While Andaman Islands is India’s territory, the government should discuss the development of the Agalega Islands with Mauritius at the DTAA review next month which would be mutually beneficial to both countries

In his recent visit to India, Dr Arvin Boolell, foreign affairs minister of Mauritius recalled the close relations with India for more than three decades now and expressed willingness to go for a review of the Double Taxation Accordance Agreement (DTAA) next month.  
 
Capital gains tax is almost nil in Mauritius and 40% of foreign investments into India come through this country. The DTAA will come up for renegotiation in August and the minister took the pains to explain that Mauritius is not a tax haven but has a low tax jurisdiction.
 
Under the Article 13 of DTAA, a company registered in Mauritius can get the benefits of the treaty and pay capital gains tax only in that country.  But, if they do not charge capital gains levy, the company can escape payment of tax on this gain! Such a loophole needs to be covered.
 
India wants to renegotiate the treaty because it feels round-tripping can and should be checked, which actually refers to the movement of money out a country to another and getting it back under the guise of foreign capital taking advantage of the tax breaks. This issue is likely to be one of prime concern during the August deliberations.
 
Also, it appears, several years ago, in 2006, Mauritius had offered two islands to India—Agalega Islands, some 70 sq km with a very small population—for what is known as the “Blue Development”. This was to focus in setting up hotels, resorts and building a new modern airport which would increase the tourist potential.  Such a foothold in the Islands would add to India's strategic advantage in battling Somali piracy which has now become rampant and attacks are made with impunity.

It is likely that this issue of Agalega Islands may also come up for discussions in the ensuing DTAA meeting. It is imperative that India and Mauritius discuss this issue for mutual benefit.
 
While India ponders over the Agalega Islands Development (AID), a walk down the memory lane on a similar issue would be appropriate.
 
In the late 1980s, the hottest topic for discussion, in the Middle East and in India, was on the development of Andaman Islands (or any one of the islands in that archipelago) as India's free Zone. It is difficult to pin-point where this idea germinated with businessmen from UK, Hong Kong and UAE (Dubai) claiming credit for such an innovative proposal.
 
The idea was to declare one of the islands as the free zone and let NRIs (non-resident Indians) develop it into a modern Hong Kong for India, free from too much bureaucracy, red-tapism and political interference. All kinds of petitions and proposals flashed around for a few months and eventually, as it normally happens in projects of such dynamic nature, slowly sank into the Andaman Sea, for reasons unknown!
 
Why, then, raise it now?
 
Strategic importance of the Andaman Islands does not require any elucidation. These are on the “India plate” and were subject to the tsunami a few years back, with its epicentre in Indonesia and where it caused havoc. Though there was some loss, the Andaman Islands overcame the tragedy, thanks to timely assistance from the central government.
 
In the meantime and in the background, China made deep inroads into Myanmar, not without a reason. With Pakistani support, when the Gwadar port is completed with Chinese help, it would help them to almost encircle India!
 
 Hence these islands need full protection of the Indian defence forces and it is highly debateable if the present ‘preparedness’ of our forces are adequate?
 
China’s expansionist policy in Far East is well known. Almost every island in the region is subject to claim by China which is in dispute with all its neighbours. That China is a bully need not be emphasised.
 
India needs to wake up and develop Andaman Islands a little more seriously. Economic importance in terms of oil/gas strikes cannot be ruled out. But the past feelings of Chini-Hindi-Bhai-Bhai would not get us anywhere in dealing with this giant and now, economically a very strong neighbour, who wants to treat Arunachal Pradesh as its backyard and calls it a ‘disputed’ area.
 
All said and done, this does not and should not prevent us from moving forward in discussing the issue of these Agalega Islands, which will be mutually beneficial. However, what needs to be made clear is whether it is just going to be a venture for development or one of a long-term lease of the islands so that India can plan a workable strategy? Can we have our naval presence and raise the Indian flag?

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts. From being the advisor to exporters, he took over the mantle of a trader, travelled far and wide, and switched over to setting up garment factories and then worked in the US. He can be contacted at [email protected].)