Port Louis: Mr Speaker, Sir, there are ominous signs that trouble is in store. There is urgency. Action must be taken now. But, we must be rational and not merely reactive. Mauritius has always been a nation of increasing prosperity. This should never change. During the next three years we will set growth on a more sturdy course. We will also set the base for a high-investment, high-productivity, high-efficiency, high-technology and high-wage economy. We will do so because this is the surest way to join the league of high-income countries.
Tax Policy to Boost Investment and Growth
51. Mr Speaker, Sir, I will start with major changes in tax policies.
52. Some taxes are discouraging investment.
53. We have given some deep thought to the impact of taxes on dividends and interest on our economy. We have weighed their pros and cons. And we have decided on what is best for our country.
54. Mr Speaker, Sir, I am pleased to announce that I am completely abolishing the solidarity tax on dividends and interest, effective 1st January 2012.
55. Tax on dividends is a double tax. No one should be made to pay tax twice.
56. To tax interest income is to tax savings. And we do not want to penalise savings.
57. As regards capital gains tax, we all know that it will be a difficult year for the treasury. But our system of taxation on property is erratic and sometimes excessive. Here also we have weighed the pros and cons. And I have put the long-term interest of the country first.
58. I am pleased to announce that the capital gains tax on immovable property is being completely abolished and it will apply with immediate effect.
59. And I am not stopping here.
60. I am taking further the endeavour to reform our tax policy, to make it more just.
61. We have analysed very carefully the ‘raison d’être’ of the municipal tenant’s tax which is payable on commercial properties. It is an unfair tax. It is not paid by landlords but by tenants – the very people who, by definition, can least afford to pay. There is also a wide disparity in the tax charged between each municipality. In some cases the tax can go up to 20 percent of the rent which can be a very substantial amount. There is uneven collection and wide tax evasion.
62. I am therefore pleased to announce the complete abolition of the municipal tenant’s tax, effective 1st January 2012.
63. Government will compensate the municipalities for revenue foregone. This will represent some 175 million rupees per year.
64. We are also removing land transfer tax on the sale of immovable property by financial institutions relating to debt recovery.
65. Furthermore, Mr Speaker, Sir, in view of the difficult financial situation of some of our hotels, guest houses and tourist residences, they will, for 2012, pay the environment protection fee only if they are profitable.
66. And the tax holiday of Freeport operators which should end in 2013 will now be carried forward indefinitely.
Enhancing Promotion Capacity
67. Mr Speaker, Sir, I talked earlier about the importance of demand to investment decisions. To boost investment we must take our products to where demand is. We will do so very aggressively on our traditional markets in Europe and the USA.
68. And we will run more focused and more carefully thought-out promotion campaigns in India, China, and Africa, where the potential is unfolding at a rapid pace.
69. We will seek to maximise the synergies among public as well as private promotion agencies.
70. Since I took office, there has been formal coordination between promotion agencies in the public and private sectors. This will continue. They will collectively seek new markets for our sugar, fruits and vegetables, textiles, seafood, financial services, tourism, ICT/BPO, education, health care and other exports.
71. We are empowering BOI, now with a young professional at its head, to actively promote Mauritius to further develop the financial sector, ICT/BPO and the education and medical hubs.
72. Enterprise Mauritius, also with an experienced new CEO, will take care of promotion for manufactured goods and agricultural products.
73. We will organise an annual Mauritius Fair with the participation of foreign buyers and local enterprises.
74. Besides promotion abroad, the BOI will also facilitate inward investment. We want the BOI to offer a unique experience for investors.
75. The incremental promotional budgets of these organisations will be put in a National Resilience Fund.
76. Never before, Mr Speaker, Sir, has so much resources been made available to our promotion agencies to put Mauritius on the global map.
Internationalising Our Economy
77. Mr Speaker, Sir, as we promote Mauritius abroad as a quality destination for foreign direct investment, we must also internationalise our economy.
78. Government has decided to appoint two roving ambassadors for Africa and the Indian Ocean.
79. They will assist in widening the network of Double Taxation Avoidance Agreements and Investment Promotion and Protection Agreements with African states. We are planning to start with Algeria, Angola, Burkina Faso, Tanzania, and South Sudan.
80. But we won’t get off the ground if we do not have better connectivity to the region. This is crucial. Our modern airport must become the new hub for the region, offering interconnection between Africa and the rest of the World.
81. What is certain is that our country requires frequent flights to Africa. This can only be viable under a hub concept, where passengers come to Mauritius on transit to other destinations.
Investment Facilitation: Regaining the Momentum
82. Mr Speaker, Sir, business facilitation is another core determinant in the investment equation.
83. The performance of Mauritius in many international rankings is a source of pride and joy for the entire nation. We are ranked:
* First out of 53 countries in Africa on the Mo Ibrahim Index of African Governance.
* First in Africa on the Fraser Institute’s Economic Freedom Index.
* And again first in Africa, in the World Bank's Ease of Doing Business report, for the 4th year running, well ahead of 2nd place South Africa.
84. However, these indicators should not be ground for complacency. Instead, they should be a source of inspiration to do even better.
85. To carry through our ambition to always be amongst the best, we have recently set up a Joint Public-Private Sector Business Facilitation Task Force. Its focus in 2012 will be to report on policies and actions to:
• remove remaining bottlenecks to investment and exports;
• simplify regulations; and
• save time for applicants.
86. Indeed, Mr Speaker, Sir, time is money says the old adage.
87. This is why Government has also invested in a new system to cut the time for registering property from 15 days to 2 days. The new system will be operational next week.
88. Recently, my colleagues have started to abolish numerous import permits except where they are absolutely necessary.
89. We are also amending the law to enable Permanent Residence holders to purchase an apartment. This should attract more foreign direct investment (FDI) and boost the construction industry while making more economic use of residential land.
Opening more Economic Space at Home
90. Mr Speaker, Sir, as we seek more economic space abroad, we will also broaden the scope for investment at home.
91. Government will do so by disinvesting from some of its commercial and industrial assets. Our aim is three-fold: to make better use of Government assets to generate wealth and employment, raise revenue to invest in new strategic sectors, and offer better facilities to the public.
92. Thus Government will disinvest from -
• The casinos,
• Domaine Les Pailles Properties,
• Port-Louis Waterfront Retail Outlets,
• The Belle Mare Tourist Village,
• Lakepoint Complex, and
• Offer a management contract for the Citadel.
93. Mr Speaker, Sir, in recent years we have made significant efforts to reform our institutions. The payoff has matched up to our efforts. Our international ranking on governance bears this out.
94. However, the world keeps changing and we must adapt.
95. And today, I am pleased to announce a series of institutional reforms that will further consolidate our progress on governance, embed efficiency, provide greater satisfaction to employees, and improve service delivery.
96. Experts from Singapore are currently reviewing the functioning of the parastatals in the water and waste water sectors to improve delivery of services. It is expected that substantial reforms and investment will follow in the water sector.
97. Assistance from Singapore will also be used to review the organisation and functioning of the Mauritius Tourism Promotion Authority.
98. We have begun the search for a specialised Private Financial Institution to undertake the transformation of the DBM into a Micro, Small and Medium Enterprise Bank.
99. The Ministry of Fisheries will explore how to involve a strategic partner in the operations of the Albion Fisheries Research Centre.
100. Air Mauritius is conducting a strategic review to determine how best to position itself as our country opens air access and seeks to be a hub between Africa and the rest of the world. It is exploring the possibility to expand its network of partnerships with other airlines.
101. The IFC is assisting Government in identifying a Strategic Partner to develop Cargo Handling operations and transform Mauritius into a trans-shipment hub.
102. The new airport terminal is being built and operated under a management contract with Aéroports de Paris.
103. The Ministry of Agriculture is merging cess-financed institutions to save planters 287 million rupees a year.
104. In addition, the Office of Public Sector Governance has been set up under the Prime Minister’s Office. It will, in priority, assist public enterprises to improve governance, efficiency, services and cut out waste.
105. We are amending the Public Procurement Act to secure efficiency gains, including obtaining expertise under Government to Government agreements.
106. In the same vein, Government will consider bulk purchases to reduce the cost of its procurement.
107. To improve access to public services, wherever possible, Government will open its offices on Saturdays.
108. Government is really all about people. To ensure that the civil service improves service delivery, we must focus on every public officer. We must unleash their full potential and constantly upgrade their knowledge, improve their skills and update their mindset.
109. A Civil Service College will begin operations by outsourcing courses on motivation and leadership including problem-solving skills and planning.
110. The reforms I have just announced are essential if we are to raise our people’s income levels and quality of life and avoid the middle income trap which has ensnared many countries similar to Mauritius.