Tuesday, May 5, 2009

Saudi investors pledge $2bn for Madagascar projects

Reuters - May 4th, 2009

Saudi investors have pledged $2-billion for Madagascar's tourism, communications and energy sectors, the government said, in a sign that some financiers are not shying away from the new president's administration.

A political crisis since early this year has dealt a hefty blow to the Indian Ocean island's $390-million-a-year holiday industry and the roughly $8-billion-a-year economy.

Some investors are concerned that Africa's youngest incumbent president, Andry Rajoelina, will revise existing contracts - branded golden handshakes by the new government - if economic circumstances become more favourable.

"Investments initially worth up to $2-billion will target the energy, communications, telecommunications and hotel sectors," Madagascar's Foreign Affairs Ministry said in a statement late on Sunday.

The delegation from the Union of Saudi Investors was visiting Madagascar to explore opportunities at a time when recent deadly protests and a slew of political arrests have fuelled fears the island could slide back into turmoil.

Rajoelina, who took power in March from ousted leader Marc Ravalomanana, has been quick to court new investors in a bid to re-boot the cash-strapped economy whose budget is 70% funded by the international community.

Several donors - including the United States and Norway - have frozen non-emergency assistance, straining the treasury accounts.

Traditionally, Madagascar's economy has been based on cultivation of paddy rice, coffee, vanilla and cloves, but in recent years, there have been billions of dollars of foreign investment by resource companies.

Despite a wealth of natural resources and tourist-luring wildlife, Madagascar is one of the world's poorest countries, ranked 143 out of 179 on the UN's Human Development Index.