Role Of Fdi In The Mauritian Economy Finance Essay

In 1961, the celebrated Nobel Prize victor, James Meade, predicted that Mauritius will hold a glooming hereafter because of its exposure to climatic alterations, monetary value dazes and in add-on deficiency of occupation chances in other sectors apart from the sugar industry. However, of all time since its independency Mauritius has progressed from a single-channel harvest economic system to a more diversified 1 with a dynamic secondary sector, more late with a good established service sector accompanied with Global Business activities and besides Business Processing Outsourcing.

In world, FDI was really helpful in the enlargement and constitution of the Mauritanian economic system. The first measure taken by the Mauritanian authorities to pull FDI into the state was to ordain an Export Processing Zone Act ( EP2 ) in 1970 whereby several little Asiatic investors in the fabric and fabrication sector were attracted as they could hold discriminatory entree to both the European and U.S markets. In mid 1980s, the state started registering FDI both in the EPZ and touristry sector. Harmonizing to the UNCTAD study 2001, the FDI inflows to Mauritius were more good because of its spillovers effects that it had instead than the capital inflows itself. It was due to the technological promotion and the know-how that FDI influxs brought that the EPZ and touristry sector were able to turn and go the prima pillars of the economic system.

It is deserving cognizing that Mauritius was able to pull export oriented FDI because of its stable authorities, its open-door policy and financial inducements. Nowadays, this type of investing plays a polar function in the development of the economic system. The chief intent of the EPZ Act 1970was to pull the attending of both local and foreign investors in the EPZ sector in order to increase induced FDI export. After the puting up of the EPZ sector, for a period of 10 old ages ( 1970- 1980 ) , FDI continuously grew by 12.5 per cent. As the sector strengthened and with the diversified economic system, FDI inflows grew by even more, that is, 49.5 per cent during 1985 and 1990. Indeed, there were fluctuations in the influxs of FDI into the economic system. For case, it was noted that in the 1990s, there was a lessening of 13. 9 per cent but nevertheless the tendency was reverse in 1997 up boulder clay 2000 whereby there was an addition of foreign capital influxs. Table 1. will exemplify the tendency in entire and sectoral influxs of FDI from the old ages 2001 up to 2010.

Sectors

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Agribusiness, forestry & A ; fishing

14

1

484

19

26

18

447

Manufacturing

5

65

127

387

263

181

271

149

485

63

Electricity, gas, steam & A ; air conditioning supply

3

25

17

2

Construction

245

1

14

46

12

45

68

211

1292

Sweeping and retail trade ; fix of motor vehicles and bikes

14

386

284

123

510

198

38

103

291

125

Education

2

55

30

74

125

18

Health and Social work

2

29

120

145

2732

Financial & A ; insurance activities

600

316

1311

392

481

3593

4056

4564

1371

4645

Entire

902

780

1750

1447

1512

4140

4505

5547

2638

9222

Table 1. FDI by sector ( Rs 1000000s ) , 2001 aa‚¬ ” 2010

Beginning: Bank of Mauritius, Annual Report 2008 & A ; 2011

From the tabular array, it can clearly be concluded that through the period considered there has been fluctuations in the tendency of FDI influxs to Mauritius. Nonetheless, Mauritius was successful in pulling sufficient export- oriented FDI. The fiscal and insurance sectorsaa‚¬a„? tendency is striking to the eyes because despite the planetary fiscal crisis that really handicapped the world-wide fiscal sector, yet in Mauritius FDI inflows in that sector kept on turning. In fact, it is the lone sector entering such a high degree of FDI. Nevertheless, there are several factors that can really explicate this high degree of FDI inflows into the fiscal and insurance sector. Likewise, Mauritius satisfies many features such as experient and proved legal power, web of dual revenue enhancement understandings, international publicity protection understanding, international acknowledgment and OECD white listed legal power, regulative model, financial inducements and convenient clip zone of being a good fiscal Centre which will prone investors here. Chiefly, it is the fiscal and insurance sector that has the largest part in the FDI inflows into the state. As noted from table 1. the degree of FDI into the electricity, gas, steam and air conditioning supply sector is low ; this is because it is really hard to put in this sector harmonizing to investors as it is a monopolistic sector dominated by the authorities. There was a changeless addition in inward FDI into the economic system apart from 2004, whereby there was a autumn of approximately 17 % as compared to the old twelvemonth and in 2009 besides a important autumn was registered, that is, a lessening of approximately 52 % . But nevertheless, it did non go on falling. In 2010, the sum of FDI influxs increased one time once more. Furthermore, it is critical to cognize that harmonizing to the making concern study 2012, Mauritius is ranked first among the African states and 19th worldwide. This means that Mauritius is really contributing to concern friendly environment which in fact can explicate the high degree of inward FDI into the economic system. Table 2. will give an overview from where FDI flows into Mauritius.

Economy

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Entire universe

936

979

1,966

1,797

2,807

7,222

11,514

11,419

8,793

13,948

Developed Economies

Europe

315

440

369

1,029

1,732

5,338

5,936

5,676

5,500

7,819

France

25

234

157

491

427

523

1,176

1,167

2,333

7,819

Germany

5

95

46

177

59

172

27

3

United Kingdom

158

172

143

579

3,821

2,802

2,044

1,493

4,632

Other developed Europe

278

2

42

148

586

1,287

606

448

590

North America

3

29

37

518

75

167

2,380

1,063

687

132

United States

3

29

37

518

75

163

2,380

1,063

677

132

Developing Economies

Africa

600

336

1,197

32

162

296

1,124

1,929

1,056

2,019

South Africa

600

336

1,022

19

27

38

498

1,415

510

1,468

Latin America & A ; the Caribbean

16

34

45

25

552

121

69

Panama

13

4

13

9

7

5

Asia & A ; Oceania

80

301

170

791

1,344

2,047

3,198

1,429

3,908

United Arab Emirates

8

45

11

9

114

1,285

847

382

338

China

18

33

38

6

78

348

280

India

2

143

149

670

160

610

1921

320

2887

Malaya

30

70

17

2

2

Singapore

13

1

23

119

304

285

Taiwan Province of China

1

40

Unspecified

18

95

63

31

13

32

2

Table 2. FDI inflows from different states, 2001- 2011 ( Rs 1000000s )

Beginning: Bank of Mauritius ( Annual Report 2008 & A ; 2011 )

Table 2. gives an indicant of the different beginnings of inward FDI into Mauritius. The states have been classified as developed and developing economic systems. Among the developing economic systems, Europe is the state whereby the most inward FDI is registered into Mauritius. Apart from Europe, the part of United Kingdom besides is important. Equally far as the development states are concerned, the economic systems invariably puting in Mauritius significantly are Asia and Oceania. It is really unexpected despite the convulsion in the planetary economic system due to the fiscal crisis, Mauritius registered addition in inward FDI. However, despite this positive tendency in inward FDI, Mauritius is non ranked foremost in Africa for pulling most FDI. Nigeria, South Africa and Ghana are among the highest FDI drawing cards in Africa. Consequently, taking entire universe into consideration, apart in 2004, whereby there was a autumn of 8.5 % in inward FDI, there has been important addition in inward FDI into the state. Due to economic reforms in 2006, there was a encouragement in FDI into Mauritius. Furthermore, the authorities is promoting the development of new sectors such as seafood and aqua civilization which will prone investing in Mauritius. In fact, Mauritius is doing the most of its resource allotment nowadays to pull FDI.

Following this, it can be said that FDI has played a important function in the development of the economic system but surely, states where encouraged to put by several installations that are offered to them.