Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No. 73083-MU
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
PROGRAM DOCUMENT
FOR
A PROPOSED LOAN
IN THE AMOUNT OF GBP 9.6 MILLION
(US$15 MILLION EQUIVALENT)
TO THE
REPUBLIC OF MAURITIUS
FOR A
SECOND PRIVATE SECTOR COMPETITIVENESS
DEVELOPMENT POLICY LOAN
February 25, 2013
Finance and Private Sector Development
AFCS4 Country Management Unit
Africa Region
This document has a restricted distribution and may be used by recipients only in the performance of their official
duties. Its contents may not otherwise be disclosed without World Bank authorization.


��M A U R I T I U S   -   G O V E R N M E N T   F I S C A L   Y E A R 
J a n u a r y   I   -   D e c e m b e r   3 1 
C U R R E N C Y   E Q U I V A L E N T S 
( E x c h a n g e   R a t e   E f f e c t i v e   a s   o f   J a n u a r y   3 1 ,   2 0 1 3 ) 
C u r r e n c y   U n i t   =   M a u r i t i u s   R u p e e 
U S $ 1 . 0 0   =   R s .   3 0 . 3 0 
W e i g h t s   a n d   M e a s u r e s 
M e t r i c   S y s t e m 
A B B R E V I A T I O N S   A N D   A C R O N Y M S 
A D S L                                     A s y n c h r o n o u s   D i g i t a l   S u b s c r i b e r   L i n e   ( a   f i x e d - l i n e   b r o a d b a n d 
t e c h n o l o g y ) 
A F D                                       A g e n c e   F r a n � a i s e   d e   D e v e l o p m e n t   ( F r e n c h   D e v e l o p m e n t 
A g e n c y ) 
A f D B                                     A f r i c a n   D e v e l o p m e n t   B a n k 
B D S                                       B u s i n e s s   D e v e l o p m e n t   S e r v i c e s 
B o l                                       B o a r d   o f   I n v e s t m e n t 
B o M                                       B a n k   o f   M a u r i t i u s 
C A                                         C e r t i f i c a t i o n   A u t h o r i t i e s 
C C M                                       C o m p e t i t i o n   C o m m i s s i o n   o f   M a u r i t i u s 
C P S                                       C o u n t r y   P a r t n e r s h i p   S t r a t e g y 
D B M                                       D e v e l o p m e n t   B a n k   o f   M a u r i t i u s 
D P L                                       D e v e l o p m e n t   P o l i c y   L o a n 
E o I                                       E x p r e s s i o n   o f   I n t e r e s t 
E U                                         E u r o p e a n   U n i o n 
F D I                                       F o r e i g n   D i r e c t   I n v e s t m e n t 
G D P                                       G r o s s   D o m e s t i c   P r o d u c t 
G o M                                       G o v e m m e n t   o f   M a u r i t i u s 
I B R D                                     I n t e r n a t i o n a l   B a n k   f o r   R e c o n s t r u c t i o n   a n d   D e v e l o p m e n t 
I C A                                       I n v e s t m e n t   C l i m a t e   A s s e s s m e n t 
I C A C                                     I n d e p e n d e n t   C o m m i s s i o n   a g a i n s t   C o r r u p t i o n 
I C T                                       I n f o r m a t i o n   a n d   C o m m u n i c a t i o n   T e c h n o l o g y 
I C T A                                     I n f o r m a t i o n   T e c h n o l o g i e s   C o m m u n i c a t i o n   A u t h o r i t y 
I D A                                       I n t e r n a t i o n a l   D e v e l o p m e n t   A s s o c i a t i o n 
I F C                                       I n t e r n a t i o n a l   F i n a n c e   C o r p o r a t i o n 
I F C C                                     I n t e r n a t i o n a l   F i n a n c e   C o n s u l t i n g   G r o u p   o f   C a n a d a 
I M F                                       I n t e r n a t i o n a l   M o n e t a r y   F u n d 
L A V I M S                                 L a n d   a n d   A d m i n i s t r a t i o n   V a l u a t i o n   I n f o r m a t i o n   M a n a g e m e n t 
S y s t e m 
M B G S                                     M a u r i t i u s   B u s i n e s s   G r o w t h   S c h e m e 
M C I B                                     M a u r i t i u s   C r e d i t   I n f o r m a t i o n   B u r e a u 
M & E                                       M o n i t o r i n g   a n d   E v a l u a t i o n 
M N F                                       M o v i n g   t h e   N a t i o n   F o r w a r d 
M o B E C                                   M i n i s t r y   o f   B u s i n e s s ,   E n t e r p r i s e   a n d   C o o p e r a t i v e s 
M o F E D                                   M i n i s t r y   o f   F i n a n c e   a n d   E c o n o m i c   D e v e l o p m e n t 
M S M E                                     M i c r o ,   S m a l l   a n d   M e d i u m   E n t e r p r i s e s 


﻿NEF                  National Empowerment Foundation
NICE                 National Institute for Cooperative Entrepreneurship
NLTA                 Non-Lending Technical Assistance
NRF                  National Resilience Fund
NWEC                 National Women's Entrepreneur Council
OCW                  Out of Court Workout
PBB                  Program Based Budgeting
PDMA                 Public Debt Management Act
PEFA                 Public Expenditure Financial Accountability
PFM                  Public Financial Management
PKI                  Public Key Infrastructure
PPP                  Public Private Partnership
PSC                  Private Sector Competitiveness
PSP                  Public Sector Performance
RTA                  Reimbursable Technical Assistance
ROSC                 Report on the Observance of Standards and Codes
SBM                  State Bank of Mauritius
SMEs                 Small and Medium Enterprises
SMP                  Significant Market Power
SMEDA                Small and Medium Development Authority
TA                   Transactions Advisor
UBEB                 United Business Enterprise Board
UNDP                 United Nations Development Program
Vice President: Makhtar Diop
Country Director: Haleh Z. Bridi
Sector Manager: Irina Astrakhan
Task Team Leader: Smita Kuriakose


﻿
﻿REPUBLIC OF MAURITIUS
SECOND PRIVATE SECTOR COMPETITIVENESS
DEVELOPMENT POLICY LOAN
TABLE OF CONTENTS
LOAN       PROGRAM    SUM M ARY  ...................................................................................................................... iii
PROGRAM DOCUMENT DATASHEET ......................................................................................................vi
I.    IN TR O D U CTIO N................................................................................................................................... 1
H.    COUNTR    Y  CONTEXT     .......................................................................................................................... 3
A.    Recent Developments And Macroeconomic Policy Framework ................... 3
in Mauritius                    ....................................................... 3
B.    Macroeconomic Outlook and Debt Sustainability   ......................... 5
III. THE GOVERNMENT'S PROGRAM AND PARTICIPATORY PROCESSES............. 9
A.    Government Program.......................9......                 ...............9
B.    Public Budget Consultative Process and Transparency  ............       .......... 13
IV.   BANK SUPPORT TO THE GOVERNMENT'S PROGRAM.........................................................14
A.    Link to the Country Partnership Strategy ................................ 14
B.    Collaboration with the IMF and other Donors    .................................. 14
C.    Relationship to other World Bank Operations   ................................ 16
D.    Lessons Learned ......................................                ........... 17
E.    Analytical Underpinnings         .......................................... 18
V.    PRIVATE SECTOR COMPETITIVENESS DEVELOPMENT POLICY LOAN.......................21
A.    Operation Description............................................. 21
B.    Policy Areas             ..........................................   .........21
VI.   OPERATION IMPLEMENTATION .............................................................................................. 41
A.    Poverty and Social Impacts         ...............................     ......... 41
B.    Environmental Aspects............................................42
C.    Implementation, Monitoring And Evaluation     ..................       ..........42
D.    Fiduciary Aspects           ................................................... 42
E.    Risks and Risk Mitigation         ...............................     .......... 43
Figures and Tables
Figure 1: Value Added as a share of GDP (in percentage)                           ..............3.......... ............3
Figure 2: Broadband prices in selected low and middle-income economies, in US$ Purchasing Power Parities,
per month      ..................................................................38
Table 1: Exports and Tourist Arrivals, 2011 and 2012.........................................4
i


﻿Table 2: Selected Economic Indicators and Projections, 2009-2015  ................................7
Table 3: Evolution of Proposed Indicative Triggers to Prior Actions for DPL2 ..........................23
Annexes and Boxes
Annex 1: Operations Policy Matrix .................................................... 46
Annex 2: Letter of Development Policy ................................................. 49
Annex 3: IMF Relations Note...... .................................................. 57
Annex 4: Statement of Loans and Credits                               ....................... ..................  61
Annex 5: Country Context.......................................................... 62
Annex 6: Map of Mauritius                    .......................................................... 64
Box 1: The Impact of the European Economic Slowdown on the Mauritian Economy ...................4
Box 2: Good Practice Principles for Conditionality                        ..........................................22
This Loan was prepared by an International Bank of Reconstruction and Development (IBRD) team consisting of
Smita Kuriakose (Task Team Leader, Economist), Tim Kelly (Senior ICT Policy Specialist), Antonia Preciosa
Menezes (PSD Specialist), Mahesh Uttamchandani (Lead PSD Specialist), Brinda Devi Dabysing (PSD Specialist),
Asya Akhlaque (Senior Economist), Nataliya Mylenko (Senior Financial Sector Specialist), Kailash Sharma
Ramnauth (Senior Investment Officer), Aurora Ferrari (former Service Line Manager- Financal Inclusion),
Andrew Lovegrove (Consultant), Andrew Singer (Consultant), Rafael Munoz Moreno (Senior Economist), Vasish
Ramkhalwon (Operations Officer), Patrick Kabuya (Senior Financial Management Specialist), Wolfgang Chadab
(Senior Finance Officer), Solange Alliali (Lead Counsel), Shahrzad Mobasher Fard (Research Analyst), Yeshareg
Dagne (Program Assistant) and Khurshid Banu Noorwalla (Team Assistant).
11


﻿LOAN PROGRAM SUMMARY
REPUBLIC OF MAURITIUS
SECOND PRIVATE SECTOR COMPETITIVENESS
DEVELOPMENT POLICY LOAN
Borrower               Republic of Mauritius
Implementing Agency    Ministry of Finance and Economic Development
Financing Data         IBRD Loan: Development Policy Loan (DPL). The proposed
loan amount is US$15 million.
Operation Type        Programmatic DPL (two operations). The proposed operation
is the second and the final of the series.
Main Policy Areas      Enterprise  Competitiveness, Access  to  Finance, and
Information and Communications Technology (ICT) including
e-Govemment.
Key Outcome            1.    Improving Enterprise Growth and Competitiveness
Indicators            *   Number of enterprises accessing "generic" and specialized
business development services (BDS) increased;
*  Development of a Monitoring and Evaluation Framework
for BDS schemes;
*  Number of insolvency practitioners registered;
*  Number of banks using out-of-court workouts;
2.    Improving Access to Finance
*  Development Bank of Mauritius (DBM) restructured by
the sale of its non banking assets;
*  A new licensed commercial Bank with a focus on the
Micro, Small and Medium Enterprises (MSME) segment
established;
*  Reduction in time taken to register property;
*  Completion of the necessary legislative amendments for
the facilitation of secured lending transactions;
*  Increase in coverage of the credit information bureau;
3.    Promoting ICT usage and e-Gov Reforms for Increased
Efficiency and Transparency Gains
*  Increase in number of broadband subscriptions with actual
speeds of at least 10 Mbit/s;
*  Decrease in the price per 1 Mbit/s per month of broadband
service, fixed and mobile; and
*  Increase in the number of public services that can be
111


﻿executed via secured online transactions.
Program Development     The development objective of the programmatic series is to
Objective(s) and        strengthen  the policy  and  institutional environment in
Contribution to Country  Mauritius  to  support  competitiveness  and  enterprise
Partnership Strategy    development. The operation will achieve this by supporting
(CPS)                   reforms in three integrated and mutually reinforcing pillars:
(i)   Improving enterprise growth and competitiveness;
(ii)  Improving access to finance; and
(iii)  Promoting ICT usage and e-Government reforms for
increased efficiency and transparency gains.
For each of these pillars, prior actions have been identified
that create the underpinnings to support the reform processes.
A facilitative business environment and greater access to
finance, coupled with improvements in the ICT sector, will
increase enterprise competitiveness and facilitate access to
export markets.
The proposed DPL is consistent with the objectives of the
Country Partnership Strategy (CPS) for the period 2007-13
which was presented to the Board in October 2006 and the
CPS Progress Report of May 2011. The proposed DPL is
aligned with four CPS pillars, in particular improving
competitiveness and investment climate along with inclusion
and fiscal consolidation themes of reform.
Risks and Risk         The implementation of the proposed reform program entails a
Mitigation             number of risks:
(a) The challenge of maintaining macroeconomic stability in
the face of continuing uncertainty in global developments and
the ongoing economic slowdown. The Government has the
means and tools to cope with external economic uncertainties,
though a firm commitment will be needed to rein in public
expenditure and accelerate economic reforms if the global
economic slowdown lingers.
(b) Political risks that may affect the pace of the reform
program at a time when the need for reform is most urgent,
given the economic slowdown and global economic
uncertainties. This DPL aims to mitigate this risk by
supporting reforms where consensus exists, helping to put in
place building blocks to expedite the reform program in the
medium term. In addition, the policies supported by the
proposed DPL will contribute significantly to help mitigate the
I political risks through measures that emphasize equity
iv


﻿concerns by focusing particularly on the development of
SMEs.
(c) Limited institutional capacity within the sector ministries to
lead and implement the reforms. The DPL series has been
instrumental in building bridges among different ministries
involved in the implementation of the reform program, thereby
enhancing coordination. The Bank is supporting the
government to help mitigate this risk by bringing specialized
staff to complement the DPL dialogue in selected areas, and
promoting a public debate through articles and technical notes.
Through the Non Lending Technical Assistance which
complements this operation, the Bank has provided analytical
and operational support to line ministries. Additionally, the
DPL itself is a catalyst between the different ministries
involved in the reform program, thereby enhancing
coordination. Furthermore, a Services Agreement for
Reimbursable Technical Assistance (RTA), signed by the
Bank and the government, is available to further strengthen
institutional capacity in line ministries where needed.
Operation ID           P132510
v


﻿
﻿PROGRAM DOCUMENT DATASHEET
REPUBLIC OF MAURITIUS
SECOND PRIVATE SECTOR COMPETITIVENESS
DEVELOPMENT POLICY LOAN
Date: February 25, 2013                 Lending Instrument: Development Policy
Country: Republic of Mauritius          Lending
Operation: Mauritius Second Private Sector  Board Approval Date: March 26, 2013
Competitiveness Development Policy Loan  Effectiveness Date: June 26, 2013
Operation ID: P132510                   Closing Date: June 30, 2014
Team Leader: Smita Kuriakose            Environmental screening category: N/A
Sector Manager: Irina Astrakhan         Sectors: General industry and trade sector
Sector Director: Gaiv Tata              (45%); SME Finance (20%); Information
Country Director: Haleh Z. Bridi        technology (20%); Credit Reporting and
Secured Transactions (15%)
Themes: Other Private Sector Development
(60%); Other Financial Sector Development
________________________________(20%); e-Services (20%)
Special Development Policy Lending:              [Yes     [X] No
Crisis or Post-Conflict Situation (exception to  [Yes     [X] No
0P8.60):
Programmatic:                                   [X]Yes   [No
Deferred Drawdown Option:                      DYes       [X] No
Subnational Lending:                             [Yes     [X] No
Operation Financing Data
[X] IBRD Loan   [IDA Credit   [Grant         [Other:
Total Bank financing (US$m.): 15
1Proposed terms: Fixed spread loan payable in 18 years, (including 5 years grace period)
Tranche Release Information
Single tranche to be released upon effectiveness.
Does the operation depart from the CAS in content or other significant  [ ]Yes [X] No
respects?
Does the operation require any exceptions from Bank policies?  0    ]Yes [X] No
Have these been approved by Bank management?                      [ ]Yes [X] No
Is approval for any policy exception sought from the Board?       [ ]Yes [X] No
Program Development Objective of the DPL programmatic series is to strengthen the policy
and institutional environment in Mauritius to support competitiveness and enterprise
development. The operation will achieve this by supporting reforms in three integrated and
mutually reinforcing pillars: (i) improving enterprise growth and competitiveness, (ii)
improving access to finance, and (iii) promoting ICT usage and e-Goverment reforms for
increased efficiency and transparency gains.
vi


﻿
﻿PROGRAM DOCUMENT
REPUBLIC OF MAURITIUS
SECOND PRIVATE SECTOR COMPETITIVENESS
DEVELOPMENT POLICY LOAN
I. INTRODUCTION
1.   Having successfully become an upper middle income country, Mauritius now strives to
become a high income nation. Ranked only behind South Africa in the Africa Region on The
World Economic Forum's Competitiveness Index and the first in Africa on the World Bank
Ease of Doing Business indicator; Mauritius is recognized as one of the most competitive and
2
business-friendly locations . Mauritius has moved from an import substitution strategy which
was not very successful given its small local economy towards greater export diversification
through industrialization. From being a predominantly agricultural economy, based on sugar
production it has been able to diversify into textiles exports, tourism and more recently
financial services, offshore global business and ICT which have developed as the economy's
new pillars. However, achieving the high income nation status requires keeping up to and
surpassing the pace of reforms set by its competitors.
2.    The manufacturing sector in Mauritius is facing increasing competitive pressure from
increasing global competition in the export markets especially in light of the ongoing
European slowdown which being the country's main export market is taking a toll on
Mauritius' economy. Gross Domestic Product (GDP) growth is estimated to be 3.3 percent in
2012, vis-d-vis the 3.7 percent projection made when the first operation of this DPL series
was approved (March 2012), and below government budget projections of close to 4.1
percent. The European economic downturn has had a significant impact on Mauritian exports
in 2012 with a noted decline in tourist arrivals from the major European markets.
3.    The competitiveness agenda, thus, remains central to achieving the Government's
program of reforms. With a view to weather the slowdown accompanied by the current global
economic crisis; to boost economic growth through higher productivity and to increase high
value added exports, the new Government Program, namely Moving the Nation Forward
(MFN) adopted in April 2012, and the 2013 Budget Speech astutely remain committed on
continuing to support the competitiveness agenda for development of the manufacturing and
services sector. It emphasizes the need to gain greater global competitiveness through the
need to promote technology investments to improve quality of Mauritian exports to enable
entry into new markets abroad. Also, this reemphasizes the need to prioritize the Small and
Medium Enterprise (SME) sector which is an important source of job creation and growth.
4.    The DPL series is consistent with the objectives of the Country Partnership Strategy
(CPS) 2006, and the CPS Progress Report of May 2011, that underlines improving
competitiveness and investment climate as its central theme of reforms, along with promoting
1 Government Program 2012-15, GoM, April 2012.
2 The Doing Business Ranking has moved from 24 to 19 in the 2013 Doing Business Report.
1


﻿inclusion and fiscal consolidation. Further, the DPL programmatic series is well aligned to the
World Bank's Africa Strategy that focuses on competitiveness and employment, and
vulnerability and resilience as its two pillars, with governance and public sector capacity as its
foundation.
5.    This Second Private Sector Competitiveness Development Policy Loan (PSC-DPL2),
in an amount of US$15 million, is the second and the last in a series of two annual
programmatic operations in support of the Government's medium-term reform program that
centers on competitiveness and equity as its twin pillars. The series aims at strengthening the
policy and institutional environment in Mauritius to support competitiveness and enterprise
development. This DPL operation will continue to focus on accelerating reforms in support
of private sector competitiveness by (i) supporting the growth of new business enterprises
through demand driven business development schemes (BDS) and greater access to finance;
(ii) making business exit easier; and (iii) promoting ICT usage and e-Government reforms for
increased efficiency and transparency gains.
6.    There has been encouraging progress in implementing the reform program since the
PSC DPL1, with reforms in some sectors going beyond what was initially envisaged. These
include more substantial regulations being passed to operationalize the Mauritian Insolvency
Act 2009 making debt resolution regimes more effective; the development of a National
Broadband Policy (NBP); and the implementation of policy reforms to increase competition
in the ICT sector. Progress to date on the measurable indicators is highlighted in Annex 1.
Through the Bank's non-lending technical assistance (NLTA), technical assistance and
support was provided to help develop a pipeline of financial and private sector development
policy reforms for this Second PSC DPL. This proved to be a very useful tool, as it helped
provide technical expertise and global best practice on policy and institutional issues
informing policy dialogue.
7.    The Second PSC DPL is being designed in coordination with the Second Public Sector
Performance (PSP) DPL which is being presented jointly to the Board. The two DPL series
are designed to be mutually reinforcing to address complementary aspects of Mauritius'
reform program and the CPS for the period 2007-13. The PSP DPL focuses primarily on the
performance of the public sector, while this PSC DPL focuses primarily on strengthening the
policy and institutional environment for private sector competitiveness. It is the combination
of the reforms supported by these two DPL series that will help the Republic of Mauritius
improve its competitiveness, increase its economic resilience, and prepare it for the next phase
of rapid and inclusive economic growth.
Refer to Africa's Future and the World Bank's Support to It. World Bank (March 2011).
2


﻿II. COUNTRY CONTEXT
8.    The   Republic  of      Figure 1: Value Added as a share of GDP (in percentage)
Mauritius has had an 80
impressive   development
record. Between 1985 and
2007,    the   Mauritian  40
economy expanded at an
average annual growth rate 20
of 5 percent on the strength
of the exports of garments,  0
agricultural  commodities       Primary Sector   Secondary Sector   Tertiary Sector
(principally      sugar),  Source: Statistics Mauritius
seafood, and tourism  services. Years of rapid growth have transformed the economy.
Agriculture now accounts for less than 4 percent of GDP, manufacturing for 17 percent of
GDP, and the share of services is increasing (Figure 1). The manufacturing sector remains a
strong contributor to employment in Mauritius.
9.    However, the economy is showing signs of slowdown due to the current global
economic uncertainty. GDP growth though positive, has remained below the level necessary
to achieve the country's aspiration of becoming a high-income nation by the next decade. The
main export market remained the European continent with a share of 57.8 percent, while at a
country level the United Kingdom was the main buyer, accounting for 19.2 percent of total
exports. The other main markets were France (13.0 percent); USA (9.9 percent); South Africa
(9.9 percent) and Spain (7.4 percent). There have been some improvements in 2012, where
the exports to Europe have increased by 2.6 percent as compared to 2011. The unemployment
rate is estimated at 8.0 percent for the year 2012, as compared to 7.9 percent in 2011.
10.   The MNF, April 2012, lays emphasis on focused export promotion to improve
opportunities in new emerging markets; an increased focus on economic diversification by
helping build industrial expertise; and providing value added services in the financial services
sector. Among other things, the program continues to promote better targeting of foreign
investment into the services sector, promote SMEs development through access to finance and
business development services, upgrade tertiary level technical skills, and improve
infrastructure, particularly in ICT.
A.    RECENT DEVELOPMENTS AND MACROECONOMIC POLICY FRAMEWORK
IN MAURITIUS
11.   Expansionary macroeconomic policies have enabled the economic recovery in
Mauritius that followed the 2008/2009 global financial crisis. Real GDP growth slowed from
5.5 percent in 2008 to 3.1 percent in 2009 amid the financial crisis, before rising to around 4.2
percent in 2010. GDP growth subsequently slowed to 3.8 percent in 2011 and 3.3 percent in
2012 in the wake of renewed turbulence in the global economy. The government's
consolidation efforts initiated prior to 2008 had created the fiscal space needed to adopt an
expansionary macroeconomic policy stance. Between 2009 and 2011, fiscal stimulus
measures, which mostly consisted of targeted programs to assist firms and workers,
3


﻿cumulatively accounted for about 7.5 percent of GDP. On the aggregate demand side,
government consumption and investment contributed the most to growth in 2009, followed by
a recovery in exports in 2010, and an increase in inventories in 2011. On the supply side, in
line with the evolving structure of the economy over the last decade, overall growth was led
by the service sector, particularly real estate services, hotels and restaurants, and financial
intermediation. These together now account for 23 percent of GDP, up from 18 percent in
1990. Hotels and restaurants, the sectors that suffered the most in 2009, rebounded in 2010.
12.    Despite the challenges to growth on the external front and the lower-than-expected
expansionary fiscal policy, the economy is still projected to have grown by 3.3 percent in
2012 according to latest estimates from Statistics Mauritius. This is below the 3.7 percent that
was projected when the first operation in this DPL series was approved (in March 2012) and
below the government's 2012 budget projections of 4.1 percent. This could be attributed to a
large extent to the slowdown in the European market to which Mauritius is very exposed to
(Box l).
Box 1: The Impact of the European Economic Slowdown on the Mauritian Economy
The main areas where economic shocks from the global economy have manifested in
Mauritius are tourism, exports and commodity imports. The European economic downturn
is adversely affecting Mauritius as the country remains highly dependent upon European
markets. Exports and tourism from major European markets has stagnated during 2012 in
terms of arrivals (see table below). This is being compensated for by increasing tourist
arrivals and exports from Africa and Asia, but overall tourist arrivals remained lackluster
during 2012. Imports, in turn, rose by 19 percent in 2012 compared to 2011, led by rising
food (20 percent increase) and fuel (35 percent increase) imports.
Table 1: Exports and Tourist Arrivals, 2011 and 2012
2011       2012     % Change
Exports of Goods     62,358     67,991      9.0
To Europe            38,328     39,308      2.6
To Africa            3,488      5,137       47.3
To Asia              13,140     15,980      21.6
Tourist Arrivals    964,642    965,441      0.1
From Europe         609,648    560,699      -8.0
From Africa         231,174    265,215      14.7
From Asia            91,057    104,336      14.6
Source: Statistics Mauritius
13.    The fiscal position is improving, and the Government achieved greater debt
consolidation in 2012 than had originally been expected. The budget deficit for 2012 is now
likely to be lower than projected (2.3 percent of GDP actual versus 3.7 percent of GDP
projected).4 There has been a stronger than anticipated decline in recurrent expenditures as
4 Both the total spending and the fiscal deficit figures have been corrected taking into account the spending from
extra-budgetary funds. For 2012, we estimate a 0.4 percent of GDP contribution from extra-budgetary funds to
the overall fiscal deficit.
4


﻿well as in public investment - each amounting to 1.1 percent of GDP - that were only
partially offset by a 0.8 percent decline in revenues induced by the economic slowdown. As a
result, total public sector debt was brought down to 56.5 percent of GDP in 2012 compared to
57.4 percent in 2011 (Table 2).
14.   The Government adopted a slightly more accommodating monetary policy stance in
2012 than in 2011, but it remains cautious nonetheless. The Bank of Mauritius reversed its
tightening monetary policy in December 2011 as a result of the domestic economic slowdown
and global uncertainties. The repo rate was further reduced to 4.9 percent in March 2012 and
has been kept unchanged ever since. This more accommodative monetary policy was
facilitated by a decline in inflation from 6.5 percent in 2011 to 3.9 percent in 2012, in part
related to the slowdown in food prices as well as the appreciation of the rupee against, most
notably, the Euro. In November 2012, the Bank of Mauritius' Monetary Policy Committee
expressed its concerns over the projected increase of the inflation rate to 6 percent in 2013
due to increasing food and oil prices, the recent rupee depreciation, and the impact of the
public sector salary increase due to be awarded in 2013 as part of the Pay Research Bureau
report. This adds to the MPC's previous worries about the effects of prevailing negative real
interest rates on savings deposits and on corporate indebtedness. As such, the Bank of
Mauritius stands ready to revisit its policy in order to avoid any second-round effects on
prices and wages.
15.     The Bank of Mauritius has stepped up its sterilized interventions in the foreign
exchange market to respond to the rupee appreciation and to build additional buffers against a
potential economic slowdown. The rupee's appreciation - 5.5 percent nominal appreciation
vis-d-vis the Euro between June 2011 and June 2012 - largely stemmed from relatively
buoyant capital inflows, including Foreign Direct Investment (FDI), growing government
external borrowing (albeit on a sustainable trajectory), and large net capital inflows to the
banking sector. In response, the Bank of Mauritius is implementing a medium-term program
to increase foreign exchange reserves to six months of imports of goods and services (from
4.3 months as at the end of December 2011), with parallel sterilization of the additional
money supply. By December 2012, foreign reserves increased by US$268 million to reach
US$2.9 billion or 4.5 months of imports of goods and services. As a result of this
intervention, the rupee has depreciated by 3.4 percent vis-d-vis the Euro between June 2012
and December 2012.
B.    MACROECONOMIC OUTLOOK AND DEBT SUSTAINABILITY
16.   Real gross domestic product (GDP) is projected to rise by 3.7 percent in 2013, but this
forecast remains subject to a downward revision should various risks to global economic
growth materialize. This forecast is based on the assumptions that measures will be
implemented to stimulate private investment, implement public investment, expand market
share in emerging economies and support growth in emerging sectors while traditional sectors
experience some consolidation. This projection also remains subject to a downward revision
should external uncertainty linger and global economic growth continue to stagnate. Growth
in GDP is expected to trend towards 4.5 percent by 2015 in line with the global economic
recovery and a fiscal policy that is guided by the debt strategy requirement of reducing the
total public sector debt-to-GDP ratio to 50 percent by 2018.
5


﻿17.    However, some downside risks to the economic outlook exist that could result in
economic growth deviating from these projections. Domestically, the main downside risks to
the economic outlook remain the slow pace of structural reforms to support growth, chief
among which is the need to increase the efficiency of the public sector. This is essential in
order to tackle critical bottlenecks in education and infrastructure. On the external front, the
key downside risks remain sluggish growth in external demand and the pressure that this may
put on the current account balance. Overall, these risks are manageable considering the
resilience that the Mauritian economy has shown in 2012 and given the available means and
tools to cope with external uncertainty.
18.    The Government envisages a prudent fiscal policy in 2013. The budget deficit for
2013 is projected to be 2.5 percent of GDP. Public spending is expected to edge up to 24.5
percent of GDP in 2013 (compared to 23.7 percent of GDP in 2012), with capital spending
projected at 3.1 percent of GDP, above 2012 outlays. Public revenues and grants are expected
to slightly increase to 21.9 percent of GDP and the Budget's fiscal deficit, including spending
from extra-budgetary funds, is expected to widen to 2.5 percent of GDP, up from an
anticipated 2.3 percent of GDP this year. The Government is seeking to strike a balance
between budget consolidation and measures to support growth. Special programs are being
implemented to support vulnerable sectors (such as SMEs) and groups (such as unemployed
youth and children) while seeking to ensure fiscal consolidation. The Government is trying to
achieve significant containment in transfers and subsidies (mostly transfers to parastatals and
the public sector), which reflects the Government's efforts to increase public sector efficiency
in these areas. These transfers and subsidies have already been reduced from around 6.3
percent of GDP in 2011 to 5.0 percent of GDP in 2012. A further decrease to 4.4 percent of
GDP is projected in 2013. The Government contemplates, in the event of lower than
accounted revenues; the key expenditures will be protected using the remaining resources
from the National Resilience Fund (1 .1 percent of GDP).
19.    Debt consolidation   will be   achieved  despite the   implementation  of the
recommendations of the 2012 Pay Research Bureau report, which will raise the central
government's wage bill by 19 percent in 2013. In practical terms, this adjusts public sector
wages by the equivalent of the accumulated inflation over the last five years. As only partial
adjustments were made during that time, mostly for lower rank grades, the PRB
recommended broadening the top to bottom pay ratio, which was only 7:1. For the central
6
government, the 19 percent increase in the wage bill for 2013 represents a sizeable amount of
its budget (0.6 percent of GDP), particularly considering the uncertain external environment
and the impact that it may have on the negotiation of private sector salaries. Private sector
salaries in the past have followed increases in the public sector, which, if this happens again
in this case, may put inflationary pressures on the economy.
For 2013, this includes additional 0.7 percent of GDP contribution from extra-budgetary funds.
6 The PRB projects the wage bill for the central government, parastatals, and local entities at 8.8 percent of GDP
in 2013, which represents an increase over the 8.2 percent of GDP recorded in 2008 at the time of the adoption
of the last pay review.
6


﻿Table 2: Selected Economic Indicators and Projections, 2009-2015
2((9   2010   2011   2012    2013     2014    2015
SEst.             Proj  rj  rj
(Percent of GDP, unless otherwise indicated)
National income, prices and employment
Real GDP Growth at market prices (%)     3.0    4.1    3.8    3.3     3.7      4.3     4.5
Growth in consumer prices (%)            2.5    2.9    6.5    3.9     5.7      4.6     4.7
Unemployment rate (%)                    7.3    7.8    7.9    8.0     8.2      8.0     7.7
Savings and investment
Gross national savings                   13.8   13.3  13.1   14.7     15.4    16.2     16.7
Gross domestic investment                26.4  23.6   25.7   24.7     25.1    25.3     25.5
(Governme*nt budge*t
Revenues and grants                      22.8  21.9   21.4    21.4    21.9    21.3     20.3
Tax revenue                            19.1   18.5   18.3   18.8    18.7     18.4     18.4
Total expenditure                        26.3  24.9   23.5   23.7     24.5    23.2     21.7
Current expenditures                   23.6   22.2   20.8   20.9    21.4     20.7     19.4
Compensation of employees             6.0    5.9    5.6    5.4     6.0      6.0     5.8
Use of goods and services             2.8    3.1    2.6    2.6     2.9      2.9     2.7
Interest payments                     3.8    3.4    3.0    3.0     2.7      2.6     2.6
Transfers and subsidies               6.6    5.5    6.3    5.0     4.4      4.0     3.7
Net acquisition ofnon-fmancial assets   2.7    2.7   2.7     2.8     3.1     2.5      2.2
Fiscal balance (including extrabudgetary funds)  -2.0  -3.0  -2.1  -2.3  -2.5  -1.9    -1.4
Net acquisition of financial assets      0.3    0.0    0.9    0.4     1.8      2.5     3.2
Borrowing requirements                   2.2    2.9    2.9    2.5     4.1      4.2     4.3
Balance of goods and services           -10.5  -12.2  -13.2  -13.0   -12.5    -11.9   -11.5
Exports of goods and services          47.1   50.9  52.6    53.8    55.1    54.9     54.5
Imports of goods and services         -57.6  -63.1  -65.8  -66.8   -67.6    -66.8    -66.0
Current account balance                 -7.4   -10.3  -12.6  -10.0   -9.6     -9.1     -8.7
FDI                                      2.5    3.1    1.6    1.7     1.5      1.5     1.6
Overall External Balance                 4.3    2.1    1.6    1.8     1.2      1.3     1.1
Net international reserves (M1ns USD)   2,304  2,448  2,631  2,892   3,044    3,195   3,368
Months of imports of goods and services, f.o.b.  5.1  4.8  4.3  4.5   4.6      4.6     4.6
Mlemorandanm items
Public sector debt                       59.6   57.4  57.4    56.5    55.8    55.0     54.3
Total external debt                      22.0  22.3   23.7   23.7     25.1    26.7     26.5
GDP at current market prices (Rs. Blns)  282.4  298.8  322.8  344.6  377.9    412.1   451.0
Sources: Mauritian authorities; IMF and World Bank staff estimates and projections
20.     The net financing requirements of the government are projected to increase from 2.5
percent of GDP in 2012 to 4.1 percent of GDP in 2013, around half of which will be used to
provide loans for infrastructure development. Significant efforts have been made to lengthen
the maturity of the domestic debt, with long-term debt (with a minimum maturity of five
years) having increased to 52 percent of total domestic debt in 2013, up from 49 percent in
2012 and 43 percent in 2011. This will help to alleviate some of the risk involved in the
significant amount of securities that were approaching maturity that had to be rolled over at a
potentially higher interest rate. In order to lengthen the maturity on its debt and reduce its debt
7


﻿servicing costs, the government is also increasingly relying on external loans. These will
represent 13.3 percent of GDP in 2013, up from 11.9 percent of GDP in 2012 when external
loans already financed more than half of the budget deficit. External loans are mostly
provided by international financing institutions. With these loans, the Government is seeking
to: (i) take advantage of low global and concessional interest rates; and (ii) extend term
maturities to reduce the risk of roll-over needs. These loans will mostly support government
investments in transport, energy, and water.
21.    The current account deficit will be financed by financial flows and, to a lesser extent
FDI. The current account deficit has widened from 7.4 percent of GDP in 2009 to 12.6
percent of GDP in 2011 mainly as a result of rising FDI-funded imports. This trend was
reversed in 2012 as a result of the growth in exports. Also despite an increase in imports, the
current account deficit is expected to narrow to 10 percent of GDP. Moving forward, the
current account deficit is projected to be further reduced to 9.6 percent of GDP in 2013 and
9.1 percent of GDP in 2014. Although the deficit is expected to be financed by financial flows
and FDI, further increases in the price of food and fuel, and a more severe and protracted
economic downturn in Europe than envisaged could lead to some deterioration in the deficit
and in the ease of access to FDI.
22.    The March 2012 Debt Sustainability Analysis projects a sustainable public sector debt
level for Mauritius over the medium-term. There was an increase in public sector debt from
52 percent of GDP in 2008 to 57.4 percent in 2011, resulting mainly from the implementation
of the stimulus packages but subsequent fiscal consolidation is projected to bring down the
total stock of public sector debt to 57 percent of GDP in 2013. The 2008 Public Debt
Management Act (PDMA), amended in 2010, imposed a ceiling of 60 percent of GDP on the
total amount of outstanding public sector debt, with the aim of reducing it to 50 percent of
GDP by the end of 2018 . Given current trends and policy, the medium-term debt trajectory is
likely to comply with the Act. Under a baseline scenario with a slight acceleration of
economic growth from 3.3 percent in 2012 to 4.2 percent beyond 2013 and a gradual
reduction of the fiscal deficit to 2 percent of GDP by 2014, the debt-to-GDP ratio would
gradually reach the PDMA 50 percent debt-to-GDP target by 2018.
23.    Risks of deviations from a sustainable trajectory remain. Under alternative scenarios
such as a depreciation of the rupee by 30 percent caused by a severe contraction of world
economy, the debt-to-GDP ratio could exceed 65 percent in 2018 which would be above the
PDMA ceiling. This would require the government to adopt more ambitious medium-term
fiscal consolidation measures, including slowing down the implementation of the investment
program and making efficiency gains in public expenditure. In the same vein, total external
debt (estimated at 23.7 percent of GDP in 2012) is projected to be sustainable, though it may
rise over the next few years to finance the public infrastructure program before stabilizing.
External debt sustainability is resilient to a 30 percent real depreciation of the rupee, but
external debt dynamics would become unsustainable over a five-year period should the
external current account deficit increase by 3 percentage points of GDP compared to the
baseline scenario.
7 The Public Debt Management Act 2008, as amended provides that for the purpose of Public Sector Debt
ceiling, public enterprise debt be discounted on the basis of prescribed criteria (i.e. managerial independence,
solid governance structure, market access, and limited risk). For 2012, public sector debt for the purpose of debt
ceiling was 53.1 percent of GDP compared to total public sector debt of 56.5 percent of GDP.
8


﻿24.   The November 2012 Bank of Mauritius Annual Report presents a picture of a sound
banking sector. Bank profits are high and their capital position is strong, with moderate
exposure to market risk and changes in interest rates. Stress-tests by International Monetary
Fund (IMF) staff have confirmed resilience of the banking sector to a variety of shocks. Loans
to non-residents accounted for more than 50 percent of total bank loans and 29 percent of
banks' total assets in 2011. These loans, predominantly financed by domestic residents and to
a lesser extent Europe, were heavily concentrated in Asia and particularly, in India, with
Mauritius serving as an intermediary of funds to this country. During the first nine months of
2012, roughly 73 percent of bank credit to residents was offered to the domestic corporate
sector, with construction receiving the largest share at 26 percent followed by tourism (18
percent), trade (12 percent) and manufacturing (8 percent). The Bank of Mauritius is offering
credit lines in foreign exchange accounts to cushion potential currency mismatches. Also,
household indebtedness to banks rose from 12.8 percent of GDP to 17.2 percent between
2006 and 2011, 61 percent of which was for mortgages.
25.   Overall, the macroeconomic framework is adequate for development policy lending.
While the global economic slowdown took a toll on the Mauritian economy in 2012 and
global economic uncertainties may continue in 2013, the economy has already proved - as in
2008 - to be highly resilient to external shocks, and the government has the means to cope
with these external shocks in the short and medium term.
III. THE GOVERNMENT'S PROGRAM AND PARTICIPATORY
PROCESSES
A.    GOVERNMENT PROGRAM
26.   Mauritius has built much of its successful development record since its independence
on pro-active and effective growth strategies. The National Long-Term Perspective Study,
also known as Vision 2020, was a long-term development vision conceived in the 1990's with
the objective of opening up and diversifying the economy by moving towards high value-
added products, skills development and a knowledge-intensive economy. In April 2012, the
Government presented its new program, "Moving the Nation Forward" (MNF) for 2012-15.
The MNF represents the third major policy platform since the current Government came to
power in 2005, providing a broad vision for development of the country. A commission has
been established to translate the MNF vision into a set of coherent programs with well-
defined priorities, timelines and performance indicators. The MNF proposes the setting up of
a National Strategic Transformation Commission, which will in consultation with all
stakeholders, make recommendations on: optimal use of resources, inclusive growth,
sustainable development, urban planning and land zoning as well as promotion of new
sectors. MoFED is coordinating the preparation of the 10-year Economic and Social
Transformation Plan. This plan will focus on enhancing the incentive framework and
developing and upgrading human resources to support job and income growth in a sustainable
and equitable way so that Mauritius can move to a High-Income Nation status.
9


﻿27.    The main objective of the MNF is to assist the country in becoming a high income
country over the next ten years with per capita income rising from US$8,000 to more than
US$14,000. The MNF seeks to "...raise the skills and capacities of our people, harness the
power of technology, modernize and streamline... institutions, accelerate innovation in
existing industries and encourage diversification and growth in new and more sophisticated
sectors."8 The MNF contains the following six pillars covering economic, political, social and
environmental issues.
Pillar 1: Prosperity for all
28.    The Government remains committed to the path that has produced economic growth in
the last seven years, particularly with regards to the principles of promoting an open and
market friendly environment, low taxes and streamlined regulations. However, in view of the
rapidly changing world economy, including the rising importance of emerging markets and
the new challenges that the domestic economy faces, the Government aims to reduce the
country's dependence on Europe, increasing its exposure to higher growth economies, while
at the same time moving up the value chain and encouraging growth, investment and jobs in
new sectors.
29.    New sectors such as the "ocean economy" are being harnessed to accelerate growth in
the medium term. The Government intends to prepare a plan for the development of an ocean
economy taking advantage of its very large exclusive economic zone (2.3 million square
kilometers or about 1,000 times the country's land area). This includes fundamental and
applied research on the ocean and the development of a regional fisheries management plan
and related legislation, which will ensure that the fishing industry remains economically and
environmentally sustainable.
30.    Reform in traditional sectors such as sugar and tourism will be accelerated. The
sugarcane sector continues to face the consequences of the dismantling of the Sugar Protocol
that is part of the continuing reform of the European Union (EU) Common Agricultural
Policy, as well as the abandonment of lands by small planters. Hence, the Government intends
to step up the reform of the cane industry as well as modernize and diversify the agro-food
production sector to make it competitive and sustainable.9 In tourism, the Government aims to
attract visitors from a broader spectrum of countries, increasing spending per tourist, and
developing new tourism products. This will be achieved by improving the country's
attractions, visibility and accessibility.
31.    In the financial sector, the Government intends to support the diversification of the
global business sector. In particular, it will upgrade the legal and regulatory framework to
encourage the sector to provide more value added products to enhance Mauritius'
attractiveness as an international financial center, with a major focus on providing fully
integrated services and tapping into greater opportunities in Africa. For the domestic financial
8 Moving the Nation Forward, Introduction, para 10.
9 Key priority measures to be implemented in partnership with all stakeholders include: (i) redefining land and
agricultural policies; (ii) creating new financial schemes; (iii) offering risk management schemes; (iv)
constructing modern slaughter house meeting export norms; (v) improving access to markets; (vi) building
institutional and human capacity, including empowering women; and (vii) strengthening governance for
institutions.
10


﻿services, the Government is encouraging providers to offer innovative financial products and
improving access to financial services for all segments of the population.
32.    Efforts to improve the investment climate and to provide clear and transparent
guidelines for investors will continue. The Government will seek to attract FDI into high
value added sectors as well as in infrastructure. In particular, the Government intends to
finance 10 percent of the Public Sector Investment Plan through FDI by 2015. The
Government will continue its support to the SME sector through various instruments to boost
financing, promotion and employment, including reinforcing support to women entrepreneurs
and making access to finance easier for SMEs. It was agreed as part of this DPL dialogue to
develop an overarching Monitoring and Evaluation (M&E) framework and include six of the
twenty two schemes under the National Resilience Fund (NRF) that particularly deal with
providing Business Development Services (BDS).
33.    Regional integration and connectivity with Africa remain a top priority. To broaden
Mauritius economic space, the Government intends to promote opportunities for increasing
cross-border investment and trade in the region including cooperating with neighboring
countries in setting up Special Economic Zones. It will seek to improve air transport to Africa
to facilitate the movement of business people and tourists with the aim of becoming a regional
transport hub. The Government also intends to assist the manufacturing sector increase
exports through market intelligence, focused export promotion campaigns, and improved
visibility of Mauritian products to capture new opportunities in existing and emerging
markets. 10
34.    The Government intends to implement a set of measures to address skills mismatches,
to assist employers unable to find qualified personnel and unemployed workers having
difficulties finding jobs. A new National Training Strategy will be developed to ensure that
reforms in education and training are informed by the changes in the labor market so as to
cater to the skills needs of the country for 2012-2025. Particular efforts will be made to
improve employability of the youth. To enhance skills and employability among the youth,
Government has launched a three-year National Youth Employment Program for those aged
between 16 and 30 years to provide them with apprenticeship, training and placement in
various sectors of the economy. A stipend will be offered to the unemployed youth, and their
training costs will be subsidized.
35.    Continued effort will be made to consolidate public finances to reduce public debt to
51 percent of GDP by 2015 and below 50 percent by 2016, two years earlier than initially
envisaged. It will do so by ensuring that domestic revenues cover recurrent expenditures, and
net new Government borrowing goes towards financing investment. While continuing its low
tax policy, tax collection will be strengthened to broaden the tax base and raise Government
revenues. The Government will also seek to rationalize parastatal agencies and state owned
enterprises to reduce their cost and improve the quality of their services.
10 To that end, the Government proposes to implement a long list of measures comprising: (i) promoting a cluster
based approach in the manufacturing sector; (ii) introducing an industrial productivity enhancement program;
(iii) formulating an industrial technology development plan; (iv) revamping the export promotion strategy and
plan; (v) establishing dedicated technology parks; (vi) developing a new industrial investment promotion
strategy; (vii) ensuring the effective implementation of antidumping and countervailing legislation; and (viii)
recognizing excellence in the manufacturing sector as well as in handicrafts.
11


﻿Pillar 2 & 3: Enhanced Connectivity and Empowering People
36.    The Government will continue to invest in the expansion and modernisation of public
infrastructure with the aim of becoming a regional transport hub. This will be achieved
through the selection of a strategic partner for the Cargo Handling Corporation to contribute
to investment in port infrastructure and increases in the volume of container traffic and
through the restructuring of Air Mauritius to achieve greater global connectivity and
efficiency. Also, several major projects to ease road traffic are currently being implemented as
a continuation of the on-going Road Decongestion Program. Overall, investment in land
transport will be managed through Public Private Partnerships (PPP), taking advantage of the
substantial private sector financing available along with expertise in successful infrastructure
projects. The Government is aware that this program is ambitious given current investment
levels as well as the limited capacity and the lack of expertise, as demonstrated by the slow
implementation rate of the public investment program. To address this, a Project Management
and Delivery Unit under the Prime Minister's Office will be in charge of the timely
implementation of all infrastructure projects.
37.    The Government will accelerate the development of the ICT sector to help leverage
investment, FDI and youth employment. The 2013 Budget offers a range of innovative ICT
measures, including a commitment to subsidize broadband access charges to bring down the
price from Rs. 349 to Rs. 200 per month (or US$6.35) and a commitment to invest Rs. 600
million (US$19 million) in a submarine cable to Rodrigues (with enhanced satellite
connectivity in the interim). Other measures in the 2013 Budget include the use of digital
signatures and Public Key Infrastructure (PKI) encryption to allow a wider range of
government services to be transacted online and measures to strengthen the ability of the
regulator to intervene on issues of pricing and market dominance both of which are supported
under this Second PSC DPL. Further, GoM will support setting up an ICT academy to
produce skilled professionals and increase value added per worker in the sector. Once the new
submarine fiber optic cable is operational, the Government plans to connect every household
with at least one megabyte per second by 2015 and is implementing the WiFi Mauritius
Programme for the provision of free Internet access points across Mauritius and Rodrigues
with a view to achieving full universal Internet access. In addition, the Data Protection Act
will be amended to incorporate new international data protection principles to strengthen the
safeguards to process personal data and help further attract investments in the ICT sector
through a free and secure flow of data. The Government will provide necessary support for
the development of the ICT sector in Rodrigues and will proceed with the laying of a sub-
marine fibre cable to link Rodrigues with Mauritius.
38.    The Government is committed to sustaining efforts to transform the education system
by emphasizing equitable access, enhanced quality, and improved learning. With a view to
broaden skills, the Government will enhance primary school curriculum". At the tertiary
education level, the Government will introduce a tertiary education bill that will provide a
framework for the development and regulation of tertiary education, including enhanced tools
to ensure quality assurance.
1 The primary school curriculum will be enhanced by including new topics such as Civic Education, Health
Literacy, Information Technology, and Sustainable Living.
12


﻿Pillars 4, 5 & 6: Cohesive Society, Strong Nation and Sustainability
39.   The Government will continue to modernize the civil service and provide it with the
resources required to deliver high quality services. To that end, it will set up a Civil Service
College, which will include a School of Diplomacy and International Relations. The College
is to become a regional center for public sector management and governance. The
Government will continue supporting the Independent Commission Against Corruption and is
committed to fighting corruption by implementing international and regional anti-corruption
instruments such as the United Nations Convention Against Corruption, the Southern African
Development Community Protocol against Corruption, and the African Union Convention on
Preventing and Combating Corruption.
40.   The Government is currently implementing the Maurice Ile Durable project, which
provides a broad framework for a modem and sustainable Mauritius. In the energy sector, the
Government will continue to implement the Power Sector Expansion Plan, which seeks to
provide reliable electricity supply using least cost clean technologies. In addition, measures
will be implemented to promote energy saving and efficiency increasing technologies. As
renewable energy will be insufficient to meet increased demand, the Government is studying
alternatives such as using liquified natural gas and building a 100 MW coal power plant by
2015. The Government has also developed a framework for the local production and use of
ethanol, which will bring environmental benefits, increase the production of renewable energy
and reduce the country's dependence on imported fossil fuels. The National Development
Strategy will be the national planning instrument that will set the vision of the government on
Land Use Strategy for the next twenty years to ensure sustainable management of land use to
better support the economy and the environment. A Land Use Planning Bill will be introduced
to provide for strategic and detailed planning processes to promote investment opportunities
and orderly development. Also, a Land Administration, Valuation and Information
Management System (LAVIMS) Project is being implemented to modernize land
management. With the implementation of LAVIMS, the time taken to register land titling is
now reduced to two days. In addition, the Budget Speech for 2013 announced the
Government's decision to further facilitate the use of movables and intangibles as collateral
with a view to increase access to finance. These measures are supported by this PSC DPL.
B.    PUBLIC BUDGET CONSULTATIVE PROCESS AND TRANSPARENCY
41.   There are various ways in which stakeholders and civil society are consulted during
the preparation of the annual public budget, which is the main instrument for introducing
economic reforms in Mauritius. Each year, the Joint Economic Council, the largest private
sector coordinating body in Mauritius, discusses private sector business priorities with the
Ministry of Finance and Economic Development (MoFED) as part of the preparation of the
public budget. MoFED also discusses sector issues and proposals with industry associations
and labor unions. More recently, MoFED has solicited proposals from civil society and has
posted some documents on their website to solicit feedback during budget preparation.
42.   With regard to the reforms supported by this operation, the World Bank has
undertaken extensive consultations with all relevant line ministries, who in turn led the
consultations with a wide range of stakeholders. For example, consultative stakeholder
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﻿workshops were held to discuss the new guidelines introduced for out-of-court workouts as
well as revisions in the insolvency regulations. Stakeholder consultations were also held to
discuss the restructuring options for the DBM. MoFED has set up a stakeholder committee
comprising Government and private sector representatives including private commercial
banks to suggest recommendations for the potential legal amendments required to further
facilitate the use of movable and intangible assets as collateral. Under the ICT component,
consultative workshops were held to discuss and solicit feedback on the suggested legislative
changes in the ICT Act to liberalize spectrum management as well to discuss the findings of
the Significant Market Power (SMP) assessments which has led to the finalization of tariff
guidelines.
43.   A Public Expenditure and Financial Accountability Assessment (PEFA) report
prepared jointly by the IMF, the World Bank, the United Nations Development Program
(UNDP), and the EU in 2010 confirmed the high transparency standards of the Mauritian
public budget. The report found that public access to key fiscal information is adequate, with
budget documents being made freely available to the public in a timely fashion. All budget
documents are placed on the Government website immediately upon the submission of the
budget to Parliament, and published documents are also made available. Audited year-end
financial statements are also made public well within the six-month period after the
completion of the audit, and contract awards are also published on the websites of the relevant
executing agencies. The PEFA report gave the classification and comprehensiveness of the
information included in the budget documentation its highest possible ranking according to
the Government Finance Statistics 2001 classification system adopted by the Government in
2008. However, the reporting of extra-budgetary expenditures could be improved, and with
this in mind, the Government is consolidating the various off-budget funds into one single
consolidated fund.
IV. BANK SUPPORT TO THE GOVERNMENT'S PROGRAM
A.    LINK TO THE COUNTRY PARTNERSHIP STRATEGY
44.   The PSC DPL Series and the Country Partnership Strategy (CPS) (2007-13) are
closely linked to each other and to the Government's reform program. The CPS Progress
Report, approved in May 2011, extended the CPS to FY15 to align it with the electoral cycle
in Mauritius. The proposed Loan (PSC DPL2) continues to be aligned with the four pillars of
the CPS: (i) fiscal consolidation and improving public sector efficiency; (ii) improving trade
competitiveness; improving investment climate; and (iii) democratizing the economy through
participation, inclusion and sustainability. The PSC DPL Series is also well aligned with the
Bank's Africa Region Strategy that focuses on competitiveness and employment, and
vulnerability and resilience as its twin pillars.
B.    COLLABORATION WITH THE IMF AND OTHER DONORS
45.   The Government's aim at the outset was to coordinate development partner assistance
around the DPL policy dialogue. The previous DPL Series (2006-09) benefitted from close
collaboration between all of the development partners operating in Mauritius, including the
harmonization of prior actions and indicators in line with Government priorities. With a view
14


﻿to aim at a similar level of coordination with this DPL Series, the task team has held regular
meetings with development partners to provide progress updates on the reform agenda and
identify areas of mutual collaboration and as a basis for developing a platform for unifying
policy recommendations. African Development Bank (AfDB), the EU, the UNDP and Agence
Franqaise de Developement (AFD) have all participated in the various development partner
meetings that have been held during the implementation of this reform program.
46.   International Monetary Fund: Mauritius has no formal program with the IMF,
though the annual Article IV reports have provided technical insights on sources of growth,
labor markets, inflation, exchange rates, and monetary and fiscal policy. Also, key support has
been provided in the area of fiscal efficiency and budget reform, with a focus on performance-
based budgeting and the Medium Term Expenditure Framework. In 2011, the IMF established
the Africa Regional Technical Assistance Center South in Mauritius to provide technical
assistance to countries in Southern Africa in areas such as macroeconomic policy, macro-
fiscal policy, and public financial management. The recently completed PEFA for Mauritius
were prepared jointly by the IMF, the World Bank, UNDP and the EU.
47.   European Union: The World Bank and the EU collaborated on a joint diagnostic and
results matrix for the World Bank's CPS for the period 2007-13 and the EU's 10th European
Development Fund (EDF) Country Strategy Paper for the period 2008-2013. Between 2006
and 2013, the EU has provided Mauritius with two sector budget support operations, namely
on the wastewater sector for E38 million and on the sugar sector for EI million. The latter
was aimed at restructuring the sugar industry in the context of the phasing out of sugar price
guarantees awarded under the former Africa Caribbean and Pacific Sugar Protocol. Also, it
has supported the economic reform program of Mauritius through three general budget
supports, with additional focus on education and socio-economic empowerment, particularly
among the most vulnerable. The EU has finalized preparation of a new three year general
budget support program of around 686 million that will span over 2013-2015. In addition to
its traditional areas of engagement (macroeconomic stability, sound public financial
management system and implementation of the government program), the EU support
program will focus on performance indicators related to the sugar reform measures,
education, State Owned Enterprises, health and social protection. The EU recently assisted
Mauritius in aligning its national data protection legislation with EU guidelines.
48.   African Development Bank: The main African Development Bank (AfDB) program
in Mauritius is the ongoing US$700 million budget support operation (of which US$200
million has already been disbursed). This was approved in 2009 to mitigate the impact of the
global downturn on economic growth and employment while improving trade competiveness,
health, ICT, and public financial management. These policy reforms were aligned with the
World Bank's previous DPL series (2006-09). The AfDB has also provided around US$3.5
million of technical assistance between 2005 and 2011 in areas such as ICT, Program Based
Budgeting (PBB), and public debt management. The AfDB and the World Bank have also
closely collaborated on the production of economic and sector work, including the Africa
Competitiveness Report, the Investment Climate Assessment (ICA), the Country Economic
Memorandum Update and the eTransform Africa Report. The AfDB has previously been
active in the ICT sector, for instance funding the development of the National ICT Strategic
Plan, updated most recently for 2011-2014.
15


﻿49.   United Nations Development Program      (UNDP): The US$15 million UNDP
Country Program (2009-2012) for Mauritius was jointly undertaken with the Government and
in consultation with non-state actors and development partners. The Country Program is
guided by principles of national ownership, multi-stakeholder partnerships and synergies and
it focuses on capacity development in four strategic initiatives, aiming at creating more
growth opportunities to restore the economy. These four strategic initiatives are: (a) the
Empowerment Program; (b) the "Zone d' Education Prioritaire; (c) PBB; and sector strategies
and (d) environment protection, energy and management of natural resources. The new
Country Program for 2013-2016 will focus on planning and resource management for
inclusive growth; social inclusion and empowerment; and energy and environment.
50.   Agence FranVaise de Developpement (AFD): The AFD supports the Government
both in the form of budget support and project financing in Mauritius. The main sectors of
intervention are: Infrastructure (transport, water, and wastewater), private sector development
and sustainable development (Maurice Ile Durable process, energy efficiency, green
energy). The AFD disbursed 624 million per year between 2007 and 2009 in alignment with
the DPL series calendar. In 2010, the AFD budget support operation focused on a sector
approach in the form of an Environment Aid Program. A new Energy Development Policy
Loan initiated in 2012 is going to focus on a policy dialogue on energy, and is being
supported by technical assistance to strengthen planning. There is a El.5 million grant
available to support business growth, of which half has been disbursed, as well as a 650
million program to support "green investments" by companies which is nearly fully disbursed.
C.    RELATIONSHIP TO OTHER WORLD BANK OPERATIONS
51.   This PSC DPL series is being implemented in parallel with the PSP DPL series. The
PSP DPL is focusing primarily on the performance of the public sector, while this DPL is
focusing on strengthening the policy and institutional environment for private sector
competitiveness. It is the combination of the reforms supported by these two DPLs that will
help Mauritius improve its competitiveness, increase its resilience; and prepare it for the next
phase of rapid and inclusive economic growth. The reforms supported through both DPL
series are, thus, complementary and the two operations have been prepared in coordination to
ensure the coherence of the entire reform program and to keep transaction costs low for both
the government and the Bank.
52.   The PSC DPL series has been complemented by just-in-time knowledge services
through NLTA. This technical assistance has supported the programmatic PSC DPL Series
by developing a pipeline of financial and private sector development policy reforms to be
supported under the Second PSC DPL. Areas where analytical work has been conducted also
include new areas such as technical assistance to the newly formed tertiary education ministry
which is critical, given the skills development and infrastructure bottlenecks facing Mauritius.
Aligning tertiary education outcomes with the needs of a knowledge economy, increasing
quality of research, and adopting global good practices towards implementation of reforms in
the sector are important for realizing the country's ambitious vision. Assistance was provided
by conducting a high level policy workshop to discuss the draft strategy of the newly formed
Ministry of Tertiary Education, Science, Research and Technology as well as conducting a
diagnostic review of the sector to outline the strengths, weaknesses and opportunities of the
16


﻿sector in light of the country's ambition of being a knowledge hub. The Technical Assistance
will serve as a platform for future reforms in this important area.
53.    Policy reforms supported by Bank DPLs are complemented with a Specific Investment
Loan project in the infrastructure sector. The US$50 million Mauritius Infrastructure Project
approved in 2009 aims to accelerate public investment and reduce critical infrastructure
bottlenecks mostly in the transport sector. The Government aims to further strengthen
infrastructure capacity-building and is seeking a second infrastructure project to reduce
transport costs, improve road maintenance, and contribute to improved road management and
road safety in Mauritius. The forthcoming project that is expected to be approved in FY14 is
tentatively considering to pilot output and performance based road contracts, improving road
safety management; strengthening institutional framework and building institutional capacity
in the transport sector.
54.    The International Finance Corporation (IFC) has focused its interventions on three key
sectors: (i) infrastructure, (ii) tourism and (iii) financial services. Interventions are targeted at
supporting the mobilization of FDI to these sectors; introducing climate change mitigation
and cleaner production standards and best practices; promoting South-South transactions; and
improving access to finance for SMEs. In particular, the IFC has supported funding and
capacity building activities for SMEs. Since 2009, IFC has provided a global trade-line
guarantee to two local commercial banks to act as confirming banks to second tier banks in
Africa and the Indian Ocean region. In 2010, IFC committed and disbursed a US$75 million
senior loan to State Bank of Mauritius (SBM) to support the bank's regional focus and
strengthening its balance sheet. To support its investment, IFC also provided a year-long
program in capacity building and training of SME loan officers and owner/managers, which
was recently completed. In February 2012, IFC committed C1O million in a private equity
fund that invests in private sector businesses in the Indian Ocean region, with a view to
increase regional cooperation and cross-border investments. IFC also conducted an MSME
capacity diagnosis at the Development Bank of Mauritius (DBM), on behalf of the
Government of Mauritius (GoM), and made recommendations to the GOM on the way
forward. IFC's mandate as advisor to the GoM with respect to Cargo Handling Corporation
for the search of a strategic partner is still ongoing.
D.     LESSONS LEARNED
55.    The progress since the First PSC   DPL and the implementation of the last
programmatic DPL series (2006-09) both yield important lessons that have informed the
preparation of this DPL. These lessons included the need to ensure that: (i) the DPL is aligned
with the Government's priorities and leadership; (ii) there is ownership by line ministries, (iii)
there is strong coordination with development partners; and (iv) the loan is designed to
include an appropriate degree of flexibility to allow the Government to respond to emerging
crises as well as for the reform program to evolve over time.
56.    The success of a DPL in Mauritius is measured primarily by its capacity to stimulate
and support the policy agenda rather than its financing. In Mauritius, the Bank's budget
support is viewed by the Government as a catalyst for stimulating and coordinating the
Government's policy agenda. The previous DPL series was effective in helping MoFED to
bring sector ministries and agencies on board and to align other donors around the reform
17


﻿effort. This was also observed in the preparation and implementation of the First PSC DPL.
The Government has repeatedly emphasized that this is, and will remain, the main value
added of World Bank support, as it remains possible for the government to close its financing
gap in both the domestic and external markets. The Government's continued realignment of
the Bank portfolio away from Investment Loans towards DPLs further underscores this.
57.    Ownership by line ministries is critical for the implementation of the reform agenda.
Progress since the First PSC DPL has highlighted that varied degrees of progress across
identified reform agendas are in part due to the varied levels of ownership by respective line
ministries. The Government has a strong sense of direction with regard to its reform program
and the technical expertise to undertake upstream policy dialogue with the Bank and other
development partners. The Bank has contributed to this through its parallel preparation of
economic and sector work in priority areas. The dialogue gradually built consensus for the
reforms and helped the participants to articulate country priorities linked to clear and
achievable outcomes. Leadership and political commitment from the Government
complemented by strong institutional capacity in designing and implementing the policy
reform agenda have been the critical factors in the success of previous operations.
58.    Strong coordination with development partners reinforces the Government's program
implementation. The previous DPL series succeeded to a large extent due to the harmonized
policy dialogue among all development partners. This often translated into joint prior actions,
missions, and singular reporting for all development partners, thus significantly reducing the
government's transaction costs. The operations in the programmatic series were aligned with
the government's budget cycle to reinforce national institutions and to use the annual Budget
Speech to sustain the reform process. Furthermore, the timing of the operations was adapted
to match the revised budget calendar. Experience from the First PSC DPL suggests that this
was an important impetus to ensure that reforms were achieved. This has been further
demonstrated in the 2013 Budget where critical reform measures were introduced in areas
such as increasing coverage under the credit information bureau and the decision to further
facilitate secured lending transactions.
59.    It is critical to build into the loan enough flexibility for the Government to be able to
adjust and respond to the country's changing needs. The previous DPL series (2006-09)
included this flexibility in two important ways. First, the DPL series was able to adapt to
immediate changes in the external environment, particularly the 2008 crisis, through a rapid
deferred draw down option as well as through an increase in the value of the loan of the third
operation. This helped to keep the reforms on track and provided the resources needed to
reduce any potential economic risks. Also, one additional operation was added to the series to
align it with the electoral cycle. Second, the previous DPL series took a flexible approach in
building support for and a consensus around the reform program, thus allowing the Bank to be
perceived as an honest broker of diverging views. This allowed the reform program to
develop over-time with the DPL serving to bolster the program and supporting the
development of an overall vision.
E.     ANALYTICAL UNDERPINNINGS
60.    The preparation of the PSC-DPL series is based on analytical work carried out by the
World Bank, the Government and other development partners. In addition, the design of the
18


﻿PSC-DPL series benefited from the extensive dialogue and analytical work that underpinned
the Manufacturing Services Development and Competitiveness Project and Mauritius
Economic Transition Technical Assistance Project investment operations that focused on
private sector competitiveness, enterprise growth and business environment matters.
61.   The second 2009 ICA    for Mauritius identified obstacles that hinder firms'
competitiveness, particularly access to finance for small firms and the lack of skilled labor.
Recommendations stemming from the ICA have contributed to the reforms outlined under the
access to finance component. The three subcomponents under this pillar all aim at further
facilitating the access to finance especially for SMEs. This is being pursued through the
restructuring of DBM to provide specialized SME products and services, increased coverage
under the credit information bureau and the use of movables and intangibles as collateral.
62.    The Government's mid-term review of the National ICT Strategic Plan 2007-2011,
carried out with the support of the AfDB, served to guide the preparation of the ICT and e-
Gov component of this operation. The review underlines clearly that the Strategic Plan has to
be updated to take into consideration new priorities of this fast evolving sector. The Plan was
extended to 2011-2014 with the following focus: (i) policy and regulatory review; (ii)
institutional review of the ICT sector; (iii) development of a broadband policy; (iv) market
review of competition and prices; (v) reinforced cyber security with the setting up of the
Mauritius PKI; (vi) effective design and deployment of e-Government initiatives; and (vii)
improved spectrum management.   The prior actions supported under this DPL have
implemented this National ICT Strategic Plan with the legal amendments to facilitate
spectrum management and the deployment of e-Government services.
63.   The 2011 joint IMF, World Bank, and EU PEFA shows the progress achieved by the
government since the 2007 PEFA assessment (conducted by EU) in moving forward the
public financial management (PFM) reform agenda. The main achievement has been the
strengthening of the budget formulation and management framework by implementing PBB
in the past three years. There has also been substantive work undertaken to strengthen
complementary reforms, including procurement, budget execution and external audit
processes. This has resulted in improvements in the PEFA indicators relating to budget
credibility, comprehensiveness, and transparency and a move towards policy-based
budgeting. The assessment, however, highlighted a number of areas where reforms were
required: (i) strengthening the macro-fiscal strategy to incorporate more effective Medium
Term Expenditure Framework buy-in from ministers and controlling officers; (ii) stronger
links between the multi-year estimates and subsequent annual estimates; (iii) more credible
project appraisal of capital projects; further strengthening of tax collection arrangements; (iv)
reducing the frequency of in-year budget adjustments; (v) strengthening debt management and
internal and external audits; and (vi) increasing the effectiveness of parliamentary oversight.
The Government designed and has made positive progress in implementing a post-PEFA
Action plan (2011-2013) focused on the reforms noted above. Public Finance Management
legislation is being developed to replace the Finance and Audit Act, with the aim of
embedding PFM requirements in legislation. Specifically, the law is aimed at enhancing
regulation of transparency, accountability and sound management of the revenue, expenditure,
assets and liabilities of the government.
19


﻿64.    There have been a number of diagnostic reviews undertaken on DBM in the past. In
2008, the GoM commissioned a restructuring study on Development Bank of Mauritius
(DBM) that was undertaken by the International Financial Consulting Group of Canada
(IFCC). The IFCC Report provided a detailed diagnostic of the institution, and the
development of a road map to restructure the operations of DBM. The IFCC proposed six
policy options for the DBM restructuring. 12 After detailed deliberation and consultations with
the relevant stakeholders, the Government undertook the decision to transform the DBM into
a financially viable MSME Bank, licensed by the Central Bank, and with private sector
participation. This decision was announced in the November 2011 budget speech, following
which IFC was given the mandate to attract a strategic partner that specializes in MSME
Banking in December 2011. Prior to signing the mandate to act as a strategic advisor, IFC
undertook a diagnostic analysis on DBM which identified its chronic operational and
governance weaknesses recommending against its transformation into an MSME Bank and
instead recommending its orderly closure and issuing an Expression of Interest (Eol) to invite
a credible international SME Bank, with a verifiable record to set up such an institution in
Mauritius. In May 2012, the findings of the study led IFC to reconsider and decline the offer
to act as the Government's advisor on transforming DBM into an MSME Bank.
Subsequently, in August 2012, as part of the technical assistance supporting the proposed
PSC DPL2 operation, the World Bank undertook an updated diagnostic review of DBM. It
was found that transforming DBM into an MSME Bank was not a viable option as the
institution was structurally unprofitable. The two viable options recommended included either
(i) winding up or (ii) selling DBM's banking assets to a new commercial bank with a focus on
the MSME market segment within a broader sustainable business model. GoM chose the
second option and has hired an international transactions advisor to assist in the restructuring
process.
65.    In March 2004, the World Bank, at the request of the GoM, delivered a Report on the
Observance of Standards and Codes (ROSC) which benchmarked Mauritius' insolvency and
creditor rights framework against international standards. The ROSC found that many aspects
of the insolvency framework in Mauritius were inconsistent with international best practice,
resulting in, low recoveries for creditors in Mauritius. The ROSC found that the Mauritian
system produced a liquidation bias that saw very few viable businesses rehabilitated, thereby
destroying significant company value. The Insolvency Act 2009 incorporates many, but not
all, of the main recommendations of the ROSC and is modeled closely after the insolvency
legislation of New Zealand. In addition, the World Bank conducted a review of accounting
and auditing practices in the country and issued a ROSC - Accounting and Auditing in 2011.
The report highlighted improved adoption of good accounting and auditing practices
necessary to produce quality financial reports by the private sector and State Owned
Enterprises. The report recommended improved support to accountants and auditors to ensure
they fully comply with the stipulated financial reporting standards in order to issue quality
reports that support accountability and necessary decision making. The prior actions
supported under this DPL aims at strengthening the insolvency framework in Mauritius.
12The six options proposed were: (i) do nothing, (ii) keep DBM as it is but spin off the industrial parks and
properties, (iii) turn DBM into a full-fledged commercial bank, (iv) convert DBM into a Development Finance
Agency, (v) Development Finance activities as part of a Development Agency/soft liquidation of DBM, and (vi)
hard liquidation.
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﻿66.   In April 2007, the IFC was appointed to provide GoM with advisory services to
prepare a Feasibility Assessment for the Expansion of the Credit Reporting Infrastructure to
review the legal framework governing credit information reporting in Mauritius. The
assessment provided (i) a review of the existing legal and regulatory framework that will
allow for the effective operation/supervision of a world-class benchmarked credit bureau; (ii)
an in-depth assessment of all major credit providers and their respective reporting capabilities,
and report on the main issues and requirements which need to be resolved in preparation for
the expansion of the credit bureau in Mauritius; and (iii) advice on the formulation of a
business plan for credit reporting in Mauritius including possible options for the credit
bureau's ownership structure. Some of these recommendations were implemented through
amendments to the Bank of Mauritius Act in July 2008.
V.     PRIVATE SECTOR COMPETITIVENESS DEVELOPMENT POLICY LOAN
A. OPERATION DESCRIPTION
67.   The proposed PSC DPL, in an amount of US$15 million, is the second and the last in
a series of two annual programmatic operations in support of the Government's medium-term
reform program to increase competitiveness. This DPL series is aligned with the mandate of
the Government's program and is consistent with the objectives of the CPS 2006, and the CPS
Progress Report of May 2011, that underlines improving competitiveness and investment
climate as its central theme of reforms, along with promoting inclusion and fiscal
consolidation. This operation builds on the reforms supported by the last DPL in this series,
which was approved by the Executive Board on March 27, 2012. To date, good progress has
been made in implementing most of the actions supported by the DPL series. In many cases,
initial commitments included as prior actions under the first operation have now resulted in
concrete changes in government policy and programming. The objective of this operation is to
continue to support the trend of these changes. The DPL series is aligned with the
government's budget cycle, which is the primary vehicle used by the government to introduce
new policy initiatives.
B. POLICY AREAS
68.   The development objective of this PSC DPL programmatic series is to strengthen the
policy and institutional environment in Mauritius to support competitiveness and enterprise
development. The operation will achieve this by supporting reforms in around three integrated
and mutually reinforcing pillars (i) improving enterprise growth and competitiveness; (ii)
improving access to finance; and (iii) promoting ICT usage and e-Government reforms for
increased efficiency and transparency gains. Facilitative business environment and greater
access to finance have been identified as key elements for improving enterprise
competitiveness and growth in Mauritius. ICT is considered a key pillar for supporting
competitiveness, and indeed the hope is that it will become a "fifth pillar" in the national
economy contributing at least 7 percent of national GDP. Table 3 presents the final prior
actions for the PSC DPL2, along with a comparison of how these prior actions have evolved
from the indicative triggers presented in PSC DPL1. Annex 1 presents the policy matrix for
the overall PSC DPL series.
21


﻿69.     Private Sector Competitiveness includes many aspects, and this program           has in
particular focused on those that are outlined under the three pillars of this programmatic
series. Issues such as the prevalent skills mismatch and the lack of an appropriate PPP
framework are important constraints to economic private-sector-led growth which this
operation does not address, and are, therefore, deserving of greater focus in future
engagements in the private sector development agenda.
Box 2: Good Practice Principles for Conditionality
Principle 1: Reinforce ownership
The proposed operation is rooted in the Government's reform program as laid out in the President's
address of 2012 and subsequent Budget Speeches. The New Government Program launched in April
2012 further reiterated this commitment. The sectors selected for the DPL series were proposed by the
Government and the World Bank endorses their relevance in terms of their potential growth and equity
impact. Furthermore, the Government's commitment to reforms is demonstrated by the Budget Speech
2013 that endorsed key reforms, along with the quick endorsement by the Cabinet of the proposed prior
actions for the Second PSC DPL.
Principle 2: Agree up-front with the Government and other financial partners on a coordinated
accountability framework
In line with the Government's request and the World Bank Africa Strategy, the DPL Series has sought to
harmonize policy dialogue and financing of relevant development partners, around Government
priorities, to the extent possible. Regular meetings between all development partners have been taking
place around the preparation of this and the previous operation, to pool resources. Government sees the
DPL series as an important vehicle for achieving the objective of harmonizing policy dialogue and
financing.
Principle 3: Customize the accountability framework and modalities of Bank support to country
circumstances
The proposed DPL focuses on issues of strategic importance, but also on those where the Government
sees a particular benefit to World Bank engagement and support, for instance in order to build consensus
among all stakeholders or overcome capacity limitations. The DPL also reflects Mauritius' particular
interest for knowledge services from the World Bank, and incorporates a particularly rich set of
analytical work to underpin its support to the Government's reform agenda.
Principle 4: Choose only actions critical for achieving results as conditions for disbursement
The proposed DPL operation has identified a small number of critical activities needed to unlock the
reforms in the three policy areas that underpin the Government's reform program supported by the
operation.
Principle 5: Conduct transparent progress reviews conducive to predictable and performance-based
financial support
The programmatic nature of the proposed DPL series, aligned with the term of the current Government,
has ensured regular and systemic supervision and preparation of each phase of the DPL series in line
with the annual budget. This has traditionally been the major vehicle for announcing policy reforms in
Mauritius.
22


﻿Table 3: Evolution of Proposed Indicative Triggers to Prior Actions for DPL2
Indicative
Trigger for DPL2   Prior Action for DPL2          Explanation                    Status
(at time of DPL 1
approval)
PILLAR I: IMPROVING ENTERPRISE GROWTH AND COMPETITIVENESS
Implementation of  Implementation of the  The development of the M&E           Completed
an Action Plan for  consolidation of SMEs  Framework would be led by
consolidation of  programs that includes  MoFED in order to capture all
SMEs program      (a) establishing an inter-  the relevant BDS schemes
under Ministry of  agency coordination    (some of which are not under
Business,         committee under        the aegis of MoBEC). The
Enterprise and    MoBEC and (b) the       Request for Proposal for the
Cooperatives      issuance of a Request  consultancy of the M&E
(MoBEC) that      for Proposal to develop  Framework was issued in
includes (a)      an overall M&E          September 2012 but did not
establishing an   Framework for Business  attract any response. MoFED
inter-agency      Development Services   has reissued the RFP with an
strategic         schemes.               emphasis on wider outreach to
coordination                             the intemational consultancy
committee and (b)                        pool. The development of the
developing a                              M&E Framework is envisaged
framework that                           to be completed by June 2013
sets up guidelines                       and will be disseminated
on cost-sharing,                          amongst the various agencies so
target groups and                         it can be used before the next
types of services,                        budget cycle.
and M&E
systems.
Ministerial       Publication of the               No Change                   Completed
approval and      amendment to
publication of a  Insolvency Act 2009 to
code of ethics for  include the Rules
insolvency        relating to the
practitioners.    Performance and
Conduct ofInsolvency
Practitioners in the
national gazette.
Establishment of  Publication of                  No Change                    Completed
procedures by the  Regulations related to
Director of the   the registration and
Insolvency        removal of insolvency
Service to deal   practitioners in the
with the          national gazette.
suspension and
removal of
insolvency
practitioners from
the registry.
23


﻿Indicative
Trigger for DPL2   Prior Action for DPL2          Explanation                    Status
(at time of DPL 1
approval)
Publication of the Out-      New Prior Action                Completed
of-Court Workout
Guidelines to promote
safeguarding viable
businesses on the
insolvency website upon
endorsement of
guidelines from BoM.
PILLAR 2: IMPROVING ACCESS TO FINANCE
Adoption of a     DBM restructuring       Prior Action spells out the          Completed
detailed          initiated by the        actions that needed to be
transformation    appointment of a        implemented.
plan and          transaction advisor,
implementation of  endorsement by steering
selected actions.  committee of an
inception report and the
issuance of letters of
invitation to potential
investors for the sale of
DBM's non-banking
assets.
Cabinet approval  Government decision to  The indicative trigger was           Completed
of legislative    further facilitate the use  reconsidered to be not feasible
amendments to     of movable and         as due process is required to be
Civil Code and    intangible assets as   completed prior to cabinet
other laws to     collateral and the     approval of the legislative
allow the setting  establishment of a     amendments to laws and the
of a modem        modem movable          Civil Code. The Government
movable collateral  collateral registry.  has announced its decision via
registry.                                the budget speech of November
2012, the need to further
facilitate the use of movable and
intangible assets as collateral. A
stakeholder committee set up is
discussing the nature of legal
amendments required. The
objective is to have the specific
legal amendments approved by
cabinet prior to Nov 2013 so
that they are included in the
Finance Bill of Dec 2013.
24


﻿Indicative
Trigger for DPL2   Prior Action for DPL2          Explanation                    Status
(at time of DPL 1
approval)
The Bank of       The Bank of Mauritius   In order to further the objective    Completed
Mauritius to      to amend the Bank of   of increased coverage, it was
establish and     Mauritius Act in order  considered more critical to focus
publish eligibility  to define 'Utility   on including utility bodies under
criteria and      Body13' to further     the coverage of the credit
licensing         increase coverage of the  information bureau which are an
guidelines for the  Credit Information   important source of credit
setting up of     Bureau,                information.
private credit
information                               Furthermore, there may not be a
regulation from                           market for a private credit
the Ministry of                           bureau. Past experiences of
Public Utilities to                      BoM inviting private credit
enforce the                              bureaus in the region have not
accuracy of the                          yielded any results.
name on utility
bill to match the
name of the actual
user
PILLAR 3: PROMOTING ICT USAGE AND E-GOV REFORMS FOR INCREASED EFFICIENCY
AND TRANSPARENCY GAINS
Establish         Draft legal changes to  Prior Action spells out specific     Completed
protocols to      pertinent sections of the  changes required.
strengthen the    ICT Act 2001 related to  This action relates, in particular,
independence of   licensing adopted by the  to reform the ICT Act 2001, as
Information       ICTA Board,             amended. In 2011, section 30 on
Connounication                            defining significant market
and Technology                           power was amended. In
Authority (ICTA).                        November 2012, changes to
section 24 on issue spectrum-
based licenses were proposed
and adopted by ICTA Board,
and will be submitted to
Parliament for approval in the
next session. Both changes will
provide more transparency and
legitimacy for regulatory
decisions.
Setting up of     Publication of         This has gone beyond the              Completed
system to collect  guidelines for tariff  intended trigger. Collection of
market-level data  setting on ICTA        market level data was completed
to be able to assess  website.            as were market assessments for
the existence of                          significant market power in two
significant market                       markets considered bottlenecks.
power in five                             This was followed by
markets in                               stakeholder consultations,
Mauritius.                               feedback from which was
nincorporated into the tariff
13 As a body corporate which provides utility service to the public and includes the Central Electricity Board, the
Central Water Authority, the Waste Water Management Authority, and companies offering information,
communication and telecommunication services.
25


﻿Indicative
Trigger for DPL2  Prior Action for DPL2        Explanation                   Status
(at time of DPL 1
approval)
guidelines that have been
published.
Cabinet approval  Contract with a       This goes beyond the indicative    Completed
of targets for   competitively selected  trigger and is a concrete action
increasing       partner to develop a   indicating future developments
paperless G to B  Government Services  in this area.
and G to G       Platform for
transactions.    eGovernment services,
protected by a Public
Key Infrastructure
(PKI).
PILLAR 1: Improving Enterprise Growth and Competitiveness
70.    The entry of new firms, their expansion in the initial years of life, and the exit of
distressed or obsolete firms14 is part of firm dynamics. Research based on firm-level data
supports the assertion that the continuous process of reallocation of resources plays an
important role for aggregate productivity and output growth.15 Improving entry, survival and
growth of innovative and entrepreneurial firms and facilitating firm exit are thus an important
part of the "creative destruction" process that underpins economic growth.
71.    Facilitating firm entry, growth and survival: Over time, the Government of Mauritius
has undertaken several "market completing" interventions16 focusing on skills and training,
technology development, and information services gaps. The Ministry of Business, Enterprise
and Cooperatives that targets SME development has three institutions that offer Business
Development Services (BDS) programs, i.e. the Small and Medium Enterprise Development
Authority  (SMEDA),17      the Mauritius Business Growth       Scheme (MBGS) and        the
Cooperatives Division of the Ministry. Most of these programs were considered as not
meeting changing market needs of SMEs, and were of mixed quality. Cognizant of the
shortcomings, MoBEC piloted a new Mauritius Business Growth Scheme (MBGS) in 2010
that provides BDS on a market driven platform. The MBGS model supports enterprise
productivity and competitiveness in line with the evolving needs of private sector firms. The
Scheme offers reimbursable financing, on a cost-sharing basis, to buy specialized expertise in
the areas of: skills and training; technology upgrading and standards; and marketing. The
effectiveness of these programs, however, was further hampered by coordination challenges
among the multiple agencies and between programs with overlapping objectives, roles and
cumbersome procedures.
14 Porter 1990; Audretsch 1991; Nickell 1996; Klapper, Laeven, and Rajan 2006.
15 Bartelsman, Haltiwanger, and Scarpetta 2009.
16Hallberg, K (2000), A Market-Oriented Strategy For Small and Medium-Scale Enterprise, IFC, Discussion
Paper No. 40.
17 SMEDA targets firms with less than 50 employees and provides services related management training, export
assistance, technology and export awards, management guides, in-house consultancy services, business
counseling, and a number of grant schemes.
26


﻿72.    There was widespread agreement - both within the private and public sector - that a
multiplicity of service providers with overlapping roles and responsibilities hinders the ability
of firms to identify and obtain the required support.  Fragmented BDS assistance programs
to small enterprises raise the overall cost and reduce effectiveness of the programs. With a
view to undertake a strategic reorientation of SME programs, MoBEC sought cabinet
approval of consolidating its SME programs which was the agreed prior action for the first
PSC DPL. This was envisaged under the United Businesses Enterprise Board (UBEB) to be
brought under the aegis of MoBEC.
73.    However, challenges in implementing this proposed consolidation as well as new
developments in this area, led to a shift in the implementation of this proposed consolidation.
A diagnostic review, conducted under the World Bank NLTA, identified that there were new
schemes that had been established for enterprise development (including SMEs) and financed
under the NRF.19 The majority of the schemes are overseen by the Restructuring Working
Group, which operates under the NRF Management Committee headed by Financial
Secretary, MoFED. The schemes are of two types (i.e. financing and business development).20
The NRF funds specific projects while the operating costs (salaries, rent, utilities etc) of the
various implementing agencies are paid through the annual budget. The NRF has available
funding of MUR 7.3 billion (approximately US$240,000), to be utilized over three years
2012-14. These changes have shown that the Government has shifted its support away from
the previous focus on direct centralized supply of BDS by parastatals. Hence, there has been
a clear shift towards support to the user of BDS's, and not the supplier which is a positive
development.
74.    As part of the NRF, Government support to firms to assist them in becoming export-
ready is currently being directed primarily through MBGS, which falls under the remit of
MoBEC. Since the first operation, there has been an 84 percent increase in the number of
firms that have received specialized BDS services from a baseline of 80 to an actual number
of 147 in December 2012. There are no new activities being undertaken by SMEDA, the
National Women Entrepreneur Council (NWEC),21 or the National Institute for Cooperative
22
Entrepreneurship (NICE),   and they only provide basic training services to SMEs. It is
critical that this new model of service delivery should build on (i) a sustainable institutional
structure; (ii) a robust M&E system that focuses on enhanced accountability and impact
feedback learning mechanism; and (iii) a framework that provides clarity regarding target
groups and types of services, along with potential for cost-sharing for the SMEs programs.
75.    To ensure that the Government receives value for money for its support through BDS
schemes to enterprises, a robust Monitoring and Evaluation (M&E) system is vital. It was
thus agreed that the M&E arrangements put in place are introduced on a consistent basis for
all BDS-related schemes being funded out of the NRF23
18 For details please refer to Mauritius ICA, (2010); and Jenders (Nov. 2008), Mauritius: Industrial and SME
Strategy, Final Report.
19 The NRF was set up in January 2012 under the Finance and Audit (National Resilience Fund)
Regulations 2012.
20 It may be noted that as of date, none of the new schemes are directly being implemented by SMEDA.
21 National Women Entrepreneur Council is similar to SMEDA, but with a special focus on firms led by women.
22 These implementing agencies do however receive their operating costs through the Annual Budget.
23 These schemes include: (i) MBGS, which is the main scheme of cost-sharing support to firms for the purchase
of primarily private BDS's;
27


﻿76.    This will allow relevant stakeholders to compare the value for money achieved by the
various mechanisms of support currently being funded, given the similar objectives. The
M&E system will also be developed with a view to capture the results of agencies such as
SMEDA, currently left out of NRF funding. SMEDA is using public funds to support BDS-
related activities, even though these are from the Annual Budget alone, with nothing currently
from the NRF. It was therefore agreed that SMEDA be included in the new proposed M&E
framework to be spearheaded by MoFED.
77.    The main objective of this exercise is to provide a broad framework for the
establishment of a new M&E system that focuses on improved results through verifiable
indicators, enhanced accountability and impact feedback learning mechanism. In addition, the
proposed framework would also provide clarity regarding target groups and types of services,
along with potential for cost-sharing for future SMEs programs.
78.    The development of the framework was initially planned to be completed by January
2013, however the initial RFP issued by MoFED did not attract any relevant expressions of
interest. MoFED has made a concerted effort to reach out to the international consultant pool
by re-issuing the RFP on international websites with larger outreach as well as reaching out to
reputable firms to inform them of the proposal. The standard procedure requires that
expressions of interest are solicited within one month of the RFP being issued followed by a
selection process that could take 4-6 weeks. Upon selection, the consultant would be required
to develop an M&E framework within two months to be discussed, finalized and disseminated
to the relevant agencies by June 2013 in time for the next budget cycle. The M&E framework
will inform MoFED and various agencies of the effectiveness of the various schemes and will
further inform the design and implementation of future BDS schemes.
Co-ordination between Institutions
79.    Co-ordination among the various implementing agencies continues to be poor.
MBGS, SMEDA, NICE, NWEC, National Productivity and Competitiveness Council
(NPCC) and Enterprise Mauritius (EM) are all involved in closely-related activities. Since
UBEB did not materialize, there is no formal co-ordination mechanism in place, at the
implementing agency level, to allow the senior managements of these agencies to compare
progress; seek synergies and deal with issues in a systematic manner. The proposed inter-
agency committee under MoBEC has been established and received cabinet endorsement. The
committee includes senior management representatives from Ministries of Finance, Industry,
Gender and Tourism as well as agencies such as MBGS, NICE, NWEC, SMEDA, Enterprise
Mauritius, Board of Investment, and Development Bank of Mauritius (DBM). The inter-
(ii) The new MBGS Start-up Entrepreneurship Scheme;
(iii) Market Development Support that supports participation in international trade fairs and other similar events
by manufacturers, which is being implemented by EM;
(iv) Participation in International Fairs SME Refund Scheme, for SME's only, but covering all sectors, and with
the manufacturing sector being implemented by EM, tourism sector by Mauritius Tourism Promotion Agency
(MTPA) and services sector by Board of Investment (Bol);
(v) Fair Trade Development, that is supporting co-operatives in obtaining "Fair Trade" certification, with the
market identification undertaken by EM and the implementation of certification support carried out by MoBEC;
(vi)Enterprise Restructuring, that is supporting firms wishing to restructure debts, or to raise new working
capital, and which includes support for financial analysts to carry out detailed assessments.
28


﻿agency committee aims to serve as a platform to share information of existing initiatives
amongst the members as well as gauge the existing gaps that need to be addressed to service
entrepreneurs and SMEs. The indicators for this component were the number of enterprises
accessing (i) generic and (ii) specialized business development services increases. These
indicators are being retained. In addition, "development of a Monitoring & Evaluation
framework for BDS schemes" shall be added.
*   The prior action for DPL2 is "Implementation of the consolidation of SMEs programs
that includes (a) establishing an inter-agency coordination committee under MoBEC
and (b) the issuance of a Request for Proposal to develop an overall M&E Framework
for Business Development Services schemes."
80.    Facilitating firm exit and promoting business rescue of viable firms: Strengthening the
Mauritian credit environment through more effective debt resolution regimes has been
identified as a priority area in the Government's efforts to improve competitiveness and
growth of enterprises. A strong insolvency regime is not only concerned with streamlining
regulatory mechanisms to allow insolvent businesses to exit the market, but also with saving
financially distressed but still viable businesses, in order to ensure job retention and longer-
term debt recovery for stakeholders. Moreover, the professionals who help implement these
insolvency regimes, namely insolvency practitioners, need to be well regulated in a
transparent and coherent manner in order to ensure effective and fair outcomes. Faster exit,
effective restructurings and insolvency practitioner regulation, all help form a robust
insolvency regime that seeks to improve the overall credit environment of the country.
81.    Insolvency proceedings in Mauritius are significantly faster, cheaper, and return more
to creditors than those in other parts of Sub-Saharan Africa.  However, according to the
WBG's 2013 Doing Business Report (DB 2013), Mauritius performs worse in the 'Resolving
Insolvency' indicator than it does in any of the other nine indicators. Mauritius ranks 64 out
of 183 globally in this indicator, compared to its highest ranking, which is eleven, in the
Paying Taxes indicator. Resolving Insolvency is the DB indicator that tracks the efficiency of
exit from the market for businesses, and thus this ranking reflects, in part, the poor health of
the insolvency system.
82.    Part of Mauritius' weak performance in this indicator is due to several reforms relating
to the Insolvency Act remaining outstanding or incomplete. Although the Insolvency Act
represented a significant advancement in the development of Mauritius' insolvency
framework, in order to be fully operationalized and implemented, it requires significant
secondary legislation that remains outstanding. In particular, although insolvency practitioners
were given a greatly expanded set of responsibilities under the Insolvency Act, and
commensurately, their regulation was contemplated, they remain largely unregulated.
83.    As part of the 'Prior Actions' for DPL1, the GoM introduced regulations related to
Insolvency Practitioners' qualifications and appointment24. The prior actions in DPL1 focused
24 The Insolvency (Prescribed Forms) Regulations 2012 were made by the Minister under section 411(1)(a) of
the Insolvency Act and were published in the Government gazette in February 2012. These provide various
prescribed forms under the Insolvency Act, including the Notice to Appoint an Insolvency Practitioner. The
GoM has also introduced the Insolvency (Qualifications of Insolvency Practitioners) Regulations 2012 under
section 411(3) of the Insolvency Act 2009. These regulations provide for individuals who are qualified to be
29


﻿on operationalizing the Mauritius Insolvency Act 2009 through more substantive regulations,
in particular, in relation to insolvency practitioners. The prior actions in PSC DPL2 sought to
build upon these reforms, better implement the Insolvency Act 2009, and enhance the overall
effectiveness of the country's insolvency regime. In particular, the PSC DPL2 has the
following three prior actions in the area of insolvency.
84.    (i) Publication of rules of professional conduct for insolvency practitioners: there are
currently no uniform standards that provide insolvency practitioners with professional and
ethical guidance for carrying out their functions. This ethical code of conduct, published by
the Insolvency Service under rules, will apply to all insolvency practitioners appointed in
compliance with the Insolvency Act. These rules will enhance transparency, fairness and
professionalism amongst insolvency practitioners, and ultimately will enable more effective
processes under the law.
85.    The draft codes of professional conduct were shared at stakeholder consultation
meetings and comments received were incorporated into the final Rules which were also
shared with all relevant professional bodies in order to ensure that there are no conflicts with
other professional codes of ethics. These rules of professional conduct were published on
October 19, 2012 under General Notice No. 2260 in the National Gazette, and all registered
insolvency practitioners are currently expected to abide by these rules.
86.    (ii) Establishment of procedures by the Director of the Insolvency Service to deal with
the suspension and removal of insolvency practitioners from the Registry: the Insolvency
25
Service has prepared three draft guidance forms under section 374 of the Insolvency Act
The purpose of these forms is to ensure that there are uniform procedures in place for
registering and removing insolvency practitioners. Together with the rules on professional
conduct, they will help ensure a more streamlined, transparent regulation of the profession.
In order to ensure that these forms are binding on insolvency practitioners (and not merely
guidance forms), and as a means of complementing and supporting the previous regulations in
relation to insolvency practitioner qualifications, it was recommended that these draft forms
be issued as regulations under section 411(1)(a) of the Insolvency Act. This section provides
for the Minister of Finance to make such regulations as he thinks fit for the purposes of the
Insolvency Act. The forms were submitted to the State Law Office, and were published under
Government Notice No. 157 of 2012. The Regulations came into operation on September 1,
2012 and are now binding on all registered insolvency practitioners in Mauritius.
87.    (iii) Publication of Out-of-Court Workout (OCW) guidelines by the Insolvency Service
to promote safeguarding viable businesses: seeking to keep viable businesses alive can help
maximize stakeholder returns, retain jobs and preserve supply networks.    Out-of-Court
Workouts promote restructuring arrangements between lenders and debtors in an informal and
flexible manner that does not drain court resources and seeks to preserve viable businesses.
company secretaries under the Companies Act to act as insolvency practitioners, which includes legal
practitioners and accountants.
25 These forms are the following:
(a) Form 1: Application for Registration as an Insolvency Practitioner;
(b) Form 2: Notice of Ceasing to hold Office as an Insolvency Practitioner; and
(c) Form 3: Notice of Suspension or Removal from Professional Practice of an Insolvency Practitioner
30


﻿Guidelines help ensure that all parties to the restructuring abide by the same general principles
of good faith, confidentiality, a standstill period, rescue funding and transparency. The
publication of these guidelines by the Insolvency Service will help encourage out-of-court
tools that will aim to save businesses before they have reached severe financial distress.
Implementing Out-of-Court Workouts will complement the formal procedures set out in the
Insolvency Act 2009
88.    These guidelines were discussed at stakeholder consultation meetings and have
received the endorsement of the Bank of Mauritius. The Mauritian Banker's Association has
also agreed to further disseminate these guidelines amongst its members. The Insolvency
Service has published these guidelines on its website and also intends to publish it by way of
General Notice in the National Gazette. The Prior Action, "Publication of Out-Of-Court
Workout Guidelines by the Insolvency Service" was not in the first DPL. It is an additional
prior action, given the strong stakeholder demand in this area and the Insolvency Service's
willingness to help establish a debt restructuring framework.
89.    The indicator of "Number of Insolvency Practitioners Registered" is still used.
However, the baseline has changed since all insolvency practitioners had to re-register after
the new regulations were passed. The indicator of "number of businesses with approved
restructuring plans" has been amended to "number of bank using out-of-court workouts" as
this is a more reliable measure. Whereas restructuring plans are confidential, and therefore
difficult to count, it is easier to ask the banks whether they will be using any out-of-court
process in order to achieve restructuring, making the indicator more measurable.
The prior actions for DPL2 are: (i) Publication of the amendment to Insolvency Act
2009 to include the Rules relating to the Performance and Conduct of Insolvency
Practitioners in the national gazette; (ii) Publication of Regulations related to the
registration and removal of insolvency practitioners in the national gazette and (iii)
Publication of the Out-Of-Court Workout Guidelines to promote safeguarding viable
businesses on the insolvency website upon endorsement of guidelines from BoM.
PILLAR 2: Improving Access to Finance
90.    Access to finance is an important driving force in economic growth, and it ranks high
on the list of factors emphasized by individual entrepreneurs as critical to the survival and
growth of their businesses. The overall financial intermediation picture yields a relatively
well-banked view of Mauritius. It ranks quite well compared to other Sub-Saharan countries,
with growth in the Banking Sector at 13.5 percent at the end of June 2012 compared to 11
percent in 2011. However, there are differences among the various segments with SMEs
citing access to finance as a constraint to doing business in Mauritius.
91.    Further analysis and consultation with stakeholders indicate that the constraint may be
linked to both supply side issues along with demand side factors outside the credit market. On
the supply side, consultations with stakeholders revealed that commercial banks are, in
general, not inclined to lend to SMEs. This is mainly because SME property and assets are
usually in the form of machinery, inventory or accounts receivable and these do not, therefore,
31


﻿qualify as collateral for bank loans. While some commercial banks are lending to SMEs, their
lending procedures tend to be lengthy, and the overall borrowing costs including interest, time
to get the loan approved, and cost to prepare the documents is considered too high.
Furthermore, SME businesses face a dearth of specialized financial products and services that
cater to their needs.
92.    On the demand side, SME entrepreneurs in the country usually lack the financial
literacy skills or support to prepare bankable business plans that are required as part of the
documentation for the lending process. Commercial banks identify building SME capacity to
prepare and present bankable projects as the main obstacle to an expansion of their SME
lending. In the same vein, the country lacks proper systems to monitor the credit-worthiness
of most individual entrepreneurs who do not appear in the existing credit bureau database.
The majority of these entrepreneurs are also absent from the land registry database since the
procedures, time and cost to register inherited real estate is forbidding. The PSC DPL is
supporting demand side factors through credit bureau and land titling reforms. While
addressing the demand side issues is a necessary condition for addressing access to finance
constraints, it may not be sufficient to meet SME financing needs.
Supply side constraints to access to finance:
Restructuring the Development Bank ofMauritius
93.    The Mauritian banking industry comprises 20 banks, of which seven are local banks,
eight are foreign-owned subsidiaries, one is a joint venture and four are branches of foreign
banks. All the banks are licensed by the Bank of Mauritius to carry-out banking business
locally and internationally. The total number of Non-Bank Financial Institutions, licensed
under the Financial Services Commission, is currently 729. These include institutions that
operate under the Insurance Act, the Securities Act and the Financial Services Act. Directed
and subsidized credit programs have been offered by the public sector institution,
Development Bank of Mauritius.26 These programs, however, have done little to achieve the
fundamental objective of increasing the access of small enterprises to financial services.
94.    There has been a recent development in the move towards greater access to finance for
SMEs. With a view to increase access to finance to SMEs, the 2012 Budget Speech also put in
place a major reform to boost the supply of bank credit available to MSME entrepreneurs by
(i) setting up a MUR 3 billion fund (approximately US$100,000) from which loans will be
disbursed to MSMEs through commercial banks over a three year period; and (ii) agreeing
with participating banks to offer these loans at a reduced interest rate of 8.5 percent per
annum (compared to the commercial rate of 14 percent per annum). In the processing of these
loans, all related costs and charges are to be borne by the lending institution (but offset by the
low cost of program funds) and are not passed on to the customer. To facilitate this, the GoM
has abolished inscription fees that are levied on registered loans and removed registration duty
on loans of less than MUR 1 million. A total of 14 commercial banks have been allocated a
portion of the Fund for on-lending to SMEs.
26 The DBM was set up as an SME Bank in 1964 to provide affordable financing to the agricultural sector and
SMEs in general.
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﻿95.   DBM has performed poorly and over time fostered a "non-payment culture", as
indicated by a very high volume of non-performing loans. Maintaining the status quo is thus
not a viable option. To better respond to its policy development objectives, the Government
has decided to restructure DBM. The prior action for DPL1 was fulfilled with the 2012
Budget Speech confirming the Government's intention to seek a specialized private financial
institution to transform the DBM into a financially viable MSME Bank. IFC was given the
mandate to attract a strategic partner that specializes in MSME Banking. Prior to signing the
mandate to act as a strategic advisor, IFC undertook a diagnostic analysis on DBM which
identified its chronic operational and governance weaknesses recommending against its
transformation into an MSME Bank and instead recommending its orderly closure and issuing
an Eol to invite a credible international SME Bank with a verifiable record to set up such an
institution in Mauritius. The findings of the study also led IFC to turn down the offer to act as
the Government's advisor on transforming DBM into an MSME Bank. In August 2012, the
World Bank undertook a technical mission to work with the authorities and DBM and
conducted a diagnostic review of DBM. This review also highlighted that status quo is not
viable and identified only two viable options for DBM: (i) winding up; or, (ii) selling of
DBM's banking assets to a new commercial bank with a focus on the SME market within a
broader sustainable business model. While the details of the restructuring process required to
downsize DBM and pay off its liabilities will be identified by the Transaction Adviser (TA)
retained by the GoM in October 2012, the steps so far identified by the technical team include
the sale of DBM's property portfolio.
96.   Deloitte (India) has been appointed as the TA to assist the restructuring of the DBM
by the State Investment Corporation led steering committee. The TA has prepared an
inception report outlining the timeline and the detailed work flow required for the
restructuring to be completed. This inception report was approved by the committee in
December 2012. The two main tasks of the transaction advisor are to (i) devise disposal
mechanisms for the banking assets that will not be transferred to the new commercial bank
with a focus on the MSME market segment (real estate, investment portfolio and non
performing loans); and (ii) explore restructuring options, to ensure that the new MSME bank
obtains a license from the banking regulator under the Banking Act (2004).
97.   To date, two half-day workshops have been held with stakeholders including the DBM
management, board and shareholders to discuss the above and to obtain consensus on the
preferred option. A Restructuring Plan, incorporating feedback from these stakeholder
workshops was prepared and submitted to the committee for approval on January 21, 2013.
Meanwhile, in parallel, letters of invitation of sale have been sent to DBM's existing land
tenants, providing them with the right of first offer on the area they are currently leasing. So
far, over 75 percent of these tenants have expressed their intention to buy. The business plan
for the new MSME Bank is due in April 2013 with the objective of: (i) having an equity
partner, and (ii) applying for a banking license no later than August 2013.
* The prior action for DPL2 is "DBM restructuring initiated by the appointment of a
transaction advisor, endorsement by steering committee of an inception report and the
issuance of letters of invitation to potential investors for the sale of DBM's non-
banking assets."
33


﻿98.    The indicators have been changed to reflect the fact that the options could include a
new commercial bank taking over the assets of DBM and catering to the MSME space. The
new proposed indicators are:
i.   DBM restructured by the sale of its non banking assets; and
ii.  A new licensed commercial Bank with a focus on the MSME segment established.
Demand side constraints to access to finance:
(a) Facilitating access to finance through movable and immovable collateral
99.    The problem of access to finance for SMEs in Mauritius also depends on factors
outside the credit market, underlining demand side constraints.27 Insufficient suitable
collateral is cited as among the top constraints to accessing credit. Although the legislation in
Mauritius provides for a wide range of movable property that can be used as collateral, its
secured transaction system is fragmented and different security rights are available for
different types of grantors and different types of assets.
100.   Credit is more readily available to businesses that have immovable property (land and
buildings) to be used as collateral than those having movable assets as banks heavily prefer
immovable property such as land or buildings to secure a loan. For immovable assets,
ensuring formal property rights is fundamental. Effective administration of land is part of that.
If formal property transfer is too costly or complicated, formal titles might go informal again.
The prior action for DPL1 was the amendment of the Transcription and Mortgage Act in
order to prescribe time limits consistent with business standards to register property. This has
enabled the implementation of the Land and Administration Valuation Information
Management System (LAVIMS) project.28 The time taken to register land tilting was reduced
from 210 to 26 days in 2009, as recorded by the DB Survey and is now expected to reduce to
two days with the implementation of LAVIMS. The Registrar General has also computerized
the electronic Register of Deposit that would enable the platforms to become fully
transactional in the medium term to allow online access, e-submission of documents and e-
payments. The indicator for this component was "reduction in the time taken to register
property", which is being retained.
101.  Around the world, movable assets, not land or buildings, often account for most of the
capital stock of private firms and an especially large share of the assets for micro, small and
medium-size enterprises. The existing legal and regulatory regime for secured transactions in
Mauritius has not been reformed in recent years to reflect the new financial and commercial
needs of the banking and business community. The World Bank through the NLTA provided
a technical assistance note with an assessment of the legal and regulatory framework for
secured transactions as a means to improve access to credit. The Government has announced
the decision to further facilitate the use of movable and intangible assets as collateral and the
establishment of a modern movable collateral registry. In order to do so a stakeholder
committee has been set up to review the necessary legislative amendments relating to secured
27 The factors behind Doing Business ranking - with Mauritius standing 53rd out of 183 economies - also
highlight issues outside the financial sector (Doing Business, World Bank 2013).
28 The LAVMIS project is a separate Government funded project that aims to establish a modern, cost efficient
land administration, valuation and management system in Mauritius.
34


﻿transactions and collateral registries reform. The substance of this reform will address issues
relating to the creation, registration and enforcement of security interests over moveable
collateral. Specifically, the reform will involve the movement to a 'notice-filing' system
consistent with modem personal property security legislation and an electronic notice-filing
registry. The due process required to complete these amendments will require more time and
hence the intended trigger was ambitious in its intended timeline. The intention is to have the
proposed amendments completed prior to November 2013 so that they are introduced in the
Finance Bill of December 2013. This will be followed by the establishment of a modem
movable collateral registry. A new indicator will be added to reflect this prior action, namely
the "completion of the necessary legislative amendments for the facilitation of secured
lending transactions ".
* The Prior Action for DPL2 is: "Government decision to further facilitate the use of
movable and intangible assets as collateral and the establishment of a modern
movable collateral registry."
(b) Increasing coverage of Credit Bureau:
102.  Credit bureaus play an important role in financial stability by helping control over-
indebtedness and are critical to the expansion of credit for both individuals and small
businesses. The Mauritius Credit Information Bureau (MCIB) was established in December
2005 by the BoM as a public registry of borrower information with the main objective to
ensure the development of an overall sound credit environment in Mauritius. The MCIB
collects information from and shares information with financing institutions to enable them to
make more informed lending decisions, thereby lowering their default rate and improving the
quality of lenders' loan portfolio.
103.  Since December 1, 2005, it became mandatory for participating institutions to make
the necessary inquiry from the MCIB before approving, increasing or renewing any credit
facility of customers. The MCIB provides factual information on the creditworthiness of
borrowers, i.e., it generates credit profile reports but does not provide credit scores. To
further reinforce its contribution to the financial stability of the economy, the MCIB needed to
expand its coverage to include non banking financial and credit-granting institutions, and
utility companies. Lack of information on overall consumer indebtedness is an area of
concern from the perspective of financial stability as borrowers may accumulate large debts
through small facilities from credit providers other than those falling under the purview of the
Bank and related liabilities could remain hidden from lenders and lead to flawed
creditworthiness assessment. It is, therefore, important to pool information from all credit-
granting institutions including credit financing institutions which provide direct consumer
financing to individuals.
104.  The prior action for DPL1 was to expand coverage of the credit information bureau to
include all non-bank financial institutions. This led to an increase in coverage from 407,160
customers in June 2011 representing 49.8 percent of the adult population to covering 554,809
registered entities representing 67.8 percent of the population in December 2012. Participants
of the MCIB currently comprise 17 banks including the Bank of Mauritius, nine leasing
companies, eight insurance companies, the Mauritius Housing Company Ltd, the
35


﻿Development Bank of Mauritius, the National Housing Development Co Ltd, the Mauritius
Civil Service Mutual Aid Association, and the Employees Welfare Fund.
105.  Another critical source of data especially for those who are outside the credit
mainstream is utility companies. These include the Central Electricity Board and the Central
Water Authority, waste water management and companies offering information,
communication and telecommunication services. In order to make it obligatory for these
utility companies to share information with the Bank of Mauritius, it was proposed that
Section 52 of the Bank of Mauritius Act be amended to add the definition of the words
'Utility Body' as a corporate body which provides utility service to the public and includes
the Central Electricity Board, the Central Water Authority, the Waste Water Management
Authority, companies offering information, communication and telecommunication services,
which is the prior action for this operation. Further, in order to facilitate the transfer of data
from the utility companies to MCIB, there have been system enhancements that have been
undertaken to facilitate data transfer and decrease the transactions costs involved. Future
enhancements would include the development of a file transfer protocol to make the transfer
possible online expeditiously.
106.  With the amendment to the Banking Act, this prior action directly increases the
coverage of the MCIB by including utility companies which is critical towards achieving the
objective as laid out in this component. The indicator of increased coverage under the credit
information bureau is retained.
* The Prior Action for DPL2: "The Bank of Mauritius to amend the Bank of Mauritius
Act in order to define 'Utility Body29' to further increase coverage of the Credit
Information Bureau. "
PILLAR 3: Promoting ICT usage and e-Government reforms for Increased Efficiency
and Transparency Gains
107.  ICT is considered a key pillar for supporting competitiveness, and indeed the hope is
that it will become a "fifth pillar" in the national economy contributing at least 7 percent of
national GDP. Given its potential to have significant positive spill-over effects on other
sectors of the economy, the Government of Mauritius has prioritized the development of a
high performance broadband infrastructure on which ideas and services can be transmitted.
108.  To develop a high performance broadband infrastructure, Mauritius will have to rely
on large private sector investments in high bandwidth networks, both wireless and fixed. It
has long been recognized that slow broadband speeds and relatively high prices, compared to
its international peers, are the Achilles heel of communication services in Mauritius and a
barrier to enhanced competitiveness. Here there is some progress to report, with a number of
recent developments that have the potential to be "game changers" that include (i) the market
29 As a body corporate which provides utility service to the public and includes the Central Electricity Board, the
Central Water Authority, the Waste Water Management Authority, companies offering information,
communication and telecommunication services.
36


﻿entry of Bharat Telecoms, with a US$50 million investment in creating a 2,900 km fibre
network to cover Mauritius, using a technology known as Internet Protocol TV; (ii) the entry
of Belgacom as a third supplier of international bandwidth (after Mauritius Telecom and
EMTEL), with a price offering around one-third that of the incumbent; (iii) the launch of 4G
mobile broadband services, which will put competitive pressure on fixed-line broadband
services; and (iv) the Government announcement of the use the Universal Service Fund to
subsidize entry-level broadband price in the retail market of 2 Gb of data per month at 256
kbit/s for 200 Rupees (US$6.50) which is intended to supplement the operation of market
forces in reducing prices at higher-usage levels.
109. Nevertheless, market determined broadband prices remain relatively high in Mauritius
for both fixed-line and mobile services, when compared with a representative range of other
low and middle income countries (see Figure 2). Using a measure of performance - the
typical speed for broadband services (as measured by NetIndex in January 2013) -- Mauritius
ranks only 171s in the world (out of 180 countries), with an average download speed of
around 1.57 Mbit/s. Developing a data collection framework for monitoring broadband
quality of service is an urgent task to tackle the slow broadband speeds.
110. Mauritius lacks strong Internet Service Providers (ISPs) that are independent of the
main operators. The ongoing work to define markets and determine which operators have
SMP should provide the impetus for regulatory action to encourage the development of
independent ISPs by providing equal access to core facilities. A first step would be to carry
out a study, and assess stakeholder opinions, on the possible need to consider structural
separation of the incumbent's network, and to extend open access principles inland from the
cable landing stations. The exercise of SMP by the incumbent operator, Mauritius Telecom,
was highlighted in the December 2012 ruling, of the Competition Commission into Mauritius
Telecom's MyT offering. My T is a bundled "triple play" offering of Pay TV, internet access
and telephone service. The Competition Commission found that Mauritius Telecom had been
leveraging its market power in residential fixed-line broadband access to restrict competition
in the supply of Pay-TV. Following the ruling, Mauritius Telecom has undertaken to unbundle
the service offering to allow for separately priced services.
111.  The prior action for DPL1 was the development of a National Broadband Policy
(NBP), which is part of the process of signaling the Government's intentions clearly, credibly
and convincingly. The Policy, which was published online in January 2012, outlines a policy
framework that will guarantee the predictability to the business environment while at the same
time aiming to achieve robust competition that will improve consumer welfare through lower
prices, more abundant offerings and an increased set of choices.
112.  The indicative trigger for DPL2 was to "Establish protocols to strengthen the
independence of ICTA. " Here the independence of ICTA, which is the regulatory body, is
more a question of perception rather than of legal status. Since the incumbent operator is still
60 percent owned by government, there is a perception that the market is closed to new
operators. The prior action for DPL2 relates to a more transparent process of spectrum
allocation. The civil radio frequency spectrum is an increasingly vital resource for information
and communication services, especially for mobile broadband. The ICT Act, originally
enacted in 2001, offers a traditional "command and control" approach to spectrum, based on
the principle of "first come, first served". Draft legislation revising section 24 (licensing) of
37


﻿the ICT Act has been prepared following extensive stakeholder consultation workshops. The
new draft legislation has been adopted by the ICTA Board prior to being presented for
Parliamentary approval in the next session commencing in March 2013.
Figure 2: Broadband prices in selected low and middle-income economies, in US$ Purchasing
Power Parities, per month
Fixed broadband                          Mobile broadband price for
basket, PPP, 2011                         1GB/month, (PPP), 2011
Chile                            53.1
Brazil 50
South Africa                     41.9         South Africa                       47
Malaysia                    37.4              Thailand                        46
Thailand                   35.9                  Chile                     40
China                  32                   Mauritius               30
Mauritius                29.8                   Mexico                 29
Mexico                28.5                    Malaysia             25
Russia            20.6                         India              24
Morocco            19.6                       Morocco             20
Brazil           19.1                         China            19
India         15.2                           Russia           18
0        20        40        60               0         20       40        60
Note: Right chart based on a monthly basket of fixed broadband services. Right chart based on monthly cost of subscription with 1 GB
equivalent data download. This comparison pre-dates the new subsidized price for broadband introduced in the 2013 Budget Speech and
should be reflected in future price comparisons.
Source: ITU, ictData.org.
113.   The new draft legislation recognizes class licenses and introduces a new section 24B
on spectrum management. This inter alia creates a framework for allowing spectrum auctions,
spectrum sharing and even secondary spectrum trading. The use of market mechanisms for
spectrum allocation will reinforce the perception of regulatory independence because it will
free the regulator from having to make arbitrary decisions for spectrum allocation based on
the principle of "first-come, first-served". The use of spectrum sharing and trading will
promote efficiency and innovation in the use of spectrum. In the longer term, the possibility of
raising government revenues from spectrum usage may provide a welcome boost to the public
purse and would prove a superior alternative to the "solidarity tax" currently being imposed
on the profits of telecom operators. The first opportunity to use the new powers may come
with the refarming of analogue broadcast frequencies, due to be released with the digital
switchover in broadcasting, planned for later this year - the so called "digital dividend".
The prior action for DPL2 is "Draft legal changes to pertinent sections of the ICT Act
2001 related to licensing adopted by the ICTA Board."
114.   The expected outcomes from this action was defined as an "Increase in the number of
homes that have access to download speeds of at least 10 Mbit/s and upload speeds of at least
5 Mbit/s by 2013." This indicator, however, is not technologically-neutral as it fails to address
competitiveness because it is concerned only with residential usage rather than business
usage. Furthermore, it is a supply side indicator, whereas, the indications are that Mauritius's
problems are more on the demand side. For these reasons, an alternative statement of this
38


﻿outcome indicator would be "Increase in number of broadband subscriptions with actual
speeds of at least 10 Mbit/s". Note that the threshold figure of "actual speeds of at least 10
Mbit/s" is one of the stated targets in the NBP, and is a more meaningful indicator than
advertised speeds. The prior action on spectrum reform should lead to an increase in the
supply of spectrum and with a more market based approach to spectrum allocation result in
possible new entrants into the mobile broadband market and potentially reduce unit prices for
mobile broadband. This should in turn force down prices for fixed broadband and potentially
increase the overall number of broadband subscribers.
115.  The second prior action in DPL1 recommended the adoption of a set of regulatory
tools that will allow the regulator to achieve some of the competition goals set out by the
NBP. Specifically, it recommended that an amendment to the Information and
Communications Technology Act of 2001 would provide ICTA the required authority to
regulate markets where an operator is deemed to have a SMP. Amendments to that Act were
approved in December 2011, as part of the Implementation of New Economic and Financial
Measures (Miscellaneous Provisions) No. 2 Act. The amendment was drawn up through a
consultative process with the full support of the Competition Commission of Mauritius
(CCM).
116.   Defining SMP is an important first step both for determining whether any remedies
are necessary to avoid market distortion or to promote open access, for instance through
structural separation. It is also a first step towards lifting the burden of regulation in markets
that are deemed to have effective competition, or lifting obligations from operators that are
determined as not having SMP, for instance by waiving the requirement for pre-approval of
tariffs. The corollary of this is that any remaining regulation can be better targeted. The
progress has gone beyond the intended trigger.
117. As noted above, the work on SMP has been carried out in close collaboration between
the regulator and the CCM. The two agencies identified two markets for urgent action -
Wholesale Intemet-Digital Subscriber Line and International Bandwidth. The aim was to
complete the SMP analysis for these markets first before defining and analyzing other, more
competitive markets. The definition of SMP in broadband markets played a significant part in
the determination of the Competition Commission concerning the Mauritius Telecom MyT
bundled services offering. Work on defining different market segments has also enabled more
precise and limited collection of tariff data to be carried out, and an ICT Market Observatory
has been established. Based on the data collected and the SMP analysis undertaken and
stakeholder consultations held, the guidelines for tariff applications together with the required
application forms have been published on the ICTA website.
*  The prior action is "Publication of guidelines for tarif setting on ICTA website."
118.  The expected outcome indicator from this prior action was a decrease in average
monthly retail price of broadband ADSL 256 kbps with 3 GB allowance service to
households. Again, this indicator is not technologically-neutral in that it presupposes that
Asynchronous Digital Subscriber Line (ADSL) is the relevant technology as opposed to fibre
to the home (offered by Bharat Telecom) or 4G mobile (offered by EMTEL and Mauritius
Telecom and soon by MTML). Furthermore, the indicator accepts the notion of a 3GB per
39


﻿month bandwidth cap, whereas such caps are being lifted in most competitive markets around
the world. The subsidized entry level broadband price also uses a cap of only 2GB per month.
A restatement of this outcome indicator would be a decrease in the price per 1 Mbit/s per
month of broadband service (fixed) and/or per GB of data (mobile). By using a unit price
rather than a price based on a current service, it should be easier to make comparisons
between different services and to "future proof' the indicator for the days when data caps are
lifted and slower speed services are no longer available. The link between the prior action and
the outcome indicator is that, now that markets vulnerable to SMP have been defined, it will
be easier to track price trends. The publication of tariff guidelines will not only promote
transparency but should, in the longer term, reduce the requirement for pre-approval of tariffs
by non-dominant operators, thereby promoting greater price innovation.
119.  For the E-Government Component: the prior action for DPL1 was intended to support
the Government's efforts to promote the widespread adoption and use of public key
infrastructure (PKI) which is a secure encryption technique, to execute secure electronic
transactions. In order to enable a secure electronic transactions operating environment, the
Electronic Transactions Act was amended, and the Electronic Transactions (Certification
Authorities) Regulations 2010 came into effect on December 1, 2010, providing for the
licensing framework as well as the regulation of Certification Authorities (CA) activities in
Mauritius. In addition, there is a Data Protection Commissioner responsible for upholding the
rights of individuals as set out in the Data Protection Act, 2004.
120.  The indicative trigger for DPL2 was stated as "Cabinet approval of targets to
increasing paperless G to B and G to G transactions ". One manifestation of this was the
decision in the 2013 budget to reduce each Ministry's stationery budget by 25 per cent,
generating a saving of US$1.4 million. Nevertheless, this is a relatively weak indicator of
future progress towards e-Government. In order to make the prior action more positive, it was
suggested that it be made dependent on signing a contract to establish a Government Services
Platform, based on Public Key Infrastructure (PKI), which will support a wider range of
government services, some of which may replace paper-based alternatives (such as secure
email replacing memos) but others of which are new (for instance, permitting the use of credit
cards to pay for services such as online business registration). ICTA itself has been nominated
as the Certification Authority for PKI and serves as the root authority for issuing digital
signature certificates. E-Mudra, a company based in India is expected to become the first
commercial registry. Work is underway on a national ID system and a partner, from
Singapore, has been identified and a contract negotiated and signed in October 2012. The
system of national digital ID cards is expected to cover some 900'000 citizens by the end of
2014. A national digital ID would provide a platform for a number of other eGovernment and
eCommerce services that require identity authentication. Work to clean up the government
data base of citizens, for instance to remove duplicates, is underway. But the national digital
ID is only one of many services that could be developed once a secure platform exists. For
this reason, the prior action is "Selection of a competitively selected partner to develop a
Government Services Platform for eGovernment services, protected by a Public Key
Infrastructure (PKI)". The expected outcome indicator for the eGovernment components is an
increase in number of public services that can be executed via secured online transactions.
This will be retained.
40


﻿*   The prior action for DPL2 is: "Selection of a competitively selected partner to develop
a Government Services Platform for eGovernment services, protected by a Public Key
Infrastructure (PKI)".
VI.       OPERATION IMPLEMENTATION
A.     POVERTY AND SOCIAL IMPACTS
121.   The DPL supported reforms are expected to have in general a positive impact on the
poor and the vulnerable in the following ways: (i) strengthening the SME programs that will
enable SMEs to become more productive; (ii) increasing access to finance to firms that do not
have access to immovable collateral and alleviating this constraint by further facilitating the
use of movable collateral; (iii) the introduction of a specialized MSME bank and (iv)
increasing competition in the telecom sector making mobile services more affordable.
Combined, these measures are aimed at raising private sector competitiveness and increasing
investment, including FDI, and designed to support a virtuous cycle of growth, employment
generation and productivity gains. Reform measures supported by the three pillars are targeted
at decreasing business costs and creating better conditions for private local and foreign
investments and ultimately leading to job creation.
122.   Reforms under Pillar 1 support the growth of enterprises by facilitating both entry and
exit. The rationalization of SME programs will improve the capacity of the Government to
provide targeted business development services, which will enable greater productivity gains
for SMEs and start ups. The other prior actions under this pillar facilitate firm exit through the
implementation of existing legislation, by providing the framework for the rehabilitation of
stressed enterprises to seek temporary protection from its creditors without forcing them into
bankruptcy and loss of jobs. Reforms under Pillar 3 aim at promoting ICT usage for increased
competitiveness and transparency. In particular, the prior actions are aimed at increasing
competition in the market, making prices more affordable, thus implying greater access to
these technologies by the population.
123.   Reforms under Pillar 2 aim at increasing access to finance which will yield direct
benefits to lower income segments of the population. The reforms under this pillar, increase
access through three areas of support: firstly through restructuring of DBM and the
establishment of a commercial Bank with a focus on the MSME segment; secondly increasing
the coverage of the credit bureau and facilitating access to finance by reducing the risks
associated with limited information on potential borrowers and thirdly through facilitating the
use of movable property and intangible assets and the establishment of a movable collateral
registry to facilitate secured lending transactions. This will enable firms and individuals who
do not have fixed assets to be able to access credit.
124.   Supported policies under this second operation will not have a significant
distributional impact. The restructuring of the DBM will not have any adverse effects on its
employees since the Government plans to have a robust plan that includes placing any
redundant staff in various government institutions based on their specific skill sets. The
specific risks will be clearly identified during the due diligence carried out by the professional
transaction advisor, and formal measures to mitigate the employment shock on redundant
workers will be put in place by ensuring that (i) appropriate clauses are included in the
41


﻿divestiture contracts, (ii) proper budgeting measures are made to compensate potential
retrenched workers according to the law, and (iii) a retraining and re-skilling program is put in
place through the Placement and Training Program under the National Empowerment
Foundation (NEF). Further, The World Bank is supporting the strengthening of active labor
market programs of the NEF under the Public Sector Performance DPL.
B.    ENVIRONMENTAL ASPECTS
125. None of the reforms supported by the DPL series are likely to have a direct effect on
the environment, natural resources, or forestry. Beyond the immediate focus of the DPL, other
Government policies and development objectives such as increasing tourist arrivals by 2015,
expanding the port and airport, relieving traffic congestion, and making the business climate
more investor friendly may have an environmental impact. Historically, the record of
environmental management, though not perfect, has been relatively good.30 The Safeguard
Diagnosis Review carried out in October 201031 shows that Mauritius' environmental policies
are sufficiently robust and are being implemented satisfactorily.
C.    IMPLEMENTATION, MONITORING AND EVALUATION
126.  It was decided at the outset of the preparation of the First PSC DPL that the
Government and the World Bank will meet twice a year to review the progress of the DPL.
MoFED will be responsible for the overall coordination of supervision and monitoring of the
reform program supported by the proposed DPL series. MoFED has been liaising with focal
points in the Ministries, departments and agencies involved. Periodic monitoring and dialogue
with relevant line ministries and other stakeholders involved in the implementation of the
reforms have taken place through field missions that produce detailed aide memoires
documenting the progress on the reform program and on a daily basis through staff based at
the World Bank's country office. An Implementation, Status and Results report has been
prepared to track the progress since DPL1 was approved by the Board. MoFED, as the
primary counterpart of the operation, will be responsible for furnishing information to the
World Bank, as required, to monitor outcomes in the policy matrix (Annex 1). This has been
complemented by intensive dialogues and assessment between World Bank and the relevant
ministries, departments and agencies with a view to identify constraints, and areas where
technical support is needed.
D.    FIDUCIARY ASPECTS
Public Financial Management System and Fiduciary Issues
127.  Mauritius has a satisfactory financial management system. The country's fiduciary
framework is adequate to support the proceeds of the credit.  This fact is supported by
conclusions of the 2010 PEFA report that noted (a) an improved Public Financial
Management (PFM) performance since the 2007 PEFA assessment, and (b) that 90 percent of
all loans and grants received by Government in 2009 were managed using government
30 See EU "Mauritius Country Strategy Paper 2008-2013," Annex 3, Executive Summary of the Country
Environmental Profile.
31 Safeguard Diagnostic Review for the Republic of Mauritius, October 2010, World Bank
42


﻿systems with a few exceptions for loans and grants from China and India. As summarized in
paragraph 63, GoM designed and has been implementing a post PEFA PFM Action Plan
2011-13 aimed at further strengthening PFM systems.
128. External auditors have not reported any concerns with the audited financial statements
of the BoM. The IMF has not undertaken a safeguard assessment on the Bank of Mauritius.
The independent external auditors issued an unqualified audit report on June 30, 2012, and the
BoM's audited financial statements are published on the BoM website.
Funds Flow Arrangements
129.  The loan disbursement will follow the World Bank's procedures for development
policy lending. The loan will be disbursed in a single tranche upon effectiveness. The loan
proceeds from the World Bank will be credited to an account that is part of the country's
official foreign exchange reserves at the BoM. The rupee equivalent of the loan proceeds will
be reflected in the budget to finance budgeted expenditures. The Government will provide a
letter to the World Bank within 30 days of receiving the loan proceeds written by the
Accountant-General confirming that: (i) the accounts used to deposit the loan proceeds are
part of the country's official foreign exchange reserves; and (ii) the rupee equivalent of the
loan proceeds has been reflected in the budget and in the Government's accounts on the date
reflected. The loan proceeds shall not be used to finance excluded expenditures as defined in
Section 2 of the Appendix in the loan agreement. If any portion of the loan is used to finance
ineligible expenditures as so defined, the Bank will require the government to promptly
refund the amount upon notice.
Accounting
130.  The accounting of the loan proceeds will be the responsibility of Accountant-General
at the Ministry of Finance and Economic Development. Government procedures will be
followed to administer and account for the loan proceeds and related payment. Since the
control environment is considered to be adequate, no additional fiduciary requirements shall
apply.
E.    RISKS AND RISK MITIGATION
131.  The implementation of the proposed reform program entails a number of risks that had
been identified at the preparation of the First DPL and are still relevant: (a) the challenge of
maintaining macroeconomic stability under growing uncertain global developments; (b) a
slowdown in the momentum of reforms; and (c) limited institutional capacity within sector
ministries to lead and implement the reforms. The more detailed identification of these risks
and the proposed mitigation measures are provided below.
132.  The first and perhaps the most important risk is that the macroeconomic stability may
be affected given the growing uncertainty in the global economic climate, particularly in the
European economies to which Mauritius remains highly exposed. These global economic
uncertainties represent a significant threat to a small open economy such as Mauritius. While
the impact of the global economic slowdown has been partially contained so far and GDP
growth is estimated to be 3.3 percent in 2012, a more protracted and extended slowdown
43


﻿could further deteriorate Mauritius' economic prospects primarily on two fronts - the fiscal
position and the current account deficit. Slower global economic growth is already depressing
domestic growth and tax revenues, thus making it more difficult to finance the Government's
priorities. Despite this difficult environment, the Government is consolidating the fiscal
deficit and reducing public debt. Current account deficits, although high, have been
adequately financed, mostly by high FDI and inflows to the financial sector. However, this
could quickly reverse if international financial markets were to deteriorate. Finally, the
concentration of the country's exports on a few markets (Europe) and products (tourism and
textiles) and its large share of imported commodities could further increase the current
account deficit.
133.  The economy has proved its resilience in 2012, and the Government has the means to
cope with external economic uncertainties, but a firm commitment will be needed to rein in
public expenditure if a more substantial slowdown materializes. Furthermore, on the external
front, the increasing levels of foreign exchange reserves (projected to be at six months of
imports in the medium term) provide an additional buffer against a potential deterioration in
the balance of payments. Mauritius' floating exchange rate also facilitates correction of
external imbalances in the medium term. The recent trend towards reorienting exports towards
new markets (particularly Africa) will also help. On the fiscal front, the slowdown in the
growth of public revenues is being more than compensated for by the containment of public
expenditure, with a reduction of the fiscal deficit and public debt. Should revenues dip, this
would require an acceleration of efficiency gains in the public sector, and additional use of the
remaining funds from the National Resilience Fund created in 2011. The Government is also
extending the maturity of the public debt further reducing roll-over risks, as the majority of
debt is domestic, and there is currently excess liquidity in the domestic capital markets.
134.  The second risk is that a narrowing political reform space affects the pace of the
reform program at a time when the need for reform is most urgent. There are a few champions
for strong reforms and the effective voice and demand for reform by other stakeholders is
limited. This reflects the fact that many of these new reforms will have redistributive effects,
sometimes eliminating the rents and subsidies.
135.  There are several ways to mitigate this risk. To the extent that the proposed program
has been designed to mitigate this risk by supporting reforms where consensus exists, helping
to put in place building blocks to expedite the reform program in the medium term. An
example is the fact that UBEB as envisaged when DPL1 was presented to the Board did not
materialize due to apprehension of its possible social impacts. However, as a second best
option moving towards the objective of greater efficiency of government resources, the inter-
agency committee aims to serve as a platform to share information of existing initiatives
amongst the members as well as gauge the existing gaps that need to be addressed to service
entrepreneurs and SMEs. The Government's focus on growth of SMEs shall support its
inclusion agenda. Moreover, over the medium-term the accelerating reforms for engendering
competitiveness and growth will generate better conditions for job creation. Finally, better
communication will be key to building consensus around the reforms to raise the awareness
and understanding about the reforms and their benefits among all stakeholders. This has been
useful in the implementation of the reforms supported under this operation. All major reforms,
be it the restructuring of DBM, the legislative changes introduced for spectrum management
and greater competition in the ICT market and the regulations and guidelines introduced to
44


﻿make the insolvency regime more efficient have been done in consultation with all the
relevant stakeholders so that it is an inclusive process and can take on board feedback from
these players before the finalization of these reform measures.
136.  The third risk is that of institutional constraints, including limited capacity in sector
ministries, which might make it more difficult to effectively design, implement and monitor
the reforms. Underlying institutional political economy constraints and the narrowing reforms
space identified above combined with limited institutional capacity in some sector ministries
can limit the effectiveness and progress of reforms. This is evident from the different pace of
reforms across line ministries. Compared to previous reforms in which MoFED played an
active role in leading and coordinating the efforts, the on-going reform processes are overseen
in most cases by sector ministries. This involves a broader set of stakeholders, which requires
additional effort in building and broadening consensus around the reform agenda. However,
the institutional capacity of sector ministries to design and implement these sector reforms
may be limited, particularly in the newly created ministries. In addition, after a period of
ambitious reforms, a certain reluctance to change from some stakeholders has sometimes been
observed.
137.  The World Bank is supporting the Government to help mitigate this risk by bringing
specialized staff to complement the DPL dialogue in selected areas, and promoting a public
debate through articles and technical notes. Through the NLTA which has complemented this
operation, the Bank provided analytical and operational capacity in line ministries such as
MoBEC and the Ministry of Tertiary Education, Science, Research and Technology.
Additionally, the DPL itself is a catalyst between the different ministries involved in the
reform program, thereby enhancing coordination. Also, the World Bank's portfolio in
Mauritius is designed to help strengthen capacity tailored to the needs of a Middle Income
Country. This will be done on the one hand through analytical work, coordinated with other
development partners to leverage limited resources to support selected capacity-building in
priority areas. On the other hand, the portfolio includes strategic technical assistance on
selected governance areas, such as on capacity-strengthening in anti-corruption, both
horizontally and vertically. Furthermore, a Services Agreement for Reimbursable Technical
Assistance (RTA) signed by the World Bank and the Government is available to further
strengthen institutional capacity in line ministries where needed.
45


﻿Annex 1: Operations Policy Matrix
Medium-term Objectives                                                                      .            Baseline               Responsible
Policy Actions                          Indicators                  Targets       Entity
DPL1                         DPL2                                                 2013
(prior actions)              (prior action)
Improve outreach and quality of  Cabinet approval of   Implementation of the            Number of           Generic     (i) 25   MoBEC
Business Development services  consolidation of SME     consolidation of SMEs programs  Enterprises        BDS = 200    percent
(BDS) programs targeted       programs under Ministry  that includes (a) establishing an  accessing (i)                increase
towards SMEs.                 of Business, Enterprise and  inter-agency coordination    Generic and (ii)   Specialized
Cooperatives (MoBEC).     committee under MoBEC; and (b)  Specialized BDS    BDS =80
the issuance of a Request for    increases.                      (ii) 50
Proposal to develop an overall                                  percent
Monitoring & Evaluation                                        increase
Framework for Business
Development Services schemes.
Development of        No         Yes
an M&E
Framework.
Facilitating, through the     Ministerial approval of   Publication of the amendment to  Number of           Zero         50     Registrar of
implementation of existing    the registration guidelines  Insolvency Act 2009 to include the  insolvency                        Companies!
legislation, firm exit by     and prescribed application  Rules relating to the Performance  practitioners                       MoFED
providing the framework for the  form to register Insolvency  and Conduct of Insolvency  registered.
rehabilitation of stressed    Practitioners in Mauritius.  Practitioners in the national
enterprises to seek temporary                           gazette.
protection from its creditors                           Publication of Regulations related
without forcing them into                              to the registration and removal of
bankruptcy.                                             insolvency practitioners in the
national gazette.
Publication of the Out-Of-Court
Workout Guidelines to promote
safeguarding viable businesses on
____________________________             the_insolvency_web site_upon    ___________________________
46


﻿Medium-term Objectives                                                                         .            Baseline                Responsible
Policy Actions                           Indicators                   Targets       Entity
DPL1                          DPL2                                                  2013
(prior actions)               (prior action)
endorsement from BoM.            Number of banks
that have used the     0           4
OCW guidelines.
Provision of suitable menu of  Cabinet Approval of a     DBM restructuring initiated by the  DBM restructured    No         Yes      MoFED/DBM
financial products/services for  decision to transform DBM  appointment of a transaction  by the sale of its
SMEs through the restructuring  into a financially viable  advisor, endorsement by steering  non banking
of DBM, and the establishment  MSME Bank, licensed by    committee of an inception report  assets
of a specialized MSME          the Central Bank, and with  and the issuance of letters of
financial institution.         private sector involvement. invitation to potential investors for  A new licensed
the sale of DBM's non-banking     commercial Bank
assets.                          with a focus on
the MSME               No         Yes
segment
established.
Increase access to finance     The Transcription and     Government decision to further   Reduction in time    15 days     2 days    Registrar
through reforming land titling  Mortgage Act is amended  facilitate the use of movable and  taken to register                        General
procedures and further        in order to prescribe a time  intangible assets as collateral and  property.                           /MoFED
facilitating the use of movable  limit consistent with   the establishment of a modem
assets as collateral.          business standards to     movable collateral registry.     Completion of
register property.                                          necessary legal
amendments to         No          Yes
facilitate secured
lending
transactions.
Facilitate enhanced access to  The coverage of the credit  The Bank of Mauritius to amend  Increase in          50%         70%      Bank of
finance by reducing the risks  information bureau is     the Bank of Mauritius Act in order  coverage of the                         Mauritius/
associated with limited        expanded to include all   to define 'Utility Body32' to further  Credit                               MoFED
information on potential       non banking financial     increase coverage of the Credit Information
borrowers.                    institution.               Information Bureau.              bureau.
32 As a body corporate which provides utility service to the public and includes the Central Electricity Board, the Central Water Authority, the Waste Water Management Authority,
companies offering information, communication and telecommunication services.
47


﻿Medium-term Objectives                                                                          .            Baseline                Responsible
Policy Actions                           Indicators        (21)        Targets       Ett
(2011)                   Entity
DPL1                          DPL2                                                   2013
(prior actions)               (prior action)
Promote investments in         Cabinet approval of        Draft legal changes to pertinent  Increase in                     15%       ICTA
affordable and ubiquitous      National Broadband         sections of the ICT Act 2001      number of                      increase
broadband networks by          Policy.                    related to licensing adopted by the  broadband
increasing transparency and                               ICTA Board.                       subscriptions with
legitimacy for regulatory                                                                   actual speeds of at
decisions.                                                                                  least 10 Mbit/s
To reform regulation so that is  Cabinet approval to      Publication of guidelines for tariff  Decrease in the  Fixed:     10        ICTA
applied in only markets where  amend ICT Act to           setting on ICTA website.          price per 1Mbit/s  $27.83       percent
necessary and allows           introduce a definition of                                    per month of                    decrease
competition where possible.    Significant market Power                                     broadband service  Mobile:
(SMP) and equip the ICT                                     fixed and mobile.  $17.38
Authority with the
appropriate tools to
regulate markets in which
there is evidence of SMP.
To promote widespread          Cabinet approval of the    Contract with a competitively     Number of public  0             10        Ministry of
adoption and use of public key  Action Plan to ensure the  selected partner to develop a    services that can                         ICT
infrastructure (PKI) so that   widest adoption of the PKI  Government Services Platform for  be executed via
secured electronic transactions  technology.              eGovernment services, protected by  secured online
can take place.                                           a Public Key Infrastructure (PKI).  transactions.
33 Includes all broad band subscription including ADSL, 3G, Fiber optics/ LAN and WiMax
48


﻿Annex 2: Letter of Development Policy
Office of the Vice-Prime Minister, Minister of Finance
& Economic Development
Government House, Port Louis, Republic ofMauritius
Tel. (230) 201 2431 Fax: (230) 213 6450
cREULIc orrnums                    Email: xlduval@mailgov.mu
In reply please quote  CF/92/4/B                        Date: 15 February 2013
Mrs Haley Bridi
Country Director for Mauritius
Africa Region, World Bank
Rue Andrialifidy
I..azanimanantsoa Ansoy
Boite Postate: 4140
Antananarivo,Madagascar
Dear Madam
Second Private Sector Competitiveness Development Policy Loan and Second Public Sector
Development Policy Loan- Mauritius Invitation to Borrower to negotiate
I thank you for inviting the Government of Mauritius to negotiate for the proposed Second
Private Sector Competitiveness Development Policy Loan in the amount of US$ 15 million and the
proposed Second Public Sector Development Policy Loan in the amount of US$ 20 million and I
would like to confirm that February 20, 2013 is convenient for the Mauritian Delegation to
negotiate the Public Sector and Private Sector Development Policy Loans.
We have noted the content of the discussions as part of the negotiations. The Mauritian
Delegation will be headed by Mr G. Bussier, Acting Director and he will sign the Minutes of
Negotiations once negotiations have concluded in the name of the Republic of Mauritius. The list of
the Mauritian Negotiating Team is attached.
The Mauritian authorities took note of the Bank Policy on Access to Information and
confirm that we have no objection to the Bank publicly releasing the Program Documents for both
Development Policy Loans and the Letter of Development Policy upon distribution to the Bank's
Board of Executive Directors.
We look forward to the negotiations, and would like to thank you and your team for their
assistance in getting us to this stage in the loan process.
Regards
Yours Sincerely,
CharlesLM .GaKtan
Vice-Prime Mini     nister of Finance and
Economic Development
49


﻿Letter of Development Policy
Over the last seven years Mauritius has undergone a series of reforms, with the help of its
development partners, to maximise the country's potential to transform itself into a high-
income economy. These reforms were designed to enhance the country's competitiveness
and to put the economy on a higher growth trajectory whilst creating opportunities for the
most vulnerable groups through economic empowerment
Whilst the reforms undertaken helped build resilience by reducing macroeconomic
vulnerabilities and Improving fiscal sustainability, challenges remain due to the continuing
difficulties being faced by the global economy. Sustaining the quality and pace of
implementation of reforms Is, therefore, vital to increase the economy's long-run growth
potential and to help reinvent itself in the face of adversity.
The 2013 Budget includes a number of measures to support the on-going reform programme,
namely, Improving the business environment, encouraging the adoption of technology,
modernising access to innovative public services and Implementing an Africa strategy. New
impetus has been given to all sectors including financial services, education, health, tourism,
entertainment and shoppin& manufacturing and other export-oriented industries, agriculture
and fishing and ICT-BPO.
In spite of the downside risks and uncertainty prevailing worldwide, latest available
information indicate that GDP growth rate was 3.3 percent in 2012. This performance can be
attributed to pro-growth policies, sound macroeconomic management, improved public
sector governance, and ongoing reforms. Based on the current global economic outlook, and
policy measures taken in the 2013 Programme Based Budgeting (PBB), the Ministry of
Finance and Economic Development is forecasting a growth rate of 4 percent this year-
assuming recovery of our main trading partners coupled with diversification of markets and
higher implementation rate of budget measures, more specifically those related to public
infrastructure projects. Investment rate is likely to rise to around 23.8 percent this year and
is mainly driven by the public sector.
On the other hand, inflation reached 3.9% by the end of 2012, lower than the 6.5% recorded
in 2011. For this year, unemployment rate is likely to remain stable at 8 percent with a higher
net job creation of around 5,100. Current account deficit will be around 10-11 percent of GDP
while the overall balance of payments would remain in surplus. 2012 was an exceptional year
for Mauritius whereby Foreign Direct Investment inflows is estimated to have reached some
Rs 12 billion , higher than Rs 9.5 billion in 2011. This is among the highest levels of FDI
recorded.
The implementation of the reform agenda will require the financial and technical support of
all the development partners, Including the World Bank (WB), the European Union (EU), the
African Development Bank (ADB) and the Agence Frangaise de D6veloppement (AFD), the
United Nations Development Programme (UNDP) and the International Monetary Fund (IMF).
The four pillars of the reform programme namely (i) Improving public sector efficiency, (1i)
sharpening competitiveness, (Ill) improving the Investment climate and (iv) widening the
1
50


﻿circle of opportunities, continue to underpin the country's growth strategy. Government
relies on the continued support of the Bank through Development Policy Loan (DPL)
operations as an important vehicle for supporting policy reform in Mauritius. While financing
is needed, Government values the policy dialogue and technical support from the World Bank.
In this context the second DPL operations will help reinforce Governments medium term
reform programme. The Second Public Sector Performance Development Policy Loan (PSP-
DPL) of US$20 million will focus primarily on the performance of the public sector while the
Second Private Sector Competitiveness Development Policy Loan (PSC-DPL) of US$15 million
will put emphasis on the competitiveness agenda. The combination of the reforms proposed
by these two complementary DPLs will help improve the country's competitiveness and
resilience and prepare the economy for rapid and inclusive economic growth.
This letter of development policy broadly outlines how current and prospective reforms will
consolidate and extend the gains In each of these areas.
A. Improving Public Sector Efficiency
Government is well aware of the need to exercise fiscal prudence in the wake of sustained
international economic crisis and has laid out measures to improve efficiency in the public
sector. Discounted Public Sector Debt as a percentage of GDP has continued its declining path
reaching 53.1 per cent GDP by end December 2012 while overall budgetary central
government deficit dropped to around 1.8% of GDP last year. Government is relentlessly
pursuing the objective of bringing public sector debt as a ratio of GDP to 50 percent by 2018.
National Audit Office will be reinforced to produce interim audit for timely monitoring and the
Public Accounts Committee would be empowered to better bring public expenditure under
parliamentary control Public Procurement Act would be reviewed to expedite the
implementation of infrastructure projects while providing transparency, as all outcomes of
tender exercises will now be displayed as from Rs 5 m, well below the present threshold of Rs
15 m.
To ensure Government gets value for money out of its support to the use of Business
Development services (BDS) to serve economic growth, a robust system of Monitoring &
Evaluation is in the process of being established that focuses on improved results on verifiable
indicators, enhanced accountability and Impact feedback learning mechanism.
Similarly, to help improve human resource management the Ministry of Civil Service and
Administrative Reforms (MCSAR) would pilot the establishment of the Human Resource
Management Information System in six organizations in 2013. The organisations concerned
are: (a) Ministry of Civil Service and Administrative Reforms; (b) Ministry of Information and
Communication Technology (including CIB, CISD);(c) Ministry of Finance and Economic
Development (Headquarters only);(d) Ministry of Education and Human Resources (including
the 4 education zones); (e) Public Service Commission; and (1) Accountant General. Based on
the assessment of the pilot programme, improvement as well as extension to 10 Ministries
will be done in 2014 with full implementation scheduled for 2015. MCSAR is also working to
reduce Schemes of Service from more than 2,500 to around 2,375 in 2013 and further to
2
51


﻿around 2,156 by 2014 and to 1,918 by 2015. This will be also complemented with reforms to
reduce the time required to amend a scheme of service from six to four months in 2013 and
further to three months in 2015.
As concerns efficiency in public enterprises, Government has decided in 2012 to undertake
reforms on a number of state owned enterprises which are either loss making or have
accumulated significant amounts of debt and to implement a restructuring plan to generate,
on a cash basis, a 5% return on all new money injected in the selected enterprises. The
objectives of the reforms are to redress the general operational and financial deficiencies in
the business model of these public enterprises so as to improve their general economic
efficiency, service delivery and to impose financial discipline so as to minimise their fiscal
burden. Some 11 state owned enterprises (SOEs) have been targeted with total arrears and
loans amounting to Rs 2.1 bn. Three of the SOEs have already had their restructuring plans
approved: Business Parks of Mauritius Ltd, Cyber Properties Investment Ltd (CPIL) which is a
subsidiary of the BPML and the National Transport Corporation. The Office of Public Sector
Governance (OPSG) as part of its mandate will be reviewing the implementation process of
these restructuring plans. Also, as part of its monitoring function, the OPSG is in the process
of implementing a comprehensive performance monitoring framework to improve corporate
governance and has prepared a first review on SOE sector performance which captures the
latest financial information stemming from the Parastatals Information Management System
(PIMS) on 22 enterprises.
In the absence of effective planning many middle-income countries get caught in a middle-
income country trap. The few that have escaped this trap have relied on an improved long-
term planning, process that is integrated into the budgeting framework In this context,
Government is in the process of preparing a 10-year Economic and Social Transformation
Plan (ESTP) that will set out the long-term national goals and strategies which seek to achieve
a balance between growth, equity and sustainability objectives. The development of the ESTP
will strengthen the framework for medium-term strategic planning, at the level of line
ministries, and reinforce the benefits of Performance-Based Budgeting (PBB). Thus the EST?
will provide the framework for ensuring coherence and coordination between ministry
strategies. Also the ESTP Is complementary to the work of the Maurice Ile Durable (MID)
vision and establishes the important link with the budgeting exercise.
B. Sharpening Competitiveness of the Economy
The world is in transition and new challenges are emerging, Mauritius needs to seize this
opportunity to rise to the competitive challenges.
As a measure to Improve access to credit especially for SMEs and start-ups use of movables
(such as plant and machinery, shares/securities, goodwill, intangibles and intellectual
property rights) as collateral for obtaining credit will be facilitated and promoted. A
committee of stakeholders Is entrusted with the responsibility for making appropriate
recommendations on required legislative and other changes. It is expected that this revised
secured transactions framework will improve accessibility of businesses to credit in
Mauritius.
3
52


﻿A measure to improve the menu of credit facilities available to entrepreneurs in the micro,
small and medium bracket Is to create the space for a Micro, Small and Medium Enterprises
(MSME) bank to operate in the country. The restructuring process of the Development Bank
of Mauritius is underway with the aim of having a commercial Bank with a focus on SME
lending applying for a banking licence before the year end.
A Trade Portal is being developed to have swift access on line to all trade related processing
systems for tariff and non tariff measures. Once operational, the Trade Portal will facilitate
exchanges of information on regulatory policy among stakeholders, thus fostering public
participation and stakeholder involvement The Trade Portal is expected to be fully
operational by June 2013. The tender has already been awarded to a firm to develop and
implement this project. In parallel, to fully integrate all trade-related processing systems, the
Government has started developing a 'Single Window' system. This Single Window system is
designed to provide on-line facility to submit applications for Import/export licenses and
permits and receive clearance from all government agencies. The development of the Single
Window system will enable traders to track the progress of their applications in real time and
facilitate data harmonization and standardization among Ministries and agencies. This will
reduce time for processing as well as related transaction costs. It will also assist in improving
our Ease of Doing Business and Logistics Performance and Competitiveness Indicators. The
Single Window system Is expected to be fully operational by December 2014 and Mauritius
would be amongst the first countries to implement such a system in the Eastern and Southern
Africa region.
The Joint Public Private Business Facilitation Task Force, set up with a broad mandate to
review existing systems and processes, and streamline regulations and facilitate investment
and trade for goods and services, made some recommendations. These were reviewed and
acted upon by an Inter-Ministerial Committee (IMC) set up in July 2012. Concrete results
Include the adoption of a silent agreement rule for processing building and land use permits at
the local authority level, in which permits are deemed to have been approved two weeks after
the effective date of receipt of the application if the local authority has not responded by then.
Government through the IMC continues to review existing regulations and processes with a
view to making the regulatory environment more business-friendly.
A predictable and competitive regulatory environment will be secured for the development of
ICT by allowing for additional players to operate on an equal footing including through
greater use of open access principles and the use of market mechanisms to avoid arbitrary
decisions for spectrum allocation. The adoption of these regulatory tools will allow the
regulator to achieve some of the competition goals as set out by the National Broadband
Policy.
C     Ehhancing the Investment Climate
The performance of Mauritius in many international rankings is a source of pride and joy for
the entire nation including the ranking on the Mo Ibrahim Index of African Governance and
the World Bank Group's Doing Business Report These indicators should not be grounds for
complacency.
4
53


﻿Government will continue to facilitate the operations of businesses by enhancing the
regulatory environment to make it more transparent predictable, and business friendly.
Hence, the Business Facilitation Act will be revisited to adopt a 'whole of Government"
approach to investment facilitation and to remove bottlenecks and streamline procedures
when investing in Mauritius. In addition, the Board of Investment will set up a Business
Facilitation Unit whose main objective would be to support investors in the Implementation of
large projects.
In line with the strategy of Government to further open up the economy, a number of
measures will be implemented. These measures include:
* increasing the options of non residents to acquire Immovable property;
* a new system to modernize land management which will reduce the processing time
for registering properties from 15 to 2 days; and
* the amendment to the visa regime which will have a favourable Impact on FI inflow
with an expected increase in transfer of technology, knowledge, talents and capital.
These measures will also facilitate movement of the business community to and from
Mauritius.
One of the Doing Business Indicators in which Mauritius does not perform well is Resolving
Insolvency. A cost effective and efficient regime is, therefore, gradually being established to
allow businesses to exit the market or give the possibility of rehabilitating the businesses
without forcing them into bankruptcy. Thus, publication of rules of professional conduct for
insolvency practitioners will enhance transparency, fairness and professionalism amongst
insolvency practitioners, and ultimately will enable more effective processes under the law.
Credit bureaus play an important role in financial stability by helping control over-
indebtedness and are critical to expansion of credit for both individuals and small businesses.
All banking institutions, insurance, leasing companies and utility bodies have already joined
and are contributing data to the Mauritius Credit Information Bureau (MCIB). In addition,
recent amendments introduced in the Banking Act will enable data from utility bodies such as
the WMA, ICTA and telecommunication operators to be included in the MCIB. It is expected
that the coverage of the MCIB will increase to 90%.
In a bid to increase transparency and to make the regulatory environment more business-
friendly, government has adopted a prescribed schedule of administrative penalties to apply
at Customs to make the system more transparent, simplified, predictable and efficient This
will increase transparency and predictability within the Customs department, thus ensuring
the independence and fairness of the appeals process. It is expected that the time allowed to
operators to settle their Customs administrative penalty will be reduced from six to three
weeks.
.    Shadng Prusperity with All
Ownership by the people is a crucial element for the success and sustainability of the reform
programme Government Efforts are being pursued to exploring shortfalls in development to
5
54


﻿achieve a more inclusive society, as well as improving the ranking of Mauritius on the human
development index.
In 2012, Government implemented the Social Register of Mauritius (SRM). The objective of
the SRM is to collect more comprehensive information about social protection clients. The
SRM will also allow Government to better track clients over time and evaluate progress
towards empowerment In June 2012, Cabinet determined that new social protection
programs should use the SRM and a number of new programs launched by the Government
since have started enrolment through this system. The SRM will be a key policy design and
planning tool to assess the needs of the potential beneficiaries and help them to access the
social aid programmes provided by Government The SRM will gradually become a powerful
tool to maximise policy effectiveness in the fight against poverty and for effective public
service delivery.
The National Empowerment Foundation, operating under the Ministry of Social Integration
and Economic Empowerment implements programmes designed to alleviate poverty and
empower vulnerable people through the intervention of non state actors. To improve
performance and its effectiveness a number of measures are being implemented. The NEF
has now completed its restructuring with an emphasis on case management at the household
level and a focus on monitoring and evaluation. A business process review is underway to
further improve service delivery. A strategic plan for the Ministry of Social Integration and
Economic Empowerment, to be implemented by the NEF, has also been approved. Capacity
building of NGOs will be carried out and the use of the Social Register of Mauritius (SRM) are
being actively promoted in all NEF programs.
Education and training are prime movers of our economic development objectives and crucial
to ensuring the sharing of prosperity with all. A number of measures will thus be
implemented. A daily hot meal will be provided in every ZEP school Scholarships will be
given to children from vulnerable families if they cannot get a student loan and provided they
qualify through the SRM. To ensure access to information to the student population,
Government will distribute one tablet computer to students in Form IV. This will open
tremendous opportunities for digital learning, give access to a world of data stored online and
enable students to do research and to develop their skills. In addition, high speed fibre optic
cables will be extended to every secondary school and a subsidised price for entry level
broadband introduced.
CONCLUSION Way Forward
Successive economic and financial crises which are hitting the world and the main markets of
Mauritius may make it difficult to continue with the ambitious reforms that would allow
Mauritius to become a High Income Country within the next 10 years. We are thus requesting
the World Bank to support us in staying on course for the reforms and long-term goals whilst
addressing the short term priority of preventing a reversal of the important gains.
Government wishes to continue having recourse to the support of World Bank and
instruments like Development Policy Loans to help design and implement pro-growth reforms
that will propel the economy on to a higher growth trajectory, attain full employment, and
6
55


﻿improve the quality of life of its population. Areas of future interventions can be property tax
reform, labour efficiency and productivity, diversification of markets and improvement in the
implementation of public sector capital projects. We would also appreciate if the World Bank
can offer assistance to ministries where institutional capacity to design and implement
reforms may be limited.
For Government of Mauritius
Charles Gabtan Xavier-Luc DUVAL. G.C.S.K
Vice Prime Minister, Minister of Finance and Economic Development
7
56


﻿Annex 3: IMF Relations Note
INTERNATIONAL MONETARY FUND
WASHINGTON, D. C. 20431
CABLE ADDRESS
[NTERFUND
January 24, 2013
Mr. Makhtar Diop
Vice President
Africa Region
World Bank
Washington, D.C.
Dear Mr. Diop:
I am writing to update you on the economic developments and outlook for Mauritius. Prudent
macroeconomic policy making since the 2008/09 financial crisis and the reforms implemented
over the past few years contributed to a solid performance of the Mauritian economy in 2012.
The challenge in 2013 will be to safeguard growth in a difficult external environment and to set
the foundation for future growth through increased public investment and structural reforms while
continuing fiscal consolidation to reduce economic vulnerabilities.
We welcome the Bank's initiative on two Development Policy Loans which should facilitate the
continued implementation of the next phase of structural reforms.
Please note that consent is being sought from the authorities regarding publication of the letter.
We will inform you of the authorities' decision as soon as it is obtained.
Sincerely yours,
Antoinette M. Sa
Director
African Department
Attachment
57


﻿MATRUTUs-ASSESSMENT LETTER FOR THE WORLD BANK
January 24, 2013
1.    This note provides the IMF staffs assessment of Mauritius' macroeconomic conditions
and prospects.
Recent Economic Developments and Outlook
2.     The volatile external environment dampened domestic economic activity in 2012.
Growth is estimated to have slowed to 3  percent, driven by a slowdown in tourism and
manufacturing, while the real estate sector, financial intermediation and transport and
telecommunications have sustained growth momentum. Despite this deceleration, the output gap
is estimated to be small (below   percent). Inflation remained broadly stable at 4 percent. Credit
to the private sector has continued its recovery over the year. with an estimated growth of
13 percent. On the external front, exports are estimated to have grown moderately (5 percent in
dollar terms), reflecting broadly unchanged tourist arrivals. FDI inflows are projected to decline
modestly, but remain around 2 percent of GDP and international reserves are projected to increase
somewhat. In June 2012, Moody's upgraded the country's credit rating to Baal.
3.     Macroeconomic policies were broadly accommodative in 2012. In line with staff
recommendations. the fiscal policy stance was not as expansionary as envisaged in the 2012
budget. The structural primary deficit excluding grants was broadly unchanged relative to 2011
(compared to a discretionary fiscal impulse of 1.5 percentage points projected in the last staff
report). The Bank of Mauritius (BOM) adopted an accommodative monetary policy stance for
most of the year. In March 2012, the BOM reduced the policy rate by 50 basis points to
4.9 percent given the deceleration in global growth. In the three subsequent Monetary Policy
Comittee (MPC) meetings, the BOM maintained the policy rate at that level in light of
continued uncertainty in the global outlook. Since June 2012, the authorities started to intervene
more actively in foreign exchange markets to moderate exchange rate fluctuations and to build up
a buffer in international reserves. Reserves are generally adequate but given the characteristics of
the Mauritian economy, including exposure to natural disasters, some build-up appears justifiable.
4.     Economic growth is expected to pick-up, but the outlook for 2013 faces some
headwinds. Staff projects that real GDP growth in 2013 will continue to be slightly below
potential (with an output gap of about 1 percent) reflecting subdued demand from Mauritius' main
markets. In subsequent years, real GDP growth is expected to accelerate in line with potential
growth, estimated at around 412 percent. Inflation would stabilize at around 5 percent. Staff
projects the current account deficit to gradually narrow to around 7 percent of GDP by 2018, in
part as a result of sustained fiscal adjustment and reforms improving external competitiveness
(including public enterprise reforms, infrastructure investment, streamlining of trade regulations,
58


﻿2
land law reform, among other areas). Mauritius' growth prospects depend heavily on the global
economy. especially on developments in Europe.
5.    Fiscal policy as planned for 2013 is broadly neutral and includes a modest
discretionary fiscal impulse. The fiscal policy stance is reasonable given the projected slow-
down in economic activity, although the small discretionary fiscal stimulus will likely have a
limited impact in a small open economy with a flexible exchange rate. From a medium-term
perspective, a fully neutral fiscal stance in 2013 might be preferable to smooth the projected
strong fiscal adjustment in 2014-15, which is aimed at building primary surpluses needed to
address external imbalances, reduce debt vulnerabilities and rebuild policy buffers.
6.     The current accommodative monetary policy stance is broadly appropriate, but
inflationary pressures may arise from wage increases in the private sector or higher fuel
prices. Staff currently forecasts inflation to marginally exceed the unannounced target of
5 percent. The current monetary policy fiamework of "hybrid inflation targeting" remains well-
suited for Mauritius-a small and open economy. Though broadly appropriate with current
inflation below the unannounced target of 5 percent, the authorities should stand ready to tighten
policy in response to inflation developments. There may also be a need to reduce excess liquidity
to align market driven interest rates more closely to the BOM's policy rate, particularly if
inflationary pressures emerge.
7.    Further fiscal consolidation over the medium-term and structural reforms would
facilitate external adjustment. Fiscal adjustment would contribute to addressing external
imbalances in a sustained manner. The current flexible exchange rate regime has served Mauritius
well in terms of responding to external shocks. Efforts to improve competitiveness through
structural reforns are crucial to facilitate the reduction of the large current account deficit.
8.     The updated debt sustainability analysis shows a broadly positive debt outlook for
Mauritius. Both total public debt and external debt are on sustainable trajectories and the results
of stress tests indicate that debt dynamics are resilient to several shocks. Nevertheless. the
authorities will need to implement their planned fiscal adjustment over the nedium-termi--as
previously envisioned. Current projections suggest that the public debt target of 50 percent of
GDP in 2018-as mandated by law-can be met, but a more ambitious fiscal adjustment path
over the medium-term would contribute to reducing debt vulnerabilities.
Fund Relations
9.     Mauritius is on the standard 12-month cycle for bilateral consultations under Article IV of
the IMF's Articles of Agreement. The last Article IV consultation (Country Report No. 12/62,
March 2012) was completed by the Executive Board on March 14, 2012. A Financial System
Stability Assessment update was completed by a joint I-World Bank team on April 20, 2007.
59


﻿3
Table 1 Mauritics: Selected Economic and Financial Indicators, 2010-2018
2010  2011       2012           2013       2014    2015    2016    2017    2018
Acual  Actual LastSR   Est.  LastSR  Proj   prj.   Proj     Pro     Prj    Pro
anual perchange, uress otherwse indicated)
National incore, prices and employment
Real GDP                                                 4.1     3.8    3.7    3.3     4.1    37      44     47     46      4.5      45
Realg DP percapia                                       3.6     3.4    3.1    2.7     3.5    3.2     38     4.1     4.2    4.1     4.1
GDP percapia (in US dollars)                           7,562   8,725  8,403  8,851   8,789  9389    9913  10,487  11,102  11,807  12,562
GDEP dellator                                            1.7     4.1    3.9    3.3     59     5.7     4.6    47     5.0     50      5.0
Consumer prices (period average)                         2.9     6.5    4.8    3.9     53     5.7     4.6    47     5.0     50      5.0
Coansumer prices (end of peiod)                          6.1     4.9    5.0    3.2     55     6.0     5.1    5.0     5.0    50      5.0
Unemploymet rate (peent)                                7.8     7.9      .    8.0
(anual percet change, in US Dliars)
External sector
Exports of grs and services, fo.b                       18.9    19.6    3.0    4.8     6.1    6.7     6.3    6.7     6.8    7.1      73
OfW hich: trism recepas                               15.9   23.0     2.9    1.7   10.3     43     55      54     58      5.8     59
lbbos&goand servi s elf.                         20.5   20.8     3.0    3.9     43     59      53     6.0    57      6.5     6.5
Neoinalelfectre exchangerate(annual avehaes)           3.2     33      .     0.5
Realeffecuve exchange rate,(annual averages)             3.2     62      .      1.3
Tersetfrade                                           -55     -5.3     ..    0.5
(Annual change in percent of begining al pidM2)
Money and oredit
Net foreign assets                                      202     -77    169     8.7            74
Dunestic redit                                          10.3     86    100     12.7          11.5
Net daims on govemment                                  1.0   -14      15     0.2            1.0
Creditto norregvernmentsector                           99    102      82    15.0           10.4
Broad money (nd  period, annual perntage change)        7.6     46    123     6.4            97
Income velecity f broad money                           09      10     09     10             1.0
Inerest rate(weightedaverageTBs,pnmaryaucliens)          39     46       .     3.3
(Percent  GDP, uness olherrse indicated)
Central govemrment finanas
Overallcoroidated baance (includinggrats 2             -3.0   -2.1   -3.7   -2.3    -3.2   -2.6    -1.9   -1.4    -1.5   -1.5    -1.8
Primary balane (induding grants)                        04      0.9   T5      0.7   -T.6     0.1     0.7    1.2     1.1    1.1     0.9
Revenuesand ganis                                       21.9    21.4   21.8   21.4    20.9   21.9    21.3   20.3   20.2    202     20.3
Expenditure, exel. net lending                          24.9    23.5   25.5   23.7    24.1   24.5    23.2   21.7    21.7   218     22.0
Danestic delt fcntral govemmet                          43.1    42.6   40.5   41.5    38.1   397     37.6   374    36.0    34.5    33.2
Extemal debo cenlral goverment                          75      8.4   10.0    8.7    11.6   10.3    12.4   12.6   12.6    11.7    10.9
Investnment and saving
Grossndestcinvesu ent                                23.6    25.7   24.8   24.7    25.3   25.1    25.3   25.5    25.6   258     25.9
Public                                                  6.1    5.5     7.4    5.5    77      7.6    7.1     7.2    5.6     54      50
Private                                                17.5   20.2    17.5   19.2   17.5    17.5   18.2    18.2   20.0   20.4     20.9
Gross national savings                                  13.3    13.1   14.8   14.7    16.4   15.4    16.2   16.7   17.5    18.1    18.7
Public                                                -T.5    -0.5     0.2    1.0     0.5    1.3    1.1     0.9    0.7     0.7     0.4
Private                                                13.8   13.6    14.7   13.7   15.8    14.1   15.2    15.8   16.7    17.4    18.2
External sector
Balan  of gods and services                            -122    -13.2  -13.8   -13.0  -117    -12.5  -11.8  -11.5   -10.8  -10.5   -10.1
Exaseg    oand servies.. b.                       50.9   52.6    53.9   54.0   54.4    54.1   54.1    54.3   54.6    54.8    55.0
Impons ofgoos and servis,fo.b.                     -631    -55.8  -67.7  -67.0  -672    -6.5   -66.0   -65.8  -65.4   -65.2   -65.1
Correnaccount balance                                  -10.3  -12.6  -10.2   -10.0   -9.1   -97     -9.1   -8.8    -B.1   -77     -7.2
Overall balan                                           2.1     1.6   -2.4     1.8    0.2    1.2     1.3    1.1     1.4    1.7     1.7
Total extemal dobt                                      22.3    23.7   16.1   23.7    177    25.1    26.7   26.5    25.9   24.9    23.8
Net intemaonal reserves (millinse U.S dellars)        2,448   2,631  2420   2,834   2512   2977    3144   3298    3,497  3,766   4044
Morths of imports ofgods and services, fo.b             4.8    4.3     3.9    4.4    39      44     44      44     44      44      45
Me-rndum nems:
GDP atcrent marie prices (billonso Maurian upees)    298.8   322.8  350.0  344.6   3859   3779    412.5  451.9   496.2  544.5   5975
GDP at crent marke prices (millons ofU.S dollars)      9,706  11,244      .    1457
Public sectordet (percent ofGDP)                        574     57.4   57.0   562     55.7   55.8    55.0   54.2   52.6    50.0    47.6
Foreignand loalcurrenyon-ermdebtraig(Mods)        Baa2    Baa2     ..   Baal      .
Surces: Maurian authoites; and IMF stattesimales and projeecions
lIncludescreditteparastatals
2GFSM201 cenceptdnetlending/netborrowing,indudesspecalandotherexabhudgetaryfunds.
Numberswere revisoi  ncoderpvate extemal debtransacliensas reported in te 2011 ForeigAssets and iabilities Survey (FALS)
These figures do not dicunt cerlain ypes of Stae-owned enterprse debt. Such dsconting  ervisaged underhe 2008 Public Debt Management Act for
te purpeswof calculaing the public debt ceiling. In 2011, dscounted SOE debt ammunted to 33 percent ofGDP.
60


﻿Annex 4: Statement of Loans and Credits
Difference between
expected and actual
Original Amount in US$ Millions                         disbursements
Project ID  FY    Purpose                                IBRD     IDA       SF      GEF     Cancel.   Undisb.   Orig.   Frm. Rev'd
P091828    2010   MU-Infrastructure Project               50.00     0.00     0.00     0.00     0.00    29.46     25.34     25.76
Total:   50.00     0.00     0.00     0.00     0.00     29.46    25.34     25.76
MAURITIUS
STATEMENT OF IFC's
Held and Disbursed Portfolio
In Millions of US Dollars
Committed                                Disbursed
IFC                                     IFC
FY Approval   Company                   Loan       Equity    Quasi     Partic.  Loan       Equity    Quasi     Partic.
2012          I&P (III) Capital                     12.5                                     3.5
2011          State Bank of Mtius (SBM)  75.0                                     75.0
2009          Stanbic Mtius                                  20.0                                     20.0
2006          I&P Capital (II)                      9.6                                      9.6
Total portfolio:  75.0     22.1      20.0       0.00     75.0      13.1      20.0       0.00
Approvals Pending Commitment
FY Approval   Company                         Loan       Equity      Quasi      Panic.
2012          tbd34                           10.0
Total pending commitment:  10.00       0.00        0.00        0.00
34 Tbd: to be disclosed
61


﻿Annex 5: Country Context
Matmitius at a gace                                                         3129112
Sub-   Upper-
POVERTY and SOCIAL                                     Saharan   middle-
Mauritius    Africa  income      Developmentdarond'
2010
Population,mid-year(milions)                      1.3      853    2,452
GNI per capita (Atlas method, US$)               7,750     1,16     5,884              Life expectarcy
GNI (Atlas method, US$ bilions)                    99      1004    14429
Average annual growth, 2004-10                                                               T
Population (%)                                     06       2.5      0.7
Laborforce(%}                                      17       28        12     GNI                            Gross
per |-Pnimary
Most recent estimate (latest year available, 2004-10)                        capita                     enollment
Poverty (% of populattanbelow nationalpovertyline)
Urban population (%oftotalpopulation)              43        37       57
Lifeexpectancy at birth (Wars)                     73        54       73
Infant mortality (pert,0001iebirths)              13        76       17
Child malnutrition (%ofcmildren under5)            ..       22        3         Access toimproved watersource
Access loan improvedwater source (%ofpopulation)   99        61       93
Literacy (%olpopulation age br)                    88        62       93
Gross primaryenrollment (%ofschool-agepopulation)  99       100       111              MawItus
M ale                                            99        104      111         -     Uper-midle-rranoegrup
Female                                           DO        95       111
KEY ECONOM IC RATIOS and LONG-TERM TRENDS
1990    2000      2009     2010
Economic rathe"
GDP (sSf$ billans)                        27       4-6      88       97
Gross capital formation/GDP              30.2     26.1      212     23.8
Exports ofgoods andservices/GDP          65.0     614      49.0     52.4                   Trade
Gross domesticsavings/GDP                23.0     256       V.5      10.1
Gross national savings/GDP               25.8     26 3      15.0     1.5
Current account balance/GDP               -31      06       -74      -8.2
Interest payments/GDP                      18       11      0.2       0.2     Dometic                  Capital
Totaldebt/GDP                             35.1    206       94       i. 1    aving
Totaldebt servicelexports                 93       B.1      20        18
Present valueofdebt/GDP                                              8.3
Present valueofdebtlexports                                   .       11
Indebtedness
1990-00 2000-10    2009      2010   2010-14
(average annual growth)
GDP                               5.2     39       3.0      4.2       44                Ma/I/Us
GDPpercap/ta                      4.0      31      25       3.7      3.9          -     Uppe-midfie-incmnegow
Exports ofgoods andservices       5.6     2.4     -35       V0      54
STRUCTURE of the ECONOMY
(   1990    2000     2009'     2010     Growth of capital and GDP(%)
(%ofGDP)
Agriculture                               12.9     70       43       4.2
20
Industry                                 32.8     310       291      286 1   0
Manufacturing                           24.4     235       T.4      19.i     0
Services                                 54.4     62.1     66.6     67.2     10      05   06   07    0?   09   10
20
Householdfinal consumption espenditure   63.4     60.3     74.0     73.6     30
Generalgovt final consumption expenditure  13.6    111     14.1     13.9                   GF    -      P
Imports ofgoods andservices              72.2     619      58.4      63.8
1990-00 2000-10      2009     2010     Growthofexportsadimports(%)
(average annual growth)Grwhoeptandmots()
Agriculture                              00      -04       88      -13     15
Industry                                  54       20       2.9      27      10
Manufacturing                            53      0-7       21        21
Services                                  6.3      59       3.8      5.0
Householdfinal consumption expenditure     51      34        51      -0.4    10
General gov't final consumption expenditure  3.6   34        51      34      15
Gross capital formation                   48       41      -20.9     14.1                 Expors  --- Imports
Imports ofgoods andservices                5.1     2.0      -91       71
Note:200 data arepreliminaryestimates
This table was produced from the Development Economics LDB database
The diamonds show four key indicators in the country (in bold) compared with its incomegroup average If data are missing, the diamond will
benocomplae
62


﻿Mauritius
PRICES and GOVERNMENT FINANCE
1990    2000      2009      2010
Inflation (%)
Domestic prices
f%change)                                                                      13
Consumer prices                            185       4.2       25       29
n plicit GDP deflator                      10.1     2.1     -02        19
Government finance                                                              3
(%ofGDP,includescurrentgrants)
Current revenue                            23.0     19.0     228       219             05    06   07    08   09    10
Current budget balance                      2.7     -1-9       00      -07
Overallsurplus/deficit                      -1.9    -48       -35      -38                    fPdefator -     cPI
TRADE
(M  millions)                             190     2000      2009     2010      Exportandimportlevels(US$mill.)
Totalexports (fob)                         1,163   1,578     1,929    2259     5000
Sugar                                     329      240       21       348
na.                                                  -       282      329     4000
M anufactures                              718    1,174     1126     1293     3 000
Total imports (cif)                        1,431   2,158     4,091    4398    2000
Food                                       187     299       762      821
Fuelandenergy                             105       151      641      865     1.000
Capital goods                             328      653       956      91         0
Export price index (2000=V0)                105      U0        11       121           04   05   06  07   05   09   10
in port price index (2000=100)              101     10        130      145                lExpos   *Impeors
Terms oftrade (2000=0)                     104      10        88       83
BALANCE of PAYMENTS
1990    2000      2009     2010
(US$ nflurfo ns)                             0    2000Currentaccount balanceto GDP(%)
Exportsofgoodsandservices                 1,21     2,686     4156     4,942        0
Enports ofgoods and services               1784    2,725     5080 6   127      -2  0          06        08   09   1
Resourcelbalance                           -153     -39      -923     -1,185
Net income                                   -B      -11       53      205
Net current transfers                       87       79       215      183
Current account balance                    -83       29      -654     -797
10-
Financing items (net)                      244      16       1,033     998      12
Changes in net reserves                     -161    -185     -379     -201
Memo:                                                                        la
Reserves including gold (US$ millions)      521     688     2,824      3,141
Conversion rate (DEC, ocal/US$)             1.9     262       320      308
EXTERNAL DEBT and RESOURCE FLOWS
'   1990    2000      2009 r    2010
(118$ milions)                                    2000Compositionof2010 debt(US$ mill.)
Totaldebt outstanding and disbursed         932     946       826     1,076
IBRD                                      176      86       204       197
0: 3
IDA                                        19      13         8        7             F 188              A 197
Total debt service                          151     453        129      131
IBRD                                       30      23         11       9                                     B:7
IDA                                         0        1         1        1
Compositionofnet resource flows
Officialgrants                             25       9        95        73
Officialcreditors                          57      -12       146     247                                      D:298
Private creditors                          44     -261        31      27           E:
Foreign direct investment (net inflows)    41     266       257       431
Portfoli equity(net inflows)               0       -4      206      -40
Wbrtd Bank program
Commritments                               30       5        215      20
Disbursements                               6       4        109       3       A- [BRD                    E - Bilaerl
Principal repayents                        1        19        9        7       B-IDA    D- Other mulfilaeral  F - Pivate
Net flows                                  -11     -15      100       -4       C - IMF                    G - Short-term
Interest payments                          14       5         3        3
Nettransfers                              -25      -20       97       -6
Note:This tablewas produced from the Development Eco nomics LDB database.                                      3/29/12
63


﻿IBRD 33446
57°30'E                                             Rodrigues Island                      INDIAN
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®     NATIONAL CAPITAL                                                                                                         Gabriel
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RIVERS                                                                         Quoin          19 Å55                           0 1 2 3 Kilometers
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MAIN ROADS                                                                                              sand                  01    2   3ailes
63o20'E           63125'E            63°30'E
.......DISTRICT BOUNDARIES_____________________
-    -   INTERNATIONAL BOUNDARIES                                                                                      57°45'E
20°00'S Cannoniers                                                                             20°00's
Point
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DECEMBER 2004