Mauritius WT/TPR/S/5
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III. FOREIGN DIRECT INVESTMENT
(1) TheForeign Investment Régime
1. Investment policy inMauritius islinked toindustrial policy. Incentive schemes, firstintroduced
in1970undertheExportProcessingZoneActandcurrentlyimplementedundertheIndustrialExpansion
Act1993, encourage investment inmanufacturing production through exemption fromcorporate taxes
andother financial incentives (Chapter IV(3)(ix)). Similar incentives arealsoextended toservices
sectors, including tourism andfree-port activities.
2. CurrentpolicyinMauritiusaimstochannelinvestmentfromabroad,particularlytoboostcapital
andtechnology-intensive production, inorder toimprove totalfactor productivity. Inthiscontext the
MauritiusExportDevelopmentandInvestmentAuthority(MEDIA)has,since1993,promotedinvestment
inindustrial sectors defined aspriorities bytheGovernment, including electronics, printing andoptical
goods.1Attractingcapitaltothe"offshore"businesssectorisexpected,throughinter-linkages,todevelop
domestic support services.2
3. Foreign direct andportfolio investment isgoverned bytheprovisions oftheNon-Citizen
(Property Restriction) Act(1975).3TheGovernment ofMauritius hasnotified theWTO thatitdoes
notmaintain anymeasures prohibited under theAgreement onTrade-Related Investment Measures.4
Repatriation ofinvested capital, profits anddividends isallowed without restriction anddoesnotrequire
theapproval oftheCentral Bank, theMinistry ofFinance oranyother body ofGovernment.5The
stamp dutyoncapital appreciation wasprogressively reduced intheearly1990s andabolished in1994.
Therepeal oftheExchange Control ActinJuly1994 lifted allremaining restrictions oncapital
movements.
(i) Procedural issues
4. ThePrime Minister 'sOffice authorizes allforeign investment, either directly, iftheinvestor
doesnotchoose toapply foranIncentive Certificate, oratafinalstage oncetheCabinet hasapproved
theproject eligible foranIncentive Certificate.6
5. Ifaforeign investor applies foranIncentive Certificate, suchasunder theExport Enterprise
Scheme orthePioneer Status Enterprise Scheme (Chapter IV(4)(ii)), twocopies oftheapplication must
besubmitted totheMinistry ofIndustry andIndustrial Technology andbeaccompanied byafeasibility
1Republic ofMauritius (1994c).
2Offshore business refers tobusiness transacted inforeign currency between non-residents.
3Anynon-citizen whowishes toacquire property inMauritius requires written authorization from thePrime
Minister 'soffice.
4G/TRIMS/N/1/MUS/1,NotificationunderArticle5.1oftheAgreemen tonTrade-RelatedInvestmentMeasures,
4April 1995.
5Anapplication totheBank ofMauritius for"Approved Status" isanecessary formality toensure the
repatriation ofpaid-up capital.
6Ministry ofIndustry.WT/TPR/S/5
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study anddetails oftheproject. Once theapplication isrecommended bytheIndustrial Development
Committee, which ischaired bytheMinister ofIndustry andcomposed ofrepresentatives fromother
Ministries andGovernment agencies, itissenttoCabinet forapproval.7Final authorization, totransfer
funds, requires thesignature ofthePrime Minister.
6. Decision onaformal application usually takes sixweeks. Once approval isobtained, the
applicant isgiven threemonths toincorporate thecompany through theRegistrar ofCompanies. Upon
registration theIncentive Certificate isissued.8
7. Among theservices provided byMEDIA isassistance inobtaining official clearances required
before start-up. InJune1990theIndustrial Coordination UnitintheMinistry ofIndustry andIndustrial
Technology wascreated asaone-stop shop, where neworalready established investors may, although
theyarenotobliged touseitsservices, obtain government clearances andpermits. TheUnitconsists
ofaCoordinatingCommitteeassistedbyathree-personsecretariattofacilitatethecomplicatedprocedures
forobtaining clearances andpermits prior tobeginning operations, e.g.building, work andresidence
permits andmanufacturing licences issued bytheMunicipality orDistrict Council.9Although ithas
noexecutive power, theCommittee, which meets every twoweeks, canhelpremove bottlenecks by
urging thevarious ministries involved totakedecisions expeditiously.
8. Applications forhotelconstruction aremade under Development Certificates Schemes orthe
Hotel Management Scheme launched in1982. Fornewhotelprojects orformodernization, up-grading
orexpansion ofexisting hotels, anenvironmental impact assessment mustbecarried outbytheMinistry
oftheEnvironment.
(ii) Sectoral policies
9. Inthecaseofmanufacturing production forexport (Export Enterprise), there isnoceiling on
foreign equity participation andnoconditions areattached tospecify theleveloftechnology transfer
orexport performance. Themaincriterion forgranting incentives under thePioneer Status Enterprise
Scheme istheleveloftechnology andskills which mustbeabove theaverage existing inMauritius.
Foreign participation maybelimited to49percentforinvestments inanactivity catering tothedomestic
market, andisgenerally notencouraged inareasinwhich Mauritius hasalready mastered theproduction
technology.ForeignownershipintheExportServiceZone(ChapterIV(4)(ii))islimitedto30percent.10
10. Inthetourism industry, theGovernment, forreasons ofexcess capacity, in1990 restricted
theissuance ofpermits fornewhotelprojects. Hotel developers areexpected tocontribute tothecost
ofnewinfrastructure, suchasaccess roads, electricity andtelephone. Forty percentofthedevelopment
project mustbefinanced withequity. Ifforeign-owned, thehotel musthaveatleast100rooms; for
7TheIndustrialDevelopmentCommitteeiscomposedofrepresentativesoftheMinistryofIndustryandIndustrial
Technology,theMinistryofEconomicPlanningandDevelopment,theMinistryofFinance,theMinistryofTrade
andShipping, theMinistry oftheEnvironment andQuality ofLife, theMauritius Export Development and
Investment Authority, theBank ofMauritius, theCustoms Department andtheDevelopment Bank ofMauritius.
8Allforeign-owned businesses must beincorporated inMauritius.
9Republic ofMauritius (1994c).
10Republic ofMauritius (1994c).Mauritius WT/TPR/S/5
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aMauritian-controlled hotelalower minimum of60rooms isset.11Foreign hotel operators mustbe
incorporatedinMauritiusaccordingtotheHotelManagement(Incentives)Act,1982.Foreigninvestment
intourism-related investments benefiting fromDevelopment Certificates requires aminimum capital
investment ofMauRs10million; foraMauritian-owned company theminimum isMauRs5million.
Ownership ofcarrental agencies andyacht chartering islimited toMauritian nationals; touroperators
mayinvest inMauritius subject topermission fromtheMinistries ofTourism, Finance andthePrime
Minister 'sOffice (Chapter V(4)(i)).12
11. Among theincentives listed toattract investment tothefree-port isthatcompanies maybe
100percentforeign-owned. TheMauritius Freeport Authority isresponsible forlicensing companies
engaged intrans-shipment orre-export tradeoperating inthefree-port, which isthecustoms-free zone
withintheport.Free-portcompaniespayanannualfeeofUS$350andmustbeincorporatedinMauritius
(Chapter IV(3)(xi)).
12. Intheoffshore sector, butnotincluding offshore banking, anapplication mustbefiledwith
alocally incorporated offshore management company which hasbeenlicensed bytheMauritius Offshore
Business Activities Authority (MOBAA) toundertake initial screening foroffshore certificates.13These
companies setup,manage andprovide services tooffshore entities, andarerequired toperform "due
diligence" ontheirclients andmonitor theirtransactions.14Allapplications arethenexamined bythe
Technical Committee within theMOBAA. TheCommittee consists ofrepresentatives from the
Prime Minister 'sOffice, theMinistry ofFinance, theBankofMauritius, theAttorney-General 'soffice
andfourother professionally qualified persons. Under Section 17oftheMOBA Act1992, adecision
shouldbecommunicatedtothemanagementcompaniesoftheapplicantswithin15daysoftheapplication.
13. Offshore banking operations require theauthorization oftheBank ofMauritius; onlybanks
andfinancial institutions of"established reputation" (international standing) areencouraged toapply
foralicence, which willbeissued forafeeofUS$20,000 oncetherequisite prudential regulations
aremet. Likedomestic banks, anoffshore bank isrequired tomaintain minimum paid-up capital
ofMauRs25million afterdeduction ofaccumulated losses. Capital doesnothavetobedomiciled
inMauritius, although theBank ofMauritius maysetnetfree-asset ratios andliquid-asset ratios. As
ofmid-1995, seven offshore banks were inoperation.
14. Withrespect tothedomestic (onshore) banking industry, foreign banks areallowed toestablish
bothsubsidiaries andbranches. Licensing criteria arelaiddown intheBanking Act1988.15There
isnodiscrimination withregard tobanking services, andtheminimum capital requirement isapplied
equally todomestic banks andbranches orlocally incorporated subsidiaries offoreign banks.
11Foreign participation inhotels oflessthan100rooms islimited to49percent. Tourism establishments,
hotels andrestaurants, must bestaffed predominantly byMauritian nationals (GATS/SC/55).
12GATS/SC/55, 15April 1994.
13Asofmid-1994 there were 18licensed management companies.
14Duediligence involves verifying theidentity oftheapplicant andevaluating credit worthiness.
15Criteriaincludesprudentialrequirements,suchasadequatecapitalandanappropriatecontrolandaccounting
system,theneedsofthemarketandtheabilityandwillingnessoftheapplicanttocomplywithsuchotherconditions
asthecentral bank mayimpose pursuant tothisAct.WT/TPR/S/5
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15. Mauritiushasconcludedbilateraltaxtreaties,toavoiddoubletaxation,withBelgium,Botswana,
Canada, China, France, Germany, India, Italy, Luxembourg, Malaysia, Pakistan, Swaziland, Sweden,
theUnited Kingdom, VietNamandZimbabwe. Mauritius isamember oftheMultilateral Investment
Guarantee Agency andtheInternational Convention onSettlement ofInvestment Disputes. Under
theCOMESA Treaty, members areencouraged toconclude taxtreaties asameans ofpromoting intra-
Common Market investment (Chapter II(4)(ii)).
(2) Trends inForeign Direct Investment
16. Toalarge extent, foreign direct investment fuelled thepastdecade ofexport-led growth in
Mauritius.16Theinitial spurt inforeign investment inMauritius intheearly 1980s canbeascribed
totherelocation ofHong Kong clothing firms bumping against MFA quota ceilings fortheirclothing
exports.17Mauritius, politically stable, enjoying duty- andquota-free access totheEuropean
Communities under theLomé Convention, aswellasproviding anabundant andrelatively cheap labour
force, proved attractive toinvestors. Hong Kong hasbeentheleading investor inMauritius, followed
byFrance (Table III.1).
Table III.1
Total inflows ofdirect foreign investment inMauritius, bysource, 1986-93
(Mau Rsmillion)
Hong Kong 445 Other Europe 38
France 302 Italy 21
Malaysia 221 Sweden 12
Chinese Taipei 168 Netherlands 5
United Kingdom 127 Austria 0.3
Germany 111 Other Africa 117
Switzerland 110 Réunion 107
India 107 Zimbabwe 6
China 69 Madagascar 4
United States 63 Others 156
Japan 51 Australia 16
Singapore 49 Pakistan 25
South Africa 29 Tax-free zones 581
Source: Bank ofMauritius.
17. Foreign direct investment boomed during the1980s buthassince subsided asforeign
manufacturers relocated toproduction siteswithlower wage costs. Between 1983 and1990 annual
inflows grewfromMauRs19million toMauRs578million (Chart III.1). By1993thesehadlevelled
offtoMauRs274million asthestrength oftheExport Processing Zone (EPZ) sector diminished in
parallel withrising realwages andavirtual standstill innewhotel construction. Some oftheslack
wastaken upbyinvestment inoffshore andonshore banks; according totheBankofMauritius, foreign
banks own20percentoftotalonshore bank assets. Since 1992 there hasbeen anetoutflow of
investment from Mauritius (Table I.3),aslocal commercial banks havemade major investments in
banking inReunion andIndia.
16Bank ofMauritius.
17World Bank (1993), p.23.Mauritius WT/TPR/S/5
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18. Total inflows ofdirect foreign investment overtheten-year period 1983-93 amounted to
MauRs3.1billion orUS$212 million, withthemajority destined forEPZindustries.18Thetourism
sector hasalsoattracted large inflows representing nearly onequarter ofthetotal(Chart III.2).
18According toestimates, foreign enterprises control about 45percentoftheEPZ sector, among which
15percentthrough wholly-owned subsidiaries and30percentthrough joint ventures.WT/TPR/S/5
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