https://orcid.org/0000-0003-3743-2045
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Abstract
The literature on Global Wealth Chains (GWC) has analysed how value is captured across different segments of offshore financial sector activities. A division of labour has emerged, with financial centres in North America, Europe and East Asia capturing most value out of GWCs while other tax havens remain stuck in low-value GWC segments or in positions of dependency on larger financial centres. This paper analyses how one prominent tax haven (Mauritius) established its position in the GWC while being stuck in low-value GWC segments. The paper analyses both how offshore strategies transformed the country’s political economy but also how such strategies shape contemporary vulnerabilities. In the 1980s, with the Mauritian economy in dire need of foreign exchange, the government adopted an offshore strategy. Mauritius’ offshore growth has contributed to a vast inflow of foreign exchange for an otherwise import-dependent economy. Offshore has also contributed to social and economic benefits for segments of the population. However, the vulnerabilities and detrimental effects of this strategy are now increasingly visible. As Mauritius’ example shows, when countries are locked into low-value GWC segments, tax haven strategies may only be a short-term band-aid, substituting one form of dependency (commodity dependence) for another (offshore finance).
Acknowledgments
I am grateful to RIPE’s editors and reviewers for thoughtful, constructive and supportive feedback throughout the review process. Their inputs have improved this article considerably. Sam Hickey, Barnaby Dye, Tom Lavers, Shamel Azmeh and Kate Pruce provided comments that also helped improve the paper. Early versions of this paper were also presented at the International Studies Association Conference in Accra in 2019 and a State-Society Relations workshop in the University of Manchester’s Global Development Institute in 2020. Thank you to all those who provided constructive feedback and encouragement. I also thank everyone in Mauritius who shared their time and experience. Any errors and omissions are my sole responsibility.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1 See Bonizzi (Citation2013) for a review of this literature.
2 Interview, senior Mauritian offshore sector lawyer, January 2019.
3 Interview, offshore bank senior manager, January 2019
4 Interview, leading Mauritian banker, January 2019.
5 Interview, former finance minister and Senior banker, January 2019.
6 Interview, Senior Banker, Mauritius Offshore Sector, January 2019.
7 Interviews, Former Finance Minister, Mauritius; Franco-Mauritian conglomerate official; prominent journalist, January 2019. See also Sandbrook (Citation2005).
8 Interview, prominent Sino-Mauritian politician, January 2019.
9 Interview, retired politician, January 2019.
10 Interview, senior finance ministry civil servant, January 2019.
11 Interview, retired senior civil servant, January 2019.
12 Interviews, leading Mauritian government officials, January 2019.
13 Interview, former senior civil servant, January 2019.
14 Interview, prominent left-wing politician, January 2019.
15 Interview, senior civil servant, January 2019.
16 Interview, Rama Sithanen, January 2019.
17 Interview, former politician, January 2019.
18 Author’s calculation.
19 Interview, former civil servant, January 2019.
20 Interview, former finance minister, January 2019.
21 Interview, senior civil servant, January 2019.
22 Interview, former Finance Minister, January 2019.
23 Interview, left-wing politician, January 2019.
24 Interview, former Finance Minister, January 2019.
25 Interview, High Commission of India in Mauritius, January 2019.
26 Interview, offshore bank, January 2019.
27 The regulation of ‘global business’ (or offshore finance) licenses’ occurs under three key regulations, which have been amended in response to bilateral and multilateral demands. These legislations included The Companies Act 2001, The Financial Services Act 2007 and the Finance Act 2012. Until 2006, banking activities were regulated under two separate banking regimes: segment A (onshore domestic activities) and segment B (offshore activities). In 2006, the Banking Act was amended with the central bank supervising both segments, with only one bank license required. As one senior bureaucrat mentioned, ‘Without the regulations, Mauritius didn’t have much attraction. Regulations are how we secured the trust of investors.’ Another senior civil servant highlighted that ‘we had to show Mauritius wasn’t being used as a letterbox. We had to show the OECD that we would be transparent.’
28 Interview, former Mauritian politicians, January 2019.
29 Interview, Mauritian economist, January 2019.
30 Interview, offshore bank manager, January 2019.
31 Interview, senior OMC manager, January 2019.
32 Interview, former finance minister, January 2019.
33 Interview, prominent Mauritian economist, January 2019.
34 Interview, former Minister, January 2019.
35 Interview, former Finance Minister, January 2019.
36 Interview, Financial Services Commission, January 2019.
37 Interview, owner of Mauritius offshore business entity, January 2019.
38 Interview, offshore bank, January 2019.
39 Interview, Minister, Government of Mauritius, January 2019.
40 Interview, former minister, January 2019.
41 Interview, OMC manager, January 2019.
42 Interview, senior manager, offshore bank, January 2019.
43 Interview, senior bureaucrat, January 2019.
44 Interviews, Mauritian government officials and offshore banks, January 2019.
45 Interview, senior manager, International Bank, Ebene, January 2019.
46 Interview, OMC manager, January 2019.
47 Interviews, OMC and bank representatives, January 2019.
48 Interview, senior bureaucrat, January 2019.
49 Interview, offshore bank representative, January 2019.
50 Interview, senior government official, January 2019.
51 Interview, leading global bank, January 2019.
52 Interview, offshore bank representative, January 2019.
53 Interview, senior bureaucrat, January 2019.
54 Interview, senior bureaucrat, January 2019.
55 Interview, former Mauritian finance minister, January 2019.
56 Interview, OMC manager, January 2019.
57 Interview, OMC manager, January 2019.
58 Interview, senior government official, January 2019.
59 Interview, former politician, January 2019.
60 Interview, former IFS senior manager, January 2019.
61 Interviews, civil servant and retired politician, January 2019.
62 Interview, IFS Founder, January 2019.
63 Interview, owner, OMC, January 2019.
64 Interview, senior civil servant, January 2019.
65 Interview, senior OMC manager, January 2019.
66 Interview, senior bank official, January 2019.
67 Interview, senior economist, January 2019.
68 Interview, senior OMC manager, January 2019.
69 Interviews, retired bureaucrats, January 2019.
70 Interview, high-profile economist, January 2019.
71 Interview, prominent economist, January 2019.
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Pritish Behuria
Dr. Pritish Behuria is a Lecturer in Politics, Governance and Development at The University of Manchester’s Global Development Institute. His work operates at the intersection of international political economy, development studies and comparative politics. His research primarily examines the politics of economic transformation in the contemporary global political economy, with extensive research experience in India, Eastern and Southern Africa.