After decades of legal battles and diplomatic wrangling, Mauritius stands on the verge of reclaiming sovereignty over the Chagos Archipelago – a remote string of atolls best known as the site of the UK–US military base on Diego Garcia. This development is more than a symbolic decolonisation milestone. It hands Mauritius a strategic asset that could, if deftly managed, be leveraged to boost foreign direct investment (FDI) and economic growth. The question is: can Mauritius translate its new territorial prize into a magnet for global capital? The answer will depend on a realistic appraisal of opportunities, from expanded maritime resources to high-end tourism, and a careful navigation of regional geopolitics involving great powers and deep-pocketed Gulf states.
From Colonial Holdover to Strategic Asset
Britain’s agreement in late 2024 to cede sovereignty of Chagos to Mauritius – while retaining the Diego Garcia base under a long-term lease – has reshaped Mauritius’s strategic landscape. The preliminary deal guarantees the US–UK military presence on Diego Garcia for at least 99 years, assuaging Western security concerns, and in return finally settles the last unfinished business of African decolonisation. For Mauritius, sovereignty over Chagos means gaining control of an exclusive economic zone (EEZ) of about 2.3 million square kilometres– a vast expanse of ocean potentially rich in marine resources and strategic value. Critically, Port Louis now holds a valuable bargaining chip in negotiations with its former coloniser and allies. Prime Minister Navin Ramgoolam’s government has pressed Britain to improve the financial terms of the handover, insisting on more generous compensation for hosting the base. Reports indicate Mauritius has sought on the order of $110 million per year from the UK to lease Diego Garcia, with payments front-loaded and inflation-protected. While London has kept exact figures under wraps – dismissing speculation of doubled costs as “categorically untrue”- Mauritius’s hardball approach signals its understanding that Chagos is an economic as well as strategic asset. If a final treaty locks in annual rent or lump-sum payments worth several billion dollars over time for the base rights, it would inject a sizeable new revenue stream into Mauritius’s economy. That alone, however, is just one piece of the puzzle. The broader prize lies in leveraging the archipelago’s return to attract investment far beyond the military domain.
Blue Economy Horizons and Niche Tourism
With sovereignty comes the ability to tap into Chagos’s economic potential – particularly its maritime bounty. The waters around the archipelago are ecologically pristine and have been protected as a no-take marine reserve for years. Mauritius could choose to maintain environmental safeguards while carefully opening parts of this zone to sustainable economic activity. One opportunity is in fisheries and aquaculture. The Indian Ocean tuna fishery is one of the world’s largest, and expanded Mauritian jurisdiction could allow for greater licensing of fishing rights or partnerships in seafood processing. Foreign fishing companies and canning industries – from Europe to Asia – might be enticed to invest in Mauritian facilities if given access to the rich fishing grounds around Chagos. Such arrangements would need to balance conservation with commerce, but they represent a path to more “traditional” FDI in the blue economy, as opposed to the mainly offshore financial flows Mauritius has relied on historically. Another tantalising possibility is eco-tourism. The Chagos Archipelago’s untouched atolls and reefs could be marketed as an exclusive destination for environmental tourism, akin to the Seychelles’ outer islands or luxury resorts in the Maldives. Developing even a small-scale resort or research station on an outer Chagos isle would require significant foreign capital – for infrastructure, transport, and logistics – given the archipelago’s remoteness (over 2,000 km from Mauritius’s main island). Yet the allure of a pristine tropical paradise, combined with careful branding as a high-end, low-impact destination, could attract niche investors. For example, an international hotel group or a wealthy Gulf hospitality developer might finance an exclusive diving lodge or a scientific outpost in Chagos, appealing to adventurous affluent travelers. Any such project would demand world-class environmental safeguards and community engagement, especially if exiled Chagossians are allowed to resettle on some islands. In fact, Mauritius has already indicated that Chagossian families will be permitted to return to at least two of the islands as part of a reconciliation process. Integrating these former residents into eco-tourism initiatives – for instance, as guides or proprietors of homestays – could ensure development is inclusive and culturally sensitive.
Crucially, Mauritius can offer investors predictability and rule of law in pursuing these opportunities. The country’s stable institutions and reputation as one of Africa’s best-governed economies will be an asset when pitching projects that might take years to become profitable. That said, bold plans must be grounded in realism. Building airstrips, docks or hotels on remote atolls is exceedingly costly, and the fragile coral ecosystems will constrain capacity. The model will likely be one of very limited, bespoke developments rather than mass tourism – more Galápagos than Maldives in scale. Nonetheless, even a handful of high-value projects could generate outsized attention, burnishing Mauritius’s image as an emerging player in the Indian Ocean’s blue economy.
Geopolitics: A Two-Edged Sword
Mauritius’s newfound leverage comes at the intersection of intensifying geopolitical currents in the Indo-Pacific. On one hand, the Chagos deal (backed by Washington and New Delhi) has boosted Mauritius’s standing among Western powers and India, who prefer to see Port Louis in charge of the territory rather than London – or worse, Beijing. Indeed, Britain’s decision to hand over Chagos was framed partly as a move to bolster ties with Africa and cement the base’s legal foundation in the face of international court rulings. The United States, for its part, applauded the agreement, with President Joe Biden noting it would secure Diego Garcia’s operations for decades to come. In strategic terms, Mauritius has become the landlord of a critical American military asset, which subtly increases its influence in security dialogues. This status can be parlayed into economic gains: countries that value the base’s stability may feel an added impetus to invest in Mauritius as a reliable ally. For example, the US and UK could channel more development assistance or encourage their corporations to invest in Mauritius’s financial services and infrastructure as goodwill gestures. India – which has long seen Mauritius as a “gateway” to Africa – might similarly deepen its economic partnership now that Mauritius controls an even larger maritime domain important to Indian security.
On the other hand, the geopolitical spotlight brings scrutiny. Skeptics in London and Washington initially fretted that ceding Chagos would “hand our territory to an ally of Beijing,” as one British MP railed. Mauritius does enjoy strong ties with China – including a free trade agreement and considerable Chinese investment over the years – but Ramgoolam’s government has been careful to dispel fears of a Chinese flank opening up in Chagos. Port Louis has firmly stated it has no intention of allowing any Chinese military presence and is not a participant in China’s Belt and Road Initiative, easing Western anxieties. This balancing act between great powers will remain delicate. Mauritius must reassure Western partners of its reliability, while also courting investment from all sides. Any signal of tilting too far towards one bloc could jeopardize others’ willingness to invest. The ideal outcome is to emulate the savvy diplomacy of a country like the Seychelles – maintaining friendly ties with India, China, the US and Europe, and attracting development projects from each. If Mauritius can leverage Chagos to garner security cooperation from India (which has already built coastal radar stations and is developing facilities on Mauritius’s Agaléga Island) and economic projects from partners as diverse as Japan or France, it will strengthen its hand. In essence, geopolitical capital can be converted into economic capital, provided Mauritius remains adroit and non-aligned enough to do business with all major players.
Courting Gulf Capital and Investment
Among the most promising – and perhaps under-appreciated – sources of new FDI for Mauritius are the Gulf states. The wealthy monarchies of the UAE, Saudi Arabia and Qatar have been on an African investment spree in recent years, seeking opportunities in ports, logistics, energy and real estate across the continent. In the past decade, GCC countries invested over $100 billion in Africa, with the UAE accounting for $59.4 billion and Saudi Arabia $25.6 billion of that sum. This surge of Gulf investment has made the UAE one of Africa’s top four foreign investors, behind only China, the US and the EU. Mauritius is well-positioned to capture a slice of this capital flow, especially now that it holds an even more strategic location in the Indian Ocean.
Several factors make Gulf investors a natural fit. First, Mauritius offers political stability, a familiar legal environment (common law based) and attractive tax incentives – it already has an Investment Promotion and Protection Agreement with the UAE to safeguard investors and avoid double taxation. This framework gives Gulf businesses confidence that their investments will be secure. Second, the Chagos Archipelago could align with key Gulf investment themes. Food security is a priority for Gulf nations; having access to fisheries or mariculture projects in Chagos’s waters could entice interest from state-backed Gulf funds or agribusiness firms. For instance, a consortium from the Middle East might partner with Mauritius to develop a sustainable tuna farming venture or a seafood export hub, capitalising on the region’s protein needs.
Infrastructure and logistics are another avenue. The UAE’s DP World, which operates dozens of ports worldwide, has already discussed developing Mauritius as a shipping and freeport hub. While Chagos itself is remote, Mauritius could leverage the archipelago’s mid-ocean position to offer services like maritime refueling, transshipment or even hosting a strategic communications cable node. Any expansion of port or aviation infrastructure – be it upgrading Port Louis or establishing a support base for Chagos – could attract Gulf financing. The existing airstrip on Diego Garcia (one of the longest in the region) raises the intriguing prospect of future civilian use if geopolitics allow. Were Mauritius to negotiate some civilian flights or medevac/emergency access to that runway, one could envision Gulf carriers or logistics firms playing a role in connecting Mauritius (and by extension Chagos) with the Middle East. Such ideas remain speculative for now, but they highlight the archipelago’s potential as a logistical bridge between Africa and Asia – a concept that Gulf investors, with their global transport enterprises, understand well.
Then there is tourism and real estate, sectors where Gulf investors are highly active globally. Mauritius is already a luxury getaway for affluent visitors from Europe and elsewhere; attracting more visitors from the Gulf (and their investment) is a logical next step. Gulf-based hotel groups and sovereign wealth funds have poured money into resort developments from the Seychelles to Zanzibar. With Chagos back in the fold, Mauritius can pitch unique ultra-premium projects – perhaps a private island retreat or an environmental research resort – that might appeal to the likes of Dubai or Doha investors seeking prestige projects. Imagine a Qatar or UAE-funded marine research center in Chagos, hosting scientists and eco-tourists, showcasing Gulf philanthropy and advancing marine science. Such a venture could put Mauritius on the map as a hub for climate and ocean research, a cause that aligns with many Gulf states’ efforts to diversify their global image beyond hydrocarbons.
Moreover, Mauritius’s established role as a financial services hub can complement Gulf capital flows. Mauritian entities already serve as investment vehicles funneling funds into India and Africa (Mauritius has been the single largest source of FDI into India, at $177 billion since 2000, thanks to tax treaties). Gulf investors can utilize this platform – setting up funds or holding companies in Mauritius to invest regionally – thereby indirectly boosting FDI inflows and the financial sector in Mauritius. The government in Port Louis could actively court Gulf sovereign wealth funds for co-investments, touting the Chagos acquisition as evidence of Mauritius’s growing geopolitical clout and long-term stability. In diplomacy, small gestures count: Mauritius might invite Gulf dignitaries for high-profile visits to newly sovereign Chagos islets, or propose joint development initiatives, to stoke interest.
Challenges and Constraints
For all the exciting scenarios, Mauritius must temper expectations with a dose of reality. The mere return of Chagos does not automatically guarantee an investment bonanza. There are significant practical constraints:
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Infrastructure and Accessibility: Outside of Diego Garcia’s militarised facilities, the Chagos islands have virtually no infrastructure. Any economic use will require starting from scratch – building jetties, power supply, housing and more – in an environment that is 1,000+ miles from the Mauritian mainland. The cost and logistics of construction in such isolation will give pause to even the most ambitious investors. This means projects will materialize slowly, likely one at a time, and only if clearly viable.
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Environmental Protection: The archipelago’s ecology is among the most pristine on the planet, home to vibrant coral reefs and endangered species. Mauritius has a global reputation to uphold in environmental stewardship, and it will face pressure domestically and internationally to ensure Chagos is not spoiled by reckless development. Large-scale industrial fishing or mass tourism is likely off the table. Investors will have to adhere to strict sustainability criteria, which could limit short-term returns. In the long run, though, branding Chagos as a model of conservation can enhance Mauritius’s appeal to high-quality investors (and tourists) who value sustainability.
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Chagossian Resettlement and Legal Issues: Any investment plan must factor in the rights of the Chagossian diaspora. Thousands of Chagossians were expelled decades ago, and many are eager to return. Mauritius has pledged to facilitate resettlement on some islands and manage a trust fund for the community. This is a moral and legal imperative. It also means portions of Chagos will be devoted to local communities whose needs (housing, livelihoods, infrastructure) come before profit. For investors, partnering with Chagossian-led enterprises or ensuring jobs for returning families will be essential to secure local buy-in and avoid social backlash. Additionally, as the Chagos saga involved international courts, any missteps could invite fresh legal challenges or UN scrutiny – an outcome Mauritius will be keen to avoid as it enjoys its hard-won sovereignty.
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Global Economic Climate: The opportunity arrives at a time of uncertain global economic conditions. Rising interest rates and cautious post-pandemic recovery have dampened FDI flows into many emerging markets. Mauritius itself saw FDI inflows of only around $580 million in 2022, rising to about $760 million in 2023– modest figures that it would certainly like to multiply. The government will have to compete hard to capture investors’ attention when many alternative destinations exist. Clear, investor-friendly planning for Chagos (e.g. outlining which islands are open for what type of investment) and continued reforms to ease doing business will be needed to turn heads.
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Maintaining a Balance of Powers: As noted, inviting foreign investment cannot be divorced from the geopolitical context. If, for example, a Chinese company expresses interest in a major project in Chagos, Mauritius may find that move quietly opposed by India or the US. Conversely, overly favoring Western partners could leave Chinese or Middle Eastern money on the table. Mauritius will need to diversify its suitors – perhaps by forming consortia that include partners from East and West. Transparency and adherence to international norms in any deals can help prevent suspicion that Mauritius is pivoting into one camp’s orbit. In this regard, Mauritius’s own diplomatic skill will be tested: it must reassure everyone that Chagos will not become a pawn for military adventurism (something Port Louis has already made clear), but rather a shared opportunity for peaceful development.
From Gateway to Powerbroker: Mauritius in Global Circles
Mauritius has long punched above its weight economically, branding itself as the “Mauritius Miracle” built on stability, openness, and smart positioning between Africa and Asia. The return of the Chagos Archipelago could elevate that status further – if handled wisely. In global investment circles, Mauritius can now market itself not just as a tax-friendly finance hub or idyllic holiday spot, but as a strategic stakeholder in the Indo-Pacific future. Control of Chagos gives it a voice in regional security and a seat at tables previously reserved for larger nations. This enhanced profile can be leveraged in forums like the African Union, the Indian Ocean Rim Association, and investment conferences where Mauritius can pitch opportunities tied to its expanded domain.
The government in Port Louis would be prudent to craft a comprehensive vision for Chagos-related development, one that it can present to international partners. This might include proposals for a marine research institute, a renewable energy pilot zone (imagine harnessing ocean thermal energy or offshore solar in the Chagos waters), or a special economic zone focused on the blue economy. By articulating concrete projects, Mauritius can move beyond abstract sovereignty to actionable investment cases. It can also better coordinate donor support – for instance, securing grants or soft loans for initial infrastructure that lay the groundwork for private investors to follow.
Engaging the Gulf states will be a particularly shrewd strategy. The UAE, Saudi Arabia, and Qatar have shown they are keen to invest abroad not just for profit, but to gain influence and secure resources for the future. Mauritius can offer them a stable base of operations in a region where they have growing interests (for example, Gulf navies are increasingly active in the Indian Ocean, and Gulf airlines overfly its expanses). A high-profile partnership – say, a UAE-Mauritius initiative to develop a “smart” port or a Saudi-backed effort to conserve marine biodiversity in Chagos – could unlock significant funding while aligning with these countries’ strategic objectives. Crucially, such partnerships can be framed as win-win-win: good for Mauritius’s economy, beneficial for the Gulf’s long-term plans, and acceptable to Western allies (who generally view Gulf investments as less threatening than Chinese ones).
Finally, Mauritius should be cognizant of not overextending itself. Sovereignty over Chagos is a monumental achievement, but it also comes with new responsibilities and risks. The government must avoid viewing the archipelago as a mere cash cow; it is first and foremost a trust to manage for the benefit of all Mauritians – including Chagossians – and for the preservation of its unique environment. If Mauritius can strike the right balance, it stands to gain enduring economic rewards. A nation of 1.3 million people, once impoverished and resource-poor, could harness its enlarged territory to attract billions in fresh investment, create jobs in emerging sectors, and solidify its reputation as a beacon of stability and opportunity in Africa.
In the style of a Financial Times op-ed, one might conclude that Mauritius is at an inflection point where statesmanship and strategy will determine whether the Chagos reunification becomes a developmental boon or just a historical footnote. The potential is undeniably there. A successful leverage of the Chagos Islands’ return – through prudent diplomacy and targeted investment promotion – could see Mauritius evolve from a regional gateway into a veritable powerbroker of the Indian Ocean, where capital and ideas from East and West intersect. The world’s investors will be watching closely as this new chapter unfolds, portfolio spreadsheets at the ready. Mauritius must now show that it can convert its hard-won sovereignty into tangible prosperity, anchoring itself as a key node in the global investment map.
