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1 Meeting on the Trade and Development Implications of Tourism Services for Developing Countries: UNCTAD XII pre-event Geneva, November 2007 EFFECTIVE TOURISM POLICIES AND STRATEGIES FOR TOURISM DEVELOPMENT : THE CASE OF MAURITIUS By: Dr. Ramesh DURBARRY University of Technology Mauritius The views expressed are those of the author and do not necessarily reflect the view of the United Nations.

2 Effective Tourism Polices and Strategies for Tourism Development: The Case of Mauritius Dr Ramesh Durbarry University of Technology, Mauritius

3 Historical Context Mauritius used to be a monocrop economy- heavy reliance on sugar (1960s - 90% of GDP, 97% of exports)- characteristics of a poor country 1970s Promotion of Import Substitution industries- failed Export Processing Zones- use of fiscal and administrative incentives Diversification into the tourism industry 1980s Export Processing Zone- mainly Textile was the impetus of growth and employment Hotel sector expansion 1990s Tourism and Manufacturing gaining economic importance FDI Flows in Tourism From 2000 ICT- Cyber Island Tourism Offshore banking and financial services

4 Sectoral Contribution to GDP Year Agriculture, hunting, forestry and fishing Manufacturing Construction Transport, storage and communications Financial intermediation Tourism : Real GDP per capita US$ 4,800 (from US$ 296 in 1990) Inflation Rate 4.9 Unemployment 9.6

5 Evolution of the Tourism Sector 800, , , , , , , , Tourist arrivals in Mauritius 2 million Tourist arrivals 48, , , , , , , ,276

6 5% labour force Tourism Receipts/ Accommodation/ Employment Tourism Receipts (Rs. Mn) Annual Grow th 25.0% 29.8% 4.1% 5.9% 20.8% 9.6% 24.3% Hotels Rooms 1,009 2,201 4,603 8,657 9,647 10,640 10,497 10,666 Employment ,860 22,613 25,377 25,798

7 Tourism Policies The National Tourism Policy emphasises low impact, high spending, selective, up-market, quality tourism is favoured. Preserve the natural, exquisite and pristine characteristics of seascapes Ban on high-rise construction Limit construction of new hotels Maximum number of rooms per hotel since 1989 is 200, however.. Generally, there is a ban on direct charter flights Attract FDI flows- from an incentive driven approach to a targeted promotion of projects approach Mauritius has an upmarket image and policies have been aimed at highspending tourism Opening up of the air access Developing Mauritius as a duty-free island Promoting the island as a centre for MICE Allowing foreigners to acquire property Liberalisation of FDI Flows Setting up of the Tourism Fund- finance the development and maintenance of tourist sites, develop areas deprived of infrastructural facilities with potential to attract visitors

8 Investment Incentives Development Incentives Act (1974)- tax relief for a period of 10 years, exemptions from custom duty (85%), free repatriation of profits Hotel Management Incentive Act (1982) corporate tax 15% instead of 30%, preferential loan rates, etc July harmonisation of corporate tax- 15%, Annual allowances- 30% for hotel building (reducing balance basis), Business Facilitation Act (2006) - enables investors to start operation within a delay of only 3 working days Mauritius has several agreements of Double Taxation Avoidance Treaties 32 signed to date One stop shop agency- Board of Investment in 2000 to promote, facilitate and improve the investment climate in Mauritius

9 Investment Policies For the sound management and control of the tourism industry issuance of Hotel Development Certificate: Criteria:- a) Number of rooms: A company which is Mauritian-controlled must build a hotel of at least 60 rooms, whereas the minimum number of rooms for a foreign owned company should be 100. No hotel projects should exceed 200 rooms. b) The company must be incorporated with the Registrar of Companies in Mauritius. c) The project should be financed by at least 40% of equity. d) In case of resort hotels, the promoter should have at least 2.5 acres of land. For foreign owned hotels, the area of land must not be less than 10 acres. This parameter would not apply for inland hotels. e) The room employment ratio should be in the region of 1:1. f) The cost of one room should be at least around Rs 700, 000 (1990 estimate). g) For large hotels, the promoters should either show evidence of experience in the management and marketing of hotels or give the management of the hotel to a specialised management company. For first-class restaurants, the duty on imported kitchen equipment is levied at half the normal rate. Tour operators and car rental agencies are granted a 60 % concession on air-conditioned buses and vehicles to encourage tour operators to invest in quality of vehicle fleet

10 Importance of FDI Rs million Year * EPZ Tourism ,572 Banking , ,398 Telcom'ns 7, Other ,079 1, Total 7, ,966 1,796 2,807 7,222 5,943 *Jan to June Total FDI Inflows: 2001 US$31.2m 2004 US$59.8m 2006 US$232.9m Tourism FDI flows out of Total FDI: 19.1%.2005 [US$ 17.9m] 36.1%.2006 [US$ 84.0m] 60.1% * [US$ 115m]

11 Tourism Strategies Attract high spending tourist Tourism Act of 2004, setting up of the Tourism Authority to promote the social, economic and environmental benefits to Mauritius from tourism. to formulate policy and nationally integrated planning for the tourism industry, co-ordination of activities of the various organisations in the tourism industry. Investment- priority to hotel projects of the highest standards Key role of the Mauritius Tourism Promotion Authority Introduction of the concept of Integrated Resort Scheme Creation of Tourist Villages Community inclusion e.g thr SMEs, Table d hôte, etc Around 25% of visitors stay in non-hotel accommodation Develop the MICE market Alternative Tourism: Cultural Heritage Tourism Regional integration e.g SADC, EAC

12 Key Driving Forces Accessibility Visibility Attractiveness

13 Accessibility Air access: From mono-designation to dual/multi designation strategies COMAIR creating additional seat capacity of 4,788 monthly Corsair creating additional seat capacity of 3,280 per month Air Europe, Eurofly and Volare Airlines allowed to land in Mauritius. Virgin Atlantic now operates 2 flights per week Air Mauritius: From daily to 12 flights to UK An Indian Airline will be landing in Mauritius in the near future Bilateral Agreement with Spain and Mauritius From 3 to 7 flights (Sydney, Melbourne, Perth and Brisbane) as from 25 th Oct 07. Travel Services KFT from Hungary TUI Fly Nordic from Sweden (Ex Britannia) Tourists from Russia is expanding Facilitation for private jets to land in Mauritius. Source: MTPA

14 Visibility Ensured by Mauritius Promotion Tourism Authority (MTPA) MTPA established in 1996 to: promote Mauritius abroad as a tourist destination by conducting advertising campaigns, participating in tourism fairs and organising, in collaboration with the local tourism industry, promotional campaign and activities in Mauritius and abroad. provide information to tourists on facilities, infrastructures and services available to them in Mauritius conduct research into market trends and market opportunities FAM and Press trips Events Creation Proximity Marketing and Bonding with the Distribution Channels Website: MTPA has had a budget of US$ 10 million per year in 2006 and 2007

15 Participation in Annual Fairs Month Venue Fair January Spain/Madrid International Tourist Trade Fair (FUTUR) February Czech/Prague Holiday World Fair February Italy/Milan Vorsa International de Tourisomo (VIT) February South Africa/Durban INDABA March Germany/Berlin International Tourist Boost (ITB) March France/Paris Salon Mondial du Tourisme September France/Dovisa TOPRESA Tourism Fair October Swiss/Montrax Travel Trade Workshop (TTW) November UK/London World Travel Market Source: Ministry of Tourism, Leisure and External Communications.

16 Attractiveness Enhancing the base product of 3 Ss with new add-ons Renovation and restoration of tourist sites and attractions (Heritage, historical and cultural sites) Embracing niche products such as golf, spa and wellness, duty free shopping, establishment of marine parks, etc) Events Creation (Golf Events, Festival International Creole, Sports Events, Celebritydriven Events) Source: MTPA

17 Linkages to the Local Economy Study by UNCTAD (2007): The Development Dimension of Tourism FDI in East and Southern Africa by R. Durbarry (Mauritius), J. Kweka (Tanzania), F.Nsonzi (Uganda), M. Ikiara (Kenya), H. Fidzani (Botswana), S. Gelb (South Africa) & D. Barrowclough (UNCTAD). Project funded by IDRC and UNCTAD. Cases show that: Opportunities for SMEs Tourism firms buy a lot of their supplies locally although leakages still remain Tanzania, Botswana- more than 90% purchase from local supplierssimilar for Mauritius Foreign firms have high preference for imports Kenya- 84% of food, beverages and cleaning chemicals- from local suppliers There is a need to improve quality

18 Linkages..Cont d Botswana purchase all the food products from wholesales within the country 80% of hoteliers purchase fish from SMEs and street vendors Most inputs by hotels, lodges and camps signals existence of linkages (especially backward linkages) between these tourism establishments and their supplying industries (wholesalers, SMEs, retailers, farms etc.). Contributes towards alleviation of poverty - mainly thr employment and hence providing a source of livelihood for the local people. Kenya Employment- Not so much except for manual jobs. Preferential treatment in the supply of agricultural commodities Donations to organisations e.g. schools, Red Cross Uganda Weak linkages

19 Linkages..Cont d Mauritius Tend to recruit people in local community- direct and indirect Supply of food and vegetables Good opportunities for taxis, catamaran, handicraft, etc Equipment maintenance, vehicle and fridge maintenance are mostly contracted out to local firms Foster cultural tourism Better environment, entertainment facilities Opportunities for SMEs Tanzania Tourism backward linkages- Business opportunities for SMEs Hotels source over 90% by of their food supply requirements locally Most of the construction materials are imported despite local supplies being abundant- reasons: quantity and quality Efforts by tourism businesses to link with SMEs are hampered by lack of information direct financial support to improve local social and economic services direct linkage with poverty reduction thr employment, but FDI mostly in cities

20 Promoting SME Development Case of Mauritius Business Facilitation Act Start operation in 3 days (getting rid of trade licences, etc) Harmonise the cost of doing business across all sectors and business activities. Empowerment Programme Empowerment Fund- Equity participation by Govt ($10,000 to $100,000) Soft loans from Development Bank of Mauritius for SMEs Support services, advice and training support from SEHDA Women participation Enterprise Mauritius Awareness Campaign Consultations- ministries, local institutions, govt agencies, private sector

21 Why Mauritius has fared well? There is now no shortage of investors willing to invest in tourism! Open and low tax regime Same level-playing field for all Mauritius has a long tradition of private entrepreneurship Open business platform Investment protection Infrastructure facilities and well developed ICT sector Efficient support facilities Control on Red tape and bureaucracy Investment climate improvement Targeted investment projects Political stability A tradition of hospitality Natural resources Human resources, etc The govt policy is to act as a facilitator to business, leaving production to private sector