In his annual State of the Nation address on Tuesday, the President said that the Seychelles offshore sector has already shown its potential to assist the country’s development, and that growth in the tourism and fisheries sectors will allow the government to initiate more schemes aimed at attracting further capital from around the world.

"We are going to widen services that are already in operation," he said, adding: "New services to be offered include mutual funds, special license companies, a stock exchange and new products and services in the insurance sector."

The government is also promoting investment in the onshore business environment with a new law that exempts payment of business tax on the first SR250,000 (US$41,000) of profits for all companies, effective from Janaury 1, 2007. The government is also continuing to restructure the tax system, with the creation of a single Revenue Authority with the power to collect all dues on behalf of government, including registration fees and licenses. At present, the general ‘Office of Tax’ operates under the auspices of the Ministry of Finance. "This authority will enable Government to use its revenue more effectively and help those in need more rapidly and more efficiently," the President argued.

Michel went on to state that liberalisation of foreign exchange remains "a fundamental element" of the government's economic reform agenda, originally initiated in October 2006.

"This reform will facilitate economic growth as businesses get more access to financial resources," he said. "Our economy has benefited considerably in the last two years with the implementation of these liberalisation policies. There is a rise of local investments and FDI and there has been increasing growth in tourism and fishing."

In line with the increase in tourism and fisheries industries, the government is anticipating an increase in the incoming flows of foreign exchange. According to Michel, exports of goods and services have risen by 20% from 2005 to 2006 while flows linked to investments have increased by more than SR400 million (US$65.5 million) in that same period.

Michel said that the Seychelles has also made good progress on reducing its national and international debt, and the country enhanced its credibility last year when the government mobilized a US$200 million bond with a positive rating on international financial markets.

"The government has introduced a rational strategy for the next decade regarding our international debt as well as our national debt," the President observed. "We are experiencing a considerable reduction of our debt, which is now only 60% of our GDP. However, we are ensuring that this strategy does not hamper our programme to redress the economy in the short term. We are achieving this objective through our effective fiscal policies by which the surplus goes toward reimbursement of our debts and our growth rate."

Following the launching of the bond last year, Michel said that the government has cleared a substantial amount of its arrears, especially with the African Development Bank, World Bank, European Investment Bank and with Paris Club Creditors. "We are also continuing to pay off our existing debts as FDI enters the country," he noted, adding that the government is continuing negotiations with its remaining international creditors.

Michel claimed that the government has also been able to reduce its short-term loans, meaning that more financial resources are available for private sector investment.

"Our fiscal budget situation will continue to improve as we continue on our reform programme and consequently the need for government to borrow will be reduced considerably," he observed.

According to statistics provided by Seychelles Central Bank, the GDP of the Seychelles increased by 3.3% in 2005, and by 7.6% in 2006. Growth in excess of 5% is predicted for 2007 to 2008. Michel also stressed that the International Monetary Fund has made "an extremely positive analysis" of the country's economic performance in the last few years.