OPEC FUND AND MADAGASCAR SIGN INVESTMENT ENCOURAGEMENT AND PROTECTION AGREEMENT

An agreement for the encouragement and protection of investment has been signed between the OPEC Fund for International Development and the Republic of Madagascar. Drawn up within the framework of the Fund's Private Sector Facility, the agreement was initialed by H.E. Denis A. H. Andriamandroso, Ambassador of the Republic of Madagascar to Germany, and by Mr. Suleiman J. Al-Herbish, Director General of the OPEC Fund.

The Fund's Private Sector Facility is a financing window, endowed with its own resources, through which the Fund channels support directly to the private sector in developing countries. Its objectives are to promote economic development by encouraging the growth of productive private enterprise and supporting the development of local capital markets. Under the Facility, loans are made to financial institutions for on-lending to small, medium and micro-enterprises, as well as directly to specific projects. Equity participation in private enterprises is also undertaken. As a pre-condition to such investment, the Fund requires conclusion of a standard agreement with the country concerned for the encouragement and protection of investment. The agreement accords the OPEC Fund the same privileges as those normally given to international development institutions in which the country holds membership.

With 70% of its population living in rural areas, Madagascar’s economy is dominated by agriculture, which contributes around 30% of GDP. Since the late 1980s the country began implementing policies to reform the economy, and in recent years the financial sector has been strengthened through bank restructuring and privatization. In mid 2002, Madagascar embarked on a medium-term poverty reduction program, which focuses on creating an environment conducive to developing the private sector; opening the economy to attract foreign investment; diverting government investment towards poverty reduction goals and enhancing efficiency and governance in the public sector.