No To A Fire Sale

The citizenship and passport of Mauritius belongs to the people. It is an intrinsic right conveyed to citizens through our independence and our Constitution. The government cannot therefore tinker with the Constitution or the rules governing citizenship and the passport

The people and the country are up in arms at the widely decried 2018/19 government budget proposal of selling the Mauritian citizenship and the Mauritian passport to High Net Worth individuals (HNWI) for a price tag of US $ 1 million and $ 500,000 respectively to raise funds for the Mauritius Sovereign Fund. The Mauritius Sovereign Fund is to be used for ‘new capital projects and public debt repayments’. This is a desperate measure contrived by a government at a loss as to how to mobilize funds for capital projects and public debt repayments. The government must necessarily cut its coat according to its cloth at all times.

It is also a thoughtless proposal which has far reaching adverse socio-economic consequences. In the national interest it must be scuttled forthwith. This highly contested proposal is also a measure of the inability of the government and its cohort of advisors to come up with innovative alternative initiatives and strategies to bolster State revenues to assure sound budget management and the robust and sustained socio-economic development of the country. We know that billions of Rupees could be saved annually by containing waste in government administration and the rigorous management and implementation of government projects as well as through judicious decision making. This controversial proposal has already been aired by international news channels such as the BBC. It shows Mauritius in a bad light.

Limiting this contested proposal initially to 100 HNW individuals is aimed at reassuring the people. However, a growing clamour from the multitude is questioning the very principle of a widely condemned fire sale of the Mauritian citizenship and passport to harness funds for the financially strapped capital budget and for public debt repayment. The people above all require transparency and accountability on both key elements of the national budget.

Last year government finances were propped by generous grants of some Rs 8.9 billion mainly from the government of India out of a total of Rs 12.7 billion to finance various capital projects including the Metro Express. Is the government resorting to this extreme measure because it does not have a similar financial leeway of handsome grants from friendly counties this year?

Desperate step

After selling 40% of the shares of Mauritius Telecom to France Telecom (now Orange S.A.) in 2000 to raise funds, deluxe villas and up market residential properties to foreigners since 2001 under the IRS, RES, PDS and the 2015 Smart City schemes, government is now reduced to taking the desperate step of selling the citizenship and passport of the country to High Net Worth individuals to mobilize funds for capital projects and public debt repayment.

According to a July 2017 survey, of the 195 countries in the world, only some 17 countries have taken the extreme step of offering residence permits or citizenship to super-rich foreigners. However in most cases, the price to pay is to invest in a business, real estate or government bonds. Only 9 countries which include 5 Caribbean island states actually offer their citizenship for sale. Of these, Cyprus and Malta had recourse to the extreme measure of selling their citizenship to bail their countries out of bankruptcy and dire financial straits.

The option of granting citizenship to foreign nationals is only exceptionally envisaged by a State when a foreign investor has successfully invested substantially in a new growth promoting and employment creating business. The government proposal therefore puts Mauritius in the singular situation of offering its citizenship and passport for sale to HNWIs who have neither invested substantially in the country nor have a successful track record of having substantially contributed to the socio economic development of the country.

In a context where growth is capped below 4% during the last 7 years, what the country is in dire need of is substantial and productive foreign direct investment, innovativeness, transfer of technology and expertise to create employment and wealth for the common good in high-tech skilled based higher value added segments of manufacturing and the diverse pillars of the services sector. Is the government putting the cart before the horse? In any case, what has been the real socio-economic contribution of all the HNWIs who have acquired hundreds of high-end villas in the various property schemes since 2001, to the economy?

The arguments put forward by the Economic Development Board (EDB) and the current daily blitzkrieg on national TV to justify this contested measure are effete and far from holding water. The lack of depth and superficiality of the government argumentation on such a serious matter to justify the widely decried measure was epitomised by a government Minister who showcasing his patent ignorance in the National Assembly this week blithely stated that there are not that many High Net Worth individuals in the world!

Not for sale

It must be clearly stated that the Mauritian citizenship and its passport are not for sale. Such a proposal is flawed in so many respects and basically does not have a leg to stand on. First and foremost the government has no mandate to do so, the more so as it seems that the State Law Office has not been consulted on such a key constitutional and legal issue.

The government proposal also does not take into consideration a host of adverse socio-economic repercussions of this highly controversial measure. If the HNWIs do not have any local economic activity they would not be paying taxes and yet be benefitting from all the privileges of a citizen such as health care, pension and presumably voting rights.

Selling citizenships to wealthy foreigners who would then be able to buy property and land will also put an additional pressure on land values which are already excessively high making it even more inaccessible to mainstream Mauritius and people from all walks of life. It will further widen inequalities. In a country where the bulk of the land is owned by a few, the Smart City scheme has already significantly hiked real estate prices.

Already indications from real estate specialists are that a small plot of say 100 toises of residential land costs between Rs 400,000-600,000 in rural areas and range between Rs 800,000 and 900,000 in urban areas. These land values already exclude large swathes of the young from acquiring land to build a house. This is therefore a fundamentally botched measure which must be urgently scrapped. Comments have also been made that this measure will soften the market demand for high-end residential properties under the various property development and smart city schemes.

The idea of trading the Mauritian citizenship and passport to High Net Worth individuals to obtain some Rs 5 billion to finance ‘new capital projects and public debt repayments’ is therefore nothing short of short sighted and daft. The citizenship and passport of a country have no price. It cannot be traded off like a commodity. Its status has been built by the nation through their collective responsible conduct as citizens, deft diplomacy and the positive image of the country as Mauritius is not a source of illegal immigrants.

Those of us who have been travelling since independence have witnessed the growing standing of the Mauritian passport with the immigration officers at airports across the world. The Mauritian passport today enables citizens to travel without a visa or have access through an entry visa on arrival to 145 countries and territories, ranking it 28th in the world in terms of travel freedom. Mauritius is among only 5 countries whose citizens can travel without a visa to the EU Schengen space, China and Russia.

Adverse consequences

A survey carried among the super rich found that one of their prime motivations in obtaining a second or even third passport is to take advantage of lower tax rates to better manage their tax liabilities. The number of countries the passport holder can travel to without a visa is also a very well sought after advantage. Despite the assurances of due diligence in the choice of HNWIs, past experience has shown that controversial investors such as Alvaro Sobrinho, Jean-Claude Bastos de Morais and others flagged in the Panama and Paradise Papers and in the context of the ongoing inquiry on the Libyan financing of the presidential campaign of Nicolas Sarkozy in 2007 have gained access and obtained permits as operators in our financial services sector.

The lure of both a low tax regime and visa free travel access to 145 countries including the Schengen space could attract questionable HNW individuals only bent on taking undue advantage of these important benefits. Mauritius cannot take the risk of being perceived as a ‘shady tax haven’. This could backfire and undermine our special status in the Schengen space, adversely affect the standing and repute of the country as a clean financial jurisdiction and also bring the country, as has been the case for citizenship selling counties Cyprus and Malta, under the scrutiny and strict oversight of the OECD to ensure best practices to combat financial malpractices.

No means No

The citizenship and passport of Mauritius belongs to the people. It is an intrinsic right conveyed to citizens through our independence and our Constitution. The government cannot therefore tinker with the Constitution or the rules governing citizenship and the passport. This is not a matter of debate. No means no. These are unalienable elements of our nationality. The people stand ready to robustly safeguard these rights.

Whoever sows the wind reaps the whirlwind. They do so at their own risk and peril.

 


* Published in print edition on 22 June 2018

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