MALAGASY LAND and FOREIGN INVESTMENTS


Nowadays, the concern of the Malagasy governement is focused on how to attract foreign private investments. Some reforms within the Malagasy framework have already been trigerred, but according to what we see in Madagascar, it is not enough yet. It is not yet enough because important international investors are still ignoring Madagascar. Of course, we have the Rio Tinto’s subsidiary: QMM in Tolagnaro, we also have the Sheritt International in Ambatovy… but is it enough? The answer is obvious: NO. It is not enough because the positive effects we were expecting from these investments, are not visible yet. The rate of unemployment is still high. Taxes from these 02 big companies are not enough to enable the Malagasy governement to do great public works. Obviously, there is a huge luck of important investors in Madagascar. Why don’t they come?

There are several causes in it, but i will just talk about a current fact which makes all the foreign investors reluctant to work here: the land.   

In Madagascar, the laws which regulate the land, are still very … conservative. They follow and still respect a legal principle which is a heritage from the era of 19th century: It is forbidden for Malagasy people to sell Malagasy land to foreigners . 

The modern Malagasy land law is very clear on this issue: Foreigners can just rent and use the land, and they can not own Malagasy land. 

Recently, the new Malagasy investment law: act 2007-036 of January 14th, 2008, has brought a very key change concerning the possibility for foreigners to own their land in Madagascar. This law provided that foreign companies or foreign investors (individuals who have been granted with investor visa), can buy Malagasy land under the following conditions:

1. the land has to be used exclusively for professional exploitation. Any personal use and exploitation which is different from the nature of exploitation he “promised” to the Malagasy governement, are forbidden. If there is a breach of such condition, the governement can legally withdraw its title of land ownership;

2. the foreign company or investor has to submit its business plan (investment planning in Madagascar) to a public body named EDBM (Economic Development Board Madagascar). Such plan has to describe and detail its intended business and its pertaining investment in Madagascar;

3. the foreign company or investor has to apply for a formal approval named “authorization for land acquisition” before the EDBM in order to be allowed to purchase legally a Malagasy land. Such authorization if granted, gives to the foreign company or investor the same rights as for a Malagasy entity to purchase and to own land in Madagascar.

The land has to be used only and exclusively for professional purposes. This means: the land that the foreign companies and foreign investors buy, has to be used for the professional needs of their official businesses in Madagascar. If the land is used for another business purpose or for a non-business purpose, the governement has the right to withdraw the title of land ownership it gave to the investor… This is a point on which the international investors do not agree at all. How can they invest in a country where the State does not protect the absolute nature of the right of land ownership? May be the verb to protect is not really appropriate here, because the Stae does not even protect, the State clearly violates the principle of absoluteness of the right of land ownership. In foreign investors’ mind, it would be “easy” for the State to declare that the investor is on breach of its professional duties related to its land, and then to take its land away. Foreign Investors always tend to think that a country like Madagascar is led by a governement which wants to “fool” them and to “steal” their money. 

The obtaining of the so called “authorization for land acquisition” is subject to the condition of submitting a business plan to the EDBM. Such plan will disclose all the information about the planning of investments and the details of use for the land it proposed to acquire. If the EDBM decides that the business of the foreign investor is serious and interesting enough, it can grant the “authorization for land acquisition”. This is a point which needs to be highlighted: it is just an administrative consent from the EDBM which will enable the foreign investor to buy land like Malagasy companies or Malagasy investors. This is also a point which may disturb international investors, they do not feel confortable with the idea that they can not straightly buy land. Some international investors do not really like the fact that their investment plans will be delayed by such procedure. 

Nowadays, the priority of the governement is to attract as much great international investors as possible. In one hand, the Sate tries to do reforms to promote International investments in Madagascar. In the other hand, the great reform of land status towards foreigners has not occured yet. 

If you were the president of the Republic of Madagascar, your number one top priority is to attract international investors, would you be ready to sell the national land?

14 thoughts on “MALAGASY LAND and FOREIGN INVESTMENTS

  1. There is a more political aspect of it that the “theoricists” tend to ignore. The fact that madagascar is an island. Islanders are used to themselves and don’t like much of foreign presence and above all foreign occupation of their land.
    Therefore any president that wants to open up the country’s land law reforms has to face popular distastes of its policy… bottom line is, it has to be tight to accomodate everyone.
    Unfortunately, it doesn’t work that way for investors. They need a healthy economic environment that is also incentive for them to be interested in…
    I think there are some other things that we don’t fulfill (yet) to attract foreign investment:
    * energy supply, JIRAMA and oil supply — this is priority one. I don’t think that the president realizes it but, all his efforts to go all over the wolrd is in vain if he can’t supply the energy these investors require.
    * political stability — utopic we know,… one day who knows
    * local worker’s abilities — do they fulfill the qualification required… importing foreign labor increases tremendously the total cost of investment…
    * etc

    so to answer your question: yes but let’s start with the basics that is boost first local investments and solve the energy supply crisis that we face at the moment. Then we can go forward🙂

  2. a tough question you ask here. probably you could pose certain conditions before selling the motherland. too much of a problem for little stupid me.

  3. This article is so clairvoyant with respect to the latest news ( Daewoo etc.) Thank you for sharing the knowledge. We will try to spread this precious information as much as possible.

  4. Yes, the priority of the government is to attract as much great international investors as possible and the Sate tries to do reforms to promote International investments in Madagascar. This is one of the best investment for the betterment of the country.

  5. Thoroughly helpful information on MALAGASY LAND and FOREIGN INVESTMENTS THE CYBER OBSERVER.

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  6. It is not so much that investors believe countries like Madagascar are trying to “fool” or “steal” their money. To understand our views, take a look at our government. In the United States, we have very strong laws protecting investors. This is the case in most developed, first-world nations. We’ve acquired so much wealth because we’re used to government protection. We don’t inherently view developing nations as being thieves, we’re just very careful and do what we can to protect ourselves.

    It all comes down to “Supply” and “Demand”. There are fundamentally two supply/demand processes when it comes to foreign investment – the investor’s supply/demand and the government’s supply/demand. Investors supply capital (money) for investments and demand a safe place to invest that money. Meanwhile governments such as Madagascar demand foreign investments while offering a supply of investment opportunities. Unfortunately for governments such as Madagascar, there is a lot more demand for the investor’s money than there is a supply. With more investment opportunities available than they have money, investors have the advantage.

    If you had a bunch of money and could find investment opportunities that gave you a good return while also better protecting your money, you would certainly invest there instead of a location that didn’t fully protect your investments. The only reason investors choose to invest money in places such as Madagascar where there is less protection, is because they believe the potential payoff is greater than the risk they are taking. If Madagascar wishes to attract foreign investment without enacting laws that better protect investors, they are going to have to show investors that they have a great resource that they would have a hard time finding anywhere else and thus would be able to make more money in the end! That is how places like China and India attracted foreign investment despite it being more risky for investors. China and India have cheap sources of labor (you can pay them less).

    Madagascar is competing with many other countries for foreign investment and must figure out what their competitive advantage is. What do they have a lot of that nobody else has or can obtain easily? While it is not a surprise that labor is cheaper in Madagascar than it is in, let’s say, France, I doubt they really want to go that route because it will only help further impoverish and take advantage of Madagascar’s lower class. They need to work smarter, not harder!

    Or… they can do a better job protecting foreign investment. It is up to Madagascar’s leaders.

    Building up basic infrastructure and supplying reliable energy/skilled labor, as the user “simplux” mentioned, would also help.

  7. Just like myself i would like to buy land in madagascar but with all said i would rather invest my money in the Seychelles as there one can own the land and you dont have to use it for business purposes.

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