Foreign Direct Investmentin the Financial Sector

ByBhisham Ramkelawon

MPCB

Foreign Direct Investmentin the Financial Sector

ByBhisham Ramkelawon

MPCB

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Road Map for Presentation

Objectives

Factors increasing FDI in Financial Sector

History of FDI in Mauritius

Positive Benefits for the country

Relationship between FDI and Financial Sector

Introduction

Way Forward

Introduction: Foreign Direct Investment ( FDI)

• FDI plays an important role in stimulating economic for an economy

• It is more productive than domestic investments and shares a positive

relationship between FDI and economic growth

• FDI has several positive effects which include productivity gains,

technology transfers, the introduction of new processes, managerial

skills, and know-how in the domestic market

Objectives

• Factors motivating FDI in the Financial Sector

• Relationship between FDI and Financial Sector

• Benefits of FDI to the Country

• Way Forward

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• Mauritius, a small island economy of the Indian Ocean, has witnessed an incredible development in the last 30 years.

• Mauritius was transformed from a dependent monocrop economy in the early 1970s to a multi-sector middle-income economy two decades later.

• The driving force of Mauritius’ development has been its exports sectors, namely the sugar sector, tourism and the Export Processing Zone (EPZ).

• Now the relatively dynamic financial sector has also played a crucial role in the development process.

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History of FDI in Mauritius

History of FDI in Mauritius

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Source : Bank of Mauritius

Comparative Analysis FDI inflow by Countries

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Source Board of Investment 2011

Introduction Sector Analysis

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Source : Bank of Mauritius 2011

Mauritian Economy The Bird View

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Source : AXYS Stockbroking Ltd latest research paper 2012

Relationship between FDI and Financial Sector

• In late 1980s and 1990s the Mauritian Financial Sector was affected by the process of financial liberation

• This sector now recognised as the fourth pillar in Mauritius with around 0.7 points in GDP in 2010

• Employment now turns around to 12 600 individuals working in this sector

• With increase investment and need for non bank financial institutions lead to an increase of Insurance and Offshore Companies

• Positive relationship between financial sector and economic growth

• Financial sector now acts as a financier of productive investments and accelerator of economic growth

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Relationship between GDP and Growth of Finance Sector

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Source : AXYS Stockbroking Ltd

Key Notes:

• Increase in growth of this sector from year 2008 to 2011

• Overall GDP of this sector amounts to 11.0 %

Source : AXYS Stockbroking Ltd

Factors increasing FDI in the Financial Sector

• Entry of Multinational Banks in Mauritius taking advantage of Spill over of local banks in this sector

• Multinational Companies taking advantage of Favourable Government Policies to encourage Investment in this sector

• Presence of Factor conditions (Macro environment factors Political and Social Factors and Human Capital) in the country

• A culture of doing business in Mauritius which has increased wide range of international firms to invest in this sector

• Results an increase in offshore and international banks coming to invest in Mauritius

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Positive benefits for Host Country

• FDI is directly linked with countries that are financially developed and institutionally strong

• Creates demand condition for investors to come and do business

• Inflow of capital and investment in the country

• Domestic financial sector plays a vital role in ensuring international flow and encourage economic growth

• Increase the image of the Host Country (Mauritius) internationally in the market

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Way Forward

• Financial Sector still plays a vital role in making the country attractive to FDI both in short run and long run

• This sector should play an integral part of the strategy to attract FDI inflows

• Continuous development and international promotion of this sector worldwide

Thank You

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