Madagascar flag Madagascar: Investing in Madagascar

Foreign direct investment (FDI) in Madagascar

FDI in Figures

FDI inflows to Madagascar had been declining in the past years due to the country’s political crisis, and in the context of a challenging global environment, that trend continued. Policy and institutional reforms and infrastructure projects that were expected to improve the investment climate did not materialize yet (U.S. Department of State). According to UNCTAD's World Investment Report 2023, the country received USD 396 million in FDI inflows in 2022, up from USD 358 million one year earlier. At the end of the same period, the stock of FDI reached USD 9.1 billion, around 59.7% of the country’s GDP. Mauritius, China, the Netherlands, and France are the main investors in the country (IMF). The main investment opportunities concern the mining, infrastructure, textiles, energy, tourism, and agri-business sectors.

The Malagasy government enacted various reforms to improve the business climate, including some related to company creation, granting construction permits, and trans-border trade. However, the special economic zones have not attracted enough sustainable and quality investment. The Plan Emergence Madagascar (PEM) is expected to attract investments related to the construction of new road infrastructure, the development of water supply, and the energy and mining sectors (Coface). 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. A new investment law was promulgated on July 27, 2023, which repeals the old law No. 2007-036. Madagascar ranks 107th among the 132 economies on the Global Innovation Index 2023 and 118th out of 184 countries on the latest Index of Economic Freedom.

Foreign Direct Investment 202020212022
FDI Inward Flow (million USD) 358358396
FDI Stock (million USD) 8,3388,6969,092
Number of Greenfield Investments* 721
Value of Greenfield Investments (million USD) 3541318

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.

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What to consider if you invest in Madagascar

Strong Points

Reasons to invest in Madagascar include the following:

  • Abundant natural resources (gemstones, industrial and decorative stones, oil, and rare metals for mining activities; a big and fertile land with a favourable climate)
  • Low cost of local inputs and labour
  • The strategic location between Asia and Africa
  • Improving business environment
  • Political stability since 2009
  • Developing tourism sector
  • Public debt mainly on concessional terms
  • Incentives to export-driven companies with export processing zone status
Weak Points

Several factors still hinder Madagascar's FDI attractiveness:

  • Dependency on agricultural and mining products
  • Inadequate infrastructures (road, hydraulic and electrical networks)
  • Dependency on foreign aid
  • High levels of poverty (in 2019 75% of the population lived on less than USD 1.90 a day - World Bank, latest data available)
  • The Malagasy people are subject to poor access to electricity (with a 15% rate access to electricity in 2019 - World Bank, latest data available)
  • Weak financial system
  • High risks of corruption in both public and private sector
  • Limited access to education for the Malagasy population
Government Measures to Motivate or Restrict FDI
The government of Madagascar is trying to make the country a more attractive destination for FDI, through several initiatives and incentives. For instance, companies active in the renewable energy, tourism, industrial, civil work and construction sectors can benefit from a tax reduction equal to the tax calculated on 50% of the amount of investment that they realised during the related tax year. Similarly, the petroleum code provides a custom and importation duties exemption for hydrocarbon research, exploration, and exploitation activities. A mining company committing to invest more than USD 50 million can benefit from a minimum income tax exemption, a reduced corporate income tax rate for the transformation entity, exemption from custom and importation duties, and VAT reimbursement on locally purchased equipment and investments.
Furthermore, the Malagasy government has set up Export Processing Zones (EPZ). Export-driven companies located in the EPZ can enjoy tax exemption upon company registration; a reduced dividend tax rate at 10%; exemption from professional taxes; income tax exemption for the first five years (10% tax thereafter); exemption from customs duties and taxes on imported equipment and inputs; free transfer of funds upon the termination of activities.

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.

Bilateral investment conventions signed by Madagascar
Consult the site of the Economic Development Board Madagascar.

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Latest Update: May 2024