Sale and Lease of Land to Generate National Income

National Sovereignty and Development

Was the Mauritian government desperate to finalize the agreement before Parliament’s dissolution, and hence agreed to the terms imposed by the UK?

By Prakash Neerohoo

Everybody was taken by surprise last week with the announcement, on the eve of the dissolution of Parliament, of a deal (political agreement) between the UK and Mauritius regarding the transfer of sovereignty over the Chagos archipelago from the occupier to its rightful owner. Some were pleasantly surprised as they saw in the deal a long-awaited recognition of Mauritian sovereignty over the archipelago by the British occupier. Others were unpleasantly surprised by the surrender of our “sovereign rights” over one island in the archipelago (Diego Garcia, which has hosted an American military base since 1967.

The two countries still need to negotiate a bilateral treaty to formalize the transfer of sovereignty to Mauritius. However, the deal has already become a topic of significant controversy in both Mauritius and the UK. In Mauritius, opposition parties (both parliamentary and extra-parliamentary) have denounced it as a “sell-out” of territory to a foreign power that has been occupying the Chagos illegally since independence in 1968. In the UK, prominent right-wing politicians (including former Conservative Prime Minister Boris Johnson and the leader of the UK Independence Party, Nigel Farage) have come out against the proposed transfer of sovereignty over the Chagos, which they still consider as British Indian Ocean Territory (BIOT).

It was the former Conservative government (led by Rishi Sunak), though that started negotiations for the transfer of sovereignty following the International Court of Justice (ICJ) advisory opinion of 2019, which affirmed Mauritian sovereignty over the Chagos archipelago. Whether those negotiations would have continued under a new Conservative government after the July 4th elections in the UK is doubtful, considering that some Conservative Party members, such as former Foreign Minister David Cameron, questioned the validity of the ICJ’s opinion.

The new Labour government under Keir Starmer resumed negotiations with Mauritius to finalize a political agreement on October 4th, just before the writ of elections was issued by the president of the Republic. The timing was indeed curious, if not intriguing, as British Foreign Secretary David Lammy admitted that the deal had to be announced before the elections in Mauritius. Why didn’t the UK wait until after the elections on November 10th to negotiate the deal with a new government in Mauritius? Was the Mauritian government desperate to finalize the agreement before Parliament’s dissolution, and hence agreed to the terms imposed by the UK? These are legitimate questions.

Multi-dimensional issue

The transfer of sovereignty over the Chagos is a complex matter with several dimensions: legal, geopolitical, and economic. Legally, international law experts may have differing views on whether a transfer of sovereignty followed by a leaseback of Diego Garcia Island to the UK for 99 years (renewable upon the exercise of a right of occupation) constitutes full sovereignty or limited sovereignty to all intents and purposes. Under the deal, Mauritius will delegate its “sovereign rights” over Diego Garcia to the UK, which will exercise the rights and authorities of Mauritius regarding the use of the island, as stated in the political agreement. Delegation of rights and authority implies that the British occupier will have full authority to use the island as it deems fit (military purposes or otherwise).

Under a normal lease agreement, legal ownership of the island would remain with the lessor (owner) while possession was transferred to the lessee (occupier). If that were the case, the political agreement would have mentioned transfer of possession (or occupancy) instead of transfer of “sovereign rights.” With the ability to exercise sovereign rights over Diego Garcia, the UK has obtained a major concession from the Mauritian government of Mauritius, that is the right to occupy the island for two consecutive leases of 99 years each (the first lease to be automatically renewed at the UK’s discretion).

Currently, Diego Garcia is leased to the US under a 20-year lease from 2016, following a first lease of 50 years that began in 1967. The UK now has de facto control over Diego Garcia. However, by exercising sovereign rights over the island under the bilateral treaty, the UK will have both “de facto control” and “de jure control” over the territory, akin to a legitimate owner with full rights. Under a typical lease agreement, the UK would be a lessee required to return the property at the expiry of the lease of 99 years or a lessee-owner who acquires ownership at the expiry of the lease under a “lease-to-own” arrangement (assuming all annual lease payments are made on time). The transfer of sovereign rights sounds like a colourable device to bypass the stipulations of a standard lease.

Geopolitical implications

The deal has significant geopolitical implications for Mauritius and the entire Indian Ocean. Mauritius will lease Diego Garcia to the UK, which will sublease it to the US to host a military base. By doing so, Mauritius will renounce its traditional non-alignment policy and firmly align itself with the Western sphere of influence amid a new Cold War between the East (Russia and China) and the West on the heels of the Ukraine war that has mobilized all western countries against Russia. Both the UK and the US view Diego Garcia as a vital asset for Western defence purposes to counter Chinese influence in the Indo-Pacific region.

The US has previously utilized the base in Diego Garcia; in March 2003, it flew B-52 bombers from that location to attack Iraq, as documented by Philip Sands in his book “The Last Colony.” If tomorrow B-52 bombers were to launch strikes from Diego Garcia against Iran or Yemen, in the context of the Israel-Palestine war, would Mauritius bear any liability for such attacks as the lawful owner of Diego Garcia? Or could Mauritius absolve itself by arguing that it has delegated its sovereign rights over Diego Garcia to the UK, thus having no control over the island’s use? When Iraq was attacked, Diego Garcia was part of the BIOT, and Mauritius had no liability for its use. Now, it will be part of the recognized territory of Mauritius although it will be leased to the UK.

Economic aspect

More fundamentally, the surrender of sovereign rights over Diego Garcia through a 99-year lease has an economic dimension. Many coastal states (e.g., Djibouti) that have no sustainable development models are leasing their land to foreign powers for military purposes to generate lease income, which constitutes a significant portion of their national income. This is a model that Mauritius is poised to adopt with the lease of Diego Garcia for an “indexed annual payment” from the UK, as mentioned in the deal. It is worth noting that the political agreement does not specify “lease payment,” as such, which implies rights and obligations for both parties in terms of ownership and possession. How will the annual payment be calculated? Will it be an arbitrarily imposed rate by the UK or a rate negotiated by both parties, considering what is received by other countries receiving lease income from comparable property?

Most likely Mauritius would receive at least $2 billion (Rs 90 billion) annually from the lease. This would provide a lifeline for the country’s balance of payments, at a time when fiscal deficits (6% of GDP) and public debt (85% of GDP) are growing at a higher pace. Any lease revenue would be credited to the Consolidated Revenue Fund of the government. As such, it would an easy income stream to fund public expenditure and overall consumption during a time of significant challenges, such as developing its production capacity for food and energy security and bolstering import-substitution capacity within a sustainable development model while protecting the environment.

For some time now, the country has been engaged in the sale of prime real estate to foreigners through IRS/PDS (Integrated Resort Scheme/Property Development Scheme) schemes to generate foreign currency income. Investment in real estate accounts for 65% of Foreign Direct Investment (FDI) in the country, according to data published by the Central Bank. Another instance where Mauritius has provided land to a foreign power is the island of Agalega, where India has constructed a naval facility for Indian Ocean surveillance. As the agreement between the two countries is secret, we do not know whether there is a land conveyance for zero payment (in exchange for loans and other assistance from India) or merely an agreement allowing India to utilize the island under Mauritian sovereignty indefinitely.

For many years, the country has operated at an annual trade deficit (imports exceeding exports), which earnings from traditional sectors like exports and tourism were not able to cover. Our economic growth model, based on high consumption, fuels ever-increasing imports. The overall balance of payments deficit has been offset by deposits from foreign entities operating in the global business sector. As the economy appears to have hit a plateau with its traditional industries, lease income from Diego Garcia will undoubtedly supplement existing revenue generators for the country (exports and tourism). Ultimately, selling and leasing real estate to foreigners (individuals and states) for national income generation is not a sustainable economic strategy, as it provides an easy income stream that supports social policy but obviates the need to develop the economy on a more robust basis. In contrast, foreign countries (US, China, or India) that lease external land for military purposes have a solid economy based on production and innovation. They are almost self-sufficient in food and energy.

Mauritius Times ePaper Friday 11 October 2024