Agoa.info - African Growth and Opportunity Act
TRALAC - Trade Law Centre
You are here: Home/News/Article/Mauritius: A Duty Free Island in the Making

Mauritius: A Duty Free Island in the Making

Published date:
Monday, 12 September 2005

The island of Mauritius in the south-west Indian Ocean wants to become a duty free shopping paradise in a bid to attract tourists. But there are concerns that this development strategy might come at a heavy price.

In the 1970s Mauritius took its lead from Hong Kong and Taiwan, launching a tax free zone to entice foreign investors to set up textile, clothing and jewellery factories aimed at the export market. Now the island is looking towards Dubai and Singapore for ideas to spark development. Eager to stimulate a new growth spurt, Mauritius is considering setting up a duty free shopping haven aimed at drawing tourists from the region and further afield.

The vibrant economic growth that characterised the island in the 1990s has slowed. Mauritius' main exports - sugar and textiles - are coming under increasing pressure with low international prices and liberalised trade laws. The textile industry, in particular, is facing tough competition as exports from China and India erode its global market share.

Thousands of workers have been laid off in the past two years in both sectors and many more are expected to be retrenched in the coming months.

Mauritian Finance Minister Ramakrishna Sithanen says that the island needs an annual growth rate of seven to eight percent to be able to create jobs, tackle the budget deficit and pay for free transport for the elderly and students -- a service which was introduced Aug. 15 at a cost of 20 million dollars annually.

This and other pressures have provoked calls for a new economic model with more diversified activities -- and an emphasis on the service sector.

The idea of making Mauritius a duty free island was first mooted in the 2005/2006 budget proposals presented Apr. 27, 2004, by the then finance minister, Pravind Jugnauth. "The idea is to create a new and unprecedented dynamism in the economy for investment, and to take a big step forward on the full employment growth path," he said.

His successor, Sithanen, told parliamentarians in August that the government was still committed to promoting Mauritius as a duty free island.

Presently Mauritius attracts about 700,000 tourists annually. Figures issued by the Central Statistics Office last month show arrivals grew from 702,018 in 2003 to 718,861 in 2004. Tourist spending rose from 647 million dollars in 2003 to 814 million dollars in 2004. The forecast for this year is for 755,000 tourists with estimated spending power of about 880 million dollars.

It is said that tourists to the island are not encouraged to spend their money on goods sold locally: they arrive with 10 kilogrammes of luggage and leave with the same 10 kilogrammes. "We have to tap that potential and make tourism the leading growth sector in our economy. In the short and medium term, our hope for higher economic growth, for more employment creation and for poverty reduction lies in that sector," said Sithanen.

Under the minister's proposals, Mauritius would become duty free over a period of four years.

The 80 percent rate for customs duty on imported clothing, all articles of leather, jewellery, sportswear, electronics, cosmetics and the like has already been removed (on Jul. 1). Tourism sector investments worth 1.5 billion dollars over the next five years have been announced, and there are plans for further investments in port and airport infrastructure.

Last year, Jugnauth noted the need for a "shopping mall scheme to promote, encourage and facilitate the development of modern integrated business, shopping and leisure centres".

The duty-free concept appeals to many parties in Mauritius. "It may take time to materialise, but it is known that this concept will boost economic activities in the island," Rajiv Servansingh, deputy secretary at the Mauritius Chamber of Commerce and Industry, told IPS.

Raj Makoond, director of the Joint Economic Council, also sees potential in other areas related to tourism: "New services like specialised health centres for tourists could be created."

Chartered accountant Subhas Purgus believes business tourism, the local hotel industry, local handicrafts, the financial sector and the island's established jewellery sector stand to benefit most from moves towards a duty free shopping paradise.

However, there are also fears that the move could harm local manufacturing sectors, and drain government coffers of much-needed tax revenues in the form of an estimated 135 million dollars collected annually from customs duties.

Taking note of such concerns, Sithanen has avoided putting all his economic eggs in the same basket. Apart from a duty free policy, he has also announced a package of measures for other sectors that would, he said, set the stage for more robust growth of the economy.

This has done little to reassure another former finance minister, Vishnu Lutchmeenaraidoo, who cannot envisage tourists buying duty free fridges or colour television sets in Mauritius.

"Mauritius is not Dubai or Singapore, situated in the midst of rich buyers in Asia. It is a small island in the midst of an ocean of poverty," he said. In addition, "Communication links are so bad between Mauritius and Africa that it is unconceivable that people from Madagascar, Comoros and Kenya would come to buy electronic goods here."

Instead, Lutchmeenaraidoo has argued for tax breaks for local enterprises producing goods for export.

Local manufacturers have joined Lutchmeenaraidoo in voicing concerns.

"There is the risk of dumping foreign goods from nearby South Africa in Mauritius," said Jacques Li Wan Po, manager of the Food Canners Ltd company.

In his view, developments in the textile sector provide ample warning of the dangers of duty free. "By removing duties on imported clothing, the government has imposed foreign competition on our local manufacturers," he said.

Gaeteno Gnudi, manager of Peace Angels House - a local manufacturer of clothing - is another person for whom the promise of duty free is illusory. "Let us not be a nation where we make our people sell other people's stuff," he says. "Why do we have to copy Dubai?"



“AGOA Latest AGOA Trade Data currently available on AGOA.info


Click here to view a sector profile of Mauritius’ bilateral trade with the United States, disaggregated by total exports and imports, AGOA exports and GSP exports.


Other regularly updated trade statistics on AGOA.info include: (click each link to view)

  • AGOA-Beneficiary Countries’ AGOA and GSP Trade Aggregates

  • AGOA Trade by Industry Sector

  • Apparel Trade under AGOA’s Wearing Apparel Provisions

  • Latest Apparel Quotas under AGOA

  • Bilateral Trade Data for all AGOA-eligible countries individually.

  • You are here: Home/News/Article/Mauritius: A Duty Free Island in the Making