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A The Economic Strategy The Implementation of the Strategy

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A The Economic Strategy The Implementation of the Strategy Powered By Docstoc
					The Macroeconomic Perspective
     of the 2010 Budget



                   Presented by
           Mahmood Cheeroo
             Secretary General


             Tuesday 20 October 2009
       Labourdonnais Waterfront Hotel, Caudan
                  Contents
A. The Economic Strategy

B. The Implementation of the Strategy

C. The Response of the Economic Crisis: The Stimulus
   Package
D. The Challenges Ahead
      THE ECONOMIC STRATEGY

• A more open, business-friendly and uniform low
  tax environment with the following key
  objectives:

   A.1   Uniform Tax Regime
   A.2   Open Trade Regime
   A.3   Open Economy
   A.4   Business Facilitation
   A.5   Other Macroeconomic objectives
   A.6   The Social dimensions
      A.1 Uniform Tax Regime

• Uniform Corporate Tax of 15%

• Uniform Personal Income Tax of 15%

• Uniform Rate of VAT at 15%

• Uniform Property Tax
        A.2 Open Trade Regime

• Duty Free Island

• Enhanced Market Access for Exports

• From Preferences to International
 Competitiveness
         A.3 Open Economy

• Easier to come to work in the country

• Easier to settle down/Residence

• Easier to have access to Property

• Easier to invest
       A.4 Business Facilitation

• Reductions in the number of permits

• Uniform approach in incentives

• Cut Lead time to start/close a business

• Better settlement in business disputes

• Silent Agreement
 A.5 Other Macroeconomic Objectives

• Exchange Rate Stability

• Lower Inflation Rates

• Lower Interest Rates

• Fiscal Consolidation/Lower Budget Deficits

• Higher Economic Growth rates
       A.6 The Social Dimensions

• More Flexible Labour Laws

• An Ambitious Empowerment Agenda

• Elimination of Absolute Poverty

• Reduction of Unemployment
      B. THE IMPLEMENTATION OF THE STRATEGY

• B.1 The Budget Exercise
• B.2 The Actual Implementation of the
  strategy:
     2.1 Tax Policy
     2.2 Trade Policy
     2.3 Opening of the Economy
     2.4 Business Facilitation
     2.5 Macro-economic Targets
     2.6 Social Objectives
                B.1 The Budget Exercise

• 2006/2007: Implementation of Macro-measures

• 2007/2008: Consolidation of Macro-measures +
  Competitiveness

• 2008/2009: Balancing of Economic Agenda with Social
  Imperatives

• ASP+ 2009: Response to Global Financial and Economic
  Crisis
B.2 The Actual Implementation of the Strategy
 2.1 Tax Policy
Personal Income   Single rate of 15%
Tax
                  Single deduction
                  Uniform rate of 15%
Corporate Tax
                  Exceptions: Global Financial Companies
                               Solidarity Levy (Hotels, Tour
                                operators)
                               Special Levy on Banks
                               CSR
Property Tax      National Residential Property Tax
                  Review of Campement Site Leases
Sales Tax         Rate of 15% maintained
                  Coverage extended
B.2 The Actual Implementation of the Strategy

2.2 Trade Policy
• Import Duties
     Top Tariff reduced to 30%
     Only 3 bands
     Duty abolished on many items, specially Food



• Market Access
  •   Improved Access (EPA, AGOA, Bilaterals)
  •   Erosion of preferences
  •   Competitiveness (MAAS, MASMED, …)
B.2 The Actual Implementation of the Strategy

 2.3 Opening of the Economy
 •   Residence permit + work permit combined in one
     occupation permit
 •   Non-citizen retiree can apply for residence permit if USD
     40,000 annually
 •   Occupation permit issued in 3 days
 •   No restriction to investor to purchase real estate for
     registered activity
 •   Possibility to apply for permanent residence after 5
     years
 •   Possibility to purchase property
 •   International law firms allowed to practice in Mauritius
B.2 The Actual Implementation of the Strategy

2.4 Business Facilitation
• 3 days to start a business

• Prior health, fire, police clearances abolished

• Trade licence paid after start of operations

• Development and Building permits simplified

• All certificate schemes abolished

• Commercial division in Supreme Court

• Time taken to register property reduced from 7 months to 15 days

• Reduction of number of permits for import/export
B.2 The Actual Implementation of the Strategy
2.5 Other Macro-economic Objectives
                                                   2006       2007    2008      2009

Average Exchange rates:
US Dollars / Rupees                                 31.7      31.9     29       33.51
UK Pounds / Rupees                                   59        64     53.5      51.31
Euro / Rupees                                       40.3      43.8    42.6      45.41
Inflation                                          8.9 %     8.8%     9.7%       3%2
GDP Growth rate                                   +5.1%      +5.5%    +5.0%    +2.7%2
Interest rates: Bank Rate – (Dec)                 12.45%     10.05%   8.83%    4.49%3
Budget Deficit as a % of GDP-                      -4.3%     -2.7%    -3.0%     -4.8%
Fiscal Year                                                                   (6 months)


1. Average Exchange rates from January 2009 to August 2009
2. Forecast
3. Bank Rate at the end of July 2009
  B.2 The Actual Implementation of the Strategy

2.6 Social Dimensions
• ERiA and EReA passed

• Unemployment figures improved before crisis

• Mitigated results on elimination of poverty
C. THE RESPONSE TO THE ECONOMIC CRISIS:
           THE STIMULUS PACKAGE
• The Stimulus Package

• The Policy Reversals
 C. THE RESPONSE TO THE ECONOMIC CRISIS
C.1 The Stimulus Package
• The Additional Stimulus Package of December
  2008
     MTSP
     MASMED
     Rs 1 billion package
• The SJR Fund
   Total Budget Rs 3.5 billion
   Greater sectoral coverage (EOE, DOE, Services, SMEs)
   More Targeted (Cashflow, equipment, export-credit
    guarantee)
C. THE RESPONSE TO THE ECONOMIC CRISIS (cont’d)

C.2 The Policy Reversals
• Tax
   –   Extension of reduced Corporate Tax to Freeport Operators
   –   Amendments to Uniform Property Tax
   –   Review of solidarity Levy
   –   Reduction in Registration Duty for property


• Trade
   –   Freezing of Trade Liberalisation until December 2010
   –   Government Procurement preference to Domestic enterprises


• Other Macro-economic objectives
   –   Unclear Exchange Rate Policy
   –   Higher Budget Deficits
   –   Recurrent Expenditure vs. Capital Expenditure
        D. THE CHALLENGES AHEAD


D.1 The Opportunities and Threats of Recovery

D.2 Tax Policy

D.3 Trade Policy

D.4 Other Macro Policies

D.5 Sectoral Issues
     D. THE CHALLENGES AHEAD (cont’d)

D.1 The Opportunities and Threats of Recovery
• The Opportunities
   - Higher demand for our goods and services
   - Hopefully better prices
   - New markets


• The Threats
   - Exchange Rate instability
   - Rise in prices (Petroleum, Food, Freight rates, minerals)
   - W Syndrome
      D. THE CHALLENGES AHEAD (cont’d)

D.2 Tax Policy
• The pursuit of the uniform tax policy?

• Variations in the uniform rate/new Tax?

• Tax as an incentive instrument?

• Subsidies?
     D. THE CHALLENGES AHEAD (cont’d)

D.3 Trade Policy
• Duty Free Island vs. Residual Duty ?

• Duty Free Island and Preferential Market Access
  negotiations

• Legal protection measures (anti-dumping,…)
      D. THE CHALLENGES AHEAD (cont’d)
D.4 Other Macro Policies
• Exchange Rate Policy
  – Stability of prices vs. export promotion
  – Cross-rate movements


• Prices and Interest Rates
  – How to stabilise prices when inflation is mostly imported?
  – How to pursue a local interest rate policy without control on inflation and
    exchange rate movements??

• Budgetary Policy
  –   The need for massive investment in infrastructure
  –   Continued support to enterprises
  –   Unchanged pattern of social expenditure
  –   Budget Deficit and Public Debt
     D. THE CHALLENGES AHEAD (cont’d)
D.5 Sectoral Issues
• Industry
   – Markets: What is needed to maintain/increase market share
   – Products: R&D, Technology transfer, differentiation
   – Labour: Availability and Turnover


• Trade
   – Price control and competition
   – Regulatory Framework
   – Trade Facilitation (permits, clearances)


• ICT
   – From basic ICT activities to more value-added services (KPO)
   – Human resources
   – Infrastructure (availability and cost)
Thank you…….

				
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posted:10/16/2011
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