Abstract：Over recent years, the rapid and spectacular expansion of Chinese economy is an opportunity that should not be neglected by African countries not only in connection with strengthening the South-South cooperation, but also in for the development of African economies. It is crucial to identify the channels by which African countries will derive benefits, as proved by the result of the robust and growing intensification of its economic partnership with various countries in the Sub-Saharan Africa. This is the reason why the research project focusing on the impact of China’s economic relation with Sub-Saharan Africa was initiated by AERC.

Our research aims at conducting a comprehensive analysis of the main systems and models of the past, present and future development of economic partnerships, based on foreign direct investments, between China and Sub-Saharan African Countries, with particular focus on Madagascar. This will provide a better understanding of the impact of the partnership between the two countries and help identify challenges for African countries development perspectives, as well as to emphasize on articulation of appropriate global policy decisions to be taken by different countries to protect their interest, in view of experienced impacts and challenges to be met.

Bachelor’s thesis an analysis of China’s direct investment in Madagascar

Contents

Abstract 4

1 - INTRODUCTION 6

2 - LITERATURE REVIEW 8

2-1 FDI THEORETICAL ELEMENTS 8

2-2 SOME CONCEPTS ON FDI 8

2-3 RISKS AND ADVANTAGES LINKED TO FDI 9

2- 4 TERMS OF REFERENCE 10

2.5 - METHODOLOGY AND THEORETIC FRAMEWORK 11

2.5.1PROCESSING AND ANALYZING PRIMARY AND SECONDARY DATA AND LITERATURE 11

2.5.2 EXPECTED RESULTS 11

3- BACKGROUND OF FDI IN MADAGASCAR 13

3-1 BACKGROUND 13

3-2 FOREIGN DIRECT INVESTMENTS FROM CHINA 21

3.3- MADAGASCAR’S ATTRACTION AND INCENTIVE POLICY 23

3.4 MADAGASCAR’S BUSINESS ENVIRONMENT 25

3.5 MADAGASCAR: THE FINANCIAL AND POLITICAL CRISIS 26

3-5-1 INTERNATIONAL CONTEXTS 26

3.5.2 EFFECTS OF THE POLITICAL CRISIS IN MADAGASCAR 28

4 - CHINESE FDI SPECIFICATIONS IN THE ECONOMY 29

4-1 CHARACTERISTICS OF CHINESE FDI COMPANIES 29

4-2 MARKETING CHANNEL OF CHINESE FDI COMPANIES 32

4-3 CHINESE FDI AND INTER-COMPANY RELATIONS 33

4- 4 EMPLOYMENTS IN CHINESE FDI 34

4-5 EXISTING PROBLEMS: 36

5 - CONCLUSION AND ECONOMIC POLICY RECOMMENDATIONS 36

6. REFERENCE: 39

Bachelor’s thesis an analysis of China’s direct investment in Madagascar

1

1 - INTRODUCTION

Foreign Direct Investment (FDI) is a major channel by which China’s economic growth impacts are conveyed to the typical African economy. Several research issues arise in this connection:

 In which sectors are FDIs from China channeled?

 To what extent are Chinese FDIs linked with support aid?

 Do FDIs increase capital available for companies, or is it simply an investment interest, which does not result in capital increase?

 Are Chinese direct investment companies in search of resources or markets or are they rather targeting the local or external market?

 What economic advantages result from Chinese FDIs in terms of exports, imports, substitution, and contribution to added value and employment?

 Do Chinese FDIs exclude or strengthen national corporate position and how do they involve locale firms?

 What are the effects of Chinese FDIs in the local economy in terms of skills transfer, vertical integration, use of local inputs, chain management and technology transfer?

 How are Chinese FDIs differentiated from FDIs from other sources?

 Is the country also investing in China?

This research will also focus on the following relevant policy issues:

 What are the available mechanisms for encouraging Chinese FDI support and discouraging harmful inputs?

 What policies should be proposed to optimize the positive impact of Chinese FDIs in terms of employment creation, generation of forex, added value, employment, training and transfer of technology?