The Mauritius national Budget Speech for 2016/17 was delivered by Hon. Pravind Jugnauth, Minister of Finance and Economic Development, on 29 July 2016. Below are extracts from his speech.

I would like to begin by thanking the Prime Minister for entrusting me the task of managing the finances of the nation and steering the economic development of our country. This Budget, which I am presenting today, will bear out my determination in living up to the trust that has been put in me.

Many organizations and professional groups have participated in pre-budget consultations. Men and women from all walks of life have made numerous proposals and shared their insights. Their contributions have been very helpful in the preparation of this Budget and I wish to express my deep appreciation to all of them.

We have analysed the current domestic and global context in which we had to prepare the budget.

The background is indeed fraught with uncertainty, adversity and tough challenges, while the expectations are many and the aspirations are high.

If we stay the course, the confluence of adversities and challenges will most certainly pull us back.

If we decide on a new course, we can change things for the better and come on top.

The choice is clear.

Today we choose to come on top - to move forward and up.

Today we choose to break with the past that has stifled development for the last decade and see the future in a new light.

The challenges of tomorrow cannot be met with our mindset, policies and actions locked in the paradigm of yesterday.

The current development model can no more deliver on our aspirations as a nation. This Government started its mandate with troubling economic and social indicators. It will take more than just traditional policies and approaches to turn them around.

In the past year, our economy has shown good resilience. But we need to do much better.

The GDP growth rate for the year 2015/16, would be 3.4 percent.

The unemployment rate went down to 7.6 percent in the first quarter of 2016 from 8.7 percent a year earlier.

The inflation rate is significantly down to 0.9 percent for 2015/16 and is forecast to be 2 percent for 2016/17.

The overall Balance of Payments was in surplus of Rs 20 billion, with the current account deficit, as a ratio of GDP, reduced to 4.6 percent for 2015/16.

The official reserves increased from 6.2 months of imports in December 2014 to reach 8.5 months at end June 2016.

And the Budget Deficit for the financial year 2015/16 is estimated at 3.5 percent, with total revenue and grants amounting to Rs 88.2 billion against a total expenditure of Rs 103.1 billion.

I would like to announce here that I am circulating a SUPPLEMENT to the Budget Speech that includes a comprehensive review of the economy and social indicators.

I would also like to announce that I am including an Annex as an integral part of the Budget Speech. It provides greater details on some of the measures, schemes and legislative amendments in this Budget.

It is clear that our economic performance has been an honourable one, considering the unfavourable international economic setting. Global GDP has in fact grown by 3.1 percent in 2015. For 2016, the IMF is now predicting that global growth will stay at 3.1 percent, down from its initial forecast of 3.7 percent. This reflects mostly lower than expected growth in the USA, Europe and OECD countries.

There are many reasons to think that the pressures of global trends on our economy will become more acute. The Brexit event is another staunch reminder of this reality.

We must therefore lift up the growth path before the 3 to 3.5 percent growth trend of recent years becomes the ‘new normal’.

Without stronger economic performances, the challenges on the social and environmental fronts will also become even more daunting.

However, moving to a higher growth path will require major changes in the way we do things as well as in the things we do.

Where we have to be bold we must be bold.

Madam Speaker, I have decided that Budget 2016/17 must indeed be about ushering in A NEW ERA OF DEVELOPMENT.

This new era of development will be centred on ten key strategies:

First, fostering a wave of modern entrepreneurs;

Second, creating more job opportunities for all;

Third, entering a new economic cycle focusing on innovation, boosting exports and private investments;

Fourth, moving towards a fully-fledged digital society;

Fifth, fundamentally reforming business facilitation and expanding our economic horizons;

Sixth, building the infrastructure that fits into the future;

Seventh, lifting the quality of life for one and all;

Eighth, addressing the root causes of poverty;

Ninth, launching a major public sector reform programme;

And tenth, ensuring macroeconomic stability and sound public finances.

Strategy three: Entering a new economic cycle focusing on innovation, boosting exports and private investments

To enter a new economic cycle focussing on innovation, and boosting private investment, exports and productivity, it is imperative that our productive sectors make a significant leap forward in embracing new activities and modern ways of doing business.

Advancing the manufacturing sector to new frontiers

The manufacturing sector which is the largest contributor to GDP must take the lead in this new cycle.

I would like therefore to announce the launching of three new niches.

Diversifying the manufacturing base

Firstly, an international private consortium is setting up a modular near shore mobile oil refinery and onshore storage facilities at Albion. Besides its impact on employment and growth, the project can make of Mauritius the first source of low sulphur bunker fuel (LS380) in the Indian Ocean region.

Secondly, we are opening our country to gold business that will encompass a wide spectrum of high value-added activities, ranging from refinery of gold, producing gold bars, setting up topend jewellery processing units, vault facilities and to trading of gold and bullions on our new commodity exchange. The exchange will also facilitate trade in diamond and other precious metals.

Moreover, an Indian Delegation presently in Mauritius has expressed an interest in setting up several manufacturing projects in Mauritius, one of which is the production of bicycles and motorcycles. This project aims mainly at exports to the African market and has the potential for creating a significant number of jobs.

To further diversify our manufacturing sector, a Pharmaceutical Village will be set up at Rose Belle to cater for local as well as African markets.

We must also embrace the new era of 3D printing that will transform manufacturing and other industries in the future. To this end, Government will introduce the application of 3D printing technology, by equipping the two technopoles at Rivière du Rempart and Rose Belle with 3D printers.

I am also removing VAT on 3D printers and providing customs duty exemptions on materials used in the manufacture of medical devices.

Modernising the manufacturing sector

As the manufacturing sector diversifies, it must also modernise.

The investment tax credit whereby a specified manufacturing company is able to offset against its tax liability 5 percent of the investment in new plants and machinery over 3 years, is being overhauled. The minimum eligibility requirement of Rs 100 million investment in a year is being removed to allow more businesses to benefit. And the tax credit can be recouped over a longer time period.

For manufacturers of textiles, wearing apparels, ships and boats, computers, pharmaceuticals and for film production the tax credit will be increased from 5 to 15 percent. This represents 45 percent of capital expenditure incurred on new plants and machinery over three years.

As we face the challenges of Brexit, we need to reposition our textile and apparel sector, improve its competitiveness and bring Mauritius nearer to the European markets. I am therefore announcing a major Air Freight Rebate Scheme which will entail a 40 percent reduction by our national carrier of the air freight cost to Europe. This significant reduction in cost will be a major game changer to give a new impetus to that industry. The scheme will be underwritten by Government over a two-year period.

To support the ‘Made in Moris’ initiative of the manufacturing industry, the Bid Price-Preference of 10 percent is being increased to 20 percent for locally manufactured goods in respect of the procurement exercise by public sector bodies. This will apply to such goods as shoes, uniforms, school books, printing materials and furniture which will be listed in a Schedule.

And I am also taking new measures to boost activities in the Freeport. These measures are described in the Annex.

Agri-business: Branching out

I now come to our plan to transition the agri-business sector from the traditional mould to the new economic cycle.

First, we must put agricultural land to modern and more productive use. In that context, the Mauritius Cane Industry Authority will set up an Agricultural Land Management System to bring unutilised abandoned cane lands of small planters under productive use.

Second, the grant facility for sheltered farming is being increased from Rs 250,000 to Rs 400,000 to encourage planters to undertake crop production under protected structures.

In the same vein, I am providing Rs 20 million for the setting up of an exclusive Bio-Farming/Organic zone with comprehensive modern infrastructural facilities at Britannia.

And a feasibility study will be undertaken on the setting up of a Bio-Technology Institute.

With regard to the tea industry, we are establishing a new tea nursery at La Brasserie, providing seedlings free to growers and giving a subsidy on fertilizers.

Moreover, the ex-Dubreuil tea factory which was closed in the late 1990s will be reopened to promote tea and other agroprocessing activities.

To boost dairy production, Rs 10 million are being earmarked for the setting up of a heifer farm at Melrose by the Ministry of Agro-industry, and for a cash incentive of Rs 5,000 to farmers for every new female calf (heifer) reared up to lactating phase.

I am making an additional provision of Rs 10 million to enable industrial milk processors to provide small cow keepers with essential support such as artificial insemination and other veterinary services, milk collection and animal husbandry.

I am providing Rs 7 million to support bee-keepers through the creation of bee-keeping zones in different regions.

To encourage exports, the subsidy on freight costs for horticultural products is being extended to flowers and exotic vegetables.

Let me announce our actions to support the men and women who are taking risks, making efforts and yet have to struggle to run their farms and agri-businesses.

Government is renewing all the schemes that are meant to support some 11,000 sugarcane planters. Thus, for the sugar crop year 2016:

• Planters producing up to 60 tonnes of sugar will benefit from an additional revenue of Rs 1,820 per tonne of sugar; and

• The 80 per cent advance provided to sugar cane planters will be maintained through arrangements with the Mauritius Sugar Syndicate.

We are providing Rs 25 million for acquisition of sophisticated equipment for the testing of fruits and vegetables by the Food-Tech Lab of the Ministry of Agro Industry and Food Security.

I am also pleased to announce that fifty per cent of the outstanding balances on loans, together with interest due, which were contracted by pig breeders, under the Pig Sector

Re-structuring Programme, will be waived, if they pay back the remaining balance before 30th June 2017.

In the same vein, all outstanding interests will be waived on start-up loans taken by planters, breeders and fishermen prior to 1^st July 2012, under certain schemes, if they pay back all capital balance before 30th June 2017. Rs 30 million are being earmarked for setting up a new unit for mass rearing and sterilization of fruit flies; and Rs 16 million to litchi and banana growers for the purchase of protective nets and bags.

Concerning the cooperatives sector, I am providing for the upgrading of the building of the National Institute of Cooperative Entrepreneurship at Bois Marchand.

I am also exempting cooperative societies from the payment of corporate tax on all non-sugar agricultural activities.

And I am providing Rs 10 million to set up a contributory insurance scheme for non-sugar crops.

Madam Speaker, agricultural produce must be safe and clean for consumption.

To curb the excessive use of specific pesticides, herbicides and fruit ripeners, a 15 percent levy is being introduced on those products.

Moreover, the Ministry of Agro-Industry and Food Security will implement a system of quantitative restrictions coupled with a more rigorous and intensive testing of fresh produce.

Financial services: reaching out to new markets

Madam Speaker, the financial services industry also needs to branch out and reach out to new markets with a wider spectrum of products.

I am therefore announcing a new thrust to the development of our financial services sector.

First, GBC2 companies will now be allowed to invest in listed securities.

Second, companies holding a ‘Global Headquarters Administration Licence’ issued by the FSC will be granted an 8-year tax holiday.

Third, companies with the following licences issued by the FSC will be provided with a 5-year tax holiday:

1. a ‘Treasury Management Centre License’;

2. an Asset and Fund Managers license and managing a minimum asset base of USD 100 million;

3. international law firms with a Global Legal Advisory Services License. To that effect, a ‘Limited Liability Partnership Bill’ will be introduced;

4. an ‘Investment Banking and Corporate Advisory License’;

5. an Overseas Family Corporation’ license.

Foreign Ultra High Net Worth Individuals investing a minimum of USD 25 million in Mauritius will be provided with a 5-year tax holiday.

These tax holidays will be subject to meeting conditions of employment creation and substance.

Furthermore, the ‘Rose Belle Business Park’ will host the new ‘Mauritius International Derivatives & Commodities Exchange’ (MINDEX). I am allocating Rs 50 million as seed capital for its initial setup.

In pursuit of that diversification thrust, we will also develop Mauritius as a full-fledged International Arbitration Centre with the capacity and expertise to resolve disputes.

As regards the banking sector, the Bank of Mauritius Act and Banking Act will be reviewed in the light of recent events and to adapt to change.

Tourism: blazing new trails

Madam Speaker, the tourism sector must ride on the crest of the wave of regained dynamism and seize the opportunity to blaze new trails and sustain its long term development. This entails the development of out-of-hotels activities, attraction-based tourism, the duty-free island, and a more open air-access policy.

At the same time, Government wants to achieve a greater integration of tourism development with the growing aspirations of our own population for more leisure activities and wider shopping opportunities.

To this end, the Ministry of Tourism, the Ministry of Arts and Culture, together with relevant private sector organisations will work out an annual calendar of national events to be known as the Mauritius Calendar.

To give an impetus to the duty free island while diversifying our tourism sources, we will intensify the marketing of Mauritius in Africa, in particular targeting the new rich. And we will also build up our marketing efforts in the Gulf regions, Scandinavian countries and Eastern Europe.

The newly launched Africa-Mauritius-Singapore-Asia Air Corridor positioning Mauritius as an aviation hub in the region will greatly contribute to improving accessibility for visitors from new markets in Asia and Africa. I am providing an additional Rs 40 million for marketing the Air Corridor initiative.

Government will also facilitate the setting up of a world class aquarium, a national museum and other new leisure attractions.

With a view to promoting access to leisure and leisure facilities, I am removing admission charges leviable by local authorities. The Local Government Act will be amended accordingly.

The Film Industry: Setting the Stage

Madam Speaker, the film-making industry is showing good potential for growth and for creating exciting new opportunities for our young people and artists generally.

To harness that potential we are increasing the refund on qualifying production expenditure under the Film Rebate Scheme up to a maximum of 40 percent and clarifying that production of films for export will be zero-rated for VAT purposes.

I am providing an amount of Rs 10 million to the Mauritius Film Development Corporation for the purchase of equipment which it will lease to film-makers.

I am also exempting the importation of lighting equipment for use in film-making from customs duty.

As part of the development of the Omnicane smart city project, Mauritius will be endowed with its first film city which will be located in the south of the island. The project also includes the setting up of a Film Training facility.

Realising the blue economy

Concerning the blue economy, the following initiatives will be undertaken:

First, the 31 sites which have been identified for aquaculture development will be fully surveyed by the Mauritius Oceanography Institute.

Second, Government will provide incentives for the setting up of common facilities on land for aquaculture and fish processing.

Third, two studies are being concluded with regards to the production of electricity through ocean waves and offshore wind.

Fourth, Government is signing an MOU with the National Institute of Oceanography Goa towards the setting up of a World Class Research Institute of Oceanography in Mauritius.

Fifth, to encourage outer-reef and bank fishing:

• I am providing Rs 20 million for the purchase of a multi-purpose vessel for research, surveys and training of fishermen and skippers.

• And a grant of 50 percent, up to a cap of Rs 4 million will be given to cooperative societies to enable them to acquire semi-industrial vessels.

Sixth, a new incentive scheme with a tax holiday of 8 years will be introduced to attract industrial fishing companies to operate from Mauritius and contribute to the development of our seafood hub.

Seventh, to promote small-scale aquaculture, a provision of Rs 12.5 million has been made in the Budget for the purchase of 10 floating cage structures to allocate to Fishermen Cooperatives.

Eighth, the Mauritius Ports Authority will construct breakwaters at Fort William to provide shelter for approximately 120 fishing vessels.

And ninth, to address the human resources constraint, the Mauritius Maritime Training Academy will increase its intake by 50 percent to 1,200 trainees annually.

Green economy: maximising investment opportunities

Madam Speaker, Government’s policy emphasis on developing local sources of renewable energy offers a unique potential for launching a green economy, with new high valueadded jobs, while at the same time addressing environmental issues and reducing future oil import bills.

To this end, the CEB will create a renewable energy company, which will ultimately become a special vehicle for the production of electricity from solar photo voltaic systems of up to 15 MW. It will subsequently open its shareholding to SMEs, cooperative societies and small investors.

Second, a feasibility study will be carried out on the production of electricity through solar panels placed on roof tops of houses. The aim is to involve some 10,000 households, over the next five years, who are benefitting from the social electricity tariff. The cost will be fully met by the public sector. These households will get the first 50 kwh monthly free of charge. All surplus production will go to the CEB.

Third, to accommodate the production of more electricity from intermittent renewable sources, it is necessary to increase the capacity of the grid for absorption of such power generation. To this end, the CEB will invest Rs 400 million to increase the grid absorption capacity of intermittent energy from 148 to 160 MW by 2018.

Fourth, furthermore, the CEB proposes to procure battery storage systems so as to become resilient to the intermittent nature of renewable energy.

Fifth, I am removing VAT on Photovoltaic Inverters and batteries.

Sixth, as regards hydro power, the CEB will invest Rs 200 million for the upgrading of the Sans Souci plant capacity and it has identified twelve sites on private land with potential hydro power generation.

Seventh, a major waste-to-energy project is expected to add up to 30 MW of electricity on the grid by 2019.

Eighth, Government will facilitate production of energy from bio-mass, including cane tops and trash and at the same time ensure that small planters will get their fair share of the revenue.

The Electricity Act and the CEB Act will be amended to accelerate the permit approval process of renewable energy investment projects.

Strategy five: Fundamentally reforming business facilitation and expanding our economic horizons

I now come to strategy number five: fundamentally reforming business facilitation and expanding our economic horizons.

For too long our economy has operated in an environment where obtaining approvals and permits to start and grow a business is complex, lengthy and onerous.

We have to free our economy from the stifling bureaucracy and get it out of the constraining mould of laws, regulations and administrative procedures that have not been able to adapt to the new exigencies.

Our first measure therefore is to cut drastically the time it takes to deliver Building and Land Use Permits (BLPs) and clearances for all construction related projects. To this end,

1. the requirement for approval by the Executive Committee of the Local Authority concerned when determining a BLP is being abolished;

2. the Local Authority will have only 8 working days to seek any additional information from an applicant; and

3. we are requiring that all applications for constructions with a floor area exceeding 150 square meters be made on-line.

Second, the Property Development Scheme will be reviewed and the PDS regulations will be amended to:

1. remove the maximum size limit of 50 arpents;

2. remove the requirement to sell at least 25 percent of residential units to Mauritian buyers; and

3. review the current maximum permissible land size for a villa, from half an arpent to 1.25 arpent.

Third, we will take onerous paper work out of the system. An e-licensing platform will be set up to provide a single point of entry for applications for permits and licences. This will bring down submission of documents in some cases from around 48 copies to just one copy.

Fourth, the Investment Promotion Act will be amended to authorise the BOI to issue the necessary clearances and approvals for a business to start operation in cases where the statutory deadlines for processing applications have lapsed. This is in line with the Silent Agreement Principle. It should unlock a significant number of projects which are in the pipeline, accelerate job creation, turn around the declining trend in private investment, increase FDI and boost up economic growth.

Fifth, some countries like the UK, Singapore and Australia have applied the concept of a Regulatory Sandbox Licence (RSL) which allows companies to invest in innovative projects within an agreed set of terms and conditions, even in the absence of a formal licencing framework. This can be an effective mechanism to speed up strategic investments. We are therefore introducing the Regulatory Sandbox Licence in Mauritius. The Board of Investment (BOI) may issue approvals, permits and licences to start an innovative project after consulting relevant ministries.

Sixth, to further open the economy we are allowing noncitizens, registered with the BOI, subject to security clearances, to acquire apartments and business spaces in buildings. The Noncitizens (Property Restriction) Act will be amended accordingly.

In the new era of development, where openness will be a core feature of our economic strategy, economic diplomacy will have a crucial role to address cutting-edge issues in foreign policy, in particular in the areas of trade, finance and investment, so as to open new opportunities for Mauritian businesses.

Now that the issue of DTA with India has been resolved, Government will revive and finalise the negotiations with New Delhi on the Comprehensive Economic Cooperation and Partnership Agreement (CECPA) including a Preferential Trade Agreement.

And we will continue to build on our Africa strategy where we have made concrete progress in the past year, with the signing of agreements with Senegal, Madagascar and Ghana for the establishment and management of Special Economic Zones.

Regarding the Special Economic Zone project in Senegal, I am pleased to announce that 40 hectares of land have already been allocated by the Government of Senegal. The project will be executed by a joint SPV where Mauritius Africa Fund holds 51 percent of the shares.

In 2014, the Honourable Prime Minister took the commitment that once elected, high priority will be given to the establishment of an Embassy in Saudi Arabia. I am pleased to announce that we are now going beyond this promise by setting up, not only an Embassy in Riyadh, but also a Consulate in Jeddah. This will significantly raise the visibility of the Republic of Mauritius in Saudi Arabia. These two diplomatic representations will further improve communication and contribute in providing greater security, comfort and opportunities to our citizens travelling to Saudi Arabia.

We are also proceeding with the opening of a consulate in Reunion Island to further facilitate trade and business relationships.

To support economic diplomacy, seven Counsellors (Economic Matters) will be recruited in addition to those already serving in Paris, New Delhi and Johannesburg.

Industrial Property Framework

With a view to modernising our Industrial Property Framework and consolidating the institutional arrangement to administer Industrial Property, a consolidated Bill will be introduced. It will encapsulate all aspects of industrial property as well as provide for the protection of patents, plant breeders’ right, industrial designs and marks including geographical indications and trade names.

In the same vein, Mauritius will adhere to a number of the World Intellectual Property Organisation (WIPO) Administered Treaties, namely, Patent Corporation Treaty (PCT), the Hague Convention and the Madrid Protocol to facilitate the registration of Patents, Trademarks and Industrial Designs.

Both the enactment of new legislation and the adherence to the Treaties will be completed by December 2016. Government will then come up with an attractive fiscal package to encourage innovation.

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» Download: Supplement to the Budget Speech 2016/17: Economic and Social Review (PDF, 8.81 MB)