This chapter summarises the technical chapters of the Investment Policy Review, including the key findings and recommendations in each policy area. It reviews the performance of Mauritius in attracting foreign investment and the benefits it has received from that investment, the challenge of raising productivity, the investment policy framework, investment promotion and facilitation, investment incentives and responsible business conduct in Mauritius.
OECD Investment Policy Reviews: Mauritius 2024
OECD Investment Policy Reviews
Abstract
The development trajectory of Mauritius has been one of the most successful in Africa. A poor, remote island economy at independence in 1968 and heavily dependent on traditional exports of sugar, it now boasts a sophisticated services sector and briefly became a high-income country in 2020 – before the devastating effects of Covid-19. Building on its strong sugar, textiles, tourism, and financial services sectors, the Mauritian economy has stood out in sub-Saharan African for its strength and stability. GDP per capita on a purchasing power parity basis has increased more than five-fold since 1990. GDP increased in real terms by an average 4.4% per year over 1990-2019.
Given the importance of the tourism sector, the economy was heavily affected by the pandemic, with the most severe contraction in Africa, shrinking by 14.5% in 2020. The measures taken by the government to face the crisis – one of the largest COVID-19 response packages as a share of GDP – seem to have proven efficient (World Bank, 2022[1]). GDP growth rebounded to 3.4% in 2021 and reached 8.9% in 2022, partly due to a rise in exports and the realisation of investment projects and 7% in 2023. The government forecasts GDP growth of 6.5% in 2024.
Development success stories of this kind are rare in Africa, and Mauritius’ experience in escaping from a poverty trap which seemed so intractable at independence has been much studied. One of the elements that is commonly cited is the tradition of strong economic management and political stability, Mauritius has been the top or second-best performer in Africa by many policy metrics, ranking first in Africa in the 2020 World Bank Doing Business Index (13th worldwide), second in the Human Development Index (72nd worldwide) – fluctuating between high and very high human development). The island is often considered a model of social development, particularly its social protection system and its efforts to promote social equality and reduce poverty. It tops the Mo Ibrahim Governance Index for Africa, as it has done continually for more than a decade. Mauritius was also the highest-ranking African country in the Global Competitiveness Index (52nd in 2019) and ranks highly in several indicators of economic freedom – the first in Africa in each case.1
Other longstanding elements include macroeconomic stability, even in the face of external shocks, and cultural diversity and its link with inclusive politics and the diaspora. But if these elements provided the fuel for take-off, preferential access to major markets combined with the Export Processing Zone Scheme provided the spark. They were supplemented by an abundant pool of labour and foreign direct investment (FDI) inflows at critical times to help jumpstart industries. This success story is described in more detail in Chapter 3.
In the first three decades of independence, Mauritius managed to turn potential weaknesses into advantages, many of which remain. But starting in the mid-2000s, it could no longer count on some elements of the early success: the EPZ scheme was terminated as preferential access to EU and US markets was eroding rapidly; and the pool of labour started to dry up. If the success of Mauritius were simply being in the right place at the right time in the decades after independence, with the right policies in place, then its development trajectory might not have continued as those conditions changed. Instead, it went through an important round of reforms in the 2000s and particularly after 2005, at a time of strongly deteriorating terms of trade.
The Investment Promotion Act 2001/Board of Investment Act 2000 created the Board of Investment, the precursor to the Economic Development Board. The Companies Act 2001 created a unified core legal regime for all companies set up in Mauritius (OECD, 2014[2]). The Business Facilitation (Miscellaneous Provisions) Act 2006 greatly facilitated business registration, amending 26 laws to simplify business procedures by removing the scope for discretion and focusing on a rules-based approach. In 2008, implemented a centralised database linking the company registry with tax, social security, and local authorities, thereby reducing start-up costs by two thirds and the number of days required from 46 to 6 days. The result was a ten-point improvement in 2008 in the distance to frontier score under the Doing Business indicators.2
Major tax reforms in 2006 eliminated most tax holidays and credits in place and replaced them with a flat 15% rate for personal and corporate income tax (formerly 25%). The differential treatment of EPZ investors was thereby eliminated, and the EPZ scheme was terminated with the repeal of the Industrial Expansion Act in 2006. The favourable tax and regulatory environment, which was previously provided exclusively in the EPZ, was expanded to the entire economy, thereby opening the economy to further competition, eliminating distortions and significantly reducing customs tariffs and trade barriers. Minimum income thresholds ensured that the tax system enhanced its progressivity. Tax administration was also greatly simplified, and the tax base was expanded. A Competition Act was introduced in 2007. Trade and investment were liberalised, with the unweighted average tariff rate falling from 29% to 13%.
The government also improved macroeconomic stability by dealing with high public deficits and rising public debt. Labour market reforms succeeded in easing labour market regulations and reducing the high cost of job termination through the Employment Rights Act and the Employment Relations Act of 2008/2009. Further reforms affected state-owned enterprises (SOEs). FDI inflows increased rapidly during this period and growth rebounded in 2006-08.
Comprehensive reforms during this period demonstrate the agility of the government in reacting to exogenous shocks and declining terms of trade, but Mauritius has not yet settled convincingly on a new development model. Instead, it straddles the old export-led development approach and the development of a modern services economy.
Despite its successful performance over decades, Mauritius is confronted with several long-standing structural challenges. In spite of an improved performance recently, annual GDP growth has generally been below average for an upper middle income country since the early 2000s (Figure 1.1). Going forward, economic growth risks slowing if it continues to rely on the same drivers as in the past (IMF, 2022[3]).
Much of recent growth has been driven by consumption, with a declining share of investment and stagnating capital productivity (World Bank, 2021[4]). Private sector gross fixed capital formation as a share of GDP fell steadily from the global financial crisis until 2015 but has since picked up again, although at 16%, it is still far below its historic peaks of 20% reached in 2008 and in the early 1990s. Foreign direct investment (FDI) inflows3 peaked in 2012 as a share of GDP but have been climbing again in recent years, reaching a record of nominal gross FDI inflows of MUR 27.2 billion in 2022 and an estimated MUR 37 billion in 2023 – largely on the back of rising FDI in the real estate sector Over one half of the FDI in recent years has gone into the residential real estate sector, linked to the various incentive schemes in place in this sector4, including the provision of resident permits to foreigners purchasing a property.
Mauritius is facing declining competitiveness in its traditional export sectors, a lack of economic diversification and a need to focus on greater digitalisation of the economy, as well as adaptation and mitigation policies to tackle climate change vulnerabilities (IMF, 2022[5]). The government argues that it has made considerable improvements in recent years in many of these areas, but export competitiveness in manufacturing remains a problem.
A first OECD Investment Policy Review undertaken in 2013-14 noted structural challenges, such as weak growth of domestic private investment, a skill base insufficiently tailored to the needs of business, a loss in export competitiveness and stagnating productivity growth (OECD, 2014[2]). In retrospect, the performance described at the time can now be seen as part of a long-term secular trend which has continued to this day, albeit with some slight improvement in some areas in recent years.
Source: World Bank and Bank of Mauritius
Foreign investment, except in real estate, is not arriving to the extent relative to GDP seen in some other countries in Africa or in successful economies in Asia. FDI offers several avenues for structural transformation: in the best of circumstances, it can expand more productive sectors, increase competition within sectors, contribute to technology diffusion and knowledge spillovers, improve workers’ skills, and promote sustainable and inclusive outcomes. The domestic private sector has performed some upgrading in traditional sectors, as explained in subsequent chapters, but engages in very little research and development (R&D).
Mauritius has had some success at upgrading and diversification. The textile and apparel industry has increased manufacturing of yarn and fabrics and moved towards greater vertical integration within the industry. Similarly, a restructuring of the sugar sector moved the sector away from the manufacture and exports of raw sugar to that of refined and special sugar. In addition, new sectors have been developed such as the tourism industry, the ocean economy, financial services, healthcare, education and renewable energy.
While the understanding of the need for further structural transformation is widely shared in Mauritius, including within the government, and frequently echoed by international organisations (IMF, 2022[5]), the mechanisms through which structural transformation is achieved are not functioning smoothly. According to the World Bank, “structural impediments prevent capital from flowing to profitable investment opportunities that could lay foundation for future growth” (World Bank, 2021[4]). The first OECD Investment Policy Review noted the prevailing reluctance among the domestic business community to venture beyond the “established” sectors of sugar, tourism, financial services and real estate (OECD, 2014[2]).
One element behind this might be the oligopolistic nature of these industries which favours the status quo. According to the World Bank, over two-thirds of sectors, including ICT, financial services, transport, and tourism, can be considered to be highly concentrated (World Bank, 2021[4]). Other studies have also highlighted monopolistic tendencies in several sectors in the past (Overseas Development Institute, 2011[6]) (African Peer Review Mechanism, 2010[7]). Although small markets are naturally more likely to have fewer competitors, the presence of vertically integrated conglomerates in Mauritius and high levels of cross-directorships contribute to highly concentrated markets (World Bank, 2021[8]).
This market structure has implications for competition policy. The Competition Act 2007 has been in force since November 2009 and established the Competition Commission of Mauritius (CCM). In part thanks to the Act, competition has increased over the past decade, with fewer firms holding significant market power (World Bank, 2021[9]). But the World Bank also argued that the Commission should scale up its review of regulations and policies restricting entry or facilitating collusion, as well as greater efforts at advocacy (World Bank, 2021[4]). Some private sector associations lament the limited impact of either the Act or the CCM. The Commission does not fully cover network industries often dominated by SOEs, and while the Competition Act empowers the CCM to control merger situations, merger notification is not mandatory.
According to the government, the Competition Commission has nevertheless created a department overseeing market studies, policy and advocacy which will enhance focus on such efforts and increase such reviews and initiatives.
This Review does not provide an independent assessment of competition policy in Mauritius, although competition policy is one of the policy areas covered in the OECD Policy Framework for Investment which underpins this Review and plays an important role in a healthy investment climate. Given the concerns raised in existing studies, the government could consider further collaboration with the OECD on a Competition Policy Assessment or a competition review in a specific sector, such as banking. Cognisant of the shortcoming of the current Competition Act, the CCM has embarked on a law review exercise with the assistance of a consultant and will reportedly soon engage in stakeholder consultations.
Market entrants in new sectors could potentially be discouraged by the presence of state-owned enterprises (SOEs), although in the right conditions state ownership need not be an obstacle to private investment, if adequate competition policy, regulatory frameworks and corporate governance standards are in place,. Stakeholders consulted as part of the review called for increased powers for the Utilities Regulatory Authority, including greater independence. SOEs include many prominent businesses such as Maubank, Air Mauritius, Mauritius Telecom and the National Insurance Company, to name a few.
The government also sometimes holds equity shares in local companies through its State Investment Corporation (SIC), with total investments of over USD 150 million – principally equity investments – in logistics and shipping, production, distribution, financial services, ICT, construction, real estate, tourism and leisure, gaming, fund management, blue economy and energy. The SIC played a vital role in establishing the Stock Exchange of Mauritius. Its aim is to invest in industries or sectors that are of particular relevance to Mauritian development and those that demonstrate the capacity and potential to emerge as leaders in their respective line of business, including by participating in the strategic decision-making process. The SIC is involved in public-private ventures to promote FDI and encourage the transfer of technology locally to improve economic efficiency. It also supported small businesses in financial difficulties in the wake of Covid.
Discriminatory policies also potentially deter foreign investors. Mauritius is one of the members of the Southern Africa Development Community (SADC) with the lowest level of statutory barriers to investment but maintains a more restrictive environment for foreign investment on average than OECD members and Adherents to the Declaration on International Investment and Multinational Enterprises more broadly, as measured by the OECD FDI Regulatory Restrictiveness Index. Restrictions on FDI exist in key sectors of the economy such as tourism, agriculture and construction.
The ongoing inclusion of Mauritius in the OECD Indicators on Product Market Regulation (PMR) will shed light on the importance of obstacles related to FDI restrictions, the strength of competition enforcement and the role of SOEs. Product market regulations, if not properly designed and regularly evaluated, may unduly restrict entry by new businesses, and limit or distort competition among existing firms. The PMR indicators serve to benchmark laws and regulations against international best practices, identify areas for regulatory reforms and set priorities, and allow the evaluation of potential gains from competition-enhancing regulatory reforms.
Beyond the absence of more contestable markets, the government’s close relationship with, and support for, local business also perpetuates the status quo. Mauritius has at various times, including presently, offered generous incentives to businesses. To the extent that these incentives support existing activities or those in decline, they do little to assist in developing new sectors.
Foreign investors have played a critical role at key times in Mauritian economic development, including investors from Hong Kong, China in the take-off of the garments sector and Indian investors behind the ICT sector. They have contributed more broadly to productivity, innovation and skills development, as well as to the green transition. But FDI inflows have rarely represented an important share of GDP in Mauritius (excluding global businesses), and that share has been declining for much of the past decade (Figure 1.2). The upturn in 2022 was the result of an adjustment to reflect the findings of an annual survey of investors which showed higher investment activity than had been initially recorded.5 “Traditional” flows increased impressively between 2006 and 2012, coinciding with an important period of reform, but much of this investment has gone into real estate which was gradually opened in the 2000s. The development impact of this type of investment is likely to be less than into other sectors, although the government expects a boost to consumption and ultimately investment from this sector.
(annual FDI inflows, % of GDP)
Source: World Bank, Bank of Mauritius
Besides providing a source for financing, FDI in Mauritius contributes to productivity, innovation and skills development. According to the World Bank Enterprise Survey, foreign firms in Mauritius in sectors other than real estate are larger and more likely to export than domestic firms. Their labour productivity is 43% higher, and they experience faster productivity growth than domestic firms (Chapter 3). While 27.2% of foreign firms in Mauritius report spending on R&D, only 9.3% of domestic firms do so. Similarly, foreign firms are more likely to engage in product and process innovation, and 61.9% of foreign firms offer their workers training compared to only 19.1% of domestic firms – although this last finding has been contested by the government and local stakeholders. While foreign firms are more likely to have a female top manager than domestic firms, they do not outperform domestic firms on other gender dimensions. With the right policy mix in place, local firms could benefit from knowledge, technology and skills transfers from foreign firms.
FDI in Mauritius also supports the green transition and the uptake of clean technologies, as foreign firms outperform domestic peers in terms of environmental practices. For example, more than half of foreign companies report complying with environmental certifications or standards and taking measures for water management and waste minimisation, recycling or management compared to less than 30% of domestic firms. Similarly, more than 40% of foreign firms report monitoring energy consumption, water usage or CO2 emissions, adopting greener materials for production and taking measures for energy management compared to only 22-27% of domestic firms. With the right policy mix, foreign firms’ strong performance in the use of clean technologies and environmental protection measures could contribute to improving overall environmental performance and the wider deployment of clean technologies.
The government and stakeholders understand well the challenges the economy is facing in moving towards a new development trajectory. Whether or not Mauritius finds itself in a middle-income trap (see Chapter 3), it is clearly facing headwinds in efforts to accelerate further structural transformation and revive productivity. This Review looks at the role of investment, particularly foreign investment, can play as part of this process and the mix of policies, governance and institutions that can bring about this transformation.
Individual chapters discuss key elements of the investment climate: investment policy; investment promotion and facilitation; international investment incentives; and responsible business conduct. The Review also looks at trends and impact of FDI in the past and at policies to raise the productivity levels of domestic firms, including SMEs. The recommendations from these sections are summarised further below.
Cutting across all the policy areas addressed in this Review is the question of governance. The government has a justified reputation for effectiveness and efficiency, as confirmed in numerous international rankings, but there are many broader aspects to governance and scope for further improvements in certain areas.
Many institutions in Mauritius, notably the EDB, are widely recognised to be of high quality in their areas of respective responsibilities. A recent OECD report on regulatory governance in Mauritius speaks of a solid institutional framework as well as a culture of consensus, consultation and collaboration across ministries and agencies (OECD, 2022[10]). But good regulatory governance must extend beyond these elements. The way legislative proposals are introduced, and policies developed more generally, suffers from several shortcomings. The OECD report cites a lack of systematic ex ante scrutiny of legislative proposals, with rulemaking generally lacking either planning or anticipation (OECD, 2022[10]). Interviews with stakeholders confirmed some dissatisfaction with the quality of governance. Based on OECD recommendations (OECD, 2022[10]), the government introduced a provision for a regulatory impact analysis (RIA) in the budget, with an RIA Office under the Prime Minister’s Office. According to the government, the modalities for implementation of RIA are under discussion.6
In July 2022, Moody’s reviewed the sovereign rating of Mauritius from Baa2 Negative to Baa3 Stable, while Mauritius retained its investment grade status. Moody’s cited as a rationale the “weakened quality and effectiveness of institutions and ineffective policymaking, which is hampering the country’s economic resiliency and capacity to absorb future economic shocks”7. At the same time, Moody’s noted that Mauritius outperforms the median for Baa-rated sovereigns. The government has demonstrated an ability to adapt to a changing external environment while maintaining financial and economic stability.
Stakeholder engagement – an essential part of good policy design – is deficient in several ways. According to the OECD, consultations tend to occur on an ad hoc basis to ensure political backing rather than systematically to improve the proposal itself. Because they are not structured systematically, such consultations may involve some groups more than others, thereby running the risk of regulatory capture. It is also unclear how inputs are subsequently used by the government, as there is little feedback provided. The result is inadequate consideration of alternatives and frequent recourse to legislative amendments (OECD, 2022[10]). Interviews with the government suggest that public consultations are required but the requirements are not strictly defined, with each ministry having its own method. Nevertheless, consultation papers are sometimes issued to obtain inputs on proposed legislation.
The government has a longstanding tradition of dialogue with the private sector (OECD, 2014[2]), which is frequently consulted on new laws and regulations (WTO, 2022[11]). A Public-Private Joint Committee has been established under the chairmanship of the Minister of Finance, Economic Planning and Development. But much of this consultation is limited to major organisations, such as Business Mauritius, rather than public stakeholders more generally (US Department of State, 2023[12]). In consultations as part of this Review, it was suggested that civil society is mostly confined to service delivery in Mauritius, with fewer efforts at policy advocacy in dialogue with the government.
The almost exclusive interaction with the private sector might explain the observation that the government tends to provide support to industries already well-established or in decline – what the World Bank calls “business as usual” (World Bank, 2021[4]). One local business association mentioned that decisions within government are not taken broadly, out of fear of policy reversals that might affect investment. The World Bank calls for strengthening public-private dialogue, arguing that “public-private dialogue appears to be weakest in circumstances where a cross-government solution to complex issues is needed” (World Bank, 2021[4]).
Even business associations have complained about the speed with which new legislation is sometimes introduced and provided the examples of legislation which they felt was introduced without sufficient notice, such as a ban on plastics or the generalised social contribution (contribution sociale generalisée - CSG).8 The government contests this characterisation, arguing that the Government Programme of 2022-2024 called for a Plastic Free Mauritius within the nearest possible delays and that the ensuing regulations under the Environment Protection Act were introduced in phases. Furthermore, a moratorium was introduced and later extended for some types of plastic.
Stakeholders consulted as part of this Review spoke of a fragmented approach to governance, with no institutionalised framework for coordination. The first OECD Investment Policy Review of Mauritius called for stronger institutional rationalisation and coordination (OECD, 2014[2]). One successful example of such coordination is the Inter-Ministerial Committee set up in 2012 to reduce red tape and bureaucracy and improve the rankings of Mauritius under Doing Business.
On several occasions, the government has demonstrated flexibility in adapting to challenges and opportunities, yet the pragmatic reactivity and the piecemeal design of policies suggests that an overarching strategy is sometimes lacking. An early assessment as part of the Africa Peer Review Mechanism argued for a more long-term vision rather than a crisis-led approach. It spoke of the overwhelming perception that the private sector leads and the public sector follows in Mauritius (African Peer Review Mechanism, 2010[7]). The notion of the private sector as the driver of change was echoed in interviews conducted as part of this Review but is disputed by the government and at least one private sector stakeholder. To the extent it reflects reality, it can potentially distort policymaking, as the domestic private sector may not always be the best judge of what is required, especially concerning disruptions to the status quo.
The lack of strategic thinking can be seen in investment policymaking. Several studies have lamented the absence of a coherent and overarching national investment strategy (OECD, 2014[2]). This applies both to the need for a more coherent strategy to attract FDI (World Bank, 2021[4]) and to the lack of overarching legislation governing incentives and subsidies (WTO, 2022[11]). The EDB, for example, prioritises certain sectors for promotion but also offers a broad range of incentives to other sectors, some of which appear to be the outcome of ad hoc decisions influenced by sectoral lobbying, at times benefiting existing firms in well-established industries. Offering incentives on an ad hoc basis rather than based on an overarching strategy potentially impedes the most effective use of incentives, as well as regulatory predictability. Although the EDB has a strategic plan, it is only used for internal purposes and not publicly available.
No overarching long-term strategy for sustainable development exists, nor a sustainable development framework, based on a whole-of-government approach, and which considers the role of the private sector and involves business in managing sustainability and climate-related challenges.9 A Ministry of Planning was eventually subsumed in the MOFEPD, but the Planning Bureau in MOFEPD was also shut down. The creation of Maurice Stratégie in 2023 is likely to take on a role in this area, as the mandate of this new government entity includes research and analysis and visioning to shape policies for inclusive and sustainable economic development (Government of Mauritius, n.d.[13]). Maurice Stratégie has a mandate to come up with Vision 2050 and is exploring with international development partners to define a methodology and come up with a roadmap.10
Going beyond the lack of strategy is the question of sometimes poor implementation, an issue that is discussed in the individual policy chapters that follow.
An essential component of effective and efficient policies is careful and systematic monitoring and evaluation. The OECD Policy Framework for Investment asks the following questions in this regard: are policies reviewed periodically to see whether they have achieved their objectives; are alternatives considered to achieve the same objectives; are RIAs required for new or amended laws or to review the existing stock of legislation (OECD, 2015[14])?
The underperformance in monitoring and evaluation can be seen in investment promotion. EDB has a limited number of key performance indicators related to promotion relative to many other investment promotion agencies and lacks a system for tracking them. Similarly, a systematic monitoring and evaluation (M&E) strategy is absent, compounded by a lack of systematic data collection of many indicators that are crucial for meaningful reporting and evaluation. Investment incentives are monitored through tax expenditure reporting, but this is limited to an assessment of the cost of incentives, not whether they are effective or the best use of scarce resources.
The foundations of Mauritius’ success – strong institutions, macroeconomic stability, inclusive and stable politics – remain in place. But what is required at early stages of development is not necessarily what is required now. Mauritius’ impressive economic growth risks slowing without the adoption of policies supporting a new development path. New economic development strategies are needed, which do not rely on past drivers of growth, such as favourable demographics, structural transformation, and capital accumulation. Comprehensive approaches are needed in creating a more productive and innovative economy. Enhancing productivity is essential in raising per capita income. Beyond enhancing institutional capacities, priorities should include attracting and better leveraging FDI, further enhancing competition in the business environment, supporting small and medium-sized enterprises (SMEs), creating a strong foundation for innovation, and improving workers’ skills to help foster inclusive and stable growth.
A supportive business environment that minimises unnecessary barriers to firm establishment and growth should encourage investments that enhance productivity and innovation. While innovation is influenced by numerous factors, a crucial element is cultivating a business environment that facilitates the creation and dissemination of knowledge. Cross-sector collaboration plays a pivotal role in translating fundamental research into commercial opportunities (OECD, 2015[15]). To promote cooperation among the various stakeholders involved in innovation, well-coordinated efforts among institutions are needed.
Although FDI already contributes to capital accumulation and other aspects of economic development in Mauritius, inflows could be increased and better leveraged to introduce new knowledge and technologies, serving as a foundation for productivity growth and innovation. To achieve this, Mauritius must attract more investment in productive sectors with strong absorptive capacities and facilitate partnerships between foreign firms and local counterparts.
Implementing solutions to productivity growth will require strengthening policymaking and institutional capacities. Improving planning and policy coordination would help to ensure the development and implementation of comprehensive solutions to continuing productivity challenges. Broad-based growth requires inclusive policy dialogue that engages the private sector, including SMEs, and other affected groups. The effectiveness of SME assistance programmes could benefit from implementing a more rigorous system of consultation and of monitoring and evaluation, to assist in designing more effective programmes in future.
Connections between foreign-owned and domestic firms will need to be encouraged. At the same time, domestic capacities for innovation and technological upgrading will need to be raised to benefit from such linkages with foreign-owned firms. Specific funds dedicated to strategic sectors may be used to support innovation and upgrading, building on existing programmes (UNCTAD, 2021[16]). Policymakers also need to consider how intellectual property rights, rules on FDI, restrictions on the employment of foreigners with management and technical skills, and fiscal incentives, and other rules affect lead firms’ decisions on investment and technology transfer (World Bank & WTO, n.d.[17]).
Beyond this support, effective innovation systems rely on institutional capacities and relationships. While innovation is influenced by numerous factors, a crucial element is cultivating a business environment that facilitates the creation and dissemination of knowledge. Cross-sector collaboration plays a pivotal role in translating fundamental research into commercial opportunities (OECD, 2015[15]). To promote cooperation among the various stakeholders involved in innovation, well-coordinated efforts among institutions are needed. The significant delays between investment in R&D and the realisation of gains from innovation mean that national innovation plans are useful in setting common goals to direct policymaking (Cantwell and Vertova, 2004[18]). Such plans should be designed through inclusive processes and should incorporate measurable targets for tracking progress.
Addressing the productivity challenge will also require ongoing reforms of education and training, in close collaboration with the private sector, as well as expanded on-the-job training and other forms of continuous learning. A greater emphasis on digital skills as a complement to technological upgrading and growth may also be needed, including integrating ICT skills development into technical and vocational education and training (TVET) programmes and schools – including introducing foundational skills in primary education – to better prepare workers for a more innovative and digitalised economy.
Additional education and training will not do much support growth without efficient labour markets that connect workers with work to which they are well-suited. Currently, many workers in Mauritius are poorly matched to their jobs, representing wasted potential. Addressing the skill mismatch will require different approaches for different demographic groups, including the strengthening of continuous learning and of employment services. The government is aware of this job mismatch in the labour market and has introduced new institutions like Polytechnics Mauritius to reduce the gap between jobs and trained workers. Over 95% of their students get employed, according to the government. Labour market policies addressing the needs of women will also be needed to lessen inequalities by gender in Mauritius.
Mauritius has a modern legal framework for private sector activity, in keeping with its aim of becoming one of the world’s most business-friendly jurisdictions. It provides a high degree of legal protection for investors, and its Companies Act has played a key role in making Mauritius a hub for global businesses. In the last Doing Business rankings from the World Bank, it ranked 13th out of 190 jurisdictions. It has also made significant strides to improve its corporate governance framework, including the update of its Corporate Governance Code in 2016, following extensive stakeholder consultations. Concerning contract enforcement, Mauritius has developed strong judicial processes that meet international standards in terms of quality, integrity and efficiency, as part of efforts to become jurisdiction of choice for international arbitration. Assessments of its court system show it to be a leader in Africa and among upper middle-income countries. It has made great strides in enhancing the protection of intellectual property (IP) rights and in strengthening competition policy, not least through the creation of the Competition Commission of Mauritius in the Competition Act of 2007.
In terms of domestic businesses and those foreign investors interested in actual operations in Mauritius, however, the regulatory framework does not appear to be fulfilling its role. The weak performance in attracting traditional FDI outside of real estate (Chapter 2) and in improving productivity and enhancing innovation (Chapter 3) suggest that more could be done beyond the search for further administrative simplification and regulatory rationalisation. Although Mauritius is open to FDI in relative terms, it maintains some restrictions in key sectors of the economy which might have the effect of dampening competition in these vital sectors. Advancements in corporate governance could include more complete adherence of state-owned enterprises to the Corporate Governance Code and improved disclosure. Despite the overall strong protection of intellectual property rights, local firms have reportedly conducted research and development in other jurisdictions out of concerns for protecting their IP rights. As often seems to be the case in Mauritius, the landscape for IP rights is fragmented institutionally, although the Intellectual Property Council set up as part of the Industrial Property Act 2019 is intended to address this issue.
None of these shortcomings in the domestic business environment presents a critical roadblock, but taken together, they can help to explain why structural transformation, upgrading within sectors and R&D-led innovation are not occurring sufficiently at this stage of development of the Mauritian economy.
Reassess the rationale for restrictions in key sectors, as well as their potential impact on FDI inflows in these and in other sectors. Mauritius maintains a more restrictive environment for foreign investment on average than OECD members and Adherents to the Declaration on International Investment and MNEs. Many of the restrictions are in similar sectors to those found in other countries, such as broadcasting, air transport and property. While Mauritius does not appear to discriminate widely against foreign investors, restrictions in key sectors such as sugar and tourism, run counter to the aim of presenting Mauritius as an ideal place to do business and are not in line with the degree of openness in other small economies that position themselves in the same way as Mauritius, such as Singapore.
Consider distinguishing between compensable and non-compensable forms of indirect expropriation. This would align its domestic framework with commitments under international investment agreements, while preserving some regulatory leeway to implement meaningful public policy changes without being constrained by obligations to compensate affected investors. Investors’ property rights are protected through constitutional safeguards limiting the government’s powers to nationalise or expropriate property to exceptional circumstances and with adequate compensation. The relevant caselaw also appears to expand constitutional protections to indirect expropriation measures as well.
Assess the corporate governance framework against G20/OECD Corporate Governance Principles. Changes in the regulatory framework for company establishment and governance over the years have transformed Mauritius into one of the most business-friendly jurisdictions. The amended Companies Act 2001 provides for a modern legal framework for company establishment and the corporate governance framework for public interest entities was reviewed in 2016 to reflect international best practices. A process to align the 2016 Mauritian National Code of Corporate Governance with the revised G20/OECD Principles of Corporate Governance was launched by the National Committee on Corporate Governance in April 2024.
Raise awareness of IP rights over intangible assets. Mauritius strives to become a research, technology, and innovation economy, where businesses are equally empowered to innovate. This vision may only be achieved through a strong intellectual property (IP) rights regime. The framework for IP rights has evolved significantly since the OECD’s Investment Policy Review of 2014. The Industrial Property Act was adopted in 2019 and entered into force in 2022, consolidating the legal framework and strengthening IP rights protections. The legal regime covers patents, marks, copyrights, industrial designs, utility models, layout-designs of integrated circuits, plant varieties, trade names, and geographic indications. Despite significant improvements in the IP legislative framework, the reported lack of awareness of rights over intangible assets may hinder the development of an enabling IP and innovation ecosystem.
Consider further collaboration with the OECD on a review of competition law and policy or a competition assessment of a specific sector such as banking. Effective competition is essential for a dynamic business environment in which firms are willing to take risks, invest and innovate. Creating and maintaining a competitive market requires a well-structured competition law, together with an effective competition authority, and, more widely, economic policies that foster competition and avoid unnecessarily restricting it. While research suggests that the Competition Act improved the enforcement and penalty in matters of uncompetitive behaviour, finding a positive relationship between the law’s scope and competition intensity, the World Bank has recommended the Competition Commission to scale up its review of regulations and policies restricting entry or facilitating collusion, as well as greater efforts at advocacy.
Consider clarifying current treaties in force to reduce exposure to potential claims. Along with the conclusion of trade agreements, international investment agreements have been a key aspect of Mauritius’ development and growth strategy. A sizeable investment treaty network through bilateral or multilateral agreements grants relative and absolute standards of protection to qualifying investors. Most agreements in force follow older designs that feature vague framings of obligations and a lack of specificity in the meaning of key provisions. While the revision of the Mauritian model bilateral investment treaty (BIT) is a welcome step towards incorporating more specific language in future investment agreements, Mauritius should consider clarifying its current treaties in force, given its exposure to potential claims. Joint interpretations can be a simpler and faster device than renegotiation to address some aspects of treaty policy, provided that the existing treaty text allows for such an approach. The entry into force of the African Continental Free Trade Area Protocol on Investment is also expected to replace ten in-force BITs concluded by Mauritius with other African Union members.
Mauritius stands out as one of the most business-friendly nations in sub-Saharan Africa due to a combination of political stability, effective governance, and a commitment to fostering a conducive business environment. It has strategically positioned itself as a hub for channelling investment into Asia and Africa, earning a reputation as a reliable international services and global business platform. The transformation of the business environment is evident in the continuous implementation of successful reforms over the past decade, resulting in significant reductions in the time and cost associated with starting a business.
At the forefront of these efforts is the Economic Development Board (EDB), Mauritius’ apex investment promotion agency (IPA). The result of a merger of three public institutions in 2017, the EDB plays a pivotal role in promoting Mauritius as an investment and business hub, an export platform, and an international financial centre. Despite the involvement of various entities under the Ministry of Finance, Economic Planning and Development (MOFEPD) in investment-related activities, the EDB stands out as the primary investment agency in charge of co-ordinating efforts. The EDB manages a comprehensive set of 13 diverse mandates, a much stronger integration of responsibilities than in other IPAs globally.
Where most OECD IPAs tend either to be part of policymaking ministries or solely implementation agencies, the EDB assumes a dual role, carrying out an extensive array of image building, investment generation, investment facilitation and policy advocacy activities, albeit on typically an ad hoc basis. It responds to investors on a case-by-case basis, offering information on long-term collaboration with local suppliers and partners when requested, but the absence of systematic implementation, especially in the realm of matchmaking and linkage programmes, can be a concern. Aftercare services such as dispute resolution and business linkage programmes are available but not formalised, which can create perceived challenges for investors regarding the reliability and availability of these services. Unlike other IPAs that typically employ systematic tools to match foreign investors with domestic suppliers, the EDB engages in these activities informally, often geared towards export promotion services. More structured efforts by the agency to institutionalise services, improve co-ordination with relevant ministries, and leverage existing databases for effective matchmaking can not only address concerns about service reliability for investors but also contribute to the overall growth and development of domestic value chains.
Mauritius actively engages in formal public-private dialogue mechanisms, considering it a fundamental element of its conducive business environment. Initiatives such as the Public-Private Joint Committee highlights this commitment, serving as a platform for quarterly discussions between public and private stakeholders, facilitating the exchange of views and collaborative efforts to tackle challenges faced by investors. Expanding on the success of integrating stakeholder feedback through the Joint Committee, Maurice Stratégie, a research-based think tank incorporated under the EDB, was established to play a pivotal role in collecting data and feedback from the business community. To reinforce these initiatives and enable investors to voice their challenges effectively, the government is in the process of introducing the Business Obstacle Alert Mechanism (BOAM), allowing the private sector to report obstacles encountered in investment activities and seeking resolution from competent authorities. This will not only help informed decision-making but also establish an up-to-date database of challenges faced by economic operators.
While Mauritius has successfully established a friendly business environment, it lacks a clear strategy to drive efficient and targeted investment promotion. Although the EDB developed a strategic plan for 2021-24 and is currently developing a new one, this falls short of what is commonly considered as an investment strategy. An investment strategy should result from broad consultations across government to ensure consistency and coherence with broader government objectives. It should include a technical, comprehensive and operational action plan that not only outlines the objectives, but also puts forward a reform plan to foster those investment goals. Such a strategy should have an adequate system for monitoring and a subsequent design for implementation.
The absence of this broad and externally validated strategy, significantly impedes the overall effectiveness of its initiatives and can make prioritising activities, allocating resources efficiently, and measuring the impact of its efforts challenging. Implementing a promotional strategy with clear objectives provides a roadmap for aligning these activities with overarching goals, enhancing the agency's focus and impact. The absence of a robust system for tracking key performance indicators (KPIs) further compounds these challenges. The role of prioritisation and monitoring and evaluation (M&E) are fundamental in guiding and ensuring effective outcomes, providing agencies with essential tools to set objectives, define KPIs, and systematically assess performance for strategic decision-making. The EDB, in its M&E efforts, revises targets quarterly and publishes annual activity and financial reports for transparency, but it does not systematically collect data on various indicators to enhance meaningful reporting and evaluation, aligning with comprehensive practices observed in other IPAs. By introducing a comprehensive KPI tracking mechanism, it can systematically monitor and evaluate the outcomes of its investment promotion activities, helping to identify successful strategies while also facilitating informed decision-making and adaptive management.
Clear and well-defined output and outcome indicators are essential for IPAs to ensure they fulfil their strategic goals and support economic and sustainable development objectives. While output indicators focus on internal agency metrics like project numbers and client satisfaction, the EDB tracks only two, highlighting a potential gap in evaluating client interactions and diverging from common IPA practices. Crucial outcome indicators related to jobs, innovation, exports, wages, and sustainability are not formally tracked, affecting the agency's ability to effectively assess a) its impact and progress as an agency and b) the impact of the attracted investment on fulfilling national objectives. The EDB does track a handful of more specific indicators that are not surveyed including the generation of new projects, the number of high-net-worth individuals, retirees and youth (digital nomads). It also monitors the materialisation of projects through sub-committees of the EDB, which shows the agency’s ability to systematically monitor indicators in depth and on a long-term basis. Yet, there are other basic yet important output and outcome indicators such as market studies, jobs created and levels of innovation that are not sufficiently taken into account.
Moreover, the EDB's customer relationship management (CRM) system, though established for efficient communication and reporting, tracks only about 30% of the agency's activities, below the average for other agencies, revealing a gap in data collection and harmonisation. To address these data gaps and reflect an expanded mandate, internal restructuring, and a dynamic business landscape, the EDB is revamping its CRM system to enhance operational efficiency through standardised and streamlined business processes, which is expected to be fully operational by July 2024. Continuing to streamline CRM systems and mandating reporting on ongoing activities can enhance the EDB's evaluation capabilities. The establishment of an ESG Framework in Mauritius and collaborative initiatives with institutions like the African Development Bank reflect a commitment to sustainability and offer the opportunity to incorporate sustainability KPIs into the evaluation framework.
Mauritius has made substantial efforts to improve the investment climate over time, and these efforts have paid off in international rankings such as Doing Business. The government deserves praise for being able to address challenges in this area, but as other top performers such as Georgia and Rwanda have found, high rankings on the ease of doing business are not always sufficient by themselves to draw in investment, as evidenced by the mixed record of Mauritius in attracting FDI described in Chapter 2. Nor will improvements to the regulation of the business environment be enough to address the productivity and competitiveness challenges facing Mauritius and the need to diversify and upscale the economy.
Instead of a clearly articulated investment strategy embedded within a broader national sustainable development plan, Mauritius offers ad hoc approaches, responding to issues as they arise but lacking an overall vision. In other countries, this vision is sometimes embodied in an Investment Law, outlining the country’s expectations from investment, where foreign investment is not welcome or subject to conditions, and a list of which sectors are targeted for promotion, with reference to a national development plan. An Investment Law is not a necessary component of a good investment climate, but it can promote coherence within government and send a strong message to investors.
An alternative is a comprehensive Investment Strategy. The EDB does engage is some prioritisation but tends to support both new investors in new sectors as well as many domestic firms requesting assistance (Chapter 6.) This scattershot approach is not only expensive in terms of forgone revenue but also not likely to be sufficiently effective in attracting the types of investment likely to help overcome existing challenges.
The development success of Mauritius can partly be explained by the reactivity of the government and the EDB (and previously the BOI) in addressing problems as they arose – but often in an ad hoc and uncoordinated way, resulting in a plethora of initiatives by different ministries and agencies. Support for existing industries and the use of migrant labour, for example, designed to perpetuate the successes of earlier decades, may serve more to maintain the status quo than to chart a new development path.
In the area of public-private dialogue where Mauritius has some institutionalised mechanisms, the government receives feedback from the principal employers’ organisations such as Business Mauritius which helps to ensure that obstacles to doing business are addressed. But a close relationship with the existing private sector should not come at the expense of leadership from the government based on a broad agenda which creates opportunities for new businesses, including foreign-owned ones, and which considers broader issues of inclusiveness and sustainability.
Consider thoroughly examining and potentially restructuring the digital infrastructure for business registration, introducing clear and predetermined criteria to ensure greater predictability and efficiency in business procedures. While Mauritius has commendably simplified and digitalised its business environment, the EDB and other relevant agencies such as the Corporate Business Registration Department and the Financial Services Commission could further streamline the complex network of existing online platforms. Despite numerous reforms, clarity is needed on which platform serves specific investor types for which business procedures. A review of the digital infrastructure could introduce clear and predetermined criteria to ensure greater predictability and efficiency in business procedures, including defining customer categories and specifying which entities fall under the purview of different platforms to eliminate confusion and enhance user experience.
Mauritius should continue to participate actively in the discussions that follow the conclusion of the text Agreement on Investment Facilitation for Development negotiated at the WTO, including on implementation of the agreement.
Strengthen the EDB’s business matchmaking programme to foster linkages between foreign affiliates and domestic firms in the context of its aftercare services. These services could also include preparing suppliers’ databases, which, on the one hand, may reduce foreign firms’ transaction costs and, on the other hand, help to provide opportunities for local firms. Greater co-ordination with similar initiatives across other ministries and private institutions would avoid overlaps and reinforce the implementation and monitoring of linkage programmes.
Adopt a strategic approach to investment promotion within the EDB, including by systematically expanding monitoring to include a broader set of output and outcome indicators than are currently monitored to better ensure consistency between targets and desired outcomes. Typical output indicators, such as the number of assisted firms, query responses, and costs, are crucial for conducting meaningful impact evaluations. Beyond the two output indicators currently tracked, EDB should consider incorporating measures such as the number of investment projects, participating firms, and client satisfaction. By incorporating these fundamental data points, the EDB can gain insights into its role, assess service effectiveness, and make informed resource allocation decisions.
Integrate sustainability KPIs into EDB’s M&E system, encompassing metrics aligned with various SDGs and other outcome indicators. This will allow both a better evaluation of the economic impact of investment projects, and also their environmental, social, and governance aspects, allowing the EDB to comprehensively gauge the impact of its investment promotion strategies on sustainability outcomes. Recognising that such indicators often require project and firm-specific data, the EDB should establish a collaborative framework with investors that actively involves them in the data collection process to ensure accuracy and relevance in sustainability metrics.
Enhance data tracking and reporting to optimise EDB’s current CRM system, particularly in ongoing policy advocacy activities where extensive investor and business data are collected. The CRM system should be expanded to encompass a broader range of indicators, including socio-economic ones, for a more comprehensive assessment. CRM systems should be streamlined across EDB offices to promote information-sharing and harmonised monitoring, improving the accuracy of evaluation data and overall efficiency. Recognising the pivotal role M&E plays in shaping EDB strategies, developing a dedicated evaluation strategy should be prioritised to effectively assess the agency's impact and identify bottlenecks through relevant indicators mentioned above. The EDB may also consider establishing a dedicated evaluation team focusing on impact evaluations within the existing Strategic Planning Unit, to help guide prioritisation, resource allocation, and overall strategy.
Robust evidence as to the effectiveness of incentives in attracting investment is limited, yet many governments feel compelled to provide generous tax incentives due to global competition. When providing incentives, it is crucial to assess scope, policy goals and costs of incentives, as enhancing their design can help to reduce redundancies and support positive spillover effects (Celani, Dressler and Wermelinger, 2022[19]). Focusing on certain design mechanisms, as explored in Chapter 6, while limiting the generosity of some incentives can be an important step to foster a smart use of investment tax incentives.
Mauritius has a long history of tax incentives and low corporate taxation. In the 1970s, the government introduced the Export Processing Zone (EPZ) scheme to diversify the economy beyond sugar production, providing tax holidays, duty exemptions, and other incentives to companies engaged in manufacturing for export (Cling and Letilly, 2001[20]). In subsequent years, many additional incentive programmes followed until the government decided to simplify the tax system in 2006, by introducing a flat tax of 15% for corporate and personal income taxes, while in parallel repealing most investment incentives (OECD, 2014[2]). Since then, several incentive schemes have re-emerged to boost investment and economic growth that create job opportunities, likely also due to competition with other countries offering generous tax benefits (Republic of Mauritius, 2017[21]).
Mauritius offers investors a range of tax and non-tax incentives. Among the main incentives for investors are corporate income tax (CIT) incentives that are introduced by annual Finance Acts and consolidated into the main tax law (the Income Tax Act 1995). They take the form of full and partial CIT exemptions, reduced CIT rates, a tax credit and tax allowances. Although not covered by this analysis, Mauritius also offers many additional benefits, including other types of tax benefits (e.g. exemptions from value added tax, customs and import duties), financial and in-kind incentives (e.g. refunds of selected business expenses, provision of building facilities or land) and regulatory benefits (e.g. regulatory sandbox scheme).
Mauritius has taken steps to enhance transparency of investment incentives and follows many good practices in this respect: tax-incentive granting legislation is consolidated in the main tax law (the Income Tax Act 1995), the scope of CIT incentives is clearly determined in the law, and an up-to-date investor guide maintained on a government homepage provides clear information on available benefits. Consultations with the private sector suggest that some of the numerous incentives seem to be granted on an ad hoc basis rather than based on an overarching strategy, potentially impeding the most effective use of incentives as well as regulatory predictability.
CIT incentives are designed to support the growth of domestic and foreign private sector investment as well as social and economic development objectives, including job creation, skills development, social inclusion and supporting a green transition. CIT incentives support these goals mostly by targeting certain qualifying expenditure (e.g. costs for solar panels, training or wages) and outcome conditions (e.g. requiring a minimum number of jobs created). While setting adequate outcome conditions can be challenging, requirements such as employment creation can promote development objectives, but they require careful monitoring to ensure that the outcome has been met. This necessitates resources, administrative capacity and close coordination with other government agencies.
Mauritius could consider re-evaluating the design of its CIT incentives to streamline income-based incentives in favour of expenditure-based ones. Most of its CIT incentives use income-based tax instruments (CIT exemptions or reduced CIT rates) that often apply for multiple years and lower effective tax rates significantly (by up to 55% for some industries). Expenditure-based incentives (tax allowances or credits) could enable better targeting of incentives towards reducing specific business costs, thereby encouraging spending that might not occur without the incentive (IMF, OECD, UN, World Bank, 2015[22]). Furthermore, expenditure-based incentives are expected to be less affected by the new international tax agreement (OECD, 2022[23]). Under these rules, jurisdictions that tax large multinational enterprises’ (MNEs) income below 15% may lose potential tax revenues as other jurisdictions are allowed to impose top-up taxes. These new rules are likely to have significant implications for Mauritius’ tax incentives.
An effective use of investment incentives necessitates monitoring and regularly evaluating the costs and benefits of incentives, including vis-à-vis public revenue mobilisation, investment attraction, and the respective policy objective. Mauritius monitors the costs of incentives and provides annual tax expenditure reporting but could track further datapoints as to the beneficiaries of incentives and investment outcomes (e.g. new jobs created, minimum share of exports or value addition). Such data could provide a solid foundation for policy evaluations, crucial for assessing if incentives are best designed to support their intended policy goals. Mauritius does not yet evaluate its incentive measures in this respect but would benefit from doing so to understand the effectiveness of measures in place.
The tax system is only one out of many aspects pivotal for investment decisions and often not the most important one. Many investors consider other elements of the investment climate as more important when deciding on a project location (OECD, 2015[14]). Many of these elements are already well developed in Mauritius (e.g. political stability, quick administrative procedures), and the government implemented measures to advance certain aspects (e.g. supporting education by offering free education until graduation) (Ministry of Finance, Economic Planning and Development, 2023[24]). Mauritius could consider further addressing factors hampering its investment climate with measures, other than tax incentives, that may be more suitable to do so.
Design investment incentives based on an overarching strategy. Mauritius offers a broad range of investment incentives, some of which appear to be the outcome of ad hoc decisions influenced by sectoral lobbying, at times benefiting existing firms in well-established industries. Following an overarching strategy when designing incentives could enhance regulatory predictability and a more effective use of investment incentives.
Re-evaluate the design of CIT incentives to streamline income-based incentives in favour of expenditure-based ones. Expenditure-based instruments (tax allowances and credits) target specific costs and are more likely to create additional investment. They will also be less affected by the Global Minimum Tax and could be designed as a more cost-effective alternative to current generous income-based CIT exemptions and reduced rates. Incentives should complement, not replace, wider efforts to improve the investment climate. While tax and non-tax incentives can help promote certain investor behaviour, other policies might be more appropriate.
Implement monitoring practices and a regular evaluation mechanism to assess if incentives support their intended policy objectives and at what cost. Mauritius already monitors the cost of incentives through annual tax expenditure reports but could consider collecting further data on beneficiaries and project outcomes as a basis for evaluations. Implementing a periodical evaluation process would be crucial to identify the most effective, as well as redundant, incentives and could help to inform policy decisions.
Phase out redundant tax incentives to create fiscal space for needed reforms. The government may want to consider streamlining the wide offering of investment tax incentives, phasing out less efficient ones and adjusting excessive benefits where possible, enabling greater fiscal space for measures strengthening the investment climate and needed reforms.
The concept of RBC is relatively new in Mauritius. Although there is a nascent recognition of the relevance of responsible business practices and the need to address RBC-related issues, in general, the private sector and civil society appear to have limited knowledge of RBC and risk-based due diligence. That said, local businesses and CSOs are familiar with the related concept of CSR and have developed multiple initiatives in response to measures taken by the government to promote CSR. The CSR Tax and the inclusion of CSR in the Code of Corporate Governance have been key drivers for the creation of CSR foundations or programmes by businesses and the implementation by CSOs of CSR projects aligned with priority areas identified by the government, as well as for the related reporting.
Against this backdrop, Mauritius ample opportunity to move beyond CSR, and a philanthropical approach, towards RBC, and an approach aimed at enhancing businesses’ contribution to sustainable development and the management of business-related adverse impacts on people, the planet and society. This can contribute to support Mauritius development strategy, as a remote small island heavily reliant on trade and investment for growth. Companies, investors, and customers worldwide are increasingly paying attention to RBC matters and basing their business, investment and consumption decisions on related considerations. In addition, a growing number of countries, including some of Mauritius’ main trade and investment partners, are elaborating and enacting legislation that require businesses to observe RBC principles and standards in their operations and supply chains.
Building on its relevant experience in promoting CSR, the government should take further action to drive, support and promote responsible business practices aligned with OECD RBC principles and standards. This will be facilitated by the fact that, in general, Mauritius has a developed legal, regulatory, and policy framework in the areas covered by the OECD Guidelines for Multinational Enterprises on RBC. It has adhered to the main international legal instruments in these fields and developed relevant laws, regulations, and policies. Reports of RBC issues seem rather limited, but existing ones deserve attention as these issues can trigger adverse impacts on people and the environment and undermine the attractiveness of the island as a place to trade with, or source from, and as an investment destination. This is notably the case of the risks of adverse impacts on the rights of low-skilled migrant workers that have been reported by trade unions and CSOs in recent years. The adverse environmental impacts associated with the development of the key sectors of the economy can also have a similar effect, particularly when coupled with the absence of a long-term sustainable development strategy that underlines the responsibility of the private sector for these impacts and seeks to involve businesses in managing sustainability challenges.
Beyond ensuring that its legal and regulatory framework in the areas covered by the Guidelines continues to be appropriate and continuously implemented and effectively enforced, Mauritius could also resort to other policy areas to promote RBC as, for the time being, this approach is rather limited and could be strengthened. For instance, its trade and investment policies and agreements only occasionally include considerations of relevance for RBC. Likewise, despite efforts in this direction, its public procurement framework does not yet foresee the possibility to integrate such considerations in public procurement processes. Mauritian SOEs have adopted some policies and practices relevant for RBC, but they do not seem to have developed due diligence processes to address adverse impacts. Making progress towards creating an enabling environment for RBC will therefore imply taking further measures to encourage RBC across trade and investment policies, and to exemplify RBC in the government’s role as economic actor and in its commercial activities, as procurer of goods, services and works, and owner of enterprises.
Establishing the National Contact Point (NCP) under the Guidelines will also help to create an enabling environment for RBC in Mauritius. The government set out and consulted on the plans for establishing the NCP with local stakeholders, as well as with BIAC, TUAC and OECD Watch, and the OECD Secretariat. To this end, the National Contact Point was established under S.27J of the Economic Development Board Act, supplemented by the Economic Development Board (National Contact Point) Regulations 2023 specifying the details of the NCP’s institutional arrangements and functions. The NCP will consist of an NCP Secretariat, an Expert Panel for case-handling and an Advisory Panel for strategic and oversight tasks. The Advisory Panel will serve as a forum for stakeholder engagement for the NCP’s work and for consultation with other parts of government. The Expert Panel will be composed of experts with legal and substantive knowledge in an ad hoc manner for each case. Consistency and predictability will have to be ensured through specific procedures to be drafted in the future. Following regulatory arrangements to establish the NCP in November 2023, the NCP Secretariat will be tasked with developing case-handling procedures and a promotional plan.
Enhance awareness and knowledge of RBC among stakeholders and provide guidance and support to businesses operating in or from Mauritius to implement OECD RBC principles and standards, by:
Raising awareness of the specificities of the concept of RBC and seeking support of business associations and large companies in Mauritius that have already developed initiatives relevant for RBC to progressively engage all stakeholders in promoting RBC. This could entail organising awareness-raising events (conferences, webinars), developing and delivering training programmes, elaborating promotional material and creating networks to share good practices.
Communicating expectations regarding RBC to local businesses and those operating in or from Mauritius. This could include referring to RBC and the recommendations of the Guidelines in the National Code of Corporate Governance.
Promoting the use of the OECD Due Diligence Guidance and the Sector-specific Due Diligence Guidance with business associations and individual businesses. This is particularly important for the guidance relevant for Mauritius. It includes the OECD Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector and the three guides specific to the financial sector on RBC for institutional investors, Due Diligence for Corporate Lending and Securities Underwriting, and RBC Due Diligence for Project and Asset Finance Transactions. The future NCP, as well as the EDB and other government entities, such as the National Committee on Corporate Governance or the ICAC, could play a key role in that regard.
Providing reliable information, tools, and incentives to encourage the observance of RBC principles and standards by businesses operating in or from Mauritius. This could entail mainstreaming RBC into existing information dissemination mechanisms, tools, and incentives or designing new ones specifically for RBC, in cooperation with the future NCP. The EDB and the NCP could, for instance, create an information platform on RBC and the related tools and incentives.
Maintain an appropriate legal and regulatory framework in areas covered by the Guidelines that is continuously implemented and effectively enforced, with a focus on current concerns regarding specific labour, environmental and corruption issues. This could include:
Ensuring, in relation to low-skilled migrant workers in Mauritius, that the labour legal and regulatory framework, or relevant policies and practices, encourage businesses operating in or from Mauritius to contribute to eliminating all forms of forced or compulsory labour, provide a safe and healthy working environment, and maintain the highest standards of safety and health at work, and that these frameworks, policies and practices are implemented and enforced.
Within the environmental legal and regulatory framework and relevant policies and practices, encouraging enterprises operating in or from Mauritius to conduct their activities in a manner that protects the environment, avoids and addresses adverse environmental impacts and contributes to the wider goal of sustainable development. This means, in particular, that enterprises should establish and maintain systems of environmental management that embed environmental impact assessments in broader due diligence and contribute to developing environmentally responsible and economically efficient public policy.
Encouraging, through the anti-corruption legal and regulatory framework or relevant policies, businesses operating in or from Mauritius to develop and adopt adequate internal controls, ethics and compliance programmes or measures for preventing, detecting, and addressing corruption, elaborated based on a risk assessment.
Promote coherence across government entities in Mauritius to enhance alignment between policies and practices relevant to RBC. Taking advantage of the fact that Mauritius is a small country with a relatively well-integrated public administration, the government could take measures to enhance coordination and cooperation between ministries and government entities that have competences in the areas covered by the Guidelines and in other relevant economic areas. This could be done through different types of coordination mechanisms, such as intergovernmental committees or overarching national plans or strategies on RBC and/or related topics, with a view to adopting a whole-of-government approach and progressively mainstreaming RBC in relevant policy areas and initiatives. As recognised by the Guidelines and encouraged by the OECD Recommendation on the Role of Government in Promoting RBC, the NCP may support these efforts by the government to develop, implement, and foster the coherence of policies aimed at promoting RBC. Maurice Stratégie could also play a role by taking RBC into consideration in the context of its mission to shape policies for inclusive and sustainable economic development.
Promote RBC through trade and investment policies and consider integrating considerations of relevance to RBC in bilateral and multilateral agreements where appropriate. The different support services and incentives provided by the EDB could be used as a conduit to promote responsible business practices among local exporters and foreign investors. In addition, the inclusion of sustainability provisions and RBC clauses in the regional trade and investment agreements recently concluded by Mauritius constitutes a useful reference upon which the government could draw should it seek to further integrate such provisions and clauses in its network of trade and investment agreements. The revision of the Investment Promotion and Protection Agreement model represents a good opportunity in this regard.
Use public procurement as a strategic tool for promoting RBC in Mauritius and include RBC in public procurement policies. The government could seize the opportunity provided by the upcoming development of a sustainable public procurement framework to start integrating considerations of relevance for RBC, beyond corruption, in its public procurement policies and in the different phases of the procurement cycle.
Establish and publicly disclose clear expectations for SOEs to observe RBC principles and standards, together with mechanisms for their implementation. The government could build on the fact that most SOEs are familiar with the concept of CSR, have started disclosing non-financial information, and have adopted some policies and instruments of relevance for RBC, to incentivise them to observe RBC principles and standards based on a shared and structured RBC approach including due diligence processes aligned with the OECD RBC instruments, particularly OECD Due Diligence Guidance.
Establish an effectively functioning NCP to further the effectiveness of the OECD Guidelines. Following the adoption of the NCP Regulations, the government should see to the timely development of any other procedures guiding the operations of the NCP, including case-handling procedures. It should ensure that the NCP is equipped with sufficient resources to fulfil its mandates successfully and is able to support efforts towards RBC policy coherence across government. As the NCP takes up its work, it should pay particular attention to the meaningful engagement of representatives of all types of stakeholders. The government should consider fine-tuning the NCP regulations and develop procedural guidance documents that ensure that:
the NCP Advisory Panel’s upcoming operating rules ensure that appointment of stakeholders takes place following meaningful consultation with concerned groups, and that all stakeholder groups have equitable weight in the Advisory Panel’s decisions, to ensure accessibility, accountability, impartiality and equitability, as well as compatibility with the Guidelines.
all regulated aspects of the NCP’s institutional arrangements are clear to achieve transparency and, consequently, predictability with regards to the NCP’s operations.
Within six months of adopting the regulations to establish the NCP, develop and start implementing a promotional plan to fulfil the NCP’s mandate to promote RBC, the Guidelines and related OECD legal instruments. Promotional efforts should be targeted to different audiences and include all stakeholder groups. A promotional plan should include the following:
Preparation of a website providing easily accessible information about the NCP, RBC and related instruments;
Events introducing the NCP and the Guidelines to all main national stakeholder groups;
Basic promotional materials disseminating information about the NCP and the Guidelines.
Establish the NCP’s case-handling function within six months of adoption of the regulation to establish the NCP, paying particular attention to the perception of impartiality of the NCP’s Expert Panel and the predictability of the NCP’s case-handling, for example by:
Fine-tuning the role of the Advisory Panel in developing the case-handling procedures and ensuring that all types of stakeholders, including civil society, trade unions and business associations, are meaningfully involved in the development of these case-handling procedures;
Clarifying and strengthening the support provided by the NCP Secretariat to the Expert Panel to achieve the greatest possible consistency among cases;
Adopting strong case-handling procedures in a timely fashion and disseminating them for wide access by potentially interested parties.
References
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[21] Republic of Mauritius (2017), “Budget Speech 2017-2018: Rising to the challenge of our ambitions”, https://edbmauritius.org/wp-content/uploads/2022/10/2017_18budgetspeech.pdf.
[16] UNCTAD (2021), Technology and Innovation Report 2021: Catching technological waves -- Innovation with equity, https://unctad.org/system/files/official-document/tir2020_en.pdf.
[12] US Department of State (2023), Investment Climate Statement: Mauritius.
[1] World Bank (2022), Mauritius: Systematic Country Diagnostic update, https://documents1.worldbank.org/curated/en/866371646406360210/pdf/Mauritius-Systematic-Country-Diagnostic-Update.pdf.
[8] World Bank (2021), Mauritius - Through the Eye of a Perfect Storm : Coming Back Stronger from the COVID Crisis - A World Bank Group Country Economic Memorandum, Washington D.C.: World Bank Group, http://documents.worldbank.org/curated/en/586691621628367648/Mauritius-Through-the-Eye-of-a-Perfect-Storm-Coming-Back-Stronger-from-the-COVID-Crisis-A-World-Bank-Group-Country-Economic-Memorandum.
[4] World Bank (2021), Mauritius Country Economic Memorandum: Through the Eye of a Perfect Storm, https://documents1.worldbank.org/curated/en/586691621628367648/pdf/Mauritius-Through-the-Eye-of-a-Perfect-Storm-Coming-Back-Stronger-from-the-COVID-Crisis-A-World-Bank-Group-Country-Economic-Memorandum.pdf.
[9] World Bank (2021), Mauritius Productivity Study, https://documents1.worldbank.org/curated/en/505891629463452213/pdf/MU-P173238-Productivity-Study-Report-Final-Draft-7-01-2021.pdf.
[17] World Bank & WTO (n.d.), Global Value Chain Development Report 2019: Technological innovation, supply chain trade, and workers in a globalized world, http://documents.worldbank.org/curated/en/384161555079173489/Global-Value-Chain-Development-Report-2019-Technological-Innovation-Supply-Chain-Trade-and-Workers-in-a-Globalized-World.
[11] WTO (2022), Trade Policy Review, Mauritius: Report by the Secretariat, https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/TPR/S417R1.pdf&Open=True.
← 1. Mauritius is first in Africa in the Fraser Institute’s Economic Freedom of the World Index, the Wall Street Journal and Heritage Foundation’s Economic Freedom Index, the Forbes Best Country for Business Index and the Bertelsmann Transformation Index.
← 2. Over a longer horizon, Mauritius overall ranking in Doing Business progressed from 49th place out of 112 countries in 2007 to 20th out of 189 by 2014 (OECD, 2014[2]).
← 3. Gross FDI inflows, excluding global business companies.
← 4. Integrated Resort Scheme, Invest Hotel Scheme, Property Development Scheme, Smart City Scheme.
← 5. The Bank of Mauritius conducts an annual Foreign Assets and Liabilities Survey which collects data on equity and intra-company loans, which cannot be collected from banking records and other sources. It also provides data on reinvested earnings. The Survey undertaken in 2023 led to a substantial upward revision of the estimate for net FDI inflows in 2022. Several sectors saw increased gross inflows in 2022 as a result of the adjustment, notably in manufacturing and in tourism-related sectors. By country of origin, FDI inflows from France doubled, making it responsible for one third of total FDI in 2022.
← 6. The enforcement of the RIA framework is expected to be managed administratively by way or circulars, notes, guidelines and policy directives to all ministries and relevant public sector agencies involved in business-related rulemaking. A pilot RIA was carried out as part of the OECD review on the applicability of Fire Certification. Impact assessments of other measures have not been made publicly available.
← 7. Information supplied by APRM: https://www.aprm-au.org/publications/aprm-statement-on-the-rating-downgrade-of-mauritius-by-moodys/
← 8. The CSG was introduced in September 2020, replacing the former National Pension Fund and intended to protect the income of retired workers faced with rising dependency ratios. Unlike the previous NPF, the CSG had no upper limit, resulting in a potentially higher wage bill for employers.
← 9. The absence of a sustainable development framework in Mauritius is expressly recognised in the Environment Master Plan for 2020-2030 which calls for the EPA to be amended to include provisions supporting sustainable development and for developing a sustainable development framework. See Government of Mauritius (2022), Environment Master Plan 2020-2030 for the Republic of Mauritius, Section 4.1 “Sustainable development”, https://environment.govmu.org/DocumentsList/Masterplan%20for%20the%20Republic%20of%20Mauritius.pdf.
← 10. The crafting process is expected to be lengthy as it would involve extensive consultations and discussions among all stakeholders in Mauritius, involving public institutions, the private sector, NGOs, civil society and the public . Maurice Stratégie is seeking the assistance of United Nations Resident Coordinator Office to organise a capacity building based on “future and systems thinking” which will support the conduct of a strategic foresight process contributing to the Vision 2050. A draft Roadmap has been sent to the Strategic Advisory Council of Maurice Stratégie and is current in review.