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The Macroeconomic Perspective of the 2010 Budget

The Macroeconomic Perspective of the 2010 Budget. Presented by Mahmood Cheeroo Secretary General Tuesday 20 October 2009 Labourdonnais Waterfront Hotel, Caudan. Contents. THE ECONOMIC STRATEGY.

JasminFlorian
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The Macroeconomic Perspective of the 2010 Budget

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  1. The Macroeconomic Perspective of the 2010 Budget Presented by Mahmood Cheeroo Secretary General Tuesday 20 October 2009 Labourdonnais Waterfront Hotel, Caudan

  2. Contents

  3. THE ECONOMIC STRATEGY • A more open, business-friendly and uniform low tax environment with the following key objectives: • A.1 Uniform Tax Regime • A.2 Open Trade Regime • A.3 Open Economy • A.4 Business Facilitation • A.5 Other Macroeconomic objectives • A.6 The Social dimensions

  4. A.1 Uniform Tax Regime • Uniform Corporate Tax of 15% • Uniform Personal Income Tax of 15% • Uniform Rate of VAT at 15% • Uniform Property Tax

  5. A.2 Open Trade Regime • Duty Free Island • Enhanced Market Access for Exports • From Preferences to International Competitiveness

  6. A.3 Open Economy • Easier to come to work in the country • Easier to settle down/Residence • Easier to have access to Property • Easier to invest

  7. A.4 Business Facilitation • Reductions in the number of permits • Uniform approach in incentives • Cut Lead time to start/close a business • Better settlement in business disputes • Silent Agreement

  8. A.5 Other Macroeconomic Objectives • Exchange Rate Stability • Lower Inflation Rates • Lower Interest Rates • Fiscal Consolidation/Lower Budget Deficits • Higher Economic Growth rates

  9. A.6 The Social Dimensions • More Flexible Labour Laws • An Ambitious Empowerment Agenda • Elimination of Absolute Poverty • Reduction of Unemployment

  10. B. THE IMPLEMENTATION OF THE STRATEGY • B.1 The Budget Exercise • B.2 The Actual Implementation of the strategy: • 2.1 Tax Policy • 2.2 Trade Policy • 2.3 Opening of the Economy • 2.4 Business Facilitation • 2.5 Macro-economic Targets • 2.6 Social Objectives

  11. B.1 The Budget Exercise • 2006/2007: Implementation of Macro-measures • 2007/2008: Consolidation of Macro-measures + Competitiveness • 2008/2009: Balancing of Economic Agenda with Social Imperatives • ASP+ 2009: Response to Global Financial and Economic Crisis

  12. B.2 The Actual Implementation of the Strategy 2.1 Tax Policy

  13. B.2 The Actual Implementation of the Strategy 2.2 Trade Policy • Import Duties • Top Tariff reduced to 30% • Only 3 bands • Duty abolished on many items, specially Food • Market Access • Improved Access (EPA, AGOA, Bilaterals) • Erosion of preferences • Competitiveness (MAAS, MASMED, …)

  14. B.2 The Actual Implementation of the Strategy 2.3 Opening of the Economy • Residence permit + work permit combined in one occupation permit • Non-citizen retiree can apply for residence permit if USD 40,000 annually • Occupation permit issued in 3 days • No restriction to investor to purchase real estate for registered activity • Possibility to apply for permanent residence after 5 years • Possibility to purchase property • International law firms allowed to practice in Mauritius

  15. B.2 The Actual Implementation of the Strategy 2.4 Business Facilitation • 3 days to start a business • Prior health, fire, police clearances abolished • Trade licence paid after start of operations • Development and Building permits simplified • All certificate schemes abolished • Commercial division in Supreme Court • Time taken to register property reduced from 7 months to 15 days • Reduction of number of permits for import/export

  16. B.2 The Actual Implementation of the Strategy 2.5 Other Macro-economic Objectives 1. Average Exchange rates from January 2009 to August 2009 2. Forecast 3. Bank Rate at the end of July 2009

  17. B.2 The Actual Implementation of the Strategy 2.6 Social Dimensions • ERiA and EReA passed • Unemployment figures improved before crisis • Mitigated results on elimination of poverty

  18. C. THE RESPONSE TO THE ECONOMIC CRISIS: THE STIMULUS PACKAGE • The Stimulus Package • The Policy Reversals

  19. C. THE RESPONSE TO THE ECONOMIC CRISIS C.1 The Stimulus Package • The Additional Stimulus Package of December 2008 • MTSP • MASMED • Rs 1 billion package • The SJR Fund • Total Budget Rs 3.5 billion • Greater sectoral coverage (EOE, DOE, Services, SMEs) • More Targeted (Cashflow, equipment, export-credit guarantee)

  20. C. THE RESPONSE TO THE ECONOMIC CRISIS (cont’d) C.2 The Policy Reversals • Tax • Extension of reduced Corporate Tax to Freeport Operators • Amendments to Uniform Property Tax • Review of solidarity Levy • Reduction in Registration Duty for property • Trade • Freezing of Trade Liberalisation until December 2010 • Government Procurement preference to Domestic enterprises • Other Macro-economic objectives • Unclear Exchange Rate Policy • Higher Budget Deficits • Recurrent Expenditure vs. Capital Expenditure

  21. D. THE CHALLENGES AHEAD D.1 The Opportunities and Threats of Recovery D.2 Tax Policy D.3 Trade Policy D.4 Other Macro Policies D.5 Sectoral Issues

  22. D. THE CHALLENGES AHEAD (cont’d) D.1 The Opportunities and Threats of Recovery • The Opportunities - Higher demand for our goods and services - Hopefully better prices - New markets • The Threats - Exchange Rate instability - Rise in prices (Petroleum, Food, Freight rates, minerals) - W Syndrome

  23. D. THE CHALLENGES AHEAD (cont’d) D.2 Tax Policy • The pursuit of the uniform tax policy? • Variations in the uniform rate/new Tax? • Tax as an incentive instrument? • Subsidies?

  24. D. THE CHALLENGES AHEAD (cont’d) D.3 Trade Policy • Duty Free Island vs. Residual Duty ? • Duty Free Island and Preferential Market Access negotiations • Legal protection measures (anti-dumping,…)

  25. D. THE CHALLENGES AHEAD (cont’d) D.4 Other Macro Policies • Exchange Rate Policy • Stability of prices vs. export promotion • Cross-rate movements • Prices and Interest Rates • How to stabilise prices when inflation is mostly imported? • How to pursue a local interest rate policy without control on inflation and exchange rate movements?? • Budgetary Policy • The need for massive investment in infrastructure • Continued support to enterprises • Unchanged pattern of social expenditure • Budget Deficit and Public Debt

  26. D. THE CHALLENGES AHEAD (cont’d) D.5 Sectoral Issues • Industry • Markets: What is needed to maintain/increase market share • Products: R&D, Technology transfer, differentiation • Labour: Availability and Turnover • Trade • Price control and competition • Regulatory Framework • Trade Facilitation (permits, clearances) • ICT • From basic ICT activities to more value-added services (KPO) • Human resources • Infrastructure (availability and cost)

  27. Thank you…….

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