Madagascar - Foreign investment



Prior to independence, nearly all private investment was French. The investment code of 1973 required that the Malagasy government own at least 51% of most new foreign projects, especially those involving strategic sectors of the economy. Import duties on equipment, excise on products, and taxes on profits were reduced or waived. Priority was given to enterprises in the allocation of foreign exchange and in the sale of goods and services to the state and its enterprises. In 1974, the government embarked on a socialist course, nationalizing large foreign enterprises without compensation and imposing strict controls on imports, prices and foreign exchange. There was little private foreign investment under these restrictive policies. The economy contracted and productivity declined. In 1994, under the pressure and guidance of the IMF, the World Bank, and donor states, a new liberalized policy framework was instituted. In 1997, the government announced that 45 state enterprises were set for privatization by the end of 1998, but only two companies had been privatized by mid-1999. Nonetheless, public foreign investment is encouraged.

A new code that became operational in 1986 allowed some exporters tax holidays of up to eight years, and there were special incentives for small enterprises. Foreign investors had the right to transfer dividends freely. The investment code of 1990 provided further incentives to foreign private investors and was opposed by local businesses for that reason. Rules covering foreign exchange and the number of foreign employees were relaxed. Small- and medium-size companies were provided tax exemptions through the first ten years of operation.

A number of export processing zones were set up in Madagascar. These have attracted investors from Europe (50%, mainly French, and Germany and Italy), Mauritania (30%), and Asia (10%, mostly Hong Kong and Singapore). Between 1990 and 1992, 69 new foreign-financed businesses were established in Madagascar. Investment during 1999 focused on the telecommunications, petroleum, and mining sectors. The value of foreign direct investment in 1998 was around $16 million.

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Aug 17, 2009 @ 8:08 am
Investors are not from Mauritania, but from Mauritius.

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