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His Excellency Mr Hery RAJAONARIMAMPIANINA President of the Republic of Madagascar We are building a business environment that favours the development of the private sector, which is the backbone of economic development. We are creating a strong legal system that stands for fair and free justice. We are creating land tenure systems that favour agricultural development. Building a fiscal framework is no less important. Our work is not complete but we work daily towards the rule of law, a strong justice system and security across the country. We are also taking steps so that infrastructure, energy and human resources can stimulate growth. Finally, we have a large and educated youth population. Extract of the interview of the President of the Republic of Madagascar (in Leading Edge 2016) His Excellency Mr Hery RAJAONARIMAMPIANINA President of the Republic of Madagascar Countries with current Free Trade Agreements (FTAs) Countries granting a Generalized System of Preferences (GSP) to Madagascar A strategic hub for your business Centrally positionned and connected with most major global economies + 50 countries : current Free Trade Agreements (FTAs) and Generalized System of Preferences (GSP) granted to Madagascar + 600 millions potential consumers in 34 African countries Preferential customs arrangements facilitating access to US and European Union markets. 7 REASONS to INVEST IN MADagascar 1. Potential access to A global MARKET OF 2. PREFERENTIAL customs ARRANGEMENTS to MORE THAN 600 MILLION CONSUMERS IN 34 African facilitate access to US AND EUROPEAN MARKETS COUNTRIES THROUGH strategic POSITIONING at THE gates OF Africa The eligibility of Madagascar to the African Growth and Opportunities Act (AGOA) with the United States and the Madagascar is a member of the Southern African Development signing of the EPA (Economic Partnership Agreement) with Community (SADC), COMESA (Common Market for Eastern the European Union allow companies in the country to export and Southern Africa) and IOC (Indian Ocean Commission), to these markets without customs duties. This is reflected regional free trade organizations totaling more than 600 in a strong trade dynamic between Madagascar and the two million potential consumers. Investing in Madagascar countries, with Madagascar exports to the United States will give investors access - in addition to the competitive rising 12.8% in 2016 and to the European Union 44.6% in 2016. advantages of the country - to these high-potential free trade zones. In July, Madagascar signed the Tripartite Free Trade Agreement (TFTA), which combines SADC, COMESA, and the 3. Multiple INVESTMENT OPPORTUNITIES IN HIGH East African Community (EAC), which included 57% of the potential AREAS total African population. Through a bold sectoral strategy geared towards promoting sectors with strong comparative advantages, Madagascar offers a range of opportunities in tourism, agribusiness, mining, textiles, ICT, renewable energy, infrastructure. 4. COMPETITIVE factor COST 6. COMMITMENT BY THE MalagasY GOVERNMENT to structural projects affecting Madagascar has many competitive advantages, including infrastructures AND renewable ENERGY labor costs (US $ 50/month), the cost of electricity SOURCES (US $ 0.167/kWh in 2016) and water (US $ 0.30/m3 in 2016). For industrial use, lease price for industrial sites (US $ 2.00/m²/ Beyond the achievements of its own, the Malagasy month), availability of "natural" materials and inputs at low Gouvernment relies on Public-Private Partnerships. Several cost, ease of exploitation of resources (eg.: open pit mines, ambitious infrastructure projects are being implemented in natural conditions for agriculture and infrastructure), etc. the telecommunications sector, with the installation of more Also, investors can take advantage of the value of the Internet than 12,000 km of fiber optic network over 14,000 km of radio- connection, which ranks second in terms of speed in Africa. relay networks. The energy sector includes several projects for the construction of hydroelectric power plants, including 5. A legal AND taX frameworK for INVESTMENT Volobe's $ 500 million, generating 110 MW. The next stage of the creation of Special Economic Zones, one dedicated Madagascar is implementing significant legal, procedural specifically to the textile industry (an integrated industrial and administrative reforms aimed at facilitating business zone of + 100ha) will favor the construction of infrastructures practices and encouraging local and foreign investment. By necessary for the emergence of growth poles. 2016, more than 20 reforms have been implemented in the areas of business law, trade justice, import-export, business 7. AN ISLAND RICH IN natural RESOURCES start-up, facilitation of credit, taxation, etc. Various laws favoring investments have been promulgated, in particular Madagascar is endowed with potential mining, agricultural, the Law on Free Zones and Companies, which allows freehold energy, fisheries. Particularly dense and varied, which only companies to benefit from exemptions from customs duties need to be exploited. The uniqueness and richness of its and VAT on imports ; and Income Taxes for the first 15 years. biodiversity (the biodiversity rate is 90% (# 1 in Africa), and the endemicity rate is the highest in the world) are also an asset for tourism investments. I. MADAGASCAR POLITICAL SYSTEM : OFFICIAL NAME : Republic with semi-Parliamentary Madagascar double command regime. Multiparty. POPULATION In 2016, the World Bank Country’s aREA : RELIGIONS : estimated the population at 587 041 sqm Christianity 41%) about 24.8 million inhabitants. Traditional religion (52%) 64% live in rural areas and Islam (7%) MAIN EXPORTS : Textiles, 36% in urban areas. mining products, fish 55,68% are between 15 to 64. products, annuity Gross National Income (GNI) is OFFICIAL LANGUAGES : products (vanilla, US $400 per capita. cloves,…) Malagasy - Français CURRENCY : Ariary (MGA) WEATHER CONDITIONS : May to October : winter (15 to 26°C in the coastal regions and 4 to 20°C in the central TELEPHONE CODE : November to April : summer (20 to 37°C in the TIME ZONE : +261 coastal regions and 15 to 30°C in the central) EAT (utc +3) II. ECONOMIC AND SOCIAL CONTEXT 1. ECONOMIC ENVIRONMENT Major macroeconomic aggregates (2015-2016) GNI PER CAPITA US $ 411 US $ 401 GDP GROWTH 3.01% 4.2% INFLATION RATE 7.9% 6.7% (AVERAGE ANNUAL VARIATION) 14 454 GROWTH RATE PER sectOR PRIMARY SECTOR 0.7% 2.2% Companies createD SECONDARY SECTOR 4.1% 4.9% (2016) TERTIARY SECTOR 4.2% 4.8% Source : World Bank and INSTAT 2015 2. TRADE Top 5 main products exported and imported by Madagascar : EXPORTED IMPORTED PRODucts 2016 PRODucts 2016 (USD M) (USD M) FOOD TOTAL EXPORTS TEXTILE ENERGY PRODucts EQUIPMENT (MADAGASCAR TO THE WORLD) USD M 533.1 412.2 330.5 IMPORT EXPORT 644.9 4000 Vanila FOOD PRODucts 316.6 274.8 2500 ORES RICE 102.6 SHRIMPS 65.8 Sugar 1000 68.2 36.5 - 2009 2010 2011 2012 2013 2014 2015 2016 others others Malagasy goods exports doubled from 2010 to 590.5 total 1 845 total 2016. This increase was due to growth in several 2 256 2 256 sectors : apparel, agriculture, mining, etc. 3. INVESTMENT 2014 2015 2016 351 441 541 FDI flows (USD million) FDI flows (USD million) FDI flows (USD million) 6 277,20 5 619,1 5 882,4 FDI stocks (USD million) FDI stocks (USD million) FDI stocks (USD million) 6 0 2 Number Number Number of investments greenfield * of investments greenfield * of investments greenfield * 21,1 34,6 36,2 Inward FDI Inward FDI Inward FDI (% of GFCF**) (% of GFCF**) (% of GFCF**) 58,8 57,7 60,4 FDI stock (as % of GDP) FDI stock (as % of GDP) FDI stock (as % of GDP) Source : UNCTAD (2017) *Greenfield investments correspond to the creation of subsidiaries ex-nihilo by the parent company. ** Gross fixed capital formation (GFCF) is an indicator measuring the sum of investments, mainly material, made during a year. 4. InfrastructureS Water and electricity JIRAMA (Jiro sy Rano Malagasy) is the main supplier of water and electricity in Madagascar, but there are three other dealers. Regulation, control and monitoring of the sector are provided by ORE : Office de Régulation de l’Eléctricité (Electricit - Regulation Office. Average cost of : Water : 16.19 0.07 66.31 3 USD USD USD/KW 0.33 USD/M Medium Voltage for Fixed premium Consumption Royality Industrial (monthly) (monthly) Purpose Telecommunication The market for mobile telephony and Internet are growing. If the mobile phone industry had 9 426 996 subscribers in 2016 (1,045,888 in 2006), the one for internet has 1 491 186 subscribers (10,742 in 2006). Four operators are present in this sector: Telma, Orange, Airtel and Blueline. The ARTEC (Autorité de Régulation des Technologies de Communication) or Regulatory Authority for Communication Technologies ensures the regulation, control and monitoring of telecommunications. Arrachart Fascène in Antsiranana à Nosy Be Ambodisatrana in Sambava Philibert Tsiranana in Majunga Ravoraha in Sainte Marie Ambalamanasa in Toamasina International airport of Ivato Antananarivo Tsimahavaokely in Morondava Beravina in Fianarantsoa Pangalana in Mananjary Ankoronga in Toliara Marilliac in Tolagnaro Air transport Sea and river transport 14 11 INTERNATIONAL AIRLINES SEAPORTS IN MADAGASCAR serve Madagascar with regular, direct flights to including 5 container terminals. The first port of 10 countries across 3 continents. entry is Toamasina then the other ports of national • Air Austral interest like Taolagnaro, Toliara, Mahajanga, and Antsiranana. The secondary ports