Comparison Of Cost Of Doing Business In Mauritius Accounting Essay

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The cost doing business in any country involves the measurement and tracking the changes in regulations affecting 10 areas in the life cycle of a business namely, business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. For policy makers, knowing where their economy stands in the aggregate ranking on the ease of doing business is useful. Also useful is to know how it ranks compared with other economies and compared with the regional average

2.0 Starting a Business in Mauritius in 2010 and 2011

Starting Costs refer to all the costs involved by recording all procedures that are officially required or commonly done in practice by an entrepreneur to start up and formally operate an individual or commercial business, as well as the time and cost required to complete these procedures. It also records the paid-in minimum capital that companies must deposit before registration (or within 3 months). The ranking on the ease of starting business is only the simple average of the percentile rankings on procedures, time, cost and paid-in minimum capital.

Procedures

Starts up procedures are those required to start a business, including interactions to obtain necessary permits and licenses and to complete all inscriptions, verifications and notifications to start operations. It also involves all the bureaucratic and legal steps that an entrepreneur must complete for the incorporation and registration of a new firm. There are 5 procedures to legally start a business in Mauritius in 2010 and 2011. The procedures are broken down in terms of Preregistration, like name verification and reservation, notarisation, Registration and Post Registration. Post Registration includes social security registration and company seal.

The first start up procedures involves the incorporation and registration of the business and to search for the name of the company. Entrepreneurs are able to form a company without having to go through notary services. An annual registration fee of Rs2000 must be paid to the Registrar of Companies by companies with a turnover of less than Rs30 Million. The company must also register with the Commercial Registry to get a business registration card. This procedure should be done within 2 days. This procedure is the same for both 2010 and 2011.

The second procedure is to receive inspection by local authorities. There was no charge involved and should be done within 4 day for both 2010 and 2011. However compared to 2010, the business licensing process was simplified in 2011. Once the company is registered, the Commercial Registry provides relevant agencies with an electronic notice about the newly registered business and the expected start date of its activities. So the local authorities will select those prospective businesses that intend to trade within its jurisdiction and will communicate fees, relevant guidelines and any other provisions.

Thirdly, the entrepreneur should pay license fee. This procedure involves a license fee of Rs6000 that must be paid by the company to the local authority. This procedure remains the same from 2010 to 2011. The fee for the current financial year must be paid in 15 days of the start of the business and no latter that January 15th in the subsequent financial year. The authority can also levy a 50% surcharge on any unpaid amount within the prescribed period. The procedure should be completed in 1 day simultaneous with the previous procedure.

The forth procedure concerns the registration with social security office. This procedure is similar in 2010 and 2011. It is free in both years. In this procedure, the entrepreneur must complete an application form and submit the employment contracts to the employer registration and the certificate of incorporation on the Central Registration database. This procedure shall be completed 1 day simultaneous to the second procedure.

Finally, the last procedure is to make a company seal. For both 2010 and 2011, it costs USD12 to make a company seal and takes place 1 day simultaneous with the second procedure. Start up procedures are completed when the final documents is received.

Time

Concerning the time involved to complete the procedures, it was 6 days for both 2010 and 2011. However this does not include time spent to gather information. Moreover, each procedure will start on a separate day. Furthermore, the procedure is completed once the final document is received. There are no prior contacts with officials.

Costs

The costs required to complete each procedure is measured as a percentage of income per capita. This involved official costs only, there should be no bribes. Furthermore no professional fees are taken into consideration unless these services are required by law. In 2010, the costs required to complete each procedure was 3.8% while in 2011, the costs requires to complete each procedure decreases to 3.6%.

Paid-in Minimum Capital

The Paid-in Minimum capital is funds deposited in a bank or with notary before registration. It is measured as a percentage of income per capita. It remains the same in both 2010 and 2011 that is it remains 0.0%.So it can be concluded that in 2010, starting a business in Mauritius would require 5 procedures, takes 6 days to be completed, cost 3.8% of income per capita and required paid in minimum capital of 0.0% of income per capita. On the other hand, in 2011, everything remains the same except that it cost 3.6% of income per capita for that financial year.

When all the four factors have been taken into consideration, the starting costs are obtained. In 2010, Mauritius was ranked 12th while in 2011, it was ranked 15th out of 183 countries on the ease of doing business. This showed that starting costs was less in 2010 than in 2011 for Mauritius.

3.0 Dealing with Construction Permits in Mauritius in 2010 and 2011

Dealing with the construction permits is very important to protect the general public. It needs to be very efficient where the procedures to deal with construction permits are simple, straightforward and inexpensive in time and money, so that everyone is better off. If not, entrepreneurs may pay bribes to pass inspections or simply build illegally which will lead to hazardous construction that might public safety at risk.

So dealing with construction permits would involve the procedures, time and cost for a business to obtain all the necessary approvals to build a simple commercial warehouse in the economy's largest business city, connect it to basic utilities and register the property so that it can be used as collateral or transferred to another entity. The ranking on the ease of dealing with construction permits is a simple average of the percentile rankings of its procedures, time and cost. In 2010, Mauritius was ranked 39 overall dealing with construction permits. Moreover in 2010, there were 18 procedures involved, take 107 days and costs 32.3% of income per capita. On the other hand in 2011, dealing with construction permits requires 16 procedures, takes 136 days and costs 30.6% of income per capita, and Mauritius was ranked 53 out 183 countries.

Procedures

The procedures to legally build a warehouse are as follows:-

Firstly, the entrepreneur should submit all relevant documents and obtain all necessary clearances, licences, permits and certificates. Secondly, the entrepreneurs should complete all required notifications and receive all necessary inspections. Thirdly, he should obtain utility connections for water, sewerage and a fixed telephone line. Finally, the entrepreneur should register the warehouse after its completion. In 2010, there were 18 procedures to deal with construction permits where as in 2011 there were only 16 procedures, thus being an advantage for entrepreneurs.

There are 18 procedures for 2010 and 16 procedures in 2011. A table is provided below to illustrate the procedures:

Number

Procedure

2010

2011

Time to complete (days)

Cost to complete (Rs)

Time to complete (days)

1

Obtain plan approval from Central Electricity Board (CEB)

15

250

15

2

Obtain plan approval from Central Water Authority (CWA)

15

250

15

3

Obtain plan approval from Waste Water Management Authority

(WMA)

15

250

15

4

Obtain building and land use permit simultaneously

14

65,530

14

5

Receive initial stage inspection

1

No Charge

1

6

Receive foundation level inspection

1

No Charge

1

7

Receive roof inspection

1

No Charge

1

8

Receive and receive fire inspection

1

100

1

9

Receive sanitary inspection from Waste Water Management

Authority (WMA)

1

No Charge

1

10

Obtain sewage connection from Waste Water Management Authority (WMA)

60

1,750

60

11

Receive plumbing inspection from CWA ( However in 2010, this procedure also involves receiving plumbing inspection from the Central Water Authority)

1

No Charge

1

12

Obtain water connection from CWA ( In 2010 this procedure involves obtaining power connection from the Central Electricity Board

14

No Charge

14

13

Obtain phone connection from Mauritius Telecom (In 2010 this procedure involves receiving plumbing inspection by the Central Water Authority)

1

No Charge

10

14

Notify municipality of the completion of construction and receive

final inspection ( However in 2010 the 14th procedure was to obtain water connection from the Central Water Authority)

14

1,500

1

15

Obtain fire safety clearance ( However in 2010 the 15th procedure was to obtain phone connection from the Mauritius Telecom)

10

2,000

14

16

Issuance of occupancy permit by the Ministry of Local Government ( However in 2010 the 15th procedure was to notify the municipality of the completion of construction and receive final inspection )

1

No Charge

10

17

Obtain an occupancy permit by the Ministry of Local Government( Note only 2010)

10

No Charge

18

Obtain the plan approval from the Fire Department ( Note only 2010)

14

250

Time

In such a case, the time required to complete each procedure does not include time spent gathering information. Each procedure will start on a separate day. Each procedure is completed once the final document is received. There is no prior contact with officials. From 2010 to 2011, there was an increase in the number of days to deal with the construction permits. It increases from 107 days to 136 days.

Cost

The cost required to complete each procedure decreases from 32.3% to 30.6% from 2010 to 2011.

4.0 Cost of getting Electricity in Mauritius in 2010 and 2011

The procedures, time and cost required for a business to secure a permanent electrical connection for a newly built warehouse. Around the world, electricity connections are provided by distribution utilities that often retain monopolistic positions even in otherwise liberalized electricity markets. Businesses and other customers have little choice.

In Mauritius, The Central Electricity Board (CEB) is the sole authorized distributor of electricity in Mauritius. The main and biggest warehouse is situated at Port-Louis (city of Mauritius).

1. Submit application with Central Electricity Board (CEB) and await estimate. An application can be submitted in person, by letter, fax or online. The following documents have to be attached: (25 days

• Location plan

• Site plan

• National Identity Card or Passport.

• Building permit

• Trade License from local authority

• Title Deed of land acquisitioned or lease agreement (need to be notarized)

• Load details.

All these should take about 25 days only and would cost in the region of about Rs 34,897.40The other procedures would take another 66 days to be completed

2. CEB carries out external and internal visual inspection. (7 days)

3. The client's electrical contractor carries out the civil work for the transformer. (30 days)

Economy

Year

Ease of Doing Business Rank

Getting Electricity

Rank

Procedures (number)

Time (days)

Mauritius

DB2010

..

..

4

91

Mauritius

DB2011

..

..

4

91

4. Central Electricity Board (CEB) carries out a routine inspection of the civil works, external connection works and meter installation. (29 days)

5.0 Cost of getting Credit in Mauritius in 2010 and 2011

"All businesses, whether engaged in mining, lumbering, agriculture, manufacturing, distributing, providing services or retailing, require working capital to operate, to grow and to compete successfully in the marketplace. It is well established that one of the most effective means of providing working capital to commercial enterprises is through secured credit."

Economy

Year

Rank

Getting Credit

Strength of legal rights index.

(0-10)

Depth of credit information index (0-6)

Public registry coverage (% of adults)

Mauritius

DB2010

87

6

3

36.8

Mauritius

DB2011

75

6

3

49.8

As Far as Mauritius is concerned, with a limited number of banks due to a smaller economy, access to credit is bound to be a problem but with right political stability, development of efficient sectors and efficient government policies, the adequate resources will be found in order to help a business to launch itself and survive in the market. Ranked at the 87th place (cost of getting credit) in 2010, 1 year later Mauritius found itself in a more comfortable place by securing 12 places and reaching the 75th spot showing clearly huge investments have been made; the cost of doing business has either gone down in Mauritius or taken a hike in other economies. The financial sector may also have spread on a larger scale, allowing more credit to flow in the market, thus reducing definitely the cost of doing business.

6.0 Paying taxes in Mauritius in 2010 and 2011

Paying taxes rank is measured with 3 components; Payments which is the total number of tax payment per year, Time as the total time required to file returns and pay taxes and Total Tax Rate which is the percentage of tax on profits.

Mauritius ranked 11th in the year 2010 and 12th in 2011 for paying taxes. Payments and Time remained a constant 7 and 161 respectively for the aforementioned period. During this time, Mauritius shifted from a tiered rate to a single rate with a broader tax base and converted tax administration to electronic. However, the total tax rate increased from 22.9% in 2010 to 24.1% in 2011, thus increasing the cost of doing business. Mauritius introduced the corporate social responsibility tax in the year 2011 which could explain the decrease in rank, as a result an increase in the cost of paying taxes.

7.0 Trading across borders in Mauritius in 2010 and 2011

Trading across borders is international trade and should be encouraged. However, there are costs associated with trading such as tariffs, number of procedures to complete amongst others.

Mauritius improved its rank from 24th to 22nd during this period for trading across borders.

Trading across borders data

2010

2011

Rank

24

22

Cost to export (US$/container)

737

737

Cost to import (US$/container)

689

689

Documents to export(number)

5

5

Documents to import(number)

6

6

Time to export (days)

14

13

Time to import (days)

14

13

The above table shows details about trading across borders for Mauritius. The gain in rank in 2011 may be due to the reduction in the number of days it takes to make both import and export procedures.

Export procedures

Duration

Cost (US$)

Documents preparation

8

387

Customs clearance and technical control

1

75

Port and terminal handling

2

175

Inland transportation and handling

2

100

Total

13

737

The above table shows the duration and the cost of export procedures of the year 2011. It takes on 13 days for a firm to complete export procedures.

Import procedures

Duration

Cost (US$)

Documents preparation

8

394

Customs clearance and technical control

2

50

Port and terminal handling

2

145

Inland transportation and handling

1

100

Total

13

689

The previous table shows the time and cost a firm takes to make import procedures in the year 2011.

Mauritius has been able to reduce the time taken for these procedures by electronically exchanging information amongst traders using a program called Trade Net. Customs clearing times was also reduced by employing risk-based assessments to limit the number of physical inspections.

8.0 Starting a Business in Madagascar in 2010 and 2011

Starting Costs for Madagascar would be similar to the starting costs for Mauritius. This involves costs that arose when recording all procedures that are officially required or commonly done in practice by an entrepreneur to start up and formally operate an individual or commercial business, as well as the time and cost required to complete these procedures.

Procedures

In Madagascar, there were 2 starting procedures in 2010 and 3 starting procedures in 2011. In 2010, the first procedure involves the entrepreneurs depositing registered status and applying for license (Carte Professionnelle and Statiscal identifications). It costs MGA 88,899 and takes 5 days. On the other hand, in 2011 the first procedure is to obtain a new fiscal identification number. The entrepreneur has to apply for this online and must provide some documents. This procedure is free and lasts for 1 day.

The second and last procedure in 2010 was to file a notice of constitution to be published in a daily newspaper in French. It takes 2 days and costs MGA 15,000. However the fee to publish a notice of constitution in a daily newspaper varies between MGA 10,000 and MGA 20,000. On the other hand the second procedures involves the entrepreneur depositing registered statuts and apply for license (Carte Professionnelle), and statistical identifications. The k-bis, statistical card, tax registration confirmation, commercial registration number, and professional card (carte professionelle) can be obtained in about 2 days. Owing to reforms, a notice of publication is

no longer needed to obtain the k-bis. The company can continue with subsequent procedures in the meantime. it takes on average 4 to 8 days to get registered with the EDBM. This procedure cost MGA 93,350. The fee schedule is as follows:

- Commercial registration fee: MGA 15,500.

- Institut National de la Statistique Malgache (INSTAT) (see Decree

2005-380, dated June 22, 2005): MGA 20,000.

- K-bis: MGA 2,000.

- Deed registration costs: MGA 9,100

- Registration fees: 0.5% of the start up capital

- Lease registration: 2% of the lease.

In 2011 there is a last procedure and this involves the file a notice of constitution to be published in a daily newspaper in French. The fee to publish a notice of constitution in a daily newspaper varies between MGA 10,000 and MGA 20,000. It should be completed in 2 days and costs MGA 15,000.

Time

Concerning the time involved to complete the procedures, it was 7 days in 2010 and 8 days in 2011. However this does not include time spent to gather information. Moreover, each procedure will start on a separate day. Furthermore, the procedure is completed once the final document is received. There are no prior contacts with officials.

Costs

The costs required to complete each procedure is measured as a percentage of income per capita. This involved official costs only, there should be no bribes. Furthermore no professional fees are taken into consideration unless these services are required by law. In 2010, the costs required to complete each procedure was 12.9% while in 2011, the costs requires to complete each procedure decreases to 12.1%.

Paid-in Minimum Capital

The Paid-in Minimum capital are funds deposited in a bank or with notary before registration.(within 3 months). It is measured as a percentage of income per capita. It was 248.1% in 2010 and 0.0% in 2011.

So it can be concluded that in 2010, starting a business in Madagascar would require 2 procedures, takes 7 days to be completed, cost 12.9% of income per capita and required paid in minimum capital of 248.1% of income per capita. On the other hand, in 2011, starting a business in Madagascar would require 3 procedures, takes 8 days to be completed, cost 12.1% and required paid in capital 0.0%.

When all the four factors have been taken into consideration, the starting costs are obtained. In 2010, Madagascar was ranked 70h while in 2011, it was ranked 20th out of 183 countries on the ease of doing business. This showed that starting costs was more in 2010 than in 2011 for Madagascar. This is because Madagascar eliminates the minimum capital requirement.

9.0 Dealing with Construction Permits in Madagascar in 2010 and 2011

In Madagascar, dealing with the construction permits is very important to protect the general public. In 2010, Madagascar was ranked 130th overall dealing with construction permits where as in 2011, Madagascar was ranked 131th. In both 2010 and 2011, the number of procedures and the time (days) was 16 and 172 days respectively. However the cost (% per capita) was 468.8% in 2010 and 422.2% in 2011.

Procedures

The indicators reported here for Madagascar are based on a set of specific procedures-the steps that a company must complete to legally build a warehouse. Firstly, the entrepreneur should submit all relevant documents and obtain all necessary clearances, licences, permits and certificates. Secondly, the entrepreneurs should complete all required notifications and receive all necessary inspections. Thirdly, he should obtain utility connections for water, sewerage and a fixed telephone line. Finally, the entrepreneur should register the warehouse after its completion. There are 16 procedures for 2010 and 2011.

Since the procedures are the same for 2010 and 2011, a table is provided overleaf to illustrate the procedures:

Number

Procedure

2010

2011

Time to complete (days)

Cost to complete (MGA)

Time to complete (days)

1

Acquire property registration certificates

30

2,000

30

2

Obtain official topographical plan of the plot

7

6,000

7

3

Acquire lot plan with Commune seal

7

No Charge

7

4

Obtain preliminary approval from the Urban Commune

1

No Charge

1

5

Submit application for building permit

1

No Charge

1

6

Receive inspection from Provincial Service of Land Development (SPAT)

1

No Charge

1

7

Obtain building permit

90

1,170,540

90

8

Receive final inspection at the end of construction by SPAT

1

No Charge

1

9

Receive inspection by fire protection service

1

No Charge

1

10

Obtain occupancy certificate

7

No Charge

7

11

* Apply for a telephone line

1

No Charge

1

12

* Malagasy Telecom performs inspection of the building in order to prepare estimate

1

No Charge

1

13

Obtain telephone connection

30

100,000

30

14

* Apply for water connection ( However in 2010, this procedure also involves the application for Electricity Connection

1

No Charge

1

15

* JIRAMA inspects the building to prepare an estimate

1

No Charge

1

16

* Obtain water connection ( In 2010, this procedure also involves the acquiring of electricity connection

21

4,000,000

21

Time

In such a case, the time required to complete each procedure does not include time spent gathering information. Each procedure will start on a separate day. Each procedure is completed once the final document is received. There are no prior contacts with officials. The number of days to deal with the construction permits remains the same in 2010 and 2011 that is 172 days.

Cost

The cost required to complete each procedure decreases from 468.8% to 422.2% from 2010 to 2011.

10.0 Cost of getting Electricity in Madagascar in 2010 and 2011

1. The client applies for electricity connection and awaits estimate of connection fees from Jiro sy rano Malagasy.

(JIRAMA) (15days)

The application can be submitted by mail, letter, or in person at one of the utility's agencies. The client will need to attach some documents to the application, with the client's personal and professional details, a description of the works and of the electrical installation, as well as a Signing Authority ("pouvoir de signature") and a Commitment Letter ("lettre d'engagement").The last 2 documents have to be notarized. Agency: Jiro sy rano malagasy (JIRAMA)

2. The client obtains external inspection by Jiro sy rano Malagasy. (JIRAMA) (1 day)

3. The client obtains right of way from the local authority (Commune) (50 days)

4. The client buys the material for the external works from a local store (18 days)

5. The client obtains testing of material and external works by Jiro sy rano malagasy (JIRAMA) (19 days)

6. The client signs a supply contract with, pays an advance on consumption to, and awaits final connection from JIRAMA (366 days).

Economy

Year

Ease of Doing Business Rank

Getting Electricity

Rank

Procedures (number)

Time (days)

Madagascar

DB2010

..

..

6

450

Madagascar

DB2011

..

..

6

450

11.0 Cost of getting Credit in Madagascar in 2010 and 2011

Economy

Year

Rank

Getting Credit

Strength of legal rights index.

(0-10)

Depth of credit information index (0-6)

Public registry coverage (% of adults)

Madagascar

DB2010

167

2

1

0.1

Madagascar

DB2011

177

2

0

0

Madagascar finds itself ranked even lower in 2011 compared to 2010, maybe due to political instability, firms find it more difficult to find access to credit, a deterioration of 10 places show clearly there is a huge problem in finding credit in Madagascar since despite a not so favourable 167th spot, it must mean that, the cost of doing business has shoot up in Madagascar when it comes to the case of getting credit.

12.0Paying taxes in Madagascar in 2010 and 2011

Economy

Paying Taxes

Madagascar

Rank

Payments (number per year)

Time (hours per year)

2010

72

23

201

2011

72

23

201

Madagascar is ranked 72 for paying taxes for both the year 2010 and 2011. On average, a firm take 201 hours per year to prepare and pay taxes in Madagascar and about 23 payments per year. These figures remained constant through the time period. Furthermore, the total tax rate decreased from 39.2% in 2010 to 37.7% in 2011 which means that firms has to pay a lesser percentage of tax out of profit reducing the cost of doing business. Madagascar opted to reduce tax rate which is one of the many ways to simplify the paying of taxes such as reducing the number of payments or allowing electronic filing.

13.0 Trading across borders in Madagascar in 2010 and 2011

Madagascar 114th in 2010 as compared to 106th in 2011 for trading across borders.

Trading across borders data

2010

2011

Rank

114

106

Cost to export (US$/container)

1279

1197

Cost to import (US$/container)

1660

1555

Documents to export(number)

4

4

Documents to import(number)

9

9

Time to export (days)

21

21

Time to import (days)

26

24

From the above table it can be seen that there is a small improvement in Madagascar cost of trading. The latter managed to reduce cost to import, cost to export and it's time taken for import procedures.

Export procedures

Duration

Cost (US$)

Documents preparation

14

200

Customs clearance and technical control

2

272

Port and terminal handling

2

225

Inland transportation and handling

3

500

Total

21

1197

The above table distinguishes the different export procedures for Madagascar in 2011. The duration and cost for these procedures is considered to be high.

Import procedures

Duration

Cost (US$)

Documents preparation

17

189

Customs clearance and technical control

3

315

Port and terminal handling

2

551

Inland transportation and handling

2

500

Total

24

1555

The previous table shows the different import procedures and its respective duration and cost for the year 2011.

Despite Madagascar's attempt to reduce the costs and duration of trading across borders, they are still considered to be high.

14.0 Comparison for starting costs between Mauritius and Madagascar for 2010

Start up cost can be divided into 4 broad categories: time, cost, procedures and paid-in minimum capital.

Mauritius is ranked 12th while Madagascar is ranked 70th.Madagascar is in this worse situation due to its political instability, such that investors will not be willing to invest there. On the other hand Mauritius has political stability and a sound legal system which attracts investors, such that incorporating a company is easier and quicker in Mauritius. Normally companies will want to start production as soon as possible, so they will prefer Mauritius to Madagascar.

The cost of start up procedures for Madagascar was of 12.9â„… of Gross National Income (GNI) per capita while for Mauritius, it was only3.8â„…. Although Mauritius has a GNI per capita of $13,800 which is higher than the GNI per capita of Madagascar which is $950, the cost of start up procedures was much lower in Madagascar than in Mauritius. In other words the cost of start up procedures was $123 in Madagascar while in Mauritius, it was $ 524. This can be explained by the fact that Mauritius tend to have a higher cost of living and there is a sound legal system. So, companies need to pay for the sound legal system. This explains the complexity in start up procedures for Mauritius. The number of procedures for starting a business in Mauritius was 5 as compared to Madagascar which had a relatively lower number of procedures namely 2 procedures. So companies will prefer to invest in Madagascar as it is easier to start a business there.

The time to register the company is lower in Mauritius than in Madagascar. In Mauritius it takes only 6 days to register a company where as in Madagascar, it takes 7 days. So incorporation of a company is quicker in Mauritius than Madagascar. This is because Mauritius is a more developed country than Madagascar. Mauritius uses better technology than Madagascar, that's why it takes a smaller period of time to register a company in Mauritius.

Furthermore, cost (â„… of income per capita) for Mauritius is 3.8â„… while for Madagascar, it is 12.9â„…. These figures explained why investors prefer to invest in Mauritius than in Madagascar. This is because they spend less in Mauritius. Lower cost will tend to maximize profits. So profits of a company investing in Mauritius will be higher than another company investing in Madagascar.

The paid-in minimum capital is nil for Mauritius and 248.1% for Madagascar. So it can be concluded, Mauritius has a lower cost than Madagascar except for the start up costs. This is showed in the ranking of start up business whereby Mauritius is 15th while Madagascar is 20th.

15.0 Comparison for starting costs between Mauritius and Madagascar for 2011

In 2011 Mauritius is ranked 15th while Madagascar is ranked 20th. There has been a considerable improvement in Madagascar's regulation such as the abolishment of the paid-in minimum capital. However in 2011 also, Mauritius is better ranked than Madagascar even though Mauritius was ranked 12th in the previous year.

Cost of start up procedures for Mauritius is 3.6% of Gross National Income (GNI) per capita while for Madagascar, it was 12.1%. Mauritius has a GNI per capita of $14,760 which is higher than the GNI per capita of Madagascar which remains $950. Even though, the cost of start up procedures was lower in Madagascar than in Mauritius as the cost of start up procedures was $114 in Madagascar while in Mauritius, it was $ 531.

Concerning the time to register the company, it remains 6 days in Mauritius while it increases from 7 days to 8 days in Madagascar. Incorporating a company is quicker in Mauritius in 2011. This also supports the fact that Mauritius is better ranked than Madagascar.

Moreover, cost (â„… of income per capita) for Mauritius is 3.6â„… while for Madagascar, it is 12.1â„…. So investment is lower in Mauritius in 2011 also. Lower cost leads to big profits, hence attracting investors to invest in Mauritius.

Paid-in minimum capital is nil for both countries. This is because of regulation which levered this requirement in order to attract investors. No minimum capital requirement involves any cost for both countries.

16.0 Comparison for Construction Permits between Mauritius and Madagascar for 2010

Concerning construction permits ranking, Mauritius is 39th while Madagascar is 130th implying a lower construction permits costs in Mauritius than in Madagascar. This is so because Mauritius tends to lower its costs to attract investors. Companies look construction permits' cost as a burden, so they prefer to choose countries which give the best facilities.

Although there were 18 procedures in Mauritius, it requires only 107 days to be completed it as compared to Madagascar who need 172 days to complete 16 procedures. So construction permits will be received more rapidly in Mauritius than in Madagascar. The cost of construction permits procedures for Madagascar was of 468.8â„… of Gross National Income (GNI) per capita while for Mauritius, it was only32.3â„…. Although Mauritius has a GNI per capita of $13,800 which is higher than the GNI per capita of Madagascar which is $950, the cost of start up procedures was lower in Madagascar than in Mauritius. In other words the cost of start up procedures was $4453 in Madagascar while in Mauritius, it was $4457. However this is not a big difference. This can be explained by the higher cost of living and there is a sound legal system found in Mauritius which explains the complexity of the procedures for Mauritius.

Moreover, cost (â„… of income per capita) for Mauritius is 32.3â„… while for Madagascar, it is 468.8â„…. Investors would prefer to invest in Mauritius than in Madagascar due to the lower costs involved when dealing with the construction permits. This will lead to higher profits for the company investing in Mauritius.

As illustrated above, an investor will have more advantage dealing with construction permits in Mauritius than in Madagascar in 2010.

17.0 Comparison for Construction Permits between Mauritius and Madagascar for 2011

Mauritius was ranked 53th while Madagascar was at the 131th place in cost of construction permits. Both countries was better ranked the previous year, however the fall in the rank for Mauritius is greater relative to Madagascar. Both countries have 16 procedures to deal with the construction permits. However Madagascar still required more days to complete their procedure, that is 172 days which is more than Mauritius which is 136 days. The cost (â„… of income per capita) was also much lower in Mauritius than in Madagascar.

18.0 Comparison for getting electricity between Mauritius and Madagascar for 2010 and 2011

Madagascar has a lower cost of getting electricity and hence a lower cost of doing business than Mauritius in the years 2010 and 2011.It takes 15 days in Madagascar for the await estimate compared to Mauritius where it will take 10 more days. Madagascar also is more favourable for the external inspection with 6 days less than Mauritius. Having a cost of Rs 34, 897.40 to apply for electricity for business purpose makes the cost of doing business and getting electricity higher compared to Madagascar where no fees are charged for an application and to obtain electricity. The reasons for these differences are that Madagascar are largely more technically-advanced, they are a far bigger economy and more have power stations compared to Mauritius who suffer from huge setback of technology.

The per capita consumption of electricity in Madagascar is 46kWh while in Mauritius it is 1,668kWh. This entry consists of total electricity generated annually plus imports and minus exports, expressed in kilowatt-hours. The discrepancy between the amount of electricity generated and/or imported and the amount consumed and/or exported is accounted for as loss in transmission and distribution.

19.0 Comparison for getting credit between Mauritius and Madagascar for 2010 and 2011

When comparing both economies, it is to no surprise that Mauritius carves itself a better ranking both in 2010 and 2011. It may be the smaller economy but it is also becoming the fitter one. Cost of getting credit is definitely lower but it also depends on the scale business is being conducted. Mauritius may find itself realising small projects and hence the finance will be available, Madagascar being a big island will want to realise bigger projects but the resources and finance cost are higher.

Still Mauritius is way far ahead of Madagascar where the ease of getting credit is concerned implying a lower cost of business.

20.0 Comparison for Paying Taxes between Mauritius and Madagascar for 2010 and 2011

Mauritius ranked 11th while Madagascar was 72th for paying taxes in 2010.

Paying Taxes data

2010

Mauritius

Madagascar

Total tax rate

22.9

39.2

Payments

7

23

Time

161

201

The above table shows that Mauritius has lower tax rates for all three categories whether in the tax rate as a percentage of profits, the average number of payments to be made or the time taken to complete and pay tax. Having high tax rates acts as a disincentive for firms to invest in Madagascar hence, experiences low inward FDI as compared to Mauritius.

In 2011, Mauritius and Madagascar ranked 12th and 72nd respectively while Mauritius lost one rank, Madagascar remained steady.

Paying Taxes data

2011

Mauritius

Madagascar

Total tax rate

24.1

37.7

Payments

7

23

Time

161

201

There have been no changes in both the average payments and the average time for both countries. However, the total tax rate of Mauritius increased whilst that of Madagascar decreased because of the latter's tax rate reduction policy. We can still conclude that the cost of paying taxes in Mauritius is still lower than in Madagascar.

21.0 Comparison for Trading across borders between Mauritius and Madagascar for 2010 and 2011

By comparing Mauritius against Madagascar, it is obvious to say that the cost of trading in Mauritius is lower than in Madagascar.

Trading across borders data

Mauritius (2010)

Madagascar (2010)

Rank

24

114

Cost to export (US$/container)

737

1279

Cost to import (US$/container)

689

1660

Documents to export(number)

5

4

Documents to import(number)

6

9

Time to export (days)

14

21

Time to import (days)

14

26

The table compares Mauritius with Madagascar in the various factors for trading across borders. It should be noted that Madagascar promotes export to imports as its cost of export is lower as compared to Mauritius which is vice versa.

Trading across borders data

Mauritius (2011)

Madagascar (2011)

Rank

22

106

Cost to export (us$/container)

737

1197

Cost to import (us$/container)

689

1555

Documents to export(number)

5

4

Documents to import(number)

6

9

Time to export (days)

13

21

Time to import (days)

13

24

For the year 2011, both countries improved their ranks and their figures. However, the cost of trading in Mauritius is still lower than in Madagascar.

22.0 Conclusion

Ranked fairly well in both 2010 and 2011 in comparison to Madagascar, Mauritius as an economy deserves the number 1 place in Africa for doing business despite the presence of bigger economies. Mauritius' sound economic policies and prudent banking practices helped to mitigate negative effects from the global financial crisis in 2008-09. GDP grew more than 4% per year in 2010-11, and the country continues to expand its trade and investment outreach around the globe thereby spurring a lower cost of doing business compared to Madagascar but a higher one in the economy itself.

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