UK-MADAGASCAR TRADE & INVESTMENT FORUM 2015 The conference is supported by

Media Partners Contents 02 FOREWORDS 04 ECONOMIC OVERVIEW 09 ECONOMIC INDICATORS 12 PROGRAMME 13 OUR PARTNERS 16 MAP

Publisher: Chris Gerrard Art Director: Steven Jones Conference Team: Rebecca Isaacs, Chris Hindle, Jamie Brunsdon, Natalia Debczak-Debski, James McKay, James Martin, Premal Vadgama Conference Directors: Atam Sandhu, Leon Isaacs, Roger Martin, Henry Bellingham, Peter Hain Correspondence Developing Markets Associates Ltd (DMA), 150 Tooley Street, London, SE1 2TU email: [email protected] | web: www.developingmarkets.com | www.sendmoneypacific.org | www.sendmoneyasia.org DMA acknowledges the assistance of all the individuals and organisations who have contributed to this publication. The views expressed herein are the opinions of the authors, and do not necessarily represent the Government of Madagascar, Embassy of Madagascar or DMA. All rights reserved. No part of this publication may be reproduced or transmitted in any form without the written permission of the publisher. Published by Developing Markets Associates Ltd (DMA) Printed by Woodrow Press Picture credits: istockphoto.com

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UK-MADAGASCAR TRADE & INVESTMENT FORUM 2015 01 Foreword BY HE PRESIDENT RAJAONARIMAMPIANINA PRESIDENT OF THE REPUBLIC OF MADAGASCAR FOREWORDS T IS WITH GREAT PLEASURE THAT I WELCOME YOU My government is to the first UK-Madagascar Trade & Investment Forum. committed to creating I am pleased and proud to visit London and be among the most conducive you today because firstly, I am here to continue and environment for strengthenI the two-century long historical relationship business. We have between Madagascar and the United Kingdom. Secondly, it is a worked on a set of great opportunity for myself and my governmental delegation economic and structural to discuss and explore with British investors the many policies to reinforce investment and business opportunities that Madagascar has to the progress already offer, not just in one or two areas, but across many sectors, made. Our policies are for our mutual benefit. geared at maintaining macroeconomic stability Madagascar has emerged from a political crisis. Since my election and enhancing fiscal sustainability. We have undertaken a series to the Presidency of the Republic in 2014, I have worked tirelessly of reforms to improve governance and the business climate to restore constitutional order. I have always emphasised fighting and enhanced social development policies are reflected in the against poverty, improving good governance and the rule of law, National Development Programme. And we will continue to tackling corruption, and promoting a better investment climate improve it by exploring innovative business models. We are among my priorities. We are on the path to institutional and working on a new petroleum and mining code. On the agenda political stability and the time has now come to support this of the next session of the National Assembly is a new bill on progress with economic recovery. the framework for public private partnerships. I’m sure you’ll be attentive to this. ‘Madagascar, a modern and a prosperous nation’ – such is our vision for our country and we wish to associate the United The members of the government present here today will be your Kingdom in realising this vision. interlocutors and they will provide you with any information you might need. They are here at your disposal. Madagascar has the potential to grow rapidly. It is endowed with abundant natural resources: millions of hectares of arable As I said earlier in this introduction, our two countries have a two- land and microclimates that allow a wide variety of farming, century long and excellent historical relationship bound by our an Exclusive Economic Zone in the sea which is larger than the treasured past histories. We have today an historic opportunity land area, 5,000 kilometers of coastline with pristine beaches, to make the relationship between our two countries a defining an exceptional and rich biodiversity with numerous endemic partnership of the century ahead, placed under the sign of plants and animals which makes it a haven for ecotourism. economic cooperation in a pragmatic ‘win-win’ approach.

In addition, Madagascar has commercially significant reserves This is the partnership I’ve come here to build. We warmly invite of several minerals, including rare earths, uranium, coal, you to explore the opportunities today and look forward to chromite, graphite, mica, as well as gold and other precious and fruitful partnerships in the future. semi-precious stones. The existence of oil and gas has also been confirmed. I would like to express my sincere gratitude to DMA for making this forum possible. My government and the Malagasy people As for its human capital, Madagascar has a young and welcome you to Madagascar. vibrant population. See you soon in Madagascar! Thank you for your attention and The future of our country and our population depends on how have a good forum. we exploit this natural wealth. It is my firm belief that, with your know-how and your experience of the markets, your investment on one hand, the natural capital of Madagascar, the ingenuity and generosity of its human resources and our political will on the other hand, we can realise our vision together. It will be an example of inclusive, sustainable development with the greatest HE President Rajaonarimampianina respect for the environment. President of the Republic of Madagascar

02 UK-MADAGASCAR TRADE & INVESTMENT FORUM 2015 Foreword BY ATAM SANDHU, CEO DMA

T IS MY GREAT PLEASURE TO WELCOME YOU ALL TO At the heart of the new this the first UK-Madagascar Trade & Investment Forum, dynamic in Madagascar taking place in the suitably opulent and historic setting is the government’s of Lancaster House – in the heart of St James’s, London. National Development I Programme, which Now managed by the UK Foreign & Commonwealth Office, prioritises improved Lancaster House was once the finest privately owned town house governance, the in all of London. Enviously described by Queen Victoria as being development and more a palace than a house, it was a central hub of social and modernisation of national political life throughout the 19th Century, when the British Empire infrastructure; broadened was at its peak. Many notable events have taken place here. In May access to social services 1848, for example, Chopin performed here for Queen Victoria. In and increased private a letter to his family, the composer describes the building (then investment in key sectors, including extractives, tourism, agriculture Stafford House) as being finer than any royal castle or palace and infrastructure. We will hear more about these sectors – and he had yet seen. During more modern times, in 1979, Lancaster others – throughout the course of today’s programme. House was the setting for the Lancaster House Agreement, which granted Zimbabwe (then Rhodesia) independence from Underpinning development is the fact that Madagascar, the world’s the United Kingdom. Many key Commonwealth meetings have fourth largest Island, boasts huge potential for mining, agribusiness, also taken place here over the decades. So, we find ourselves tourism, manufacturing (textiles/apparel), hydrocarbons and in auspicious surroundings, which I trust will provide a fitting renewable energy production. Space exists for strategic investors backdrop to lively and productive discussions today. to participate in long-term projects. Rich natural endowments offer scope for wealth creation from diverse economic activities. I would personally like to extend a very warm welcome to the Government of Madagascar delegation, led by HE President The extractives sector is already being rapidly transformed from Hery Rajaonarimampianina, and including many of his key its historically artisanal base into a large-scale mining industry. ministers and officials. Today we will be hearing from the Minister Madagascar is now entering an era of significant natural resource of Economy and Planning, the Governor of the Central Bank, extraction, which will generate high income and growth the General Manager for the Economic Development Board, potential. The mining sector’s contribution to GDP is expected the Minister of Energy & Hydrocarbons, the Minister of Mining, to surge from less than 1% to 15% in the coming decade, whilst the Minister of Industry & Private Sector Development, exported production is forecast to contribute between 30% and the Minister of State in Charge of Infrastructure & Territorial 60% of national export earnings and 18% of the government’s Planning, the Minister of Tourism, Transport and Meteorology fiscal revenues by 2018. These interests must be balanced with – amongst many other distinguished delegates. From the UK- protecting Madagascar’s natural beauty and diversity, which are side, we have the much-welcomed participation of the British amongst its greatest natural assets. Ambassador to Madagascar and the UK Minister for Africa. The seniority of those in attendance today from both public Internationally, most people may be most familiar with and private sectors is a testament to the fact that this meeting Madagascar as an ecological hotspot – a place indeed where is Madagascar’s most significant investment outreach campaign a high percentage of the wildlife is to be found nowhere else on the international stage to date. I am certain that today’s on earth. In terms of biodiversity and uniqueness, it is perhaps proceedings will not only succinctly present the government’s one of the emerging ecotourism sector’s premier destinations investment agenda but also provide a unique opportunity for internationally. New forms of sustainable tourism that encourage the business leaders and investors amongst you to engage with investment into and the protection of the ecological resources ministers and other senior government officials directly, in an on which they are founded is certainly a hot topic – and environment geared towards getting business done. We hope perhaps nowhere more so than in Madagascar, where human you find the forum a productive one. development has already had a significant impact on the natural environment. But, as we will be discovering during the course And lastly, may I express my sincere thanks to our event sponsors of today’s programme, through presentations representing and the Government of Madagascar for helping us to bring this both public and private sector viewpoints, Madagascar – one of event to fruition. the world’s last true frontier markets – is now emerging as an exciting investment destination on multiple sectoral fronts. Atam Sandhu, CEO, DMA

UK-MADAGASCAR TRADE & INVESTMENT FORUM 2015 03 ECONOMIC OVERVIEW

Economic Overview A ROADMAP FOR NATION BUILDING By Moin Siddiqi, Economist

ATURE HAS BLESSED energy production. Rich natural income exceeding developing countries’ ABUNDANT NATURAL endowments offer scope for wealth average. Despite bountiful natural and wealth to Madagascar so creation from diverse economic activities. human resources, growth remained that development of the The government of Madagascar outlined sluggish because of persistent crises, nationalN economy can transform this Island- in its General State Policy, its overarching high-cost and the low-quality of basic nation into a prosperous and established priorities: alleviating poverty and instability, infrastructure and global isolation (due country. Almost half of Madagascar’s assets strengthening the rule of law, combating to past nationalistic policies) as well as lie in its natural capital, which includes corruption, increasing foreign direct exogenous shocks: periodic cyclones, plentiful crop and pastureland, water investment, the rehabilitation of critical drought, and locust infestation. The resources, mineral and non-mineral subsoil infrastructure (particularly electricity and cumulative cost of 2009-13 political crises assets, as well as the mega biodiversity roads) and nurturing the private sector – in forgone GDP growth and investment and spectacular landscapes for which it is key to reviving the economy. is estimated to exceed US$8bn. known worldwide. Madagascar was one of Africa’s The Island-nation – classified by the The world’s fourth largest Island boasts wealthiest countries in the 1960s, with World Bank as a least developed country huge potentials for mining, farming, an educated elite, strong institutions, (LDC) – requires technical and financial tourism, light industries and renewable good infrastructure, and a per capita assistance from development partners

04 UK-MADAGASCAR TRADE & INVESTMENT FORUM 2015 in almost every sector of the Malagasy well as to increase social spending on reversing the deterioration in human economy. “Everything is a priority and education and health. However, there development indicators; (ii) scaling up everything is urgent,” stated HE President are downside risks, whereby a slow essential infrastructure in roads, electricity, Hery Rajaonarimampianina. The country pace of reform implementation would telecommunications, ports and air freight; has staged a strong recovery in the past keep Madagascar on a path of economic (iii) creating an attractive/secure business two years driven by the extractive and stagnation and persistent poverty,” stated environment and encouraging foreign services sectors. the International Monetary Fund (IMF). investment; (iv) improving governance The Fund emphasised that the following and strengthening institutions, including An Agenda for areas are crucial to preserving macro- a more professional judicial system; and Durable Prosperity economic stability and tackling deep- (v) mobilising resources for health and seated deficiencies, which have hindered education to meet labour market needs. The most pressing challenge for Malagasy sustainable development of Madagascar Currently, half the population is less than policymakers and their development in the past: 20 years of age – hence the need for partners is that the economy not only faster job creation. A jobless recovery will achieves output growth that is sufficiently Increase domestic revenues by not yield a prosperity that is widely shared robust to reduce unemployment but broadening the tax base and among Malagasy citizens and create should also be regionally and socially implementing tax policy and revenue conditions for socio-political stability. inclusive to foster national reconciliation. administration reforms in order to provide much-needed resources for A Recovery in Progress The government has made the “fight growth enhancing investment projects; against poverty through inclusive Madagascar returned to the international growth” its principal goal by developing Improve public expenditure fold after restoring constitutional a strategy centered on three pillars: management and composition/quality democracy and forming a cohesive/ good governance, economic stability and of budgetary spending as well as credible government in April 2014, which greater access to basic social services. This budget execution and control within in turn, facilitated the normalisation of strategy is enshrined in the Programme government departments; ties with investor and donor community. Général de l’Etat (PGE) and translated The World Bank has reassumed its into the National Development Keep domestic budget financing at low operations, and in June-2014, the IMF Plan (NDP), 2015-19. It lays out levels to avoid crowding out credit to approved a US$47mn Rapid Credit well-prioritised reforms and costed the private sector. Presently, access Facility for Madagascar, in support investment plans – thereby sending out to credit is expensive and limited, of structural policies and measures a clear signal, both within society and to especially for small and medium-sized to restore macroeconomic stability, development partners, of Madagascar’s enterprises (SMEs); and to strengthen the capacity of the commitment to sustainable and inclusive government. The inflows of official aid recovery. The NDP aims to redress the Implement business-friendly reforms to took the immediate pressure off the economy, raise living standards and enhance private sector development, economy, whilst the return of foreign achieve a higher level of income through restructuring and rehabilitating of the investors will over time deliver revenue the development of all 22 regions of public utility company (JIRAMA) and and economic growth. Greater Island. Other objectives include deepening financial intermediation. increasing annual real GDP growth to 5% Domestic credit as a share of GDP The mining sector (initially construction or more, spurred by higher agriculture remains low, thus the economy is then production) has provided an impetus productivity and expansion, mining (given largely cash-based; to growth thanks largely to foreign unexploited mineral reserves), labour- direct investment (FDI). Agriculture still intensive manufacturing (absorbing Strengthen the economic climate, remains dominated by low productivity a rapidly growing workforce), and including through effective governance subsistence farming. An action plan seeks tourism (reflecting strong potential for and social policies for reversing the to improve landownership regulation ecotourism); reducing significantly the ongoing deterioration in development and transparency, productivity growth poverty head-count; raising the tax ratio indicators by boosting pro-poor growth, (especially for rice), and a conducive to 14% of GDP by 2017; and building while preserving debt sustainability. environment to attract private players. international reserves buffers equivalent In tourism, the ambitious medium-term to at least three-months of imports. The government intends to accelerate target of 1 million visitors (compared Support from the international financial structural reforms to diversify and improve to 375,000 pre-crisis in 2008) requires community will be pivotal to achieving economic competitiveness. To that end, human capacity building, harmonisation these national goals. medium-term priorities are (i) ensuring of sector standards and attracting pro-poor growth, fiscal substantiality and visitors from more destinations. The country is now at a crossroads. “A well-prioritised medium-term economic programme that is implemented “THE GOVERNMENT INTENDS TO concertedly would increase growth and reduce poverty. This will require ACCELERATE STRUCTURAL REFORMS resources in order to undertake TO DIVERSIFY AND IMPROVE essential investment in infrastructure, as ECONOMIC COMPETITIVENESS”

UK-MADAGASCAR TRADE & INVESTMENT FORUM 2015 05 The construction sector should benefit “MADAGASCAR HAS AN OPEN from a recovery in other sectors and the revival of major infrastructure projects. ECONOMY AND HAS FAVOURED REGIONAL ECONOMIC INTEGRATION” Developing the commercial farming sector with higher productivity and larger areas under cultivation demands sizeable transportation, among other sectors oriented firms with EPZ status, providing investments into new roads and irrigation. where strategic investors can participate at least 95% of total production is The World Bank estimated the cost of in long-term projects. exported. An incentive scheme includes rehabilitating decrepit road network at exemption from customs duties and

ECONOMIC OVERVIEW US$1.5bn (14% of GDP). Madagascar has Located in the Africa-Asia axis and on taxes.The country offers an open and less than 10km of paved road per 1,000 major maritime routes (not far from favourable FDI regulatory regime and km2. The private sector faces one of the the Middle East), Madagascar offers firm guarantee against expropriation. highest electricity costs in Africa. Reducing advantages to international businesses Most business sectors are fully open operational costs and technical losses, – with preferential trade agreements to foreign equity ownership and upgrading the generation/distribution (quota free, duty free) access to the the Investment Promotion Act offers infrastructure, as well as reviewing the American and European markets as a level-playing field for domestic and relative tariff structure and energy source well as other advanced economies. foreign investors with respect to mix (towards renewable energies) should As a member of regional economic blocs, ownership of local companies. There increase the reliability and geographical Madagascar is also a good location for the is no direct quantitative capital control coverage of electricity provision. ease of exporting goods and services to (inflows and outflows). The government SADC (Southern African Development has also set up a ‘one-stop shop’ After years of neglect, huge investments Community), COMESA (Common for investors. are urgently needed across all sectors Market for Eastern and Southern Africa) to close the ‘infrastructure gap’. The and IOR-ARC (Indian Ocean Rim The legal system, based on French civil government has given priority to restoring Association for Regional Cooperation). law, contains adequate protections capital spending and intends to rely on for private property rights, and the the private sector, in particular, FDI, and Madagascar has an open economy government accepts the binding concessional financing from multilateral and has favoured regional economic international arbitration of investment institutions for the execution of mega integration; however exports to sub- disputes between foreign investors and projects. Public-Private Partnerships Saharan African countries remain low. the state. Madagascar is a signatory (PPPs) represent viable funding options Europe, the USA and Asia to date remain to the International Centre for the for large-scale infrastructure development the most important markets. Competitive Settlement of Investment Disputes – with supportive legal/institutional advantages include abundant local raw (ICSID) Convention, as well as the frameworks to limit possible fiscal risks. materials, a large pool of young/trainable New York Convention of 1958 on the labour, with private sector wages below Recognition and Enforcement of Foreign Growth revival for the coming years those in most countries and situated near Arbitral Awards. is based on expected increases in business platforms in South Africa and agricultural production through better Mauritius, which offer access to expertise, Fiscal incentives have been revised to irrigation and extension services for input and logistical preparations. attract inward investment and new which Madagascar is receiving assistance regulations allow for tax breaks and from the World Bank and the African The largest FDI is in the extractive mutual agreements to avoid double Development Bank. The authorities also industry (especially mining), which is taxation. Madagascar has signed expect a recovery in tourism and in capital (as opposed to labour) intensive. bilateral investment treaties with several manufacturing exports (mainly textiles) These jobs are often highly specialised, countries: Belgium, Canada, China, with the restoration of the US’s African skilled ones for which not many Malagasy France, Germany, Mauritius, Norway, Growth and Opportunity Act (AGOA); citizens qualify. This ‘skills gap’ suggests the Sweden, Switzerland, and Thailand. It has trade privileges and new investments need to train more Malagasy technicians also signed double taxation treaties with in extractive industries; while additional to take advantage of high-quality jobs. France and Mauritius. Major investing donor financing should also reactivate Integrating more SMEs in the value chain countries are France, Spain, Mauritius, infrastructure projects. of foreign firms investing in Madagascar China, USA, Britain, Singapore, Germany, would also boost job creation. Canada and India. An Intriguing FDI Destination In recent years, a large amount of FDI The government aims to improve the also went into export-processing zones business climate in coming years by Madagascar is courting foreign investors (EPZs) to benefit mainly from preferential addressing key challenges such as the high and improving bilateral ties with countries access to the American market. These cost of electricity, difficulty in obtaining across the globe in its drive to reignite investments are in labour-intensive credit despite a relatively liquid banking economic growth. There are ample sectors. Prior to 2009, Madagascar was system, cumbersome procedures for opportunities in tourism, agribusiness, sub-Saharan Africa’s largest exporter the registration of property, high cost of manufacturing (mainly textiles/ of textiles. The government provides export operations and the complexity of apparel), mining, petroleum, energy and numerous fiscal incentives to export- dispute settlement procedures.

06 UK-MADAGASCAR TRADE & INVESTMENT FORUM 2015 Strengths & Opportunities large-scale mining industry. The Ambatovy ilmenite and Ambatovy nickel mining Cobalt and Nickel Mining Project owned operations - is expected to surge from Madagascar offers several possibilities in by international consortium comprising less than 1 to 15% in the coming decade, major sectors: of Sherritt International Corp’s (40%) whilst exported production is forecast and SNC-Lavalin (5%) – both Canadian- to contribute between 30 and 60% of MINING: Geological studies and based – Korea Resources Corp (27.5%) national export earnings and 18% of the explorations have established the and Japan’s Sumitomo Corp (27.5%) is government’s fiscal revenues by 2018. existence of mineral resources of varying the largest-ever FDI in Madagascar and importance in Madagascar. These include one of the biggest in sub-Saharan Africa PETROLEUM: In addition to minerals, industrial and metallic minerals: titanium and the Indian Ocean region, whose total Madagascar has potentially significant (ilmenite), of which Madagascar holds project costs exceed US$7bn. Ambatovy hydrocarbon deposits. The existence of the world’s largest reserves, graphite, is poised to become the world’s largest oil has been known for over a century gypsum, dolomite, silica, mica, quartz, lateritic nickel mines with annualised but exploration and development (E&D) gold, platinum, silver, iron ore, copper, capacities of 60,000 tons of refined nickel, was until recently deemed commercially zinc, nickel, cobalt, chromite, zircon, 5,600 tons of cobalt, and 210,000 tons of unviable. The country is on the verge coal and rutile; precious and gemstones: ammonium sulphate fertilisers for nearly of becoming a small oil producer. ruby, sapphire (half of globe’s supply), 30 years. Another mega-project is QIT Recoverable reserves are sizeable and emerald, aquamarine, beryl, tourmaline, Madagascar Minerals (QMM), which is are estimated by the National Office topaz, garnet, cordierite, rose quartz; 80% owned by Rio Tinto and 20% by the of Mines and Strategic Industries at and decorative stones: crystal, marble, government of Madagascar – supported 1.5bn barrels. Around 18 international silicified wood, jasper and limestone. by the World Bank. QMM plans extracting oil companies (IOCs) are currently Some of them have already been ilmenite and zircon from heavy mineral at the exploration phase, including industrially exploited, such as chromite, sands over an area of 6,000 hectares Ophir Energy, ExxonMobil, Sterling nickel and ilmenite. Some are currently along the coast during the next 40-50 Energy Ltd, Tullow Madagascar and under exploration, such as iron ore years. Annual production will eventually Madagascar Oil (MOIL). and coal. While others gemstones, expand to 750,000 tons. decorative stones and rare metals According to a 2013 report, there were have been exploited by small-scale Madagascar is now entering an era of some 20 onshore and 200 offshore oil extraction projects. significant natural resource extraction, blocks. MOIL is developing a massive which will generate high income and onshore heavy oilfield at Tsimiroro and Madagascar’s extractive sector is being growth potential. The mining sector’s ultra-heavy oilfield at Bemolanga through transformed from a largely artisanal into a contribution to GDP – led by Rio Tinto the application of various thermal

UK-MADAGASCAR TRADE & INVESTMENT FORUM 2015 07 techniques – with 1.7bn barrels of Madagascar has 2,800 hours of sunshine in the Indian Ocean area. Since other contingent resource already identified. It per year providing an average of 2,000 islands of the Indian Ocean Commission is targeting a production rate of 10,000 kilowatt hour per square metre a year (IOC) are tiny and net importers of barrels per day (bpd) by 2018. (kWh/sq.m/year). At 50 metres altitude, a food products, Madagascar could be the sufficient wind force reaches a speed of region’s breadbasket. The World Bank TOURISM: Madagascar’s natural 6 to 8 metre per sound (m/s) in the north, advised that to promote this potential, beauty and diversity are among its 6 to 6.5m/s in the centre and of 8 to 9m/s Madagascar should develop sustainable greatest assets. The Island is a privileged in the southernmost region. The ground land and water management practices, tourist destination thanks to niches such temperatures reported within eight areas, while improving agricultural productivity as sport/adventure, cultural and eco- amounting to 250°C, present significant and land tenure security. Amid soaring

ECONOMIC OVERVIEW tourism, as well as 5,000km of beaches. geothermal potentials. global food demand and insufficient In 2014, the tourism sector (plus its production, investment in food production indirect and induced impacts) accounted Given massive private investments in Madagascar is potentially lucrative. for 19.7% and 16.5% of GDP and total and strong legal/regulatory framework, employment, respectively, according to Madagascar can expand its current As an Island, Madagascar has a halieutic the World Travel & Tourism Council 500-plus MW thermal energy output and fish farming potential of more than (WTTC). Madagascar is one of the to 8, 000MW sourced from renewable 50,000 tons per year, 60% of which has a world’s most distinct and important energies, particularly hydro and commercial value. An exclusive economic environmental hotspots, with more than solar power. zone covering 115mnha and a large 80% of flora (black and white orchids, continental shelf of about 12mnha are full palm trees, ravinala, baobab, pitcher AGRICULTURE: Madagascar of ichtyologic resources. plants, medicine plants) and a higher rate boasts agricultural and agro-industrial for the fauna. The country is also known potentials, reflecting large, fertile land In sum, Madagascar can realise its for its rosewood and its diverse wildlife, with miscellaneous climates for any ambitions of becoming a true emerging including lemurs and tortoises. In fact, agriculture activities, which account for market – contingent on political/economic over 70% of the 250,000 wildlife species over 25% of GDP, employing 80% of the stability, better governance and increased found in Madagascar are found nowhere population and contributing more than growth-enhancing reforms (namely, PPPs, else on planet earth. 70% to export earnings. The country has competition and taxation). However, given 18 million hectares (ha) of cultivable land the country’s low capital accumulation There are opportunities in the hospitality and plentiful water resources for irrigation and limited advanced technologies, private business related services (air, sea and and production (2,000km of rivers). investment (including FDI) and donor ground transportation, tours operations, Exports consist of low-volume high-value funding are needed to put Madagascar and building new hotels). In terms of products like vanilla (of which Madagascar on the path of sustainable robust growth accommodation facilities, Madagascar is the world’s largest producer), litchies trajectory in coming years. lacks (4 and 5 star hotels). and essential oils. Other crops include Arabica coffee, tea, cocoa, rice (Africa’s Investors are eager to resume business ENERGY: Madagascar boasts under- third largest producer), cotton, exotic ties with the country – there are large exploited potential in renewable energies fruits and vegetables as well as cereals profits to be made in the extractive, – including hydro, solar and wind power. and starchy foods: maize, potato, cassava, agriculture, renewable energies, transport, There are around 660 hydroelectric sites leguminous plant. It is also endowed with construction, tourism, and textile sectors. with capacities to generate up to 7,800 large herd of live stocks. The resource-rich nation is actively seeking megawatts (MW) in the eastern and new trade and investment ties with global northern regions of the Island as well Madagascar is geo-strategically situated partners. Diversified natural resources can as in the central highlands. Furthermore, for greenfield projects in the agribusiness become the engine of development.

FACT FILE LOCATION: Madagascar is the fourth largest island in the world, located in the Indian Ocean at 400km off the south-eastern coast of Africa (Mozambique and Tanzania) and it is straddling the Tropic of Capricorn; AREA [SQ. KM]: 587,040; GOVERNMENT TYPE: Republic; CAPITAL CITY: Antananarivo; POPULATION: 23.57mn (2014); BUSINESS LANGUAGES: French (official), English and Malagasy; CURRENCY: Malagasy Ariary (MGA); LABOUR FORCE: 11.69mn (2013); KEY INDUSTRIES: Meat processing, Seafood, Soap, Breweries, Tanneries, Sugar, Textiles, Glassware, Cement, Automobile assembly plant, Paper, Petroleum, Tourism; FINANCIAL SECTOR: 11 banks, five financial establishments, 30 micro-finance institutions (MFIs) and five insurance companies;MAJOR PORTS: Antsiranana, Mahajanga, Toamasina, Toliara; MAIN CROPS: Vanilla, Coffee, Sugarcane, Cloves, Cocoa, Rice, Cassava (tapioca), Beans, Bananas, Peanuts, Livestock products. Madagascar is a member of the World Trade Organisation (WTO) and signatory to the World Bank’s Group’s Multilateral Investment Guarantee Agency (MIGA) Convention and the African, Caribbean and Pacific Group of States (ACP)-European Union Cotonou Agreement.

08 UK-MADAGASCAR TRADE & INVESTMENT FORUM 2015 TABLE 1 KEY MACRO-ECONOMIC INDICATORS Projections 2012 2013 2014 2015 2016

DOMESTIC ECONOMY Nominal Gross Domestic Product (GDP) 21,774 23,423 25,629 28,960 32,600 (Billions of Ariary at current prices) Total GDP (Millions of U.S. Dollars) # 9,920 10,602 10,674 Real GDP growth (%) ** 3.0 2.3 3.3 3.4 4.6 Consumer Prices (annual Avg, % chg.) 5.7 5.8 6.1 7.6 7.4 Total Domestic Investment (%) of GDP 17.6 15.9 15.6 16.3 17.6 Gross National Savings (%) of GDP 10.8 10.3 15.3 14.9 15.4

PUBLIC FINANCES (%) of GDP Government Revenue, excluding Grants 9.6 9.6 10.1 10.3 10.6 Government Expenditure 13.4 14.9 14.7 16.7 15.4 Budget Balance, including Grants -2.6 -4.0 -2.3 -4.4 -2.8 Official Grants // 1.2 1.3 2.3 1.9 1.9 Gross Domestic Government Debt 33.7 34.0 34.7 35.4 43.6

# GDP in Purchasing Power Parity (PPP): US$34 bn (2014). ** Real GDP, avg annual growth: 1990-2000: 2%; 2000-14: 2.8%. // Net Official Development Assistance (ODA): US$500 mn (2013). Major Donors: France (US$75.4mn); EU institutions (US$73mn); USA (US$56mn); Japan (US$50.6mn); Germany (US$14mn); and Norway (US$13mn).

SOURCES: Malagasy authorities; World Bank; and IMF projections.

TABLE 2 EXTERNAL TRADE, PAYMENTS & DEBT INDICATORS (IN % OF GDP, UNLESS OTHERWISE INDICATED) Projections 2012 2013 2014 2015 2016

Exports of Goods & Services 29.2 30.3 32.8 34.9 37.9 Imports of Goods & Services 38.7 38.7 37.1 38.8 43.2

Merchandise Trade Balance -11.1 -7.7 -5.1 -3.1 -4.0 External Current Account 1/ -6.7 -5.6 -0.2 -1.3 -2.2

Net Foreign Direct Investment 7.8 5.2 2.9 2.9 3.5

International Official Reserves (months of total imports) 3.1 2.3 2.5 2.5 2.6

External Official Debt 2/ 23.4 22.6 23.5 30.6 34.5 Debt-Service (% of exports of goods) 46.4 39.4 36.3 29.8 25.2

SOURCE: Sub-Saharan Africa Regional Economic Outlook (October 2015), IMF.

1/ Current-account deficit is financed by inward FDI and private debt inflows. 2/ Foreign debt has been low and stable since HIPC relief in mid-2000s; and is now mainly on highly concessional terms.

PRINCIPAL EXPORTS: Nickel; Apparel (non-knit); Coffee & Spices; Ores; Seafood. MAIN DESTINATION OF EXPORTS (% OF TOTAL 2014): France 17.7%; USA 9.0%; Belgium 6.8%; Holland 6.4%; South Africa 5.7%; Japan 5.4%; South Korea 5.0%; China 4.8%; Germany 4.5%; and Canada 3.8%.

PRINCIPAL IMPORTS: Oil & Mineral Fuels; Industrial & Electrical Machinery; Cereals; Motor Vehicles & Parts; Natural Minerals & Stones. MAIN SOURCES OF IMPORTS (% OF TOTAL 2014): China 20.5%; France 10.6%; Algeria 6.3%; India 5.4%; Bahrain 5.0%; Mauritius 4.6%; South Africa 4.2%; Kuwait 4.0%.

SOURCES: UN Comtrade (2013); Direction of Trade Statistics (2014), IMF.

UK-MADAGASCAR TRADE & INVESTMENT FORUM 2015 09 TABLE 3 PROJECTED SECTOR CONTRIBUTION TO GROWTH 2015 2016 2017 2018 2019

Real Supply-side Growth (% change) Agriculture 2.6 3.5 3.5 3.6 3.6 Food & Drink 3.7 3.8 3.8 3.8 3.8 Export Processing Zone 7.4 14.8 14.8 13.8 12.8 Energy 5.5 5.5 5.4 5.3 5.2 Extractive Industry 28.1 10.0 5.0 5.0 5.0 Transportation 5.5 6.1 6.5 6.3 6.1 ECONOMIC INDICATORS Services 3.3 5.6 6.4 6.3 6.4 Trade 2.7 2.9 3.1 3.2 3.3 Public works/Construction 13.1 12.8 12.5 11.6 10.8

Memoranda items:

Nominal GDP at market prices (billions of Ariary) 28,960 32,600 36,279 40,182 44,498 Nominal GDP growth 13.0 12.5 11.3 10.7 10.7

SOURCE: IMF staff projections.

TABLE 4 FDI INFLOWS TO MADAGASCAR (IN U.S. DOLLARS) 2009 2010 2011 2012 2013 2014

Foreign Direct Investment 1/ 1,066 808 810 812 567 351 Total FDI Stock 2/ 3,496 4,452 5,359 5,650 6,378 6,277 As (%) of GDP 40.9 51.0 54.2 57.0 60.1 59.0 Number of Greenfield Projects 3/ – – – 8 5 6

SOURCE: UNCTAD World Investment Reports.

1/ FDI represents net inflows of investment to acquire a lasting management interest (10% or more of voting stock) in an enterprise operating in an economy other than that of the investor. It is the sum of equity capital, reinvestment of earnings, other long-term capital, and short-term capital as shown in the balance of payments. 2/ FDI stock represents the value of the share of affiliate enterprise at book value or historical cost, reflecting prices at the time when the investment was made and reserves (including retained profits) attributable to the parent firm, plus net debt of affiliate to parent co. 3/Greenfield Investments are a form of FDI where a parent company starts a new venture in a foreign location by constructing new operational facilities from scratch.

TABLE 5 THE ECONOMIC CONTRIBUTION OF TRAVEL & TOURISM 2011 2012 2013 2014 2015

Total Visitors ('000) 230 260 200 230 216 Foreign Visitor Exports (MGA bn) 1/ 1709.7 1946.2 1933.1 3036.8 2759.1 Total Contribution of Tourism 3,454.8 3,810.2 3,790.3 5,113.2 4,833.6 to GDP (MGA bn) 2/ Employment Impacts ('000) 3/ 586.4 660.6 665.4 882.6 813.9 Capital Investment (MGA bn) 4/ 689.2 744.2 715.3 699.0 724.7

1/ Spending within the country by international tourists for both business and leisure trips, including spending on transport. 2/ Economic output derived by the hospitality sector, plus supply-chain effects. 3/ The number of jobs generated directly in the tourism sector, including the indirect and induced contributions. 4/ Capital investment spending by all hospitality-related industries. This also includes capital expenditure by other industries on specific tourism assets such as new visitor accommodation and passenger transport equipment, as well as restaurants and leisure facilities for specific tourism use.

SOURCE: World Travel & Tourism Council.

10 UK-MADAGASCAR TRADE & INVESTMENT FORUM 2015 GDP COMPOSITION, 2013 Percent of Total 7.5% Agriculture, Forestry, Fishing & Hunting Extractive activities 11.3% 26.4% Manufacturing Production-Distribution of Electricity, Gas & Water Construction 0.3% Wholesale & Retail, Vehicle repairs & Hospitality 24.0% 14.6% Transport & Communications 3.5% Finance Intermediation, Retail Estate & Business activities 1.3% Public Administration & Defence, Compulsory Social Security 11.1% SOURCE: AfDB, African Economic Outlook 2015

FDI STOCKS BY SECTOR, 2012

0.05% Percent of Total: US$5,927mn 1.2% 4.5% Agriculture & Fishing 4.2% 0.4% Manufacturing 1.8% 1.9% Public Utilities 10.0% Construction & Public Works 2.0% Commerce 5.2% Hospitality 68.7% Transport Finance Oil Distribution Telecommunications Mining

SOURCE: US Dept. of State, 2014 Investment Climate Statement.

UK-MADAGASCAR TRADE & INVESTMENT FORUM 2015 11 Programme of the Day UK-MADAGASCAR TRADE AND INVESTMENT FORUM

PROGRAMME 19th November 2015, Lancaster House

0800-0910 1345-1500 Registration & Refreshments Session 3 – Investing in Industry and Infrastructure 0910-0920 Chair: Christopher Brown, Chairman of the Welcome Anglo-Malagasy Society • Atam Sandhu, Chief Executive, DMA • Hon Narson Rafidimanana,Minister of Industry, Private- • HMA Tim Smart, British Ambassador to Madagascar Sector Development, & Small & Medium Business • Hon Rivo Rakotovao, Minister of State in Charge of 0920-0940 Infrastructure & Territorial Planning • Geoffrey Tassinari, Chairman, AMIC (Malagasy Private Keynote Addresses Equity Association) • James Duddridge MP, UK Minister for Africa • Franck Fohine, Chief Executive Officer, Vidzar Groupe • HE Hery Rajaonarimampianina, President of the Republic Q&A Session of Madagascar 1500-1530 0940-1050 Refreshments Break Session 1 – Economic Outlook & Financial Sector Development Chair: Leon Isaacs, Chairman, DMA 1530-1700 • Hon Herilanto Raveloharison, Minister of Economy Session 4 – Other Key Sectors and Planning Chair: Hon Henry Bellingham MP, Former Minister • Alain Rasolofondraibe, Governor of Central Bank for Africa of Madagascar • Hon Ulrich Andriantiana, Minister of Tourism, Transport • Eric Andriamihaja, General Manager, Economic and Meteorology Development Board of Madagascar • Emilie Filou, Freelance Journalist and Co-Author, • Stephania Bonilla-Féret, Economic Affairs Officer, UNCTAD Lonely Planet Guide: Madagascar Q&A Session • Richard Nimmo, Managing Director, Blue Ventures Expeditions 1050-1120 Q&A Session Refreshments Break 1700-1730 1120-1230 Closing Remarks • Atam Sandhu, Chief Executive, DMA Session 2 – Investing in Energy & Extractives • HMA Tim Smart, Chair: Roger Martin, Director, DMA British Ambassador to Madagascar • HE Hery Rajaonarimampianina, President of the • Hon Gatien Horace, Minister of Energy and Hydrocarbons Republic of Madagascar • Hon Joeli Valerien Lalaharisaina, Minister of Mining • Robert Estill, Chief Executive Officer, Madagascar Oil 1730-1900 • Ian Harebottle, Chief Executive, Gemfields Q&A Session Gala Drinks Reception – Sponsored by Madagascar Oil 1230-1345 Networking Lunch

12 UK-MADAGASCAR TRADE & INVESTMENT FORUM 2015 Our Partners

Madagascar Oil A Leader in Madagascar’s Developing Energy Industry. league of the world’s giant oilfields. Additionally, the Company Madagascar Oil is an AIM listed independent is seeking to further balance the portfolio through a international oil and gas company focused on sustained evaluation of the prospectivity of its exploration exploration, development and production opportunities properties. This work will specifically target potential high in five onshore blocks in Madagascar.The Company is gravity oil or large volume gas opportunities. the leading and longest operating oil and gas company in The Company is fully committed to working closely with Madagascar and the country’s first upstream mining title was the Government of Madagascar to achieve the important awarded in early 2015, resulting in a 25-year development strategic objective of developing its first commercial license on Block 3104 Tsimiroro. production. Madagascar Oil is fully engaged in making a This development license is key to the development of positive contribution through its commitment to Corporate 1.7 billion barrels of contingent resource already identified Social Responsibility and is also participating in programmes to in the Tsimiroro field. Through the application of various sustain the biodiversity of the Island. thermal techniques, Tsimiroro is capable of being in the

Energizer Resources Energizer Resources is a mineral exploration and mine that the flake graphite concentrates from the Molo deposit development company based in Toronto, Canada, that meet or exceed quality requirements for all major end- is developing its 100%-owned, feasibility-stage Molo markets for natural flake graphite, namely refractories, anode Graphite Project in southern Madagascar. Extensive material for lithium-ion batteries, specialty graphite foils, independent testing by various third-parties has verified and graphene ink applications.

Gemfields Gemfields is the world’s leading supplier of exploration and ethics, Gemfields supports the delivery of responsibly sourced coloured gemstones, specialising a consistent supply of high-quality coloured gemstones to in emeralds and amethysts from Zambia and rubies from jewellers, manufacturers and luxury brands worldwide. In Mozambique. Listed on the AIM market of the London January 2013, Gemfields acquired Fabergé – aligning the Stock Exchange (ticker: GEM), Gemfields oversees the mining world’s largest coloured gemstone producer with one of the and marketing of coloured gemstones from some of the most recognisable and iconic heritage brands of all time, to world’s finest gemstones deposits and it does so responsibly create what can readily be described as a true global coloured and transparently. gemstone champion. Positioned at the intersection of mining, marketing, www.gemfields.co.uk

Clarke Energy Clarke Energy is a multinational specialist in fuelled power generation. We are the largest authorised the engineering, installation and maintenance of distributor and service provider for GE’s reciprocating reciprocating engine based power plants and gas engine business. engine compression stations. Our offering ranges from The company’s focus is on delivering quality installations, the supply of an engine, through to the turn-key installation backed up with reliable, accountable after-sales support. of a multi-engine power plant. Our facilities deliver fuel We have a culture of integrity and high ethical standards. efficiency and help reduce carbon emissions. Applications Clarke Energy has a dedicated, highly-trained team of include combined heat and power (CHP) with natural gas, sales, engineering, project management, commissioning and biogas, landfill gas and coal gas or high efficiency diesel- maintenance staff deployed around the world.

UK-MADAGASCAR TRADE & INVESTMENT FORUM 2015 13 Our Partners

Green Ventures Capital Founded by Misa Andriamihaja and seeded by Jim by investing in key components of the clean energy value Herrnstein of Renaissance Technologies LLC; Green chain, from generation to distribution and sales; and defines

OUR PARTNERS Ventures Capital (GVC) is an investment company authorised its clean energy focus as to include natural gas, renewables by the Financial Services Commission (FSC) in Mauritius; with and energy technologies. primary offices in London, United Kingdom. GVC is continuously looking to invest in development GVC specialises in equity and equity-linked investments in and construction projects (development funding and equity clean energy assets across Africa; and is targeting a selection capital for large scale infrastructure), operational of 10 African countries chosen through a proprietary in- projects (privatisation opportunities or upgrade and house macroeconomic and market analysis. expansion of operating assets); and energy companies GVC aims to capitalise on the strong African energy market seeking growth capital.

Rio Tinto Rio Tinto is a leading global mining group that focuses proud to achieve and are always learning. With headquarters on finding, mining and processing the Earth’s mineral in the UK, our Group comprises Rio Tinto plc – a London resources. Our goal is to deliver strong and sustainable and New York Stock Exchange listed company, and Rio shareholder returns from our portfolio of world-class assets Tinto Limited – which is listed on the Australian Securities and our compelling pipeline of projects. We take a long-term, Exchange. We are strongly represented in Australia and disciplined approach, developing and running long-life, low- North America, and also have significant businesses in Asia, cost, expandable operations that are capable of delivering Europe, Africa and South America. value throughout the cycle. QIT Madagascar Minerals (QMM) (Rio Tinto: 80 per cent) is Supporting our world-class assets is a company of world- a mineral sands operation based around an ilmenite orebody class people who are the foundation of our success. This near Fort Dauphin, southern Madagascar. It comprises a mine, 60,000-strong workforce, across more than 40 countries, separation plant and port facilities. QMM is one of the largest pulls together as a team committed to getting the best out mining projects ever undertaken in Madagascar. It is mobilising of our operations. Their safety is always our first concern. around 600 employees and 600 service providers on the site. We also foster a culture of innovation, where our people are The extraction started in 2009.

This is Africa This is Africa, a publication from the Financial and identifies the opportunities and risks in this dynamic Times, examines African business and politics in a business environment. global context, making sense of the relationships For complimentary access to articles register at: that Africa is building with the rest of the world. It www.thisisAfricaonline.com/register challenges international preconceptions about the continent

14 UK-MADAGASCAR TRADE & INVESTMENT FORUM 2015 Notes

UK-MADAGASCAR TRADE & INVESTMENT FORUM 2015 15 42° 44° 46° 48° 50° 52° Moroni Cape of Ambre 12° Anjiabe 12° COMOROS Antsiranana Bemanevikabe Irodo Bobasakoa Mayotte Ambatoharanana Ampisikinana (under French Lokia Ambilobe Daraina Administration) Ampohana Ampondra MADAGASCAR Antsiranana Ambanja Zarambavy Tanambao-Daoud 14° Bemanno 14° Maromandia Doany Sambava Antanantanana Farahalana Analalava Antsahabe Andranofotsy The boundaries and names shown and the Antalaha designations used on this map do not imply Anjajavy Marovotry official endorsement or acceptance by the Tsianinkira United Nations. Ambohitralanana Maroantsetra l Mahajanga e Bay Ampanavoana n Cape Mandritsara of 16° n Saint-André Marovoay Antongil 16° a Vilamatsa h Morafeno Seranambe Ambato Boeny C Ambohipaky Antanambe Matsitso e Besalampy u Andrangazaha Ambodiatafana q AntanandavaAntanandava Besakay i Onara Vohilava b Mahajanga Maria Ampandrana Toamasina m Fenoarivo Atsinanana a Tambohorano Ranobe AmbakirenyAmbakireny z Andasibe Manakana Amparafaravola o Ankatrafay Ambatondrazaka M Ambohimena 18° Makaraingo 18° Maintirano Fiadanana Ivondro Toamasina Antananarivo Ankiliroa Tsiroanomandidy Bemamba Ambila-Lemaitso Sakay Bekopaka Antananarivo Moramanga Indian Appontement Vohitrampasina Ocean Vatomandry Andramasay Behamotra Ambatolampy Belo Tsiribihina Adabozato Mangoro Beroboka Avaratra Antsirabe 20° Ambodiharina 20° Morondava Malaimbandy Soavina Masomeloka Manometimay Amborompotsy Nosy-Varika Maharivo M Belo a Toliary n a Ambatomainty n j Mahela a Ankoba Mandronarivo r Fianarantsoa Mananjary Ambohibe Manja Fianarantsoa Ampasimanjeva Morombe Nosy Ambositra Sahasinaka Menamaty Iloto Mattana 22° Andavadoaka Befandriana Atsimo Manakara MADAGASCAR Ambohitsabo Vohipeno Ranohira Mananaba National capital Tanambao Farafangana Regional capital Manombo Atsimo Fiherenana Lopary Town, village Toliary Ankiliarivo Ranomena Airport Onilahy Bezaha Anakao Isahara International boundary Betioky Beheloka Provincial boundary 24° Efoetse Sandravinany Roads

ra d Toliary Railroad Vohombe ra a en Manambato Ankazoabo M Linta Mandrane 0 100 200 300 km Indian Etrobeke Mahatalaky Androka Beloha Tolanaro Ocean (Fort-Dauphin) 0 100 200 mi Beaniky Lavanono Talaky 42° Cape Betanty 42° 44° Sainte-Marie 46° 48° 50° 52°

Map No. 4360 United Nations Department of Field Support March 2009 Cartographic Section The conference is supported by

Media Partners About DMA

DMA is a globally-recognised development and in product development and financial education consultancy focused on mobilising capital to for people who are under-banked or unbanked in emerging economies. developing countries.

We work with national governments, Our clients have included DfID, the World Bank, development agencies and the private sector Agence Française de Développement, DFATD, the to design and deliver programmes that drive International Fund for Agricultural Development, both investment and economic development. AusAid, NZAID and the EC.

> For Governments > For the Private Sector

DMA is the market leader in investment promotion As a counterpoint to our work attracting FDI for sovereign governments worldwide and on the behalf of sovereign governments, DMA maintains a large network of institutional and assists private sector clients in making sustainable private investors, with interests in all key sectors investments into emerging economies across and regions. multiple industries.

Our investment summits – led by either the We specialise in helping companies understand Head of State or Head of Government – are the and navigate complex political landscapes and most productive, globally, in terms of generating leverage our extensive network of industry experts awareness, matching businesses and in delivering and connections with governments to assist with tangible investment outcomes. They are fully market entry strategies, political risk mitigation supported by the UK Government and, over and stakeholder engagement. the past six years, have been attributed as having facilitated more than US$9 billion in new Our relationships with private clients are long- investments into emerging economies. lasting because of the detailed understanding our technical experts have of their operating > For Development Agencies and Donors environments. We know the challenges private businesses face when entering emerging economies We design and deliver projects for a wide range and this has proven invaluable in delivering effective of stakeholders interested in harnessing the global and realistic solutions across our client base. flow of capital for development purposes. DMA has particularly expertise in the field of remittances DMA is headquartered in central London

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