In a communiqué dated 27th May, the Prime Minister’s Office (PMO) in Mauritius has set out latest developments in the Mauritius-India relationship in the wake of the Prime Minister’s recent visit to India on the occasion of the swearing-in ceremony of new Prime Minister of India, Mr Narendra Modi.
The main point coming out from the Communiqué is that, following the conversation the two leaders had on the occasion, the heretofore decades-long partnership between the two countries will be re-launched and consolidated to fit in with emerging expectations in India.
It is apt that there has been a high level meeting to deal with inter-country matters which were calling for serious attention. One can only hope that, after a prolonged period of uncertainty concerning one of the principal links between the two countries, notably the use of their Double Tax Avoidance Agreement (DTA), matters will be sorted out to bring up the vaster potential for mutual cooperation between the two countries which share a number of affinities and can develop a common vision on several regional and global issues.
Mr Modi comes with a reputation for understanding business and investment better than many of his peers as he has demonstrated lately as Gujarat’s Chief Minister. He will understand how destructive of business are situations when businessmen and women are clueless or have dire forebodings about future policy orientations of any one country.
Accordingly, the decision taken, as stated in the Communiqué from the PMO, to set up dedicated cells in the offices of both the Indian and Mauritian PMOs to systematically monitor financial flows between the two countries may hopefully prove useful in removing counter-productive bureaucratic hurdles in the flow of investments.
At this stage, it is not clear whether each and every investment decision will be vetted through this process or only exceptional cases calling for special attention, it being given that a contemplated investment by a single company may be undertaken sequentially over a fairly long stretch of time as the project develops. In other words, it is assumed that this arrangement will have over-riding influence towards expeditious decision-making in lieu of the piecemeal cluttering up of decisions that might have been expected otherwise, acting as an advance ruling on the propriety of the contemplated investment. For this to happen, it suffices that those responsible for the respective cells in the two countries are suitably empowered to deal with financial regulatory, tax and legal dimensions in a one-stop-shop at the respective PMOs.
The Communiqué goes on to state that Mauritius has decided to furnish automatically to India all the data pertaining to companies wanting to carry on investment in India, thus overtaking the past practice of doing so only when explicitly requested to provide such information. The hope is that this transparent approach would contribute to India advantageously employing the services of Mauritius’ financial sector to channel further investments into Indian infrastructure build-up.
Normally, investors, while remaining open to submitting themselves to establish the bona fide of their intended investments in any country, would not like this information to be publicly advertised. It will be necessary to ascertain that the data that would be so provided are employed solely for proving that the investment being undertaken is in good faith and does not involve the use of tainted money and that they are being handed over for no other purpose than establishing the bona fide.
Our Management Companies have been undertaking this kind of due diligence on investors for a long time now before engaging in business with counter parties channelling investments into India or any other country. And the financial regulators have kept adding on details of various many things local financial service providers should scrutinize to pass the “fit and proper” tests. Investor confidence regarding sensitive aspects of the information furnished will need to be safeguarded while conveying a higher degree of assurance to the Indian authorities that unlawfully acquired money is not being filtered back into India. In any case, for Mauritius to survive as an international service provider, it has to go as far as other countries providing similar services can go and no further. Should it be overzealous, it would risk the crumbling of an important sector of activity. We have to tread carefully.
It is important to observe that extensive preoccupation with the provision of financial services from Mauritius has introduced undesirable factors like uncertainty and risk of retrospective action by Indian tax authorities. The negativity that has been sparked by such preoccupation has acted to thwart a bigger potential partnership between the two countries in several domains at the regional level at least. Action should therefore be taken to sort out issues remaining in suspense to the satisfaction of both sides and to balance the equation regarding the DTA once and for all at the highest level. Once this is dealt with, Mauritius can be treated by India as a reliable friend working together with it for the advancement of both countries.
India has a technology advantage over many regional countries. It has every reason to use its comparative advantages to become one of the best performing countries of the world. International partnering is essential for India to employ itself to its full potential in a bigger reach-out of its global role. Mauritius could play its own part in this quest, apart from the association it already has with India since decades in the provision of international financial services. The idea is to hold hands together into this new adventure and cease looking at each other with unproductive mistrust. This may be part of the global mission of India at a time the management of its destiny as a nation is changing hands.
* Published in print edition on 30 May 2014