MAURITIUS BUDGET 2010: FM Sithanen plays Santa

PORT LOUIS: Finance minister Ramakrishna Sithanen today presented his fifth budget keeping the common man in mind. Nearing election year, Sithanen’s presentation is not likely to raise eyebrows.
The budget for the year 2010 – made to coincide with the calendar year for the first time – has its focus on accelerating the private sector investment, mitigating the economic crisis and creating more jobs, ensuring social security including low cost housing, water supply and sewage – and sustainable development while stressing on Greener Mauritius. The budget also promises to promote culture and sports too.
“The Balance of Payments (BoP) has turned around from a deficit of 4.9 billion in 2005 amounting to 2.6 per cent of GDP to a surplus as from 2007,” Brunel University doctorate finance minister said adding that “despite the crisis the surplus is projected to be around Rs 13.5 billion ($452 million) for 2009, representing about 4.8 per cent of gross domestic product (GDP).”
He has, however, projected a fiscal deficit at 4.5 per cent. But the government borrowing requirement will only be four per cent of the GDP, because it is going to raise Rs 1.5 million from the listing of Mauritius Telecom (MT).
Painting a rosy picture of the island nation’s economy – in his over two-hour long budget speech in the parliament house – he hailed the role of Small and Midium Entreprises (SMEs) as according to him, in the past four years, these enterprises have generated 24,000 new jobs, accounting for 60 per cent of the total 40,000 jobs created. “In 2008, the economy has created more jobs for women than men,” he said.
The good news for the business community is that he has kept the tax rates unchanged. However, the budget has targeted to raise Rs 66.8 billion in revenue that is up by 21.9 per cent than the last year.
Due to its traditional mono-crop economy, the budget has a various packages for the sugar industry sector.
He has continued the Additional Stimulus Package (ASP) until December 2010 to mitigate the crisis because of the positive outcome from ASP during the year. The budget vows to provide support of Rs 900 million to local authorities compared to some Rs 45 million they used to receive annually and maintain the additional Rs 100 million for infrastructure
development in Rodrigues.
Though, he is worried about the very high budget deficit. The expansionary macroeconomic policies -- in particular stimulus Measures -- have triggered a rise in household consumption as a percentage of GDP to 75.2 per cent in 2009 from 74.3 per cent in 2008. As a result the saving rate is expected to fall to 12.8 per cent in 2009.But according to the finance minister, the Indian Ocean Island nation has survived the crisis. He attributed the survival of the economy despite the global crisis, to reforms.The Central Statistics Office (CSO) has predicted a growth rate of 2.8 per cent for 2009 and 4.3 per cent for 2010. By 2011, he said, the economy will rebound and be on track for five per cent and above.

FDI
FDI averaged around Rs 1 billion annually for the two decades ending 2005. We have taken this yearly average to around Rs 8.4 billion since 2005. Following the reforms in 2006, we have attracted more than Rs 30 billion of FDI. This year, in the midst of the crisis, we are expecting around Rs 9 billion of FDI. The FDI is also more diversified than in the past, coming from various countries and flowing into almost all sectors of the economy. Two months ago the Jin Fei project was inaugurated. It is the single largest FDI in our history, for an investment of Rs 25 billion over eight years, creating some 40,000 jobs, both direct and indirect.

National Savings
National saving rate in Mauritius has been historically high, staying above 20 per cent for most of the years since independence. However, as from 2001 it has been on a decline. The situation could have tightened the capacity to finance investments. But it has not. During the period 2006 to 2009, average monthly rupee deposits at banks have grown by around 40 per cent, outpacing GDP growth and generating enough liquidity to meet investment needs. In fact, all types of deposits, including savings, time and foreign currency have been rising at rates exceeding GDP growth. The savings-investment gap is also reflected in the current account of the Balance of Payments (BoP). The Net International Reserves have gone up from Rs 56.3 billion in 2005 to around Rs 100 billion – an 80 per cent increase. Our country has enough foreign currency reserves to pay for 42.8 weeks of imports compared to 31.4 weeks in July 2005.

Current Account
The current account deficit is expected to be lower at around nine per cent of GDP. The BoP has turned around from a deficit of Rs 4.9 billion in 2005, amounting to 2.6 per cent of GDP to a surplus as from 2007. Despite the crisis, the surplus is projected to be around Rs 13.5 billion for 2009, representing 4.8 per cent of GDP.

Agro-Industry
One of the traditional pillars of the country’s economy – the sugarcane Industry – has bounced back and expanded by around 22 per cent, including an 18.2 per cent growth in 2009. “The government’s vision of food security has been fruitful as the stage has been set for the production of 10 million litres of milk per year as from 2010 and 12 million litres by 2011. The Food Security Fund is also financing the purchase of fibre glass boats for off lagoon fishers. The Fishermen Investment Trust is funding activities that were previously inaccessible for artisanal fishermen, including fish farming in cages, integrated fish culture projects in barachois and purchase of boats for off lagoon fishing in Mauritius and in Rodrigues. The Marine and Agricultural Resource Support (MARS) programme is implementing pro-poor reforms and institutional development, marine resource management, and diversification of rural incomes and employment in Mauritius and Rodrigues.

Textile
The textiles and clothing sector was recovering from its deep recession, expanding its output by up to 8.5 per cent in 2007. But it was caught in the
global crisis, stagnating in 2008 and its output shrinking by four per cent in 2009.

Tourism
The tourism sector has been booming before the global crisis hit the island nation. It expanded by an annual average rate of 7.8 per cent from 2006 to 2008 with a peak of 15.2 per cent in 2007. But this year, it has been hit by the crisis, showing a negative 7.6 per cent growth.

Financial sector
The financial industry has come out relatively unscathed from the global financial turmoil. It will grow by some six per cent this year. The sector is showing an annual average growth rate of around 7.6 per cent for the period 2006 to 2009.

ICT/BPO
The ICT/BPO sector has grown by 40.8 per cent in the past three years and is expanding by 16.2 per cent this year. It is now contributing 5.8 per cent to GDP from less than one percent in 2005 and is employing 12,000 persons.

Construction
The construction industry has been experiencing its best period in many years. Its growth averaged 10.5 per cent annually for the period 2006 to 2008. This year the slowdown in real estate and IRS and RES activities have affected its output, while public investment in infrastructure has enabled it to maintain a positive growth of 2.5 per cent. The real estate sector is maintaining a healthy growth pace, averaging seven per cent for the period 2006 to 2009 and expanding by about six per cent in 2009.

Health care
The health centre of excellence has become a reality - providing world class services to Mauritians as well as to foreign clients. The number of beds in private clinics has increased by 56 per cent since 2005 to more than 800. There are now 19 private clinics in Mauritius in contrast to 12 in 2005.

Infrastructure development
The budget continuing its focuses on infrastructure development – including eco friendly infrastructure – has promised to modernise and expand import.
“Over Rs 15 billion have been allocated to extend, improve and create new road networks. Out of which Rs 1.3 billion to maintain and rehabilitate round 600-km of roads. The construction of the additional carriages and road ways will add 360 km of roads to the network,” he said.
He has also allocated budget for the Port. The Mauritius Container Terminal berth is being strengthened and expanded and the seabed is being deepened to 16.5-m at a cost of Rs 3.5 billion to allow the Port to meet growing traffic and attract larger vessels,

Agriculture
To enable planters and breeders to optimise their revenue, AREU is setting up an agricultural production and marketing information system. It will provide planters with real time market intelligence on crop production and prices by using mobile phone technology and posting information on a central website. Relevant information for breeders will also be supplied. To encourage the development of high-tech sheltered farming the government is introducing a scheme to provide technical assistance for the design and implementation of projects. It will also advance 90 per cent of the investment costs on soft terms, with a moratorium on payments for three years. It is setting up a scheme to assist sugar co-operatives to obtain the Fair Trade accreditation from the EU. This will enable them to obtain a premium of $60 per tonne of sugar. Government will advance the funds on soft terms for 75 per cent of the costs of consultancy and the application fee of Rs 150,000. Government has instead decided to set up a Cane Democratisation Fund to hold the 35 per cent stake in the various companies. The shares currently held by the Sugar Investment Trust in milling companies will be transferred to the Cane Democratisation Fund. In return, the shareholders of SIT will own shares of corresponding value in the Cane Democratisation Fund. Shares in the Cane Democratisation Fund will be offered to planters, labourers and artisans.

Bounty for the employees
Upto Rs 12,000 monthly salary holders – 3.5 per cent increment
Above the Rs 12,000 – Rs 450