Critical issues for American investors in Madagascar

This report appraises the investment environment in Madagascar for U.S. investors. On the negative side, continuing political instability is the major disincentive to investors; other negatives include an economy that is still basically agricultural and low-tech, an undeveloped private sector, primitive infrastructure, an enormous external debt, inefficient government, an unsteady financial sector, and, possibly, a cultural bias against rapid change ("muramu"), which may translate into a lack of entreprenurialism. Madagascar"s assets include abundant and untapped natural resources; the government"s genuine openness to investment in any sector; unrestricted access to European and U.S. markets; and a low-cost and productive labor force. Construction, mining, food processing, tourism, and pharmaceuticals are identified as the most promising sectors for investment. Practical constraints to conducting business in Madagascar include serious bureaucratic corruption and red tape, a shortage of trained indigenous managerial talent, a heavy emphasis on personal contacts, and domination of the culture by French language, business codes, and practices. Annexes summarize business and trade statutes relevant to foreign investors.