Malagasy land and foreign investments

Andrydago | October 21, 2008

by andrydago

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?

Original source: Quest Bulgaria

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