Friday, 5 April 2013

Mauritius Economic Freedom

Mauritius’s economic freedom score is 76.9, making its economy the 8th freest in the 2013 Index. Its overall score is essentially the same as last year, with improvements in property rights and labor freedom counterbalanced by declines in freedom from corruption and monetary freedom. Mauritius is ranked 1st out of 46 countries in the Sub-Saharan African region.
Maintaining its status as one of the world’s 10 freest economies, Mauritius continues to be a global leader in economic freedom. All the pillars of economic freedom are solidly maintained. The small island economy benefits greatly from a sound and transparent legal framework that strongly upholds the rule of law. Budgetary reforms remain largely on course, keeping public debt and budget deficits under control despite expansionary fiscal policy since 2008.
With a stable business climate, Mauritius sustains a dynamic entrepreneurial environment. Barriers to free trade are low, and commercial operations are aided by efficient regulations that support open-market policies. Inflationary pressures are under control, and foreign investment is welcome.
Quick Facts
  • Population:
    • 1.3 million
  • GDP (PPP):
    • $19.3 billion
    • 4.1% growth
    • 4.5% 5-year compound annual growth
    • $14,954 per capita
  • Unemployment
    • 7.8%
  • Inflation (CPI):
    • 6.5%
  • FDI Inflow:
    • $400.4 million

    Open Market
    The trade-weighted average tariff rate is very low at 1.1 percent, and there are relatively few non-tariff barriers. The investment framework is open and efficient, facilitating the flow of new investment. The growing financial sector, dominated by private commercial banks, is competitive. The number of non-performing loans is declining, and banking continues to be well-capitalized and resilient despite ongoing global financial turbulence.
    Trade Freedom 87.9 
    Investment Freedom 90.0 
    Financial Freedom 70.0 


    Trade Freedom

    Trade freedom is a composite measure of the absence of tariff and non-tariff barriers that affect imports and exports of goods and services. The trade freedom score is based on two inputs:
    • The trade-weighted average tariff rate and
    • Non-tariff barriers (NTBs).
    Different imports entering a country can, and often do, face different tariffs. The weighted average tariff uses weights for each tariff based on the share of imports for each good. Weighted average tariffs are a purely quantitative measure and account for the basic calculation of the score using the following equation:
    Trade Freedomi = (((Tariffmax–Tariffi )/(Tariffmax–Tariffmin )) * 100) – NTBi
    where Trade Freedomi represents the trade freedom in country i; Tariffmax and Tariffmin represent the upper and lower bounds for tariff rates (%); and Tariffi represents the weighted average tariff rate (%) in country i. The minimum tariff is naturally zero percent, and the upper bound was set as 50 percent. An NTB penalty is then subtracted from the base score. The penalty of 5, 10, 15, or 20 points is assigned according to the following scale:
    • 20—NTBs are used extensively across many goods and services and/or act to effectively impede a significant amount of international trade.
    • 15—NTBs are widespread across many goods and services and/or act to impede a majority of potential international trade.
    • 10—NTBs are used to protect certain goods and services and impede some international trade.
    • 5—NTBs are uncommon, protecting few goods and services, and/or have very limited impact on international trade.
    • 0—NTBs are not used to limit international trade.
    We determine the extent of NTBs in a country’s trade policy regime using both qualitative and quantitative information. Restrictive rules that hinder trade vary widely, and their overlapping and shifting nature makes their complexity difficult to gauge. The categories of NTBs considered in our penalty include:
    • Quantity restrictions—import quotas; export limitations; voluntary export restraints; import–export embargoes and bans; countertrade, etc.
    • Price restrictions—antidumping duties; countervailing duties; border tax adjustments; variable levies/tariff rate quotas.
    • Regulatory restrictions—licensing; domestic content and mixing requirements; sanitary and phytosanitary standards (SPSs); safety and industrial standards regulations; packaging, labeling, and trademark regulations; advertising and media regulations.
    • Investment restrictions—exchange and other financial controls.
    • Customs restrictions—advance deposit requirements; customs valuation procedures; customs classification procedures; customs clearance procedures.
    • Direct government intervention—subsidies and other aid; government industrial policy and regional development measures; government-financed research and other technology policies; national taxes and social insurance; competition policies; immigration policies; government procurement policies; state trading, government monopolies, and exclusive franchises.
    As an example, Botswana received a trade freedom score of 79.7. By itself, Botswana’s weighted average tariff of 5.2 percent would have yielded a score of 89.7, but the existence of NTBs in Botswana reduced the score by 10 points.
    Gathering tariff statistics to make a consistent cross-country comparison is a challenging task. Unlike data on inflation, for instance, countries do not report their weighted average tariff rate or simple average tariff rate every year; in some cases, the most recent year for which a country reported its tariff data could be as far back as 2002. To preserve consistency in grading the trade policy component, the Index uses the most recently reported weighted average tariff rate for a country from our primary source. If another reliable source reports more updated information on the country’s tariff rate, this fact is noted, and the grading of this component may be reviewed if there is strong evidence that the most recently reported weighted average tariff rate is outdated.
    The World Bank publishes the most comprehensive and consistent information on weighted average applied tariff rates. When the weighted average applied tariff rate is not available, the Index uses the country’s average applied tariff rate; and when the country’s average applied tariff rate is not available, the weighted average or the simple average of most favored nation (MFN) tariff rates is used.1 In the very few cases where data on duties and customs revenues are not available, data on international trade taxes or an estimated effective tariff rate are used instead. In all cases, an effort is made to clarify the type of data used and the different sources for those data in the corresponding write-up for the trade policy component.

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