Madagascar: Investing in Madagascar
FDI inflows to Madagascar had been declining in the past years due to the country’s political crisis, but the reforms introduced by the administration of President Andry Rajoelina are expected to reverse this trend. According to UNCTAD's World Investment Report 2021, the country received USD 359 million in FDI inflows in 2020, down from USD 474 million in 2019, as a result of the global economic crisis triggered by the Covid-19 pandemic. The stock of FDI reached USD 8.3 billion in 2020. UNCTAD’ Investment Trends Monitor reported that although global FDI flows rebounded strongly in 2021, FDI flows to African countries (excluding South Africa) rose only moderately. The Malagasy government enacted various reforms, aiming especially to improve the business climate, in order to attract investors. Three reforms stand out: company creation, granting construction permits and trans-border trade. However, special economic zones have not attracted enough sustainable and quality investment. France, Mauritius, China and the United States remain the main investors in the country. In 2018, an agreement was signed between the Malagasy Economic Development and Business Development Agency (AMDP) and the Chinese consortium Taihe Century Investments Developments co. Ltd. The agreement involves a global investment of 2.7 billion USD over ten years, targeting six projects, in particular in the fields of fishing, aquaculture, the fight against illegal fishing, shipyards and centres Recreation.
There is no law prohibiting or limiting foreign investment in the country, but many obstacles make investment difficult. Madagascar has enormous natural potential, but the poor and costly quality of infrastructure, limited access to credit and financial instruments, as well as the poor definition of property titles, are all obstacles to investment. Political instability and corruption have blocked all public investment and caused the departure of many investors. Although Malagasy law treats foreign and local investors equally, foreign companies are often subject to criminal prosecution for questionable taxes, labour law violations or other reasons. The administration of President Andry Rajoelina has promised to revive the economy and stressed the importance of improving the business and investment climate, citing growth driven by the private sector as a driver of future economic development. Rejected three times by the National Assembly, a law on the recovery of illicit assets was adopted in 2019. In the Doing Business 2020 report published by the World Bank, Madagascar still ranked 161st out of 190 economies.
Foreign Direct Investment | 2019 | 2020 | 2021 |
FDI Inward Flow (million USD) | 474 | 358 | 300 |
FDI Stock (million USD) | 7,980 | 8,338 | 8,638 |
Number of Greenfield Investments* | 5 | 7 | 2 |
Value of Greenfield Investments (million USD) | 91 | 330 | 128 |
Source: UNCTAD, Latest available data
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Country Comparison For the Protection of Investors | Madagascar | Sub-Saharan Africa | United States | Germany |
Index of Transaction Transparency* | 7.0 | 5.5 | 7.0 | 5.0 |
Index of Manager’s Responsibility** | 6.0 | 3.5 | 9.0 | 5.0 |
Index of Shareholders’ Power*** | 5.0 | 5.5 | 9.0 | 5.0 |
Source: Doing Business, Latest available data
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.
Reasons to invest in Madagascar include the following:
Several factors still hinder Madagascar's FDI attractiveness:
The Economic Development Board Madagascar, Madagascar's one-stop-shop for investment, manages business registration, which on average is completed within one to two weeks of receipt of complete documentation, one of the shortest times in Sub-Saharan Africa.
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Latest Update: March 2023