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Mauritius Government Role in Economic Development

During the 1960s when Mauritius gained its political independence, an attempt at diversifying the economy was made. Such economic diversification was inevitable for the country if it were not to result in social and political unrest and economic bankruptcy.
The Mauritius government realized that, there was the paucity of natural resources in the sense that, unlike other African countries, there were no mineral or oil deposits. There was the exiguity of the domestic market which usually acted as a brake for the industrialization process. There were the large geographical distances that separate Mauritius from the sources of raw materials abroad and from the possible foreign markets. Last but not least, apart from the sugar industry, the rest of the Mauritian economy suffered from a shortage of management and technical skills and capital for investment purposes.
So the government came to the conclusion that, Mauritius had to diversify from its over-dependence on sugar, and to industrialize in order to be able to cope with the pressing population and unemployment problems. Mauritius had to make a choice between Import Substituting Industrialization (ISI) strategy and Export Oriented Industrialization (EOI) strategy. The Government of Mauritius, adopted an Import-Substituting Industrialization (ISI) strategy.
Thus, in order to encourage manufacturing activities in the economy for import-replacement purposes, legislation was passed in 1964 whereby a host of fiscal and other incentives were provided to encourage the setting up of these ISI industries. 
Those companies or Industries set up within this legal framework were issued with “Development Certificates” and holding a D.C., they were appropriately called D.C. companies.
They were protected from external competition in the traditional way through tariff and non-tariff barriers to trade. By the time political independence came along in March 1968, it was quite evident that the ISI strategy had failed to deliver the goods with respect to the unemployment situation.
Therefore, soon after independence, the new government had to look for a quick solution to its main economic problem of unemployment. The government switched to Export Oriented Industrialization (EOI).
Thus, through the passing of legislation embodied in the Export Processing Zone (EPZ) Act No.51 of 1970, an Export Processing Zone, or a Free Zone as it is also sometimes known, was created.
By the end of the 1980's, in fact, export-manufacturing firms could be encountered all over the country. There were also various social or sociological factors such as the absence of an industrial culture whereby much of the labor force was ignorant of the discipline and hardships required for or in factory work.
Thus the following incentives were offered to investors to entice them to manufacture for
export markets and these incentives apply to both local or domestic investors as well as foreign investors. The main advantages of manufacturing in the E.P.Z. were:
  • Complete exemption from payment of import duties on productive machinery, equipment and spare parts.
  • Complete exemption from payment of import and excise duties on raw materials and components except spirits, motor-cars and petroleum products.
  • Exemption from payment of income tax on dividends and profits for the first ten years of operation and favorable corporate tax rate.
  • Availability of factory buildings and fully-serviced land at reasonable or subsidized rates.
  • Subsidized electricity or water rates
  • Favorable labor laws 
Over and above the above-mentioned incentives, foreign investors also enjoyed the following conditions:
  • Guarantee against nationalization
  • Free repatriation of capital (except capital appreciation), profits and dividends
  • Availability of permanent residence and work permits for foreign technicians and managers.

Last Updated on: 19-04-2010

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