Published in Mtimes 28 Sep 2018
Like the electoral reform proposals, the two-day ‘Mauritius International Financial Centre-Forward Looking’ conference held on 19 & 20 September 2018 at Intercontinental Mauritius Resort, turned out to be a non-event, more of a damage limitation exercise after the Eastern and Southern Africa Anti Money Laundering Group (ESAAMLG) damning report.
It was all about the latest trends impacting on our financial sector but limited in its “open dialogue” on the pending issues that are worrying the global business operators. Many of them felt that they were left in the lurch on most of the issues. Rather than the conference, it will be the ‘Practice Circular’, which is expected to be ready in two weeks’ time, outlining some of new parameters for operators, that they hope will help to clarify things - especially the new stringent criteria for determining the residency of Global Business Companies, the tax exposures and the limitative nature of the application of the partial exemption and the return on disposal of securities, among others.
Indeed, the conference was so forward looking that it had time-travelled most of the participants to 2030 with the financial sector doubling its size, its contribution to GDP in real terms attaining US$1.9 billion and boosting employment to 17,000 jobs and increasing revenue to US$0.3 billion in real terms. But some participants who were more grounded had to shake off the irrational exuberance of some speakers bringing them back to the local realties.
We have a pattern here typical of hierarchical structures. Keep on repeating and spreading the all-knowing bosses’ incendiary rhetoric till one and all start believing it is an irrefutable theme of our distorted reality. We have been through this before, you recall the Sugar protocol which was so sacrosanctly eternal, the IT sector which would create thousands and thousands of jobs, the plethora of hubs that would soon be emerging and for the past 10 years we continue displaying the typical hyperbole that we are a “Gateway to Africa”.
There’s no problem in being ambitious, but we just do not have the necessary demand and the resources to realise it.
A crucial input to realise our financial sector ambitions is our ICT infrastructure which is still struggling to move up the value chain to provide higher value added activities and services focusing on innovation and creativity - for example, just in terms of fixed broadband penetration, international bandwidth availability and mobile broadband subscriptions, we still have a long way to go. While we sat on our laurels, content with the low value added BPO/call centres, some African countries have bypassed us. Major companies such as IBM and others have already set up research labs in Kenya’s Silicon Savannah. Botswana and Rwanda are catching up fast.
To our wizards of the world of finance, Fintech-Blockchain-Crypto-assets seem to be the new holy grail or necessarily the cure-all panacea for our financial sector. But this world-changing technology is: a) costly - the computer networks consume lots of energy, b) a sophisticated and a computationally intense security network - it will be needing highly qualified people to man it, and c) risky - legislators have largely failed to keep pace with innovators (or scammers). It also needs a large market capacity to be profitable – economies of scale-, and it has yet to mature - presently as the number of computers accessing and writing to the network grows, it can be slow and cumbersome.
A very recent report on crypto-assets by the Treasury Committee of the House of Commons warns us that the slow, costly and energy-intensive verification process for transactions of crypto-assets based on public decentralised blockchains may ultimately limit the extent to which crypto-assets and blockchain can replace conventional money and payments systems. The Committee even doubts whether universal applications of the technology are currently reliably operational. The report recommends that “in deciding the regulatory approach, the UK Government and regulators should evaluate the risks of crypto-assets, and assess whether their growth in the UK should be encouraged”.
Indeed, if we cannot know better than experts in the field, let us move a step at a time. And if we could tone down the irrational exuberance, which is more a reflection of our speakers rather than that of our infrastructure and markets, we may succeed in gradually innovating and transforming the Mauritius’ international financial centre by 2030.
