Madagascar is a low-income country, which economy is characterized by the availability of unique and high-quality natural resources. Foreign Direct Investment (FDI) has been important in Madagascar from the perspective of domestic economy and trade. There are several foreign owned firms in the fast-growing sectors, supporting exposure to new technologies. In the mid-2000s, the FDI in Madagascar was mainly focused on natural resources-seeking investment related to mining of minerals. In the recent years foreign direct investment (FDI) has been increasing in Madagascar and is increasingly targeted towards a range of high-performing sectors in the economy, such as agribusiness, textiles and apparels [1].
However, in order to carry out the adaptation and mitigation actions needed to fulfill the NDCs, a notable amount of financial support from global partners is required, through the United Nations Framework Convention on Climate Change (UNFCCC) and other existing or future financial mechanisms. The estimate costs of the mitigation actions will be above 6 billion US dollars and the cost associated with the implementation of all the actions presented in the NDC are estimated at USD 42.099 billion [2].
Past international development assistance and private sector investments in Madagascar have been hampered by political instability and issues in governance. However, Madagascar's high poverty rate, climatic vulnerability and unique terrestrial and marine biodiversity could help the country to obtain sources of financing from global investors and lure sustainable development funds [3].
Key policies and governance approach
The Emerging Madagascar Plan (EMP) 2019-2023 is the benchmark for the country's development policy and is based on three fundamental pillars of sustainable development: (i) developed human capital; (ii) accelerated, inclusive and sustainable economic growth; and (iii) the transformation of Madagascar into a green island [4].
Madagascar has received around USD 756 million as net official development assistance in 2019, which represented around 14% of imports of goods, services and primary income and around 53% of central government expense [5].
To manage the costs associated to the NDCs. Madagascar is creating a sustainable national financial mechanism, based on the external contributions and domestic resources, that will deal in particular with climate change [6].
Successes and remaining challenges
For post-COVID-19 recovery, the government intends to focus on implementing the Emerging Madagascar Plan (EMP) to achieve zero hunger by 2023 through increased agricultural productivity, among other goals. However, the country should also step-up efforts in regards to climate change mitigation. Madagascar needs to strongly promote FDI.
Initiatives and Development Plans
In 2020, Madagascar's Ministry of Environment and Sustainable Development (MEDD) and the United Nations Development Program (UNDP) jointly organized the launch of a program funded by the Green Climate Fund (GCF) of a total budget of USD 1.3 million. The adaptation planning project under the preparedness program aims to support Madagascar’s efforts in climate change adaptation by generating knowledge, strengthening institutional capacities and leveraging funding opportunities [7]. An important component of the program will focus on promoting private sector investments to cover the massive costs of climate adaptation actions in Madagascar, estimated at USD 28.7 billion in its national determined contributions (NDC) [7].
In addition, Althelia Madagascar Fund supports climate-smart agriculture and renewable energies in the east of the country [3]. The Green Climate Fund (GCF) funded a $ 60 million proposal to strengthen national meteorological services and early warning systems in Madagascar. The Adaptation Fund, registered new commitments of $ 129 million in 2018 and recently approved $ 14 million for building urban climate resilience in four African countries, including Madagascar [3].
Goals and Ambitions
Madagascar aims to be an emerging economy by 2030 and aims for inclusive and sustainable economic growth.
- It is strategic for Madagascar to continue efforts to integrate climate change concerns into relevant policies and planning processes at the state and national levels;
- The country should increase fund and implement impact studies regarding climate change impacts for the country and key sectors such as agriculture and fisheries;
- Madagascar should explore the possibilities of promoting environmentally friendly small and medium-sized enterprises;
- support actors who can help the rural to engage in small-scale green industries, sustainable fishery or circular economy business models.
- Madagascar should reduce environmental pollution and resource depletion through investments in eco-industrial activities, environment sector and conservation of its rich biodiversity.
- In addition, it must be noted that, to carry out the adaptation and mitigation actions needed to fulfill the NDCs, a notable amount of financial support from global partners is required.
[2] Republic of Madagascar. MADAGASCAR’S INTENDED NATIONALLY DETERMINED CONTRIBUTION.
ALAN MILLER (CEADIR) AND DR. ERIC HYMAN.
[5] The World Bank (2019). Net official development assistance received (current US$) Madagascar.
[6] SDG Knowledge Platform (2021). Voluntary National Review 2021 – Madagascar.
[7] UNDP (2021). New Readiness Programme launched in Madagascar to support adaptation planning.