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FSC conference charts next phase of Mauritius IFC

On 19 September, the Financial Services Commission (FSC) of Mauritius kicked off a two-day conference with the theme ‘Forward Looking’, which brought together leading stakeholders from the industry and government authorities to discuss the future path of the Mauritius International Financial Centre (IFC) in the light of the recent 10 Year Blueprint exercise and the implications of the Global Business reform announced in the Budget 2018-2019.

The keynote speaker was the Hon. Prime Minister and Finance Minister Pravind Kumar Jugnauth, who highlighted that financial services remains one of the “linchpins” of the Mauritian economy, which was growing at 5.5% per year, and that the Government was presently rethinking the way the sector operates. He stated that he was “fully committed to bring Mauritius into the league of high income countries translating essential benefits to citizens in the country” and saw that unemployment was constantly declining while FSI was on the rise, which “demonstrates a high level of confidence in doing business in Mauritius”.

The Prime Minister emphasised that achievements would be measured not only by the wealth created by by inclusiveness, sustainability and job creation, and that “the speed and scale of today’s changes call for new ways of tackling the uncertainties of the future”. He noted that the financial services sector was “increasingly being called upon to adapt to changes in the wake of disruption” and saw that as an innovative and forward looking nation “we have to demonstrate our capabilities in turning these challenges into key opportunities”.

In terms of the specific initiatives set out in the Budget, he noted that developments in AI, robotics and Blockchain were being witnessed, and saw that the complexity of emerging technology implies that stakeholders have a responsibility to work together and adapt. He highlighted that Mauritius was closely collaborating with the OECD on Blockchain to spearhead best practices in Africa, and that the Government was setting up a national blockchain strategy plan to encourage it in both public and private sectors. He also noted the Government’s commitments to the review of the Global Business regime and to fight money laundering. In conclusion, he appealed to the audience to “embrace an innovative and entrepreneurial culture” as, in the words of Nelson Mandela, “it always seems impossible until it is done”.

The results of the recent exercise to prepare a 10 Year Blueprint for the financial services sector were outlined by Harvesh Seegolam, Chief Executive of the Financial Services Commission, who noted that the Mauritius IFC would focus on the three areas of cross-border investment, corporate banking and corporate finance, and private wealth. He said that in real terms the size of the Mauritius IFC was set to increase from USD 976 million in 2016 to approximately USD 2 billion ten years from now. He underlined that growing interest was being shown in Mauritius, with major names coming to set up, and that it would be “important not to compromise on our key fundamentals”, namely ensuring adherence to international norms, nurturing the good repute of the Mauritius IFC, encouraging sustainable and substance-based activities and adopting sensible regulatory approaches. He explained that the process to implement the Blueprint would be led by a Steering Committee at the level of the Prime Minister’s Office, and that project management would be set up at FSC level working in collaboration with the Ministry of Financial Services and Good Governance.

Innovating the Mauritius International Financial Centre was the focus of the first panel session, moderated by Lord Anthony St John of Bletso from the UK House of Lords, who asked the panellists to identify the different factors which growth will rely upon in the future. Sunil Benimadhu, Chief Executive of the Stock Exchange of Mauritius, noted that to reach the targets set out in the Blueprint would not be an easy feat but was “do-able” and that the Blueprint clearly highlights what needs to be done. Terry Smith, CEO of Fundsmith and Member of the Economic Development Board, saw that “good ideas are not in short supply but execution of good ideas is in short supply”. He saw that it would be important to concentrate on the enablers of making regulation work well so it would be seamless and joined up, making the infrastructure improve over time and making the tax regime competitive. He argued that if the focus would be on the factors that Mauritius could control then “Mauritius is a very nice place and has a lot of attractions and people will come here and help you with that growth”.

Looking at the wider picture, Daniel Essoo, Chief Executive of the Mauritius Bankers Association, emphasised the need to “beef up the effort” with regard to risk and to ensure that Mauritius remains a highly compliant and risk averse jurisdiction. The need to invest in people in order to move up the value chain was raised by Assad Abdulatiff, President of the Association of Trusts and Management Companies, who saw that the question of whether Mauritius can realise what is a “tall order” depends on “the extent to which we are able to adapt and deal with all the changes happening around us”. Richard Arlove, CEO of ABAX/Ocorian, thought it was important establish key factors such as “Who are our clients? Who is buying Mauritius?” and to determine the target market from a national perspective. On reputational issues, Richard said “we need to stop the bleeding as there is no point in trying to double our revenue if there is a fire in the house and there is fire”.

Francois Jurd de Girancourt, Partner at McKinsey Co. Inc which had performed the analysis for the Blueprint, responded to questions on size, growth and innovation. He noted that cross border investment was already an important part of the IFC’s activity, with India representing 60% and Africa representing 20%, which was the fastest growing. He noted that in the area of corporate banking and corporate finance Mauritius was well placed, and that trade finance for Africa was growing at 17%. He noted that private banking was already growing in the Mauritius financial sector, particularly offshore. He also noted the issue of cost, noting that it is still 50% cheaper to set up a company in Singapore than in Mauritius, and that consideration should be given to how Mauritius can attract global leaders as a cross border corporate banking hub, noting that the working group on the Blueprint had already identified 100 corporates who could set up structures in the next 10 years.

The issue of tax was raised in the discussion, with Terry Smith commenting that “tax is central and it is the elephant in the room to some degree. We need to achieve a balance of not falling foul of the international community but not giving in to pressure”. He argued that when it comes to the detail of tax implementation “what people like to see is certainty”.

The impact of the changes to the Global Business sector was discussed by a panel further to presentations by Martin Wilding, Director of Authorisation and Supervision at the Financial Services Commission, and Mario Hannelas, Director of the Mauritius Revenue Authority, who explained the detail of the main changes, which included enhanced mandatory substance requirements for GBL1 companies in the future (to be re-named GBL), the new Authorised Company regime and the abolition of the GBL2 regime. Martin Wilding emphasised that change was necessary to enhance the reputation of the Mauritius IFC, to further assist the country as it competes on the global stage with other IFCs and to meet international standards and best practices.

In the discussion, Wasoudeo Balloo, Tax Partner at KPMG, saw that the tax reform was important because of the BEPS project which is modernising international tax laws and is impacting the tax regime, and there are some key challenges to be addressed, with issues being raised by clients on the impact on existing structures. Samade Jhummun, CEO of Global Finance Mauritius, noted that there was a fundamental difference between the GBC2 and the Authorised Company since GBC2 is exempt for tax purposes while the Authorised Company is non-resident in Mauritius, and “you need to know where your POEM (place of effective management) is or you might be taxed elsewhere”. He emphasised that it was important for Mauritius to keep its competitive edge with other jurisdictions. Mahesh Doorgakant, Vice President of the Association of Trusts and Management Companies, noted that it was already known that the GBC2 regime was not sustainable, and that it would be important to know how the Management Company would fit in the Authorised Company framework. Mahen Rawoteea, Lead Analyst at the Ministry of Finance and Economic Development, saw that it was important to have a good reputation and to balance this with competitiveness to ensure sustainability.

Harvesh Seegolam concluded the discussion with an update on the process going forward. He noted that the Financial Services Commission would start to receive applications for Authorised Companies as of 1 October 2018 and that up until 31 December they would give a lot of priority to those applying for the new status. He explained that the FSC was currently working on its own internal guidelines and that a Circular Letter would then be issued to Management Companies.

The conference continues on 20 September with the morning session focusing on the enabling framework for FinTech in Mauritius, and the afternoon session highlighting regulatory challenges arising from anti-money laundering and combating terrorism international requirements.

Source: Platform Africa