Will a 50-storey tower allow Mauritius to come back stronger from the COVID-19 crisis? No, but the Tower is not a stand-alone project. The future Mauritius World Trade Center Tower is only intended to be the visible part of Government’s new Trade Facilitation Programme, claims Mauritius Africa Fund (MAF) official.
Mauritius is living its worst economic recession since 1980. The abrupt decline in tourism has led to a contraction of real GDP by nearly 15% in 2020. Although, the government has been able to contain financial risks on households and businesses so far through a vast and unprecedented set of stimulus measures, including minimum wage subsidy for the employees of vulnerable sectors and income support for the self-employed worth over Rs 18 Bn, the chances of a rapid economic rebound remain low. As the last IMF Article IV Mission shows, a 5% GDP growth in 2021 will depend on recovery in tourism, which in turn, depends on how the world powers and the surrounding region performing against the COVID-19 pandemic.
However, local policymakers know that if Mauritius is to bounce back, they must not only make the island COVID safe all over again for tourists but also attend to the strategic deficiencies highlighted by the European Union (EU) and the Financial Action Task Force (FATF) in Anti-Money Laundering and Counter Financing Terrorism that have categorized our economy as a High-Risk Third Country. Although no major disruption has been reported by the operators, the Mauritius Financial Center will not be able to sustain another year in the EU blacklist and the FATF greylist without serious damages. If risk-averse investors continue to pull out funds, the financial industry that contributes up to 13% to GDP and employs 8695 professionals will rapidly decline and further weaken national economic resilience. Financial institutions are actively working to strengthen legal frameworks and improve both monitoring and reporting mechanisms to rebuild the credibility of the Mauritian jurisdiction to avoid the emigration of large institutional investors to rival financial hubs.
“The cracks that have appeared in the wall since last year now threatens the whole economic infrastructure. The risk of economic model collapse is real and is being taken seriously. As part of the institutional response, the Cabinet has asked MAF to work on viable solutions that can help the country ward-off threats on the medium and long term. It is in this difficult context that the Mauritius World Trade Center (MWTC) project has been submitted and approved by the Minister”, a MAF official told Matinale.
Quote: “The cracks that have appeared in the wall since last year now threaten the whole economic infrastructure. The risk of a collapse of the Mauritian economic model is real.”
The prime concerns of industry operators, especially banks, are the medium and long-term reputational as well as the operational risks that are direct consequences of the EU blacklisting and the FATF greylisting. Correspondent banks based in the EU may, in time, refuse to service the requirements of local banks and international cash transfers will take days if not weeks to be processed. While a wide-array of measures are being adopted to enforce additional safeguards, the MWTC is intended to be an additional programme that will attract investors with a new set of incentives and connect existing industry operators to a 315 strong worldwide network of international businesses and institutional stakeholders.
Quote: “The Mauritius World Trade Center Tower will be the visible part of a wider strategy”
“The MAF as the main promoter, has the capacity to apply for a license from the World Trade Center Association that will plug the Mauritius financial sector to a global network. The Mauritius World Trade Center Tower is only the visible part of this strategy that will provide the country with an iconic high-rise building that will offer integrated trade services to business members under the umbrella of a prestigious brand”, claims the MAF official. Already, the infant MWTC is generating interest. “Following the Expression of Interest that MAF has issued on the MWTC, 7 international groups, linked with existing WTCs have expressed interests in participation” our source shared. In the MAF’s and the MOFED’s eyes, “This is not only a strong indicator of the MWTCs own chances of success but also a vote of confidence for the Mauritius jurisdiction as a whole”.
Quote: “The response that we had from the Expression of Interest is not only a strong indicator of the MWTCs own chances of success but it is also equal to a vote of confidence for the Mauritius jurisdiction as a whole”.
Doubts
Industry operators have expressed doubts about the World Trade Centers both privately and publicly since the project was made public a week ago. Amit Bakhirta, CEO of Anneau, a financial services firm focused on investment management believes that the core of the problem is being shoved under the carpet.
“Whether we like it or not, international financial centers can only prosper if the host nurtures and maintains strong relationships with the major powers likely to dominate global political economy. Geopolitics more than ever before determines the future of nations. Thus, the prime duty of policy-makers should be to devote as much resources as needed to re-establish sound diplomatic and financial links with the United States and the United Kingdom. If we don’t sort out our geopolitical and territorial differences with these countries, the risks that the efforts currently undertaken by the State will be in vain will remain high” argues Amit Bakhirta.
Quote: “If we don’t sort out our geopolitical and territorial differences with the United States and the United Kingdom, the efforts of Mauritius although carried out in good faith are likely to fail”
He recommends that funds be set aside by Government to recruit top international funds managers with considerable experience in negotiation with large investment funds and governmental institutions in the Unites States, the United Kingdom and the European Union. In his opinion, recruiting former technocrats, such as former central banker Mervyn King for advice is not enough; “Mauritius need leaders in international relationship management in decision-making positions. We are already lagging behind in this process. Rwanda is a sound example of what should be done. Tidjane Thiam’s weight in trade negotiations between this Rwanda’s officials and Western powers is undeniable. If we want to catch up, we have to put our money where our mouth is”.
For Amit Bakhirta, the upgrading of the capabilities of the existing Mauritian diplomatic team is needed as well as setting up an elite team of international caliber that will oversee the acceleration the internationalization process of our economy. These measures would account for addressing partly the root cause of the EU blacklisting and FATF greylisting and the economic crisis as a whole.
Mauritian Economy in Figures:
Projected Real GDP Growth for 2021: 6.6%
Unemployment Rate: 10.9%
Inflation Rate: 2.6%
Current Account Balance(% of GDP): -14.7%
General Gross Government Debt (% of GDP): 87.7%
Source: IMF Data Mapper, April 2021.
