Madagascar

Madagascar is an island state in the Indian Ocean, located off the southeast coast of Africa. It is the largest state in the world, occupying one island (the fourth largest in the world).

General information

The official name of the island nation is the Republic of Madagascar. It occupies an area of 587,041 km² (45th in the world). The population of the state is about 29,802,771 people (as of the beginning of 2023). Malagasy is an ethnic group that forms the main population of Madagascar. Malagasy are divided into two subgroups — the highlanders and the inhabitants of the coast. The division into two subgroups may be due to the history of human migration to the island.

48% of the inhabitants are adherents of traditional beliefs (animalism, fetishism, the cult of ancestors, etc.), 44% are Christians (an equal number of Catholics and Protestants), 8% are Sunni Muslims.

According to the 2010 constitution of the Republic of Madagascar, Malagasy is the national language. The official languages of Madagascar are Malagasy and French. The state is a member of the International Organization of Francophone Countries.

English is common in tourist areas, in addition, the population of Madagascar uses Creole French of the Reunion Island, Arabic, and Chinese.

The official currency of the country is the ariary.

Antananarivo is the capital of Madagascar. More than 1.5 million people now live in this city. Administratively, the country is divided into 6 autonomous provinces (faritany mizakatena) and 22 regions.

History, geography, culture, mentality

The island of Madagascar began to be populated from about the 6th-5th centuries BC. The first to arrive in Madagascar were the inhabitants of Southeast Asia, India, Iran and East Africa. In the 7th century, the Arabs founded a trading port in the northwest of the island.

At the beginning of the 16th century, the Portuguese landed on the territory of Madagascar, since then numerous attempts by Europeans to conquer the island began. However, local residents resisted them, preventing them from establishing permanent settlements. It was at this moment that several intertribal formations arose on the territory of modern Madagascar, the most significant of which turned out to be the Merina. It reached its peak in the 18th century, when the ruler Andrianampuinimerin strengthened the position of the state with the help of military campaigns, diplomacy and dynastic marriages. In 1818, his son Radama I assumed the title of King of Madagascar.

In the 17th century, the important geographical position of the island and the virtual absence of colonial authorities made Madagascar what it became famous for throughout Europe — a paradise for pirates and slave traders.

In the 1880s, the French began their invasion of the island, followed by a series of bloody wars. Madagascar came under French protectorate. In 1896, the period of French colonization began, which lasted until the middle of the 20th century. The colonists planted vanilla, cloves and coffee plantations on the island, which they successfully exported. At the same time, they widely used forced labor of the local population. In 1946, Madagascar received the status of "overseas territory" of France. In March 1947, armed protests of the population began in the eastern provinces of the country, the main demand of which was to grant independence to the island. As a result, in 1956, the Malagasy got their way, France passed a law establishing autonomous governments in the colonies, and on June 26, 1960, an independent Malagasy Republic was proclaimed. In December 1987, a course was set for the socialist development of the island, and the country became known as the Democratic Republic of Madagascar. However, already in 1992 it was decided to abandon this course and in September the state was proclaimed the Republic of Madagascar, the process of democratization and market reforms began in the country.

The island of Madagascar is washed by the waters of the Indian Ocean and is located off the east coast of South Africa, from which it is separated by the Mozambique Channel. The highest point of the island is the extinct volcano Marumukutru (2876 m), which is located in the Tsaratanana mountain range, in the northern part of Madagascar. The central part of the island is occupied by the high-mountainous Andzafi plateau, gently descending to the west and abruptly breaking off to the lowlands of the eastern coast.

Madagascar can be roughly divided into five regions: the east coast, the Tzaratanana mountain range, the central highlands, the west coast, and the southwest.

The culture of the Malagasy people has developed in the process of historical interaction between the African and South Asian worlds. Due to its complexity and diversity, it has many customs that can take many forms. Among them are “fadi”, which literally means “taboo”, certain behavioral taboos that are deeply rooted in local traditions. The main recommendation when visiting Madagascar is to be sure to ask your local guides about the existing fadis in each area.

Power

Madagascar is a presidential republic. The head of state, the president, is elected for a five-year term by direct universal suffrage. Executive power belongs to the Government headed by the Prime Minister. The legislature represents a bicameral parliament, which consists of the National Assembly and the Senate, one-third of the senators are appointed by the president.

Economy

Madagascar is a predominantly agricultural country. It is included in the group of least developed countries in the world. Nominal GDP in 2019 is $12.1 billion ($10.1 billion in 2018). The inflation rate is 7.8%. GDP per capita — 440 US dollars. Meanwhile, according to the World Bank, the number of people living below the poverty line has increased by 10%, and 92% of the population is content with a daily income of no more than $2.00. The problem of hunger is acute. According to the Food and Agriculture Organization of the United Nations (FAO), 34.58% of Malagasy people are affected by malnutrition in 2020.

Agriculture (26.5% of GDP) is the leading sector of the economy, which employs about 12 million people. The main crops are rice, sugarcane, corn, vegetables, fruits, melons. Madagascar ranks first in the world in the production of vanilla and second in the production of cloves. Fishing is developed, Japan and Russia are fishing in the waters of the country.

Industry (16.9% of GDP) is poorly developed. The food industry is the most developed, the textile, tobacco and paper industries are developing. There are oil refineries, production of agricultural machinery, glass, cement, and fertilizers. More than 150 enterprises have been created in the free export zone, mainly textile and agricultural products processing.

Half of the world's reserves of sapphires, as well as semi-precious amethysts and beryls, are concentrated on the island of Madagascar. There is iron, nickel, bauxite and uranium. Deposits of chromium ore, mica, graphite and other minerals are being developed. As well as lesser-known but important industrial metals such as vanadium, which is used in the manufacture of high-strength steels and titanium alloys, and ilmenite, used in pigments and bleaches from toothpaste to paints. Large deposits of oil (about 37 billion barrels) and gas (167 billion cubic meters) have been discovered in the southern regions and on the shelf of the Mozambique Channel. On the shelf near the city of Morondava there are heavy oil fields estimated at 3 billion barrels.

The service sector is actively developing (56.6%), of which the tourist destination is 6.3% of the island's GDP.

The main trading partners of Madagascar are the EU countries (primarily France), China, the USA, India and South Africa. Export volumes for 2018 increased by more than 20% and amounted to USD 2.92 billion (USD 2.72 billion in 2017).

In May 2018, Russia signed a Memorandum of Understanding between JSC Zarubezhgeologiya and the Ministry of Mining and Oil Industry of Madagascar.

Business climate

In 2007, the government of Madagascar adopted the Madagascar Action Plan (MAP) to stimulate economic development.

The country has improved internationally through trade agreements. As part of the AGOA (African Growth and Opportunity Act), Madagascar exported $338 million worth of goods, mainly textiles, to the United States. The country trades duty-free with the European Union and the South African developing community, as well as with other countries. But it is MAP that remains the key development plan and consists of the following areas:

• Responsible and prudent government
• Education reform.
• Agricultural development and the green revolution.
• Health, family and HIV
• Fast growing economy.
• Care for nature and national solidarity.
• Connected infrastructure (expansion of infrastructure for road, rail and air transport, partly through public-private partnerships with foreign investors).

Investment climate

Foreign mining companies began to gradually enter Madagascar. Two huge investments were made in the mining of nickel and ilmenite.

The Canadian corporations Sherritt International and SNC Lavalin of Canada, together with the Korean Sumitomo Corp. and Korea Resources Corp. invested about $3.3 billion in a nickel project in the Ambatovi region, which went to the construction of a mine, a factory and the expansion of the country's main port — this is one of the largest mining projects in the world. However, work was suspended due to a sharp drop in raw material prices caused by the global economic recession.

QQM/Rio Tinto International is planning to begin production at a new $850 million ilmenite project that has been used to build a port and a sand processing plant in which it occurs. The ore will be shipped to Quebec for processing into titanium dioxide.

About 25 companies have responded to a government notice to explore for 500 million tons of iron ore in Soalala. New investors are also exploring significant uranium reserves.

Gemstones are also a great prospect, with the government's plan to shift the value chain, keeping rubies, emeralds and sapphires in high value in the country. Some investors have already received agreements with the government to open stone processing factories. The new Gemological Institute plans to produce about 400 gem cutters a year and is the first of its kind in Africa.

Also, the government of Madagascar, through e-governance, has developed a strategy to improve revenue management and access to public services for individuals and businesses.

In the Office of the President of the Republic, a Digital Governance Unit has been set up in accordance with the main objectives of supporting the Malagasy institutions in all projects that will be the subject of digitalization "Digital Government Union" (Unite de gouvernance digitale).

The country is a member of the Southern African Development Community (SADC), COMESA (Common Market for Eastern and Southern Africa) and IOC (Indian Ocean Commission), regional free trade organizations with over 600 million potential consumers. Madagascar has signed the Tripartite Free Trade Agreement (TFTA), which brings together SADC, COMESA and the East African Community (EAC), which includes 57% of the total population of Africa.

Madagascar has mining, agricultural, energy and fishing potential. The uniqueness and richness of its biodiversity (its level is 90% — No. 1 in Africa), the highest level of endemicity in the world, is also an asset for tourism investment.

Madagascar's African Growth and Opportunity Act (AGOA) compliance with the United States and the signing of an Economic Partnership Agreement (EPA) with the European Union allows the country's companies to export duty-free to these markets. This is reflected in the strong trade dynamics between Madagascar and the two countries, with exports from Madagascar to the United States increasing by 12.8% in 2016 and from the European Union by 44.6% in 2016.

The government of the country is implementing significant legal, procedural and administrative reforms aimed at simplifying business practices and encouraging local and foreign investment. The Free Zones and Companies Act allows eligible companies to enjoy exemptions from customs duties, import VAT, income tax for the first 15 years.

The competitive advantages of Madagascar for investors include:

• labor cost;
• the cost of electricity and water;
• for industrial use the cost of rent; industrial sites;
• availability of natural materials and inexpensive costs;
• ease of exploitation of resources (eg open pit mining; minerals, natural conditions for agriculture; agriculture and infrastructure), etc.;
• the benefits of connecting to the Internet (ranks 2nd in terms of speed in Africa).

The Government of Madagascar is actively developing public-private partnerships. In the telecommunications sector, several ambitious infrastructure projects are underway, including the laying of more than 12,000 km of fiber optic networks and more than 14,000 km of microwave networks. The energy sector includes several projects for the construction of hydroelectric power plants. The next stage in the creation of special economic zones specialized in the textile industry (integrated industrial zone + 100 ha) will contribute to the construction of infrastructures necessary for the emergence of growth poles.

Business and investment support structures

The government of the Republic of Madagascar actively encourages the inflow of foreign capital, especially into the leading sectors of the national economy: mining, tourism, agro-industrial complex, light industry, telecommunications. To this end, entrepreneurs carrying out large investment projects are provided with a number of tax breaks.

They are also subject to simplified administrative procedures, in particular, those governing the acquisition of real estate.

According to the World Bank, presented in the latest annual Doing Business report, Madagascar ranks 134th out of 183 in terms of a combination of factors that determine the business climate and the security of import-export operations.

The coordination of attracting and distributing foreign investments was entrusted to the Economic Development Board of Madagascar (EDBM), which has been functioning in close cooperation with the presidential administration of Madagascar, relevant Malagasy ministries and departments, as well as the local representative office of the World Bank. ).

Its competence includes the following activities:

• consideration of applications of entrepreneurs for obtaining a residence permit;
• registration and liquidation of enterprises with the participation of foreign capital;
• issuance of permits for the acquisition of land and construction of real estate;
• mediation in resolving conflicts between employees and employers, as well as between enterprises;
• participation in the preparation and conclusion of international agreements of the Republic of Madagascar on the promotion and mutual protection of investments.

In addition, Madagascar is a member of several international organizations such as the World Trade Organization (WTO) and the International Monetary Fund (IMF), which can also provide support to foreign investors.

The government of the country created the Malagasy Association of Capital Investors. Its aim is to bring together and represent all private equity operators in Madagascar. The 9 current members collectively represent an investment portfolio in Madagascar of over US$400 million, giving them real legitimacy as representatives of the profession with entrepreneurs, institutional investors, public authorities and opinion leaders.

The Ministry of Economy and Finance coordinates government efforts to attract investment and promote policies that support economic growth and development in Madagascar.