Mauritius was in 1985. In fact I took one of the first few flights out of Singapore when Air Mauritius started its direct service to Mauritius. It was a Boeing 707 and the flight was bumpy. When I landed I found a rather poor country but also an island full of warm and well educated people. I have returned after a gap of 27 years and found in 2012 a middle income island where the people are still warm and intelligent. One good thing about returning after such a long gap is that one has a better perspective how many good things have been achieved in spite of the many problems encountered. My primary purpose of writing here is not to flatter Mauritians, but rather to explore how the rise of the Chinese Yuan, also known as the Renminbi (RMB), may offer some opportunities for Mauritius if it is able to leverage its history, culture and geopolitical position?
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The rise of China In a geopolitical sense China sees itself, rightly hina has the largest foreign reserves or wrongly as a country that the US is trying to in the world of about US $3.2 trillion encircle with the help of Japan, Mongolia and dollars. So China is now poised to even South Korea and some countries of South emerge into what Britain did in the 19th East Asia. Looked at this way, it is important century and the US did in the earlier part of the for China to prevent India from joining the US Cth 20 century and the Japanese did in the second sponsored “encirclement” policy, - that is much part of last century, namely to become the largest more important to China now than to worry capital exporter in the world. about a border war that happened 50 years and While most people in the world know about now remains one of the most peaceful borders of China’s bulging reserves, not so many people know the world. The political readiness to trade with or about India’s bourgeoning need for capital. India finance a country is important in every situation is hoping to spend about 1.2 trillion US dollars to but especially so in the case of China, which fix its creaking infrastructure. India not only does still remains a centrally planned and command not have that level of savings available to tap but it economy. also lacks a strong enough long term capital market India has been doing its best until recently which can enable it to raise such enormous sums. to wish away the rise of China, neither doing So it looks like China’s surpluses and India’s anything like joining forces with others to need for long term funds is a match waiting to prevent the rise of China nor embracing China happen and would probably happen eventually. too closely to try and get special favours from It is the stated policy of China to diversify its China. reserves and make them less dependent on funding the deficits of the US. Mauritius as a bridge It is also the stated policy of India to move towards Mauritius is in the fortunate position of a more open financial system and closer economic having good relations with China and India. It is relations with China. The ground realities and true that Singapore also has the same advantages specific policies leave much to be desired; just while at the same time being one of the major because China has large reserves and India has financial centres of the world and with a very big large funding needs will not automatically lead Yuan deposit base. But Mauritius is not without to convergence. But there seems to be little long its peculiar advantages term alternative for the policies of China and India One should not underestimate the problems except, however grudgingly, to embrace each other that Mauritius will encounter while trying to financially. European, and to a lesser extent the be the match maker between China’s foreign US, financial institutions have neither the balance reserves and India’s funding needs. Many other sheet nor the risk appetite to meet India’s needs. In cities and countries, including London, Singapore fact it is obvious to anyone watching the financial and Malaysia have already staked their claim to industry that the Europeans in particular are in the become the “offshore Yuan” trading centre and process of pulling back from even traditional and all those places have bigger economies and better low risk financing activities such as trade financing geographical locations. However, smallness, in Asia. nimbleness and the ability to focus on one task Capital is fungible and Chinese surpluses are instead of trying to be everything to everybody already funding at arm’s length the needs of does have its advantages too. India. If the world financial system has no access The reason that the DTA between Mauritius to Chinese funds. India would probably find it and India became such a success was because of harder to get the funds it needs. True, China and the objectives of all the major parties, the foreign India are uneasy partners - both politically and portfolio investors into India, the Mauritian economically in spite of the fact that trade between government and legal services sector and the the two giants is growing tremendously. They see objective of the Indian government coincided. each other as competitors and have an unresolved The portfolio investors wanted lower taxes and the border dispute. But things can change and change Indian government wanted a way to attract dramatically too. portfolio investments quickly through friendly
52 Global Finance MAURITIUS the mauritius ifc
parties even before the restructuring of the are willing and eager to expand abroad and Indian economy; and the capital markets were incidentally the Industrial and Commercial Bank fully ready for them. Since it made everyone of China (ICBC) has just opened its first branch happy the DTA was a success for about twenty in India. The ICBC can surely justify opening a years. branch in Mauritius as a “gateway to Africa” or Now the situation is different: rightly or “gateway to India” – as Chinese companies have wrongly many people in the Indian government been adding operations in both places. view the DTA as something that, rather than Promote Mauritius in East Asia: Mauritius is helping India, is depriving the government of already well known in India but not many know revenues. This may or may not be accurate and about Mauritius in Hong Kong since there is no we can argue about it - but that is the reality one in charge of promoting Mauritius in Hong today. Even the corporate sector in India is not Kong. enthused enough to fight for the retention of Yuan is already convertible in Hong Kong. the DTA strongly. Unlike in the past two parties While inside China and even inside the large out of three are now not strong supporters and banks in Hong Kong one would find that therefore the DTA can at best only limp along. there are all sorts of restrictions on not only taking Yuan out of China but even taking The Next Chapter in the Mauritian – other currencies into China, as the Chinese Indian Financial Relations government wants to prevent the flow of “hot As they say, whenever one door closes, money” into China. On the other hand you can another one opens. Just at the time when the go to corner money changers in Hong Kong Indian corporate are losing interest in the DTA, who operate quite legally and change into Yuan the Indian companies, especially the capital or out of it with minimal fuss for hundreds of intensive infrastructure companies, are looking thousands of dollars. This is because there is a with interest at the bulging reserves of China very liquid “two way” market for Yuan in Hong and wondering how to access it. China’s main Kong unlike inside China. focus is not India: but China would not mind Open an Office and Sign MOUs with Hong diversifying a small portion of its exposure to Kong based institutions: London stock exchange India rather than support what it perceives as has already signed an MOU with Hong Kong’s the bullying US and the sick Europe. All it needs de facto central bank, “Hong Kong Monetary now is an honest broker to make that marriage Authority” to co-operate in developing a Yuan possible. And Mauritius has a fighting chance market. - if not a strong - chance to fulfil this role. Of course it will not be easy: but it can be done.
How to make Mauritius become a Yuan N. Balakrishnan Financing Centre for India Business professional based in Hong If Mauritius believes in its potential to become Kong for the past 25 years, he is the a yuan centre in the region it will have to take Chief Executive Officer “CY Foun- some concrete actions outlined below and which dation Limited” – a company listed may be a first step: on the Hong Kong Stock Exchange. Declare that Mauritius wants to become a Yuan financing centre – just like London, Dubai, Singapore and Malaysia have. Such a declaration by the government should not be dismissed as hot air but rather as a catalyst to gel the private sector players around the idea, safe in the knowledge that they will be acting in accordance with broad government policy. Invite Chinese financial institutions to open an office in Mauritius. The Chinese banks
Global Finance 53 MAURITIUS
Cim Group
he Star and Key of the Indian Ocean, the words Value calculations and registrar services; Tattributed to the Portuguese explorer, Vasco da • Accounting, administration, domiciliation, corporate Gama, when describing Mauritius are as relevant today as and secretarial services; they were in the 16th century when Mauritius straddled • Anti-money laundering and regulatory compliance; the trade routes with Asia. and In the 21st century, the relevance of Mauritius has • Provision of back-office trading services including the again come to the fore as an international financial centre preparation of invoices and/or letters of credit. of high repute which is rapidly becoming the investment Cim’s client base includes leading fund manage fulcrum between Africa and India. A stable democracy ment houses, supra-national funding agencies, and since its independence in 1968 and with a legal system multinationals which are amongst the largest listed that has the Privy Council of the House of Lords of entities on the world’s major stock exchanges. Our the UK as its court of final appeal, Mauritius offers the business units provide a fully integrated service, which political stability and legal certainty that is required by includes corporate and secretarial work, accounting, international investors. This is supported by its OECD compliance and taxation services. In addition to its white-list status and a framework of investor friendly Mauritian operations, Cim has set up a subsidiary in legislation, competent regulation and a qualified bilingual Singapore and a presence in South Africa and UK and workforce. has working relationships with operators in various This is the fast developing international financial jurisdictions such as the Cayman Islands, Luxembourg, centre in which the Cim Group of financial services Seychelles, BVI and Cyprus. companies operates. Cim offers a synthesised value chain Cim Trustees (Mauritius) is the fiduciary services arm of inter-relating businesses providing high-end financial of the group, with services ranging from the establishment solutions. Utilising the unique geography of Mauritius, it of trusts to the provision of trustee services. In addition, is our intention to build on the reputation that Mauritius Cim holds an investment in Universal Trustees (Pvt) Ltd has as a financial centre to develop a Southern Hemisphere in India, a start-up trust company on the Indian sub- based financial-services capability that provides global continent, focussing on the Indian diaspora. investment functionality primarily into Africa and Cim Tax Services is a member of the Taxand Asia and other developing markets. Drawing on the international tax network, which developed out of the significant human resources available within Mauritius, Andersen international auditing practices, and has and supplementing them with international skills and branches in over 50 countries worldwide and a network expertise, where necessary, we are consolidating our hub of tax advisory capabilities. in Mauritius with excellent capabilities in corporate, trust Our teams work very closely with our clients with the and fund administration, insurance, tax services and aim of providing a high level of service and responsiveness credit finance. as we understand that time is of essence in all that we do. Our international management businesses are grouped Our people are also well versed in the requirements of the under the Global Management arm of the Cim Group jurisdiction and receive regular training to remain well and incorporate corporate services, fund administration, abreast of latest development in all aspects of operations trust services and tax advisory capabilities. Cim Global from Company Law, Compliance to Accounting. We Management is a synthesis of a number of businesses operate on PFS Paxus which is a fully integrated fund achieved through a combination of organic growth administration package including NAV, registry/transfer and acquisition; IMM (International Management agency, capital accounts & full investor reporting. (Mauritius) Limited) was the first Offshore Management Investment into Africa is not solely the domain of Company licensed in Mauritius in 1992 and was private equity and investment funds, although these are augmented by the acquisition of Multiconsult in 2007. significant players, there are a myriad of other themes Both of these businesses were regrouped as Corporate that are developing and which we feel can be assisted by Services and Fund services and constitute a leading the appropriate structures and services out of Mauritius international management service in size complexity and due to its close geographic proximity, membership of capability. Cim Fund Services administers more than COMESA, SADC and IOR-ARC. Cim has developed 20% of all funds domiciled in Mauritius and is SSAE leading edge competencies combined with a procedures 16 Type II compliant. Our client base is reflective of the and capabilities framework whilst at the same time major investment and training brands internationally. ensuring strict adherence to local laws and international Our teams have experience across diversified investment norms and standards. sectors including investment funds, private equity, holding In a post-financial crisis world, where confidence is still companies, logistics, infrastructure, construction, agri- frail and liquidity is limited, Cim is fast developing as an industry and insurance. international financial services player. This is supported Cim Global Management provides a broad range of by assets under administration in excess of US $100 services including: billion an expanding international network, a unique • Structuring and incorporation of corporate entities value proposition and competent professionals driven by and establishment of trusts; our values of passion, performance and integrity. • International Tax Planning and Advice on cross border structure/ transactions, building ‘substance’; Vaughan Heberden • Mauritian Fund administration including Net Asset Chief Executive, Cim Group mauritius
Investment Promotion and Protection Agreements signed by Mauritius
1. Germany 14. Romania 27. Sénégal 2. France 15. Singapore 28. Sweden 3. U.K and Northern Ireland 16. Swaziland* 29. Madagascar 4. China 17. Zimbabwe* 30. Barbados 5. Mozambique 18. Benin* 31. Botswana* 6. Pakistan 19. Burundi 32. Belgium/Luxemburg 7. Indonesia 20. Ghana* Economic Union 8. Portugal 21. Mauritania* 33. Republic of Korea 9. South Africa 22. Tchad* 34. Finland 10. India 23. Comores* 35 Tanzania* 11. Switzerland 24. Guinea Republic* 36 Republic of Congo* 12. Czech Republic 25. Rwanda 37 Kenya* 13. Nepal* 26. Cameroon* 38 Turkey*
*Agreements signed and awaiting ratification
Mauritius rankings by different International Institutions
No Index Global Rank Africa Rank (Mauritius) (Mauritius)
1 Environmental Performance Index 2010 6 out of 163 countries 1st 2 Fraser institute economic freedom 2011 9 out of 141 countries 1st 3 2011 Index of Economic Freedom 12 out of 183 countries 1st 4 Forbes Survey of Best Countries for Business 2011 19 out of 134 countries 1st 5 World Bank Ease of Doing Business 2012 23rd out of 183 countries 1st 6 Democracy Index 2010 Full Democracy 1st 24th out of 167 7 Global Enabling Trade Index 33 out of 125 countries 1st 8 Knowledge Economy Index 64 1st 9 International Property Rights Index 2011 38 out of 129 2nd 10 Outsourcing Readiness Index (Africa) 2009 2nd out of 15 11 Corruption Perceptions Index 2011 46 out of 183 3rd (Transparency International) 12 ITU –United Nations Agency for 62nd out of 178 2nd Information and communications. ITU’s Digital Access Index 13 Global Competitiveness Index 2011-2012 54 out of 142 countries 2nd 14 Human Development Index 2011 77 out of 189 3rd 15 Mo Ibrahim Index of African Governance 2011 - 1st 16 Africa Competitiveness Index 2011 - 2nd 17 The A.T. Kearney Global Services 36 out of 50 countries 4th Location Index, 2011
56 Global Finance MAURITIUS challenges
How the rules of the Offshore game changed for ever
Business is a game. In our first university years, that’s how we learnt to start doing business even before we embraced the real world. We learnt, as a general rule of the game, that if we don’t adapt to the ever changing parameters, we were bound for bankruptcy, sooner rather than later.
ndeed in a time span of less than a decade, of risks are not reduced to only financial risks. if we were doing offshore business in the They chose third party jurisdictions for greater same way and according to the principles comfort. Who could have blamed them? Their that obtain, before say, the so-called events choice was all along most legitimate. Iof September 11, we would be today in early Endowed with a very long history of the retirement. In any case, the ensuing Great principle of continuity in governments and fair Recession of 2008 would have relegated us to elections, law abiding culture, whether local or obsolescence. international, and crucially, a tax system which is Global Business as it is described today is most friendly to capital gains and eventual only a quarter century old in Mauritius. In transfers of their gains, the jurisdiction has this very short time span, however, the country become the place to structure the investors’ India- has become the jurisdiction of choice for related middle and long term portfolios. For the international investors attempting to optimize last five years or so, the country has occupied the their risks-return equation. Let us recall that in first spot among the providers of foreign direct the aftermath of the grave oil crisis of the 1970’s, investments into India, in spite of 2 game- many countries tried to open up their frontiers to changing shifts in the way international watch- attract foreign investments to turn around their dog institutions want cross-border movements of ailing economy. But foreign investors evaluation money to take place. It is likely to remain so in
Global Finance 57 MAURITIUS challenges
the foreseeable future even if more changes are the benefits of the first-mover advantage. In the few to be expected in the rules and regulations years that followed, global business experienced governing the flows of money between countries. its first exponential growth rate, projecting it as Following the September 11 events, the fight the fastest growth industry and one of the most against terrorism took center stage. Shaken to the important pillars of the country’s economy. core, the United States of America proclaimed a However those jurisdictions who were skeptics state of utmost urgency to know who is financing about the sea wave changes that just took place terrorism and expectedly embarked the whole did not have to wait long for a double-whammy. of Europe into a major strategy of tracking the In 2008 the whole capitalist world enters a flow of funds from one country to another. major recession never seen before since the The way a jurisdiction receives cross-border Great Depression of 1929, triggered by a highly funds will henceforth be subject to Regulations. contagious large scale sub-prime mortgage Banks in turn receiving these monies should defaults and its twin-face excessive bank leverage mandatorily know who are the senders and the lending. The roll-back has terrible consequences ultimate beneficiaries. Service providers to global for the overall economy. The System is one corporations and high-net-worth individuals need more time shaken to its core. National Products to know who their clients are really. Adam Smith, plummet, major banks and blue-chip companies the father of Capitalism would not recognize his from USA to UK, from Ireland to Greece, and child. Regulations, anti-money laundering laws, some states themselves are on the brink of black-list and white-list jurisdictions, know- bankruptcy forcing the World Bank, IMF and The your-client principles, capitalism has now a new ECB to go on long term costly rescue missions. meaning. Those jurisdictions which refuse to Tax payers or those who have evaded taxes embrace it will be chastised and precluded from need to enter the fray and contribute. From the doing international business and eventually the fight against terrorism, the rules are now rewritten economy will collapse. to control companies and individuals when We can recall in Mauritius the shake-up or rather they shift money and profit from one country to the earthquake that shook the stake-holders down another using financial centers. The recent G8 to their feet. Used to more than 10 or 15 years summit has illustrated how the most developed of offshore business based on flexibility regarding economies intend to have the whole world with who are the ultimate owners and recipients of them to embark on a new tax information sharing cross-border money, Management companies strategy that will help states to collect more and financial institutions are now required to taxes to bridge their mammoth budget deficits. share information at will and request of financial This is no doubt a fresh challenging issue to address authorities according to defined criteria. for all the 70 or so international centers in the Setting-up of global companies and vehicles world which received and processed last year 1.3 for special purposes and other structures will trillion dollars of cross-border money. Financial now have to be done within the provisions of not centers will remain no matter an essential catalyst only well defined set of rules and regulations but in the efficiency of this money flow. But as always as importantly to norms and standards that are there will be losers and winners. slowly but regularly put in place by international organizations charged with the power to segregate the compliant from the non-compliant financial centers. We can also recall how the new legal and Georges Chung Tick kan institutional environm ent, based, inter-alia, on the First Chairman of the Financial Services Promotion setting-up of the Financial Service Commission Authority. and the promulgation of the Anti-money Chairman laundering laws, was firmly set-up against a back- of Kross Border Corporate Services drop of understandable resistance to change. But the country was clairvoyant enough and the jurisdiction did not have to wait a long time to reap
58 Global Finance MAURITIUS Your trusted global business partner
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The Evolving Challenge and Hostile Operating Environment for Global IFCs
The G-8 Summit Towards a tax collection war leitmotif and irritating mantra at Lough Erne in t Lough Erne, G-7 of these bankrupt governments, Northern Ireland leaders congratulated when no one has any clear idea of themselves on sanc what ‘fair’ might be. chaired by the UK tioning what amounts For example, what is seen as fair underlined on- Ato officially enforced tax extor by the UK government in having going efforts by G-8 tion. They aim to change long- Amazon, Barclays, Google, J.P. established international tax Morgan or Microsoft pay the tax countries (except for conventions by trenchant bully that HMRC, the British parliament Russia, so referred ing. They are asserting a highly and public think ought to be to henceforth as questionable right to tax income paid in the UK, might be seen as G-7) to continue not generated within their juris grossly unfair by Americans and dictions from sources that are not US-IRS. The IRS may think that on the singularly resident or domiciled in them. such tax ought to be paid to them counter-productive By doing so they are unleashing instead. The same goes for France, tack of extracting a tax collection war amongst Germany, Italy, India, China, themselves. Each is trying to extort Brazil, South Africa, Indonesia, revenue from every tax for its own national jurisdiction and every other government bent possible source. from income generated outside on tax extortion from these entities An increasingly their borders, from the same uni because of its own egregious irrelevant G-7, with verse of transnational corpora failures in managing public finan tions (TNCs), and high net ces responsibly. This absurd situa rapidly diminishing worth individuals (HNWIs) with tion is multiplied manifold in the global influence, now multiple domiciles to facilitate case of HNWIs with homes in seems determined conduct of their global operations many jurisdictions even when the and interests. That is bound to income they generate has nothing to squeeze not just have deleterious consequences for to do with these jurisdictions. every drop of juice G-7 and the rest of the world. The main reason for the tax- and skin from extortion posture now adopted by taxpaying lemons “Fair is foul, and foul is fair” G-7 governments is that all of them The reason for G-7 governments have overextended themselves for but every bitter going into hyper drive on revenue a long period of time. They have pip as well. By collection is not difficult to under borrowed too much from their doing so, it risks stand. It has nothing to do with own citizens and from (foolish) paying taxes to demonstrate res global capital markets for too long damaging global ponsible citizenship, or to apply to keep financing public expen economic revival at peculiarly distorted ideas about ditures they cannot afford. Their a particularly crucial social fairness by invoking morality, public and external debts are too inflexion point. or with issues of tax evasion, or large and their deficits remain what is now being condemned as daunting. The sovereign debt they ‘aggressive tax avoidance’. ‘Paying keep issuing is not worth the paper your fair share’ has become the it is printed on. They have
60 Global Finance MAURITIUS challenges
adopted an economic model EU) must adjust to debt and the nineties and oughties, they of entitlements and welfare economic crises through acute, refuse to accept the reality that which is powerfully entrenched, painful fiscal and monetary global IFCs like Mauritius play politically almost impossible to compression. But G-7 can a vital role. They provide the change, in countries where the only adjust to such crises global financial system with majority of the electorate (espe through graduate, moderate safety valves that permit it to cially the poorest) has become a (as painless as possible) fiscal function much more efficiently dependent client of the welfare consolidation accompanied by than it would without them. state. liberal monetary expansion It is difficult to imagine how Although they know they (euphemised as quantitative the current volume of cross- can no longer afford it, given easing). Nice, if you can issue border trade and investment their ever-increasing (welfare- reserve currencies that allow financing flows could possibly driven) costs and ever-decrea you to pass on the costs of be intermediated as efficiently sing competitiveness in the adjustment to others! and cost-effectively - especially global economy, G-7 refuses to So instead of doing what they between developed and emer accept harsh realities and looks need to, G-7 countries (deluded ging markets - without IFCs. elsewhere for cheap solutions in a bizarre belief that they still That is so especially given instead. Now their chickens have run the world) are eschewing the punitive, complicated tax come home to roost. Sadly, the the difficult structural adjust arrangements that govern direct political cowardice characteri ments they should and must bilateral investment and trade sing their governments does make. Instead they are focusing financing flows despite the not permit them to confront much too heavily on squeezing (dubious) protection offered their client electorates with every last cent of revenue from by bilateral investment treaties such obvious truths. They know every possible source; at the (BITS). they need to reform and change expense of further reducing Local judicial, political and unaffordable, unviable welfare their competitiveness and fur tax probity conditions in most dominated economic models ther damaging prospects for emerging markets (like India) by pruning, prioritising and re- reviving the global economy in do not inspire confidence on the engineering public expenditure. a balanced fashion. And they part of foreign investors from They know they must abandon are aiming at easy targets that the US, EU, Japan, and East Asia, their dysfunctional and coun cannot fight back with the same who are accustomed to much terproductive cradle-to-grave force - i.e. global IFCs- which better standards of political welfare models. But they are are now portrayed by G-7 as evil and country risk management. impotent to act. leeches sucking the tax-blood IFCs like Mauritius do much out of their economies. (though not yet quite enough) Double Standards to overcome these difficulties After all, destroying social Scapegoats by ameliorating any cross- protection is precisely what G-7 have global IFCs (like border risks and facilitate a flow these same G-7 countries, Mauritius) firmly within their of triangulated transactions using the IMF and World telescopic sights, aiming to con that seemingly afford better Bank in a grotesquely unfair, tinue their misguided efforts protection in the eyes of the inappropriate manner, forced to cripple/disable such IFCs; foreign investor. Latin America and Africa to without any regard for the There is another reason that do in the 1980s, and Asia in the implications or consequences G-7 are going after IFCs like 1990s, when these continents for the health and efficient Mauritius. They do not like the had their own debt crises. functioning of the global competition that such unrelated G-7 believes a different law economy by doing so. Obsessed IFCs offer to their own related applies to them. They believe by conceptually unsound, self- IFCs – such as Nevada, Dela that developing countries (and serving notions of ‘harmful ware and Miami in the US, the Greece which has been made tax competition’ propagated Isle of Man, Bermuda, the a developing country by the idiotically by the OECD through Bahamas, and the Channel
Global Finance 61 MAURITIUS challenges
Islands in the UK, French created by OECD countries could begin by reforming their and Dutch islands in the themselves on to OFCs. Since absurdly complex tax codes Caribbean etc. IFCs like Mauri then OFCs like Mauritius have which now have more loopholes tius have taken too much been under constant pressure than Swiss cheese. But that business away from these other from the Financial Action Task would put too many of their IFCs that are related to G-7 Force (FATF), the OECD, IFIs, tax lawyers and accountants countries in one way or another. and the G-7’s Financial Stability (who have enormous influence What the EU has done Forum (FSF) to improve the in their respective parliaments) recently to destroy Cyprus’ transparency and accountability out of work. ability to operate as an IFC of their operations. They could simplify their catering to Russian interests The accompanying threat direct and indirect tax is a case in point. It is an ins of blacklisting and applying structures/regimes and harmo tructive warning to other sanctions to jurisdictions dee nise them more closely by similar ‘offshore’ jurisdictions. med non-compliant with But, as might be expected, G-7 OECD demands has strained only bullies those it can. It dare international relations. Insti Poem Written by not take on IFCs that have the tutions and countries with a cabal of financial muscle and firepower asymmetric power have attemp Finance Ministers to fight back, like IFCs in the ted to exercise extraterritoriality Middle East, Singapore and on questionable grounds over Tax his land, tax his wage, Tax his bed in which he lays. Hong Kong (protected by many small jurisd ictions with Tax his tractor, tax his mule, China). These IFCs are all large out countervailing power. Teach him taxes is the rule. net suppliers of capital to G-7 The last decade has seen a which cannot therefore afford barrage of initiatives launched Tax his cow, tax his goat, to alienate them. So they are by the OECD such as those on Tax his pants, tax his coat. permitted the kind of opacity anti-money laundering (AML) Tax his ties, tax his shirts, Tax his work, tax his dirt. that IFCs like Mauritius are not. and countering the financing of terrorism (CFT) to reshape Tax his chew, tax his smoke, Attacks on Mauritius IFC and curb the activities of IFC Teach him taxes are no joke. The story of the development that threaten to compete with Tax his car, tax his arse and growth of Mauritius’ IFC is their own financial services Tax the roads he must pass. compelling. It holds out hope sectors/interests and that they Tax his tobacco, tax his drink, for the future – for Mauritius perceive as threatening their Tax him if he tries to think. and other similar small island tax revenue raising capacity. Tax his booze, tax his beers, economies. But the tale is not This structural problem will If he cries, tax his tears. an entirely happy one. The persist for some time. It will trajectory of Mauritius’ IFC continue to influence the way Tax his bills, tax his gas, growth has been threatened in which Mauritius’ IFC evolves Tax his notes, tax his cash. Tax him good and let him know and interrupted by several from now on. It would be in That after taxes, he has no dough. initiatives launched by the larger Mauritius’ interests if it exerted economies of the Organization more efforts in anticipating If he hollers, tax him more, for Economic Cooperation & and challenging such changes Tax him until he’s good and sore. Development (OECD) for a rather than continually reacting Tax his coffin, tax his grave, variety of self-serving reasons defensively to them. Tax the earth in which he lays. since 1998. Put these words upon his tomb, Growth of the IFC in “G7: First clean up your “Taxes drove me to my doom!” Mauritius stalled when the domestic economies” And when he’s gone, we won’t relax, OECD released its Report on G-7 countries are not ta We’ll still be after his Inheritance TAX! Harmful Tax Competition in king the more obvious steps 1998. That report passed part of that could be taken to make the burden of solving a problem life easier for everyone. They
62 Global Finance MAURITIUS CIRCUS challenges
lower ing marginal rates to more reasonable levels and dis allowing a plethora of inex plicable and unjustifiable deductions. They could aban don punitive taxation which they euphemistically call ‘progressive’. They could widen their indirect tax bases. They could abandon reliance on income taxation and instead apply fractional transaction levies, say 1%, on all trans actions and not discriminate by transaction-type (e.g. financial, stock market, property or speculative transactions). They could spend (waste) much less public money e.g. by bringing down the share of GDP con sumed by the public sector in G-7 from 45-50% to 30-35%. They could accept that gover nments (most of all G-7) are the least efficient users of capital resources and savings; they misapply scarce resources to expenditures that taxpayers stance of G-7 should not go takes into account when do not want to incur, while sac unchallenged by the IFCs or by complaining about its putative rificing precisely those services the non-G7 world at large; but (and imaginary) revenue that taxpayers want to avail of. unfortunately it is. Instead of ‘losses’. One of the key reasons that confronting them, other large Also there is a great deal of the world economy is not emerging economies (India hypocrisy about ‘round-trip recovering or growing as fast in particular for all the wrong ping’. Policy-makers, politici ans as it should is that governments reasons) are pursuing the same and bureaucrats in India know around the world – developed counterproductive anti-IFC that round-tripping is a fact of and developing – are now absor tack. They too believe, quite life. So do their Mauritian bing (pre-empting) far too large erroneously, that they are losing counterparts and regulators. Yet a proportion of scarce global too much revenue because of they both publicly deny it. So savings. They are deploying tax-avoidance through IFCs they keep pirouetting like a pair them quite unproductively, like Mauritius, instead of of peg-legged peacocks around thus denying the private sec recognising how much they the issue. Indian authorities tor the ability to compete for have benefited instead. Had know who does most of the such savings and use them Mauritius not existed it is quite round tripping – their most more efficiently in ways that doubtful that India would prominent politicians and would encourage more output, have attracted as much inward industrialists. Yet they both go employment and investment. investment as it did. That FDI/ through the silly political FII in turn generates all kinds theatrics of accusation and India joining the pack of tax revenue (from sales, counter-accusation instead of The implicit political turpi employment, profits, dividends, acknowledging quietly that if tude and hypocrisy in this user charges) that India never there was no corruption on a
64 Global Finance MAURITIUS challenges
the intricacies of and adapt constructively to. Clearly Mau ritius cannot fight this fight on its own as a singular, unique IFC. It has common cause with many of its peers in the same predicament. Collective enterprises like the IFC Forum – which Mauritius needs to join and participate in much more enthusiastically – need to become more representative of the global IFC community. They need to be more organised, rational and vociferous in pushing back against the more extreme forms of G-7 tax-bullying. But this cannot be done if the IFC Forum remains much too focused on the Channel Islands, other UK dependent overseas territories, and the Caribbean. It is not yet inclusive enough, or structured appropriately enough, to accommodate the concerns of other IFCs in the massive scale in India, and if that Mauritius does no round- Mediterranean, Middle East, the capital account were open, tripping at all, as it invariably Indian Ocean, East Asia and the there would be no round alleges. And this theatre of the Pacific. tripping of this sort. absurd goes on ad infinitum Unless Mauritius and the Most of the proceeds of ram with everyone involved in the IFC Forum get their individual pant Indian corruption that drama knowing that the truth and collective acts together, the are round-tripped (via cor can never be publicly told. So current absurdly hypocritical porations and relatives in the why not just let it lie and get on and self-serving G-7 posture Indian diaspora) - are not with life? will continue to predominate channelled through Mauritius. and damage the legitimate inte Far greater amounts are round- “Small IFCs of the world, rests of global IFCs – and of tripped through Switzerland, Unite!” the global economy - which Luxembourg, Canada, Australia, It is these absurd global are wrongly being portrayed as Singapore, Hong Kong, Carib conundrums and hypocrisies engaged in illegitimate activi bean islands, Cyprus, Gibral that are shaping the increasingly ty, for many of the reasons dis tar, the UK, and the US, - in hostile and unpleasant environ cussed above. fact almost every IFC that ment in which IFCs like Also, it must be emphasised Indians use. Mauritius is used Mauritius have to operate and yet again that the entire financial more by global transnationals steer themselves through in services industry in Mauritius and by foreign institutional the coming years and decades. needs to recognise, and finance investors than many of these They pose tricky challenges that properly on a long-term sus other jurisdictions which are players (and policy-makers) in tained basis, a capable, powerful preferred by Indian round- the Mauritian financial services umbrella financial services trippers. But that is not to say industry need to understand industry association that
Global Finance 65 MAURITIUS challenges
embraces all its constituent citizens from the excesses, exacerbated by the inept man elements (i.e. banks, insurance improprieties, and illegalities of ner in which the Eurozone debt companies, securities compa their own governments? G-7 crisis has been handled. Thanks nies, exchanges, pension funds, and large emerging countries to the ECB Chairman’s publicly management companies, ac now consider it fair to indulge stated resolve to “do whatever it countants, auditors and lawyers in every form of covert sur takes” to save the Euro (which etc.). veillance and tax extortion (it faced an existential crisis not so Such an association now is no longer taxation in any long ago) and Eurozone, Ireland exists in the form of Global commonly understood sense finally seems to be coming out Finance Mauritius (GFM). It of that term) simply because of its enforced debilitation albeit is not clear that all the actors government is the only agency fitfully. That is not true as yet of involved in the provision of IFS with legitimate right to resort to Portugal, Spain or Cyprus. The via the Mauritian IFC unders violence in order to enforce. Greek economy has contracted tand fully how much they need It is with this hostile evolution by nearly 40% in five years. such an association. Nor do they of G-7’s attitudes (and those Italy is on the brink of another show any serious commitment to of countries like India for all debacle. France is still in a state funding it properly on a rolling the wrong, misguided reasons) of recession prolonged by the 3-5 year, fully budgeted, basis. that the future of Mauritius as a highly questionable policies GFM is essential to represent viable IFC needs to be assessed. of the Hollande government the IFS industry’s views to GoM which are not working but and even more importantly to Post-2013 Global Financial backfiring. Germany and the the outside world. Environment: smaller Northern European How Mauritius must adapt countries (as well as Poland and Orwellian G7 and respond. some Eastern European mem G-7’s posture on tax extor ber of the EU) are gaining some tion should be seen in the con Eurocrisis traction while being adversely text of recent revelations about Much has happened since the affected by their larger European the extent of intrusive and global financial crisis that started neighbourhood. indefensible electronic sur in August 2007, and erupted in Unless Europe acts more veillance over internet com September 2008 with the demise quickly and decisively with munications that G-7 countries of Lehman Brothers, resulted strong German backing to have mounted through their in the disappearance of many resolve the Eurocrisis decisively, security agencies. In clandestine, well-known global financial once and for all, and if incipient secretive fashion they have institutions that provided IFS growth in the US does not been eavesdropping illegally throughout the world. The gather more momentum in the on each other, and over their crisis has since morphed into an latter half of 2013 and into 2014, own and foreign citizenry. The acute crisis of sclerotic growth, the global economic outlook posture of G-7 on surveillance debt and unemployment in may again turn bleak. If the and tax issues should raise Europe, and a growth crisis that experiment with Abenomics profound public concerns about is being gradually overcome in Japan fails it would add whether these Orwellian G-7 in the US and Japan. The fact considerably to the world’s governments have now lost all that both these latter countries travails. If it succeeds it would sense of propriety and restraint. also have acute debt and unem add another locomotive (which The excuse they use of exer ployment crises has yet to be has been moribund for over 22 ting more and more clandestine fully acknowledged by global years) to pull the world economy power, supposedly to protect markets. out of the mire that it has been their citizens from terrorist The fallout from 2008 is stuck in. threats, is wearing thin. In the still reverberating around the process they are adopting ter world. The global economy is BRICS stuttering rorist modes of conducting recovering very slowly from Oddly enough, the large themselves. So who protects a precipitate, deep recession emerging markets of Brazil,
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India and China were the tip into unviability, govern Like London and New York to counterbalance to collapsing ments would need to reca centres that are more proximate growth in the US, EU and Japan pitalise banks yet again, and to emerging countries that will from 2008-2011. But since then bank consolidation would pro create new wealth more rapidly they have all, almost simul bably gather greater force in in the coming decades than the taneously, begun to show signs most countries when current established ones. of economic and political stress. scenarios of consolidation have That may provide Mauritius At an inflexion point when the not fully played out. with greater opportunities for fortunes of the major developed That may result in even fewer, exporting a wide array of finan economies seem to be turning larger institutions (too-big-to- cial services than presently envi for the better those of the large fail) left standing with reinforced saged, providing it positions BRIC countries seem to be oligopolistic characteristics and itself, and opens itself up quickly turning for the worse. Africa tendencies if left undisturbed enough, to capitalise on these seems to be the main bright spot when things return to normal. trends. But, it will need to make on the horizon if, for once this Though that is contrary to regu the necessary changes at macro time, it can actually sustain the latory intent, it is precisely what (economy wide governance), promise that it shows. might happen. To avert such an meso (in the financial services outcome regulators may need to industry) and micro (in the When interest rates rise rethink mark-to-market rules structure and competitiveness of The recently signalled with and put in place other transi its financial firms and the human drawal of quantitative easing tional accounting devices to capital deployed in the industry) by the US Fed however has avoid the risk of partial or full levels to do so successfully. It imbalanced expectations in meltdown of global finance. will need to clean up its political fragile and nervous global act considerably to make the capital markets as conditions O pportunities for Mauritius jurisdiction more credible than in global debt markets begin These tectonic changes have it presently is. to ‘normalise’ gradually. The resulted, paradoxically, in signi worry is that global sovereign ficant opportunities emerging bond portfolios (which total for Mauritius’ IFC in providing $45 trillion for the US, EU and higher value-added financial Japan alone) held mainly by services in old and new markets. global banks, insurance com Confidence has been shaken in panies, pension funds and asset the banking systems of the US managers will lose a conside and Western Europe, but less rable amount of their present so (if at all) in the economies capital value in mark-to-market of Asia, Africa and the Middle terms when interest rates begin East; although that may be to rise, as they must. changing. There can be little Pcyer Mistry For example, if short interest doubt that China’s banking Chairman rates were to rise from their system is in serious trouble Oxford International Associate present level of below 1% to though China has the reserves around 3% and long rates went and fiscal/monetary firepower from 2% to 5% as a result, that to withstand and recuperate would result in a mark-to- quickly from a large shock to its market loss of US$3-4 trillion financial system. India, however, in a $45 trillion portfolio. That does not and its economy is would wipe out the capital base entering perilous waters. of the global banking system Even so, the locus of global and take yet another toll on the financial services provision is global financial landscape. Bank shifting, gradually but inexorably, balance sheets would again from western financial centres
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challenges
Tax Information Exchange The current state of play
On top of the agenda of the G8 Summit in Northern Ireland was the highly topical issue of tax evasion, tax avoidance, exchange of information, transparency and the current work of the OECD in relation to such matters. Prime Minster Cameron announced that Great Britain is to sweep away “tax secrecy” by introducing a “new central register’ that will ensure all the true owners of “shadowy’ shell companies have to be declared to tax authorities.
t will be remembered that the United Africa is one of the rare countries having one. Kingdom and its crown dependencies form Information should become readily available to one of the largest financial centres in the authority and trusts, trustees and trust assets. Iworld. But times are changing and other Fourth, authorities have to have in place actors have come on the block. This has given systems to assess the risk to which their anti- tax planning opportunities to multinationals money laundering and their countering of which have traditionally arranged their affairs financing of terrorism agencies are exposed. to be tax efficient and legitimately so. Starbucks Appropriate information should be shared and and Google have recently been criticized for not properly coordinated amongst regulators within a paying their fair share of taxes in the countries in jurisdiction and between regulators across borders which they operate. with in place appropriate arrangements bilateral With the above as backdrop, the G8 released or multilateral such as MoUs or Concordats. an action plan principled to prevent the misuse Fifth, it is now generally agreed that certain of companies and legal arrangements. Known shareholding structures such as bearer shares and as the Lough Erne Declaration (2013), the 8 core nominee shareholders and directors should be principles have been advocated to be fundamental prevented. to the transparency of ownership and control of Sixth, there should be a reinforcement of due companies transposed for tax planning purposes. diligence procedures on the part of financial These core principles are basically in line with the institutions as well as non-financial businesses Financial Action Task Force (FATF) – standards and professionals. on ownership identification. They are now sine Seventh, proportionate sanctions should be in qua non requirements to ensure the integrity of place for non observance of regulators. But the basic company information, beneficial owners key is to have robust enforcement measures. hip information and the timely access to such Eight, competent authorities should cooperate information. First, it is important for law enforce effectively across borders. ment or investigative authorities to know who In the wake of the foregoing, the UK has really owns and/or controls companies and who enjoined its crown dependencies to take steps are their beneficial owners. Information should towards agreeing to automatic exchange of infor be accurate, adequate and current. mation and enjoin countries to sign the OECD Second, beneficial ownership information Multilateral Agreement on Mutual Assistance should be accessible to onshore law enforcement in Tax matters. It also called upon the OECD tax administrators, FIUs and other relevant to develop a FATCA – type of agreement for its agencies. This could be achieved by creating member countries. central registries. However, since 2009 the OECD has already Third, should we go as far as a registry for started a serious work on tax transparency and trusts? Many jurisdictions do not have one. South information exchange.
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The Global Forum and its works GF and has since 2001 been in the forefront of The Global forum on Transparency and participating jurisdiction in the work of the OECD Exchange of Information for Tax purposes is the as an active non-OECD member to elaborate the only multilateral framework of its kind within TIEA. Such contribution of Mauritius has won which work in the area of tax transparency and Mauritius plaudits in the international arena. exchange of information is carried out over 120 Mauritius is also a member of the Peer Review jurisdiction which participate in the work of the Group (PRG) which is a small select group of Global forum on an equal footing. The Global 30 countries that assess collegially the reports Forum (GF) is in charge of the monitoring and prepared by the expert tax assessors appointed by peer review of members and non-members the GF. (called jurisdiction of interest) with respect to the implementation of the standards of tax Peer Reviews are carried out in 2 phases transparency and exchange of information for Phase 1 reviews assess the quality of a tax purposes. These standards have essentially jurisdiction’s legal and regulatory framework been developed from principles laid down in for the exchange of information while Phase 2 the 2002 OECD Model Agreement on Exchange reviews look at the practical implementation of of information on Tax matters (TIEAs), its the framework. Some members have undergone commentaries and in Article 26 of the OECD a combined Phase 1 and 2 assessment. Mauritius Model Tax Convention on Income and on capital, was in the very first batch of countries undergoing its commentaries as updated in the 2005 Model a combined Phase 1 and 2 review. This was done (MTC). In that respect an upgrading of standards alongside such countries as Australia, Germany, has also been carried out with the respect to the France, the United Kingdom, Canada and UN Model. The UN published in March 2011 United States. Mauritius is being peer reviewed a new and updated Model that removes the by the United States and Malaysia for a second domestic interest test requirement and eliminates supplementary report following amendments bank secrecy as a barrier to the exchanging of tax done in the Trust Act and the Companies Act in information (see Article 26(5) of UN MTC). relation to ownership identification. The Mandate of the GF is to review the All Review reports become public documents Exchange of Information (EOI) framework of once adopted by the GF and become GF reports all jurisdictions identified by the GF as well as for that country. At this point in time, the GF member countries. Mauritius is a member of the has adopted 79 phase 1 reviews, made 20
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combined reviews, made 555 recommenda positive sense) of members of the GF (within tions, 17 supplementary reviews (including that the GF as well as outside) is getting countries of Mauritius) and 50 follow up reports. The to make unprecedented progress towards tax credibility of those reports is grounded on the transparency. These guidelines of behaviour methodology which has been elaborated by the which do not have force of law (by themselves) EOCD in 2009 at the Mexico Meeting. This was or are not binding (by themselves) are being revised in 2010. The methodology sets out adhered to by the single largest tax group of guidelines for the conduct of the peer review. It is countries. central to the success of the exercise of review by peers. For it to be credible, the exercise must show Conclusions effectiveness, fairness, transparency, objectivity, Great strides are being made to strengthen consistency and cost-efficiency. The next step of the international financial architecture by the GF work would be the rating to be attributed increasing the level of cooperation. The to assessed countries. This exercise will take place laudable initiatives by the GF, G20 or the OECD in September 2013 in Paris. Countries will be can only be profitable to developing countries rated as compliant, largely compliant, partially and their emerging markets if they also address compliant or non-compliant on each and every the issue of base erosion and frontally address element and will also be given an overall rating. the issue of base erosion and profit shifting (BEPS) behaviour by multinationals. The recent R eporting Progress to G-20 Group of OECD report on BEPS (February 2013) goes Countries into the right direction. With an increasingly At their Summit in Seoul in November 2010, integrated and seamless international financial the G-20 leaders invited the GF to report on architecture, exchange of information has progress made with respect to international become vital to tax authorities and international tax transparency work done by the GF. The institutions. GF thus, adopted a Progress Report that was delivered to the G-20 leaders. In June 2012 a similar exercise was carried out at the Los Cabos (Mexico) Summit. A similar exercise will be carried out at the next G-20 meeting. This brings me to the question whether the Ra jesh Ramloll LLM (Tax) President work of the GF is instrumental in developing a International Fiscal Administrators soft law. Many reviewed jurisdiction are being (IFA) - Mauritius called and are actually taking steps to amend their domestic laws to be standard compliant. The following figures speak for themselves. Fifty peer reviewed countries have amended their laws. Seventeen countries have revisited their banking laws and regulations to improve access to bank information. A similar number of countries have eliminated the provision for bearer shares in their laws. Forty two countries have improved their standards on accounting information. Six countries have eliminated the domestic tax requirements. Therefore, what is striking since the beginning of this exercise is the high level of cooperation and commitment shown by GF members to amend their domestic laws to be standard compliant. What we are in effect seeing is the development of an entirely new area of soft law. Peer pressure (in the
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FATCA Compliance of financial entities in Mauritius as from 2013 Whilst the timeline for the implem entation of the United States’ Foreign Account Tax Compliance Act (FATCA) has been effectively extended by six months, it is easy to underestimate the planning, training and activities needed to implement compliance procedures especially if there are any IT system modifications that need to be made.
Online registration for published a draft paper form (Form financial entities 8957) of what would be expected iven that the FATCA from financial entities. Whilst this online registration portal process of simply registering is not is now projected to open expected to be onerous, the IRS has on 19th August 2013 extended the time period to register Gfinancial entities around the world by six months. This is a welcome should now be geared up to register change as it allows financial with the United States’ Internal institutions to use the remainder of Revenue Service (IRS). We still do 2013 to get familiar with the not have a view on the precise online registration process, input pre registration process but the IRS has liminary information and to
72 Global Finance MAURITIUS challenges
refine information before fina be compliant with FATCA. lising their registration in early However, the term financial 2014. The new date set of 25 April institution is defined by the 2014 is the last date by which a IRS as a Custodial Institution, financial institution can register a Depository institution, an to ensure inclusion on their June Investment Entity, or a Specified 2014 FFI list. Insurance Company. Due to the wide definition Mauritian Financial of an investment entity, there Institutions will need to are several entities which register to obtain a GIIN. are affected but still require The Government of Mauritius more information to better is in discussions with the IRS understand their roles and and is planning on signing an responsibilities. The Offshore Inter-governmental Agreement Management sector is espe (IGA). The proposed model 1 cially impacted. All special agreement will make Mauritius purpose vehicles (SPVs) that a FATCA partner country and meet the definition of being an Shanaka Katuwawala hence all financial institutions investment entity are affected will be deemed compliant whilst and will need to register Served as FATCA project manager at the Bank of New the Mauritius Revenue Authority with the IRS and follow the York Mellon from 2011-2012. implements the processes to subsequent local legislation He is now Executive Director at gather information from our that will come as a result of the Grant Thornton, Mauritius and is responsible for Specialist advisory local financial institutions. IGA. This poses an interesting services. However, even though an question onto whom the onus IGA is expected to be signed, of complying with FATCA Mauritian Financial entities requirements should fall. For will still be expected to register the Mauritian entities this has with the IRS. This registration to be the local entity itself, so by is necessary so that the financial default the responsibility needs institution can be issued a Glo to be addressed locally by the bal Intermediary Identification directors of these companies. Number (GIIN). These GIINs FATCA places requirements will serve as the main unique on financial institutions to identifier of financial institutions appoint a Reporting Officer for satisfying its reporting who could be subjected to cri requirements and identifying minal proceedings if failings its “FATCA compliant” status to are found in the reporting other withholding agents. process. There is undoubtedly going to be an increase in the Who should comply with cost of compliance, whilst the FATCA requirements? understanding of who will bear As highlighted in the Global these costs is not as obvious. Finance Mauritius FATCA The insurance sector is assessment last September, also affected and “Specified banks are heavily affected by Insurance Companies” are also the impending legislation and expected to register with the IRS should already have plans and satisfy the local reporting in place to ensure they will requirements.
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Life after shopping In the eye of the cyclone The world is in the e have to recognize in massive sprawling cities. When eye of the cyclone. that we have en we look at our Global Footprint, tered a period of we are breaking all records with On the one hand, great change: a syn disasters and Climate Refugees, there is the global Wchronized related crash of economy with Pakistan floods and Russia financial crisis, and and ecosystem with food shortages, record temperatures leading to on the other the climate catastrophes, massive eco the ban on wheat exports. The nomic change and global geo costs of 2011 Thailand floods were ecological challenge. political instability. We will need to thousands of lives and 34 billion Although the outlook change our expectations about our euros. on the surface seems material lifestyles, the nature and Despite our natural instinct focus of our work and career, our that it is a bad idea to mess up the gloomy, yet there expectations of governm ent, how environment, yet principles such is still room for we behave in our communities and as humanity, sense of obligation optimism as a wealth our companies to get out of this and morality are still not appealing of opportunities mess. enough and attractive to people. First, we need to understand No! Only Money is! It is is attainable the depth and complexity of the only when destruction of the through change and issues. We must realize that we are environment is a direct threat to the transformation. The part and parcel of Nature. This economy that we start to consider has always been true in Africa and it as a threat to our planet, or when future is still bright. Asia (although changing now). Sir N. Stern states that unchecked For, as a species, the In the Western World, instead of climate is synonymous to a 20% human being is good protecting ourselves from nature, decline in GDP, then governments in a crisis. Our backs we are finally learning to be part of sit up and take notice. it. So, can we afford to ignore these may be up against From Rio (1992) to Durban warnings? Can we remain skeptical the wall but we are (2011) we have all been behaving about the effects of climate change? always extraordinary as simple observers with little Skepticism can be healthy at times, power, in the presence of an but organized skepticism can really in that situation. immature, chaotic global decision be harmful. Furthermore, no act making process. We can only ask: ion means more of the same. “Who’s in charge? Who can really Some think that the problem do something about it?” Nobody will be fixed with new technologies, seems to have a clear idea who’s new behaviours through markets in charge. Is it Finance, the Media, and new injection of capital. It is Governments, Civil Society, the like Viagra. It only lasts a few hours. 99% or Facebook? This is not going to happen. The May be it should be all of us. assumptions are that we will bring the poor out of poverty, that we will A very big Problem carry on creating jobs and provide People don’t think they live in the food and satisfy basic needs, that environment –they live somewhere we will continue to increase our else. They move away from nature, financial/material standard of live in cold/warm sealed buildings living, that we will carry on in
74 Global Finance MAURITIUS challenges
relative stability despite a few inertia against change, and expectations. We will have to conflicts. We have already gone resistance will not only continue engineer and endure deep shifts beyond the Limits: we are but also strengthen. And all this in how we behave personally overexploiting the planet’s is due to a strong addiction: an and collectively. And finally capacity and we need to cater addiction to growth. We just this issue is a HUMAN one, for an extra 2 billion people in love growth. Politicians love it. not a single technical or market 20 years. We will need to find Economists love it. It is in the issue. It is not only about saving answers to these three basic strategy of every Government the planet, but about saving the questions: and every Company. But do we civilisation! • Is population the problem? have a choice? History is replete with exam China has not been able to fix it. Eliminating fossil-fuel indus ples of powerful companies,
How will other countries react? try to cut CO2 means losing countries, and empires that • Can the market and tech over 2 trillion € of economic have fallen because of com nology fix it? On the scale and activity. If we don’t, we will placency. (see Jared Diamond – at the speed required? The face runaway climate change Collapse). Survival is not about challenge is not only technical with huge potential loss for the size or strength; it is about but also economical and insurance industry, collapse of capacity to adapt. We need to political. food supply, geopolitical crises, consider practical preparedness, • Can the Economy grow diffe water shortages and climate investing in the right technology, rently? Bhutan is trying Pros refugees. Therefore, the issue is and psychological readiness to perity without growth -Gross no longer when but how - How cope with uncertainty and rapid National Happiness (GNH). to adjust? change. Some may argue (and justifiably To meet this challenge so) that this model may not be headlong we will need to be What response? readily exportable. prepared physically, economi We need a Global emergency The Challenge is clear: cally and psychologically to response, whatever the cost. Markets and Technology cannot accept unpleasant things. It will The Initial response will focus adjust to the scale and with be a chaotic and discontinu on climate change, particularly the speed required. There is no ous change. It will require a on energy, transport and agri evident indication of any action major evolution in human culture. Climate change is a on a global scale. There is strong values, politics and personal symptom, not the problem.
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To succeed, we will need to response is possible with a small China is producing results: It expand our response to other number of countries forming is the world largest solar market; sustainability issues. a “Coalition of cooling”: start between 2006-2010, 20% We need to create a New with 50% emissions with these 3 reduction in energy use has been
Model of Economic Develop - USA+China+EU27, then bridge achieved while EU has this target ment that does not involve con over to 67% emissions – +Brazil for 2020 (20% +20%). By 2020 sumerism or material growth, + Russia+ India + Japan. The China will have achieved 40%- but focuses on alleviating po rest of the world is only 33% ! 45% reduction. It is investing verty and extreme inequity, revi There will be systems shocks heavily in R&D - 386 billions € siting our energy production and geopolitical impli cations. - 38 % of global investment systems, redesigning our cities Already we are witnessing especially in strategic industries: for real enhancement of the global shifts in economic com Energy efficiency - New energies quality of life. petitiveness caused by the – ICT – Biotech. One can anticipate that changing value of resources and There will be losers. When there will be two types of res the move to new technologies, low lying Maldives, Tuvalu, and ponses running in parallel: challenges to the moral Kiribati will sink, they will be the Old Economy and System authority of different cultures ignored. These countries are too trying to fix itself with existing and economic systems, driven small to be acknowledged. assumptions and mechanisms; by their inability to respond to But when Bangladesh, China, and the New Economy with the looming crises. Thus, those India, USA become affected transformational thinking. who have created the problem with millions of refugees and Global agreements are will be engulfed in a process of trillions of Euros of damages, difficult to achieve. Kyoto, retribution and accountability. we will no longer ignore the Copenhagen, Durban did not At the global scale, competi question. produce any global action. We tion is fierce between EU, USA should take the example of trade, and Asia, especially China. Creative Redesign at the GATS negotiation, WTO With heavy investment in R&D HSBC estimates the global did not wait for a single global in Asia (China, S Korea, and market for low carbon techno agreement to free trade before Singapore) EU and USA are logy to exceed 2 trillion € per initiating action. Thus, a rapid losing their edge in innovation. annum by 2020 with capital
76 Global Finance MAURITIUS challenges
investment of around 7,5 • Transport and city planning transport cheaper and our trillion € during the current • Global Energy Efficiency agriculture transformed. But decade. It’s already here and it’s benefits by 50% by 2050 = 6 tril- the transition will be messy with unstoppable! They are all about lion € chaos and volatility at the social, creative measures: • EU renovation market = 32% economic and political levels in • C5 : Connect the City to energy savings various countries. We will be Chaos,Crisis and Change able to celebrate our resilience • Create Urban Leadeship Yes, there is Life after and our ingenuity, the brilliance • Create Long Term Value shopping of the human mind, and the • Promote Urban Responsibi Millions are already design power of innovation to drive lity ing the future, inventing tech rapid global change. • Engage a campaign Shop less, nology, transforming compa live more nies, changing behavior, starting L essons? • I4 : Invest in Intelligence, campaign, building new orga We need to act collectively Information Technology and nizations beyond the Great and stop waiting for someone Innovation Disruption. else to fix it. • Connect IT R&D to Quality There are two reasons We all know what we need to of Life for change: First, there is no do. Decide to Change. Decide • Invest in solar/wind/bio choice; Second the old model to act in a context of dignity • Eco-retrofit the old cities is outdated. It has delivered but and respect. Connect and work. • Sustainable by Design it cannot anymore. We need to Raise children who think. • E 5 : Exchange - Export EU redesign our model and choose Be happy! Expertise and Experience one which is rich in progress We are the system. • Partner with BRICS, Asia & and happiness and not in phy We have to change. Africa sical impact, rich in quality of We need to get to work on life and embedded in human designing the future. The future development. is already here. Millions of Maybe the direction is people have turned up to work, Happiness Economy. We need excited, committed and actively to make choices at personal, engaged. They are not waiting corporate, national, and global for permission to get on with it. levels. It will give us more fun, Technology will play a clearer conscience, more money, critical role in the way forward. more time, better health. But alone it is not a solution. In conclusion, one can say They have to deliver close to that this century is going to be Gaaet n Siew
Zero CO2, they should be safe a wild and exhilarating ride. CEO Global Creative Leadership and affordable. They should The crisis as it is known now Initiative consider factors like our quality follows 2 successive phases: of life, our geopolitical stability First, the recognition of the and our future prosperity and Failure of growth with the economic stability. assumption: growth is no longer There is much more that will the foundation of prosperity unfold. But a focus on climate and success. Resistance will and energy provides us a critical appear and we will desperately insight into the process as well try to restart growth; second, as the most important short- recognition of the End of term economy-wide impacts on growth. We will see amazing both markets and emissions. breakthrough in technology. • Food and agriculture Our Cities will be cleaner, our
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international
FDI in Least Developed Countries: Problems of Excess? When you think of foreign direct investment (FDI) in developing countries,what is the picture that comes to mind? Usually it is of multinational companies setting up gleaming high-tech plants in countries such as China or Malaysia. And most FDI to developing countries has indeed gone to these kinds of middle income countries that are well-integrated into global production networks and trade, with growing manufacturing and modern services sectors.
t is less common to think of the Least This is not just a case of a few LDCs receiving Developed Countries (LDCs) as an most of the FDI. Over three quarters of LDCs attractive destination for FDI, given these received flows of more than 2 percent of GDP in countries’ high poverty, low education 2002-11 over half received inflows worth more Ilevels and weak institutions. than 4 percent of GDP, while a quarter of these It is surprising, then, to realize that Least countries were indeed receiving FDI inflows of Developed Countries have in fact been receiving over 8 percent of GDP in this period. as much if not more FDI - as a share of GDP Most LDCs remain primarily exporters of - as other more advanced developing countries. primary commodities. Large flows of FDI into Here the key driver has been FDI into natural these countries have been mostly targeted at the resources, in particular oil and minerals. commodities sector, in particular fuel and minerals, driven by strong global demand, high Least Developed Countries as Destination commodity prices and spectacular new for FDI discoveries of subsoil assets. Countries like The Least Developed Countries (LDCs) are Angola and Equatorial Guinea provide examples 48 countries flagged by the United Nations where heavy FDI inflows have already resulted Economic and Social Council as meeting certain in strong oil production and revenues. Others thresholds: low per capita income, weak human like Democratic Republic of Congo, Liberia development and high economic vulnerability Figure 1: FDI Inflows 1980-2012 to shocks. (UNCTAD, 2012). About two thirds are in Sub-Saharan Africa with the rest mostly in % of GDP the Asia and Pacific region. The population of All Developing Countries Least Developed Countries the LDCs is about 840 million, about 12 percent 6.00 of the world total, although at about $730 billion, their GDP (at market exchange rates) is only 5.00 around 1 percent of the world total. Figure 1 shows that while FDI inflows to all 4.00 developing countries used to run at only about 3.00 0.5 percent of GDP in the 1980s, that proportion rose sharply in the 1990s, as part of a broader 2.00 process of global integration. It is striking that the pattern for LDCs has been very similar. 1.00 Indeed FDI inflows to LDCs in the 2000s appear to have been somewhat higher as a share of 0.00 GDP than for developing countries as a whole.
Source: IMF Oct.2012 WEO Database and World Bank Staff
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and Sierra Leone are examples where FDI is be a curse or a blessing? The current consensus still accelerating and major expansions in among economists is that it mostly depends minerals production and revenue still lie mostly on circumstances and policies. (Brahmbhatt, in the future. 1 Gelb, Kaiser and Vinuela (2012) Canuto and Vostroknutova 2010; Lederman note that large as-yet undiscovered reserves of and Maloney 2007). Two circumstances seem oil and minerals are likely to be found and particularly important. First, negative effects are brought on stream in Africa for decades to come, mostly related to oil and minerals rather than including in LDCs agricultural commodities. Such concentrated “point source” resources can easily become the Problematics of the Natural Resource object of rent-seeking and capture (including Curse through armed conflict). Second, high oil The growing discovery and production of and mineral revenues mostly have a negative natural resources made possible by FDI should impact in countries with bad governance, while in principle provide an enormous boost for they have a positive impact in countries with development and poverty reduction in the good governance. (Collier and Goderis 2007). LDCs, for example by increasing resources for This is worrying because LDCs are in general education, health and infrastructure. In reality characterized by weak institutions and poor experience is replete with cases of resource governance. abundant countries that have squandered their There are a number of ways in which natural natural wealth, have experienced low growth, resource abundance and poor governance can massive corruption and social conflict, and lead to worse economic performance. First, ended up even poorer than when they began – countries with weak governance are more likely the so-called “ natural resource curse”. to adopt poor economic policies to manage So, which of these roads will the LDCs travel? commodity booms. For example politicians Will a booming natural resource sector prove to may spend the new revenues in wasteful and
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unproductive ways which nevertheless today’s generation. Natural resources are part increase their political popularity. Second, of a country’s overall wealth or capital stock, natural resource booms create complicated alongside its physical capital (such as machinery problems in macroeconomic management that and buildings) and intangible capital (including are tough even in economies with good human capital, social capital, and factors such governance and institutions. These include so- as the quality of its institutions). To increase called Dutch Disease effects, with an wealth, a country’s investment in the various appreciation of the real exchange rate forms of capital must exceed the depreciation of accompanied by a contraction of sectors of the its wealth, including the depletion of its natural economy such as manufacturing. Other resources. In other words, what is referred to macroeconomic problems result from the as the country’s adjusted net savings (ANS) rate volatility of primary commodity prices, which must be positive. 2 drives volatility in natural resource revenues, The ANS rate for LDCs was positive but government spending and real exchange rates, low during the 2000s – about 4 percent a year, with the resulting uncertainty damaging compared to 13 percent for developing countries investment and growth. as a whole. ANS rates were negative for several Natural-resource-abundant countries also LDCs, indicating that their wealth stock was face longer-term questions about the optimal contracting and that current growth would not pace at which to deplete their resources today be sustainable in the future. and how much to save for the welfare of future generations. An important metric here is What Policies Can Help LDCs Best Manage whether the country’s economic strategy is Commodity Resources for Development? sustainable, meaning one that transfers enough Given the evidence that problems with wealth to future generations to allow them to governance are at the root of the natural resource achieve at least the same level of welfare as curse, it is vital to increase transparency and accountability over all aspects of natural resource extraction and use. These aspects include the terms of contracts with companies engaged in resource extraction or operation, ongoing monitoring of operations, and the collection and use of government taxes and other revenues from natural resources. Broad global efforts like the Extractive Industries Transparency Initiative (EITI) can play a part, as, at the domestic level, can anticorruption reforms, more scrutiny by civil society and media, procurement reforms, strengthening of formal audit, parliamentary scrutiny, and so on. Equitable sharing of benefits across regions, ethnic groups, and so forth can help reduce the danger of civil strife over resources. Many countries are also experimenting with use of a separate (extra-budgetary) Natural Resource Fund (NRF) to facilitate good management of revenues. Experience suggests that such funds can help buttress the right policy mix but that, by themselves, they are no substitute for sound overall fiscal and economic management. An NRF of itself will not prevent waste and abuse unless it is part of a broader effort to strengthen governance and integrate
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the fund with an overall fiscal policy References framework. The government also needs to make key Brahmbhatt, Milan, Otaviano Canuto and decisions about how to allocate natural resource Ekaterina Vostroknutova. (2010). Natural revenues between consumption and savings of Resources and Development Strategy After the Crisis. In Otaviano Canuto and various kinds, decisions which will determine Marcelo Giugale (Eds., 2010), The Day After how well the country is able to handle problems Tomorrow: A Handbook on the Future of such as Dutch Disease and commodity price Economic Policy in the Developing World. volatility, as well as the long run impact of natural Washington D.C.: World Bank. resources on growth and poverty reduction. Should the government return revenues to private Collier, Paul, and Benedikt Goderis. 2007. citizens (via tax cuts, transfers, or a “citizens’ “Commodity Prices, Growth and the dividend”), or retain them in its own hands? If Natural Resources Curse: Reconciling a Conundrum.” Working Paper No. 276. the latter, how should revenues be allocated Centre for the Study of African Economies. between public consumption and various kinds of Oxford, August. public investment? (These issues are discussed in depth by, for example Collier and Venables 2008). Collier, Paul, and Anthony Venables. 2008. If resources are to be spent on public investment “Managing Resource Revenues: Lessons and infrastructure, reforms to strengthen public for Low Income Countries.” Paper for the investment management, cost-benefit analysis, Africa Economic Research Consortium 2008 Annual Conference. Oxford. monitoring and evaluation, and budget processes and institutions are crucial. Gelb, Alan, Kai Kaiser, and Lorena Viñuela. We conclude that high FDI flows into booming (2012). How Much Does Natural Resource natural resource sectors in the Least Developed Extraction Really Diminish National Wealth? The Implications of Discovery. Center for Countries could raise difficult development Global Development Working Paper 290. challenges for these economies. With good policies and governance, though, natural resources Lederman, Daniel, and William F. Maloney. can help accelerate overall economic and social Eds. 2007. Natural Resources: Neither Curse development. Mismanaged, they could foster the nor Destiny. World Bank and Stanford deep dysfunctions and problems associated with University Press, Washington, DC. the natural resource curse. United Nations Conference on Trade and Development (UNCTAD). (2012). The Least Note: The views expressed in the article are those of the authors Developed Countries Report 2012. and do not necessarily represent those of the World Bank, or of the World Bank (2011). The Changing Executive Directors of the World Bank or the governments they Wealth of Nations: Measuring Sustainable represent. Development in the New Millennium. World Bank. Washington D.C.
Otaviano Canuto Milan Brahmbhatt
Senior Adviser on BRICs in the Senior Adviser in the Poverty Development Economics Department Reduction and Economic of the World Bank Management (PREM) Network of the World Bank.
1. See Boayke et al (2012) for Liberia and Sierra Leone. 2. World Bank (2011) provides a comprehensive discussion of the methodology of wealth accounting and of principal findings from wealth accounting data across countries
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G8 Heads of State Summit: What Happened, and What are the Implications?
GOs kept the media request to all other signatories. The UK hosted focus on the trans The Convention also paves the parency work stream, way to automatic tax informa the Group of Eight calling on the UK in tion exchange and to enforcement (G8)Heads of State Nadvance of the summit to “put its of the tax judgements of other Summit in Lough own house in order”. UK Prime signatories. The CD/OTs have Minister Cameron’s key objectives not yet committed to automatic Erne Northern for the transparency program were: exchange through the Convention Ireland in June 2013. • collection of information on or to enforce the tax judgements ‘Tax, trade and benefici al ownership for all compa- of others, but there may now be transparency’ were nies, pressure to do so. • central registers for data, The OECD tabled a report at the the key agenda • ‘freely accessible’ to law enforce- Summit entitled: ‘A Step Change in items. Corporate ment; and Tax Transparency’ with proposals taxation did not • also accessible to the general for moving to automatic exchange public. of information, on a single stan figure prominently, During the run up to the dard. As many institutions are principally because summit the UK deflected attention now adapting to accommodate US the OECD ‘Base to the British offshore centres, FATCA requirements, this appears Erosion and Profit prevailing on them to upgrade tax likely to be the new standard. information exchange collection UK Prime Minister Cameron Shifting’ project did and exchange protocols. Under withdrew plans to keep registers not report until July. considerable media attention the of beneficial ownership on the G8 Crown Dependencies and Overseas agenda on 15 June, the same day Territories (CD/OT) signalled will that he met with the Chief Ministers ingness to engage in wide-ranging and Premiers of the British offshore automatic information exchange. centres. CD/OT commitments stimula In the event, the UK received ted by the summit included the limited support at the Summit following: itself for other aspects of their • FATCA-style information ex transparency program, suggesting change with the UK; that while countries are keen to • participation in an EU pilot to receive tax enforcement data they engage in FATCA-style information have less interest in reciprocating. exchange; The next steps are Action Plans • accession (through the UK) to press ahead with the vague G8 to the OECD Multilateral Tax member commitments to enhance Convention; and beneficial ownership collection. • scheduled reviews concerning From the G8 only the UK, the US transparency in respect of beneficial and France have tabled commit ownership. ments to provide Action Plans at The OECD Multilateral Tax the time of writing. Convention commits signatories The British offshore centres to tax information exchange on already collect beneficial
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owner ship information for the data out of public registers drawn between vigilante tax corporations and have done so of beneficial ownership then enforcement by well-inten for a dozen years, through organise and analyse the data tioned NGOs and (self-help) licensed and regulated corporate for sale for commercial buyers. action by criminals to effect a service providers. The UK, by Such compiled records would be more direct ‘redistribution’ of contrast, does not yet collect any readily accessible to criminals. newly visible wealth? Ironically, beneficial ownership infor Could governments effect such risks are likely to be mation. ively protect individuals in highest in the countries with The UK Action Plan for the public eye targeted after weak institutions- the very same transparency provides for their data is stolen or released? which NGOs seek to help. deposit of beneficial ownership Should celebrities owning their in company registers. Prospects homes through companies in an Does a Level Playing Field for success of UK plans do not effort to avoid paparazzi or other Matter? look promising: overburdened harassment have their personal A level playing field - ie, corporate registrars have little data disclosed? What about the universal or at least broad- ability to chase down those individual owners of companies based application of standards contributing data to confirm running abortion clinics or - is essential to avoid simple that beneficial ownership dis engaged in nuclear research or displacement of business to less closure is adequate or accurate. life sciences activity which is expensive or less transparent Criminals, for example, would be lawful but offends fringe groups- locations. However, the notion unlikely to fear sanctions from eg, animal rights activists? of a more than 100 countries Companies House for failing Even if the G8 is comfortable, progressing in one wave to properly report. It is likely important questions remain seems an impractical process. that in due course the CD/OT regarding the real kidnapping Some countries will have to model will be seen as far more and extortion risks in emerging lead and take the competitive effective. One might expect that countries with less stable or consequences. in due course UK and other G8 effective governments. As the UK now conducts countries will need to examine NGOs have noted that approximately 25 per cent this model more carefully (also public registers would facilitate of the cross-border financial used in the Netherlands) as it their work in support of tax intermediation in the world, a becomes clear that the passive, investigation and enforcement. program which hobbles them archival process of corporate African countries with weak ins and does not include Asia and registries is unsuited to the law titutional capability are singled the US may be ineffective and enforcement task intended for out for support. Thoughtful tax pointless. Worse, the UK could it. The Department for Business, policy experts no doubt shudder lose any leverage over progress Innovation and Skills is expected at the prospect of ‘vigilante’ tax on global standards if it moves to run a public consultation on enforcement. As the recent ahead of other big players the new reporting requirements condemnation of the US IRS for who are happy to exploit the during the summer – including targeting Tea Party and similar regulatory arbitrage opened the question about whether to activists shows, government by UK action. Even if China make the information available agencies at least have the virtue and the US ultimately join the to the public. of accountability for their program, the last man standing derelictions. (and other late movers) will still Public Registers: What are There is of course no be big winners where they have the Risks? guarantee or even reason for corralled all of the business A planned release of financial confidence that all those with before the level playing field is information poses risks well access to published financial locked down. beyond occasional hacking or data would use it responsibly China’s cooperation in US bribery of tax officials to access in the regulated and impartial FATCA is uncertain; it is not a official records. Data aggregators manner expected from govern G8 member and was not asked would, for example, harvest ments. Could clear lines be to join the consensus. Even if
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China were asked to join in, for tax information collection IFC regulatory compliance we know the answer. China and exchange while the US is leapfrogged that of the OECD already blocked similar action not on the program? countries, forcing a slowdown by the UK when it chaired G20 in the pace until the larger coun under PM Gordon Brown in Conclusion tries caught up. In the meantime 2009. Few MNCs or wealthy G8 proposals represent British IFCs would be well individuals are likely to shift an ambitious program in the advised to contribute actively their affairs to China if they global drive for transparency. to the public conversation on hang back, but what about Hong Costs will be vast. Competitive regulation to ensure that the Kong if it shelters under China’s implications, cyber-criminal ac world recognises their leading umbrella? cess to data registers and level regulatory standards and their What about the US? US LLCs playing field issues all bear constructive contribution to the are generally tax-free when careful thought. economies of the metropolitan owned by non-US persons, IFCs play an important role countries they service. provided their activity is con providing the utility ‘wiring’, fined to holding operations or which supports cross-border investments outside the US. investment and trade. Glo The US establishes more balisation has fuelled a doubling than a million LLCs a year, of world GDP in a generation, most of which are used for unprecedented in world his routine (reported and taxed) tory. Poverty has declined US business. To their credit, dramatically across emerging US federal government agen economies, particularly those cies also candidly acknowledge like China which have skilfully widespread abuse of US LLCs used and supported the sym by international criminals, gi biotic financial hubs which ven that US data collection surround them. Trade, not aid, RICHARD J. HAY, Partner obligations lag well behind cur has been the emerging country Stikeman Elliot, London rent international standards. ticket to success. He is a tax partner and head of the financial regulation practice in the In many states no informa Ill-considered damage to the London office of Stikeman Elliott, tion at all on corporate owners facilities which support global Canadian and international lawyers. is collected, giving complete business could be perilous. He is counsel to the IFC Forum, a 1 group which represents the major anonymity to owners . Asian and other emerging fi professional firms in the leading There is no risk of BVI-style nancial hubs in the Middle IFCs theft of US data discs – such East – as well as the US - will discs do not exist in the US eagerly snap up existing finan system. Many US states do cial services capacity which not even track shareholders of is impaired by uncompetitive record at the moment, so US and poorly designed UK/G8 domestic standards have a long policy. G20 will now take over way to catch up. With over 18 the transparency work stream million active corporations2 US in a Heads of State meeting in self-exemption from the rules is St Petersburg scheduled for 4 a not a small hole in the global September 2013 under a Russian system. What are the prospects presidency. for a globally effective process It feels like 2002, when small
1 “Company Formations Minimal Ownership Information Is Collected and Available”, Report to the Permanent Subcommittee on Investigations, Committee on Homeland Security and Governmental Affairs, US Senate, United States Government Accountability Office, April 2006. Also see: US Money Laundering Threat Assessment, US, December 2005. 2 “The Puppet Masters: How the Corrupt Use Legal Structures to Hide Stolen Assets and What to Do About It”, World Bank, November 2011.
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An end to offshore business? Small emerging International Financial Centres(IFC) like Mauritius should develop pro-active strategies of engagement with key jurisdictions after the G8 Summit, writes Samantha Seewoosurrun of Newgate Communications, Brussels
he recent G8 Summit artificially shifting profits to thorities including, as appro in Northern Ireland low-tax jurisdictions”. priate, financial intelligence hailed an unprece • The exchange of information units. While all of the G8 coun dented crackdown on between jurisdictions was tries supported the principles, Ttax avoidance and tax evasion. seen as “a critical tool in the only six of the countries agreed UK Prime Minister David fight against tax evasion” and to present their own Action Cameron, who presided over recent developments in tax Plans, with Germany and Russia the meeting, commented that transparency were seen as declining to do so. The UK “tax authorities across the world “setting a new standard and published its own document on should automatically share infor commit to developing a single the same day as the G8 Summit, mation so those who want to truly global model for multilateral and the US and France were evade taxes have nowhere to and bilateral automatic tax quick to follow. hide”. The issue of automatic information exchange building information exchange will re on existing systems”. The G8 OECD’s four steps to tackle main high on the political expressed support for the OECD global tax evasion agenda for the months to come, report on the practicalities of In terms of the OECD’s work in Europe and beyond. Small implementation of multilateral referred to at the G8 Summit, IFCs like Mauritius might automatic exchange and pledged the OECD reported that “vast consider taking pro-active to work together with the OECD amounts of money are kept steps to engage with key inter and in the G20 to implement its offshore and go untaxed to the national jurisdictions and to recommendations urgently. The extent that taxpayers fail to develop a positive response, G8 called “on all jurisdictions to comply with tax obligations in to guard against any adverse adopt and effectively implement their home jurisdiction. Offshore ‘domino effects’ from current this new single global standard at tax evasion is a serious problem international discussions. the earliest opportunity”. for jurisdictions all over the In addition, the G8 also world, OECD and non‐OECD, State of play after the G8 agreed on a set of Action small and large, developing and Summit Plan principles to prevent the developed. Cooperation between So where do things stand misuse of companies and legal tax administrations is critical in after the G8 Summit? The final arrangements, inspired by the fight against tax evasion and communique placed signi the UK, which highlight that a key aspect of that cooperation ficant emphasis on developing companies should know who is exchange of information”. global solutions to the prob owns and controls them and The four steps suggested by lems of tax evasion and tax their beneficial ownership and the OECD are as follows: avoidance, and included the basic information should be • Enacting broad framework following points: adequate, accurate and current. legislation to facilitate the • The G8 would ensure The principles also state that expansion of a country’s net that international and G8 beneficial ownership infor work of partner jurisdictions countries’ own tax rules “do mation on companies should • Selecting the legal basis for not allow or encourage any be accessible onshore to law the exchange of information multinational enterprises to enforcement, tax adminis • Adapting the scope of repor reduce overall taxes paid by trations and other relevant au ting and due diligence
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requirements and coordina the existing Directive and new involved in international trade ting guidance proposal cover the arrangements use tax havens to avoid paying • Developing common or com- between the EU Member States tax, sometimes with the per patible IT standards. and do not seek to target third mission of governments. Star countries as such (although bucks and Apple were cited as EU ‘at the forefront of the it is noted that information examples, and it was claimed fight’ may be passed where bilateral that half of the world’s trade is The EU has explicitly stated agreements are in place), EU channelled through tax havens. that it wishes to be “at the Taxation Commissioner Semeta Mojca Kleva Kekuš MEP forefront of the fight against tax commented upon the launch of commented: “Now it is up to evasion and tax fraud”. In a Joint the proposal that it “gives the EU the European Commission to statement after the G8 Summit an even stronger hand to push prepare concrete proposals and by European Council President for more tax good governance for Member States to ensure Van Rompuy and European internationally… to ‘up our they become reality. I have also Commission President Barroso, game’ as a Union and lead by suggested creating a list of tax it was noted that automatic example. And it is also a sign we havens.” exchange of information is expect others to follow us”. already the norm for EU savings Third, later in June, the UK focus on tackling income and by 2015 should European Commission told ‘aggressive tax avoidance’ apply to all form of income and Italy, Poland, Belgium, Greece In advance of the G8 Summit, account balances, and there was and Finland’s self-governing David Cameron had already strong support for making this a Aland Islands that they must set out his priorities based on global standard and introducing enforce new EU rules aimed at the three T’s: tax, transparency country-by-country reporting tackling tax evasion within the and trade. He sought to set an by multinational companies to next two months or else face example to other leaders by tax authorities. Beyond the poli court action. The new rules – hosting a meeting with Britain’s tical rhetoric, the EU and certain which should have been applied Overseas Territories and Crown Member States have already since the beginning of 2013 - Dependencies to call for action taken a series of concrete steps require Member States to share on tax information exchange and this year to show that they mean information with each other beneficial ownership. Speaking business. on possible tax evaders and after the Summit, he proclaimed First, in April, France, set deadlines for how quickly that “tax authorities across the Germany, the United Kingdom, information must be provided. world should automatically share Italy and Spain announced plans It is made clear that countries information so those who want for a pilot action on automatic cannot refuse requests to share to evade taxes have nowhere to exchange of information (AEOI) information by saying the data hide. Companies should know using the US Foreign Account is held by banks. who really owns them and tax Tax Compliance Act (FATCA) While the EU initiatives collectors and law enforcers model agreed with the US as a taken to date do not include any should be able to obtain this basis, and called on Europe to binding measures in relation to information easily, for example take a lead in promoting AEOI offshore centres or ‘tax havens’, through central registries, so in the world. there are clear indications that people can’t avoid taxes by using Secondly, in June, in response EU politicians and policy makers complicated and fake structures.” to calls from EU Heads of State still have further measures in To further demonstrate lea and Government, the European their sights. At the end of June, dership, the UK Governm ent’s Commission adopted a new the European Parliament’s own Action Plan published on proposal to expand the scope Socialist & Democrat Group the day of the Summit states of automatic exchange of infor hosted a meeting focusing on that it will amend the Companies mation, which is seen as con tax havens, tax evasion and Act 2006 to require that this tributing to the development of corruption. Experts emphasised information is accurate and an international standard. While how multinationals and people readily available to the
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authorities through a central been an obligation for registers as a model of transparency for registry of information on com of offshore companies to be other centres to follow, which panies’ beneficial ownership, published. could yet drive further business maintained by Companies to the island, but must grasp this House. Developing pro-active opportunity now as the clock is The tough stance taken by strategies of engagement already ticking. David Cameron is already star Beyond the G8, other juris ting to yield some results, which dictions are taking pro-active will surely strengthen the resolve steps to tighten their own tax of Cameron personally and the evasion rules, with Singapore UK Government more broadly most recently announcing it will to reinforce their campaign with become a money-laundering further initiatives. Late in June, offence for banks to assist tax Starbucks announced that it has evaders to hide their funds paid £5m in UK corporation on its territory. In the light of tax - its first such tax payment this, on 30 June the Financial since 2009. Times reported Jason Collins, a partner at Pinsent Masons, Samantha Seewoosurrun Hollande ‘voulait aller plus a UK law firm, as saying that Has fourteen years’ experience in loin’ “many governments are not Brussels, including eleven years in public affairs consulting and three The f issue o tackling ‘paradis going to rest until all offshore years in the European Parliament. fiscaux’ rocketed up the poli centres sign up to ‘automatic’ She also worked in the UK House of Commons, British Embassy in Ma- tical agenda in France in the exchange of information so that drid and US Congress. aftermath of the scandal which information about their citizens brought down former Budget is as freely available as if they Minister Jerome Cazuhac, who banked onshore.” eventually admitted tax eva Taken together, recent deve sion in early April. President lopments clearly demonstrate François Hollande reacted an the strong momentum for fur grily to the scandal, which ther initiatives to crackdown delivered a severe blow to his on tax evasion and avoidance own credibility and that of his at global level, and that the bar Socialist administration, and he of ‘acceptable standards and has since announced a raft of behaviour’ will be set higher initiatives, such as one to prevent and higher. This may lead to tax dodgers from holding public greater scrutiny and attention office and another to force on countries such as Mauritius French banks to publish details over the months to come. So of their subsidiaries around the does this mark the end of global world and to create a French business? It all depends on how blacklist, to be updated each effectively Mauritius and other year, of foreign tax havens. jurisdictions can communicate Speaking after the G8a positive response and develop Summit, M. Hollande said the a targeted engagement plan outcome represented “un grand with key authorities regarding pas” which left tax havens “en its position as a well regula mauvaise posture”. He expressed ted IFC to neutralise potential disappointment that the G8 ‘domino’ effects arising from did not go further in relation the tax havens discussion and to multinationals and also to withstand international scru thought that there could have tiny. Mauritius can present itself
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mauritius
Sir Seewoosagur Ramgoolam International airport
A brand new airport terminal was inaugurated on the 30th of August 2013 by the Hon. Prime minister, Dr. Navin Ramgoolam. This new terminal that will be fully operational as from mid September will support the strategy of Mauritius to become a major regional hub for travellers between Africa, Asia and the rest of the world.
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Accelerated Programme for Economic Integration Small and remote islands, like Mauritius, suffer from inherent structural handicaps that hamper their sustained growth and sustainable development. One way to overcome this is through regional cooperation and integration.
his was the stark reality that Mauritius Ministers of Finance and Central Bank Governors, faced when it achieved independence. and by SADC in 2011. Therefore, in the definition of its foreign Progress on the implementation of the policy, economic diplomacy became an proposed Road map has, however, been very slow. Timportant component and regional cooperation It is generally recognized that the non-availability was the instrument through which this policy was of dedicated financial resources to accompany to be implemented. necessary reforms and to mitigate their possible Mauritius, therefore, joined a number of short term negative impact has historically been regional and inter-regional Organizations like one of the major reasons for the lack of progress OCAM, OAU/AU, COMESA, SADC and the towards speedy regional integration. Discussions ACP-EU Cotonou Partnership Agreement as well have been going on with some development as ESA-EU Economic Partnership Agreement. partners to explore the best possible models to get It has also supported the COMESA-EAC-SADC the regional integration accelerated using a possible Tripartite process for the establishment of a grand combination of various financing instruments FTA by 2014, and subsequently a single Customs to advance the pace of implementation of agreed Union. The latter agreement is expected to include regional integration agendas. services. But, notwithstanding the declarations If effectively implemented the Road Map/APEI at the highest political level, an agreement in the has the potential to spark a strong supply response immediate future seems elusive. and thus generate higher growth and better Following successive rounds of multilateral trade employment opportunities, diversified exports negotiations, and within the context of regional and enhanced international competitiveness nee free trade agreements, there has been significant ded for greater regional and global integration into progress in reducing traditional barriers to trade trade and production network. like tariffs. But, there are still many non-tariff With the persistent difficult economic and barriers and burdensome regulations in respect of financial situation in most of Europe, the world is which little progress has been made. Moreover, in shifting its focus eastward, but also southward to the area of services which has huge potentials for Africa. And therefore, it is urgent for Mauritius to cross border trade, many countries are still reticent improve market access to Africa and to promote to liberalize, and progress, both within the World Mauritius as a service centre by ensuring that, by Trade Organizations and in the Regional Economic coming to Mauritius, investors from countries Communities, is either slow or inexistent like China and India have easy access to Africa. In view of this unsatisfactory state of affairs, This is part of our regional strategy to transform five like-minded and reform-oriented coun Mauritius into a platform for enhanced economic tries, namely Malawi, Mauritius, Mozambique, and financial linkages to the emerging economies Seychelles and Zambia, decided in September, 2012 of the African Continent. to launch the Accelerated Program for Economic Africa has a big and fast-growing market with its Integration (APEI). This is in line with the spirit current population of 1 bn expected to exceed 2 bn of rapid integration based on the principles of by 2050, with a middle-class attaining 500 million. variable geometry and speed underpinning the In the last 10 years, Africa has grown two-and-a- Road map adopted by the COMESA Council of half times faster than any developed country,
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and has the potential to maintain that growth forum, nor is it meant to duplicate or undermine rate. According to many studies and Organizations, the regional integration agenda of the RECs within the next 10 years seven out of the top fastest- (Regional Economic Communities) to which the growing countries in the world will be in Africa. five APEI countries belong. However, it can serve Africa grew in 2012 when most of the world was in as a platform to facilitate the resolution of any trade, the midst of crisis and the future outlook is good. business or investment related problems bearing in It was against such a background that the mind that the attendance at the APEI meetings so five like-minded and reform-oriented countries far has been at high/senior officials’ level. adopted an Action Matrix covering five pillars that The success of the proposed APEI will hinge on require reform to remove impediments to trade and a strong political will in the concerned countries, investment and the ease of doing business as well the adequate structuring and sequencing of pro as the facilitation of the movement of professionals posed policy reforms and actions, effective imple and business people; the pillars are: improvement mentation and adequate financial backing from of business regulatory environment; elimination the international community as experienced in of trade to barriers in goods; promoting trade in successful regional integrations in other parts of services; improvement in trade facilitation; and the world, like the European Union through its capacity building and peer to peer learning. Cohesion Fund. The Action Matrix has identified priority Lack of access by domestic and foreign constraints and a set of specific actions to be companies to the right people with the right skills implemented over a 3-year time frame which is not allowing them to fully exploit the huge trade began in May 2013. Specific key performance and investment opportunities that an emerging indicators have been set for each participating African continent provides. In this respect, the APEI country to ensure that the objectives of the APEI countries recognize that the main challenge integration process are met within the agreed is to address the impediments to the movement of time line. In accordance with the Action Matrix, service providers across borders that will help the participating countries have to identify five make them an attractive hub for investment. The priorities and five constraints in the five pillars. main focus is the facilitation of the movement of An important element of this innovative different categories of service providers among approach is the possibility of building capacity the five APEI countries in order to address the through peer-to-peer learning and the sharing of poor allocation and mismatch of skills demand knowledge and experience. It is noteworthy that and supply initially among the five countries and the APEI platform is NOT a trade negotiations subsequently across the African continent.
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The APEI Technical Meeting held in Malawi on The support of other development partners, like 30-31 May 2013, pursuant to a mandate by the Japan (TICAD), AfDB, AFD, DFID, will have to second APEI Ministerial meeting held in Seychelles be secured in order to finance the costs associated on 19 March 2013, adopted the Terms of Reference with the implementation of the APEI Action for a study on the Facilitation of the Movement of Matrix. It is only by producing quick and tangible Professionals, Business People and other service results and the commitment for the provision of providers. It will be financed by the Development dedicated resources on a predictable basis by the Grant Facility provided by the World Bank. Calls development partners that other countries may be for Expression of Interest have already been encouraged to join the APEI. launched. The study is expected to be completed The five APEI countries had until the end of June within five months; but the Travel Handbook and to submit their technical assistance requirements Memorandum of Understanding on the Business to help them implement their commitments over Visa/Permits will possibly be ready for examination the agreed three-year period under each of the by the APEI Ministerial meeting to be held in five pillars identified in the Action Matrix. The Malawi in late September, 2013. World Bank has prepared a template to facilitate Mauritius has taken the lead on this proposal the compilation of information in this regard. in our effort to create a regional platform for the Mauritius has undertaken consultations with the export of professional services across the region operators/stakeholders to identify our needs and being given that it already has the appropriate also the constraints in the other APEI countries that framework in place and is thus encouraging its are hindering our export and business relations. APEI counterparts to do the same. Our objective In order to ensure action at the national level, is to get the other countries to adopt the same poli the APEI Ministers have decided that each cies that we have for professionals and to accept participating country has to set up a National that these provisions would apply to residents and Coordinating Committee with a designated not to citizens. If we succeed, this may encourage Focal Point that will form part of a Regional foreign enterprises investing in Africa to set up Coordinating Working Group (CWG). The latter their regional headquarters in Mauritius. It may is responsible for compiling inputs from national also encourage investment into Africa to be stakeholders and dialogue with other countries. It routed through Mauritius. This proposal should will also monitor progress in the implementation not be confused with the free movement of people of the Action Matrix. The CWG has to meet every or labour mobility advocated by some regional three months and the Ministers every six months organizations and on which we currently have At the level of Mauritius, three Technical reservation. Working Groups on the APEI have been set up For the attainment of the objectives of the APEI, by the Mauritius National Coordinating Working the five participating countries have recognized Group. They are co-chaired by the public and the importance of structured intra-private and private sector representatives and meet regularly to public-private dialogues. In this regard, they have examine actions required under the Action Matrix. agreed to define the most appropriate process and The next APEI technical and Ministerial meet platform. The European Centre for Development ings are scheduled to take place in Malawi at the policy Management will facilitate the exercise end of September, 2013. Malawi will then take over with the intention to create mutual engagement the chairmanship from Seychelles. by the Governments and the private sector so as to improve the overall business environment necessary to strengthen the competitiveness of enterprises, encourage linkages and facilitate Sutiawan Gunessee, exchanges among the APEI countries. Chairman The APEI process is being facilitated by the Mauritius National Working Group World Bank. The EU seems also to be supportive Accelerated Programme for Economic Integration of this approach which will contribute towards the acceleration of the implementation of the regional integration agendas of the RECs/ROs.
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Regional Treasury Centres for Africa Evolution of International Finance Centres The world has been experiencing structural shifts in the global economy: debt overhang in the West, cash surplus in the East and significant opportunities in Africa. This has resulted in the growth of the South-South trade corridor and the formation of a channel for investment capital between Asia and Africa. How do we tackle the fragmented nature of the Africa opportunity and what are the various options to access such a market in an efficient manner? What are also the critical aspects of the evolution of both International Financial Centres and Regional Treasury Centres in the context of a suitable mechanism to channel and manage the trade and investment flows into Africa?
A frica – Huge but fragmented opportunity (RTC) can assist in reducing the cost of making Africa’s middle class has experienced the fastest Pan-Africa investments while at the same time growth over the last decade. Consumer spending deriving efficiency benefits of a large market place. is expected to expand to USD 1.4 trillion by 2020 from USD 860m in 2008. With average GDP Centralise to realize the Africa opportunity growth expected to average 7% up to 2030 - this The journey towards regional treasury centra goes to partly explain the level of optimism and lisation can help illustrate how consolidating investor interest in Africa. corporate functions can provide the synergies However as investors rush to seize this oppor required to access Africa. The figure below shows tunity, it is important to appreciate its fragmented the key steps in centralisation and the value and nature so as to derive the necessary investment efficiency derived. synergies. The journey of centralisation begins with For example the Africa opportunity is spread Visibility. In order to be able to manage the across the vast continent (approximately 30 million funding and liquidity management needs of the km2) in multiple countries, both Anglophone and group a fundamental knowledge of the local cash Francophone Africa (some countries like Angola, flows is needed. Mozambique are Portuguese speaking). Typically the next steps that help with Within the continent, also are a number of manageability and optimisation happen in pa trade blocs e.g. COMESA, SADC, IOR-ARC, rallel or independent of each other. Firstly, the EAC, ECOWAS etc all pointing to the need and Treasury function centralises the Funding, opportunity for consolidation which brings forth Foreign Exchange, Liquidity management and multiple economic benefits. Additionally any Commodity risk hedging. In parallel the Finance investor should be aware of the varying regula function in cooperation with the Treasury applies tions including tax and currency controls and the best practice procedures for Accounts Payables should take into account the political dynamics and Receivables. across the continent. Treasury centralisation involves building in- This surely poses a challenge for any country liquidity structures. This helps in opti corporation which would like to invest across the mising returns and enhancing visibility and continent. Centralisation of company functions control on locally trapped cash particularly in up to the formation of a Regional Treasury Centre some African countries that have exchange
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Figure : Journey towards Regional Treasury Centralisation
Multinational companies are setting up treasury centers to overcome problems posed by growth of operations over a number of countries
Optimization Manageability
Treasury Centers Visibility • In-house Bank ` • Active Risk Management • Efficient Capital Structure • Supply Chain Solutions Centralized Treasury Centralized Operations • Re-invoicing Centers • Centralization of FX • Creation of SSC covering • Netting • Centralization of Funding and Payables and Receivables Account Management Investments including Interest • Automation of Reconciliation • Bank & Account Rationalization Rate management • ERP to Bank integration Complete SSC • IT Management • Daily Account Reporting • Centralization of Commodity • Centralized Invoicing Hedging • Automation and STP • Customer Service • Basic Forecasting • Local and Regional Liquidity • Market Support • Implement Control Mechanisms Management structures • Human Resources Efficiency and Value • Basic Liquidity and FX mgt • TMS system support • Payroll
controls. What follows is Regional Treasury The benefits that centralisation offers are Centres. RTCs help in optimising liquidity across however limited to the level at which an multiple geographic locations and would be the International Financial Centre (IFC) has evolved single face to the market for Forex and financing to provide a singular access to Africa. needs particularly for USD / GBP / EUR currencies. IFCs need to evolve to fully realise the Finance centralisation would usually involve Africa opportunity the setting up of a Shared Services Centre (SSC). As a starting point let us first look at the key This entails consolidating non-core treasury and factors that corporates find important when financial functions (e.g. Finance, HR Processes selecting an IFC to locate an RTC in the African etc). While SSCs provide efficiency by eliminating context. duplication of non-core corporate functions across When choosing an IFC to locate in, a corporate multiple countries, a language complexity does would usually consider the following: arise. Companies would have to take into account • Th e availability of skilled personnel the challenge of serving both Anglophone and • Th e regulatory environment Francophone Africa from a centralised location. • A ccess to international financial markets This largely helps in increasing operational • Th e availability of business infrastructure efficiency and reducing cost. Greater economies • A ccess to customers of scale are achieved where companies have high volume payments across multiple countries. To A vailability of skilled personnel increase efficiency and timeliness of payments, When international corporates select an IFC dealing with a financial institution that has a strong to locate their RTC, skilled personnel are essen network in Africa and direct access to the local tial. Furthermore, when providing access to clearing houses is an important consideration. Africa, personnel would require at least two
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additional skills: Bi-lingual in French and to attract expatriate talent which always assesses English to serve Anglophone and Francophone the relative attractiveness of IFCs. Incentives Africa and strong local knowledge about the such as tax breaks, investment opportunities into markets in Africa. To be able to achieve this, real estate or local economy, faster permanent countries hosting IFCs could look at the following residency would go a long way in attracting these strategies: professionals into the country. i) Educational Hub: A country hosting an iii) Enhancing the skills of Working Africa IFC should position itself as a hub for Professionals: Apart from fresh talent, there is also students from Africa and Asia (rebalance the a need to augment and internationalise the skills existing education curricula to include Africa of working professionals in an IFC. Professionals needs in particular). working in the IFC that want to be Africa focused This can be done by attracting or fostering can be sponsored to obtain qualifications that are partnership with the region’s best and renowned partially or fully subsidised by the Government. universities and developing a marketing strategy to attract foreign students. The rigour and quality The Regulatory environment of tertiary education needs to be made comparable Any Africa focused IFC, which wishes to with some of the high-end universities across the attract RTCs, should have a regulatory regime that world. provides clear tax advantages and that facilitates ii) Attracting Human Capital: Continued accessibility to the markets in Africa. investments in adding capacity and quality at i) Targeted Double Taxation Avoidance higher education institutions would be necessary Agreements (DTAA) & Investment Protection and to sustain the human capital requirement for an Promotion Agreements (IPPA): The DTAAs and Africa focused IFC. However, given the shortage IPPAs with African nations should be a must to of bi-lingual staff and those with knowledge about attract Africa destined investments. An IFC the markets in Africa, measures need to be taken would need to have these in place for the
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major Africa nations e.g. Nigeria, Egypt, African continent. Moreover connectivity with Sudan, South- Sudan, Angola, Tanzania, Zambia, the rest of the world would be key in the evolution Kenya South Africa, Ghana. of an IFC. ii) Embassies/Consulates for African Nations: ii) Telecommunication & Internet: An Embassies or consulates in any country hosting an IFC should have strong telecom and internet IFC would help in obtaining visa, translation and connectivity with Africa. This also includes notarisation of documents etc. Embassies would mobile phone connectivity. Africa has been also promote investment opportunities in their leading the way in mobile phone money transfers respective countries and this information would (e.g MPESA in Kenya). An IFC that can tap into be accessible to investors based in that IFC. this payment channel would be at an advantage iii) Africa Time Zone: For a location to be as it can offer international corporates a payment used by investors to access Africa, it must be able channel with access to millions of Africans. to cater for the African time zone. It goes without iii) Trade blocs: Africa has numerous trade saying that an IFC with close geographical blocs. An IFC that is a member of one or more proximity to Africa would be better placed. Even of these trade blocs would offer corporates that then policies and facilities to support extended deal in trade within the continent another reason working hours may need to be introduced. to choose them as a location for their regional headquarters. A ccess to African & International financial markets Mauritius experience in the IFC and RTC Bringing African corporates seeking equity or space debt financing closer to international investors Mauritius, an emerging IFC, is seen as a would increase the relevance of an IFC. gateway to Africa for trade and investment flows. i) Listing of African Corporate’s Stock Ex It is strategically positioned between Asia and changes located in IFC’s: Doing this would attract Africa and can act as a port for bulk-breaking global investors to take risk in large African of goods consigned for fragmented markets in corporates. This would not only offer investors Africa. platforms for African investments, but would Mauritius is already witnessing the positive also open up information on Africa to the general trend of corporates setting-up their procurement market. offices and liquidity management solutions in ii) Custody hubs: Financial institutions who the country which will eventually evolve as full- offer custody services for markets in Africa fledged RTC’s for the region. Thus IFC’s are surely should be encouraged to set up in IFCs. This evolving into crucial intermediaries in fusing would give investors a singular access point to together fragmented markets and improving the stock exchanges in Africa. efficiency of accessing them. iii) Multi-currency platforms – Exchanges in IFCs offering access to Africa should offer listing in major African currencies e.g. South African Rand iv) Financial Instruments for risk management: Sridhar Nagarajan Countries that host Africa focused IFCs should Chief Executive Officer encourage financial institutions to develop Standard Chartered Bank derivatives that can be used to hedge against risk (Mauritius) Ltd. arising from investing in assets in Africa.
A vailability of Business Infrastructure & Access to Customers i) Air Connectivity: Air hubs have played an important role in the development of IFC’s like Singapore and Dubai. Strong air connectivity would be required for passenger traffic across the
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Global Business Banking Coming of age Known as the Star and Key of the Indian Ocean, Mauritius’ history is steeped in the geopolitical and commercial importance of being a strategic maritime port of call and trading post on the route between Europe and Asia. Successively colonised by the Dutch, the French and then the British, Mauritius has traditionally punched far above its weight by virtue of its key location in terms of the relative proximity to both Africa and Asia and the ability to cover the vastness of the Indian Ocean.
ast forward a few centuries, and the idiom untarnished by not even a single international of “location, location, location” has not financial scandal. Its Global Business industry is changed an iota. The once mono-crop firmly established within the financial sector and economy, then vulnerable to the vagaries economy as a whole. As at June 2013, there were Fof the sugarcane harvest, has gradually made way some 25,696 Global Business companies (GBCs), to a diversified, increasingly service-oriented and 894 global funds and 168 management companies internationally competitive productive structure operating in the Mauritian jurisdiction; the sector that is highly integrated into the world economy. as a whole is estimated to have contributed around Consequently, Mauritius has moved from a low 4.9% to GDP in 2012, and the net value of assets to an upper middle income country in the space of GBCs and global funds reached an estimated of a few decades, globally recognised for its high USD 60 billion as at end 2012, compared to value-added production in niche segments and USD 8.9 billion in 2000. The gradual but steady its ability to take innovative practices, depicted, development of Global Business in Mauritius amongst others, by the setting up of one of the was originally a result of the wider national first export-processing zones in the world in the economic diversification strategy that involved 1970’s to kick-start a manufacturing revolution the liberalisation of the economy in the 1990’s revolving around the textiles industry. The Global (notably concerning the abolition of capital and Business sector in Mauritius, a glittering jewel in a exchange controls), pragmatic macroeconomic crowning financial sector that has established the reforms to foster and facilitate a conducive country as a renowned and reputable international business environment, and a solid regulatory financial centre (IFC), illustrates one of the many framework. As part of this strategy, the objective of ways in which this island nation has maintained positioning Mauritius as a regional hub for Global its strategic importance, while positioning itself Business (or offshore) financial services led to the as the ideal platform to tap into the current modernisation of laws and regulation in 1992 and, and future opportunities stemming from the coupled with the opening up of the stock market gravitational shifts in the global economy. in 1994 to foreign investors, provided impetus Years of growth and exposure to international to the development of the financial industry. trade created the foundations for the development A second wave of reforms under the Business of a strong and resilient banking industry and Facilitation Act in 2006 significantly improved the culminated in the emergence of a sophisticated investment climate, propelling Mauritius amongst financial sector, with institutions such as the top performers globally across a wide range of the Mauritius Commercial Bank Ltd., a key indices, such as the Ease of Doing Business Index regional bank equipped with expertise that and Index of Economic Freedom. has been developed and honed for 175 years. With the presence of some 21 international and Today, Mauritius enjoys a strong reputation as domestic banks, activities directed to the provision a safe, trusted and secure financial jurisdiction of international financial services have given
Global Finance 99 MAURITIUS GLOBAL BUSINESS
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rise to foreign-sourced income (known in investment funds listing regime by the Stock Mauritius as Segment B and consisting mainly of Exchange of Mauritius, tailored to provide a foreign currency loans and other financing outside streamlined and progressive listing process for a Mauritius to corporates). The sector has wide variety of fund structures, and several pieces experienced strong and sustained growth in of legislation to allow for new investment vehicles, recent years and shown a remarkable ability to as part of the objective of further promoting ride the global financial crisis. In this respect, total Mauritius as a platform for wealth management Segment B loans registered an annualised average services, succession and estate planning in growth rate of above 19% between March 2006 the region. These developments complement and 2013, increasing from USD 2.8 billion to USD already existing product/service offerings such 9.6 billion (MUR 86.4 billion to MUR 297.8 as Regional Headquarters Scheme (which several billion) during that period, despite the successive leading global companies have taken advantage tremors on the international front. Such robust of), private wealth management, global funds, ness illustrates the attractiveness of the jurisdiction protected cells companies, trusts and captive as a key hub and destination for finance, notably insurance company, alongside more traditional to serve emerging markets in Asia and increasingly investment routing activities and GBC hosting. Africa, the judicious expansion strategy of its As a growing business and financial hub banking players and the growth potential there- backed by a safe, politically stable and democratic in, as the targeted regions maintain their stellar economy, along with improving connectivity and growth path. Additionally, the sectorial distri infrastructure, Mauritius can therefore, within bution of these loans is well diversified, with its Global Business framework, tap into various financial & business services, manufacturing and business and financial planning opportunities, as trade financing accounting for a large chunk. IFCs continue to play a major role in enhancing In its embryonic stage, as has been the case for cross-border financial flows and structuring all international financial hubs, the key offering investments, targeting mainly emerging Asia and of Mauritius lay in the midst of its network of Africa. Notably, Mauritius has now a vast network international fiscal treaties. However, since those of tax agreements with African countries, with early days, its Global Business sector has moved the latter expected to be the main engine of world beyond its teething stage, thriving and now growth going forward, underpinned by sustainable maturing into a full-fledged financial centre, with positive developments therein, such as the positive a diverse array of services offered to clients from structural and macroeconomic reforms being varied geographies, now including derivative undertaken, the rise of an affluent middle-class trading through a world-class platform, a leading and the diversification of sectorial base. Indeed, stock market in Africa and a regionally influential international financial centres such as Mauritius regulatory reach. Specifically, the attractiveness have an important part to play in this process by of Mauritius as an IFC goes largely beyond tax serving as a platform to raise funds and channel planning considerations and is, to a significant investments in their economies’ productive extent, attributable to the quality of its services capacity and thus enable their economic deve and expertise, the sound legal and regulatory lopment - this is all the more important, given framework, and its established reputation. their current inherent hindrances to raise finance This has been achieved by building upon the domestically. comparative advantages that have enabled the Yet challenges persist; the aftermath of the country to fearlessly navigate the rough economic global financial crisis has brought forth unrelenting seas of the global economy over the past decades pressure for regulatory oversight in a bid to pre- and achieve what has been dubbed ‘the Mauritius empt and defuse factors which led to the demise of Miracle’:an innate ability to consistently re-invent major institutions across the globe. However, the and re-position its economy to sustain economic debate seems to have skewed towards populism, development and resilience. particularly the idea of taxing international capital Lately, the domestic Global Business industry flows. In fact, at a time when it is primordial to has evolved towards higher value-added services, rekindle economic activity, the least effective with key recent developments such as the specific means to do so would be to introduce new
Global Finance 101 MAURITIUS banking
levies on cross-border finance, and stifle entre All that said, the Mauritius product offering preneurs. Any move to burden this flow with is diverse and improving, with domestic players undue and unreasonable means will only worsen increasingly able to tap into opportunities, world growth prospects and hinder the attainment building on the solid footing provided by their of development objectives. Specifically for prudent business model. Beyond, the reputation Mauritius, the local legislation needs to be of Mauritius as a sound financial jurisdiction of upgraded to further encourage private equities good repute will only be enhanced through further and companies to set up business locally to provide improving the existing set-up. The burgeoning substantial and cost-effective funds to promote and thriving economies in the region, hungry for investments towards the region, tapping into the financing their development and consumption Africa/Asia axis. In light of increasing pressures to needs, provide Mauritius with ample prospects clamp down on IFCs which act as tax havens, there to strengthen its role as an international financial will undoubtedly be a rush towards financial jurisdiction. Whilst due care is required, given its jurisdictions of good repute, representing both acquired maturity, the Mauritian Global Business substantial opportunities and risks to the financial and its Banking sector are well poised to move sector therein, particularly for the banking players. confidently forward and fulfil its potential to grow The banks will have to significantly gear up their into the preferred international financial centre of capacity to gratifyingly meet the demands from the region. such a surge, notably in terms of continuous service delivery, while having appropriate safeguards and KYC policies in place to determine the source of and filter incoming funds. As a young entrant to the world of IFCs, the jurisdiction will P rATIK Ghosh also be tested by unscrupulous businessmen to Head of Global Business fraudsters to hackers. To this effect, building The Mauritius commercial Bank capacity within players to match international standards and demands will be a key component for the Mauritian jurisdiction to effectively capture this new business and further its bid to become the main player regionally.
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Opening up offshore opportunities across Africa One of the most dynamic and fastest economies in sub-Saharan Africa, Mauritius has successfully moved since its independence in 1968 from a mono-crop sugar-dominated economy to a services-oriented one. The target spelt out is now that of an innovation-driven economy. This rapid and successful transition to a mature economy - one of just two in Africa - is testimony to the vision and will to succeed jointly shared by government, the business community and the population for sound economic management coupled with a vision to succeed.
n effect, the country focuses on ensuring taxation agreements (“DTAs”) with a wide range that doing business in and from Mauritius of countries together with investment promotion is easy and smooth as well as compliant and protection agreements (“IPPAs”) with key with best practices in terms of transparency, regional and international economies. Mauritius Igood governance and ethics. It is no coincidence currently has double taxation agreements with 39 that Mauritius has been recognised as the 1st countries including India with whom Mauritius country in Africa in the World Bank Ease of has a long-standing special relationship, and more Doing Business Report. Mauritius has enacted than a dozen African countries. A number of anti-money laundering and terrorist financing other double taxation agreements are in progress. legislation while the business framework itself has Add to that the fact that Mauritius is also a been made simpler. A “Work & Live in Mauritius” privileged member of key African and regional department has even been set up within the organisations, including the African Union (AU), Board of Investment in Mauritius to expedite the Southern African Development Community formalities for individuals and investors setting (SADC), the Common Market for Eastern and up in Mauritius. The business environment and Southern Africa (COMESA) and the Indian the investment climate in Mauritius are constantly Ocean Rim Association for Regional Cooperation being enhanced with a view to strengthen the (IOR-ARC), and you get an ideal springboard for image of Mauritius as an attractive investment taking full advantage of the range of opportunities destination. The sound economic policy and that lay in store in Africa. good governance have indeed made Mauritius It is justly Africa that Barclays has in scope in the most business friendly destination in Africa. line with the Barclays Group ‘One Africa strategy’. One salient feature of the business-friendly The reason behind this is the immense potential strategy is the fact that a foreign investor can of Africa. Evidence clearly shows that over the last settle hassle-free in Mauritius and be operational 5, 10 and 20 year’s Africa’s economic growth has in just three days. Over and above being a country been second only to Emerging Asia’s and the devoid of any exchange control and where export- resilience of growth post-crisis has been im oriented operators enjoy duty-free privilege for pressive. On the front of resources, commodity inputs and equipment, Mauritius also has one extraction has been a larger proportion of African of the world’s most generous tax regimes, with GDP than in any other region. Yet, total extraction personal and corporate tax harmonised at a low is much lower and suggests that there is far more 15% and tax-free dividends. to come in Africa. In addition, the emergence of The legislation governing global business has South-South links plainly stands as a direction for been elaborated to optimally allow management of future success. Several areas, agriculture and funds outside of the European Union. The country technology for instance, can go from being drivers also boasts an impressive number of double of employment to driver of growth.
Global Finance 103 MAURITIUS banking
Africa indeed looks set to become the world’s fastest growing consumer market, the more so that an increasing number of people are expected to move to cities in Africa over the next 20 years. This is much more than the mass which has moved to cities in China in the last 20 years. Social and economic indicators indicate that this African trend is expected to accelerate. As the focus converges towards Africa, one element that stands out is the fact that the his tory of Barclays in Mauritius has always been intim ately linked to the economic development of the country and marked by the firm belief in the enormous potential of the African continent. Set up on 15 October 1919, Barclays was the first international bank to establish operations in Established on 15 October 1919 in Mauritius, Mauritius and has always been not only an active Barclays was the first international bank to commence economic player but also a strong contributor to operations in Mauritius. Barclays Bank operated as a the success of businesses and corporate entities branch of Barclays Bank PLC until 1 June 2013 when throughout the decades. it became Barclays Bank Mauritius Limited. Barclays Barclays Bank Mauritius Limited is poised Bank Mauritius Limited is a subsidiary of Barclays to be the bridge between the world and Africa Group. The history of Barclays in Mauritius has been one of award-winning performance. Its most recent by providing ways and means to customers and accolades are the Bank of the Year award for Mauritius clients who are eagerly following the evolution of from the banker and the EMEA Finance award for best African economies which are actively seeking ways foreign bank in Mauritius won for the fifth consecutive to become more business friendly. Leveraging the year. global presence of Barclays through operations Barclays Bank Mauritius Limited provides a range in 50 countries across 27 markets and building of banking services to both personal and corporate customers and clients. Personal services include current upon an extensive network in Africa, Barclays and savings accounts, foreign currency accounts, loans, Mauritius International Banking is able to provide credit cards, ATMs and telephone banking. Business a complete range of sophisticated solutions that services include lending products, trade and export span cash management, deposits, treasury, trade finance and specialist services such as treasury, foreign and lending to meet the needs of the most exacting exchange and capital markets capability. We also offer world-class international banking pro and sophisticated customers and clients. ducts and services to customers and clients worldwide. Our capacity to offer the best services and International Banking boasts a unique blend for products on the market is further enhanced by supporting the setting up or expansion of operations Barclays being the major shareholder of Absa, within the region thanks to its unquestioned internatio one of South Africa’s largest financial services nal and multilingual expertise. The strength of the local groups. We also have one of the largest footprints International Banking team is further boosted by the in the African region with a combined presence fact that Barclays Bank Mauritius 1989 byLimited being thepioneered first bank the local global business sector in of more than 1,500 distribution points. Through to have an offshore operations licence. Testimony to the Barclays Mauritius International Banking, cus ambition of our International Banking team to be on the tomers and clients have access to eight leading forefront of innovation is the first-on-the-market launch offshore financial centres, with all their assembled of a new offering, namely the opening and handling of Foundation Accounts, a new form of business entity expertise. Each of the Barclays global business centres to which Barclays Mauritius International introduced recently in Mauritius. Graham Sheward is Corporate Director in Inter Banking is linked provides tax-efficient banking national Banking for Barclays Bank Mauritius Limited in a stable and respected jurisdiction. in Mauritius. He can be contacted by phone on +230 With full access to dedicated relationship mana 4041000 or alternatively via email at gers and product specialists boasting a unique [email protected] knowledge of the local and regional market and
104 Global Finance MAURITIUS Barclays Mauritius International Banking
Bridging the world for you
At Barclays Mauritius, we understand the growth opportunities in Africa. We’ve been moving, lending, investing and protecting money for clients for over 300 years and through our International Banking team, we are here to support you locally and through one of the largest banking networks in Africa and across the globe. To find out more, please call us on +230 404 1010 or email us at [email protected] banking
in an advantageous time-zone location, Award for Cash Management some years back. Barclays Mauritius International Banking is well This online platform, offered to corporate custo placed to provide customers and clients with mers, proprietors, partnerships and designated global financial solutions combined with compre individuals of companies provides secure, re hensive local support. Our international span is liable and fast online banking solutions. Barclays further enhanced by our pioneering status on the Mauritius International Banking offers a compre front of Global Business in Mauritius. Barclays hensive and customised range of products and was the first banking institution to launch offshore services to corporates and these include: operations in Mauritius in 1989 and it is no • Cash Management coincidence that more than 20 years later, Barclays • Treasury solutions still is one of the key players both locally and • Structured finance solutions regionally. Testimony to that is our well diversified • A wide range of deposit solutions and ‘elite’ portfolio. • Electronic Banking (including SWIFT messa It is always pleasing to profile actual customer ging) feedback from our extensive network and Azuri • Credit facilities – loans and working capital Technologies, an innovative business bringing finance, structured financing power to off-grid customers in rural African • Foreign exchange and derivatives emerging markets, is a case in point. Azuri asked • International trade instruments: LC/SBLC/ Barclays to help them fulfill their ambition of Guarantees/Bills for collection expanding further into Africa, and the results • Trade Finance speak for themselves: • LC refinancing/Discounting, Pre-shipment fi • Azuri has experienced rapid growth by distri nance, Bills discounting buting their pay-as-you-go affordable solar home • Syndicated Loan Market; participation in syn systems in Africa. dicated loan market by actively seeking tran • Safer and cheaper than traditional sources sactions in London / Far East / Africa such as kerosene, their systems provide 8 hours of • Escrow account services power, allowing families to improve their quality • Agency and Project Account Bank Offering of life. I have worked across several geographies and • Barclays provided Azuri with finance of £1m though all my previous positions are reminiscent through our Social Innovation Facility, which of very good experiences, I guess I would choose was set up as a catalyst for the development of to stay in Mauritius at this point in time. innovative products that deliver a sustained social There are a number of reasons that dictate impact. this choice. The quality of life there and the • With this backing, Azuri will deliver an wonderful people of course. But over and above additional 30,000 solar home systems. these, my motivations as banking professional are • Azuri has ambitious plans to expand across the economic potential of this country and the Africa and will benefit extensively from Barclays immense opportunities ahead for doing business on-the-ground presence and expertise. to and from Mauritius. • As Simon Bransfield-Garth, CEO, says “Barclays have shown tremendous vision in look ing at the future possibilities in Africa, they are working closely with us to find ways to finance the roll out of energy into that continent.” graham Sheward, Another way Barclays is determined to support Corporate Director its customer base is through technological inn o International Banking vation. ‘Barclays Integrator’, an internet tran Barclays Bank Mauritius Limited sactional banking solution platform aimed at creating opportunity for customers to access banking facilities, is a clear illustration of our in novative spirit. As a matter of fact, the ‘Barclays Integrator’ made Barclays win the Euromoney
106 Global Finance MAURITIUS
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