Re-Inventing Our International Financial Business

While re-inventing, there’s little point to carry forward the mistaken view that something that was initiated by someone else needs to be discarded

Mauritius’ success has always depended on the extent and depth to which it has played an intermediating role in international affairs. The more it placed itself at the centre of international transactions, the more it was able to add value and improve the general standard of living. The more it has retired itself from such activity, the less the economy has progressed.

Of late, the evolving global situation has been so much fraught with risk and uncertainty that even big countries have met with difficulties pursuing this path. We might find in this prevailing difficult situation an excuse for not making the efforts we should. However, we have been also short of initiatives to break new ground in this kind of undertaking, being taken up in political equivocation rather than re-inventing the economic apparatus.

Not taking it passively

The time has come to break from this trend. This is because the international situation is not only risky. It has always been so. It is dynamic. Changes take place regularly on the international scene. Our job is to strategically adapt to them to our advantage.

Consider one recent example. It was reported last week that the Financial Services Commission of Mauritius (FSC) has taken the initiative to enlist the services of an expert from Harvard Law School to chart out a 10-year plan to revitalize our international financial services sector. It shows a willingness to break from the set pattern and this is how it should be. Nothing wrong seeking outside expertise to overcome bottlenecks.

Blueprints have been produced in the past, such as when the FSC was established in 2001. Another one called the Roadmap for the Mauritian Financial Services Industry was produced by Percy S Mistry of Oxford International Consultants in 2012 under the preceding management of the FSC. All this helps to see more clearly into what needs to be done to overhaul a dynamic sector. It can become the base for implementation action, which is the more difficult part of the story.

Recounting Accidents

The sorry thing about Mauritius is that, instead of seeing the new edge we’ve cut in the provision of international financial services, the headlines are more about a couple of accidents the sector comes across from time to time. Such “accidents” are commonplace in other global financial centres. The difference is that they are aired in those places for a while only to be overwhelmed by newer positive developments. Who speaks today about Bernie Madoff’s huge Ponzi scheme in New York City?

We are too much into negative publicity, which can stand in the way of our greater internationalisation. We’ve got to pick up from the terrible damage done already in the handling of the BAI case and the overturning impact of the changed India-Mauritius DTA. We are confronted with ever new restraining rules stronger nations are busy imposing on offshore financial activity. This in itself should occupy much of our time so as to open up space for enhancing our activities, notwithstanding such hurdles.

Highlighting success

We must also be told about the successes scored by the sector. Are there any, some might ask? Had this not been the case, does one think that all those numerous global business companies set up in Mauritius’ for long would still be doing business over here? Yes, there have been quite some successful businesses doing business from Mauritius.

Consider the closing this week of major international deal struck for the sale of Essar Oil Ltd between Essar Energy Holdings Ltd (EEHL), the holding company, and the Russian oil major Rosneft-led consortium, involving a sale by Essar of a modern port in Vadinar, India, a big power plant along with refining activity and 3,500 retail fuel outlets in different places in India. This complex deal supported by Russian President Vladimir Putin and Indian PM Narendra Modi October last year at the BRICS meeting in Goa took almost a year to be concluded. It involves one of the largest single inflows of FDI into India amounting to $12.9 billion and Rosneft’s biggest investment transaction abroad. Further, it has the effect of bringing the two important countries closer.

Not many will know however that EEHL was set up as a Global Business Company 1 in Mauritius 20 years ago and that its executives have been giving minute attention both here in Mauritius and abroad to close this huge deal successfully, without a hiccup. It has taken over two decades for Essar to build up this valuable asset through thick and thin with volatile commodity prices on the market and demand not always strong as it should have been. Thanks to the transaction, Essar has paid up $11 billion of its debts accumulated with Indian financial institutions over this trying period of business expansion.

There are numerous positive fallouts from this transaction. There was pressure on Essar to pay off the huge debts it had accumulated with specific Indian financial institutions by spending money on building power, steel plants and a major oil refinery during its expansion phase the last 10 years.

Now that $11billion has been settled out of the $18billion outstanding, with the proceeds from the Essar Oil deal, it gives a spurt principally to bank lending in India, the concerned financial institutions having become conservative in lending to others due to significant debt overhang on their balance sheets. Rosneft’s current plans to double both the oil refining capacity of Vadinar and the number of Essar retail fuel outlets as well as building petrochemical facilities in India give a further fillip to India’s growth prospects and its international perception as an interesting investment destination.

Our contribution

Is there not a contribution from Mauritius which has successfully and efficiently hosted the Indian international group having interests in oil, gas, steel, ports and power in several countries in the world? Does it not benefit more parties than ourselves alone? This should be evident. The more we in Mauritius focus on successes such as these, the less we will neutralize our efforts to play our compulsive international intermediating role – the cornerstone of our economic success.

Efforts such as those being undertaken by the FSC to re-invent our international financial business help improve our interaction with the world. While re-inventing, there’s little point to carry forward the mistaken view that something that was initiated by someone else needs to be discarded. Had it been so, would we not have discarded the FSC itself? Once we cease shooting ourselves in the foot, we’ll see more clearly the route to be charted for sustaining our economic growth.

• Published in print edition on 25 August 2017