The People’s Republic of China: a Key Partner for the Development of Madagascar (Case of Chinese FDI in Madagascar)

Abstract

The study employed the use of quantitative (descriptive analysis such as percentage), qualitative (surveys) and case studies. For instance, surveys carried on the amount of assistance given in terms of scholarships offered by China to Madagascar, building and construction of public goods such as hospitals, provided the necessary information used for analysis of the relationship between the two countries. The use of surveys assisted the study to generate firm level data that allowed the analysis of China and Madagascar investment relations with respect to concerns such as the employment effects as well as the competitive and complementary effects of Chinese firms to local firms. The use of content analysis of relevant documents and reports obtained from various sources was equally involved to corroborate the result obtained from the data.The findings reveal that the major characteristic of Chinese investment in Madagascar is its concentration in a few sectors that are of strategic interest to China, especially in the extractive industries which are carried out largely by state owned enterprises or joint ventures. In addition, the analysis clearly shows that the engagement with China, just like any bilateral relationship, has some advantages and disadvantages and that optimal outcome of the engagement will depend on the policies and institutions that are put in place to maximize the complementary effects and to minimize the competing effects. However, there is need to ensure implementation of laws and regulations in Madagascar and to ensure compliance by the Chinese investors This study was able to establish the sectors where the incoming FDI from China is directed and the extent at which Chinese FDI is bundled with inflows of aid. The study was also able to show that the incoming Chinese FDI is in resource seeking, and the output targeted at the external market. The study will be of value to academia and to policy makers who are interested in studying the China Africa relationship.

Keywords: China, Madagascar, International investment, GDP, FDI