Executive Summary

Much anticipated momentum on planned policy and institutional reforms and significant infrastructure projects in support of Madagascar’s investment climate did not materialize as investors had hoped in the last year. The Government of Madagascar’s 2019 Plan Emergence de Madagascar (PEM) is the Government of Madagascar’s blueprint for the country’s economic revival. However, it remains without an implementation plan that will translate aspirations into policy and then into action. Combined with the economic shocks inflicted by COVID-19, including several months of nation-wide confinement, growing concerns about transparency in decision-making, uneven anti-corruption measures, and variable respect for sanctity of contract and rule of law, Madagascar presents a more mixed investment landscape than a year ago.

After four years of steady growth, the World Bank had projected that the GDP would grow 5.2 percent in 2020 but instead it shrank 4.2 percent for the year. Sharp declines in exports, increased layoffs and factory closures, disruption of inputs and order cancelations for Malagasy products caused major economic disruptions in the short to medium term. Economic activity picked up in the last quarter of 2020 once the government lifted confinement orders. At the time of writing, COVID-19 case numbers are on the rise again, and the government may be compelled to implement new confinement measures.

A GOM Multi-Sectoral Plan (PMDU) to boost economy activity during the pandemic was not implemented. Instead, GOM financial reporting shows that, as of March 18, 2020, 80 percent of the funding disbursed for COVID-19 response went to subsidize public utility JIRAMA; the remaining 20 percent was split amongst multiple categories including medical outlays, special teacher allowances, social assistance, and assistance to businesses. Many in the private sector viewed this as a missed opportunity to utilize the USD 840 million in donor assistance that Madagascar received during 2020.

2020 saw delays on many fronts: opening of the new international airport terminal; finalizing the terms of the hydroelectric projects Sahofika and Volobé; resolving the concerns surrounding the opening of the Base Tulear mine in the south-west; and finalizing the investment law and the revisions to the mining code. Without new progress on pending high-profile investments which are foundational to Madagascar’s future growth prospects, it is unclear how the GOM will meet its aspirational development and investment goals. Whereas, momentum shifting toward a more business-friendly approach, it would present opportunities for investments and partnerships in infrastructure, textiles, energy, tourism, agri-business, mining, and health.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 149 of 180 (score 25/100
World Bank’s Doing Business Report 2020 161 of 190 (score 47.7)
Global Innovation Index 2020 115 of 131
U.S. FDI in partner country ($M USD, historical stock positions) 2018 N/A
World Bank GNI per capita 2019 USD 520

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The Rajoelina government’s PEM strategy has stressed the importance of attracting foreign direct investment (FDI) to achieve its ambitious economic growth goals. Since the Rajoelina administration took office in January 2019, the GOM has promoted Madagascar as an attractive investment destination by sending delegations across Africa, Europe, and Asia to make the case while also organizing trade shows in Madagascar.

The marketing push has not yet translated into actual policy and certain developments have called the GOM’s commitment to new FDI into question. Some cases in point include the following: the GOM’s failure to sign the Power Purchase Agreement its officials negotiated for Sahofika, a large hydroelectric project developed by Themis and backed by U.S. private equity firm Denham Capital and AfDB amongst others. The 200 MW USD 1 billion hydroelectric project is slated to bring electricity to 8 million new customers. The World Bank backed Volobé project appears stalled as well. Over 15 months ago, the GOM suspended work at Base Tulear, the Australian company Base Resources’ USD 560 million investment into ilmenite mining, leaving the entire project’s future uncertain. In 2021, the GOM overturned a decision by troubled national utility JIRAMA to implement the World Bank-recommended OPTIMA electricity tariff program to adjust pricing and stanch losses at JIRAMA. The World Bank continued to negotiate with the GOM but has warned that the GOM’s actions could jeopardize new funding of USD 75 million and a multi-annual program worth USD 400 million.

The GOM says it is actively seeking FDI and increased participation from the Malagasy private sector. However, the business community continues to express frustration about poor transportation infrastructure, expensive yet unreliable supply of electricity and water, endemic corruption and the uneven nature of the anti-corruption initiatives, and weak enforcement of rules and regulations as impediments to investment, foreign or domestic. In addition, the business community is concerned about the lack of transparency in awarding contracts, uncertainty about agreed terms for contracts and tenders, and centralized decision-making which has caused confusion and backtracking. The GOM drafted amendments to the mining code in late 2019 which included several provisions on ownership and taxes that worried investors and interest groups and forced a return to the drafting table. Mine operators, though, left the review committee for the legislation in late 2020, arguing that the decision-making process was unfair and some GOM proposals were not economically viable.

The existing investment law allows foreign ownership of businesses and does not discriminate against foreign-owned enterprises. There is no legal requirement that citizens own shares of foreign investment, nor any restriction on the mobility of foreign investors. The regime for visas, residence, and work permits is neither discriminatory nor excessively onerous. A new version of the law is pending clearances by senior decision makers and is expected to clarify access to land and address issues of corporate social responsibility and sustainability.

The Economic Development Board of Madagascar (EDBM), an investment promotion agency, has several objectives – to strengthen the competitiveness of the Malagasy private sector, to increase FDI, to develop and recommend business incentives for private investments in Madagascar, and to provide a one-stop shop to help investors set up or expand their business through tailored services by specialized advisors. EDBM’s move toward digitalization and paperless procedures, to enable the online creation of companies and the provision of online tools for startups & SMEs in search of investors’ support, are expected to simplify the business set up process further.

Limits on Foreign Control and Right to Private Ownership and Establishment

Broadly speaking, there are no general, economy-wide limits on foreign ownership or control. Any individual or legal entity, domestic or foreign, is free to invest and operate, in accordance with the laws and regulations.

Foreign and domestic private entities are free to establish and own their business enterprises and engage in all forms of remunerative activities. Except for the telecommunication sector, where foreign ownership is restricted to 66 percent, foreign investors can retain full ownership of their company and repatriate their earnings without restriction. Certain strategic sectors such as banking, insurance, mining, oil, and gas, medical, and pharmaceuticals have extra regulatory provisions which apply to all investors, foreign and domestic.

There is no official discrimination against foreign investors, who are treated on par with local investors, although foreign investors have reported delays in getting permits and problems finding their way through Madagascar’s convoluted bureaucracy.

Madagascar has no formalized investment screening mechanism for inbound foreign investment. Economic Development Board of Madagascar (EDBM) does conduct a review which is submitted to the licensing authority and final ratification of foreign investment must be completed by the President’s Office.

Other Investment Policy Reviews

In the past three years, the government has not undergone any third-party investment policy reviews (IPRs) through a multilateral organization such as the OECD, WTO, or UNCTAD.

Business Facilitation

In 2006, Madagascar set up the Economic Development Board of Madagascar (EDBM), a one-stop shop for receiving, processing, and delivering the required administrative documents to speed up the approval of all investment projects. Its primary recommendation for a foreign company seeking to start a business in Madagascar is to consider collaborating with a local business. Many foreign companies seek local partners to ease their introduction to the market and make new contacts. Post recommends the retention of competent local counsel and/or a local representative.

EDBM is fine-tuning an online registration service to launch in the second quarter of 2021 which should shorten the registration timeline and provide more clarity on the rules for investment. Working in conjunction with the concerned public institutions and technical and financial partners, EDBM’s reforms will establish a paperless process for business creation (companies and sole proprietorships) while putting in place a unique identifier for each company. Through close collaboration with municipalities, the Ministry of Territory Development-Habitat-Public Works, and the national utility company JIRAMA, EDBM aims to modernize the issuance of building permits at the municipal level, starting in the capital city.

While Madagascar placed 161 out of 190 in the 2020 World Bank’s overall Doing Business rankings, it ranks 80 out of 190 (Scoring 88.5) for ease of starting a business in the same report. EDBM handles business registrations, which takes on average of eight days after receipt of complete documentation and is amongst the shortest in Sub-Saharan Africa (21.5 days for the SSA region). Companies will need to secure a physical local address with a signed lease before attempting to register. EDBM assists both local and foreign investors in registering and operating their businesses. At the EDBM one-stop shop, companies can obtain their business identification cards, tax registration confirmations, commercial registration numbers, and apply for visas, work permits or professional cards. They must also register for social security and health insurance. Companies in Madagascar are free to open and maintain bank accounts in foreign currency.

Outward Investment

The GOM does not offer incentives to promote outward investment. However, many wealthy entrepreneurs have diversified their investment base by investing in Europe, the United States, Mauritius, and the Middle East.

There are no restrictions on capital outflows from Madagascar to the rest of the world, but companies and individuals must fill out a form showing the reasons for the transfers. Domestic investors who invest abroad must comply with the foreign currency control mechanism enforced at the state and commercial bank level with close monitoring by the Finance Ministry.

9. Corruption

While giving or accepting a bribe is a criminal act and is subject to trial by court, corruption is an ongoing issue at all levels in Madagascar.  No sector is immune, but it is most pervasive when dealing with the judiciary, police, tax, customs, land, and the mining industry.

Madagascar’s anti-corruption legislation, updated in 2016, mandated the establishment of the Independent Anticorruption Office (BIANCO) and the Committee for Safeguarding Integrity (CSI).  BIANCO enforces the anti-corruption law while CSI monitors the implementation of the national anticorruption strategy.  The anti-corruption courts (PAC) were established in 2018 to hear all corruption-related cases – including economic and financial crimes – after an investigation by BIANCO or the gendarmerie.  There are supposed to be PACs throughout the country; the first PAC was set up in the capital and the second became operational in Mahajanga in October 2020; the set-up of the third PAC in Fianarantsoa is underway.  Madagascar also has a Financial Intelligence Unit (SAMIFIN) to carry out research and financial analysis related to money laundering.  Transparency International Initiative Madagascar (TI-IM) has an office in the country working here since 2002.  TI-IM, BIANCO, SAMIFIN, Police and Gendarmerie collaborate closely to bring cases to the courts.

The Rajoelina administration has prosecuted some major corruption cases. In 2019, 5461 cases were charged, 1441 individuals investigated, 639 arrested, and 155 jailed for pre-trial detention.

The long-awaited Illicit Asset Recovery law was passed by ordinance in 2019.  Subsequently, the CSI, BIANCO, and SAMIFIN initiated the development of the draft implementing decree, specifically on the establishment of the Agency for the Recovery of Illicit Assets.  This ordinance will allow the country to properly manage confiscated assets at both the national and international level.  However, in 2020 members of parliament introduced legislation that would weaken the anti-corruption system by limiting the mandates of PAC judges, reducing areas of jurisdiction for the PAC, and repealing the illicit asset seizure decree. The legislation remains pending before the Senate.

There is no requirement for companies to establish internal codes of conduct that prohibit bribery of public officials.  Both the anti-corruption law and the penal code prohibit any individual/enterprise from giving money, presents, or other gifts to public officials to obtain advantages they are not entitled to.  The law also provides that any private enterprise that commits corrupt practices to obtain a permit, license or authorization is excluded from government procurement.  Furthermore, according to the law, any license, authorization, or permit issued illegally through corruption is void.

Both Article 31 of the 2016 anti-corruption law and Article 182 of the penal code require that any conflicts of interest concerning a public official should be declared to the supervising authority.  Failure to do so can lead to between six months to two years of imprisonment, a fine varying from MGA 1,000,000 (eq. USD 270) to MGA 50,000,000 (eq. USD 13,500) or both.  There is limited information on companies using internal controls, ethics, and compliance programs to detect and prevent bribery of government officials.  However, some foreign companies have begun to orient their internal control, ethics, and compliance programs to prevent bribery, and the Foreign Corrupt Practices Act prohibits U.S. firms from engaging in such behavior.

Madagascar ratified the United Nations Convention against Corruption, as well as the African Union Convention on Preventing and Combating Corruption, in 2004.  Madagascar also joined the Southern African Development Community (SADC) Protocol against corruption in 2007 but has not yet signed the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transaction.

NGOs and associations are involved in governance and anti-corruption projects.  The law does not have any explicit provisions protecting NGOs and associations.  A Transparency International report states that although many associations and NGOs exist on paper, their actions are limited in terms of impact, especially in terms of playing a watchdog or advocacy role concerning government institutions.  Environmental activists have been harassed and threatened by various means.  The government, however, does not target them directly.

In general, the private sector identifies corruption as an obstacle to investment.  The IMF country report on Madagascar published in 2017 indicates that corruption affects the business climate in Madagascar.  Forty percent of those surveyed expected to give gifts “to get things done”, or to get an operating license, or to secure a government contract.  Moreover, 30 percent of the surveyed firms expected to give gifts in meeting tax officials and were required to make an informal payment or experienced a bribe payment request.  Similarly, more than 75% of Malagasy stated that corruption had increased in Madagascar over the past year, according to the 2019 Afro barometer Survey, with 44% of Malagasy believing that police and gendarmes are involved in corruption and 39% believing the same of judges and magistrates.  BIANCO fared better with respect to the public’s trust, with 87% believing it is somewhat or very probable that BIANCO will take action if they report an act of corruption.  Nevertheless, of these respondents, 70% believe that regular citizens are at risk of retaliation if they report this. For exporters, many products require documentation linked to regulatory controls and this process can require a significant amount of time, costs, and possibly bribes.  Aside from the routine demands for a quid pro quo, close ties between business and political elites also present barriers to entry for newcomers to the field.

BIANCO has set up a secure platform to allow whistleblowers to remain anonymous and to submit sensitive information securely, using encryption and respecting data transmission and processing.  The government plans to roll out a communication campaign to introduce this online tool which allows citizens to provide authorities with information about corruption.

Despite the measures introduced to combat corruption and smuggling, Madagascar’s vulnerabilities in this regard were exposed in early January 2021 when South African authorities arrested three Madagascar nationals with 73.5 kg of gold at Johannesburg airport.  The men were enroute from Antananarivo to Dubai; so far, the GOM has had no success in persuading the South African government to extradite either the gold or the detainees to Madagascar.

Resources to Report Corruption

Bureau Indépendant Anti-Corruption (Bianco)
Name: Mr. Laza Eric Donat Andrianirina
Title: General Manager
Organisation: Independent Bureau Anti-Corruption (Bianco)
Address: Villa “La Piscine”, Ambohibao, Antananarivo, Madagascar, Po Box 399
Telephone Number: +261 20 22 489 79 / +261 20 22 489 93 / +261 33 02 002 99
Email Address: Bianco.Dg@Moov.Mg; Contact@Bianco-Mg.Mg;

Transparency International-Initiative Madagascar (Ti-Im)
Name: Mr. Solofo Rakotoseheno
Title: Chairperson Of Ti-Im
Organisation: Transparency International Initiative, Madagascar (Ti-Im)
Address: Villa Huguette (Rdc), Lot Ii U86 Cite Planton, Ampahibe, Antananarivo, Madagascar
Telephone Number: +261 20 22 288 73; +261 34 96 418 79
Email Address: Contact@Transparency.Mg; Communication@Transparency.Mg

Sehatra Fanaraha-Maso Ny Fiainam-Pirenena (Sefafi) – Observatory Of Public Life
Name: Mrs. Sahondra Rabenarivo
Title: Chairperson
Organization: Sehatra Fanaraha-Maso Ny Fiainam-Pirenena (Sefafi)
Address: Lot Iiim33k, Andrefan’ambohijanahary, Antananarivo, Madagascar
Telephone Number: +261 32 59 761 62
Email Address: Sefafi@Gmail.Com;

Name: Desire Razafindrazaka
Title: Team Leader
Organization: Afrobarometer, Madagascar Office C/O Coef Resources
Address: Po Box 4075, Antananarivo, Madagascar
Telephone Number: +261 20 22 283 82
Email Address: Coef-Re@Moov.Mg;

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics


Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2018 $13,853 2019 Host Country Statistical source* USG or international statistical source USG or International Source of Data:  BEA; IMF; Eurostat; UNCTAD, Other
Foreign Direct Investment Host Country Statistical source* USG or international statistical source Economic Data Year Amount Year Amount  
U.S. FDI in partner country ($M USD, stock positions) 2015 450 2020 Host Country Gross Domestic Product (GDP) ($M USD) 2018 $13,853 2019 $14,115
Host country’s FDI in the United States ($M USD, stock positions) Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2015 450 2020 N/A BEA data available at
Host country’s FDI in the United States ($M USD, stock positions) 2019 N/A 2020 N/A BEA data available at
Total inbound stock of FDI as % host GDP 2015 67% 2019 54.8% UNCTAD data available at     

*Madagascar is not listed in the IMF data on CDIS. The table above shows data from the Central Bank of Madagascar and Institut National de la Statistique de Madagascar (FY2015).

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment 2015 Outward Direct Investment
Total Inward Amount 100% Total Outward Amount 100%
Mauritius 289 51.4% Country #1 Amount X%
France 111 19.7% Country #2 Amount X%
United States 68 12.0% Country #3 Amount X%
Swiss 23 4.0% Country #4 Amount X%
Luxemburg 15 2.6% Country #5 Amount X%
“0” reflects amounts rounded to +/- USD 500,000.

Source: Central Bank of Madagascar

Table 4: Sources of Portfolio Investment

Madagascar does not have a database on equity and debt securities. There is no stock market and corporates rarely offer their equity shares to the public. In addition, only companies and individuals with legal and permanent resident status can purchase Treasury bonds. Therefore, a breakdown per country on issued bonds is unavailable.

Portfolio Investment Assets
Top Five Partners (Millions, current US Dollars)
Total Equity Securities Total Debt Securities
All Countries Amount 100% All Countries Amount 100% All Countries Amount 100%
Country #1 Amount X% Country #1 Amount X% Country #1 Amount X%
Country #2 Amount X% Country #2 Amount X% Country #2 Amount X%
Country #3 Amount X% Country #3 Amount X% Country #3 Amount X%
Country #4 Amount X% Country #4 Amount X% Country #4 Amount X%
Country #5 Amount X% Country #5 Amount X% Country #5 Amount X%
Investment Climate Statements
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