Madagascar - Country Commercial Guide
Investment Climate Statement (ICS)
Last published date:

This information is derived from the State Department’s Office of Investment Affairs’ Investment Climate Statement. The U.S. Department of State’s Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world. They analyze a variety of economies that are or could be markets for U.S. businesses. The Investment Climate Statements are also references for working with partner governments to create enabling business environments that are not only economically sound, but address issues of labor, human rights, responsible business conduct, and steps taken to combat corruption. The reports cover topics including Openness to Investment, Legal and Regulatory Systems, Protection of Real and Intellectual Property Rights, Financial Sector, State-Owned Enterprises, Responsible Business Conduct, and Corruption.

Executive Summary of the ICS 2023

Madagascar possesses large quantities of mineral, agricultural, and marine resources, and the Government of Madagascar (GOM) publicly welcomes foreign direct investment (FDI), however U.S. companies describe the investment climate as increasingly challenging. Following a military coup in 2009, FDI decreased from an all-time high of 22 percent of GDP in 2010 to 10 percent in 2020. In 2019 the government announced a new strategy for attracting foreign investment and promoting economic development called the “Plan d’Emergence Madagascar” or PEM. As of 2023 the government has yet to publish the PEM but continues to stress the importance of FDI to achieving its development goals.

Problems investors experience in Madagascar generally stem not from the text of laws but from the perceived lack of fair and consistent implementation. Existing laws allow foreign ownership of businesses and do not generally discriminate against foreign-owned enterprises, yet foreign companies regularly report being subjected to additional licensing and tax scrutiny and unexplained holdups in receiving government approvals. There is no legal requirement that citizens own shares of foreign investments, nor any restriction on the mobility of foreign investors, but companies which lack local partners tend to face additional regulatory hurdles and other challenges. Foreign and domestic businesses frequently claim they are not consulted prior to the implementation of new government policies affecting their activities. Due to decreasing revenues and foreign exchange levels, the government has recently instituted policies designed to increase its revenues and foreign exchange reserves derived from exports. However, these moves have had a deleterious effect on the country’s exports and foreign exchange reserves. In the vanilla sector, the government in 2022-2023 introduced new regulations and limitations on exports which caused a collapse of the country’s vanilla sales during the 2022-2023 season.

Companies and individuals seeking to conduct foreign currency transactions in Madagascar must request permission from the government via a form. Restrictions on foreign currency transfers are enforced at the state and commercial bank level with close monitoring by the Finance Ministry. In 2023, the government began further restricting the outflow of Euros and U.S. Dollars from Madagascar due to an increasing shortage of foreign exchange in the country. These measures have negatively impacted the operations of foreign investors. Madagascar was ranked 142 out of 180 countries for corruption in the 2022 Corruption Perceptions Index reported by Transparency International, and in 2022 the government threatened to prosecute the local director of Transparency International for uncovering alleged corruption. While giving or accepting a bribe is a criminal act and is subject to trial by court, corruption is an ongoing issue at all levels in Madagascar and a factor in daily life faced by most Malagasies. Corruption is most pervasive in the judiciary, police, tax, customs, land ownership, and mining. U.S. companies operating in Madagascar cite corruption as a serious impediment to their activities.

Madagascar does not have a separate free trade agreement or a bilateral investment treaty (BIT) with the United States but benefits significantly from customs duty exemptions under the African Growth and Opportunities Act (AGOA), to the point that the United States has been its biggest individual export market since 2018. Madagascar lost its AGOA eligibility from 2010-2014 due to a military coup in 2009, but exports under AGOA – primarily vanilla and textiles – rebounded. Madagascar has a young though largely illiterate workforce. Textiles, mining, energy, and telecommunications remain the most promising sectors in a challenging investment climate. To access the ICS, visit the U.S. Department of State Investment Climate Statements website.