Ladies and gentlemen,
It is with a great pleasure for me to be with you today at this seminar, which aims to promote the economic exchange between Japan and Madagascar especially in the private sector.
First of all, I would like to extend my sincere gratitude to our honorable guests, especially Mr Tahirimiakadaza RATSIMANDAO General Director of Economic and International Cooperation of the Ministry of Foreign Affairs, Mr Johary RAZOSEFA, Director of Economic Development Board of Madagascar (EDBM) for taking the time out of the busy schedules to participate in this important event.
My special thanks also go to the representatives of the 14 Japanese companies present today, some based here in Madagascar, but most of whom are coming from South Africa to seek future business opportunities in this country. I would also like to thank Mr. Hiroyuki NEMOTO, the Executive Director of Japan External Trade Organization (JETRO) in Johannesburg for co-organizing this event with EDBM.
Let me start today’s seminar with a succinct overview of current bilateral relations. I’ll touch upon first Government to Government relations and second status of private sector relation.
Our ties with Madagascar on G to G basis are excellent. At the end of the last year, Presidential couple of Madagascar made an official visit to Japan for the first time in more than half a century. This visit has elevated our relations on a new dimension.
On this occasion, His Excellency Mr. Shinzo ABE, Prime Minister of Japan and His Excellency Mr. RAJAONARIMAMPIANINA, Malagasy President identified each other as partner not only for the projects in Madagascar but also in diplomatic scenery as a whole. The content of this partnership is detailed in the joint statement issued during the visit. In this photo they are celebrating the issuance of that cornerstone document.
It was not by chance that our bilateral relations were hoisted to a new dimension last year. Actually Madagascar occupies an important place in the Free and Open Indo-Pacific Strategy that the Government of Japan has promoted since August 2016. Madagascar is one of the pivots between Asia and Africa.
This strategy is rather of economic nature despite its name. It aims to improve connectivity between Asia and Africa thorough free and open Indo Pacific Oceans as well as to promote stability and prosperity of the region as a whole. These two regions are most important regions for the world economic growth in this century. Japan has wide variety of projects to boost connectivity in these regions. Most salient projects are located on this map by black dots.
In Madagascar we have the project of extension of Toamasina Port.
The Extension of Toamasina port is the biggest ODA project that Japan has ever implemented in Madagascar. The Japanese financing amounts to above 400 million US dollars. The loan terms are most preferential ones; annual interest rate is 0.01%, repayment period is 40 years out of which the first decade is a moratorium period. Once the project is completed, the capacity of the port will be more than tripled. Since this port is the single biggest international port of the country with 90% of international cargo being treated there, the economic impact on the Malagasy GNP would be huge.
From Japanese government point of view, this project plays a key role in the Free and Open Indo-Pacific Strategy to improve the connectivity of the regions. The commitment of Japanese Government is deeply anchored and a long term one. One of the advantages of doing business in Madagascar for the Japanese private companies is that they can count upon this commitment of the Japanese government.
Before making such a long term commitment the Japanese government has made sure that these commitments be honored by our Malagasy partners all over the period of contract. Malagasy economy is currently in a good shape. The World Bank foresees a growth rate of 5.1% for this current year well above the average of the sub-Saharan African countries.
This growth rate is all the more encouraging because an expansive budgetary policy is not on the table. Madagascar now enjoys the Enhanced Credit Facility from IMF. To enjoy this facility, Malagasy authorities have to keep close consultations on the budget formation and its implementation to prove the sustainability of its debt. Budgetary austerity is now the watchword. Despite this constraint, the growth rate is expected to overshoot the African average.
This sound macroeconomic policy underpins our long term confidence in Madagascar.
The long term commitment from Japan is shown by the private sector as well.
In November last year, Sumitomo Corporation has become officially the largest shareholder of the Ambatovy project. Ambatovy is composed of nickel mine and refinement factory. It is the single biggest foreign investment in Madagascar. It accounts for about a third or a fourth of Malagasy export to the rest of the world. To Japan Madagascar is now the top Nickel provider. The government of Japan continues to support the Ambatovy project by providing Project Financethrough the Japan Bank for International Cooperation (JBIC)as a leading lender.
As the case of Ambatovy puts it eloquently, the economy of Japan and Madagascar are naturally complementary. The potential for mutual benefits are enormous, and the opportunity is extensive. However, this potential is far from being fully achieved, and the role that the private sector could play to bridge the gap remains immense.
Our trade balance is strongly marked by a large surplus on the Malagasy side. In 2017, the export from Madagascar to Japan amounts to about 130 million Euros. On the other hand, Japan has exported only about 11 million Euros toward Madagascar. This impressive trade surplus in Malagasy favor is largely explained by Ambatovy’s Nickel export to Japan.
So far, I have painted rather a rosy picture for business in Madagascar.
To be fair, I have to quote some not so rosy figures as well. Madagascar is ranked 162nd (One hundred sixty second) out of 190 countries in terms of ease of doing business by the World Bank despite significant reforms it is currently undergoing. According to the human development index (HDI) released by UNDP, Madagascar is ranked 158th out of 188 countries in 2016.
Many analysts also point out the risk of cyclical political crisis with the presidential election approaching. Political stability is a key for foreign investors. The last two month we have witnessed resurgence of this risk.
But this time, to our great relief, this risk has receded with the formation of a new coalition Government yesterday. I congratulate wholeheartedly the political wisdom and maturity proved by political leaders and people of Madagascar that paved the way to a presidential election in full respect of the Constitution. I congratulate the Malagasy people to have opted for an election against unconstitutional change of power, for international cooperation against isolation, and for development against setback.
Last but not least, I would like to underline that the confidence Japan inspires in Malagasy government and people is profound. The two largest bank notes that Malagasy Central Bank issued last year feature projects to which Japanese operators make major contributions.
Bill of 20,000 Ariary, the biggest one, is decorated the image of Ambatovy refinement factory.
On the bill of 10,000 Ariary, second biggest note, you can find the image of Ehoala Port which was extended by Daiho Corporation.
The value of Malagasy national currency is symbolically linked with these Japanese operators behind these projects. The long term confidence demonstrated by Japanese side is more than reciprocated by Madagascar side. Confidence is mutual.
I hope the visit of the JETRO mission be fruitful and contribute to further deepen the mutual confidence by crystallizing concrete business opportunities.
Thank you for your attention.