It is a breathtaking sight. When the plane dips through the clouds and passes over the first stretch of lush tropical, volcanic land, it is easy to see why Mark Twain wrote that Mauritius was made first and then heaven.
A little more than 1100 kilometres east of the Madagascar coast, Mauritius is an oasis of green in the Indian Ocean, and for decades the country has been a top destination for honeymooners from across the globe.
In the past few years, however, the island has proved more than just a locale for sun-seekers and is making a name for itself as an investment oasis as well. Technically a part of Africa, but with strong historic and economic links to India, the country is perfectly placed for investors interested in those regions.
The mother of reinvention
Mauritius is fast becoming a hub for several sectors, including information and communications technologies, biotech, research and development, renewables, healthcare and aviation, while the traditional pillar industries of sugar cane, tourism, textiles and financial services have been successfully reinventing themselves to compete on a regional – and global – stage.
Despite the worldwide recession, Mauritius is expected to end the year with 3% growth in GDP – pretty impressive for a country of just 1.2 million people. “Mauritius may be a small country but it has the potential to make a big impact, both by contributing to Africa’s overall prosperity and in providing an example of how other nations can stimulate growth by setting clear and fair rules for the benefit of those who wish to do business in Mauritius,” US secretary of state Hillary Clinton said in August at the launch of the bilateral investment treaty between the two countries. Henri Thompson, a South African developer investing in the Mauritius Land Based Oceanic Industry (LBOI) eco-park, puts it more bluntly: “Mauritius punches above its weight.”
Breaking new ground
Originally discovered by the Portuguese in 1507, it was the Dutch that named the island after Prince Maurice of Nassau, establishing the first permanent settlement in the mid-17th century. In 1715, the French seized the territory and set up a successful economy based on the manufacture of sugar cane, which remains an integral part of the economy. During the Napoleonic wars, the English gained control of the island and ruled it until independence in 1961 (hence why the island is trilingual to this day, with Creole, French and English all spoken interchangeably).
Historically, the Mauritian economy was reliant on sugar cane production, textiles, tourism and financial services. But by 2002, globalisation began to take its toll with the erosion of trade preferences for sugar and textiles. Economic growth declined sharply and public debt, unemployment and the budget deficit increased steadily. A plethora of aggressive economic reforms undertaken by the current government, elected in 2005, has seen Mauritius develop from a country reliant on those trade preferences to a player competing on the global scene (see interview with the minister of finance).
The country changed everything from taxes – they are 15% across the board – to transparency in the financial services sector. This year the country set up a groundbreaking tax – the only country in the world to do so – whereby every domestic company in Mauritius must give 2% of its profits to corporate social responsibility projects. The World Bank’s Doing Business 2009 report ranks Mauritius not only as the best country in Africa in which to do business, but awards it an overall global ranking of 17th – up from 47th just two years ago. “We have really improved the business climate, making it clear, transparent and rule-based,” says Dev Chamroo, director of planning and policy with the Mauritius Board of Investment (BOI).
One sector that has experienced exponential growth is financial services. Twenty years ago, the country first introduced legislation to permit international banks to establish offshore sites on the island. Subsequent laws have allowed for the creation of several offshore structures, including banking, insurance, trusts and investments. Major international banks such as Deutsche Bank, HSBC and Barclays all have a significant presence in the country, offering offshore bank accounts and services for companies wanting to make crossborder investments.
Destination of choice
They must all be on to something, as 44% of FDI flows into India come via Mauritius, due in large part to a double taxation treaty between the two countries. “Mauritius is one of the most exciting financial jurisdictions at the moment,” says Vaughan Heberden, CEO of CIM Group, a Mauritian insurance and investment services company.
“This place is rapidly becoming the destination of choice for investment into India and Africa.” Experts also claim the country could be the next Cayman or Channel Islands but, because of transparency laws, without the grey sheen that surrounds many other offshore locales. Mr Heberden believes Mauritius could give places such as Bermuda a run for their money as a hub for insurance. “It is not really being explored here yet, but with the right legislative framework what’s to stop Mauritius from being a leader?” he asks. “I think the next 10 years in this country will be exceptionally exciting.”
Another area of investment growth is that of business process outsourcing. In a bid to establish the country as an international centre for data back-up, disaster recovery and business continuity services for countries across the globe, the BOI held a data centre strategies conference in October to highlight the advantages Mauritius offers.
One company, Minneapolis-based Ceridian, which focuses on human resources and payroll outsourcing, has good reason to sing the country’s praises. Ceridian opened its only offshore location in 2000 with five employees. Today there are 500 people, with 200 of those working as software engineers. “This year we had more than 30% growth and we expect between 20% to 25% growth in 2010,” says Vidia Mooneegan, managing director of Ceridian’s Mauritian operations.
From its headquarters in the Cyber City section of the Mauritian capital of Port Louis, Ceridian generates more than 3 million payslips for UK companies, and Mr Mooneegan stresses that all of the employees working in payroll must have payroll qualifications – something not as aggressively imposed on UK payroll staff.
“Initially, companies focused on India. But even a country of 1 billion people can reach saturation point because it’s only in the big cities where people speak English,” says Mr Mooneegan. “Companies have been forced to look elsewhere and because we are bilingual, with a European heritage and sensibility, and because we have political stability, we are an attractive place to invest.”
Best laid plans
Property development and real estate, which account for 15% of the country’s GDP, fall under hospitality and are also increasingly attractive sectors in Mauritius. Up until five years ago, foreigners could only lease land under exceptional circumstances, but new laws put in place mean property can now be purchased providing a windfall for investors looking to the commercial and residential property sectors. New business parks are also springing up and Chinese investors recently invested $750m – the largest ever foreign investment in the country – in the Shanxi Tianli Enterprise business park that will provide a base for Chinese operations in the region. Housing industrial, trade, logistics and hospitality zones, the project is expected to bring in some $186m a year. Last year, trade between Mauritius and China rose by 11.7% to reach $323m.
A new scheme has also recently been launched whereby individuals or companies can buy into a hotel timeshare scheme, helping hotels finance their projects while broadening the circle of investment opportunities.
The LBOI ecological park – a project expected to break new ground in February – will house wind and solar power schemes as well as pharmaceutical operations for the manufacture of products such as saline. Seawater air conditioning will cool the buildings in the park, taking advantage of available cold seawater as a green alternative to the energy-intensive refrigeration systems commonly used. “This is one of the most progressive governments in the world and it wants investors to come in,” says LBOI investor Mr Thompson. “The time to invest in Mauritius is now.”
The cost of this supplement was underwritten by the Mauritius Board of Investment. Reporting and editing were carried out independently by fDi Magazine.