Madagascar, the fourth largest island nation, has a distinct place in the world geographically, economically and politically. Owing to the country’s exquisite flora and fauna, Malagasy enjoy the status of being residents in the “Eighth Continent.”  The following is an account of how the nation scores on different aspects of entrepreneurship.

Statistical Break-up Per Sector

Entrepreneurial activities are generally focused in areas such as agriculture, including fishing and forestry, which contributes 32% of GDP and more than 70% of export earnings. Industry contributes some 13% of GDP with the food, energy and beverage industries as the main sub-sectors. Services contribute about 55% of GDP.

Deriving Hope

Since the last decade, Madagascar’s debt ratio has decreased considerably from 46 % to 15.6 %. Madagascar has run a sizeable balance of payment deficits since the mid-90s. Current account deficit as a percentage of GDP averaged in excess of 6% during the last six years and registered nearly 4% in 1999. Following is an enumeration of factors and events that triggered entrepreneurial activities in the island nation:

  • Poverty Reduction and Growth Facility (PRGF): Under PRGF, Madagascar was granted $103 million for the year 2001-03 by the International Monetary Fund (IMF).
  • Heavily Indebted Countries Campaign (HIPC): Resources freed via the HIPC are directed towards improving access to health, education, rural roads, water and direct support for communities.
  • Export Processing Zones (EPZs): More than 200 investors, particularly garment manufacturers, have organised themselves under this scheme. EPZs were established in 1989 with a view to enhance entrepreneurial interests collectively.
  • Lome Convention: Absence of quota limits on textile imports to the European markets has stimulated growth in the trade immensely.
  • Eligibility for AGOA: Madagascar’s recent eligibility for AGOA is significantly increasing Malagasy export and foreign investment.
  • Poverty Reduction Strategy Paper

Pragmatic Economic Policies

A number of key policies have led to an immense boost in existing economic conditions. Some of them are:

  1. Reduction of price distortion.
  2. Floated exchange rate.
  3. Increased energy prices .
  4. Elimination of commodity subsidies .
  5. Strengthening the financial sector by bank restructuring and privatization.

A relatively small, though not inconsiderable, boost to the economy has been provided by the tourism industry. Primary tourist interest areas are the capital Antananarivo, and the islands of Nose Be in the North West and Ile Sainte-Marie to the East, owing to their beautiful beaches. Since 2006, the average number of tourists visiting the island nation has increased by 11% annually. A major group of tourists is comprised of research scholars and botany enthusiasts who are highly learned and aim to explore the flora and fauna exclusive to the region. 60% of the tourists are French; Madagascar was once a French colony and bears strong ties to the European nation in culture and history.

Despair of Mirages

With a population growth rate of about 3%, Madagascar has witnessed a sharp decline in its per capita income over the last decade. For the past thirty years, the growth rates have averaged only 0.4% every year. A very fragile feature of Madagascar’s economy is its high degree of dependence on foreign aid and direct investment; net FDI inflows into the country in 2010 were 9.87% of GDP.

Not only does the finance sector have certain loopholes that make entrepreneurial ventures dicey, but several social and geographical factors also contribute to creating major hindrances. Madagascar faces acute issues like chronic malnutrition, under-funded health and education facilities, and severe loss of forest cover accompanied by erosion. Even outbreaks of political unrest, like anti-government strikes and demonstrations, have held back the growth rate and deterred entrepreneurs. The erratic commitment of the government to economic reforms has made the business environment highly precarious.

In addition, a sudden decrease in global coffee demand in recent years has hit Madagascar below the belt as it is one of the largest coffee exporters in the world. Mining activities in the region, although claiming to achieve “sustainable development,” have had adverse results on the biodiversity of the nation, which is home to 80% of the world’s endemic species. With the country’s vast reserves of sapphires and other semi-precious stones, many mining firms like QIT Madagscar Minerals are concentrated in the areas primarily around the capital region. Such ventures might prove beneficial to the economy in the short-term, but are not at all advisable in the long run.


There are no free lunches in this world. By the same token, entrepreneurial ventures have necessitated some trade-offs in the island nation. The Malagasy population aims at achieving sustainable development that will last for years to come, providing them the means for self-employment. Trade, tourism, research and educational activities, agriculture and forestry have helped give an upper hand to Madagascar over its contemporaries, but the nation also needs to curb “unhealthy” means of achieving entrepreneurial bliss.

By Ilat


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