Business OpportunitiesBusiness Opportunities inin

Comesa after the EstablishmentComesa after the Establishment of theof the

FTA and Customs UnionFTA and Customs Union

Report

To

The Ministry of Foreign Affairs and Regional Cooperation

Mauritius

Prepared by StraConsult

Table of Contents Page

1. Executive Summary 1

2. Introduction 4

3. Goal and Purpose of the Study 5

4. Methodology 5

5. Highlights of COMESA FTA 8

6. COMESA Rules of Origin 10

7. Status of COMESA FTA 12

8. NTBs and Efforts Towards Elimination 14

9. Trade Facilitation Measures and Status of Application 17

10. From COMESA FTA to Customs Union 20

11. Multiple Membership and Overlapping Negotiations on Trade 21

12. Economic and Political Assessment of COMESA Member States 26

13. Potential of COMESA Region to Attract FDI 27

14. Mauritius as a Player in the Region 29

15. Trends in Mauritian ODI and Export of Services to the Region 32

16. Trends in Trade of Goods between Mauritius and the Region 36

17. How Trade to COMESA has been Promoted 43

18. Opportunities for Trade in Goods 47

19. Opportunities for Trade in Services 55

20. Opportunities for Investment 63

21. Recommendations 65

Appendix A: Bibliography 69

Appendix B : Acronyms 70

Appendix C: Terms of Reference 72

Country Report 74

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1. Executive Summary This report is the result of an overall study into the situation of the COMESA market, particularly after the COMESA Free Trade Area was launched in October 2000, and the business opportunities opening up to Mauritius as a result. Although the study has focussed on the COMESA market, and is an analysis of opportunities for increased opportunities for Mauritian trade in goods and services as well as investment, the report has analysed the situation where Mauritius and the region is involved in overlapping Regional Integration Agreements and other trade agreements and negotiations, with a concern to the implications in terms of preferential market access. The report examines the SADC FTA, the EU-RSA FTA, AGOA and the Cotonou and coming negotiations for EPA, highlighting that basically there are no contradictions between the regional agreements and the other agreements in as much as the RIAs are being accepted and considered as building blocks to more liberalised trade. The report notes that in certain cases conflicting jurisdiction may be a serious impediment to the full development of an FTA. Thus members of SACU who are also members COMESA cannot implement their commitment under the COMESA FTA by introducing free trade for imports from other non-SACU members of COMESA. They are prevented from doing so because of the common external tariff of SACU, which applies to imports from all non-SACU members. However, the report underscores that overlapping membership and involvement in multiple trade agreement schemes can offer the opportunity for cumulative rules of origin for preferential market access. The cumulation of origin for cotton produced in one country to produce yarn in another and garments in a third qualifies the product for preferential access under AGOA is one example. Although it is normally too early for clear evaluation of benefits of an FTA which is only just over one year old, the study shows that Mauritius is undeniably benefiting from the COMESA market for increasing exports of products which in most cases would not have found a market in other regions beyond the continent. The study comes at an opportune time for an early development of strategies that will allow Mauritius to maximise benefits in the coming years from its preferential access to the regional market. Indeed, the COMESA region now represents 8.13 % of the total exports of Mauritius, and a value of Rs 3.4 billion in 2001. In U.S Dollar terms, exports to COMESA countries have grown by 7.89% between 1998 and 2000 and by 23.77% from 2000 to 2001. In Rupee value, growth has been by 18.16% and 36.99% for the respective periods. The overall balance of trade with the COMESA region has been increasingly favourable to Mauritius reaching Rs 1.5 billion in 2001. A range of 1,422 product lines is exported on Madagascar, more than 600 on Seychelles, and over 400 to Kenya. Even Zimbabwe, which has been experiencing some trouble internally for the past two years, takes more than 200 lines of products from Mauritius for a value of Rs 171 million in 2001, making it the second biggest COMESA market for Mauritius and representing a growth of 17% over the value of 2000.

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Regional Free Trade Agreement such as the COMESA FTA and the SADC Trade protocol opens access to an enlarged market for producers and manufacturers of a wide range of products either produced by both major Mauritian enterprises and SMEs, or could be produced even partly in Mauritius. The COMESA FTA was launched with the objective of achieving zero tariffs for all tradeable goods among COMESA members (Free Trade Area). The report examines the progress achieved by COMESA states in the full implementation of the FTA, and notes that although unequal among the Member States, concrete steps confirms commitment to more free preferential trade access under the FTA. The implementation of the FTA is grounded on the agreed COMESA Rules of Origin, and is to be supported by a sustained drive for Member States to remove all Non Tariff Barriers (NTBs) to free trade. However these NTBs seem to be more enduring and the COMESA Council of ministers had noted that some Member States were attaching national conditions for accepting Certificates of Origin, contrary to the COMESA Treaty provisions. A number of such barriers have been reported by Mauritian exporters during the survey carried out for this study. Obtaining extensive information about NTBs for each of the COMESA member states and efforts done by each for their removal has been a most arduous task. Neither the COMESA Secretariat nor industry organisations are fully in command of such information. Recommendation has been made for a reporting mechanism to be set up for prompt reporting by exporters. The report notes a certain number of trade impediments such as the cost of transport or weakness in the financial systems that are hindering trade flows. The report examines those support measures that can be addressed from the Mauritian side itself. The report also draws attention to the fact that the constant growth of Mauritian exports to the region is partly a result of the delocalisation of the clothing industry to Madagascar, and partly a contribution of the Freeport trade. In other words, it is observed that Mauritius has not maximised exports from the existing production capacity for various reasons. The report also points to the fact that there has been an absence of institutional support to allow for the transformation of market opportunity into increased and broadening production capacity. A detailed trade analysis has been carried out for each of the COMESA member state and has revealed the opportunities for markets for a number of goods. The details of this trade analysis for both goods under the 35% value added and the 25% ones, are indicated for each country in the section of country reports. The report examines how trade to COMESA has been promoted by the various stakeholders in Mauritius, highlights some of the missing tools such as insufficient trade information system or absence of strategic partnership between freight forwarders and counterparts on the continent capable of providing inland transport services and makes certain recommendations in this regard. A broad political and economic assessment of the COMESA countries has been made and the potential of the region to attract FDI analysed. The role of Mauritius in this context has been assessed and details of the most important cross border investment from Mauritius given. It is also indicated that Mauritius is already, through its offshore business activities, a conduit for FDI to the region. The report examines the issue of trade in services and the status of commitments of COMESA states in that respect, while highlighting the stated determination of COMESA to drive liberalisation within the COMESA region itself. The question is raised as to whether Mauritius should await for the

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GATS commitments or the regional negotiations on services or move for bilateral agreements with certain target countries. The opportunities for exporting a range of services are examined, namely in ICT, financial services, consulting, accounting, architectural and engineering services and training, considering both the assets and weaknesses that Mauritius has. This should give us an indication the strategies to develop capacity for exports to the region. Finally the report proposes a number of recommendations for a more forceful strategy to maximise on the opportunities offered by the regional market.

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2. Introduction The RIFF Technical Working Group Secretariat based at the Ministry of Foreign Affairs and Regional Cooperation has commissioned a Desk Study on Business Opportunities in Comesa after the Establishment of the FTA and Customs Union Mauritius joined the COMESA right at the time of its inception in 1981 as the Preferential Trade Area. Mauritius joined SADC in 1994, was a founder member of the Indian Ocean Commission and was a lead player for the setting up of the Indian Ocean Rim- ARC. The diplomatic option taken by Mauritius at the early stage of its independence, that is to be part of both the Commonwealth and La Francophonie, has been essential in ensuring important gains from its own joining of the Lomé Convention. Preferential access to the EU market has provided the foundation for economic diversification, and resources for industrial and overall development of Mauritius during the last decades. The Africa Growth and Opportunity Act is now providing the opportunity for a second phase of development mainly for the textiles and clothing sector. The strategy of membership in regional integration agreements is not only in conformity with the general trend pursued by most countries including the most developed, but is providing important new trade and development opportunities for Mauritius. Indeed, the COMESA region now represents 7.45% of the total exports of Mauritius, and the products being exported could only have found a market in the region. The COMESA FTA as well as the SADC Trade protocol opens access to an enlarged market for producers and manufacturers a wide range of exportable products already produced by both major enterprises and SMEs. Multiple membership could be beneficial to Mauritius as it could capitalise on the benefits of SADC, COMESA and IOC as a hub for the region, thus maximising the opportunities of cumulative rules of origin. The Cross-Border Initiative which started in 1992, now been transformed into the RIFF (Regional Integration Facilitation Forum), has contributed considerably to facilitate increased intra-regional economic linkages, specifically concerning trade, investment and payments and thus improve regional integration within Eastern and Southern Africa and the Indian Ocean region. Most countries within this region, defined as member States from the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC), the Indian Ocean Commission (IOC), and the Southern African Development Community (SADC) are participating in this initiative.

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3. Goal and Purpose of the Study The objective of this study is to identify opportunities, constraints (market, tariffs and NTBs) of the COMESA market, the strengths of Mauritius, its producers and traders, institutional and other enabling factors with a view to deriving the most appropriate strategies to increase the volume and value of goods and services exported from Mauritius to the COMESA region.

4. Methodology This study was conducted on the basis of research through documents, surveys, interviews data compilation and analysis. Research through a number of documents covering mainly questions regarding the various trade agreements and trade negotiations, decisions and reports from COMESA organs, WTO country reports and other relevant ones. Many of these documents were provided by the Ministry of Foreign Affairs and Regional Cooperation, a number from StraConsult own documentation database, some from web sites such as COMESA or WTO, and some from other institutions such as Ministry of Co-operatives and Commerce. A number of institutional stakeholders, such as the Mauritius Chamber of Commerce and Industry, the Customs, MIDA, Mauritius Freeport Authority, Ministry of Co-operatives and Commerce were interviewed for information, views and clarification. A survey was carried out with 125 exporters. The list of exporters was obtained from the Mauritius Freeport Authority and the Ministry of Co-operatives and Commerce. A questionnaire was sent to each with a covering letter explaining purpose of the study. Unfortunately, although most were recalled and reminded, only a dozen responded. Interviews either face to face or by telephone was done with five of the main exporters. A survey for information about connections and rates was carried out with freight forwarders and shipping agents. Ten of them were contacted. Adequate response was obtained to obtain reliable information for the study. All banks were contacted and response obtained from the majority. 4.1 Supply and Demand Analysis The study required that:

(a) The actual detailed exports of Mauritius to each country of the region be obtained and analysed.

(b) The identification of market opportunities for certain groups of products such as garments,

beverages, paper products, plastic products etc

(c) The identification of exportable products under the 25% Value Origin Criteria

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Availability of data is the most crucial element of this part of the study. 4.2 Trade Flow and Trade Potential Analysis The methodology used in the identification of products for potential intra-regional trade is based on the analysis of trade flows. The approach consists of identifying complementary products, i.e. products successfully exported by one country towards some other meaningful region (here we have used exports to the world), and for which, there exists a significant import demand from the target market. In basic terms, the indicative trade potential is defined as the lowest value between the amount the target market can absorb and the amount the target exporting country can supply: Indicative trade potential = MIN (Supply capacity Market absorption) The indicative trade potential is by nature indicative and should not be taken as an absolute truth. It must be considered as a point of departure for further investigation. It is also worth mentioning that, for a given product, a significant indicative trade potential combined with a current trade greater than zero, is usually a good sign for trade expansion as it indicates that the supply already meets the demand within the target market. For products for which there is no current trade, but for which there exists a significant indicative trade potential, the conditions for trade creation should be thoroughly checked. These conditions include export competitiveness, consumer preferences, transport costs, trade barriers (tariff and non-tariff barriers), seasonal and other factors. Besides the calculation of the indicative trade potential, the applied methodology takes into consideration the competitiveness of exporting countries as well as the dynamics of demand in target markets. If figures for countries concerned are not available on a historical basis, these aspects are not fully covered in the study and should be re-evaluated in a validation phase. 4.3 Data source and nomenclatures Three sets of data should normally be used in carrying out the analysis of indicative trade potential between Mauritius and the target country:

(a) The exports of Mauritius to the World (b) The imports of the target country from the World (c) The exports of Mauritius to the target country

Exports of Mauritius to the World is available on the MCCI Web site in HS nomenclature indicating value, quantity and average value/quantity and on the international Trade Centre (ITC) web site in SITC three-digit level indicating value only. For some countries, data was available only for part of 2001. The Central Statistical Office promptly provided complete data for 2001. Imports of target countries were found on PC-TAS 2000 obtained from MIDA. The PC-TAS version of MIDA carried data in HS nomenclature indicating value, quantity and average value/quantity; however the data for only four COMESA countries as reporter countries were available from that source, namely Egypt, Madagascar, Sudan, and Uganda.

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For other COMESA countries as Reporter countries, data on their imports from the world could only be obtained from ITC website, but imposed serious limitations on the analysis due to the fact that the data was in three-digit level, without quantity and unit value/quantity. Comprehensive calculations and analysis could have been made at product level had statistics been extracted from the COMTRADE database. COMTRADE is the world’s largest and most comprehensive international trade database, covering export and import statistics by products, reported by more than 100 countries and territories over the last three decades. COMTRADE is maintained by the United Nations Statistics Division, UNSD. However COMTRADE was not available from any institution in Mauritius. In order to circumvent these constraints, the data for most countries was obtained from PC-TAS by mirror process that is from the reported exports of other countries to the target countries concerned.

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5. Highlights of COMESA FTA The COMESA Free Trade Area (FTA) was launched on October 31, 2000, marking the first ever free trade area within the African continent. The FTA was launched with three stated objectives: (a) Complete removal of tariffs for all tradable goods among COMESA members (Free Trade

Area) by the year 2000, as well as the continued development of the region as a common investment area.

(b) Establishment of a customs union, by adopting a Common External Tariff with third

countries (CET) by the year 2004. (c) Establishment of an economic community (monetary union and free movement of people)

by the year 2025 To date, nine countries, namely: Djibouti, Egypt, Kenya, Madagascar, Malawi, Mauritius, Sudan, Zambia and Zimbabwe are participating in the FTA. These countries trade on duty-free terms for all goods originating from within their territories. Namibia and Swaziland have had their derogation to apply reciprocal tariffs extended 31 July 2003 or the next Summit whichever is earlier. Five other member states – Burundi, Democratic Republic of Congo, Eritrea, Rwanda, Uganda have all reduced their tariffs by between 60% and 80% and will enjoy market access on a reciprocal basis. They have all pledged to implement the FTA between now and January 2004.

The rates of preference applied on COMESA originating goods following the launch of the FTA are as follows:

Country Rate of duty applied on COMESA originating goods Djibouti, Egypt, Kenya, Madagascar, Malawi, Mauritius, Sudan, Zambia and Zimbabwe

Duty-free trade. No duties or charges of equivalent effect on all goods originating from these countries.

Egypt has maintained the 45% local Value Added criteria as against the 35% required.

Comoros, Eritrea, Rwanda and Uganda

20% of the general (MFN) duty rates

Burundi 40% of the general (MFN) duty rates Ethiopia 90% of the general (MFN) duty rates Angola, DR Congo and Seychelles Full MFN rates Namibia and Swaziland Full MFN rates until the derogation lapses

"Charges of equivalent effect" are any taxes, duties or surcharges that are levied on any traded goods but are not levied on identical or similar locally produced goods.

COMESA has a combined population of 380 million, with a GDP of US$ 166 billion and Intra COMESA trade of US$ 4.2 billion out of a total annual trade of US$ 63 billion. Total COMESA imports were estimated at US$ 39 billion in 1998.

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Moreover, the FTA promotes cross-border investment, franchise and agency arrangements and joint venture operations. This encourages the transfer of technology and skills and contributes directly to economic development in the region.

Other COMESA countries are planning to participate in the FTA and they should be joining it by 2004. Meanwhile they are continuing to trade on preferential terms. They have reduced tariffs on COMESA originating goods between 60% to 80%. Indeed, progress is being made by a number of states towards joining the FTA. Seychelles prepared the legislation on the zero tariff regime, while Burundi, Ethopia, Rwanda, Namibia an Swaziland have carried out studies on implications of the FTA on their economies. The Democratic Republic of Congo has published the legislation on 70% tariff reduction. Rwanda will move from 60% reduction to 80% reduction effective from January 2002 and 100% reduction in 2003 when it will effectively join the FTA and ready to join the Common External Tariff. Under the COMESA FTA, Value Added Tax, Sales Tax and Excise Duty shall continue to be levied, where applicable on all traded goods including COMESA originating products, provided these are also levied on identical or similar locally produced goods. The implementation of the FTA is grounded on the agreed COMESA Rules of Origin, and is supported by: v A sustained drive for member states to remove all Non Tariff Barriers (NTBs) to free trade. v A number of Trade Facilitation Measures. v Trade Remedy Measures with the purpose of ensuring that there is uniformity among

COMESA member States in the conduct of trade remedy investigations and to ensure, to the extent possible, that such investigations are undertaken in harmony and within the framework of WTO Safeguard Agreement, covering issues such as Safeguard, Antidumping Measures and Dispute Settlement Mechanisms.

During the thirteenth meeting of the Council of Ministers that took place in May 2002 in Ethiopia, it was decided that all member States should adhere to and implement all ministerial and Authority decisions regarding the FTA. Democratic Republic of Congo, Comoros, Eritrea, Ethiopia, Seychelles and Uganda should submit a plan to indicate, by the next Council meeting, how they are going to implement the FTA by 2004. Besides, it was also decided that Customs and National Statistical Offices, which have not yet signed level agreements should do so to permit timely flow of information to National Statistics Offices for the up-to-date compilation of trade statistics. As far as trade disputes are concerned, the Council decided that Member States should adhere to the Regulations on Trade Remedy Measures.

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6. COMESA Rules of Origin Rules of Origin are the linchpin of FTAs. Goods that meet the COMESA Rules of Origin are those that are eligible for duty-free treatment. They are referred as COMESA originating goods. The COMESA Rules of Origin are a set of criteria that distinguish between goods produced within the COMESA member States and are entitled to duty-free or preferential treatment with respect to customs duty and/or other charges of equivalent effect and those considered to have been produced outside the region and pay full national duties when traded. Five independent criteria have been laid for the COMESA Rules of Origin. To qualify as COMESA originating goods, products should meet any of the five criteria: 1. The goods should be wholly produced or obtained in a Member State (that is: they should

contain no materials imported from outside the COMMON Market; e.g. animals bred and reared on a farm, fish caught in country’s lakes/rivers/sea, minerals mined from the ground. Timber felled in the country’s plantations); or

2. The goods should be produced in the member States and the c.i.f. value of any foreign (that

is, non-COMESA) materials should not exceed 60% of the total cost of all materials used in their production; or

3. The value added resulting from the process of producing the goods from imported materials

should account for at least 35% of the ex-factory cost of the goods; or

4. The goods should be produced in member Sates and be classified, after the process of production, under a tariff heading other than the tariff heading under which they were imported; or

5. The goods should be designated by Council as “goods of particular importance to the

economic development of the Member States” and should contain not less than 25% value added, not withstanding the provisions in paragraph 3) above.

However, simple production or manufacturing processes are not sufficient to confer origin. These include simple assembly of components and/or parts; mixing or blending of ingredients; processes of preservation of goods in storage or during transportation; marking and labelling; packing, repacking or decanting; washing, painting and cutting up operations. These exceptions have been laid down in order to meet the region’s overall development policy to promote investment, productive economic activity and the creation of jobs within the region. Thus, the Rules of Origin have been shaped in such a way that goods that will be traded should have undergone sufficient processing within the region to contribute to economic development and to create and sustain employment in the region. To prove the origin of each consignment of goods to be traded under the FTA and on preferential terms, the good must be accompanied by an original Certificate of Origin, which is issued in the Member States by competent authorities, which in Mauritius is presently the Ministry of Commerce.

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All COMESA Member States except Egypt and Uganda (requiring 45% value added condition instead of the agreed 35%), are applying the agreed Rules of Origin. However, some problems with customs verifications and acceptance of the Certificate of Origin are reported in the case of some countries. Indeed the thirteenth meeting of the Council of Ministers held in May 2002 expressly reemphasized that the Verification of origin was to be made strictly in accordance with the provisions of the Protocol and the Member States should not delay in giving responses to allow smooth clearance of COMESA originating goods. The Council also noted that some Member States were attaching national conditions for accepting Certificates of Origin, contrary to the COMESA Treaty provisions. The Council decided that member States should not attach any national conditions for accepting Certificates of Origin and they should comply with the Treaty provisions and Council decisions on the Rules of Origin. As regard to the harmonisation of Procedures for the Issuance of the COMESA Certificate of Origin, the Council agreed that as a Working Group on Rules of Origin had been established to review all issues and problems relating to Rules of Origin, the Working Group should first consider the issues and make before consideration by the Committee.

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7. Status of COMESA FTA An assessment of the FTA showed an encouraging trend in the growth of intra-regional trade. For example, Zambia and Zimbabwe are now exporting cotton yarn to Mauritius (displacing exports from Asia) and sugar to Kenya and Uganda. Malawi is exporting sugar to Kenya while the latter was exporting edible oils, iron and steel bars and iron rods to Egypt and Mauritius. Kenya had displaced Indian and Sri Lankan tea to Egypt. Egypt is exporting carpets, detergents and baby diapers to many COMESA member states. However, there are issues of implementation relating to the exhibitions and Certificates of Origin and taking of unilateral actions of banning importations of products without paying regard to the regulation on trade remedies. No other Member State had joined the original nine Member States, which formed the FTA on October 31, 2000, however progress has been made in implementing the COMESA tariff reduction programme. As at November 2001, Seychelles was preparing the legislation on the zero tariff regimes. Studies had been carried out by COMESA Secretariat for Burundi, Ethiopia, Rwanda, Namibia and Swaziland. Burundi: Owing to internal problems, Burundi requested and obtained a waiver not to effect further tariff reductions. The Government of Burundi carried out a study on the impact of the FTA, which revealed the risk of de-industrialisation in Burundi and the need for considerable financial resources to support the restructuring of enterprises facing difficulties. However, in spite of the existing difficulties, Burundi was studying the possibility of joining the FTA as soon as possible. Following consultations between the government and private sector, Burundi informed the COMESA Council of Ministers that it had now decided to effect a further tariff reduction of 80% from the previous reduction level of 60% as from January 2003 and will effect 100% reduction in January 2004 on COMESA originating products. DRC had published the legislation on 70% tariff reduction, which was to be submitted to the Secretariat. Following a request made by D.R Congo, a mission was sent by the Secretariat to discuss the loss of revenue with the Ministry of Finance and re-assure the authorities on DRC’s adhesion to the FTA. Ethiopia would take a decision about her participation in the FTA after the completion of a study that was being conducted. Namibia: After the conclusion of a study undertaken by the Secretariat, Namibia submitted her comments and was committed to the speedy conclusion of the matter to facilitate decision making of the nature of Namibia’s participation in the FTA. Uganda confirmed it was committed to the implementation of the FTA and had commissioned a study on the implications of the FTA on her economy and the findings, which will facilitate a decision by the Government, were being awaited. Rwanda: Rwanda announced that she would not be in a position to join the FTA by the deadline of 30th April 2002. However, she would effect 80% tariff reduction from January 2002 and 100% reduction in January 2003 when they effectively join the Free Trade Area. Legislation has been published effecting tariff reduction of 80% from January 2002, 90% from January 2003 and 100% in 2004.

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Swaziland has decided to undertake a study in addition to the one commissioned by the Secretariat. However, Swaziland was committed to joining the Free Trade Area and was in the process of moving the process forward. Swaziland is hopeful to take decision soon but will need to seek the concurrence of SACU for it to join the COMESA FTA. Special Ministerial Missions were undertaken to Burundi, Rwanda, Uganda and Democratic Republic of Congo. Other ministerial missions are also planned for Comoros, Eritrea and Seychelles. At the 11th meeting of the COMESA council of Ministers held in Egypt in May 2001, Seychelles reiterated its commitment to join the FTA on 1st June, 2001. However, it has not done so. The council reported that the Democratic Republic of Congo (DRC) had also reiterated its commitment to fully participate in the COMESA FTA at the earliest opportunity.

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8. NTBs and Efforts Towards Elimination The impact of removal of tariff barriers to free trade can easily be nullified by non tariff barriers. Such barriers take very diverse forms and may be by design or as a result of a situation which is not being properly addressed. The Council of Ministers of COMESA has already expressed concern that the COMESA FTA in particular and the trade regime in general were constantly being undermined by the practices by some Member States of NTBs in the form of cumbersome import licensing and other administrative measures. Member States were urged to comply with Treaty provisions. The Secretariat was hastened to adopt a pro-active stance in following up reported NTBs in order to facilitate their removal. COMESA has indeed recommended a time schedule for elimination of NTBs to intra COMESA trade, but does not appear to have updated information on efforts towards elimination. In fact, contacted by StraConsult, COMESA Secretariat informed that “as regards elimination of NTBs, only some member States have responded and the matter will again be raised at the next meeting of Trade and customs”. Information concerning business environment and certain officially reported NTBs is included for each country under the Country Report section of this report. A number of such barriers have been reported by Mauritian exporters during the survey carried out for this study, is highlighted hereunder. Kenya and Madagascar: v Customs difficulties for clearing goods

v Unfair competition from products from other countries coming in unlawfully.

v Dumping from European countries, especially Italy and Spain.

v Duties paid on imported wine and spirits by European countries are almost the same as ours because Kenya and Madagascar have been reducing the custom duties and increasing excise duty on imports.

Egypt: v The clearance of goods from Mauritius suffers undue delay time at customs in Egypt. v There have been problems for the export of canned meat and corned beef to Egypt. Egypt requires that the Certificate of Origin for the COMESA be stamped by the Ministry of Foreign Affairs and Regional Cooperation, the Egyptian Embassy, the Health Certificate should be stamped by the Ministry of Foreign Affairs, and an invoice stamped by their embassy for which a high fee of Rs 1,590 is charged. Exporters need to submit for certification by the Egyptian Consulate, a commercial invoice with the seals of: Ø The Mauritius Chamber of Commerce and Industry Ø The Ministry of Health and Quality of Life

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Ø Ministry of Foreign Affairs & Regional Cooperation, which has also to certify the seals of the MCCI and the Ministry of Health.

The Mauritian Ministry of Foreign Affairs & Regional Cooperation considers that it is not a requirement to certify the seals of the MCCI and the Ministry of Health due to the fact that it has not been informed officially by the Egyptian Consulate of such a procedure. Mauritius believes that these requirements amount to a non-tariff barrier and as such they have to be reversed. Kenya: v The last budget passed in Kenya announced the introduction of a 60% custom duty on imported

flour. v Some products like nine-day-old chicks and flour are being blocked. v Customs control is much too cumbersome. v The Bureau Cotechna for inspection and the Customs in Kenya very often change their

procedures thus creating a situation of unpredictability. Mozambique: v Failure by the government of Mozambique to take action with respect to the cross border

smuggling. For example, the smuggling of sugar from neighbouring countries is a common practice in Mozambique.

Madagascar: v Tariff protection to local producers v Customs control is much too cumbersome. v The inspection office, Bureau Veritas demands a fee which has to be paid in foreign exchange.

Thus the exporter has to pay for the fees and then make a claim from his client later on. v Government procurement practises biased in favour of local producers Seychelles: ð Seychelles does not give import permits for noodles.

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COMESA RECOMMENDATIONS FOR RELAXATION AND ELIMINATION OF NON-TARIFF BARRIERS AND OTHER OBSTACLES AND RESTRICTIONS TO INTRA-COMESA TRADE SCHEDULE FOR ELIMINATION NTB EFFECT PROPOSED

ACTION REQUIRED

IMMEDIATE SHORT TERM (within 2 years)

MEDIUM TERM (2-5 years)

LONG TERM (5-10 years)

Customs and Trade Procedures & Documentation • Customs

Procedures • Documentation

Numerous & cause delays Numerous & cause delays

Implement COMESA programme of Simplification & Harmonisation which is based on WCO procedures Implement WTO Customs Valuation Agreement Implement HS 1996 version Implement COMESA CD

� � �

�

Quantitative restrictions/bans and prohibitions

Restrict exports and imports to markets (mainly used to protect local industries)

Remove on all products, except for security, health, religious, and environment reasons

�

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9. Trade Facilitation Measures & Status of their Application Article 70 of Chapter Nine of the Treaty Establishing the Common Market for Eastern and Southern Africa states that Member States undertake to initiate trade facilitation programmes aimed at: (i) Reducing the cost of documents and the volume of paper work required in respect of trade

among the Member States; (ii) Ensuring that the nature and volume of information required of trade with the Common

Market does not adversely affect the economic development of, or trade among the Member States;

(iii) Adopting common standards of trade procedures within the Common Market where

international requirements do not suit the conditions prevailing among the Member States; (iv) Ensuring adequate co-ordination between trade and transport facilitation within the Common

Market; (v) Keeping under review the procedures adopted in international trade and transport with a

view to simplifying and adopting them for use by the Member States; (vi) Collecting and disseminating information on trade facilitation and documents; (vii) Promoting the development and adoption of common solutions to problems in trade

facilitation among the Member States; and (viii) Initiating or promoting the establishment of joint programmes for the training of personnel

engaged in trade facilitation among the Member States. Various trade facilitation instruments have been set in the COMESA to encourage trade. One of these instruments has been the launching of the FTA, which allows the trade of goods without the payment of custom duties. A number of the trade facilitation measures are more relevant and applicable on the continent. These are essentially the transport facilitation measures, which although do not directly concern Mauritius will undeniably facilitate Mauritian trade with COMESA states. The others are the trade and customs facilitation measures. The Transport Facilitation Measures are: Harmonised Road Transit Charges This system was introduced in 1991. It specifies the charges payable by heavy goods trucks and buses on a kilometre basis. It is implemented by a number of COMESA Member States, namely, Burundi, Ethiopia, Kenya, Malawi, Rwanda, Sudan, Uganda, Zambia and Zimbabwe. COMESA Carrier’s Licence This licence allows commercial goods vehicles to be licensed with one license which is valid throughout the region so that the vehicles can pick back loads in other countries which makes

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efficient the region’s transport fleet and reduces the cost of transport. The licence is currently in use in Burundi, Kenya, Malawi, Rwanda, Swaziland, Uganda, Zambia and Zimbabwe. COMESA Yellow Card Scheme The scheme is a vehicle insurance scheme which covers third party liability and medical expenses with a Yellow Card issues in one COMESA country and valid in the other participating countries. At present, Burundi, DR Congo, Eritrea, Ethiopia, Kenya, Malawi, Rwanda, Swaziland, Uganda, Zambia and Zimbabwe are participating in the Scheme. The insurance companies of South Africa and Namibia have expressed their wish to be part of the Yellow Card and consultations are in progress. The Trade and Customs Facilitation Measures are: Regional Customs Bond Guarantee Scheme This scheme aims to eliminate the costs and bureaucracy associated with the practice of nationally executed bonds for transit traffic. It has not yet come into force but Member States have agreed to ratify the Scheme. A workshop was organised this year. COMTEL To meet the needs of users and the current practice of routing regional telecom traffic via countries outside the region, COMESA has initiated the establishment of a company (COMTEL) to build an asynchronous transmission mode to national systems together, Egypt, Eritrea, Kenya, Mauritius, DR Congo, Malawi, Uganda, Sudan, Zambia and Zimbabwe have signed the shareholders agreement and the interim board consists of Egypt, Kenya, Mauritius, DR Congo, Sudan, Malawi and Zambia. COMESA CD The COMESA Customs Document was officially adopted in April 1996 to replace the various customs forms for clearance of goods. It is being used by most countries of COMESA with variations as in Mauritius itself. Common Statistical Rules These rules were adopted in 1996 and most countries are using them. Twelve countries have also signed service level agreements between Customs and Statistics to share data. Payment Issues The Clearing House helped in solving the problem of currency while payments are made. Payments could be made in the currency of the country where the goods are being exported. COMESA has also recommended that the PTA Bank avail credit finance for intra COMESA trade. A work programme for the integration of the Regional Insurance Industry had been adopted by the Council of Bureaux of Insurance companies as a first step towards a regional approach in trade in services. At the 12th meeting of the council of ministers that took place in November 2001, Zambia, the council was informed about a proposal for a cross-border payment and settlement system designed to enable users to make and receive payments in their home currencies, while minimizing the

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amount of convertible currency reserves required funding the payments. The system will have the features of the existing bilateral agreements between the Central Banks of Kenya, Tanzania and Uganda, but would operate multilaterally through a central Clearing House. In the COMESA, traditional shipping lines from Europe, Far East and America have been providing shipping services. However, since 1998, realignments, which have taken place, were still being consolidated. The consolidation of shipping lines led to a fall in freight rates charged on major routes such as into Europe and Far East. The Council observed that feedering was becoming the common feature in serving the sub-regional trade. This practice was not a healthy scenario for sub-regional shipping interests and ports. It is felt that it is necessary to facilitate both national and regional interests to invest in shipping in order to have a share in the world shipping business, which can be achieved through gradual participation of national and regional interests by slot chartering, and eventual progression into shipping. In this context, the decisions taken by the Council are as follows: a. The Secretariat in collaboration with member States establish an information database on

investment opportunities and regional networking of freight forwarders/cargo brokers who are potential liner operators;

b. Shipping divisions in governments, the association of freight forwarders and other related

stakeholders should create national forum to enable potential investors in shipping who require information on opportunities available for commencing shipping ventures;

c. Member States consider granting investment incentives to investors in shipping; and

d. Member States encourage existing shipping lines to explore joint ventures so as to create

larger operations based on a wider cargo base. It is regrettable that concerning the Trade Information and Dissemination Programme the Trade Information Network (TINET), which was run by the Secretariat no longer, exists.

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10. From COMESA FTA to Customs Union According to Article 45 of the COMESA Treaty, the COMESA customs Union should come into force on December 8, 2004. To achieve this goal, COMESA has made considerable progress by adopting a Common External Tariff structure with four tariff bands and rates of 0%, 5%, 15% and 30% for capital goods, raw materials, intermediate products and final consumer goods respectively; preparation of a Common Tariff Nomenclature (CTN) harmonised at the 7th and 8th digit levels; categorisation of goods into capital, raw materials, intermediate products and final consumer goods and a draft Common Customs Code. However, urgent action has to be taken with respect to the tariff structures of the Member States as some Member States have tariff rates that are higher than those adopted by the Common External Tariff (CET). Some Member States also have more tariff bands than the four band tariff structure of the COMESA. Therefore, it is imperative that some Member States reform their tariff structures by bringing down their Most Favoured Nations rates and the number of their tariff bands towards the CET targets in order to implement the Customs Union on December 8, 2004. Member States, having national tariff bindings that are lower than the COMESA CET rates, have to address their tariff bindings. Thus, at the thirteenth COMESA Council of Ministers, it was agreed that in order to avoid confusion, the various planned and existing CETs have to be harmonised by the regional economic groups in Eastern and Southern Africa. A detailed analysis of country positions including each Member State’s Most Favoured Nation Tariffs and tariff bindings and applied tariffs to the WTO is under preparation. The Council took the following decisions: (i) The FTA should be consolidated and expanded as a matter of priority; (ii) The various Customs Unions in the region should be harmonised; (iii) The Secretariat should review the CET rates adopted for the COMESA Customs Union

and come up with alternative proposals, if necessary taking into account the practice in Member States and industrial policy;

(iv) The Trade and Customs Committee should review the Roadmap to the Customs

Union following the completion of the analysis; (v) A steering Committee of the Trade and Customs Committee is formed to oversee all

the tasks related to the establishment of the Customs Union, which should be consistent with the WTO and propose appropriate recommendations.

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11. Multiple Membership and Overlapping Negotiations on Trade Members of COMESA are also members of other RIAs with planned FTAs at different stages of development and implementation, which share broadly similar objectives, using different and sometimes conflicting operational modalities or time phasing of trade liberalization program implementation schedules. In certain cases however, conflicting jurisdiction may be a serious impediment to the full development of an FTA. Thus members of SACU that are also members COMESA cannot implement their commitment under the COMESA FTA by introducing free trade for imports from other non-SACU members of COMESA. They are prevented from doing so because of the common external tariff of SACU, which applies to imports from all non-SACU members. Table 1 – Membership in RIAs COMESA SADC SACU IOR IGAD EAC OTHER Angola * * ECCAS Burundi * ECCAS +

CEPGL Comoros * * Djibouti * * D.R Congo * * ECCAS +

CEPGL Egypt * Eritrea * * Ethiopia * * Kenya * * * Madagascar * * Malawi * * Mauritius * * * Namibia * * * Rwanda * ECCAS +

CEPGL Seychelles * * * Sudan * Swaziland * * * Uganda * * Zambia * * Zimbabwe * * In other cases there is no contradiction. As all its members also belong to COMESA, IGAD for example has taken the very sensible step of adopting the trade liberalisation program of COMESA. Similarly for IOC which signed a memorandum of understanding with COMESA. The latter has the effect of dovetailing IOC’s tariff reductions with COMESA’s liberalisation program.

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Furthermore, some countries have bilateral agreements between themselves and another country which does not belong to the same FTA. Such a bilateral agreement exists for example between South Africa and Zimbabwe. An FTA exists between the EU and South Africa. Attention must also be paid to a proposed FTA between India and South Africa. Members of COMESA face two critical coming sets of negotiations: at the WTO and with the EU, while the regional FTAs are unfolding or still being negotiated, and setting up of the COMESA Customs Union planned. These overlap in time and coverage. This situation implies three major types of interaction: • the impact of combining them on the effective value added of each;

• the economic and administrative implications of trying to combine schemes;

• direct legal restrictions from one on using another.

At the practical level, an agreement with a single trading partner requires that rules of origin be imposed which affect trade with other partners and that arrangements be made, formal or informal, for consultation on the effects of the agreement on existing or new multilateral obligations. Economically, any reduction in MFN tariffs or non-tariff barriers reduces the benefit, the ‘effective preference’, of any special scheme. The conclusion is already known: countries whether belonging to COMESA, SADC or other FTA face a set of negotiating problems that are complex in time and space, with many possible variants in choice of trading partner, degree of liberalisation, and timing of liberalization. In Mauritius, both the public and private sector must carefully examine the evolving situation in the next eight years both to be able to capitalize on opportunities and to be able to have alternative trading strategies. SADC FTA The SADC Trade Protocol has already entered into force on 25 January 2000, following ratification by the required two-thirds majority of Member States. However, the technical and administrative structures are not in place for the real transactions to occur on the basis of the Protocol. These were expected to be completed in 1999 for implementation to commence on 1 January 2000. Therefore, in terms of implementation, one can distinguish two phases: the formal implementation date which is 1 September 2000, and some other date in the future when there is material and full-fledged implementation by all or the majority of the Member States. Effectively the future road map thus entails a schedule of work that needs to done to enable these Member States to implement the Protocol. There are two levels of implementation tasks to be undertaken: one at the national or domestic levels the other at the regional level, i.e. requiring intra-SADC and intergovernmental action. Despite remarkable achievements in the negotiations for tariff liberalization offers, some issues for the implementation of the SADC Protocol on Trade are still outstanding in specific areas of non-tariff barriers, textiles and clothing, sugar, and the rules of origin for wheat and wheat products and motor vehicles. Others concern the rules of origin for plastics, electrical and optical articles. In addition, some Member States requested for further improvement of offers in order to accommodate their export interests.

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Elimination of Non-Tariff Barriers to Trade (NTBs), continues to be a major area of concern to Member States as these NTBs are encountered on a daily basis by exporters. The various agencies attending to NTB's continue to negotiate for their elimination. EU-RSA FTA EU-South Africa Trade and Development Cooperation Agreement (TDCA) commonly known as the EU-SA Free Trade Agreements, was signed in 1999 and will lead to an eventual Free Trade Area (FTA) between both parties covering practically all goods within a period of 10-12 years. This agreement entered into force in January 2000. The FTA will covers about 90% of the trade between the parties, with the EU fully liberalising 95% of its imports from South Africa at the end of a transitional period of 10 years, while South Africa will fully liberalise 86% of its imports from the EU after a transitional period of 12 years. However, certain South African sectors that are perceived to be sensitive (motor vehicles, clothing, textiles, red meat, sugar, winter grains and dairy products) will continue to enjoy some tariff protection. A number of products being exported by the COMESA countries are included in the sensitive lists. As such they are fully or partially excluded from the FTA. This therefore reduces any possible threats to existing exports in these products. Furthermore a number of other existing COMESA exports are included in lists for which liberalisation will not be immediate. Research studies undertaken for the Regional Integration Research Network and presented at a workshop held from 3rd and 4th December 2001 at the COMESA Secretariat, Lusaka, indicate that overall therefore it can be concluded that the EU-SA FTA will not have any serious impact on the exports of COMESA countries to either SA or the EU. As such the policy makers should not particular worry about any possible trade diversion. Policy makers should rather look at how to take advantage of possible trade creation impacts resulting from the EU-SA FTA. The agreement appears to be resulting in an expansion of business and growth in the SA economy. As such there should be a resultant growth in demand generally within SA as the economy expands. There will also be specific growth in demand for inputs (raw materials and intermediate goods) in those sectors that are benefiting from the FTA through increased exports to the EU, particularly in the manufacturing sector. Under the rules of origin protocol of the TDCA, cumulation from ACP countries is allowed. AGOA The African Growth and Opportunity Act (AGOA) was signed into law by President Bill Clinton in May 2000. AGOA extends through September 30, 2008 the Generalized System of Preference (GSP) program for eligible sub-Saharan African countries that the United States has had in place since 1974. In particular, AGOA adds an additional 1,900 or so HTS lines to the current GSP list of approximately 4,600 products eligible for duty free entry into the United States. An important goal of AGOA is to promote efforts at sub-regional economic integration in Africa by allowing beneficiary countries duty-free access into the United States for textile and clothing products using inputs from throughout the AGOA region. In the specific case of AGOA-eligible COMESA and SADC countries, inputs to make textiles and clothing can potentially be sourced from within the region. Even countries like Zimbabwe that are currently AGOA-ineligible, can supply AGOA-eligible COMESA or SADC members with the fiber that is spun into yarn. In addition, until September 30, 2004, AGOA-ineligible countries like Zimbabwe can also be the source of the yarn and/or fabric that the lesser developed AGOA beneficiary countries use to make clothing for duty-free export to the United States. Furthermore, nothing prevents a non-AGOA eligible SADC country like Zimbabwe from being the source of yarn and fiber to make in chief weight cashmere or certain types of wool sweaters or to supply AGOA beneficiaries with yarn and fabric deemed to be in short supply in the United States.

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The rules of origin in practice in COMESA or SADC can by allowing freer movement of such inputs and garments, help on the one hand achieve necessary competitiveness for producers on the regional market so that they may better compete on the American market, and on the other build a regional supply chain for the sector. Ideally, different member states can focus on that part of the production chain where they enjoy the greatest comparative advantage. Overall the regional textile and apparel industry would become even more efficient and internationally competitive as a result of the new economies of scale that would be created. The COMESA FTA and its rules of origin indeed support such a strategy. This is less so with the SADC FTA, at least at the present stage of negotiations on textiles and clothing. The SACU block led by the R.S.A. appears reluctant to open up both its textile and apparel markets to free trade from the other countries negotiating the SADC Protocol on Trade. Cotonou EPA Negotiations The ACP-EU Partnership Agreement, which was signed in Cotonou in June 2000 (Cotonou Agreement), provides for the conclusion between the ACP and the EU of “new World Trade Organisation (WTO) compatible trading arrangements, removing progressively barriers to trade between them and enhancing cooperation in all areas relevant to trade” (Article 36(1)).In this regard, economic partnership agreements (EPAs) will be negotiated during the period starting from September 2002 until 31 December 2007.Pursuant to Article 37(5) of the Cotonou Agreement, negotiations of EPAs will be undertaken with ACP countries which consider themselves in a position to do so, at the level they consider appropriate and in accordance with the procedures agreed by the ACP Group, taking into account regional integration process within the ACP. As regards commitments during negotiations for EPAs, ACP Member States will keep in view what is taking place with respect to: (a) negotiations in the WTO which are expected to be concluded by 1 January 2005; (b) EU enlargement which is expected to take place in 2004; (c) the reform of the EU’s Common Agricultural Policy (CAP); (d) review of the EU GSP in 2004; (e) regional integration processes in various ACP regions/sub-regions which are expected in

some cases to result in the establishment of customs unions; and

(f) trade negotiations between some ACP countries and third parties, and between the EU and third parties

It has been agreed in the Cotonou Agreement that economic and trade cooperation shall be based on “a comprehensive approach which builds on the strengths and achievements of the previous ACP-EC Conventions” (Article 35(1)). The EU has also agreed that, on its side, “trade liberalisation shall build on the “acquis” and shall aim at improving current market access for the ACP countries through inter alias, a review of the rules of origin” (Article 37(7)). Therefore, irrespective of the outcome of the negotiations, with respect to trade relations with the EU, no ACP State should be worse off in the post-2007 period than under the current ACP-EU trade arrangements

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Article 35(2) of the Cotonou Agreement states that “Economic and trade cooperation shall build on regional integration initiatives of ACP States; bearing in mind that regional integration is a key instrument for the integration of ACP countries into the world economy”. Nearly all ACP States are currently involved in regional integration processes which are of varying degrees of intensity. If these processes are not to be stifled or undermined, they should have precedence over EPAs for any trade liberalisation commitment vis-à-vis the EU.ACP States must be allowed to first consolidate their own regional integration processes. Moreover, they do not have the capacity to liberalize in parallel and concurrently with the EU. EPAs should therefore support the ACP regional integration processes based on the principle of sequencing and not undermine them. EPA is supposed to ensure that the negotiations on rules of origin contribute to regional integration and to the preservation of preference margins. Recent discussions indicate that although the EU is accepting the principle of a negotiating on an all ACP basis, this is considered to be but a first phase, which will be followed as from September 2003 by negotiations on REPAs. The critical issue is about which regional identity will be agreed as party to REPAs. The past strong preference of EU for SADC has faded with the situation in Zimbabwe and the still unresolved DRC conflict. Recent thinking both on the EU and concerned ACP states appear to favour a joint COMESA-SADC region for an EU EPA.

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12. Economic & Political Assessment of COMESA Member States COMESA stretches over a geographically wide region, encompassing mainly the Southern and Eastern African sub region, with Egypt from the Northern and DRC from Central sub regions. As such, its membership has diverse political and economic realities. GNI per capita varies from US$ 3,750 (Mauritius 2000) to the very low US$ 170 (Eritrea 2000). Imports per Capita (as per Globalstat data) ranges from US$ 5,519 (Seychelles) to the extremely low US$ 12 (DRC). Table 2 – Imports per Capita in US$ (Globalstat 2001) An Bu Com DRC Dji Eg Eri Et Ken Mg Mal 241 18 92 12 955 244 130 19 97 43 41 Mru Nam Rwa Sey Sud Swa Ug Za Zw 1,933 890 33 5,519 33 840 46 107 114

Most of the countries are agricultural economies highly dependent on few commodities whose prices are highly volatile on the world market. Egypt, Kenya, Zimbabwe and Mauritius are the most industrialized. Politically, serious progress is being achieved. The region is in transition moving more towards democratic systems and a reduction of conflict areas. The Ethiopian – Eritrean conflict has stopped, peace negotiations are under way in Sudan, after 30 years civil war between the north and south region. Similarly, a cease fire and peace talks have been brokered by South Africa for the withdrawal of Rwanda from the DRC conflict. Zimbabwe has announced that it is withdrawing its troops after four years involvement in DRC. The death of Jonas Savimbi has opened a new peace era in Angola and talks between the ruling MPLA and UNITA is preparing for political settlement. On the downside however, Zimbabwe remains troubled with the land question and the land reform program through forceful eviction of white farmers. The country remains under sanctions of the World Bank and limited sanctions of the Commonwealth. It remains also non AGOA eligible. Famine has gripped large areas in Southern Africa affecting a number of countries such as Malawi, Zambia, Mozambique, Zimbabwe, Angola, Lesotho and Swaziland. After a decade of stagnation, real growth in Sub-Saharan Africa (SSA) accelerated to 4.5% per annum in 1995-98. In the COMESA region, GDP per Capita grew over the 1990 – 2000 period in nine countries, with Mauritius achieving the highest + 4.0%, Uganda 3.8% (others being Egypt, Eritrea, Ethiopia, Malawi, Namibia, Seychelles, Zimbabwe). In the other countries, GDP per Capita declined marginally by less than 1% in some such as Kenya, Madagascar, or Angola, but dramatically in others such as Burundi (-4.7%), or DRC (-8.2%). Serious progress is being achieved in terms of debt servicing in most COMESA countries, with debt service as percentage of exports of goods and services being notably reduced in 2000 from its 1990 level. Ethiopia for example has thus reduced its debt service level from 34.9 to 13.9, Uganda from 58.9 to 23.7.

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13. Potential of COMESA Region to Attract FDI FDI is not inherently virtuous – its inflow depends on the overall incentive and capability structure of the host country. FDI does not require always host countries to maintain good policies. In fact, 41% of average inflows to SSA countries in 1995-98 and 33% of the increase in FDI between 1995-98 went to four oil exporting countries namely Angola, the Congo Republic, Equatorial Guinea and Nigeria- which are rated by international rating agencies to have some of the worst policy and financial risk ratings in SSA. Besides South Africa, one can identify a group of 9 countries in SSA that have become attractive locations for FDI and that enjoy above average policy and risk ratings. • Three COMESA countries, Namibia, Uganda and Zambia attracted FDI on the basis of

economic and quantitative criteria. These are countries that during the period 1995-98 attracted FDI inflows above the region average, (calculated excluding South Africa and the four oil exporting countries), and that during 1995-98 performed better than the region average in at least three of these four criteria: i) the change in average inflows during the periods 1995-98 and 1987-90; ii) the ratio between FDI and GDP; iii) the ratio of FDI and gross domestic fixed investment and; iv) the ratio of FDI and total exports.

• Mauritius, Kenya, Malawi, Seychelles, Swaziland, Zambia and Zimbabwe (!) have best

performed looking at the CPIA rating, ICRG political risk, and the Institutional Investor ratings. Uganda has attracted larger than average FDI inflows but have lower than average policy and risk ratings. The case of Zimbabwe can be surprising to many. The reality however is that the returns from portfolio investment on the Zimbabwe Stock Exchange has been the best in Southern Africa in the heat of the land turmoil. At the beginning of 2002, Australian owned Aquarius Platinum invested US$ 38.8 million for a 50% stake in Zimasco Consolidated Enterprise which owns the Mimosa mines in Zimbabwe. A few countries - the U.K., France, the U.S., Japan, the Netherlands and Germany – continue to account for about 90% of total FDI flows although there have been some changes within periods and countries. Despite political and social instability, Africa has historically attracted FDI because of its immense natural resources. Besides oil, gold, diamonds and copper, Africa possesses more than half of the world’s cobalt, and manganese, one third of bauxite and more than 80% of world’s reserves of chromium and platinum.

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Table 3 – FDI Inflows to COMESA Countries 1987 – 1998

Period averages and changes on previous period, millions of US$

period averages changes Country 1987-1990 1991-

1994 1995-1998 1987-

1990 1991-1994

1995-1998

SS AFRICA 1455 1807 5583 385 352 3776 ANGOLA 29 395 570 -285 367 175 BURUNDI 1 1 2 0 -1 2 COMOROS 4 0 1 4 -3 0 CONGO, Democratic Rep. of

0 0 0 0 0 0

DJIBOUTI 0 2 3 0 2 1 ERITREA .. 0 26 .. .. 26 ETHIOPIA 0 0 0 0 0 0 KENYA 40 8 26 16 -32 19 MADAGASCAR 9 14 16 9 5 2 MALAWI 0 0 22 -1 0 22 MAURITIUS 29 -2 31 24 -32 33 NAMIBIA 7 85 127 7 78 42 RWANDA 15 4 3 1 -12 0 SEYCHELLES 21 7 45 10 -14 38 SUDAN 1 .. .. -1 .. .. SWAZILAND 51 38 19 41 -13 -18 UGANDA 0 3 116 0 3 113 ZAMBIA 134 10 160 103 -124 150 ZIMBABWE -18 44 85 -19 62 42 Source: IMF, World Bank, Staff estimates

Certain clear patterns can be identified about FDI inflows: Resource rich and policy poor countries continue to attract FDI ð FDI flows to manufacturing sector remain small. The stock of manufacturing FDI represented

only 18% of the total FDI stock in SSA for the U.S., 22% for France and 53% for Germany. ð Infrastructure is receiving the largest share. The overwhelming majority of these inflows (89%)

are concentrated in the telecom sector, with the rest in the power (6%) and in the transport (5%) sectors.

ð As to the type of transactions, 83% of infrastructure FDI during 1990-98 derived from

privatization, with less than 8% from new green-field investments. Smaller investment however is coming from certain Asian countries such as Malaysia, Taiwan and India. AGOA is also proving to be an attraction for investment from these countries.

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14. Mauritius as a Player in the Region Mauritius is already a player in the region. It has about 5% of intra-COMESA exports, growing investment in the region, but as yet little exports in services although this is not quantifiable for unavailability of data. Trade in goods Goods exported are of two categories: Goods produced in Mauritius and qualifying for the COMESA Certificate of Origin. This category brings the most benefits to Mauritius in economic and social terms. It also have an induced effect of both expanding production capacity for certain products and attracting investment into new lines of products. Goods exported through the Mauritius Freeport. Such goods are not qualified for the COMESA certificate of origin; hence the FTA has no relevance for their trading. No data is compiled at the point of delivery of the COMESA certificate of origin on the list of exporters requesting for such certificate, the details of goods exported and destination. Such data would allow for a proper evaluation of the extent to which goods produced in Mauritius are taking advantage of the FTA. Investment and Trade in Services Export of services from Mauritius onto the region is undocumented but from empirical evidence appears to be still very low, except for commercial presence of banks and a few other service providers in a few countries Investment in the region has two components; The first is Mauritian capital invested in the region. There has been a strong drive in this component in the last ten years, more particularly, but not exclusively on Madagascar. The second component concerns foreign investment channelled through the offshore business sector. This is already happening although not much documented given the confidential nature of the offshore sector. A few examples can be mentioned. Mauritius is the operational base of the software giant Oracle for certain regions on the continent. Similarly for the hardware supplier Hewlett Packard. The Australian investment in platinum mines in Zimbabwe was done through a Mauritius registered Zimasco Consolidated Enterprises.

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Strength & Weaknesses The strengths of Mauritius lie in: ð Its level of development and sophistication in human resource development, business culture,

business development ð Its high credibility with the countries of the region for which it is considered as a reference of

successful development. Furthermore Mauritius is not considered as a threat having any sub regional power ambition.

ð Its high international credibility as a stable, business friendly country. ð Mauritius already has the required business, legal and institutional framework and the

necessary business vehicles such as:

v The offshore business and financial sector,

v The Regional Headquarters Scheme,

v Double taxation agreements.

ð Mauritian business operators have a long trading tradition and better knowledge of best

sourcing than most operators in the region. ð A pool of educated, skilled and bilingual workforce ð The multicultural character of its population puts Mauritius in a unique situation to be a friendly

stepping stone for investors from all continents to do business on the region. It has a local entrepreneur and professional class capable of trading in goods and services and investing in the region on their own albeit only to a limited extent, but also capable of providing joint venture partnership to foreign investors targeting the region.

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Mauritius has not yet taken full advantage of the opportunities offered by the region, to do so it needs to address some weaknesses: ð Mauritius not being on the continent has the constraint of transport and related costs. ð Trade support instruments such as export credit and export guarantee schemes from financial

institutions are weak if not inexistent, whereas competitors from South Africa have strong support on this front.

ð Market information to business operators is seriously deficient. ð Various studies have shown that the majority of SMEs (about 80%) are not motivated to export,

although many have the capacity to do so. ð There is no institutional support to advise manufacturers about the necessary industrial

engineering to achieve the required level for Rules of Origin qualification. ð There is no institution providing the strategic linkage between market opportunities and new

production opportunities that could consolidate or expand the industrial base of Mauritius. ð Corporate culture in Mauritius creates limitations in the availability of human resource

competence required to support business expansion in the region. ð Corporate structure also creates serious limitations for building up the local alliances necessary

to capture the opportunities offered by the region.

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15. Trend in Mauritian ODI and Export of Services to the Region Mauritian capital has on its own already moved for investment in the region and for cross border exports of services. There is need for a systematic compilation of such investment to be undertaken, as no such data is presently available, apart from the most important investment projects which have been well advertised. The instrument put in place by Government to support ODI (Outward Direct Investment) is the Regional Development Certificate scheme, and it is left to the private sector to take advantage of what are being offered. Double-taxation treaties are also used as corporate vehicles for outward FDI. So far, only two certificates have been granted namely to SENA Development Ltd for the rehabilitation for the Maromeu sugar estate project and FTL Regional Investment Agency in Madagascar. From our own information and some research done, we are able to list out a number which are by no means exhaustive. The cases are not limited to COMESA countries. Table 4 - Outward investment by sectors

Host country Main sectors Comoros Tourism, telecommunication

Madagascar Apparel, agribusiness, retail

Mozambique Agribusiness, telecommunication

Seychelles Telecommunication, tourism

Zimbabwe Tourism

Namibia IT, Airport Management Services

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Cumulative investment abroad by Mauritius, 1990-2000 (US$ million) Source : Bank of Mauritius

1.5

5

5.4

6

7.3

18.9

32.1

40.5

0 10 20 30 40 50

South Africa

Mozambique

Seychelles

Madagascar

France

Comoros

India

Réunion

The export of services is not documented. The cases listed are mainly those involving commercial presence in the target territory. • The CIEL group (Consolidated Investments and Enterprises Ltd), through the Deep River

Beau Champ Ltd (DRBC Ltd), has acquired as part of a consortium, a majority stake in TPC Ltd (Tanzania) that has a crushing capacity of 110 tonnes of sugar cane per hour. The plant covers an area of 13,000 hectares and produces around 50,000 tonnes of sugar yearly. 4,000 Tanzanians were employed in 2001. Production is expected to increase to 75,000 tonnes per year as from 2005.

• The Food & Allied Industries Ltd (FAIL) has, since 1993, invested in Avitech SARL whose

activities include chicken farming around Antananarivo and animal feed production and sales. The Group is also a member of the consortium that has purchased and now operates the Compahnia de Matola SARL in Mozambique, a large industrial complex producing wheat, maize, flour, semolina and pasta.

• A new consortium, the Sena Group, comprising Mauritian investors, has taken over the

Marromeu sugar project in Mozambique where investment has exceeded Rs 100 million.

• The CIEL group, through Floreal Knitwear Ltd and Aquarelle Clothing Ltd, has a total of 12 production units in Madagascar, employing some 13,000 Malagasy workers.

• The level of investment made by CMT Ltd in Madagascar stood at Rs 145 million in 2001

with a T-shirt production unit employing some 1,300 workers.

• A total of sixteen Mauritian-owned companies are based in Madagascar with the investment made in each case varying between Rs 25m to Rs 250m. Production (for export to the US and EU) during a normal year preceding the turmoil stood as follows:- 21,3 million T-shirts, 20 million pullovers, 6.9 million trousers, 3 million shirts. Employment by Mauritian enterprises: 25,000.

• MCB - 25.5% of the Mauritius Commercial Bank’s profits in 2001 came from foreign

subsidiaries. The Banque Française Commerciale Océan Indien (BECOI), set up in Reunion

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Island in 1992, registered an operating profit of Rs 212.7 million (15.8%). While the main market of the BECOI is Réunion, retail banking operations are also conducted in Mayotte and Seychelles. BECOI also has a branch in Paris. The Union Commercial Bank (UCB) in Madagascar (also established in 1992) saw its profits falling to Rs 82.6 million or 6.1% of the total in FY2001 due to economic downturn. Uniâo Comercial de Bancos (Mozambique) recently set up in Mozambique picked up momentum after completing its first full year of operation. Profits for the FY2001 amounted to Rs 46.3 million or 3.4% of the total.

• SCB - The overseas operations of the State Bank of Mauritius Group include branches in

Madagascar (Antananarivo) that provide services mainly to business banking customers. The performance of the Banque SBM Madagascar during that year was satisfactory with profit after tax increasing by 4% over the previous year, deposits by 43 % and total assets by 33%. The SBM Group also holds 20.1% of the SBM NEDCOR Holdings Ltd (SNH) that holds 57% of FINCOM, a bank incorporated in Malawi and 50% of BNO-Nedbank (Mozambique) SARL.

• IBL set up the first destination management company in the Islamic Republic of Comoros,

the Tourism Services Comoros (TSC) in 1998. Travel Services Seychelles (TSS) was established over 25 years ago and has offices on the islands of Mahé, Praslin and La Digue. In 1995, TSS acquired 40% shares in Desroches Island Resort in which it holds the management contract. In 1994, IBL, in partnership with Rainbow Tourism Group of Zimbabwe, acquired Tourism Services Zimbabwe which now has offices in Harare, Victoria Falls, Kariba and Hwange. IBL also holds 40% of the shareholding of Touch the Wild, a 140 sq km private wildlife reserve and partly owns Zimbabwe-Mauritius Tours & Travel (Pvt) Ltd (Zimbabwe).

• Beachcomber has only invested in the Seychelles till now. A five star hotel is under

construction on the island of Sainte Anne at a cost of Rs 1 billion and is expected to open in November 2002.

• State Informatics Ltd has offices in Madagascar and Namibia and is planning to open a

new one in Botswana where it has recently developed software systems for the Electoral Commission and Income Tax departments. It has a network of partners in Zimbabwe, Zambia, Kenya and Ghana and its main activities are software development on ORACLE and systems support. Its total investment on the African continent is estimated to be Rs 10 million while losses in Madagascar now stand at Rs 1 million. SIL has, since last year, planned to close its office in the Malagasy capital.

• DCDM is also a Technology Solutions Provider with a strong portfolio of clients in the region. All activities combined (corporate finance, auditing, etc) contributed towards turnover of US$ 7 million on the continent in 2001. Recent problems in Madagascar caused losses amounting to Rs 5 – 6 million through unpaid contracts.

• IBL through its subsidiary, Servissair O.I has invested in and taken over the airport

management services at Eros airport in Windhoek, Namibia. It is about to take up the management of the main international airport of Hosea Kutako.

• A number of SMEs (Pascal Computers Ltd, Babic Co Ltd) have set up branches in

Tanzania, Zimbabwe and Madagascar for the assembly (simple screw-driving) and sale of hardware.

• In November 2000, the Harel Mallac Group set up Harel Mallac Madagascar SARL that

distributes computer equipment, garage tools and agro-industrial equipment. A second

35

subsidiary, Harel Mallac Electroménager SARL, was established in Antananarivo in January 2001 to market white and brown goods distributed by the mother company. The Board of Directors decided in March 2001 to inject an extra Rs 10 million into the Malagasy subsidiaries for the distribution of new product ranges in Madagascar.

• The IBL Group also has foreign subsidiaries that operate in a similar way to those of the

Harel Mallac Group. Two important ones are Electronique (Seychelles) Ltd and IBL Madagasikara S.A (Madagascar).

• Mauritius Telecom (MT) holds 50 per cent of the shares of Teleserve that is a subsidiary of Telecommunicaçoes De Moçambique. Teleserve markets and maintains the Nortel PABX System and operates the Audiotex services in Mozambique. Together with France Câbles and Radio and Invescom, MT (24.5 per cent of the shareholding) has formed Telsea (Madagascar) that holds 66 per cent of the shares of Société Malgache de Mobiles that have the GSM license in Madagascar. MT also has shareholdings in Southern Telecom Ltd (South Africa), Mountain Kingdom Communications and Africell (Burundi).

• In 1994, Emtel Ltd., a joint venture with Millicom International Cellular SA, invested in the

pioneer cellular company in Delhi (India), Bharti Cellular Ltd. Subsequently, Currimjee Jeewanjee & Co. Ltd. in collaboration with Bharti set up a cellular mobile, fixed line and international service operation in the Seychelles

• The Rogers Group has several subsidiaries in various services in the region namely in

Comores (ARIO), Madagascar (Cargo Express Madagascar SARL, Rogers International Distribution Services SARL, Transcontinent and ARIO located in Tamatave, Majunga and Nosy Be), Mayotte (ARIO), Mozambique (Mozambique Travel Services Limitada, ARIO and New Tintas 2000), Reunion Island (ARIO in Ste Marie and St Pierre) and South Africa (Savignac (Pty) Ltd). Towards the end of FY 2001, activities in Madagascar dropped while those in Mozambique expanded. The revenue and profit after tax from overseas subsidiaries amounted to respectively Rs1, 501 million and Rs8 million.

36

16. Trends in Trade between Mauritius and COMESA The COMESA FTA is in place only for just over one year, it is too early to have a proper evaluation of its impact on Mauritian trade with COMESA, although it is noted that the value of exports has increased by 37% since the operation of the FTA. It is also noted that the number of products exported to certain countries such as Burundi, Egypt, Namibia, Swaziland, Zambia have increased in 2001. Total exports from Mauritius to Comesa as a percentage of total Mauritian exports has been growing steadily from 4.44% in 1996 to 8.13% in 2001. Table 5 – Share of Exports to Comesa in Total Exports (Rs ‘000) 1996 Rs 1998 Rs 2000 Rs 2001 Rs

Total Exports to COMESA 1,435.90 2,133.24 2,520.60 3,453.00

Total Exports Mauritius 32,312.00 40,051.00 40,882.00 46,355.00

Percentage 4.44 533 6.17 7.45

In Rupee value terms Mauritian exports to the COMESA region has also grown by 18.16% from 1998 to 2000 and by 36.99% from 2000 to 2001. However in U.S Dollar terms, growth has been only by 7.89% and 23.77% for the respective periods. Mauritius is increasing its share of total intra-COMESA exports from 3.9% in 1995 to 4.8% in 1998. Unfortunately data for 2000 or 2001 is not available. Table 6

Total value of Mauritian exports (value in F.O.B) to COMESA, 1998,2000,2001 Value: Thousand Rupees Year 1998 2000 2001 Total exports 2,133,243 2,520,559 3,452,824 % growth in exports 18.16% 36.99% 1 Total Exports excluding Ships's stores & bunkers 2 Provisional Source: External Trade Statistics Year 1998, Ministry of Economic Development, Productivity and Regional Development, October 1999. :Digest of External Trade Statistics Year 1999, Ministry of Economic Development, Financial Services and Corporate Affairs, September 2000. :Digest of External Trade Statistics Year 2000, Ministry of Economic Development, Financial Services and Corporate Affairs, August 2001.

:CSO website. Date accessed: July 2002

37

Mauritius has achieved a double digit growth in exports between 2000 and 2001 to 12 of the Comesa countries. Growth in exports has been sustained over the periods 1998-2000 and 2000-2001 with five countries, namely Madagascar, Namibia, Seychelles, Swaziland and Zimbabwe. 95% of total Mauritian exports to COMESA region in 2000 is highly concentrated on five countries namely Madagascar, Zimbabwe, Seychelles, Kenya, and Malawi (1998 & 2000) or Comores (2001). With the exception of Seychelles, all these countries are those which have agreed to remove tariff barriers with their signing of the COMESA FTA. Of these five countries, Madagascar by itself represented 79% in 2000, and the four other countries 16%. The rest represented only between 4 to 5%. It should however be noted that about 58.27% of what is termed “Mauritian exports” to Madagascar is made up of textiles raw materials destined most likely to Mauritian enterprises operating in that country. Table 7 – Trend in Exports to Individual COMESA Countries

Exports1 (value in F.O.B) to COMESA states, 1998, 2000, 2001

Value: Thousand Rupees

Year

COMESA states 1998 2000 2 2001 2 % growth rate 1998 to 2000

% growth rate 2001 to 2000

Malagasy, Republic of 1,628,549 2,002,378 2,772,620 23% 38%

Zimbabwe 149,974 152,696 179,138 2% 17%

Kenya 132,150 86,618 168,032 -34% 94%

Seychelles 107,353 146,567 149,654 37% 2%

Comoros Islands 25,525 23,350 104,956 -9% 349%

Rwanda 12,108 42,612 28,818 252% -32%

Egypt 5,387 1,083 14,322 -80% 1222%

Uganda 17,716 21,301 10,508 20% -51%

Burundi 16,423 5,840 8,628 -64% 48%

Zambia 4,092 3,703 8,321 -10% 125%

Sudan 28 0 2,505 -100% 100%

Swaziland 84 345 2,129 311% 517%

Democratic Republic of Congo 0 0 758 0% 100%

Ethiopia 1,083 595 723 -45% 22%

Namibia 76 239 646 214% 170%

Djibouti 310 60 643 -81% 972%

Angola 24 0 342 -100% 100%

Malawi 32,361 33,172 81 3% -100%

Eritrea 0 0 0 0% 0%

Total 2,133,243 2,520,559 3,452,824 1 Total Exports excluding Ships's stores & bunkers 2 Provisional

Source: External Trade Statistics Year 1998, Ministry of Economic Development, Productivity and Regional Development, October 1999.

:Digest of External Trade Statistics Year 1999, Ministry of Economic Development, Financial Services and Corporate Affairs, September 2000.

:Digest of External Trade Statistics Year 2000, Ministry of Economic Development, Financial Services and Corporate Affairs, August 2001.

:CSO website. Date accessed: July 2002

38

Due to the fact that such data is not recorded, it is unfortunately not possible to determine how many exports is done under the COMESA Certificate of Origin, how much is produced in Mauritius although not qualified for the Certificate and how much is just exports of goods produced outside Mauritius. Further analysis of the trend in exports indicates the following picture: Exports to Madagascar increased in a sustained manner over the period under study. Exports to the next top four countries which constitute around 16% of exports to the Comesa region decreased by 0.47% over the period 1998-2000, but soared by 43.6% from 2000 to 2001. For the rest of the Comesa countries, exports went up by 21.5% over the first period but dipped down by 28.01% from 2000 to 2001, bringing the export level of 2001 lower than in 1998! Table 8 – Growth in Exports 1998-2000 2000-2001

Madagascar + 22.95% +38.47%

Next Top Four Export Destination - 0.47% + 43.6%

Rest of Comesa Countries + 21.5% - 28.01%

The overall balance of trade with the Comesa region has been increasingly favourable to Mauritius reaching Rs 1.5 billion in 2001 Table 9 – Balance of Trade between Mauritius and Comesa Region 1998 2000 2001

Rs Rs Rs

Exports 2,133,243 2,520,559 3,453,000

Imports 1,272,643 1,534,967 1,894,000

Balance of Trade 860,600 985,592 1,559,000

A closer examination of the reality reveals however some trends that calls for serious strategic thinking. ð Mauritius has been having a constant and growing balance of trade deficit with three countries,

namely Egypt, Swaziland and Namibia, in order of magnitude. ð Madagascar contributes most to the positive balance of trade in favour of Mauritius.

39

Table 10 – Balance of Trade with Individual Countries

Balance of Trade with COMESA States, 1998, 2000, 2001

Value: Thousand Rupees

COMESA states 1998 2000 2 2001 Malagasy, Republic of 881,087Malagasy, Republic of 1,120,278Malagasy, Republic of 1,796,677

Seychelles 76,590Seychelles 121,100Comoros Islands 104,901

Malawi 30,726Rwanda 42,612Kenya 79,447

Comoros Islands 20,324Comoros Islands 23,321Zimbabwe 65,100

Uganda 17,716Uganda 21,301Rwanda 28,818

Zimbabwe 17,605Kenya 18,336Uganda 10,496

Burundi 16,423Burundi 5,840Burundi 9,628

Rwanda 12,108Malawi 4,477Seychelles 8,573

Zambia 2,133Ethiopia 161Sudan 2,194

Ethiopia 1,081Djibouti 60D R Congo 756

Djibouti 273Angola 0Djibouti 639

Angola 24Eritrea 0Angola 342

Eritrea 0Zambia -1,285Ethiopia 177

Sudan -103Sudan -3,585Eritrea 0

Namibia -4,150D R Congo -4,887Namibia -7,871

D R Congo -7,043Namibia -6,899Malawi -30,672

Egypt -21,814Zimbabwe -34,822Zambia -55,392

Kenya -44,740Swaziland -155,794Swaziland -176,210

Swaziland -137,640Egypt -164,622Egypt -277,985

1 Total Exports excluding Ships's stores & bunkers

2 Provisional

Source: External Trade Statistics Year 1998, Ministry of Economic Development, Productivity and Regional Development, October 1999.

:Digest of External Trade Statistics Year 1999, Ministry of Economic Development, Financial Services and Corporate Affairs, September 2000. :Digest of External Trade Statistics Year 2000, Ministry of Economic Development, Financial Services and Corporate Affairs, August 2001.

When trade trend is examined country wise, the following picture emerges: Export Value of less than Rs 1.0 million: Angola, DRC, Djibouti, Eritrea, Ethiopia (except in 1998), and Namibia. DRC – exports is growing, but BOT deficit is increasing. Namibia – exports on the increase from 1998 to 2001, but BOT deficit also on the increase. Export Value between Rs 1.0 and Rs 25.0 million: Burundi, Egypt, Sudan, Swaziland, Uganda, and Zambia. Egypt - exports is on the increase but remains negligible while BOT deficit is the most important and is increasingly growing.

40

Swaziland is the country with which Mauritius has the second biggest BOT deficit. This deficit has been growing steadily, while exports are minimal. Uganda – exports after appearing promising has dipped down from Rs 21.3 million in 2000 to Rs 10.5 in 2001. Zambia – exports to Zambia doubled from Rs 4.1 million in 1998 to Rs 8.3 million in 2001, but BOT has soared suddenly to Rs 55.4 million in 2001. Export Value above Rs 25.0 million: Comores, Kenya, Malagasy Republic, Malawi, Rwanda, Seychelles, and Zimbabwe. Kenya – After a dip in 2000, Mauritian exports to Kenya has reached Rs 168.0 million in 2001, above the Rs 132.1 level of 1998 Malawi – most dramatic fall in Mauritian exports from Rs 33.2 million in 2000, to Rs 0.081 million in 2001, resulting in a positive BOT in 1998 and 2000 being turned negative by Rs 30.7 million in 2001. Products In terms of product range, Mauritius is now exporting a range of over 1,400 lines of products to COMESA countries. Table 10 shows the spread of the exported products on the range of countries. ð T-Shirts, singlets, and other vests of cotton (HS 61091000) are exported over 14 different

COMESA countries. ð Printed Books, brochures & leaflets (HS 49019990) to 11 countries ð Wheat Flour (HS 11010000) to 9 countries ð Fertilisers (HS31052000) to 7 countries ð Medicaments (HS 30049000) to 7 countries ð Denim (HS 52094200) to 6 countries ð Articles of Plastic (HS39269090) to 6 countries

41

Table 10 Selected Mauritian Exports to COMESSA Member States -2000/2001 in Millions of Rs

An

go

la

Bu

run

di

Co

mo

ros

DR

C

Djib

ou

ti

Eg

ypt

Eth

iop

ia

Ken

ya

Mad

agas

car

Mal

awi

Nam

ibia

Rw

and

a

Sey

chel

les

Su

dan

Sw

azila

nd

Ug

and

a

Zam

bia

Zim

bab

we Total

Wheat or Meslin Flour (HS 11010000) 7.732 12.724 7.697 131.165 29.399 0.876 16.800 3.645 3.232 213.269

Denim (HS 52094200) 6.142 19.087 307.845 0.005 0.033 97.731 430.844

Printed books, brochures & leaflets (HS 49019990) 0.013 0.972 58.878 3.171 0.013 6.769 0.086 0.015 2.915 0.235 5.856 78.923

T-Shirts, Singlets and other vests of cotton, knitted or crocheted (HS 61091000) 0.030 0.753 0.020 0.023 0.274 21.890 0.043 0.027 2.470 0.428 2.944 28.924

Rum and Tafia (HS22084000) 0.014 0.013 0.188 0.003 0.031 0.249

42

Fertilisers containing nitrogen phosphorus and potassium (HS 31052000) 0.064 21.377 39.776 25.026 0.373 5.726 92.342

Medicament nes not contg antibiotic/hormone/alkaloid/vitamin (HS 30049000) 0.210 4.763 0.046 0.697 0.029 0.203 6.104

Non alcoholic beverages (HS 22029000) 0.112 0.447 80.278 0.160 0.333 81.331

Articles of Plastics & of material of 3901 to 3914, excl 392610-3926901 (HS 39269090) 0.010 0.005 2.760 27.079 1.186 0.324 31.363

Wood marquetry, inlaid wood, casket, case for jewel, etc (HS 44209000) 0.006 0.001 0.208 0.010 0.109 0.288 0.012 0.008 0.657

Coaxial cable & other co-axial electric conductors (HS 85442000) 0.248 0.414 0.155 0.817

Napkins & Napkin liners for babies of paper (HS 48184010) 14.132 2.758 0.851 0.212 0.155 18.108

43

17. How Trade to COMESA has been Promoted The Government of Mauritius has in a systematic and sustainable manner over years invested massive human resources in terms of diplomatic and technical involvement in Comesa. This has given Mauritius a high profile and high credibility in the organisation. However the political effort at government level is not being accompanied by commensurate effort from all stakeholders, both government institutions and private sector having to support and facilitate the expansion of exports to the region Four categories of stakeholders are of particular importance: 1. Public Institutions – to manage procedural matters such as deliverance of Certificate of Origin. 2. Public Institutions and Private Sector Organisation – to provide the TSI functions as

“intermediaries” to provide access to sources of information on products and markets, business opportunities, trade regulations and procedures, and trade statistics.

3. Private Sector Operators – providers of transports and related services

Private Sector Operators – providers of financial transactions services 4. Manufacturers and traders. Procedural Matters The most important matter of procedure is the deliverance of the COMESA Certificate of Origin. This is done by the Ministry of Commerce which used to be under the Ministry of Trade and Industry and is now under Ministry of Commerce and Co-operatives. During the interviews carried out for the purpose of the study, it was evident that the department was not particularly proactive in providing guidance to exporters as to the requirements for evaluating whether one has the required level of local value added to be eligible for a COMESA Certificate of Origin. Officers explained that exporters are asked to come to the department where they are explained about how to apply for the Certificate. Exporters are requested to have recourse to an accountant to calculate and ascertain the value added. The report of the accountant is the basis for the delivery of the Certificate. Various exporters complain of undue delay in the delivery of the Certificate by the Ministry. It is also a matter of concern that the ministry does not compile data related to the application and delivery of the Certificates. Not even the list of exporters to whom such Certificates have been delivered has been compiled! Provision of Support by Public and Private Sector Institutions TSI functions as “infomediaries” is critical to provide access to sources of information on products and markets, business opportunities, trade regulations and procedures, and trade statistics.

44

MIDA has been present in a number of COMESA countries since 1995, namely: Kenya, Malawi, Tanzania (when it was still a member), Uganda, Zambia, Zimbabwe. MIDA is planning to re-open its offices in some COMESA and SADC countries. Economic problems in Kenya and Zimbabwe have prompted MIDA to suspend temporarily its presence in these countries. MIDA closed its representation in Malawi, Uganda and Zambia as a result of perceived lack of interest shown by Mauritian exporters. The Mauritius Freeport Authority has carried out a few market surveys. MIDA also indicated having participated in the following activities: Egypt: Participation in Cairo International Exhibition – March 2000

Zimbabwe: Participation in Zimbabwe International Book Fair – August 1999

Kenya, Tanzania and Uganda: Contact Promotion Programme for the Mauritian Printing and Pre-

Press sectors – September 1999

Zambia: Participation in COMESATEX – October 2000

Table11 - Market Surveys and Trade Promotion Office MEDIA/MIDA

Market Surveys

MIDA Presence MFA Market Surveys

Angola Burundi Comores DRC Djibouti Egypt Yes Eritrea Ethiopia Kenya Yes Yes but suspended for some time. Will now

open a Liaison Office Yes (1995) & 1997

Madagascar Yes Operating an office since 1998 Malawi Yes Yes but now closed Yes (1995) Namibia Yes Yes (1995 & 2001) Rwanda Will in 2002 Seychelles Sudan Swaziland Uganda Yes Yes but now closed Yes (1995 & 1997) Zambia Yes Yes but now closed Yes (1995, 1997 &

2001) Zimbabwe Yes Yes but suspended Yes (1995) There is almost no support from private sector organisations in this respect.

45

Private Sector Providers of Transport Services Providers of transport and related services (freight forwarders and shipping agents) appear to be well organised and capable of providing the required services to most destinations in the region. During the course of investigation for the purpose of the study, it was noted that this group was fast responsive in the provision of information about connections and rates to a range of destination. Exporters however complain about the high costs of freight. There is a serious weakness, which is acknowledged by the operators with regards to the management of on land transport services. The operators have failed to establish necessary partnerships with providers of similar services on the continent. Such partnership would give Mauritian operators the capacity to provide most reliable and competitive multimodal transport services to exporters. The establishment of a freight forwarding company in Mozambique by Rogers Group is a significant step in this context. Provision of Financial Transaction Services The banking sector has not given much attention to develop financial instruments and packages required to support Mauritian trade in the particular context of the region, such as the provision of export financing facilities at competitive rates. This has been a critical element developed in Austria and Hong Kong to promote trade between Soviet Union and the Western Europe and between China and other countries. Exporters have reported long delays in fund transfers resulting from the absence of correspondent banking relationship between Mauritian banks and banks in countries of the region. Local banks often do not have direct working relations with local banks in other countries. This requires financial transactions to be effected through local banks, then other banks with an international network, which implies that the supplier and the buyer have to pay bank charges to two or more banks. Besides, the extra time taken for transactions to clear through all the different banks penalise the smaller exporters. The absence of Export Guarantee Schemes is also an important missing instrument. On the other hand, SICOM has now set up an export insurance scheme. Manufacturers and Traders A number of manufacturers, but more particularly traders have been very proactive in promoting exports to the region; however the potential is far from having been maximized, even for products produced in Mauritius. Larger companies have invested considerable resources in market research, marketing and frequent trips to meet buyers and have reaped benefits accordingly. This is demonstrated in the case of chemical fertilizers, flour or printing services. In the case of smaller producers and traders, lack of organization and coordination of efforts coupled with a tendency to act on an individualistic basis have handicapped the capacity to invest necessary resources to make similar market inroads.

46

Problems Reported by Mauritian Exporters in their dealings with COMESA For Madagascar, Comores, Seychelles: Expensive charges in relation to double freight, port dues, forwarder fees, etc. for re-export from Freeport in Mauritius to the final destination in Madagascar, Comores, Seychelles. Comores: Freight charges are very expensive compared to charges from Mauritius to Durban. Besides, there is a big difference in the sea freights to Anjouan and Moroni as goods first arrive at the port in Moroni, from where they are transported to Anjouan in small pirogues. Malawi: For landlocked countries, like Malawi, goods reach Mozambique at Nacala. But, to reach their final destination in Malawi, there are delays due to poor infrastructure (railway lines), inefficiency, etc. Seychelles: Payments take time due to the unavailability of foreign exchange. Zimbabwe: Owing to the depreciation of their currency, imports have become very expensive for Zimbabweans. Delays in the delivery of goods, which arise due to the problem of transport of goods. Being a landlocked country, goods were passing through the Port of Beira previously before reaching their final destination in Zimbabwe. However, since the goods have now to go through the Port of Durban, there are more delays.

47

18. Opportunities for Trade in Goods Opportunities for expanding Mauritius export of goods to the region have been identified on the basis of Trade Potential Analysis already explained in the chapter on methodology. Three groups are identified: ð Products already exported to the region but which have a much more substantial market

potential either in the same country or on other countries still untapped. ð New products under the 35% Value Added Rules of Origin ð New products under the 25% Value Added Rules of Origin Tables are given for each country under the Country Report section indicating clearly the potential trade for a number of items both for the 35% and 25% value added groups. Tables 12, 13 and 14 summaries the potential identified, namely that there is: Selected Garments Items A market of US$ 3.1 million in the Indian Ocean region A market of US$ 13.7 million in the Burundi, Kenya, Rwanda and Uganda axis A market of US$ 4.3 million in the Malawi, Zambia and Zimbabwe axis Toilet Soap, Soap, and other Washing and Cleaning Preparations under HS 340 A market of US$ 7.4 in the Indian Ocean region A market of US$ 6.1 in the Burundi, Kenya, Rwanda and Uganda axis A market of US$ 15.2 in the Malawi, Zambia and Zimbabwe axis Selected Plastic Items A market of US$ 4.4 million in the Indian Ocean region A market of US$ 7.9 million in the Burundi, Kenya, Rwanda and Uganda axis A market of US$ 4.5 million in the Malawi, Zambia and Zimbabwe axis

48

Table 12

POTENTIAL MARKET - AVERAGE ANNUAL IMPORTS Based on Period 1995 to 1999

BASED ON THE UNSD COMTRADE DATABASE SYSTEM (VALUE IN DOLLARS THOUSANDS)

Code Description Com MAD SEY

610342 Mens/boys trousersand shorts, of cotton, knitted 25 25

610510 Mens/boys shirts, of cotton, knitted 41.2 41.2

610520 Mens/Boys shirts, of man-made fibres, knitted 0

620520 Mens/boys shirts, of cotton, not knitted 18.8 33.2 52

620530 Mens/boys shirts, of man-made fibres,not knitted 271.82 271.82

610910 T-shirts,singlets and other vests, of cotton, knitted 73 416.4 489.4

610990 T-shirts,singletsand other vests, of other textile materials, knitted 156 156

611010 Pullovers, cardigans&similar article of wool or fine animals hair,knitted 263 263

611020 Pullovers, cardigans and similar articles of cotton , knitted 285.8 285.8

611030 Pullovers, cartigans and similar articles of man-made fibres, knitted 63 63

611212 Track suits, of synthetic fibres, knitted

611219 Tracksuits, of other textile materials, knitted

611241 Womens/girls swimwear, of synthetic fibres, knitted

621112 Womens/girls swimwear, of textile materials, not knitted

133 1514.22 1647.22

420212 Trunks, suit-cases&sim container w/outer surface of plastics/textile

420219 Trunks,suitcases and similar containers, nes

420222 Handbags w/ outer surface of sheet of plastics of textile materials 119.2

119.2

340111 Toilet sopa&prep,shaped, papers&nonwovens impreg with soap toilet use 266 612.2 878.2

340119 Soap &orgn surf prep, shapness&nonwovens impreg w soap/prep,nes 404.8 680.2 1085

340220 Surface-active prep, washing &cleaning prep put up for retail sale 603.6 487.6 1091.2

340290 Surface-active preparations, washing and cleaning preparation, nes 305 328.8 633.8

340540 Scouring pastes and powders and other scouring preparations 25.6 25.6

1605 2108.8 3713.8

481820 Handkerchiefs, cleansing or facial tissues and towels of paper 48.2 76.2 124.4

481830 Tablecloths and serviettes, of paper 45 45

481840 Sanitary articles of paper, inlc sanit towels &napkin(diapers) babies 356.8 190.8 547.6

481890 household or hospital supplies of paper, nes 35.8 30.4 66.2

482360 Trays,dishes, plates, cups and the like of paper

440.8 342.4 783.2

49

Table 12 Continued

(VALUE IN DOLLARS THOUSANDS)

Code Description BUR KEN RWA UGA MAL ZAM ZIM

610342 Mens/boys trousersand shorts, of cotton, knitted 33.6 520 553.6

610510 Mens/boys shirts, of cotton, knitted 114 15.8 129.

8 112.

2 68.8 181

610520 Mens/Boys shirts, of man-made fibres, knitted 14.8 14.8

620520 Mens/boys shirts, of cotton, not knitted 1924.2 304.

6 2228

.8 110.

4 130.8 241.2

620530 Mens/boys shirts, of man-made fibres,not knitted 30.6 30.6 92.8 92.8

610910 T-shirts,singlets and other vests, of cotton, knitted 1408.8 474.

8 1883

.6 79.6 234.6 314.2

610990 T-shirts,singletsand other vests, of other textile materials, knitted 1763.6 1763

.6 524.4 524.4

611010 Pullovers, cardigans&similar article of wool or fine animals hair,knitted 181 36 217 23.4 23.4

611020 Pullovers, cardigans and similar articles of cotton , knitted 17.6 51.6 14.2 83.4 100 59.2 159.2

611030 Pullovers, cartigans and similar articles of man-made fibres, knitted 511.2 511.

2

611212 Track suits, of synthetic fibres, knitted 13 13

611219 Tracksuits, of other textile materials, knitted 21.2 21.2

611241 Womens/girls swimwear, of synthetic fibres, knitted 17.4 20.4 37.8

621112 Womens/girls swimwear, of textile materials, not knitted 14 14

17.6 5968.4 889 6875 491.

4 1672.2 2163.6

420212 Trunks, suit-cases&sim container w/outer surface of plastics/textile 2388.6

420219 Trunks,suitcases and similar containers, nes 26

420222 Handbags w/ outer surface of sheet of plastics of textile materials

2414.6

340111 Toilet sopa&prep,shaped, papers&nonwovens impreg with soap toilet use 31 1858.6 8.4 1898 61.8 664.2 726

340119 Soap &orgn surf prep, shapness&nonwovens impreg w soap/prep,nes 297.2 84.4

381.6 292 190.6 482.6

340220 Surface-active prep, washing &cleaning prep put up for retail sale 203.6 203.

6 64.2 270.4 334.6

340290 Surface-active preparations, washing and cleaning preparation, nes 25.2 645.6 29.8 700.

6 48.8 1377.6 1426.4

340540 Scouring pastes and powders and other scouring preparations

56.2 3005 122.

6 3183

.8 466.

8 2502.8 2969.6

50

481820 Handkerchiefs, cleansing or facial tissues and towels of paper 0 38.4 38.4

481830 Tablecloths and serviettes, of paper 50.2 50.2 0

481840 Sanitary articles of paper, inlc sanit towels &napkin(diapers) babies 775.6 775.

6 122.8 122.8

481890 household or hospital supplies of paper, nes 21.2 36.2 57.4 148

482360 Trays,dishes, plates, cups and the like of paper 102 102 36.4 47.8 84.2

21.2 964 985.

2 36.4 357 393.4

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Table 13 POTENTIAL MARKET - AVERAGE ANNUAL IMPORTS Based on Period 1995 to 1999 BASED ON THE UNSD COMTRADE DATABASE SYSTEM (VALUE IN DOLLARS THOUSANDS)

Product Classificatiion: Harmonised System

Code Description COM MAD SEY BUR KEN RWA UGA MAL ZAM ZIM 392490 Household & toilet articles nes, of plastics 202.8 193.6 256.2 885 129 71.2 253.6 508.8 392510 Reservoirs, tanks, vats etc of a capacity exceeding 300l,of plastics 61.6 169 92.2 15.8 33.6 392520 Doors, windows and their frames and thresholds for doors, of plastics 47.6 39 41.2 27 21.8 392530 Shutters, blinds (incl Venetian) & similar articles & parts of plastics 22.2 67 49.2 392590 Builders' ware nes, of plastics 193.8 157.8 125.6 103.6 15.4 49.4 99.6 48.6 99.4 392610 Office or school supplies, of plastics 163.2 467.4 54 55 1007.8 100 293.4 223 255.2 207.2 559.8 928 643.8 55 2152 115.4 554.6 420.8 557.4 920 841451 Fans: table,roof etc w a self-cont elec mtr of an utput not exceeding 125W 45.2 101 221.4 13.6 14.8 116.2 280.2 841510 Air conditioning machines window or wall types, self-contained 443.6 236 551.4 1809 22.6 113.8 480.6 551.4 1018.6 852311 Unrecorded magnetic tapes, of a width not exceeding 4mm 36.8 586.8 83.2 1273 235.2 70.2 106.8

852312 Unrecorded magnetic tapes, of a width not exceeding 4mm But not exceeding 6.5mm 22.8 109.2 36.2 105.6 852313 Unrecorded magnetic tapes, of a width exceeding 6.5mm 57 23.6 154.6 19 250.2 852320 Unrecorded magnetic discs 186 901831 Syringes, with or without needles 114 27.4 1181.8 22.4 453.8 114 329.6 734.4 940290 Medical, surgical, dental or veterinary furniture and parts nes 213.2 148 85.2 908 193.8 95 360.8 633.8 940370 Furniture, plastic, nes 22.8 22.8 165 191.4 79.4 101.8 185.6 950720 Fish-hooks, whether or not snelled 529.6 24.6

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Table 14 POTENTIAL IMPORTS AVERAGE ANNUAL PERIOD 1995 TO 1999 BASED ON THE UNSD COMTRADE DATABASE SYSTEM VALUE IN THOUSAND US DOLLARS

Description COM MAD SEY BUR KEN RWA UGA MAL ZAM ZIM Fittings, plastic 117 285.8 210.4 64.2 338.6 38.2 92.4 131.6 192.8 882.8 Baths, shower-baths and wash basins, of plastics 38.2 236.4 32 45.4 78.6 Bidets, lavatory pans, flushing cisterns & similar plastic sanitary ware 32 70 578.6 39 38 84.6 77.2 260.4 Boxes, cases, crates & similar articles of plastic 96.8 266.6 132 14.2 756.6 232 77.6 352.6 359 Sacks and bags (including cones) of polymers of ethylene 388.4 78.6 769.6 180.8 48.6 676 294.2 652.4 Tableware and kitchenware of plastics 71.2 207.4 198.6 802.8 71.4 126.4 82.2 261.6 752 Doors, windows and their frames and thresholds for doors, of plastics 47.6 39 41.2 27 21.8 Articles of plastics or of other materials of Nos 39.01 to 39.14 nes 336 1304.6 656.4 157 3816.8 748.2 992.4 826.6 1363.8 3956

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Goods under the 25% Value Added Criterion The goods under the 25% value added criterion are those considered of particular importance to the economic development of member states. The list of such goods has been designated by the Council and was last revised in June 1998. The list covers 19 HS codes. In examining the potential trade opportunities for Mauritius onto the COMESA region, the following short list of HS codes has been chosen on the basis that it can reasonably be considered that such goods could be produced in Mauritius. These are

Table

HS Code Product description 300339 Hormones nes,formulatd,not cntg antibiotics,in bulk,o/t contraceptives 300390 Medicaments nes, formulated, in bulk 300420 Antibiotics nes, in dosage 300490 Medicaments nes, in dosage 310210 Urea,wthr/nt in aqueous solution in packages weighg more than 10 kg 310221 Ammonium sulphate, in packages weighing more than 10 kg 310290 Mineral or chem fertilizers nitrogenous,nes,in pack weighing > 10 kg 310310 Superphosphates, in packages weighing more than 10 kg 310420 Potassium chloride, in packages weighing more than 10 kg 310430 Potassium sulphate, in packages weighing more than 10 kg 310520 Fertilizers cntg nitrogen,phosphorus&potassium in packs weighg </=10kg 310540 Monoammonium phosphate&mx thereof w diamonium phosphate,in pack</=10kg 380810 Insecticides, packaged for retail sale or formulated 380890 Pesticides includg rodenticides,nes,packagd for retail sale/formulatd 840219 Vapour generating boilers nes, including hybrid boilers 841810 Combined refrigerator-freezers, fitted with separate external doors 841829 Refrigerators, household type, nes 901831 Syringes, with or without needles 901890 Instruments and appliances used in medical or veterinary sciences It has been considered that under reasonable conditions, and considering the implications of production requirements, the goods under the remaining HS codes cannot be considered as potential items for production in Mauritius. Trade potential analysis for these products is given for each COMESA member state under the Country Report. The highest potential is for Syringes, Fertilisers, Medicaments, Insecticides and Refrigerators.

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19. Opportunities for Trade in Services The multilateral arrangements for liberalising trade in services are the General Agreement on Trade in Services (GATS). The 12th meeting of the Council of Ministers of COMESA held in November 2001 decided that the Secretariat should expedite the preparation of a framework strategy paper on trade in services. Besides, it also decided that trade in services is an item for consideration by the Trade and Customs Committee. It is understood that a committee has been set up at the Ministry of International Trade and Industry comprising of private sector stakeholders in various field of services, to discuss national strategy about trade in services. The committee has to date discussed about policies concerning the extent of liberalisation of such trade in Mauritius. The committee is also considering strategies and negotiating positions to be adopted by Mauritius in the appropriate SADC meetings. This report focuses on the opportunities and considers supply capacity issues as well as strategies to be devised by private sector stakeholders to export services to the region. All COMESA countries are also concerned by negotiations on trade in services under GATS, which comes in two parts: (a) The framework of rules, principles and concepts that underline obligations of members

regarding international trade in services. It contains 29 Articles and a number of Annexes; and

(b) The specific negotiated commitments listed in countries’ schedules for service sectors and

sub-sectors. Mauritius schedules of commitments to WTO comprise three sectors which are as follows: • Tourism, • Telecommunications and • Financial services. There are three major outcomes regarding commitments by COMESA countries in the service sector. 1. Substantial commitments in services were not made. 2. Nearly all COMESA countries have made commitments in tourism followed by business

services, communication, finance and transport. 3. The least developed members of the region have made the least commitments with the

developing members had more commitments.

56

The table 15 below gives details regarding commitments made by COMESA Member States in the services sector. Table 15 Countries 1

bus 2 com

3 cons

4 educ

5 envir

6 fin

7 hilt

8 tour

9 recr

10 trans

11 other

Mfn exem

Angola X X X X Burundi Djibouti X X X Kenya X X X X X Lesotho X X X X X X X X X Madagascar X Malawi X X X X X Mauritius X X X Mozambique X Namibia X X Rwanda X X X X Swaziland X X Uganda X Zambia X X X X Zimbabwe X X X Mauritius should explore the opportunities for export/supply of services in the COMESA region through the four modes: Mode 1 - Cross border supply of a service (which does not involve the cross border movement of supplier or consumer) such as supply of engineering design of a machine by a consultant in a country to a factory in another country, online data management, various teleservices, engineering and architectural drawings, consulting, Mode 2 - Consumption abroad (supply through the movement of consumers to the location of suppliers) such as training, duty free shopping, tourism, health, the repair if a ship sent by a ship owner of another country. Mode 3 - Commercial presence – entailing the presence of a supplier of one member state in the jurisdiction of another member state (through the establishment of a legal entity) such as supply of banking services through a branch or a subsidiary established in a country where such service is to be provided, similarly for IT solution providers, consulting, accounting and auditing Mode 4 - Supply of services through the presence of natural persons of a member state in the territory of another member state such as providing advice to a factory in another country by sending an expect to that country.

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Business Potential In the Services Sector What can Mauritius export to the region? What are the areas of strengths and weaknesses? Some exports of services in one or the other mode has already been materialized in the last recent years. Details of such cases by State Informatics, DCDM, the Mauritius Commercial Bank, the State Bank, Rogers and Mauritius Telecom in Namibia, Madagascar, Seychelles, Mozambique, Zambia and Zimbabwe have been given in the section on Mauritian Investment in the region. Information and Communications Technology is a service sector where Mauritius already has a strong hedge over most COMESA countries with the probable exception of Egypt. A strong competitor in the region, although not a COMESA member, is South Africa. With the forthcoming development coming in this sector in the immediate coming years, Mauritius will further strengthen its capability to be a lead service provider in ICT. This is one of the services which can be supplied in various modes IT solution providers can set up branches in some countries. They can also provide experts on specific projects in the region. There are not many well established and recognized strong IT solution providers in Mauritius. State Informatics is the most important one and it has already started making inroads into the region. DCDM is another. The other smaller emerging IT solution providers could look at building up strategic alliances with foreign companies, essentially from India. One such venture already set up is Secure Information Technology Solutions (Mauritius) Ltd. Online Data Management can be provided in Mode 1. This service where it is required is often outsourced to foreign companies in Europe. Demand in this area is likely to increase in the near future. Various teleservices can also be marketed. Demand for IT solutions services exists throughout the whole of the COMESA region with lesser opportunities in Egypt where there are strong local players. The Portuguese language is likely to be an important hurdle in the case of Angola. On the other hand, French is an important asset for markets such as the DRC and Madagascar where the competitors would be from France. Telecommunications Opportunities in telecommunications are in terms of provision of mobile telephone network service provision and in the privatization of existing fixed lines telephone institutions. Mauritius Telecom follows quite closely such opportunities over the whole of Sub Sahara African region. Immediate opportunities have emerged in Namibia, DRC, Comores, Ethiopia and Zimbabwe. In the last case, it is understood that Mauritius Telecom has actually been short listed as a potential partner in the privatization of the Zimbabwean fixed line service institution. Eritrea is also looking for strategic partnership to develop their fixed line services.

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Banking, Insurance and Leasing Services. Banking is a sector which is fast liberalizing in most COMESA countries. There is undoubtedly need for high quality professional and competitive banking services in most countries in spite of the very strong drive by nationals to set up local banks. However the two main Mauritian banks have up to now followed a strategy of setting up branches only in countries where major Mauritian enterprises have been set up, namely Madagascar and Mozambique. Opportunities for the opening of banking operations are particularly required in Comores where there is presently only one bank in operation. This is further warranted by the value of Mauritian exports to this country. Eritrea is another country where only one bank operates and the government is looking at having other players on the market. Insurance Services is another area where markets are opening up. The market has been either under monopolistic state controlled insurance companies offering very poor services or with one or two foreign ones acting in cartel or virtual monopoly. Madagascar offers interesting opportunities in this sector. In Comores and Eritrea there is only one insurance providing institutions and the respective governments are looking for new players. Zambia also offers interesting prospects given the very poor level of services offered by existing institutions. Leasing is almost non existant in most countries concerned. Economic liberalization as well as the emergence of private entrepreneurs is creating an unmet demand for such services. Namibia where there is a strong government drive for local investment in industrial development is a serious market to be considered. Similarly for Madagascar and Zambia. Accountancy Services Most countries have a fair number of accounting professionals. The major international accounting firms have also been established in most of these countries. However, some countries like Comores or Eritrea are dramatically under serviced. In certain countries such as Namibia, Malawi, Zimbabwe, there is serious resentment against the “old establishment” accounting firms (understand big five, white owned and managed), and express demand for new players to set up. In Namibia the shortage of accountants in the public sector itself is prompting government to look for players in the private sector to whom they could outsource such services. DCDM has already moved onto the regional market by setting up offices in Madagascar, Kenya or Zambia. There are however serious limitations to supply capacity from the Mauritian side. The main players are part of the major international firms and have contractual territorial limitations. Although there are numerous other accounting firms and accounting professionals in Mauritius, they are all limited by resources to expand beyond Mauritius. The most appropriate strategy in this

59

sector would be for two or more of these firms to build up partnership for such venture while retaining their individuality on the local market. Architectural Design, Engineering and other Professional Technical Services The opportunity to supply architectural design, civil engineering and project management services for projects in the region is certainly present and will be growing as more development take place in the countries concerned. Serious competition in this sector is from South Africa, Kenya and Zimbabwe. There is here however the same type of limitations as for accounting services. Furthermore, many projects are funded by multilateral organizations, and Mauritian firms have little if no international credentials. Consulting Services There is wide scope to supply consulting services to the region on a range of fields. Funding from various quarters for numerous projects is making this sector a fast growing one. There are a good number of local consultants in some of the countries of the region such as Kenya, Zimbabwe, or Uganda who have for long been operating as individuals. Recently however, a number of small firms having a critical mass and multidisciplinary capabilities are emerging. There is however a range of fields such as textiles and clothing, hotel management, management consulting, financial management, etc where Mauritius has the strong advantage of long experience Indeed a number of Mauritians have in their individual capacity been contracted out to provide consulting services in the region. In terms of consulting firms, DCDM is one which has already extended its services to the region. Similarly StraConsult operates an office in Zimbabwe. There is need to organize and promote existing supply capacity in this sector. Furthermore, government should strongly lobby institutions of the region such as the COMESA Secretariat, SADC Secretariat, African Development Bank and Economic Commission for Africa amongst others. Training As high quality specialized private training institutions are fast developing in Mauritius, such as in IT, this is one area where services could be supplied to the region in Mode 2. South Africa is the main provider of this service in the region, but demand far exceeds the capacity they can provide. Training is a service which offers very important potential for Mauritius and could become a sizeable growth sector in the immediate future. Given that: There is a serious shortage of skills in the region and demand for tertiary level training in the SADC region as established by a study HEDCO-Ireland (August 1999);

60

The post September 11 situation which is restricting visa availability for many to study in certain countries, Mauritius could by attracting reputable universities and other training institutions to establish themselves in the country, become a regional training center. Present and Projected Shortfalls in Some Key Occupational Areas

Occupational Area Estimated 1998

Shortfalls

Estimated shortfalls in

2003 with present Supply arrangements

Medical Doctors

1,300

1,650

Civil Engineer

4,000

6,200

Electrical Engineer

1,400

2,600

Electronic/ Telecommunication Engineer

1,400

2,800

Information Technologist

600

1,300

Professional Accountants

48,500

57,000

Managers (major companies)

2,000

3,000

Managers (SMEs)

12,000

15,000

HEDCO Ireland – Feasibility for a SADC Intra-Regional Skills Development Programme (August 1999) Monthly living expenses of a minimum of Rs 7.0 million per 1,000 students would be injected in the economy, apart from the cascading impact of foreign lecturers living expenses and need for accommodation, and employment creation for Mauritians. Services to the Regional Textiles and Clothing Industry Mauritius is undoubtedly a reference for the region with respect to the textiles and clothing industry. As the sector develops with the pull of AGOA, Mauritius is in a strong position to provide services to the sector as it develops in the region. A study commissioned by SADC entitled The SADC Textiles and Clothing Industries – Constraints & Opportunities, Myopia or Global Vision? carried out in 2001 identified areas where Mauritius has a competitive edge in that respect, namely: ð Provision of design and product development services

ð Provision of industrial engineering consulting, particularly in garment production

ð Provision of expert services for the setting up of quality systems

61

ð Training of middle management cadres

Tourism Mauritian companies have already invested in the provision of tourism services in the region. Examples about the IBL Group and Beachcomber have already been given under the relevant chapter. IBL Group which has been the most proactive has also recently: ð Established tour operations in Zambia ð Been awarded the management of ground handling services for Hosea Kutako International

airport in Windhoek, Namibia Tourists’ inflow from the region to Mauritius represents about 24.4% of total number of tourists’ arrivals. South Africa and Reunion constitute 84% of the regional tourism. Apart from those arriving from South Africa who come to Mauritius for leisure and are accommodated in large hotels, regional tourists support the smaller hotels. They spend less on accommodation but more on shopping. Table 16 - Tourism Arrivals by Country of Residence Jan – June 2001 and 2002

Jan – June 2001

Jan –June 2002

% Change

AFRICA 77,030 78,855 2.4

Comoros 424 376 -11.3

Kenya 637 796 25.0

Malagasy Rep. 3,130 3,564 13.9

Reunion 42,312 44,056 4.1

Seychelles 3,870 5,891 52.2

S/ Africa Rep. of 22,480 20,145 -10.4

Zimbabwe 1,647 1,895 15.1

Other African 2,530 2,132 -15.7

The development of duty free shopping facilities targeting the needs of the regional tourists would attract substantially more to visit Mauritius.

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The Strategic Issues The strategic issue for a strong development of trade in services onto the region, particularly in terms of the barriers to commercial presence of the service providers in the target countries is whether Mauritius should rely on the liberalisation of the regional market from their commitments under GATS when the doors will open wide for competition from much stronger players, or whether it should proactively push for the opening of the market at the regional level or even move for bilateral agreements with a number of countries. The second strategic consideration is the need for strong diplomatic support from government. In most of the sectors where Mauritius operators could be the service provider, the public sector of the target countries is the main client.

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20. Opportunities for Investment Opportunities for investment in the region are diverse. These opportunities are of two categories: Those of value and within the reach of the Mauritian investors Those which are of interest to foreign investors. With regards to foreign investment targeting the region, Mauritius can be promoted as a conduit, a platform for investment to be channeled to the region, through the already existing instruments such as the offshore business sector, the Regional Headquarters Scheme and the Double Taxation Avoidance Agreements with a number of countries. While it is the role of the Board of Investment to attract such investment through Mauritius, the extent to which it will market these opportunities is a matter of policy to be determined. Five potential areas can be considered: Mauritian ODI in the region. It is official government policy to encourage such investment and has provided incentives, albeit apparently insufficient, through the Regional Development Schemes to that effect. Consideration should however be given here to support such investment that either are necessary to ensure the sustainability of an existing sector in Mauritius or that will create a synergy for the development of new sectors. In the first category is the investment which has occurred for the relocation of some of the production of garments in Madagascar. Some other cases of similar nature are likely to occur in the near future whether towards Madagascar or some other country such as Botswana or Namibia which offer interesting operational environment and have now obtained LDC status under AGOA II In the same perspective, investment in the region to ensure the sustainability of the supply chain required satisfying the exigencies of the textiles and clothing sector for the AGOA market cannot be ignored. It is now well known that the main inputs such as yarn and fabrics for garment production must come from the AGOA eligible region. Mauritius as a non LDC country is already subjected to this exigency, but as from 2004, all countries including the LDCs will have to comply with the same. Production of yarn and fabrics is therefore a matter of priority for the whole region. Two schools of thoughts seem to be running on this question. One is to attract foreign investors to set up spinning and weaving mills in Mauritius not only to supply the already existing deficit of 40,000 tons of yarns required by the garment industry, but also to supply the region. This is certainly to be actively pursued. The second believe that there are limitations to this strategy and that there is need for investment in certain countries of the region to produce for the demand of yarn and fabrics. A few Mauritian enterprises are already exploring this perspective. Still on the development of the textiles and clothing sector in the region, the opportunity to attract investors from South East Asia for the production of other inputs should be explored.

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In the production or harvesting of agriculture produce of interests to Mauritius The Mauritius Chamber of Agriculture has in August 2001 published A New Strategic Orientation for the Agribusiness Sector, wherein it proposes to: ð make Mauritius a regional and international agro-processing hub, and ð to use the region as a production base. The Mauritius Freeport Authority has in its 3 Year Strategic Plan 2002 – 2005 proposed a strategy in the same perspective, namely to make of Mauritius a logistics and marketing hub for goods such as spices, vanilla, sea food and others sourced from the region. The strategy proposed by both the Mauritius Chamber of Agriculture and the Mauritius Freeport Authority imply: (a) Investment in the region for the production or harvesting of the products concerned

(b) Enterprise development in Mauritius capable of doing the necessary beneficiation of these

products and their marketing. This is a sector likely to attract both local and foreign investors.

65

21. Recommendations Although Mauritius has undeniably taken good advantage of the opportunities of the COMESA as an export market, there is need to strengthen the drive, maximise on the existing opportunities, develop the necessary strategy for export of services and develop capacity for linkage between the market opportunities for goods and the production base. A number of recommendations are here proposed to that effect: General Market Strategy: It is obvious that Mauritius will not pursue a strategy of trying to take up the market in all the other nineteen member states. The market analysis and past trends does not warrant that. The issue is therefore which markets to concentrate on. On the basis of the trade potential analysis and taking other factors into consideration, it is proposed that the strategy for trade in goods be articulated along: An East African axis covering Kenya, Burundi, Rwanda, Uganda. Here Kenya is a strong market for Mauritius already, and the others are promising. Tanzania, not a member of COMESA can be looked into in that same axis under the SADC Trade Protocol. A South Eastern axis covering Zimbabwe, Zambia, Malawi with Zimbabwe as the lead market. DRC should be studied more closely and potential for use of the Zimbabwe conduit to penetrate that market should be explored. Mozambique, not a member of COMESA, but where Mauritius has already made good business inroads should be considered in the same axis. The Indian Ocean axis with Madagascar, Comores and Seychelles are evident markets as proven by the value of Mauritius exports. Exports to this region must be consolidated and the opportunities for expansion taken advantage of to the maximum. . Egypt is a case on its own given the growing trade deficit for Mauritius and the impact Egyptian exports is having on local producers. Trade potential analysis has revealed some potential to bridge this gap, but closer market study should be undertaken, and diplomacy should strongly come in support given the importance of NTBs for access to this market. Need to undertake further market studies: On the basis of the opportunities revealed by the trade potential analysis, which however are only indicative, further on site specific market surveys need to be undertaken on markets not previously covered and on markets where such studies have been done but need to be updated or with focus on particular products. Setting up of trading “comptoirs” in strategic countries: Serious consideration should be given to the setting up of trading “comptoirs” in strategic positions on the continent. These trading “comptoirs” would be central marketing and distribution bases over the markets concerned. One such “comptoir” in Kenya could provide an excellent launching pad to the markets in the other countries of the axis. This could be a private initiative with the necessary support from the public sector. These trading “comptoirs” will greatly help to reduce marketing and other transaction costs to individual enterprises as well as increase visibility on the target markets. They would provide a serious inducement for SMEs to participate in exports.

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Setting up a Regional Trade Council Trade in goods and services with the region need to be monitored and promoted in a more coordinated manner. It is proposed that a Regional Trade Council (RTC) be set up involving private and public sector stakeholders. The RTC would not be a new institution substituting itself to the roles played by existing ones such as MIDA. It must rather be a strategy based forum. Data collection During the course of this study, it became evident that a number of critical data were not readily available, either because they are not compiled and processed or simply not collected. Strategy can only be properly defined if informed by data. Urgent steps must be taken to define which data should be compiled and designate institutions for so doing. Such data should concern, amongst others: ð Export of goods under the COMESA certificate of origin ð Export of services to the region ð Cross border Investment It is understood that financial assistance has been sought from RIFF (Regional Integration and Facilitation Forum) by Government (Ministry of Foreign Affairs & Regional Cooperation) to devise a system that will help in evaluating FDI inflow (on-shore, financial services, Freeport) into Mauritius. It is proposed that this programme should also cover outward FDI as Mauritius is taking a larger business role in the region. This should be known to foreign investors who wish to use Mauritius as a base to explore third markets in the region. Reporting mechanism for NTBs A reporting mechanism should be set in place for exporters to report promptly on NTBs they encounter in the course of their business. This would properly inform both government and public sector associations for their negotiations at either bilateral or regional level. Market Research for trade in services Market research should be undertaken for demand in the region on selected services and barriers to entry on the selected markets Developing supply capacity for trade in Services: a number of measures need to be taken, namely: ð To create awareness among the operators and professionals in this sector ð To alert the operators to the need to built alliances with strategic partners

67

Enhancing and expanding TSI functions as “infomediaries” is critical to provide access to sources of information on products and markets, business opportunities, trade regulations and procedures, and trade statistics. Support from financial institutions: banking institutions should be sensitised and urged to develop the necessary financial support facilities whether for export credit facilities or for correspondent banking relationships. The long awaited Export Credit Guarantee Scheme needs to be urgently materialised. Delivery of Certificate of Origin: serious consideration should be given to Customs assuming the responsibility of delivering of COMESA Certificate of Origin. On the one hand, Customs has developed strong understanding of the determination of Rules of Origin. On the other, they would be in a stronger position to argue and resolve problems related to the acceptance of the Certificate by their counterparts in the other countries. This department is already delivering EUR1, SADC and IOC Certificates of Origin. Customs Department would thus become an effective one stop shop for delivery of such certificates. Market Research and Marketing Market research is required both for goods for which trade potential have been identified, and on countries identified as target markets. Both market research and marketing efforts should be undertaken in a more coordinated manner by the institutions concerned. As a strong market promotion activity, an annual major regional trade fair should be organised in Mauritius. This trade fair would have as exhibitors both local producers and Freeport traders. The trade fair should be promoted to buyers from the region, and special package arranged with both airlines and hotels as a further incentive. Freight forwarding operators should be canvassed to develop alliances on the continent so that they are better equipped to offer competitive multi modal transport services, particularly on the onland side. It is understood that Air Mauritius is contemplating to start dedicated cargo planes to service the region. This is a welcome initiative. Motivating SMEs: Small and Medium enterprises having the capacity to export need to be strongly motivated and supported to do so. The setting up of trading comptoirs as proposed above will greatly help to induce them to export. SMEs are weakest with respect to their cash flow. Hence they are not in a position to export unless they are paid at sight by buyers. The support of financial institutions through the provision of trade financing will greatly enhance their capacity to export. Institutional support is required to advise manufacturers about the necessary industrial engineering to achieve the required level for Rules of Origin qualification. The University of Mauritius could contribute to this effort. Industrial engineering consultants should also be called to carry out flash evaluation of what the enterprises need to do to increase the value added level of their products to qualify under the RoO.

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Research and industrial engineering support is required to advise entrepreneurs on opportunities to translate market for products into production. This would help to expand the industrial capacity and base. A study in that spirit was carried out by the then MEDIA on the printing sector in early nineties and went a long way in helping this sector develop capacity which is presently supplying the market. Use of e-Commerce: The use of full e-commerce tools might be premature considering the low level of IT penetration and use in most of the markets concerned. However, the development of secondary level such as a portal acting as shop window for Mauritian products and producers is fully warranted. E-Commerce opportunity is most promising for the textiles and clothing sector. As supply information from the SADC region is scattered and not easily obtainable, a web site could be organised from Mauritius to provide international market with critical data on the textiles and clothing sector in the region, including producers and items that can be sourced from the region. This would place Mauritius as the preferred base for sourcing by international buyers and marketing by regional producers.

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APPENDIX A

Bibliography 1. Africa Recovery Online. 2002. http://www.wildnetafrica.co.za/africa/inc/news/africarecoveryonline.html accessed on 19.06.2002

2. COMESA. 1994. Treaty Establishing the Common Market for Eastern and Southern Africa.

3. COMESA. 2002. http://www.comesa.int/ accessed on 24.04.2002

4. Common Market for Eastern and Southern Africa. May 2001. Report of the Eleventh

Meeting of the COMESA Council of Ministers. Egypt.

5. Common Market for Eastern and Southern Africa. November 2001. Draft Report of the Twelfth Meeting of the Council of Ministers. Zambia.

6. Common Market for Eastern and Southern Africa. May 2002. Report of the Thirteenth

COMESA Council of Ministers. Ethiopia.

7. Regional Integration Facilitation Forum. April 2002. Report of the Second Regional Technical Working Group Meeting. Kingdom of Swaziland.

8. Common Market for Eastern and Southern Africa. 2001. COMESA Annual Report 2001. Egypt.

9. COMESA and the World Trade Organisation. Challenges and Opportunities in the new

WTO Round.

10. COMESA. April 2001. A guide to commonly asked questions about the Free Trade Area.

11. Imani Development (International) Ltd. September 1995. Market Surveys in Kenya, Tanzania, Malawi, Zambia & Zimbabwe.

12. Mauritius Freeport Authority. 1998. Market Survey in Tanzania.

13. Mauritius Freeport Authority. February, 2002. The Mauritius Freeport 3- Year Strategic

Plan 2002-2005.

14. Mauritius Chamber of Agriculture. August 2001. A New Strategic Orientation For The Agribusiness Sector.

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APPENDIX B List of Acronyms ACP African Caribean Pacific

AGOA African Growth and Opportunity Act

BOT Balance of Trade

CEPGL Economic Community of the Great Lakes Countries

CET Common External Tariff

COMESA Common Market for Eastern and Southern Africa

COMESA CD COMESA Customs Document

CTN Common Tariff Nomenclature

DRC Democratic Republic of Congo

EAC Eastern Africa Community

EC European Community

ECCAS Economic Community of Central African States

EPA Economic Partnership Agreement

EU European Union

FDI Foreign Direct Investment

FTA Free Trade Agreement

GATS General Agreement on Trade in Services

GDP Gross Domestic Product

GNI Gross National Income

GSP Generalised System of Preferences

HS Harmonised Systems

HTS Harmonised Tariff Schedule

ICT Information and Communications Technology

IGAD Intergovernmental Authority on Development

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IOR-ARC Indian Ocean Rim Association For Regional Cooperation

IT Information Technology

ITC International Trade Center

MCCI Mauritius Chamber of Commerce and Industry

MFN Most Favoured Nations

MIDA Mauritius Industrial Development Authority

MIN Minimum

MPLA Movimento Popular de Libertacao de Angola

NTBs Non Tariff Barriers

ODI Outward Direct Investment

PSI Pre-shipment Inspection

PTA Preferential Trade Agreement

R.S.A. Republic of South Africa

REPA Regional Economic Partnership Agreement

RIAs Regional Integration Agreements

RIFF Regional Integration and Facilitation Forum

SACU Southern African Customs Union

SADC Southern African Development Community

SICOM State Insurance Company of Mauritius Ltd

SITC Standard International Trade Classification

SMEs Small and Medium Entrepreneurs

SSA Sub Saharan Africa

TINET Trade Information Network

UNITA Uniao Nacional para a Independecia Total de Angola

UNSD United Nations Statistics Division

WCO World Customs Organisation

WTO World Trade Organisation

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APPENDIX C

TERMS OF REFERENCE FOR STUDY ON THE BUSINESS OPPORTUNITIES IN COMESA AFTER THE ESTABLISHMENT OF FTA AND CUSTOMS UNION Objectives The objectives of the study are to:

• Identify existing and new business opportunities in COMESA region with a view to increasing trade goods and services. The areas which Mauritius could target could be information and communication technology (ICT), banking, accountancy services, architectural design and related consultancy services and manufactured goods.

• Continue stimulating awareness of Mauritius operators on the rich trade and investment opportunities unfolding in the region taking into account the future SADC FTA, AGOA (where the entire Sub-Saharan region is considered as a single territory for the purpose of cumulative rules of origin) and the proposed new Economic Partnership Agreements under the Cotonou Agreement on which negotiations are scheduled to start in September 2002.

Scope of work/specific tasks

1. Make an assessment of the current economic and political situation in COMESA member states.

2. Analyse the trends in trade between Mauritius and COMESA prior to and after the

establishment of the FTA.

3. Review all the trade facilitation instruments and the status of their application.

4. Establish a list of exporters to COMESA and in particular the increasing role manufacturers from the Export Processing Zone, Pioneer Status Enterprises, the SMEs and Freeport operators could play.

5. Identify the new products and services that could be exported to COMESA countries and to

assess their potential in COMESA states.

6. Review the COMESA trade regimes especially rules of origin, cumulation of rules of origin and suggest how the region might benefit from the trade arrangements.

7. Identify the NTBs and the efforts being made to eliminate them.

8. Identify the problems encountered by Mauritian exporters in their dealings with COMESA

countries e.g. introduction of high internal taxes, and massive surge in imports from Egypt.

9. Examine the exportable products under the 25% value of origin criteria.

10. Examine role of the government agencies which have any direct dealings with export to COMESA (Customs, Ministry of Co-operatives and Commerce, MCCI)

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11. Establish intra-trade flow determinants and identify business opportunities in products such as textiles, beverages, rum, liquor, paper and paper products, leather and plastic products, furniture, etc.

12. Evaluate the economic potential of Mauritius, highlighting the strengths and weaknesses of

the country as a player in the regional markets.

13. Assess the potential of the COMESA region for attracting Foreign Direct Investment and specify the role that Mauritius could play in the process.

14. Analyse the extent of documentary control of the COMESA Certificate of Origin and the

appropriateness of a one-stop shop in all matters relating to the issue of certificates of origin.

15. Study the freight connections and rates.

16. From the above analysis establish an appropriate export market strategy for products

having export potential including the use of e-commerce to improve business opportunities.