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U.S. Department of State 
Madagascar Country Commercial Guide 
Office of the Coordinator for Business Affairs 
This Country Commercial Guide (CCG) presents a comprehensive look at 
Madagascar's commercial environment through economic,political and 
market analyses.   
The CCGs were established by recommendation of the Trade 
Promotion Coordinating Committee (TPCC), a multi-agency task 
force, to consolidate various reporting documents prepared for the U.S. 
business community.  Country Commercial Guides are prepared annualy at 
U.S. Embassies through the combined efforts of several U.S. governement 
                    I. EXECUTIVE SUMMARY 
An island nation in the Indian Ocean with a population of about 12 
million, Madagascar ranks among the poorest countries in the world.  For 
the past 15 years average GDP growth has lagged behind the population 
growth rate of about 3 percent.  Despite this substandard economic 
performance, Madagascar's unique natural environment, wide variety of 
resources, low-cost labor force and location on the crossroads between 
Asia and Africa should interest investors. 
The country's successful transition to democratic government in 1993 
impeded economic decision making and halted economic reforms begun in 
the late 1980s.  Having peacefully implemented an elected, parliamentary 
system, the focus is now on resuming economic reforms pulling the 
country out of the failed socialist experiment of the past.  The 
Malagasy economy has traditionally been agriculturally-based: vanilla, 
coffee, cloves, rice, cotton, and sisal are the chief exports, now 
supplemented by frozen seafoods and textiles.  Although the government 
has not finalized a new structural adjustment program with the IMF, it 
is under negotiation and forms the background for liberalization reforms 
the government is taking. 
Madagascar's appeal to investors stems from its extremely low-cost, 
mostly literate and highly trainable workforce.  Over 150 investors, 
particularly garment manufacturers, have located in Madagascar's Free 
Trade Zone, established in 1991.  The absence of quota limits on textile 
imports to the U.S. and special access to the European market under the 
Lome Convention has further stimulated this growth.  The 50 percent 
devaluation of the Malgache franc from the liberalized foreign exchange 
market further enhances Madagascar's export competitiveness.  
The current investment code provides for exoneration from taxes on 
profits, and taxes on imports such as equipment, for two years.  Free 
transfer of profits from investments made in foreign currency is 
permitted.  The new export processing zone program offers permanent 
exemptions from taxes, including taxes on imports of primary materials. 
The fishing, mining, tourism, and agriculture sectors all show promise. 
The deteriorated state of Madagascar's communications and transportation 
infrastructure is the chief impediment to doing business.  Internal 
communications are very difficult, and international telephone service 
is unreliable and expensive.  The local road network is in very poor 
condition and is sometimes impassable during the rainy season.  
International assistance efforts are underway to address these problems. 
The legal and regulatory environment in Madagascar can be a further 
source of frustration for foreign investors.  Foreign ownership of land, 
though legal, is rare, and the security of private property, the 
enforcement of contracts, and the assignment of liability are not 
assured by the inadequate judicial system.  Potential investors in 
Madagascar, should be aware of the country's unique but highly 
threatened environment.  The nature of some investment projects may 
necessitate environmental impact assessment of them prior to approval. 
Good prospects for future U.S. sales and investment are in 
infrastructure and telecommunications, textiles, and food processing 
(especially seafood) sectors.  Tourism, especially "eco-tourism," has 
significant potential.  There are also opportunities in consulting, 
engineering and  
BUSINESS LANGUAGE:  French                  
Located in the Indian Ocean, between Africa and Asia, 
the Island of Madagascar ranks among the poorest countries inthe world.  
World Bank data places it among the poorest countries of the  world in 
terms of real per capita GDP.  Its economic record is one of modest 
growth from independence in 1960 until 1970, stagnation from 1970 to 
1980, sharp deterioration between 1980 and 1985 and financial 
stabilization with sluggish economic growth from 1985 through 1987.  
Strong growth in GDP (4 percent) began in 1988, but the political 
disruptions of 1991, including seven months government paralysis due to 
political events, broke the fragile growth trend.	 
Since the end of the transition to democratic rule in 1993, growth has 
stalled as the new government organized its economic policy.  There are 
some encouraging developments, however,  and the country clearly has 
significant economic potential. In the long run, this stems from an 
industrious and trained labor force and a variety of natural resources. 
In the short and medium terms,considerable economic growth can arise 
from greater efficiency of the government in the allocation and use of 
resources. There are promising possibilities for substantial expansion 
of tourism,non-traditional agricultural exports, sea-foods, garments, 
handicrafts and leather goods.   
The implementation of a new structural adjustment program with the IMF 
and the World Bank, anticipated before the end of this year, and the 
adoption of a new investment Code could lead to an economic boost and 
promote direct foreign investment in the near future. 
Agriculture, food processing, aquaculture, labor-intensive textile and 
clothing, mining and tourism are the economic sectors that offer the 
best growth prospects over the near-term. In recent years, weak prices 
and increasing competition from other producing countries have cut 
sharply into Madagascar's earnings for traditional agriculture exports 
such as vanilla, coffee and spices. 
Under World Bank guidance, liberalization and privatization have become 
dominant keywords.  Flour imports were liberalized in February 1995, in 
May the price of vanilla was freed to better compete on the 
international market, and in July all wheat imports will be liberalized.  
Civil aviation and telecomunication sectors have been opened to new 
competition, and privatization of parastatal banks and the petroleum 
company is planned.  
Many investors are now developing projects to encourage value-added 
processing of agricultural products before export, and diversification 
into new products such as  essential oils.  Fishing in Malagasy 
territorial waters and shrimp farming have developed into the leading 
foreign exchange earners in recent years, attracting several foreign 
The country has commercially significant reserves of several 
minerals, including chromite, graphite, mica, titanium and 
illmenite. Significant quantities of various precious and semi-precious 
stones are also found in Madagascar. The discovery last year of an 
important deposit of sapphires in the south of the country has attracted 
foreign investors from Thailand, Indonesia, Israel, and Europe. 
Light manufacturing, especially in the clothing and textile 
sectors, increased significantly since the establishment of a duty-free 
export processing zone program in 1990. 
Madagascar's unique flora and fauna is the basis for  
development of the tourism industry, although the decrepit state of the 
transportation and communications infrastructure is slowing the growth 
of this sector. Major investments in other 
hotels and similar tourist facilities will be required in order 
to realize future growth. Liberalization of the Malagasy air transport 
sector should boost tourism if more frequent flights to European cities 
and lower fares result.  
In 1975 Madagascar's government implemented a socialist economic 
policy focused on the principle of national self-sufficiency. 
Large foreign enterprises were nationalized and bureaucratic 
controls on business were implemented. These controls included 
restrictions on imported goods, on the allocation of foreign 
exchange, on prices and on profit margins.  This resulted in a sharp 
decline in economic productivity. 
Structural reform negotiations with the Bretton Woods 
institutions began in 1986, and have focused on liberalization 
and privatization of key economic sectors to improve efficiency 
and competitiveness.   
Since October 1994, air transport has been liberalized and 
new private companies already work in both domestic and international 
traffic. The petroleum sector will be liberalized soon under the World 
Bank structural adjustment program. Regarding the telecommunications 
sector, the government, since last year, has already awarded contracts 
to private sector suppliers of cellular and international services, and 
a new administrative framework has been implemented to recast the 
government role from network operator to telecommunication regulator. 
In the banking sector, the privatization of the two 
state-controlled commercial banks is not yet implemented, but the 
foreign exchange market is now liberalized as is the holding of foreign 
exchange, and the establishment of other private and off-shore banks is 
Madagascar has run sizeable overall balance of payments 
deficits since the mid-1980's.  The current account deficit as 
a percentage of GDP averaged in excess of six percent during 
the last half-dozen years and will register nearly seven percent 
in 1995.  In the past, current account deficits have been 
financed by external borrowing, resulting in a heavy external 
debt burden. By the early 1980's these inflows began to dry up 
and arrears rose sharply. Madagascar's external debt now stands 
at over USD 4 billion (about 130 percent of GDP) and total 
arrears are close to USD 1.2 billion.  In 1989, Madagascar was 
the beneficiary of debt cancellations by the governments of 
France, Germany and the United States, and other debt was rescheduled.   
Madagascar will not be eligible for additional Paris Club rescheduling 
of its debt burden until agreement is reached with the IMF on a new 
structural adjustment program (the last one expired in 1992).  Since 
1993, Madagascar has negotiated over a new structural adjustment 
facility, but due to the government's economic policy indecisiveness in 
the implementation of the program, driven by political risk assessments, 
little progress has been made to date. On May 1994, the adoption of a 
floating money system devaluated the Malagasy money up to 55 percent.  
Subsequent large fiscal deficits caused an inflation rate of 40 percent 
by year end. 
The physical infrastructure is inadequate, in quantity 
and quality, as a supporting structure for development in 
Madagascar. The poor state of roads prevents the evacuation 
of agricultural commodities which increases postharvest losses 
and makes the supply of inputs irregular and expensive. 
Railroads cover only a small portion of the island and suffer 
from underinvestment and poor maintenance.  The port system remains the 
same unchanged essentially since independence in 1960.  The recent 
change in domestic and international air transport services is still 
unsatisfactory because of limited traffic and high cost. 
The modernization of telecommunications system is the most 
significant infrastructure project now underway.  A private firm is 
providing cellular services, and a new digital switching system being 
installed as part of a foreign assistance project within a nationwide 
plan for upgrading communications. 
                   III. POLITICAL ENVIRONMENT 
The government and the people of Madagascar are favorably 
disposed towards the United States, and relations are friendly. 
The U.S. is a major bilateral assistance donor country, and also 
contributes to several of the multilateral development institutions 
active in the country, such as the United Nations Development Program, 
the World Bank and the International Monetary Fund (IMF). 
Madagascar is historically linked to its former colonial 
power, France, and its government, legislature and judicial system 
emulate French models. 
Madagascar is a member of the Indian Ocean Commission, the 
Non-aligned Movement and the Organization of African Unity.  Its non-
alignment is reflected in its "all points" diplomatic  
and commercial relations, which include Israel, North and South Korea, 
Taiwan, China, and Iran. 
After years of failed socialist economic policies, 
Madagascar has taken, since 1990, important steps towards economic 
reforms by reducing the government's presence in the productive sectors 
of the economy. After more than one year of political dispute, consensus 
is building for achieving, as soon as possible, a structural adjustment 
program with the IMF and the World Bank.  There is general agreement on 
the goals of 
developing the private sector, improving export volumes, creating jobs, 
and reducing public sector deficits and debts. 
Madagascar's political system is defined by a Constitution 
that was approved by referendum in 1992 and provides for a mixed 
parliamentary-presidential structure. The Parliament comprises 
a National Assembly and a Senate. Currently, only the National 
Assembly is in place.  The Senate election will probably be scheduled 
for next year once local governments are elected, beginning in 
September.  In June 1993, the 138 National Assembly members were elected 
for four years. The National Assembly elects the Prime Minister who then 
designates his cabinet of ministers (the Government) with the approval 
of, and in consultation with, the President. 
The President was elected in February 1993 by direct, universal  
suffrage for a five-year term.  The Prime Minister and his government 
constitute the executive branch, but matters of sovereignty - foreign 
affairs and national defense - belong to the President.  Both the 
Government and the Parliament share legislative initiative.  In addition 
to the executive (President and Government) and the legislative 
(National Assembly and Senate), the Constitution provides for an 
independent judiciary. 
There are considerable checks and balances. The Government 
can be censured and dismissed by an absolute majority in the 
National Assembly. On the other hand, the President and the 
Council of Government (i.e., the Prime Minister and his Cabinet) 
can by decree dissolve the National Assembly. The Constitutional Court 
must approve the constitutionality of every law before it is 
promulgated. Barring a dissolution, the next National Assembly elections 
will take place in 1997, followed by Presidential elections in late 1997 
- early 1998. 
Political parties currently tend to divide along populist 
versus reformist lines, the major difference being the degree 
of adherence to economic reform prescribed by the IMF and World 
The major reformist parties tend to be more economically conservative; 
i.e., favor balanced budgets, a reduced public sector, private sector 
development, pro-market forces and a privatized banking system.  The 
economic policy of the Government of Prime Minister Francisque Ravony 
tends now in this direction. 
Imported goods can enter Madagascar via air to the international airport 
in Antananarivo or via sea to the ports of Tamatave, Mahajanga, Toliara, 
and Antsiranana. Products are then distributed by road or rail 
throughout the country. Distribution is usually handled by the importing 
company or by the Indian and Chinese businessmen who are both retailers 
and wholesalers. 
The use of agents and distributors, particularly those with 
prior experience in distributing imported products, is highly 
recommended. Local agents have contacts to develop a customer 
base, and can easily communicate in Malagasy and/or French. 
Partners can be found by obtaining lists of importers from 
the Embassy Commercial Section or by contacting the market 
research firms listed in Appendix E. The Embassy recommends that 
U.S. firms visit Madagascar and negotiate a distribution contract face 
to face, in order to develop a sense for the realities of doing business 
in Madagascar and to develop trust between the U.S. and Malagasy 
Malagasy businessmen express interest in establishing 
franchises of U.S. businesses in Madagascar, but there is not 
enough consumer buying power to support such ventures in many areas.  
Existing franchise operations that appear to be profitable include: 
Avon, Yves Rochard, Benetton, Score and Champion.  A number of leading 
U.S. products or services are sold through distributorships:  American 
Express, DHL, Caterpillar machinery, General Motors cars and parts. 
Direct marketing for U.S.- made products is not recommended. 
The Malagasy consumer is not used to Western marketing styles 
and prefers a local flavor to advertising. In addition, French 
language nuances may not be evident to an American advertiser. 
However, the Embassy does encourage U.S. businessmen to direct 
market to locate distributors and agents. 
Joint ventures are almost a necessity for foreign investors, 
as foreigners are effectively not allowed to own land in Madagascar and 
the bureaucratic process for establishing a new enterprise is time 
consuming and requires much maneuvring. The benefit to joint ventures is 
that the Malagasy partner will know or can quickly cope with the 
bureaucratic process for establishing new enterprises, which involves 
obtaining permits from several different ministries. The drawback is 
that a Malagasy partner will likely be a minority shareholder in dollar 
There are few licensing ventures in Madagascar, the most 
prominent being that of Coca Cola with Star Brewery (owned by 
Henri Fraise  and Fils Co.), a relationship of 40+ years. 
Malagasy investors express an interest in license agreements, 
but it is recommended that contracts be negotiated carefully 
because of the lack of consistency in the Malagasy Commercial 
Office space can be found through a handful of real estate 
agents, advertisements in local papers, or word of mouth. 
Landlords will rent to new companies even if they have not 
obtained all their operating permits. Electric and water 
services can be obtained quickly but obtaining telephone service 
is extremely difficult and will remain so until the telephone 
system is modernized. Office furniture can be obtained locally 
at reasonable prices, but imported office equipment (particularly 
computers) is very expensive because of high customs duties. 
There are increasing numbers of multilingual, qualified secretaries and 
administrative assistants interested in working with foreign businesses. 
The purchasing power of the average Malagasy citizen is very 
low. Most Malagasy can literally only buy immediate necessities. 
In addition, culturally the Malagasy are reserved, often shy. 
As a result there is not much value put on showy salesmanship. 
Retailers and sales clerks respond to custumer's need and process sales, 
but do not practice sales techniques common in the United States and 
even in Europe. 
Marketing is a relatively new industry to Madagascar. 
Avenues of advertising include billboards, posters, newspapers, 
radio and television.  Prominent campaigns have European 
influence and often link the product with leisure activities 
or personal enjoyment. The quality of production of advertising 
campaigns varies and depends on the budget of the advertiser. 
It is possible to pay a newspaper for a full page article/ 
advertisement, or the three television stations to broadcast  
an info/advertisement program. 
       Daily Newspapers 
       L'Express de Madagascar 
       P.O. Box 171 
       Antananarivo 101 
       Tel:  (261 2) 203 10 
       Fax:  (261 2) 213 83 
       Midi Madagasikara 
       P.O. BOX 1414 
       Antananarivo 101 - Madagascar 
       Tel: (261 2) 300 38 
       Fax: (261 2) 273 51 
       Madagascar Tribune 
       P.O. BOX 659 
       Antananarivo  101 - Madagascar 
       Tel: (261 2) 226 35 
       Fax: (261 2) 222 54 
  Business Journal: 
       Mada (weekly) 
       15, Rue Ratsimilaho 
       Antananarivo 101 - Madagascar 
       Tel: (261 2) 256 34 
       DMD (Dans les Media Demain) 
       58, Rue Tsiombikibo - Ambatovinaky 
       Antananarivo 101 - Madagascar 
       Tel: (261 2) 277 88 
       Fax: (261 2) 359 79 
       ROI (Revue de l'Ocean Indien) 
       P.O. Box 46 
       Antananarivo 101 - Madagascar 
       Tel: (261 2) 225 36 
       Fax: (261 2) 345 34 
       Television Malagasy (state) 
       Immeuble Solima - Antaninarenina 
       Antananarivo 101 - Madagascar 
       Tel: (261 2) 268 30 
       Fax: (261 2) 248 52 
       MA TV (private) 
       P.O. BOX 1414 
       Antananarivo 101 - Madagascar 
       Tel: (261 2) 208 97 
       Fax: (261 2) 344 21 
       TVF (private) 
       41 bis, Rue Andriba - Mahamasina 
       Antananarivo 101 - Madagascar 
       Tel: (261 2) 207 30 
       Fax: (261 2) 203 02 
Pricing of imported products depends on import duties 
which range from 0 to 100 percent. Profit margins on all products tend 
to be small. As a result of the devaluation of the Malagasy Franc on May 
1994, the local price of imported goods has risen arise dramatically.  
More and more businessmen are listing their prices in French Francs, 
awaiting stabilization of the Malagasy Franc. 
The concept of sales service and customer support is also 
relatively new to Madagascar and is primarily found among 
distributors of computers and automobiles. Retailers of most 
consumer goods rarely accept returns of defective products. 
In addition, companies that offer servicing very often lack 
spare parts and their technicians may have only limited training.  
Objects in need of repair may have to be sent to Europe or the company 
may have to wait months to receive a necessary spare part. 
To protect the consumer's rights, two private consumer 
organizations were created in 1992 and 1994 but their 
actions against the price increases of goods are very limited.  
As part of its liberalization strategy, the government 
frequently advertises in official and local journals or via 
radio, requesting bids for supplying the government or government-funded 
projects.  Some of these are intended for international bidders and some 
only for local companies. These bids are opened publicly and tend not to 
be contested. However,  
last year, an international bid in hotel management was 
cancelled for political reasons and the practice of awarding 
government contracts without making a public request for bids 
still occurs. 
Officially, Malagasy law protects property rights infringement. 
Madagascar is a member of the World Organization 
of intellectual Property (Organisation Mondiale de la Propriété 
Intellectuelle - OMPI) and has created two offices dedicated to 
IPRI protection: OMAPI, Office Malgache de la Propriété industrielle 
(Malagasy Office for Industrial Property) and OMDA, 
Office Malgache des Droits d'Auteurs (Malagasy Office for Copyrights). 
However, there is little enforcement: pirated audio 
and video recordings are the most flagrant violations of property 
infringement in Madagascar, and imported "fake" consumer goods can also 
be found (such as imitation Cartier bags or Rolex watches). Local 
industry is not capable of producing quality imitations. 
It is recommended that foreign investors or businessmen 
ask the assistance of a local attorney before finalizing any 
contract or operating agreement in Madagascar. 
As reform and renewal of Madagascar's economy proceeds, some U.S. 
businesses will find the country a promising market.  Telecommunications 
and transportation (and agro-industry) sectors will be undergoing major 
reinvestment programs over the next 5-10 years, using multilateral, as 
well as bilateral assistance.  U.S. makers of telecommunications 
equipment, road-building and repair machinery, and civil aviation 
equipment are well positioned to benefit.  (Caterpillar recently 
celebrated its 2000th sale since it established a distributor in 
Antananarivo.)  Agro-industry too will face major renewal and upgrading 
as the country addresses the past 30 years of low investment.  Again, 
U.S. suppliers have much to offer in this area.  The mining sector also 
might offer an attractive market if planned reforms of the mining code 
open the country to greater investment. 
Due to its reknown biological diversity and unique plant and animal 
life, Madagascar holds great potential for eco-tourism and 
environmentally sensitive technologies.  The country still has very poor 
infrastructure in the hospitality industry however, and its low per 
capita income puts some new technologies out of reach unless development 
assistance funding or bilateral export financing options exist.  
Madagascar presents a market of needs that U.S. companies could readily 
fill, but it remains a market of low purchasing power.   
Madagascar's transportation and telecommunications networks 
impose significant costs on local firms, both in terms of 
direct expenses and diminished efficiency. 
Although foreign trade is now liberalized, a heavily bureaucratic 
regulatory system remains a burden for business people. 
The small size of the Malagasy market and generally low 
income levels limit the attractiveness of the market for many 
potential foreign exporters. The current unavailability of 
Eximbank coverage is also a significant handicap for potential 
U.S. exporters of capital goods. 
According to the 1995 financial law, there are four kinds 
of import duties: 
- Import tax (TI): ranging from exempt to 30% 
- Custom fees (DD): ranging from exempt to 30% 
- Value added tax (TVA): ranging from exempt to 25% 
- Consumption tax (DA): ranging from exempt to 100% 
Imports are valued on C.I.F. 
Imports into Madagascar are liberalized and no longer need 
any import license except for a few categories of items which 
are considered by the government as "strategic" such as guns, 
explosives, precious stones, and radioactive products. 
Before importing, importers are required to submit their 
"Fiche Statistique d'Importation" (Import Data File) accompanied 
by proforma invoice to their primary commercial bank, with an 
information copy to the Ministry of Commerce. 
The following documents are required for commercial shipments to 
        Commercial invoice 
        Bill of Lading or Airway bill 
        Insurance certificate 
        Packing list 
        Import declaration 
        Certificate of origin 
        Report of VERITAS 
        Bureau inspection for quality and quantity control before 
Personal effects of diplomatic corps and international 
organizations and institutions with diplomatic privileges 
are not subject to import taxes upon entry, but if they are 
selling their effects before leaving the country, they must 
pay the import duties mentioned above. 
Temporary entry is also granted to any factor input or goods used within 
the free trade zones. 
Imports of pornographic material are prohibited. 
No import duties are levied on the following: 
     - Non-commercial parcels sent by postal packet, 
       parcel post, or by air, when no import declaration 
       is entered; 
     - Commercial consignements sent by postal packet, parcel 
       post, or by air; 
     - Personal effects of travelers/tourists; 
     - Books, publications, and documents referred to in UNESCO 
Firms operating in the free trade zones are exempted from 
import duties. 
Madagascar adheres to international labeling and marking 
standards, though there is no strong enforcement. 
The Ministry of Commerce, with the assistance of ISO, is 
working now on developing a comprehensive, enforceable system of 
Exports are also liberalized. However export authorization 
is required for certain "endangered" items specified by the  
Convention on International Trade in Endangered Species (CITES), 
such as crocodiles and crocodile skin products, live animals and 
reptiles, and precious woods. 
      - Commercial invoice 
      - Bill of Lading or Airway bill 
      - Insurance certificate 
      - Certificate of origin 
      - Phytosanitary certificate, if required 
      - Commitment of repatriation of foreign exchange earnings 
      - Packing list 
      - Export declaration 
      - Customs declaration 
      - Analysis of quality certificate, if required.  
Madagascar is a signatory to the following international 
trade agreements: 
      - 1964: United Nations Convention on Trade and Development 
      - 1994: World Trade Organization (WTO), formerly General 
             Agreement on Trade and Tariffs (GATT). 
      - 1990: Lome IV, between the European Union and ACP countries. 
      - 1993: Preferential  Exchange Zone (Zone d'échanges 
             Préférentiels - ZEP), which is the Common Market 
             for the Eastern Africa  and Australia - COMESA. 
Madagascar has bilateral commercial agreements with  
Mauritius and Seychelles. 
Bilateral commercial agreements are being studied with 
the following:  
             - Comoros 
             - South Africa 
             - Australia 
             - India 
                   VII. INVESTMENT CLIMATE 
In the past, potential investors in Madagascar have been compelled to 
deal with a thicket of bureaucratic obstacles as they sought the 
necessary permits and approvals.  Investors needed the authorization of 
those government ministries claiming technical competence in the 
targeted industry.  Ministerial overlap was a serious problem and often 
investors had no idea which ministries to approach or where to start.  
It was a process lacking in transparency, and rife with corruption. 
The introduction of a "guichet unique," or "one-stop shop" in September 
1994, to serve as the focal point for new project proposals, has the 
potential to simplify the approvals process.  This office does not have 
decision-making authority, but is responsible for directing a proposal 
to the relevant technical ministries.  Investors who have used it claim 
it is very helpful in centralizing the application process, but could be 
quicker and more responsive.  The guichet unique claims a 45-60 day 
processing time, though delays are frequent.  After a two-year 
transitional period this office is slated to become autonomous. 
Another goal of this "streamlined" project examination process is to 
clarify the standards for project approval and the reasons for refusals.  
Authorities now review investment proposals for the type of investment, 
contribution to the sector, technological level, and labor impact in the 
given region, all in light of the government's investment priorities. 
Until May 1994, the foreign exchange value of the Malagasy franc was set 
administratively.  The local currency remained highly over-valued in 
spite of several large devaluations since the mid-1980s.  The low levels 
of Central Bank foreign currency reserves meant that foreign exchange 
was essentially unavailable for holders of Malagasy francs wishing to 
convert them into foreign currency.  All available foreign exchange was 
needed to finance the importation of petroleum products and other 
essential imports. 
The establishment of an interbank foreign currency market in May 1994, 
essentially floated the currency and quickly resulted in a fifty percent 
depreciation of the Malagasy franc vis a vis the French franc, the 
reference currency.  Local businessmen are now free to bid for foreign 
exchange in this market.  A Central Bank requirement that local banks 
repatriate a portion of their foreign currency reserves held in banks 
abroad has had the effect of keeping the interbank market supplied with 
foreign exchange, though shortages often occur as demand exceeds supply. 
Malagasy companies must repatriate foreign exchange earned from exports 
within 90 days of shipment, though may keep in the country foreign-
currency-denominated bank accounts for a percentage of these earnings, 
ranging from 5-20 percent.  Any amount of foreign currency may be held 
in these accounts if it does not derive from export earnings.  
Transferring money out of the country is not legally restricted, but is 
subject to availability on the interbank commercial market as the 
Malagasy franc is not exportable.  
During the 1970s, the socialist government of Madagascar pursued a 
policy of national "self-sufficiency" that included the expropriation of 
foreign-owned companies.  The seizure of property owned by foreign oil 
companies to create SOLIMA, the government oil parastatal, was the most 
visible expression of this policy.  The government has settled the 
expropriation claims of some of the  affected companies, but others 
remain outstanding after nearly twenty years. 
In the future, expropriation of foreign-owned property by the Malagasy 
Government is not likely.  The present government is supportive of 
foreign investment and seems to realize the damage done by past policies 
to foreign perceptions of the business climate in Madagascar.  A new 
investment code is under preparation, as is a new mining code.  
Additionally, it is now legally possible for foreign-owned businesses to 
own land, but the procedure to do so has yet to be implemented. 
The Malagasy Government does not have a record of expeditious settlement 
of expropriation claims.  The still unsettled claim of one U.S. oil 
company, whose assets were expropriated along with those of other 
foreign companies to create the Malagasy national oil company (SOLIMA), 
dates from 1976.  Although recent negotiations toward a settlement have 
apparently been conducted in good faith, the government does not seem to 
place a high priority on coming to closure.  To date the government has 
not accepted binding arbitration as a settlement option in these 
Investors in Madagascar face a legal environment in which the security 
of private property and the enforcement of contracts is inadequately 
protected by the judicial system.  Legal traditions inherited from the 
French (pre-1960 French law) were superimposed on a system designed to 
facilitate state control under a socialist regime.  Private sector 
dispute settlement mechanisms were not developed extensively.  The legal 
framework in which the private sector operates in Madagascar suffers 
from 1) problems in the content of the law as written;  2) problems 
caused by insufficient dissemination and knowledge of the laws;  and 3) 
problems related to inconsistent application and enforcement of the 
laws.  Judicial reform is underway both in substance and procedure, but 
legal processes in Madagascar will continue to move slowly. 
Political violence directed against foreign-owned projects or 
installations in Madagascar has not been a problem. 
Potential foreign investors may be required to demonstrate that their 
project will generate local employment, maximize the use of local 
inputs, or train Malagasy workers for eventual technical or managerial 
roles in order to receive project approval.  Under the guichet unique, 
the approval process is becoming transparent, but is still capricious, 
subject to bureaucratic and political influence.  Investment incentives 
are available for industries, under the Export Processing Zone (EPZ) 
regulations.  Foreign or Malagasy investors can benefit from tax 
exemptions provided their projects fall into certain qualifying 
1) investment in export-oriented manufacturing industries;  2) 
development or management of industrial free zones;  or 3) provision of 
services to EPZ companies. 
Previously, foreigners were prohibited from owning property in 
Madagascar.  The government created a mechanism in 1994 whereby non-
Malagasy persons can apply and be granted the right to hold land.  To 
date this mechanism has not been used, and most foreign investors 
continue to have local partners who can hold land for the company.  
Alternatively, leasing for up to fifty years is possible with approval 
from the Ministry of the Interior.   
Property rights in the mining sector deserve special attention because 
Madagascar's mineral wealth is of particular interest to foreign 
investors.  A new mining code is under preparation but is still not in 
force.  The old Mining Law (#90-017 dated July 20, 1990) attributes 
ownership of all mineral deposits to the state, regardless of the 
identity of the owner of the surface land, and exploiters/investors can 
lease the land. 
Landowners can lose rights over their land if the government decides to 
excavate sub-surface materials.  The same law allows mining authorities 
to classify mineral deposits according to national defense needs.  An 
administrative decision can easily change a mineral's classification and 
affect the interests of a private investor.  The criteria determining 
ministerial classification are not specified. 
Madagascar has in place a legal system that de jure effectively protects 
property rights.  De facto the legal system works capriciously, and 
legal recource for foreign investors does not generally favor them.  
Madagascar's observation of rights regarding intellectual property, 
copyright and trademarks is good for a developing country.  The 
government claims to comply with the Uruguay Round's Trade related 
aspects of Intellectual Property (TRIPS) Agreement.  A government office 
of Intellectual/Industrial Property (OMAPI) supervises all aspects of 
copyright and trademarks protection.  Compliance with these regulations 
is uneven.  Major brand names and franchise rights are respected, but 
pirated copies of videotaped movies and music cassettes sell openly. 
In general, the Malagasy regulatory apparatus leaves a great deal to be 
desired in terms of transparency and streamlining.  Transparency in the 
investment project approval process is improving (see section "Openness 
to Foreign Investment") and could move further.  Tax evasion is 
widespread in Madagascar with bribery of customs or other tax officials 
a routine occurrence.  To the extent that businesspersons engage in such 
tax evasive behavior without being called to account, other firms are 
placed at a competitive disadvantage if they do not follow suit.  Tax 
law targets mining and the chief agricultural export crops (vanilla, 
coffee, cloves), particularly as these are traditionally the most 
lucrative businesses.  Environmental impact review is becoming a part of 
the investment review process, however, the procedures are new and it 
can be used as a bureaucratic obstacle at times.   
Until the recent introduction of an interbank foreign exchange market, 
the rather rudimentary Malagasy financial system did little to support 
inward investment flows and the efficient allocation of capital 
resources.  Local and foreign business persons can now bid for foreign 
exchange in this market to meet external obligations.  In the past, 
local bankers have complained that one of the principal factors 
constraining the extension of local credit has been the lack of bankable 
projects.  Recent foreign and local investment has increased the number 
of viable projects, but credit assessment is not a strong skill of the 
banking sector. 
Another problem has been the large fiscal deficits run by the central 
government, deficits which have compelled the central bank to restrict 
credit creation in the banking system to keep a lid on inflationary 
pressures.  Now, government deficits have led to high inflation and the 
33% Central Bank key interest rate makes credit unaffordable to many 
businesses.  This situation is likely to persist until the central 
government institutes effective fiscal reforms. 
The banking system in Madagascar consists currently of five commercial 
banks.  European banking institutions hold a controlling interest in two 
banks:  Banque Malgache de l'Ocean Indien (BMOI) and BNI-Credit Lyonnais 
Madagascar (BNI-CL).  Union Commercial Bank (UCB) is controlled by a 
Mauritian bank.  Bankin' Ny Tantsaha Mpamokatra (BTM, Bank for Rural 
Development), is wholly-owned by the Malagasy government and Banky 
Fampandrosoana Ny Varotra (BFV, Bank for Commerce and Trade) is sixty-
five percent owned by the state.  BTM and BFV are both nearly insolvent 
and the government is under pressure from the World Bank and IMF to 
privatize them. 
There is no stock market in Madagascar and mergers, acquisitions and 
takeovers are not a significant element of the local commercial and 
financial environment. 
According to the Ministry of Industry, the only country with whom 
Madagascar has concluded a bilateral investment protection treaty is 
Madagascar is a member of the Multilateral Investment Guarantee Agency 
(MIGA).  OPIC is active, funding the expansion of a U.S.- owned cellular 
telephone system in the capital, now spreading to regional cities.  EXIM 
Bank coverage is presently not available for Madagascar. 
With widespread unemployment and underemployment Madagascar is a labor 
surplus country.  Wage rates in Madagascar are among the lowest in the 
world.  Malagasy workers are relatively easily trained and skill 
availability is good for the types of manufacturing that dominate this 
sector, i.e. textiles, knitting and clothing assembly.  More highly 
sophisticated manufacturing skills are not available.  Workers in 
Madagascar enjoy the right of free association and are free to organize 
and engage in collective bargaining.  Safety standards in the workplace 
are generally not enforced and do not meet U.S. standards. 
Since 1991, Export Processing Zone (EPZ) regulations in Madagascar allow 
foreign or Malagasy investors to qualify for tax exemptions provided 
their projects fall within one of three categories:  1)  Investment in 
export-oriented manufacturing industries;  2)  Development or management 
of industrial-free trade zones;  or 3)  Provision of services to EPZ 
companies.  All three may qualify for tax holidays of varying terms.  
Personal taxes are reduced and EPZ firms are exempt from paying customs 
duties, import and value-added taxes, and export duties on their 
products, which should be 100% for export.  EPZ firms may be set up in 
special zones or may establish themselves independently.  They, like any 
foreign investment, are now legally eligible to hold real property, but 
similarly are subject to the regulations that have yet to grant 
foreigners real estate ownership. 
The Free Trade Zone is currently the major focus of direct foreign 
investment in Madagascar.  Of the 150 companies granted status as FTZ 
companies, about 40% are European (chiefly French) investments, 30% are 
Mauritian-owned, 20% are Asian-owned, and 10% are Malagasy held.   
There is little, if any, outward direct investment from Madagascar and 
the government has no programs to support such investment.  Foreign 
investors may freely repatriate profits.  Malagasy investors are 
required to repatriate foreign currency profits and convert them to 
Malagasy francs within 90 days of export. 
There are no comprehensive statistics available on foreign investment 
flows.  Investment in the Free Trade Zone companies was chiefly French 
and Mauritian, as noted above.  The remainder were divided between 
entities from Mauritius, Hong Kong, South Africa, Singapore, Germany, 
Italy and Spain. 
The banking system in Madagascar consists currently of 
five banks. European banking institutions hold a controlling 
interest in two banks: Banque Malgache de l'Océan Indien (BMOI) and BNI-
Crédit Lyonnais (BNI-CL). Union Commercial Bank (UCB) is controlled by a 
Mauritian bank. Bankin'ny Tantsaha Mpamokatra (BTM) is wholly-owned by 
the Malagasy state and Banky Fampandrosoana Ny Varotra (BFV) is sixty-
five % owned by the state. Following an agreement with the World Bank 
and IMF, these two banks should be totally privatized by mid-1997. 
Exporters are required to repatriate their foreign currency 
earnings within ninety days of acquisition. 
Since May 1994, there is an interbank foreign exchange market, which 
fixes daily the rate of the FMG (Malagasy Franc) according to a floating 
monetary system. 
The availability of local financing has been constrained 
recently by the Central Bank, in order to control inflation 
in the wake of large public sector fiscal deficits that have  
absorbed much of the available pool of local savings. Excessive money 
creation by the Central Bank has already contributed to Madagascar's 18 
percent rate of inflation in 1994 and up to 40 percent this year. 
Only a few exporters can get export credit in Madagascar.  
The credit granted is mainly for the purchase of traditional 
agricultural products such as vanilla, coffee, cocoa, and cloves.  In 
case of pre-financing by importers, exporters still have to pay high 
interest rates to their banks. 
Eximbank financing is not available in Madagascar. The World 
Bank and the African Development Bank have financed a variety of 
infrastructure and other types of projects. Generally speaking, the 
financing possibilities that are available to local firms are quite 
limited both in terms of variety and capacity. 
BTM:   Bankers Trust/New York 
       Citibank/New York 
            Bank of New York 
       French/American Bank/New York 
       Société Générale/New York 
BMOI:     French/American Bank/New York 
          Dresdner Bank/New York 
UCB:      Citibank/New York 
BNI:    Bankers Trust/New York 
        Bank of New York 
        Citibank/New York 
        American Express International Bank/New York 
        Chase Manhattan Bank/New York 
        Riggs National Bank/Washington, D.C. 
BFV:    Bank of New York 
        American Express International Bank/New York 
        Bank of America/San Francisco 
        Bankers Trust/New York 
        Chemical Bank/New York 
        French/American Bank/New York 
                   IX: BUSINESS TRAVEL 
Laws and common business practices are based on the European, 
particularly French, business style. 
A visa is required for entry into Madagascar and should be 
obtained prior to arrival, either at the Malagasy Embassy in Washington 
D.C. or in other cities where Madagascar has diplomatic or consular 
     - New Year's Day, January 1 
     - Day Commemorating the Martyrs, March 29 
     - Easter and Easter Monday 
     - Labor Day, May 1 
     - Ascension (6th Thursday after Easter)  
     - Pentecost (7th Sunday after Easter), Pentecost Monday  
     - OAU Day, May 25 
     - Independence Day, June 26 
     - Assumption, August 15 
     - All Saint's Day, November 1 
     - Christmas, December 25 
- Transportation 
Problems with air, train and road transportation have already been 
mentioned in Chapter II.  Visitors to the capital city of Antananarivo 
or other cities can easily find taxis. Taxi fares are relatively low. 
Rental cars are available but can be quite expensive depending on the 
vehicle type, and non-residents are usually required to hire a 
chauffeur. Air charters can be arranged to various destinations in the 
- Language 
French is the common language of business, though more and 
more businesspersons speak English. 
- Communications 
As noted previously, the telecommunications system is being 
modernized. There are now 3 television stations that broadcast in French 
and Malagasy. One of them, MA TV, broadcasts English news in the 
evening. CNN is available at some hotels, via satellite.  There are 
several radio stations broadcasting in Malagasy, French, with some 
English language programs. 
- Housing 
There are four hotels in Antananarivo that are comfortable 
by U.S. standards: the Hilton, the Colbert, the Panorama and the Radama.  
Hotels in other areas of the country vary greatly in quality.  Short-
term lease furnished flats are now offered by some companies in the 
- Health 
Visitors to Madagascar are advised to obtain vaccinations 
against Polio, Hepatitis A or Immune Globulin, Yellow Fever and Typhoid.  
Malaria medication for chloroquine-resistant areas should be taken 
during the rainy season in Antananarivo (November through April) and at 
all times in coastal regions. 
- Food 
Local tap water is not clean, and should be boiled and  
filtered before being drunk.  Fresh fruits and vegetables should be 
thoroughly washed, preferably with iodine or chlorine, before being 
consumed. Meat and poultry should be cooked thoroughly. Restaurants are 
relatively inexpensive. The more expensive, the more reliable.  Chinese 
and European cuisine are most common. 
                   X: APPENDICES 
Population: 12,412,000 
Population Growth rate: 2.8%/year 
Religions: 70% Christian, 6% Muslim. The remainder adhere to  
traditional, ancestor-oriented animist beliefs. 
Government system: mixed Parliamentary-Presidential. 
Languages: Malagasy and French 
Work week: Monday-Friday: 40 hours/week. 
                                   1994             1995 
- GDP (USD Million):              2,938               3,100 
- GDP growth rate                  0.2%                3.4% 
- GDP per capita (USD)             220                  220 
- Government spending as a 
  percent of GDP                   19.9                22.8 
- Unemployment                     40%                  40% 
- Foreign exchange reserves      
  (USD Million)                    91.9               105.8 
- Average exchange rate for  
  USD 1.00                         3,064         4,500 
- Foreign Debt (USD Million)       4,081         4,354 
- Debt Service ratio               62.4                 59.9 
- U.S. Military Assistance 
  (USD Million)                     0.0                  0.0 
- U.S. Economic Assistance 
  (USD Million)                    33.6                 28.2 
(in USD Million unless otherwise indicated) 
- Total Country exports:           318.01         N/A 
- Total Country imports:           443.67         N/A 
Source: Central Bank/State Data Office 
- U.S. Exports:                     47.93         N/A 
- U.S. Imports:                     56.98         N/A 
Source: U.S. Department of Commerce 
* - All 1995 Data estimated. 
There are no reliable statistics regarding investment.  The new guichet 
unique (see part VII) may start producing some. 
- Ministère de la Promotion du Commerce et du Ravitaillement 
  P.O. BOX 245 
  Antananarivo 101  
  Tel: (261 2) 272 92 
  Fax: (261 2) 312 80 
- Ministère de la Promotion de l'Industrie et de l'Artisanat 
  P.O. BOX: 527 
  Antananarivo 101  
  Tel: (261 2) 255 15 
  Fax: (261 2) 277 90 
- Ministère de l'Energie et des Mines 
  P.O. BOX 527 
  Antananarivo 101  
  Tel: (261 2) 255 15 
  Fax: (261 2) 325 54 
- Ministère d'Etat à l'Agriculture et au Développement Rural 
  P.O. BOX 842  
  Antananarivo 101  
  Tel: (261 2) 247 10 
  Fax: (261 2) 265 61 
- Ministère des Postes et Télécommunications 
  Antananarivo 101  
  Tel: (261 2) 261 21 
  Fax: (261 2) 240 08 
- Banque Centrale de Madagascar 
  Antananarivo 101  
  Tel: (261 2) 217 51 
  Fax: (261 2) 345 32 
- Guichet Unique 
  Ministere de l'Economie et du Plan 
  P.O. Box 674 
  Antananarivo 101 - Madagascar 
  Tel: (261 2) 202 84 
  Fax: (261 2) 285 08 
- Chambre de Commerce, d'Industrie et d'Agriculture d'Antananarivo 
  P.O. BOX 166 
  Antananarivo 101  
  Tel: (261 2) 202 11 
  Fax: (261 2) 202 13 
- FIVMPAMA (Association of Malagasy Businessmen) 
  12, rue Rainizanabololona - Antanimena 
  Antananarivo 101  
  Tel: (261 2) 347 54 
  Fax: (261 2) 320 56 
- GEM (Groupement des Entreprises de Madagascar) 
  P.O. Box 1695 
  Antananarivo 101 - Madagascar 
  Tel: (261 2) 238 41 
- SIM (Syndicat Industriel de Madagascar) 
  c/o PAPMAD 
  P.O. Box 1756 
  Antananarivo 101 - Madagascar 
  Tel: (261 2) 206 35 
  Fax: (261 2) 243 94 
- Automated Data Analysis, Processing & Trading (ADAPT) 
  P.O. BOX 4212 
  Antananarivo 101  
  Tel: (261 2) 291 92 
  Fax: (261 2) 291 92 
- Société d'Assistance aux Sociétés (SAS) 
  P.O. BOX 8019 
  Antananarivo 101  
  Tel: (261 2) 335 24 
  Fax: (261 2) 268 63 
- Cabinet Fivoarana 
  P.O. BOX 3854 
  Antananarivo 101  
  Tel: (261 2) 219 25 
  Fax: (261 2) 271 41 
- Cabinet d'Etudes, de Conseil et d'Assistance à la 
  Lot IVD 17 Bis, Tsiazotafo 
  Antananarivo 101  
  Tel: (261 2) 347 26 
  Fax: (261 2) 206 44 
- Maurice Charles Andriamampianina, Ph.D. 
  111 D 14, Antanimena 
  Antananarivo 101  
  Tel: (261 2) 350 43 
- Cabinet Ravonison, Gast et Associés 
  Lot 1B 26-9, Rue de la Réunion 
  Antananarivo 101  
  Tel: (261 2) 261 71 
  Fax: (261 2) 446 33 
  P.O. BOX 3476 
  Antananarivo 101  
  Tel: (261 2) 420 44 
  Fax: (261 2) 420 44 
- Ocean Consultants 
  P.O. BOX 3528 
  Antananarivo 101  
  Tel: (261 2) 428 06 
  Fax: (261 2) 271 26 
- Banque Malgache de l'Océan Indien (BMOI) 
  P.O. BOX 25 B, Place de l'Indépendance 
  Antananarivo 101 
  Tel: (261 2) 346 09 
  Fax: (261 2) 346 10 
- Union Commercial Bank (UCB) 
  P.O. BOX 197, Lalana Solombavambahoaka 
  Antananarivo 101 
  Tel: (261 2) 272 62 
  Fax: (261 2) 287 40 
- BNI - Crédit Lyonnais Madagascar (BNI-CL) 
  P.O. BOX 174, Analakely 
  Antananarivo 101 
  Tel: (261 2) 239 51 
  Fax: (261 2) 337 49 
- Banky Fampandrosoana Ny Varotra (BFV) 
  P.O. BOX 196, Antaninarenina 
  Antananarivo 101 
  Tel: (261 2) 206 91 
  Fax: (261 2) 345 35 
- Bankin'Ny Tantsaha Mpamokatra (BTM) 
  P.O. BOX 183, Antaninarenina 
  Antananarivo 101 
  Tel: (261 2) 202 51 
  Fax: (261 2) 213 98 
Not available 
Month                 Title                      Location 
September     Salon international de l'élevage  Antananarivo  
October       Manja 95 (clothing exhibition)    Antananarivo 
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