2009 Index of Economic Freedom

Quick Facts

Population:

• 1.3 million

GDP (PPP):

• $13.2 billion
• 3.6% growth
• 3.3% 5-year compound annual growth
• $10571 per capita

Unemployment:

• 8.8%

Inflation (CPI):

• 10.7%

FDI Inflow:

• $105.3 million

Mauritius's economic freedom score is 74.3, making its economy the 18th freest in the 2009 Index. Its overall score is 1.7 points better than last year, mainly because of improvements in investment freedom and financial freedom. Mauritius is ranked 1st out of 46 countries in the Sub-Saharan African region, and its overall score is well above the world and regional averages.

Mauritius has continued to improve an economic environment already conducive to dynamic entrepreneurial activity. Despite its overall underdevelopment, the island's institutional advantages are noticeable. A transparent and well-defined investment code and legal system have made the foreign investment climate in Mauritius one of the best in the region. Taxation has become more competitive and efficient owing to the accelerated implementation of flat 15 percent personal and corporate income tax rates in 2007. The financial sector has gradually improved in efficiency and competitiveness.

Although state monopolies exist, Mauritius has improved its management of public spending. The judiciary, independent of politics and relatively free of corruption, is able to protect property rights well.

Background Back to the top

With a well-developed legal and commercial infrastructure and a long tradition of entrepreneurship and representative government, Mauritius is one of the developing world's most successful democracies. It is also one of the strongest economies in the Sub-Saharan Africa region and has one of the region's highest levels of per capita income. The government is pushing hard to modernize sugar and textile industries that were overly dependent on trade preferences and to promote diversification into such areas as information and communications technology, financial and business services, seafood processing and exports, and free trade zones. The government remains involved in the economy through state-owned utilities and controls imports of rice, flour, petroleum products, and cement.

Business Freedom 83.3 Back to the top

The overall freedom to conduct a business is relatively well protected under Mauritius's regulatory environment. Starting a business takes an average of six days, compared to the world average of 38 days. Obtaining a business license requires less than the world average of 18 procedures and 225 days. Closing a business is easy.

Trade Freedom 86.8 Back to the top

Mauritius's weighted average tariff rate was 1.6 percent in 2006. The government has made considerable progress in liberalizing the trade regime, but some high tariffs, some quotas, import restrictions, import and export permits, and weak enforcement of intellectual property rights add to the cost of trade. The government also controls imports of what it deems to be strategic products, including rice and wheat flour. Ten points were deducted from Mauritius's trade freedom score to account for non-tariff barriers.

Fiscal Freedom 92.2 Back to the top

Mauritius has a very competitive tax regime. The income tax rate and the corporate tax rate were reduced to a flat 15 percent in June 2007. Other taxes include a value-added tax (VAT) and a property tax. In the most recent year, overall tax revenue as a percentage of GDP was 18.1 percent.

Government Size 80.8 Back to the top

Total government expenditures, including consumption and transfer payments, are moderate. In the most recent year, government spending equaled 25.3 percent of GDP. The government has made slow progress toward sound fiscal consolidation and management of public spending. State-owned monopolies persist.

Monetary Freedom71.1 Back to the top

Inflation is high, averaging 8.9 percent between 2005 and 2007. The government controls prices for a number of goods, including flour, sugar, milk, bread, rice, petroleum products, steel, cement, fertilizers, and pharmaceuticals; influences prices through state-owned enterprises and utilities; and subsidizes some agricultural and industrial production. Ten points were deducted from Mauritius's monetary freedom score to account for policies that distort domestic prices.

Investment Freedom80.0 Back to the top

Foreign and domestic investors are treated equally, and foreigners may control 100 percent of Mauritian companies in most economic sectors. A transparent and well-defined foreign investment code makes Mauritius one of the best places in the region for foreign investment. The domestic legal system is generally non-discriminatory and transparent. Residents and non-residents may hold foreign exchange accounts. There are no controls on payments or transfers and few controls on capital transactions. Foreign nationals may acquire property subject to some restrictions.

Financial Freedom70.0 Back to the top

Mauritius's efficient financial sector has become more competitive, although it represents only about 10 percent of GDP. The 2004 Banking Act, which simplified the bank licensing structure, has eliminated distinctions between onshore and offshore banks. The two largest of the 19 domestic commercial banks (the Mauritius Commercial Bank and the minority state-owned State Bank of Mauritius) control more than 60 percent of total assets. Several banks are still fully or partially owned by the government. Financial regulation is relatively solid and has become more efficient since the passage of the 2004 Banking Act. Capital markets are growing as Mauritius seeks to be a regional financial hub.

Property Rights60.0 Back to the top

The judiciary is independent, and trials are fair. The legal system is generally non-discriminatory and transparent. The highest court of appeal is the judicial committee of the Privy Council of England. Expropriation is unlikely. Trademark and patent laws comply with the WTO's Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement.

Freedom From Corruption47.0 Back to the top

Mauritius ranks 53rd out of 179 countries in Transparency International's Corruption Perceptions Index for 2007. Although its rank for 2007 represents a disappointing drop from its 2006 performance on corruption, Mauritius remains one of the region's least corrupt countries, and corruption is not seen as an obstacle to foreign direct investment.

Labor Freedom71.5 Back to the top

Mauritius's relatively flexible labor regulations facilitate employment and productivity growth. The non-salary cost of employing a worker is low, but dismissing a redundant employee can be relatively costly and difficult. Restrictions on the number of work hours have become more flexible in recent years.