Investing in Madagascar
Among the promising economic sectors, the following are singled out for the importance of the opportunities they offer.
Geological studies and mining explorations have demonstrated the existence of mining resources of varying importance in Madagascar. Some of them have already been industrially exploited, such as chromites, nickel and ilmenite. Some are currently under heavy exploration, such as oil, iron, and uranium. And some gemstones (ruby, sapphire, and emerald), decorative stones (crystal, quartz, marble, graphite, and labradorite) as well as some rare metals (gold) have been exploited by small-scale extraction projects.
Three important investment projects are being implanted with success in Madagascar:
- Nickel and cobalt extraction project ($3.3 billion) in Ambatovy. The joint venture formed by Japanese, Korean and Canadian companies is scheduled to start production in 2010 with a capacity estimated at 60 000 tons of nickel, 5 600 tons of cobalt and 19 000 tons of ammonium sulfate per year.
- Ilmenite extraction project in Taolagnaro ($580 million) promoted by a Canadian investor. Production will start in 2009 with an initial capacity of 750 000 tons of ilmenite and 250 000 tons of zircon per year.
- Smelter grade ilmenite, zircon and rutile project ($240 million) in Toliara promoted by an Australian company and a South African mining company.
More on Mining sector (http://www2.gaf.de/bpgrm/)
Mainly as an eco-tourism destination, Madagascar has attracted an increasing number of tourists over the last six years. With its unique fauna and flora, underdeveloped tourism sites and the increasing demand, there are huge investment opportunities in the hospitality business and tourism-related services (air, sea and ground transportation, tours operations, and more).
Foreign companies in the tourism sector are allowed to acquire land under certain conditions according to the law and there are 22 land reserves established by the Government for tourism activities in high potential areas.
About one-half of Madagascar is cultivable, but little more than 5 percent of the total land area is currently planted. Madagascar has 18 million hectares of cultivable land. With diverse climates and fertile land, anything grows in this country. For instance, Madagascar currently produces rice, fruits, vegetable, vanilla, spices, cotton, biofuel, and essential oils. And due to the quality of its soil, produces from Madagascar are internationally renowned for their quality.
Madagascar can be a competitive source of food supply to regional and international markets. Labor for agricultural activities is available and cheap as seventy percent of the population lives in rural area. With growing global food demand and insufficient production, investment in food production in Madagascar is actually attractive.
4. Export processing zones
Since the adoption of the law 89-027 on December 1989, the Malagasy government has offered several incentives to export-driven companies with EPZ status, including
- Tax exemption upon company registration;
- Exemption from professional taxes;
- 10 per cent only as tax on dividends;
- Income tax exemption for the first five years, then 10% tax thereafter;
- Exemption from customs duties and taxes on imported equipment and inputs;
- Free transfer of funds upon termination of activities.
These companies have to export at least 95 percent of their production.
Labor intensive industries such as textile industry have benefited from these incentives. And with the facilitated access to American and European markets granted by the AGOA (American Growth and Opportunity Act) and bilateral trade agreements, these companies have benefited from these opportunities. And with Madagascar’s membership in the SADC (Southern African Development Community), COMESA (Common Market for Eastern and Southern Africa) and COI (Communauté de l’Océan Indien), these opportunities have been significantly increased.
Public and private investments in infrastructure (roads, ports) and production facilities have created a huge demand for construction-related products and services. There are opportunities for companies with the needed expertise and resources. French, Chinese, Japanese, Malaysian have found their way in this sector.