Mauritius WT/TPR/S/5
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V. SECTORAL TRADE POLICIES
(1) Overview
1. Although sugar'sdominance hasdeclined inthelasttwodecades, itstillremains important
toMauritius 'economy; thecultivation ofsugar caneoccupies nearly halfoftheisland 'stotalland
area.In1993, sugar accounted for25percentofMauritius 'gross export earnings andisstillthemost
important sector interms ofnetexport earnings. Sugar exports benefit frompreferential access into
themarket oftheEuropean Union (EU) where Mauritius sellsbetween 80and90percentofitssugar
exports; guaranteed prices wellabove world prices haveprovided asubstantial andstable level of
earnings which would nothavebeenpossible without theSugar Protocol.
2. Sincetheearly1960s,theGovernmenthascollecteddutiesonsugarexports,ataxontheindustry
which hashelped tofinance public spending. Theshare ofexport duties ingovernment revenues has
fallen asexemption thresholds havebeenraised andtaxrateslowered aspartofpolicy actions toimprove
theprofitability ofthesugar sector. Since 1994, theexport dutyisnolonger collected asgeneral revenue
fortheGovernment; rather, funds areusedtobroaden theownership structure oftheindustry, allowing
foremployee participation, andtomodernize atfieldandfactory level.
3. Apolicy ofagricultural diversification hasbeenpursued sincethefounding oftheAgricultural
MarketingBoard(AMB)in1964,withsomesuccessinproducingstaplecropsfordomesticconsumption,
andothers forexport. Neither ricenorflour, themajor staples, canbegrown atreasonable costin
Mauritius: theirimport iseffected bythepublic sector, through theState Trading Corporation. In
addition tolicensing tosupport State trading forimports ofrice,flourandproducts within thescope
oftheAgriculturalMarketingBoard,importlicencesapplytoavarietyoffoodsforpublichealthreasons.
4. Initial industrialization efforts inMauritius focused onimport substitution. In1970Mauritius
established anExport Processing Zone (EPZ), granting fiscal andtariff concessions tofirms
manufacturing fortheexport market. Inthe1980s thissector proved tobeanengine ofgrowth and
manufactured exports, dominated byclothing, increased rapidly. Since thebeginning ofthe1990s,
policy development inMauritius hasfocused onindustrial diversification while favouring the
modernization andconsolidation ofthetextiles andclothing sector. Thecurrent policy phase manifests
agrowing recognition onthepartoftheGovernment thatthe"dual economy", withexport orientation
viatheEPZandimport substitution elsewhere intheeconomy, needs tobeintegrated andindustrial
diversification pursued. Thecurrent framework forindustrial incentives differentiates between different
types ofinvestment withobjectives, which constitute theminimum applicable criteria, spelled outin
theIndustrial Expansion Act(1993). Various efforts suchasatechnology diffusion scheme andthe
move towards adoption ofinternationally recognized quality standards aresignificant initiatives.
5. Services account forovertwothirds ofeconomic activity inMauritius: thelargest suchsector
iswholesale andretailtrade, which encompasses tourism-related services. During theUruguay Round,
Mauritius made specific commitments regarding market access insub-sectors within tourism and
telecommunications; nocommitments were made inanyother services sectors.
6. Tourism isMauritius 'third largest earner offoreign exchange aftersugar, andtextiles and
clothing. Aconsistent Mauritian policy ofkeeping itstourist business intheupper segment ofthe
market, together withconcern about theenvironmental andinfrastructural impact ofthegrowing influx
oftourists, hasprompted theGovernment tolimitconstruction ofnewhotels, bandirect charter flights
andallow amaximum number of200rooms perhotel; theminimum number ofrooms forhotel
construction is60iflocally-owned and100ifforeign-owned.WT/TPR/S/5
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7. Telecommunications policy iscurrently under review. TheMauritius Telecom Authority, the
regulatory agency, isresponsible forthegranting oflicences forbasicandenhanced telecommunication
services aswellasthesetting andenforcement ofequipment standards. Under itsUruguay Round
commitments, Mauritius isobliged tomaintain transparency andtoallow thecross-border movement
ofinformation andinterconnection withpublic networks. Theprovision ofbasictelecommunications,
thefixedpublicswitchednetwork,cablelaying,internationalaccessandmaritime/coastalcommunications
aretheprovinceofpublicly-ownedMauritiusTelecommunicationswhichthusholdsadefactomonopoly.
Allequipment mustbetested byMauritius Telecom before itcanbetype-approved bytheAuthority.
8. Since 1988therehasbeenagrowing trend towards theliberalization ofMauritius 'market for
financial services. In1988 theBanking Actwasamended toencourage innovation. Credit ceilings
onbanks wereabolished inthetwo-year period ending 1993, allowing greater scope forcompetition
inthebanking industry. TheStock Exchange wassetupin1989 andcapitalization hasgrown from
MauRs1to29billion insixyears. Non-citizens haverecently beenallowed toacquire shares inlisted
companies; offshore funds maynowbelisted onthestock exchange andinvest inlocalcompanies.
9. Aspartofastrategy todevelop afourth pillar ofitseconomy, aftersugar, theEPZandtourism,
Mauritius hascreated, inaddition toitsfreeport, thelegalandoperational framework foranoffshore
services sector topromote theisland asatrans-shipment andregional trading andfinancial centre.
(2) Agriculture
10. InparallelwiththegrowthofthemanufacturingsectorintheMauritianeconomy,thecontribution
ofagriculture toGDP hasdeclined from 12.4percentin1980 to9.9percentin1993, withvalue
added inthatyearatMauRs4.6billion (US$270 million). Agricultural imports, which sincethe1970s
havedeclined fromonethirdtounder 15percentoftotalimports, amounted toUS$75 million in1994
(Table AV.1).
11. Given thevirtual fullemployment oflabour ontheisland, thesusceptibility ofthesugar crop
tocyclone damage andthelikely dropinincome fromsugar exports resulting frompossible changes
intheEU'ssugar policy andtheUruguay Round reforms, theauthorities continue toemphasize the
needtorestructure anddiversify theagricultural sector. Apolicy ofagricultural diversification has
beenpursued sincethefounding oftheAgricultural Marketing Board in1963(Chapter IV(2)(xi)) with
some success inproducing bothstaple crops fordomestic consumption andothers forexport.1Afive-
yearprogramme foragricultural diversification established in1983 wasaimed atself-sufficiency in
aselected range offoodcrops andatreducing Mauritius 'dependence onimports ofmeatandmilk.
Land devoted tosugar canecultivation wasnottobereallocated; rather, diversification wastobe
based on"interline" production androtational crops.2Theuseof"interlines" ofsugar canetoproduce
potatoes andonions forthelocalmarket hasreduced dependence onimports; horticultural crops, fruit,
vegetables andflowers, grown forexport aswellastosupply thedomestic market, havemade agrowing
contribution, which isnowinexcess of10percentofagricultural value added (Table V.1).
1Agricultural Development Certificates areissued under theDevelopment Incentives Act1974. Certificate
holders areentitled todutyandsales taxexemptions onagricultural machinery andequipment.
2World Bank (1989), p.41.Mauritius WT/TPR/S/5
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Table V.1
Agriculture -production ofmain crops, 1989-93
(Tonnes)
1989 1990 1991 1992 1993
Industrial crops
Sugar cane 568,000 624,000 611,000 643,000 565,000
White sugar 43,000 44,000 55,000 70,000 63,000
Rawsugar 525,000 580,000 556,000 573,000 502,000
Tea(green leaf,processed) 28,540 29,610 30,582 30,374 30,900
Tea(manufactured) 5,500 5,751 5,918 5,845 5,931
Tobacco leafa1,036 799 862 963 1,015
Vegetables, pulses andfruit 62,280 65,840 64,090 72,070 79,050
Ginger 380 625 460 340 285
Groundnuts 1,505 1,755 1,380 1,190 865
Maize 2,395 2,265 2,120 1,995 1,750
Potatoes (Irish) 19,690 17,820 16,445 19,175 13,855
Rice 20 - 10 5 -
Sweet potatoes 380 325 340 330 335
Tomatoes 9,195 11,570 9,385 10,220 13,020
Mixed vegetablesb10,585 11,470 10,790 12,000 16,295
Bananas 4,640 6,135 6,490 8,530 9,880
Pineapples 1,540 1,355 1,480 2,300 4,050
a Refers tocropyear, which normally runsApril-March.
b Includes beet,cabbage, carrot, cauliflower, chillies (long andsmall), garlic, leek,lettuce, onion, petsai, sweet pepper, andlady's
finger (lalo).
Source: Republic ofMauritius Central Statistical Office, Annual Digest ofStatistics, 1993.
12. Since 1989 theSugar Industry Efficiency Act(1988) hassought topromote agricultural
diversification bygranting fiscal incentives anddutyexemptions, equal tothose fortheEPZsector,
tonon-sugar agriculture. Inaddition, export dutyrebates havebeenoffered tosugar producers based
ontheextent towhich theydiversified outofsugar.3Under the1993 amendments totheAct,the
numberofcropseligibleforsugardutyrebatesincreasedandthetaxrateonincomeearnedbyindividuals
engaged inagricultural production other thansugar canewaslowered from 15to5percent. Inthe
1994 budget itwasannounced thatsugar estates must allocate aminimum of1,200 acres forfruit
production and1,000 acres forpermanent foodcrops.4
13. Applied import tariffs, in1994, inagriculture (ISIC 111)ranged fromzeroto80percentand
averaged 20percent. Likeallparticipants intheUruguay Round, andaccording totheobligations
oftheAgreement onAgriculture, Mauritius hasbound allofitstariffs onagricultural products atceiling
3TheSugar Industry Efficiency Actattempts notonlytoincrease thepublic accountability andefficiency
ofsugar production, butalsotogiveincentives foragricultural diversification, bothwithin, andaway from, sugar.
Themeasures intheActaredesigned topreserve agricultural landforagricultural purposes andtobring people
back toagriculture byimproving theincentives forsugar canecultivation especially bysmall-scale producers,
andenhancing thecompensation toworkers inthesugar sector. TheActcould discourage themovement of
labour from sugar intoother sectors, although byraising thecostoflabour relative tocapital itcould make
employers inclined toswitch tomore capital-intensive techniques (Ministry ofAgriculture (1990)).
4EIU, Country Report (1994).WT/TPR/S/5
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ratesof122percentformostproducts. Theratesonpoultry andsugar willbebound at122percent,
although applied ratesarecurrently 80percent; teaandagro-industry products (including bananas
andfrozen orange juice) where applied ratesarecurrently 40percent,willbebound at82percent;
andinthecaseofproducts normally imported, suchaspotatoes, onions, milk, butter, wheat, maize
andrice,thebound rateofdutywillbe37percentwhen reductions arefullyimplemented (Chapter
IV(2)(ii)(b)). Current applied ratesformilk, butter, wheat andmaize arezero,andforpotatoes, onions
andricetheyare15percent.
14. Inaddition totariffs, anumber ofagricultural products aresubject toimport orexport licensing
requiring theapproval ofregulatory authorities, mainly forhealth andsafety reasons. Insome cases,
including riceandflour, imports arelimited toState-trading enterprise toensure foodsecurity, while
inother cases, where imports could compete withlocalcrops (e.g.potatoes, onions, spices), imports
arecontrolled inorder togivepriority todomestic suppliers.
15. TheUruguay Round results havehelped tobring about changes inthelegislative framework
forsanitary andphytosanitary measures inMauritius. Acommittee hasbeen setuptodraft
internationally accepted standards onfoodandfoodproducts, foodlegislation hasbeenrevised and
thecreationoftestlaboratoriesforfoodforlocalconsumptionandexportisplanned(sectionV(2)(ii)(b)).5
(i) Sugar
16. Although sugar'sdominance intheeconomy hasdeclined inthelasttwodecades, sugar cane
stilloccupies nearly halfoftheisland 'stotallandareaandfourfifths ofitscultivated land, roughly
80,000 hectares. In1993sugar accounted for25percentofMauritius 'export earnings, withMauritius
holding an80percentshare oftheworld market forspecial sugars, andemployed anestimated
75,000 workers. Planters whoownsugar factories andthose working more than40hectares cultivate
70percentofsugar-cane lands, withtheremainder worked by36,000 small-scale planters, themajority
ofwhom cultivate lessthanonehectare.6
17. Annualsugarproductionvariesbetween600,000and700,000metrictons,dependingonclimatic
conditions suchasdrought andcyclones. TheGovernment intends toboost production ofsugar and
hassetanannual production target of700,000 tonnes, inorder tomeetrecently improved market access
totheEUmarket.7Development plans forthesector asawhole include aderocking scheme, inorder
toimprove thepossibilities ofmechanized harvesting, which isexpected toclear12,000 hectares by
2002. Atpresent, some16,000 hectares areunder irrigation; theprovision ofirrigation istobeextended
tocover 50,000 hectares by2002.
18. Caneproduction perhectare inMauritius isoneofthehighest intheworld butoutput perworker
isconsiderably lower thaninothersugar-producing countries, suggesting over-employment; thisresults
5Republic ofMauritius (1994b).
6There are19sugar mills, which operate during theharvest season from June toNovember each year.
7Amendments totheSugar Industry Efficiency Actin1993 provided fortherebate ofexport dutyonnew
landallocated tocane cultivation.Mauritius WT/TPR/S/5
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largely fromlabour regulations inthesector.8Legislation requires thatsugar estates employ workers
onayear-round basis.9Between 1982 and1992, labour costs, which make upover50percentof
totalproduction costs (Chart V.1)inthesugar industry, increased 141percent.10
19. Since the1961recommendations oftheMeade Commission wereimplemented, theGovernment
hascollected duties onsugar exports, ataxontheindustry thathashelped tofinance public spending
(Chapter (IV)(3)(ii).11Inthelasttenyears annual revenue fromexport duties hasamounted toroughly
MauRs400million. In1983 graduated export duties accounted forover15percentofgovernment
revenues; tenyears laterthisshare hadbeenreduced to3percentasexemption thresholds wereraised
andtaxrates lowered aspartofpolicy actions toimprove theprofitability ofthesugar sector
8Belize andBarbados produced approximately thesame amount ofsugar withamuch smaller workforce;
e.g.inBarbados inthe1986-89 period production averaged 715,000 tonsayearwithfewer than3,000 workers
(World Bank, 1993, p.80).
9World Bank (1993), p.76. Employers contribute 10.5percentofthewage billtotheNational Pension
Programme, which is4percenthigher thanforother industries; theyear-end bonus tosugar-cane workers
issignificantly higher thanforworkers inother industries andsince 1January 1995 theworking week hasbeen
reduced from 45to40hours.
10Mauritius Chamber ofAgriculture (1992).
11TheMeade Commission produced areport ontheMauritian economy recommending thetaxing ofsugar
tofinance bothexport-led industrialization andimport-substitution.WT/TPR/S/5
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(Table IV.11). Inthelastfiveyears approximately 10percentofexport duties wererebated inrelation
tocropdiversification ortheuseofbagasse. Inthe1994/95 Budget Speech, theMinister ofFinance
declared thattheexport dutywould nolonger becollected asrevenue bytheGovernment butwould
rather beusedtoputresources backintothesugar industry, thusending thetaxing ofonesector to
benefit others. Instead, theownership oftheindustry isbeing broadened toinclude employees and
tenant farmers andsugar companies haveagreed toinvest MauRs175million ayearforthenextten
years inmodernization anddiversification.
20. Although thereduction inexport duties hasbeen oneofthechief methods forrestoring
profitability tothesugar sector, other measures toreduce costsandotherwise improve efficiency have
alsobeenadopted inthelasttenyears. In1985theGovernment, through theMauritius Sugar Authority,
executed theSugar Sector Package DealAct,lifting thebanonmillclosures andthusallowing for
theconsolidation ofprocessing capacity.12Theplanalsostressed theutilization ofsugar by-products,
including bagasse (thefibrous material contained insugar cane) asasource offuel; thisnowaccounts
for27percentofthepower generated inMauritius, mainly bythesugar mills, andhassignificantly
reduced thecountry 'sdependence onimported oil.Under theSugar Industry Efficiency Act(1988),
themaximum export dutyonsugar wasreduced from23.625 to18.75 percent,thedutyonmolasses
eliminated, themilling taxabolished andexport dutyrelief, based ontheamount ofbagasse soldper
tonne ofsugar caneprocessed, wasintroduced.
21. AJointPrivate/Public Sector Committee ontheSugar Industry wassetupin1991. Following
thesubmission ofitsreport in1992, legislative changes based onitsrecommendations wereintroduced
through theSugar Industry Efficiency (Amendment) Act,1993, withadjustments made torelated
legislation. These amendments, interalia,lowered theexport dutyto9.375 percentandintroduced
taxcredits orexport dutyrebates forcapital expenditure aimed atmodernization ofthesugar mills,
irrigation ormechanization.
22. Inthe1994/95 Budget Speech theMinister ofFinance announced thattheproceeds oftheexport
dutywould becredited tovarious funds. ASugar Investment Trust would besetupwhich would acquire
upto20percentoftheshare capital ofeachofthesugar milling companies. Twofunds (aSugar
Planters 'Fund andaSugar Employees 'Fund) would becredited withMauRs320million overthe
following twoyears toassist planters andemployees inacquiring shares inmilling companies viathe
Trust.13
23. TheMauritius Sugar Syndicate (MSS), founded in1919, isthesoleexporter ofsugar andalso
thesolesupplier tothelocalmarket. Itsforeign exchange earnings arerequired tobeconverted into
localcurrency bytheBank ofMauritius asameans fortheBank toensure anadequate levelofforeign
exchange reserves. Theproceeds fromMSSsalesarepaid,onthebasisofanaverage price, toplanters
andmillers ona76:24 ratio; theaverage pricetakesintoaccount export duties, andcessandinsurance
premiums (Chart V.2).14Since 1984, aglobal cesshasbeenlevied onthesugar crop; thiscesswas
MauRs.626pertonne ofproduction in1993/94 foratotalcollected amount ofMauRs355million
12Gulhati (1990).
13Thefunds alsoprovide assistance inenhancing theviability ofplantations andforpromoting thewelfare
ofsugar estate workers.
14Export feesarepaidtotheMauritius Marine Authority (Chapter IV(3)(ii)).Mauritius WT/TPR/S/5
Page 77
or5.9percentofsugar proceeds. Thecessiscalculated tocover theadministrative expenses ofthe
Mauritius Sugar Authority andother support organizations.15
24. Sugar exports benefit from preferential access intothemarket oftheEuropean Union where
Mauritius sellsbetween 80and90percentofitssugar exports (Chart V.3).16Under theSugar Protocol
annexed totheLomé Convention, Mauritius isallocated thelargest quota (close to40percentofthe
total) amongst ACPsuppliers; itsquota hasbeenfixed at507,000 tonnes telquel(491,030.5 tonnes
white sugar equivalent) since 1987. Anadditional average annual quota of81,500 tons(white sugar
equivalent) forasix-year period beginning on1July1995 hasbeen negotiated under theSpecial
Preferential Sugar Agreement concluded between ACPcountries andtheEuropean Union. TheSugar
Protocol guarantees apurchase price forACP bulksugar based ontheEUintervention price, which
15TheMauritius Sugar Authority, established under a1984 Act, isaco-ordinating body between the
Government, theMinistry ofAgriculture andthevarious organizations ofthesugar industry. These include
theSugar Industry Development Fund, theSugar Industry Labour Welfare Fund, theCane Planters andMillers
Arbitration andControl Board, theMauritius Sugar Industry Research Institute andtheMauritius Sugar Terminal
Corporation.
16Thesugar industry inMauritius hasbenefited from preferential market access forgenerations. In1826
theisland, thenunder British rule, wasgranted thesame import dutyprivilege asthatextended totheBritish
West Indies. These preferences lasted for20years butwere reinstated after1919 under theImperial Preference
System, followed bytheCommonwealth Sugar Agreements of1950 to1974; these inturnwere replaced by
theSugar Protocol annexed totheLomé Convention in1975.WT/TPR/S/5
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issignificantly higher thantheworld price (Chart V.4).17Theprice hasbeenfrozen inECU terms
since 1986, although thedepreciation oftherupee vis-à-vis thepound sterling (theUnited Kingdom
isthelargestsingleimporterofMauritiansugar)andagri-monetarydevelopmentsintheEUhaveallowed
fornominal growth inexport earnings fromsugar. Guaranteed prices forexports ofsugar haveprovided
anettransfer fromEUconsumers toMauritius ofMauRs15.8million (US$1,320 million) between
1975 and1989.18
25. IntheUnited States, Mauritius hasbeenallocated a1.2percentshare oftheU.S.global import
quota. Since 1977, Mauritian sugar hasbeenentitled toduty-free treatment under GSPonentry into
theUnited States. Thecurrent quota (from 1August 1994to30September 1995) issetat14,959 tonnes
rawvalue. TheUS$0.01/pound import feeonspecial sugars levied bytheUnited States hasbeenlifted
witheffect from January 1995.
26. Domestic consumption accounts forroughly 40,000 tonnes ayearorabout 7percentof
Mauritius'sugarproduction.Thetariffonsugarimportsis80percent.ImportsofsweetsintoMauritius
areprohibited (Table IV.5). TheMauritius Sugar Syndicate isthesolesupplier tothelocalmarket
atcontrolled prices, which areregulated, according totheauthorities, tothebenefit oftheconsumer.
According totheprovisions ofthe1987 amendment totheSupplies Control Act,industrial users of
17Between 1985 and1990, theprice forACP sugar was150percentoftheworld price (World Bank (1993)).
18Woldekidan (1992c), Table 4.Mauritius WT/TPR/S/5
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sugar andlocalwholesalers arerequired tosatisfy alloftheirsugar needs through purchases fromthe
Syndicate.19Local sugar prices, which incorporated asignificant subsidy element, wererevised upward
forthefirsttimein30years in1984.20In1992 prices were raised again toapproach world prices.
Since 1992, theprice ofrawsugar tolocalwholesalers andtomanufacturers/exporters hasbeenset
atMauRs2,210 andMauRs4,710 pertonne, respectively.21According totheStatement ofAccount
oftheMauritius Sugar Syndicate, theaverage price earned pertonne in1993/94 onlocalsaleswas
MauRs3,848 compared toaworld price ofMauRs6,060 andanaverage export price toMauritius
ofMauRs11,070.
(ii) Other agricultural products
(a) Import substitution
Food crops
27. TheAgricultural Marketing Board (AMB) promotes localproduction ofcertain foodstuffs to
meetdomesticrequirements(ChapterIV(2)(xi)).OriginallytheAMBmarketedonlypotatoesandonions;
19Mauritius Sugar Syndicate (1994).
20World Bank (1993), p.105.
21Mauritius Sugar Authority (1994). According totheChamber ofAgriculture, thelocal price ofsugar is
stillbelow production costs.WT/TPR/S/5
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laterin1971 itsresponsibilities were extended toother crops, including garlic, maize, turmeric,
cardamoms andmilk. Presently, theAMB actsasabuyer oflastresort, atguaranteed minimum prices
thatarebased onproduction costsplus30percent,forthesecommodities. Except forgarlic andmilk,
guaranteed prices inrealterms havenotincreased since 1987 (Chart V.5). Recent datasuggest that
producer prices arehigher thanimport prices foronions, representing atruesubsidy tofarmers.
However, thereverse istrueforpotatoes, andexplains whyhigher priced imports areallocated alarger
share ofgovernment subsidies thanarelocally grown potatoes, andsuggests thatthefarmer isinfact
taxed (Table V.2). Price controls apply topotatoes, onions andmilk, forwhich wholesale andretail
margins areset.22
Table V.2
Production, wholesale andimport prices ofmajor products marketed bytheAMB, 1991-93
(MauRspertonne)
(1987 prices)
1991 1992 1993
Potatoes Producer price 2,808 2,857 2,695
Wholesale price 2,877 2,727 2,814
Imported price 3,356 3,182 3,054
Onions Producer price 6,164 5,844 5,389
Wholesale price 4,795 5,130 4,731
Imported price 3,082 2,532 3,293
Source: Dataprovided bytheauthorities; andWTO Secretariat estimates.
22Forpotatoes in1994, theproducer price paidbytheAMB wasMau Rs4,600 pertonne, thewholesale
price charged bytheAMB Mau Rs5,200 pertonne, theretail price Mau Rs6,000 pertonne andtheimport
price Mau Rs6,200 pertonne.Mauritius WT/TPR/S/5
Page 81
28. Production levels andself-sufficiency ratios havefallen farshort ofgoals inalmost allcases.
Total AMB subsidies, withoverhalfspent onpotatoes, havedeclined inthelastfiveyears, from
MauRs30.5million toMauRs22.8million (Table V.3). Foronions andgarlic, which havelonger
growing seasons andmustbegrown aspurestand crops, production hasnotkeptpacewithgrowing
demand, asevidenced byrising imports (Table IV.8). Thelower return onlandofthese foodcrops,
compared tosugar cane, mayhaveundermined increases inoutput. Forpotatoes, aNational Potato
Committee decides eachyearontheplanting timeandthequantities andvarieties ofseeds tobeplanted;
seeds aresubsidized bytheGovernment. TheAMB maintains storage facilities, including storage
capacity of10,000 tonnes forpotatoes, anditimports when localsupply isinadequate tomeetmarket
demand. In1992, 19,000 tonnes oftablepotatoes wereproduced domestically andsome 6,000 tonnes
wereimported; thebudgetary expenditure incurred insubsidizing 25,000 tonnes ofpotatoes amounted
toMauRs11.2million orroughly MauRs448pertonne.
Table V.3
Subsidies toagricultural goods marketed bytheAgricultural Marketing Board, 1990-94
(Mau. Rs'000)
1990 1991 1992 1993 1994
Total 30,534.7 30,578.7 26,406.7 22,635.9 22,794.2
Ofwhich:
Local ware potatoes 8,615.7 3,659.5 3,492.3 4,084.5 4,708.8
Imported ware potatoes 9,125.6 13,276.4 7,723.8 5,465.8 4,976.9
Local seedpotatoes 3,044.2 1,889.4 3,644.1 2,659.7 3,226.0
Imported seedpotatoes 3,503.5 4,332.0 3,597.1 2,940.0 3,394.4
Onions 1,876.7 1,849.0 1,114.2 1,390.2 1,107.9
Milk 3,491.8 4,928.7 6,316.5 5,632.0 4,920.9
Source: TheAgricultural Marketing Board.
29. Import duties ononions andpotatoes are15percent. Thebinding constraint is,however,
thelicensing requirement which permits theAMB, themonopoly importer, topurchase internationally
when localproduction isinsufficient tomeetdemand.
30. TheAMB hasrecently, in1991, diversified itsactivities byair-freighting fresh fishfromthe
Seychelles tobreak theexisting monopoly andsatisfy localdemand.
Meat andmilk
31. AspartofMauritius 'self-sufficiency goals, theGovernment decided in1983 totrytomeet
domestic requirements formeatandmilkthrough localproduction. Under theMeat Act(1974), the
Mauritius Meat Authority purchases andimports livestock forslaughter andcontrols thequality and
regulates thesaleoffresh meatandmeatproducts.
32. ACattle Marketing Scheme which provides asubsidy ofMauRs6perkg.carcass orMauRs3
perkg.livetocattle breeders hasbeeninoperation since 1987. Since May1991, theMeat Authority
hasalsoguaranteed thepriceforlocalcattle: large-scale breeders receive aguaranteed price, small-scale
breeders afloor price.
33. Import ofslaughter cattle hasbeenthemonopoly oftheAuthority since1986, although imports
havebeenrecently liberalized. Annual import quantities aredetermined onthebasisofestimated local
production anddomestic demand. Todate, theMeat Board hasbeenresponsible forthetender forWT/TPR/S/5
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imported animals buttherecently constituted Government Tender Board willbeperforming thisfunction
infuture. In1992, outof13,129 head ofcattle slaughtered, over10,000 were imported from
Madagascar, Zimbabwe andSouth Africa.23
34. TheMinister ofAgriculture setsguaranteed prices tomilkproducers, andtheAMB administers
theMilkMarketing scheme inexistence since1985. Production offreshmilkfellfrom13,500 tonnes
to9,000 tonnes between 1989and1993while imports, which enterduty-free, rosefrom200tonearly
2,000 tonnes overthesame timeperiod.
35. Subsidies forcropandlivestock production havebeenbudgeted atMauRs60million inthe
1994/95 budget: themajor items receiving assistance arepotatoes (Mau Rs11.4million), animal feed
(Mau Rs9million) andmilk(approximately MauRs7.5million).24
Tobacco
36. Tobacco isgrown fordomestic consumption: annual production hasstabilized ataround
950tonnes. Tobacco growers areregistered withtheTobacco Board andaregranted annual quotas
forproduction; theBoard purchases alllocally grown tobacco. Thepricepaidtogrowers iscalculated
onthebasis ofproduction costs. Because oftherelatively highcostofinputs, domestic prices tend
tobehigher thanworld prices; asaresult notobacco isexported. Locally grown tobacco provides
over90percentofleaftobacco forcigarette manufacture; imports forblending purposes onlyare
controlledthroughimportpermitsgrantedtothemanufacturerbytheTobaccoBoard(ChapterIV(2)(xi)).
Thequantities imported depend onthedemand forandsaleofcertain brands ofcigarettes blended
withimported tobacco.25
(b) Imported products
37. Neither ricenorflour, themajor staples, canbegrown atreasonable costinMauritius. Their
import, initially toallow forsubsidized salestotheconsumer, iseffected bythepublic sector, through
theStateTrading Corporation (Chapter IV(2)(xi))(Table V.4). Consumer subsidies werediscontinued
in1993 andreinstated in1995; riceandflour remain subject toprice controls.
Table V.4
Subsidies toriceandflour, 1989-94
(Mau Rsmillion)
Financial yearending 30June 1989 1990 1991 1992 1993 1994
Rice
Revenue/tonne 3,245 3,243 2,993 2,643 2,805 4,402
Cost/tonne 4,395 4,906 4,138 4,278 4,349 4,732
Subsidy/tonne 1,150 1,662 1,145 1,636 1,544 312
Flour
Revenue/tonne 3,173 3,231 2,941 2,468 2,753 4,806
Cost/tonne 4,310 5,351 4,484 4,223 4,414 4,835
Subsidy/tonne 1,137 2,120 1,543 1,755 1,661 29
Source: Government ofMauritius.
23WTO, G/STR/N/1/MUS; 25July1995
24Government ofMauritius
25WTO (1995) .Mauritius WT/TPR/S/5
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38. Importdutiesonagriculturalproductssuchasrice,flour,vegetablesandedibleoils(15percent),
andanimal feed, fresh fruit(30or40percent) aregenerally notasignificant barrier totrade;
restrictions onimports tendtotaketheform ofdiscretionary licensing.
39. Inaddition torestrictive licensing tosupport State trading forimports ofriceandflour and
products within thescope oftheAgricultural Marketing Board, import licences apply toavariety of
foods forpublic health reasons (Table IV.6). Import permits, approved bytheMinistry ofAgriculture,
arerequired forgrains, plants orseeds, animal feedstuffs, meat, fishproducts andliveanimals. Imports
ofedible oilscontaining ahighpercentage ofsaturated fatsarebanned forhealth reasons.
40. ThePlantQuarantine Service within theMinistry ofAgriculture andNatural Resources inspects
andcertifies allimports andexports ofagricultural goods. Imports ofplants, fruitandvegetables,
livestock, meatandoffalrequire animport permit from theQuarantine Services andaphytosanitary
orveterinary certificate issued bythecountry oforigin. Imports ofalcoholic beverages require a
certificate ofanalysis. Mauritius isasignatory totheInternational Plant Protection Convention.
41. Food products, including milkandeggs, require origin labels, andlabelling requirements for
packaged foodforretail salewere made mandatory in1989 (Chapter IV(2)(xii)(c)). Certificates of
analysis fromrecognized foreign institutions areaccepted buttheHealth Inspectorate samples imported
foodtoensure thatshipments comply withlocalfoodregulations. Since current foodregulations do
notprovide forproduct specification andareverygeneral innature, theFood andDrugs Actisto
bereplaced byaFood Lawexpected toenterintoforce in1996. TheMinistry ofAgriculture, inorder
tostandardize Mauritian foodandfoodproducts tointernational norms, hassetupcommittees todraft
standards consistent withFAO/440 guidelines forfoodmeant forlocalconsumption andexport. The
Ministry isalsoestablishing aPesticides Residue Laboratory todetect chemical residues infood, and
aFood Hygiene Laboratory tomonitor standards offoodofanimal origin forlocalconsumption and
export.26
(c) Export crops
Tea
42. Thetrend ofemployment, production andlandunder teacultivation hasexhibited asecular
decline inthelasttenyears, inparallel withadecline inworld prices. Mauritius currently produces
between 5,000 and6,000 tonnes ofmanufactured tea,ofwhich itexports 80percent; itemploys
2,000 workers inthesector. Exports in1994 amounted to4,036 tonnes, down from 5,400 tonnes
in1992, andearned MauRs83million, afraction ofmerchandise exports. Theaverage export price
for1994isestimated tohavebeenMauRs20.58 perkg.compared toMauRs36.80 perkg.in1984
andMauRs19.37 in1989.27
43. Since September 1987, small teaplanters havebeenpaidaguaranteed price ofMauRs2.50
perkg.forgreen leaftea.MauRs20million were setaside inthe1994/95 budget forcontinued
price support. Inspiteofathree-year TeaSector Rehabilitation Scheme launched inJuly1991, the
authorities recognize thatthelong-term viability ofteaproduction isindifficulty. Measures toreduce
costsofproduction andincrease profitability oftheteaplantations (however without success) included
26Republic ofMauritius (1994b).
27Ministry ofAgriculture (1990) .WT/TPR/S/5
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fiscal incentives provided tosmallholders foradopting mechanical harvesting andprovision freeof
charge ofclean citrus plants, which canbeinter-planted withteawithout sacrificing teayields.28
According totheauthorities, current policy istoencourage diversion oflandusefrom teatoother
crops suchassugar cane, vegetables, fruitandforestry.
44. Theimportation ofteaisgoverned bytheTeaIndustry Control Regulations of1980. Importers
mustapply foralicence fromtheTeaBoard andpayalicence feeperindividual shipment, inaddition
toanimport feeof20percentofthec.i.f. import value, thecustoms dutyof40percentandthecess
ofMauRs.0.20 perkg.(Chapter IV(2)(xi)).29Imports bymanufacturers arepermitted forblending
purposes while private traders mayimport types ofteaswhich arenotgrown inMauritius. TheTea
Board issues bothimport andexport permits, although thelatter arenotsubject toafee.
Fishing
45. Lagoons andbanks arealready heavily exploited andMauritius hasimplemented anumber
ofpolicies aimed atconservation ofcoastal ecosystems andmarine resources. Nevertheless, deep
seafishing, particularly tuna,andfreshwater andmarine aquaculture offerexcellent growth andexport
opportunities.
46. In1990thecontribution ofthefisheries sector toGDPwasestimated atMauRs226.4 million,
equivalenttoabout0.5percentofGDP,andapproximatelyMauRs396millionwereearnedinexports.
Thesector, including canning, employs approximately 6,000 people. Total fishproduction hastripled
since 1983, increasing from 6,600 tonnes to19,943 tonnes in1993. Imports offresh fishandfish
products have increased very rapidly, amounting to20,602 tonnes in1994, valued at
MauRs259.7 million. Inorder tomanage fishery resources alicensing system wasintroduced in1992
andspecified catch quotas havebeenimposed since 1994 onfishing vessels.30
47. Governmentpolicyconcerningthefishingindustry,executedbytheFisheriesDepartmentwithin
theMinistry ofFisheries andMarine Resources, aimsatensuring anadequate supply offishandfish
products tomeetdomestic demand andtogenerate anexport surplus.31Thus, since 1983, thefishing
industry hasbenefited fromaseries offiscal incentives, including dutyconcessions onimports ofinboard
andoutboard motors, a75percentreduction inportfeesandfiscal concessions intheform ofa
15percentincome taxrate,granted under theAgricultural Development Certificate (ADC) Scheme.32
Term loans fromtheDevelopment Bank ofMauritius aregranted atconcessionary rates, ranging from
7percentforloans oflessthanMauRs100,000 to15percentforloans above MauRs300,000.
Export enterprise status wasextended todeep-sea fishing in1993(Chapter IV(3)(ix)). Imports offishing
vessels under anADC areexempt fromcustoms duty. Infiscal year1994/95 theGovernment allocated
MauRs55million, equivalent toabout 10percentof1994 export earnings, tothefisheries sector
fordiverse purposes, including thedevelopment ofaquaculture.
28Republic ofMauritius (1993a), p.115.
29Thelicence feeisMau Rs5,000 or1,000 forblack orChinese tea,respectively.
30Ministry ofFisheries.
31Republic ofMauritius (1993a), p.125.
32Those processing snoek forthelocal market arealsoentitled toanAgricultural Development Certificate.Mauritius WT/TPR/S/5
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48. Allfishandfishproducts maybeimported dutyfreeexcept forcrustaceans, which aresubject
toadutyof40percent. Allfishandfishproducts aresubject toexport licensing. Inorder toensure
supply tothelocalmarket, export offrozen fish,originally caught infrom shallow waters, israrely
allowed. Export offresh fishislimited toarelatively small quantity (50tonnes).
49. Athree-year fisheries agreement wassigned inNovember 1990 between Mauritius andthe
ECCommission regulating access ofEUvessels toMauritius 'territorial waters inreturn for
compensation; theagreement wasrenewed fortheperiod 1993 to1996. Anagreement withthe
Seychelles allows Mauritian tunavessels tofishintheSeychellois waters; Mauritius alsohopes to
conclude agreements withMadagascar andtheMaldives.
50. Export ofcanned tunaisunrestricted andrepresents 90percentofexports fromthefisheries
sector. Under Lomé IV,ACPcountries areentitled toanautomatic derogation fromtherulesoforigin
on9,500 tonnes ofcanned tunaintotheEuropean Union annually; Mauritius isentitled toaquota
of500tonnes under thisderogation. Theaverage catchoftunainMauritian waters isabout 7,000 tonnes
ayear. Mauritius hastwotunacanning factories withatotalcapacity of26,000 tonnes andthe
importation offrozen tunaforfurther processing isgrowing, asistunatrans-shipment trade.
51. Price controls apply tofrozen fish, inorder, according totheauthorities, tocontribute tofood
security (Table IV.13).
(3) Manufacturing
52. Themanufacturing sector inMauritius, interms ofemployment andGDP hasgrown rapidly,
particularly inthelast15years. Thesector accounted for23percentofGDP in1993, compared
to15percentin1980. Theshare ofmanufacturing employment intotalemployment roseoverthe
same timeperiod from18.4to37.1percent(Table I.1). Theshare ofmanufactured exports intotal
merchandise exports rosefrom 27percentin1980 to70percentin1993 (Table I.5)andimports
from 54to75percent(Table I.6). Theleading export commodity isclothing, accounting for
55.7percentoftotalexports andnearly 80percentofmanufactured exports. Imports areconsiderably
more diversified, although dominated bymachinery andtransport equipment andtextiles forEPZ
processing.
53. Manufacturing value added in1991 amounted toMauRs7.8billion; textiles andclothing
represented nearly halfofthatamount, followed byfood, beverages andtobacco (Chart V.6).
54. Inthemanufacturing sector, import tariffs range from 0to80percent. Thesector exhibits
boththehighest average tariff(30.1 percent)andthegreatest levelofdispersion, withover25percent
oftarifflinescarryingdutiesof55percentormore(ChartV.7andTableAV.1).Withinmanufacturing,
high tariffs apply inparticular totobacco manufacturing (80percent onaverage), furniture
(74.6 percent)andclothing (71.8 percent). Sub-sectors where theaverage dutyislessthan5percent
arespinning andweaving oftextiles (1.1percent), agricultural machinery andrailroad equipment.
55. ThehistoryofindustrialpolicyinMauritiuscanbedividedintoanumberofphases,characterized
bytheuseoffinancial incentives, including taxandtariff exemptions andinterest ratesubsidies.WT/TPR/S/5
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56. In1961 theMeade Commission recommended industrialization based onimport substitution
asapillar ofdevelopment strategy; fiscal incentives andtariff protection, financed byexport taxes
onsugar, were tobetheimplementing elements. In1964 theDevelopment Bank wasestablished to
provide long-term financing atpreferential interest ratestoindustry. Adecade latertheDevelopment
Incentives Act(1974) waspassed providing protection through tariffs andquotas tocompanies
manufacturingforthedomesticmarketunderDevelopmentCertificates("infantindustries"),andgranting
suchcompanies temporary taxexemption onincome anddividends aswellasthewaiving oftariffs
ontheirimported capital goods. Since theincentives encouraged capital-intensity relatively little
employment wascreated, with, forexample, only1,200 newjobsby1970.33Inmid-1983 there were
154companies withDevelopment Certificates inoperation, mainly infood, beverages andengineering,
employing atotalofabout 8,600 people.34
33Woldekidan (1992a).
34Greenaway andMilner (1986).Mauritius WT/TPR/S/5
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57. Aturning pointinpolicy came in1970when theGovernment began anactive export promotion
strategy. TheExport Processing Zone (EPZ) Actwasadopted, providing incentives similar tothose
forDevelopment Certificate companies tofirms manufacturing forexport. Between 1971 and1976,
exports oftheEPZrosefrom1to13percentofMauritius 'totalexport earnings. Output oftheZone
wasproduced mainly byfemale employees forwhom theminimum wage was30percentlower than
formen.35EPZfirms were subject togeneral labour laws, including aminimum wage, butexempt
from most oftheconditions oftheLabour Actgoverning termination ofemployment. Asaresult,
firms werefreetofireworkers, penalize forabsenteeism anddemand overtime.36With thecollapse
ofthesugar boom in1976, worldwide recession anddomestic economic difficulties, growth inthe
EPZsector slowed.
58. Intheearly1980s reform measures, including devaluation oftheMauritian rupee anddomestic
wage restraint, improved thecompetitive position oftheEPZsector; foreign investment, ledby
Hong Kong, played amore important rôle. From 1983to1987, EPZexports increased to58percent
oftotalexports; theshare ofEPZfirms tovalue added inmanufacturing rosefrom33to53percent,
while thatofimport-substituting firms elsewhere intheeconomy fellfrom 40to24percent.37
59. Since theendofthe1980s, realwage increases notmatched byproductivity growth inlabour-
intensive (clothing) manufacturing, which isthemainstay oftheEPZ, eroded thecompetitiveness of
theexport sector. Atthesametime, declining demand, duetotheeconomic downturn inindustrialized
countries intheearly 1990s andtheadvent ofanincreasing number oflower-cost producers to
international tradeinclothing, aggravated thedomestic situation. Theauthorities recognized theneed
toincrease thequality, andvalue-added content, ofclothing production andtodiversify intoother
manufacturing activities, and,asoneapproach, determined tointegrate thedomestic andexport
economies.
60. Thecurrent policy phase manifests agrowing recognition onthepartoftheGovernment that
thedualeconomy, i.e.export orientation intheEPZandimport substitution elsewhere, needs tobe
integratedandindustrialdiversificationpursued.In1991,theGovernmentextendedEPZ-typeincentives
toPioneer Status Enterprises, engaged inactivities thatenhance skills ortechnological development
(Chapter IV(4)(ii)). In1993theIndustrial Expansion Actconsolidated theexisting legislation relating
toincentive schemes, introducing financial concessions fornon-EPZ firms engaged inmodernization
andfor"Strategic Local Enterprises" (Chapter IV(4)(ii)).38Thecurrent framework forindustrial
incentives distinguishes between investments withdifferent purposes. Various efforts, suchasthe
technology diffusion scheme (Chapter IV(4)(i)) andthemove towards theadoption ofinternationally
recognized quality standards, spearheaded bytheMauritius Standards Bureau, arepotentially significant
microeconomic management initiatives.
61. Throughout the1980s, nominal andeffective protection fornon-export processing firms was
quitehigh. According to1987data,effective ratesofassistance (including suchitems asconcessional
credit) wereestimated atanaverage 134percentfornon-EPZ manufacturing (thenominal tariff was
93percent)withthehighest ratesinbeverages, tobacco, leather andfurniture, and8percentforthe
35Gulhati andNallari (1990).
36Gulhati andNallari (1990), p.11; andWorld Bank (1993), p.80
37Woldekidan (1992a), Table 5.
38TheDevelopment Certificate Scheme hasbeendiscontinued butthelegislation hasnotyetbeenrepealed.Mauritius WT/TPR/S/5
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EPZtextiles andclothing firms.39Atthesame time, services andespecially tourism wereimplicitly
taxed,giventhehighcostofmaterialinputs.Therentsderivedfromtheprotectivestructurefordomestic
(non-export processing) firms werecaptured byhigher operating surpluses (gross profit) andhigher
wages inthissector. In1987 labour costs perworker inEPZ versus non-EPZ industries were
MauRs15,500 versus MauRs21,900; operating surplus was20and25percent, respectively, of
totalcost.40
62. Current effective ratesofprotection arenotavailable, andtheextent towhich dutyexemptions
areusedwould make thecalculation complicated. However, the1994tariff, thefirstsubstantive change
tothetariffsince1988, hasreduced andrationalized duties, suggesting thatprotection hasbeenlowered,
asteptowards reducing thedistortions inresource allocation.
(i) Textiles andclothing
63. Thetextiles andclothing sector employs 89percentoftheEPZworkforce andaccounts for
84percentofEPZexports.41Exports ofclothing produced byEPZfirms comprise Mauritius 'leading
merchandise export -theirshare inexports rosefrom17.4to55.7percentinthe1980to1993period -
andtextiles andclothing contribute nearly halfofmanufacturing value added (Chart V.6).42Theshare
ofvalue added generated bytheEPZsector, itself dominated byclothing manufacture, inGDP rose
from5.2to11.7percentinthe1983-94 period (Table I.3).Mauritius isranked thirdamongst exporters
ofwoollen apparel intheworld. Knitted pullovers, T-shirts andmen'swoven shirts andtrousers are
theleading export items andtheEUthemajor market (Table V.5).
64. InitiallyarelocationsiteforHongKongfirmsfacingimportrestrictions,theindustryinMauritius
isincreasingly locally-owned withanumber offoreign firms having moved ontolower costlocations.
Boththenumber offirms andjobshasfallen offinthelastfewyears asrestructuring hastaken place,
prodded byrising unitlabour costs; therearesome indications thatproductivity isstarting toimprove.
65. Theagreement intheUruguay Round tointegrate textiles andclothing intotheWTO system
hasputtheMauritian sector under pressure. While Mauritius 'textile andclothing exports totheEU
market arenotrestricted under theLomé Convention, andMauritius isthelargest suchexporter of
clothing oftheACPcountries, thephasing-out oftheMultifibre Arrangement (MFA) andtheerosion
ofpreferential margins willrequire considerable adjustment onthepartoftheMauritian sector, and
theeconomy ingeneral. Adjustment hasalready begun withoutward investment byMauritian firms
relocating theirlabour-intensive production processes tolower costlocations, suchasMadagascar.
Efforts toimprove productivity andquality havealsobeenundertaken bytheExport Processing Zone
Development Authority (EPZDA) (Chapter IV(3)(ix)). Inthiscontext, thereisfocus ontheintroduction
ofnewproductionandmanagementtechniques,andonimprovingdesigncapabilitiesandproductquality,
withbothaimed atpositioning theindustry tomove intohigher value-added products.
39Woldekidan (1992d), Table 1.
40Woldekidan (1992d), Table 5.
41Economist Intelligence Unit(1995).
42In1989 Mauritius accounted for85percentoftotalclothing exports from theACP totheEC(Woldekidan
1992a).WT/TPR/S/5
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Table V.5
Clothing exports 1989-93
(US$ '000andpercent)
1989 1990 1991 1992 1993
Totala426,147 619,446 621,237 683,009 817,884
Share ofMauritius 'clothing exports to:
United States 20.3 20.5 18.8 20.1 29.5
European Union 63.5 75.1 76.7 75.4 66.3
Market share ofMauritius 'clothing
exports in:
United States 0.032 0.035 0.035 0.039 0.043
European Union 0.026 0.025 0.021 0.022 0.029
PercentofMauritius 'clothing exports
Men's,boys'clothing, notknitted 8.4 11.5 15.1 14.6 18.1
Trousers, breeches, etc.,notknitted 2.4 4.3 6.3 5.5 6.3
Shirts 5.8 6.2 7.6 7.9 10.9
Women 's,girls'clothing, notknitted 4.2 5.3 4.1 4.1 4.5
Trousers, breeches, etc. 1.6 2.4 1.9 2.1 2.3
Blouses, shirt-blouses, etc. 1.5 1.4 1.1 1.2 1.3
Men's,boys'clothing, knitted 4.4 2.6 1.8 1.4 2.0
Women 's,girls'clothing, knitted 2.5 3.6 3.0 3.2 3.4
Other textile apparel, n.e.s. 21.4 24.4 26.0 26.7 26.2
Jerseys, pullovers, etc.,knitted 13.5 12.8 13.7 13.7 12.8
T-shirts, other vests, knitted 7.7 10.5 11.3 12.1 12.6
Clothing accessories, fabrics 2.2 2.9 0.7 1.0 1.3
Accessories, notknitted 0.0 2.2 0.5 0.8 1.2
aDefined onSITC category 84.
Source: Comtrade.
66. Although Mauritius wasnotamember oftheMFA, exports ofcertain items ofclothing
(30products) areunder quota intheUnited States; andinCanada imports ofMauritian sweaters and
shirts areunder quantitative limitation. These bilateral restrictions maybeconsidered as"voluntary
export restraints". Inmost categories quota utilization rateshavefallen offsharply since 1990; in
1994 onlythree outof30products under quota totheUnited States were fullyutilized, suggesting
thatcertain clothing exports from Mauritius havelosttheircompetitiveness (Table V.6).43
67. The system ofallocating shares inexport quotas toEPZfirms manufacturing textiles and
clothing, administered bytheMinistry ofTrade andShipping, isbased onpastperformance, i.e.actual
exports inthepreceding twelve months, andopenquota. Thesystem doesnotallow forthetrade or
transfer ofquota shares. Until 1992, 10percentoftheglobal quota wasretained fornewapplicants.
Currently, companies which export 90percentoftheirquota allocation areeligible torenew their
whole allotment; quota holders meeting between 50and89percentoftheirquota commitments are
granted aquota thefollowing yearbased ontheiractual exports; andcompanies unable tomeethalf
theirallocation forfeit theirquota entitlement. Exporters whofind,sixmonths before theendofthe
43According totheauthorities, Mauritius 'quota forcotton gloves totheUnited States hasgone unutilized
"owing touncompetitive prices, and, tosome extent, administrative procedures" (Republic ofMauritius,
1993a, p.140).Mauritius WT/TPR/S/5
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agreement year, thattheycannot fullyutilize theirquota share arerequested tosurrender theexcess
totheMinistry ofTrade andShipping, which re-allocates them tonewapplicants.
Table V.6
Export performance forproducts subject totheU.S.quota system, 1989a
(Percent)
Description Product No.b1989-90 1990-91 1991-92 1992-93 1994
Playsuits 237/637 31.39 16.5 0.91 1.49 2.57
Cotton gloves 331 ... ... ... ... ...
Coats andjackets 335/835 21.72 23.9 8.53 15.86 1.07
Cotton dresses 336 57.36 10.4 5.48 18.32 4.06
Cotton knitshirts andblouses 338/339 79.12 73.7 100.65 117.55 101.42
Cotton non-knit shirts 340/640/340Y/640Y 75.29 50.8 58.89 103.32 113.82
Cotton non-knit blouses 341/641 32.24 10.5 16.68 34.42 24.7
Skirts 342/642/842 35.73 13.6 3.04 7.19 ...
Sweaters 345/438/445/446/645/646 71.05 19.3 0.93 13.08 22.06
Cotton trousers andshorts 347/348 92.76 88.01 92.28 115.2 103.15
Nightwear 351/651 ... 42.2 27.67 22.36 24.07
Cotton &man-made fibre 352/652 97.65 36.2 49.86 81.71 35.84
Wool skirts 442 5.6 ... ... ... 0.03
Acrylic spunyarn 604-A ... ... ... ... ...
Man-made fibre knitshirts &blouses 638/639 106.42 89.1 72.03 68.64 60.84
Non-cotton trousers 647/648/847 54.42 65.26 54.15 46.54 50.73
Unweighted average ofallproducts: 47.5 33.7 30.7 40.4 34.0
...Notavailable.
aQuota utilization rates.
bU.S. product categories.
Source: Government ofMauritius.
(ii) Other manufacturing
(a) Food, beverages andtobacco
68. Asinmostcountries thathavefollowed import-substituting policies, thesector inMauritius
thatreceived themostattention forsuchpurposes hasbeentheproduction ofbasic consumer goods,
particularly, foodandbeverages. In1991, food, beverages andtobacco accounted for22.4percent
ofmanufacturing value added (Chart V.6). Asnoted, efforts atsatisfying localdemand forstaple foods
havebeenpartially successful (section V(2)(ii)(a)). Theshare offoodinMauritian imports hasbeen
halved since 1980, although thisreflects notonlyincreased localproduction butalsothefallinworld
prices andtheincreasing share ofmanufactures inimports.
69. Atpresent, average tariffs inthesector range from21.9percentforfood(and68.6percent
forthesugar manufacturing branch), to59.1percentforbeverages and80percentfortobacco
manufactures. Inaddition, there areexcise duties onbeverage andtobacco products: suchtaxes on
imported alcohol canbeupto200percent(rates ondomestically produced alcohol arelevied onthe
basis ofpercentage ofalcohol and,intheabsence ofadvalorem equivalents, cannot becompared).
Theexcise dutyonimported cigarettes (HSNo.2402.20.90) isconsiderably higher thanonthose
manufactured locally, 400versus 120percent(section V(2)(ii)(a)).WT/TPR/S/5
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(b) Other
70. With textiles, clothing, food, beverages andtobacco contributing over 70percentto
manufacturing value added, remaining manufacturing activities arelimited, amounting tolessthan
theequivalent ofUS$300 million in1991. In1991 chemicals andchemical products contributed
7.1percentofmanufacturing value added; paper andprinting, 3.3percent; andother manufactured
products, 5.7percent(Chart V.6). Thislatter product category (including optical goods, clocks and
watches, toysandjewellery) accounted forover6percentofexports in1993.
71. In1994, imports ofmanufactured goods mounted toUS$1.7 billion, equivalent to94percent
ofallimports, ofwhich machinery andtransport equipment (US$488 million), textiles (US$468 million)
andchemicals (US$300 million) werethemostimportant product groups (Table AV.1). Inthecase
ofmachinery andtransport equipment (ISIC 38),theaverage tariffonimports is31.9percent: within
thissector, higher thanaverage tariffs (62.1 percent)arefound onelectrical appliances (ISIC 3833)
towhich selective price controls, intheform ofmaximum mark-ups alsoapply; formotor vehicles
onwhich excise duties arealsolevied, theaverage tariffis50.9percent.44Textiles, primarily imported
dutyfree,forprocessing intheexport processing zone, exhibit awide dispersion ofrates, ranging
from1.1percentinthecaseoftextilesforspinningandweaving,i.e.productioninputs,to71.8percent
forfinished apparel. Anydomestic manufacturers, notentitled toduty-free inputs, would thuscontinue
toenjoy significant protection. Forchemicals theaverage tariff forthesector is25.3percent, and
onrubber products itis50.2percent; tyres aresubject tomaximum mark-up under price control
regulations. Inother manufacturing, including jewellery andtoyswhich Mauritius hasbegun toexport
ingreater quantities, theaverage tariff onimports is40.5percent.
72. Asnoted,sincethebeginningofthe1990s,policythinkinginMauritiushasfocusedonindustrial
diversification away fromexcessive reliance onclothing manufacture. Thus, theinvestment andexport
promotion agency, MEDIA, began inthelate1980s topromote investments inleather andfootwear,
jewellery, toys, electronics, printing andplastics.45
73. Both printing andelectronics, chosen asareas where Mauritius maybeabletodevelop a
comparative advantage, havebeenmade eligible forPioneer Status Enterprise incentives following
thepositive results ofstudies carried outbyMEDIA (Chapter IV(4)(ii)). Printing companies orthose
assembling electronics areeligible forthefirsttenyears oftheiroperation fora15percenttaxrate
andtaxexemption ondividends paidtoshareholders; expatriate workers inhightechnology sectors
receive additional taxbenefits. Inaddition, "scheduled" imports aredutyfree. Duties onimported
printing machinery andrelated inputs havebeensuspended, ashasthedutyoncomputers. Since 1994,
50percentoffreight charges onelectronics products, including watches, havebeenmade eligible
forrebate. Thejewellery sector, where exports in1993 accounted for2.5percentofmerchandise
exports, hasalsobeendesignated asapriority sector.
74. According totheauthorities EPZenterprises manufacturing jewellery findtheprice ofgold
soldtothem bytheBank ofMauritius unattractive, astheycanpurchase inputs more cheaply from
44SeeTable AV.1. Note thattariffs herearecalculated according toISICcategories, using HS-based tariff
data; tariff averages areonlyindicative oflevels ofprotection, various dutyexemptions andconcessions may
reduce orincrease theeffective rateofprotection.
45World Bank (1989), p.47.Theauthorities notethatMEDIA isinvolved inthepublication anddistribution
ofinvestment guides, inpromotional films, inorganization ofseminars andininvestment promotion missions.
Media hasalsoopened offices inanumber offoreign countriesMauritius WT/TPR/S/5
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other sources. Gold isfreely importable, except for24caratgoldforwhich theBank ofMauritius
holds themonopoly.
(4) Services
75. Services,includingconstructionandelectricity,gasandwater,accountfortwothirdsofeconomic
activity inMauritius (Table V.7). Within theservice economy, thewholesale andretailtrade, including
restaurants andhotels, isthelargest branch. Government services andfinancial andbusiness services
(including realestate) eachaccount for11percentoftotalGDP. Within thelatter, finance, insurance
andbusiness services 'share ofGDP rosefrom 5to6percentbetween 1980 and1993.
Table V.7
Share ofservices inGDP, 1980-94
(Percent)
1980 1986 1990 1992 1993a1994b
Services 72.2 61.6 64.2 65.6 66.7 67.4
Electricity, gasandwater 2.8 3.1 1.6 2.4 2.6 2.4
Construction 7.6 5.7 7.0 7.5 7.4 7.6
Wholesale andretail trade, restaurants andhotels 14.2 12.7 17.3 17.1 17.6 17.7
Transport andcommunication 11.3 10.3 11.0 11.9 11.9 12.0
Finance, insurance, realestate andbusiness
services17.7 14.7 12.3 11.5 11.1 10.9
Government service 12.9 10.1 10.4 9.9 10.5 11.1
Other services 5.6 4.9 4.6 5.4 5.5 5.7
a Provisional data.
b Forecast.
Source: Central Statistical Office ofMauritius.
76. Trade inservices, dominated bytourism receipts, accounts for35percentofinternational
transactions effected byMauritius. In1993 merchandise exports werevalued atUS$1.3 billion and
non-factor service exports atUS$0.6 billion (Table 1.4). Shipment, other transport, andtravel, are
leading items intheinvisibles account, with"travel", i.e.receipts fromtourism, worth US$304 million
in1993. Exports of"other services", including business-related services, which make upthebalance
oftheservices account, nearly doubled between 1987 and1993.
(i) Tourism
77. Tourism isMauritius 'third largest earner offoreign exchange aftersugar andtextiles and
clothing. Between 1975and1994, theannual number oftourist arrivals rosefrom75,000 to400,000.
In1993theshare oftourism (hotels andrestaurants) inGDPwas3.5percent,andgross receipts from
tourism amounted toMauRs5,362 million (US$304 million); employment inthesector rosefrom
7,200 inMarch 1989 to13,700 inMarch 1994. Thefiveleading points oforigin, inorder of
importance, fortourists toMauritius, areReunion, France, South Africa, Germany andthe
United Kingdom. Aconsistent Mauritian policy ofkeeping itstourist business intheupper segment
ofthemarket together withconcern about theenvironmental andinfrastructural impact ofthegrowing
influx oftourists hasprompted theGovernment tolimitconstruction ofnewhotels, bandirect charter
flights andallow amaximum number of200rooms perhotel since 1989.WT/TPR/S/5
Page 94Trade Policy Review
78. TheHotel Management Scheme, inaccordance withtheHotel Management Incentive Act1982,
provides anumber offacilities andincentives forhotel development. Likeother industries eligible
fortaxincentives, hotels benefit froma15percentcorporate taxrateanddividends aretaxfreefor
tenyears from thestartofoperations. Aone-time exemption ofcustoms duties ontheimportation
ofapproved equipment ispermitted toholders ofhotel development certificates. Forfirst-class
restaurants, thedutyonimported kitchen equipment islevied athalfthenormal rate. Touroperators
andcarrental agencies aregranted a60percentdutyconcession onair-conditioned buses. The
Development Bank ofMauritius offers concessional interest rates onloans fortheconstruction or
upgrading ofhotel facilities.
79. During theUruguay Round Mauritius made specific commitments regarding market access
insub-sectors within tourism andtelecommunications (Chapter II(3)(ii)). Thecurrent regulatory
framework fortourism-related activities entails certain limitations. Foreign participation inhotels with
lessthan100rooms islimited to49percent.46Theinitial investment foraforeign-owned company
inanytourism-related activity should beleastMauRs10million andMauRs5million foraMauritian-
owned company. Theminimum number ofrooms forhotel construction is60iflocally-owned and
100ifforeign-owned. Foreign owned coastal hotels must lease landfrom theGovernment andthe
expenditure perroom should bemore than MauRs1,000,000.
80. Foreign travel agencies, arranging forservices inMauritius, must work through anagent
established inMauritius. Establishing atravel agency requires clearance fromTourism andInternal
andExternal Communications. Tour-operating services arerestricted toMauritian nationals, although
foreign participation ispossible withapermit from theMinistries ofTourism andFinance andthe
Prime Minister. Currently, afewtouroperators areallocated asubstantial number ofavailable seats
onAirMauritius. Ownership ofcarrental agencies andyacht andcruise services isreserved toMauritian
nationals. Theoperation ofduty-free shops byforeigners islimited toa30percentlevelofequity
participation.47
(ii) Telecommunications
81. Inthetenyears to1992, Mauritius doubled itslinecapacity to138,384 connected linesor12.5
main telephone linesper100inhabitants; thiscompares toaworld average of10.49 andanaverage
forAfrica of1.47. However, demand isestimated attwice theinstalled Mauritian capacity andthus
investments overthenextfiveyears areprojected atMau Rs4billion oranannual average of
MauRs800million. Telecommunications inMauritius contribute 1.3percentofGDP, compared
toaworld average of1.8percentwhich suggests thateither tariffs arecompetitive orthatcapacity
should beincreased, orboth.48
82. The1988Telecommunications Actprovides theregulatory framework fortelecommunications
services, which areadministered bytheregulator, theMauritius Telecommunications Authority (MTA).
TheAuthority isresponsible forthegranting oflicences forbasic andenhanced telecommunication
services aswellasthesetting andenforcement ofequipment standards. Telecommunications policy
inMauritius iscurrently under review bytheTelecommunications Advisory Council, which actsas
aconsultative body.
46GATS/SC/55, Mauritius: Schedule ofSpecific Commitments, 15April 1994.
47Ibid.
48ITU, World Telecommunications Development Report, 1994.Mauritius WT/TPR/S/5
Page 95
83. Thelicensing capability oftheMauritius Telecommunications Authority applies topotential
suppliers forbothbasicandvalue-added telecommunications services. Licences aregranted according
tothefollowing criteria: (i)public interest; (ii)national security; (iii)technical compatibility;
(iv)bilateral agreements which include provisions ontelecommunications services; (v)anyinternational
obligation ofMauritius inthefieldoftelecommunications; and(vi)directions oftheMinister.49The
Authority alsoapproves tariffs, which wererevised in1993tobring themmore closely intolinewith
costs. Tariffs forlong-distance phone callsareonaparwithcompetitive rates(approximately US$6.75
forthree minutes peak rates) andquite uniform; slightly lower rates apply tooutgoing callsto
neighbouring countries (eastern andsouthern Africa andIndia)
84. Theprovision ofbasic telecommunications, thefixed public switched network, cable laying,
international access andmaritime/coastal communications islicensed topublicly-owned Mauritius
Telecommunications which thusholds adefacto monopoly. Mauritius Telecommunications willbe
partly privatized (upto49percentofcapital) by1996. Exclusive rights forcellular (mobile) telephone
service andequipment havebeengranted toaprivately-owned company until31December 1995;
from 1996 Mauritius Telecommunications willenter thecellular phone market.
85. Under itscommitments taken intheUruguay Round 'sGeneral Agreement onTrade inServices
(GATS), Mauritius hastheobligation tomaintain transparency andtoallow thecross-border movement
ofinformation andinterconnection withpublic networks (Chapter II(3)(ii)). Mauritius isaparticipant
intheWTO Negotiating Group onBasic Telecommunications. Telecommunications sub-sectors,
excluding national datatransmission, are,according totheauthorities, opentocompetition fromboth
domestic andforeign suppliers. Private datanetworks maybesetupfor"own use"only. Theresale
ofprivate leased circuit capacity iscurrently notpermitted andMauritius considers theprovision of
"callback" services asanunfair trade practice.
86. Apotential supplier oftelecommunication services mustshow proof ofmarket demand, and
satisfy aneconomic needs test,inaddition tomeeting thetechnical requirements inorder toobtain
alicence from theMTA.50Service suppliers arerequired tointerconnect withthepublic network
operated byMauritius Telecommunications where applicable; interconnection charges andaccounting
ratesarenegotiated between suppliers andthelocaloperator.51TheGovernment reserves theright
toimpose limits onforeign participation. Licensees arealsosubject tocertain conditions, including
therequirements tointerconnect withother networks, topublish tariffs andtopaylicence fees. Other
terms ofthelicence, which willbeincluded intherevised legislation, require thatthesupplier extend
non-discriminatory treatment tocustomers andrefrain from anti-competitive practices.
87. Companies wishing toimport telecommunications apparatus forsaleneedadealer 'slicence,
which isgranted byMTA. Allequipment must betype-approved bytheAuthority. Type-approval
procedures arebeing elaborated forequipment connected tonetwork andradio equipment. Todate,
nomutual recognition agreements onforeign equipment certification havebeenconcluded butthe
Authority mayaccept foreign type-approval oncondition thatthespecifications areknown.
49Section 11,Telecommunications Act1988.
50WTO, Negotiating Group onBasic Telecommunications, Communication from Mauritius: Response to
Questionnaire onBasic Telecommunications, S/NGBT/W/3/Add.25.
51Until therevision ofcharges, thelicensee formobile phone services paid25percentofitsannual revenues
tothetelecommunications monopoly; interconnection charges arenowrelated totheamount oftraffic between
thefixed andmobile network.WT/TPR/S/5
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(iii) Transportation
(a) Airtransport
88. Only scheduled passenger airservices areallowed tooperate intoandoutofthecountry;
charter airlines aredenied airaccess inlinewiththepolicy aimed at"low impact, highspending"
tourism. Fifteen outof24bilateral agreements concluded between Mauritius andother Governments
arecurrently being exploited. AirMauritius fliesto20destinations andeight foreign carriers serve
Mauritius from atotalof12international points.
89. AnexittaxofMauRs100islevied onalltravellers.
(b) Marine transport
90. Shipping toEurope, United States andtheAsiaPacific region ishandled byforeign vessels.
TheMauritius fleet, vessels operating under thenational flag,consists of12general cargo vessels,
threeoftheseplytheSouth African, Reunion andMadagascar routes, andfishing vessels; 70percent
ofregional tradeiscarried outbynational flagvessels. Shipping companies areexempt fromcorporate
tax;thecrewpaysnoincome taxandthereisnoimport dutyonthepurchase ofships. TheMauritius
Shipping Corporation hasreserved freight andpassenger shipping between Mauritius andRodrigues
toaState-owned ship; ratesaresubsidized toensure thatprices ofgoods destined forRodrigues are
notinflated byhightransport costs. Mauritius doesnotparticipate inanycargo-sharing agreements.
Mauritius hasstated thatitdoesnotdiscriminate infavour ofnational maritime transport services with
respect tointernational shipping, portandauxiliary services; however, national vessels areentitled
toa50percentdiscount from berthing fees.52
(c) Portservices
91. PortLouis Harbour handles approximately 3.3million tonnes ofcargo ayear. TheMauritius
Marine Authority (MMA), aparastatal body, established under the1975Ports Actandoperating along
commercial principles, manages theharbour andprovides allportinfrastructure andequipment. The
Cargo Handling Corporation, (CHC) jointly owned bytheMMA andtheGovernment, isthesole
provider ofcontainer andgeneral cargo handling services. Certain commodities, forexample, cement,
wheat andpetroleum, areunloaded byprivate enterprises, andsugar isexported bytheprivate Bulk
Sugar Technical Corporation. TheCHC handling ratesforgeneral cargo areMauRs141/ton; itcharges
MauRs1,414 forunloading afullcontainer.53
(iv) Financial services
92. Duringthe1980s,monetarypolicyinMauritiusappliedbothcreditcontrolsandregulatedinterest
rates. Tight control induced commercial banks tocharge higher feesandwiden spreads raising financial
transactioncoststobusiness.54In1988interestrateswerepartiallyliberalized,withguidelinesremaining
inplace. Inamove towards greater reliance ontheprice mechanism, in1991 theBank ofMauritius
52WTO document, S/NGMTS/W/2/Add.31, 17July1995.
53Republic ofMauritius (1994c).
54Republic ofMauritius (1993a), p.56.Mauritius WT/TPR/S/5
Page 97
began auctioning Treasury Billsasasteptowards openmarket operations.55Credit ceilings onbanks
were eliminated overthetwo-year period 1992-1993, allowing greater scope forcompetition inthe
banking industry.56Other measures taken tostrengthen disintermediation andbroaden thescope of
financial services include theestablishment in1987ofajointprivate-public national leasing company,
thesetting upofthestock exchange in1989 and,by1994, theabolition ofallexchange controls, at
which time, licences forforeign exchange dealers andmoney changers wereintroduced. TheForeign
Exchange Dealers Act1995regulates allforeign exchange dealers ormoney changes, otherthanoffshore
banks. Supervision isundertaken bytheBank ofMauritius under theauthority oftheMinister of
Finance.
(a) Banks
93. ThebankingsystemisregulatedandsupervisedbytheBankofMauritiusunderthe1988Banking
Act,which amended existing legislation inorder tosafeguard theinterests ofdepositors andencourage
innovation intheindustry, including offshore banking. Thecurrent legislation incorporates theessential
principles ofprudential regulation, ensuring thatfinancial institutions areadequately capitalized,
depositors 'funds safeguarded andloanportfolios diversified. Allbanks (offshore anddomestic) are
requested tosubmit monthly statements totheBank ofMauritius andaresubject toexternal audit.57
Generally, banks arerequired tomaintain acashratio of10percentandaliquid assets ratio of
23percent(atotalliquidity ratioof33percent); however, fromJuly1995, thecashratiowasreduced
to8andtheliquidity ratioto2.8percentfornewdeposits made afterMay1995, provided thatthe
excess loanable funds were channelled solely totheEPZ.
94. Approval isrequired fromtheBank ofMauritius toestablish adomestic oroffshore banking
business, toopenanewbranch orchange location andforaMauritian banktoopenabranch abroad.
Domestic banks arenotallowed toconduct offshore business. Minimum capital requirements forbanks
incorporated inMauritius andforoffshore banks arethesame atMauRs25million (approximately
equal toUS$1.5 million), subject totheminimum 8percentcapital adequacy ratioapplied bytheBank
forInternational Settlements. There arenolimits onforeign equity participation andforeign banks
aresubject tothesame regulations asdomestic banks.
95. There are12commercial banks, ofwhich eight areforeign-owned, withover140branches;
foreign banks ownsome 20percentoftotaldomestic bankassets. Roughly adozen banks andfinancial
institutions inMauritius arepublic enterprises, operating oncommercial principles. Principal amongst
thesearetheDevelopment Bank ofMauritius, theStateInvestment Corporation, theMauritius Leasing
Company, theStateBank andtheStateInsurance Corporation. InApril 1995, 34percentoftheshare
capital intheState Bank wasoffered tothepublic; public saleofshares intheState Investment
Corporation andtheState Insurance Corporation aretofollow.
96. Offshore banks, forwhich legislation came intoforce on1January 1989, arenotsubject to
Mauritian taxes ordomestic monetary policy measures. Although offshore banking units maybe
established asabranch, subsidiary orjointventure withanother bank, theywereobliged tooperate
separately fromMauritian domestic banks untilJuly1995, when theywereauthorized tooperate from
55Since July1995, thebank ratehasbeenbased ontheone-week average, replacing aprevious twelve-week
average, oftheweighted yield onthree, sixandtwelve-month government securities, plusamargin.
56In1989 twobanks accounted for75percentoftotal bank deposits (World Bank, 1989).
57World Bank (1989), p.79.WT/TPR/S/5
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thesame premises. Offshore banks payalicensing feeofUS$20,000 andmust maintain minimum
capital ofMauRs25million; theyareprohibited fromdealing withlocalresidents andfromtransacting
business inlocalcurrency. Offshore banks arelicensed toconduct banking business withnon-residents
ofMauritius inforeign currencies; theyarealsopermitted togrant credits inforeign currencies to
EPZandexport service zoneunitsinMauritius andfree-port companies. Since January 1989, EPZ
companies havebeenallowed toborrow, upto90days, fromoffshore banks; since December 1990,
domestic firms mayborrow fromoffshore banks, under thesame terms asEPZcompanies andsubject
toapprovalbytheBankofMauritius.58AsofJuly1995,domesticbanksmayborrowinforeigncurrency
fromoffshore banks without seeking theapproval oftheBank ofMauritius. ByDecember 1994assets
ofoffshore banks hadreached US$504 million.59
(b) Non-bank financial services
97. Various pieces oflegislation relating toacomprehensive regulatory framework forfinancial
services arecurrently inpreparation, including theFinancial Services Authority BillandtheSecurities
andExchange Bill.Theproposed Financial Services Authority would integrate allexisting non-banking
supervisory authorities (theMOBAA, theStock Exchange andtheInsurance Unit) andlicense and
regulate investment companies.
98. TheStock Exchange, setupinJuly1989, ispresently regulated bytheStock Exchange
Commission. There aretwomarkets, anofficial market (currently quoting 40companies) andanover-
the-counter market (69companies). Companies which havehadfiveyears ofprofitable operations,
aminimum market capitalization ofMauRs20million ofwhich 25percentisheldpublicly bya
minimum of200shareholders, areeligible forofficial listing.60Thecapitalization ofthetradeable
securities market hasgrown from aninitial amount ofMauRs1.1billion inJuly 1989 to
MauRs29.1billion inJune1995. TheNational Investment Trust, amutual fundtopurchase shares
inpublic enterprises, waslaunched in1993.
99. Non-citizens mayinvest inshares inlisted companies; offshore funds, investing inlocal
companies, would belisted onthestock exchange. Inthe1995/1996 budget speech, itwasannounced
thatnon-citizens would alsobeallowed tosubscribe tonewissues andinvest inunittrusts.
100. InFebruary 1987ajointprivate-public national leasing company (Mauritius Leasing Company)
wasestablished toimport capital goods forindustry andprovide themunder leasewiththeoption for
eventual purchase. Theleases areonterms ofthreetoseven years, interest ratesarepresently between
14and19percent. Theauthorities statethattheyareencouraging thecreation ofleasing companies
intheprivate sector.
101. There arenolimitations onforeign ownership intheinsurance sector andeight outof
25insurance companies areforeign-owned.
58World Bank (1993), p.65.
59Budget Speech 1994-1995, p.15.
60Acompany mayhave itsshares listed ifpublic ownership represents only15percentofthecapital as
longasthepublicly-held share isincreased to20percentwithin three years and25percentwithin fiveyears.
Thewaiting period forlisting mayalsobereduced tothree years subject todecisions bytheStock Exchange
Commission.Mauritius WT/TPR/S/5
Page 99
(v) Other services
102. Aspartofastrategy todevelop afourth pillar ofitseconomy, aftersugar, theexport-processing
zoneandtourism, Mauritius haslaunched initiatives, inaddition tothefree-port, topromote theisland
asatrans-shipment andregional trading andfinancial centre. Theencouragement oftheservices sector
figures prominently inthedevelopment strategy ofMauritius. Asearlyas1981, legislation (theExport
Services Zone (ESZ) Act)wasenacted providing EPZ-like taxanddutyincentives topromote export-
related services.61According toSection 5oftheAct"theMinister may,where heconsiders itexpedient
inthepublic interest, declare anyservice tobeanexport service". AnESZfirmisnotallowed to
sellservices totheEPZ. Under Export Service Zone Schemes, foreign equity participation iscurrently
limited to30percent,although thereareplans toeliminate thisrestriction. However, similar services,
forexample, trans-shipment, areprovided within thefreeportinwhich businesses maybe100percent
foreign-owned (Chapters IV(4)(ii) andIV(3)(xi)). Inaddition thefreeporthasaccess tooffshore banking
facilities andreduced transport andstorage ratesfortransit trade. Iflocated inthefreeport,offshore
companies havethepossibility ofprocessing imported goods toobtain aMauritian Certificate ofOrigin,
thusobtaining preferential access toCOMESA markets, andareallowed tosellupto20percentof
theirannual turnover onthelocalmarket. Afurther steptowards integrating theonshore andoffshore
sectors isthedecision thatfrom1July1998, offshore companies, currently tax-exempt, willbetaxed
at15percent.
103. Offshore non-banking services, supervised bytheMauritius Offshore Business Activities
Authority (Chapter III(l)(ii)), include suchbusinesses asinsurance, funds management, international
trading, aircraft leasing, consultancy anddataprocessing. Thelegislative framework provides fortwo
types ofincorporation ofoffshore companies, "ordinary status" and"international". Forneither is
thereaminimum capital requirement butanordinary status company issubject tostricter controls and
mustfileannual accounts withtheMOBAA. Thisform ofincorporation mustbeusedforinsurance
andfundmanagement activities. Aninternational company facespractically norequirements butcannot
beusedforactivities dealing withthepublic; however, itcan,forexample, beemployed toownships
oraircraft registered inMauritius. ByJuly1995, there wereover2,600 companies registered inthe
offshore sector, including 45investment funds, withanassetbaseofUS$4.1 billion.
61These include accountancy, law,medicine, international marketing, quality testing, preshipment, civil
engineering, management consultancy, reinsurance andtrans-shipment.