Harnessing FDI for growth in Mauritius

This chapter documents and evaluates the role of foreign direct investment (FDI) - inbound and outbound - in the growth of the Mauritian economy. It narrates chronologically inward FDI’s continued role in Mauritius’ economic progress, and focuses in particular on the role played by the FDI policy framework. It is argued that Mauritius was able to harness the initial FDI inflows to allow the domestic private sector to flourish and although inward FDI’s role waned over time it fostered pioneering ideas that had a spillover effect on the local economy. Apart from that early encounter, FDI enjoyed a resurgence as Mauritius embarked on an ambitious diversification programme reinforcing its contribution to Mauritius’ economic growth. The chapter also highlights the notion of ‘opening up to go out’, as Mauritian companies venture abroad, particularly into Africa, driven by the small market at home and the need to sustain competitiveness. This is natural progression along the development path towards becoming a high-income economy. Yet this path is fraught with challenges as well as opportunities. These include the need for a coherent FDI policy framework and the need to recognize vulnerabilities that structural transformation poses as the country embarks on a trajectory to becoming a high-income economy.