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Social Enterprise Perspectives: Solutions to Poverty in Economically Depressed Madagascar

Organization: United Nations Development Program (UNDP)
Location: Antananarivo, Madagascar

Last summer, I worked at the United Nations Development Program (UNDP) Country Office in Antananarivo, Madagascar. I worked for the Growing Sustainable Business (GSB) Initiative replica watches uk, a program designed to identify and facilitate enterprise solutions to poverty. My task was to identify pro-poor private sector investment opportunities in ecotourism, sapphire and gold mining, and agriculture/food processing. To do this, I interviewed donors, government officials, entrepreneurs, private investors, economic sections of embassies, chambers of commerce and non-governmental organizations.

Located off the eastern coast of Africa in the Indian Ocean, Madagascar is the world’s fourth largest island. Currently, Madagascar has a population of 18 million replica breitling, and an annual GDP per capita of approx. $800 (US). About 50% of the population live in poverty, although depending on the definition of poverty and the metric of measurement, the IMF has cited numbers as high as over 70%.

The official languages are French and Malagasy. The literacy rates for males and females are 76% and 63% respectively. The population is predominantly Christian, with a large number of Malagasy practising indigenous religions and Islam. Despite Madagascar’s proximity to the African continent, many Malagasy are descendants of modern day Malaysia and Indonesia. There is an economically significant Indo-Pakistani and Chinese minority (combined less than 5% of the population), who control 80% to 90% of the country’s economic wealth.

Madagascar gained its independence from France in 1960. However, it soon began practicing flawed economic policies, including the nationalization of formerly French-owned businesses and over-reliance on foreign debt, causing a debt crisis. In 2002, Marc Ravalomana, a self-made millionaire businessman and former mayor of Antananarivo, won a power struggle that caused the economy to shrink by 12.7%. He then began to privatize state-owned companies and has successfully sought international aid and foreign investment. Despite the president’s pro-business policies and abundant natural resources, there were substantial barriers to establishing sustainable businesses in one of the least developed countries.

The country’s history of nationalization had scared off many investors, including their relatively wealthy neighbor, South Africa. Language was also a barrier to trade with its English-speaking neighbors in East Africa and the Indian Ocean. Infrastructure was generally very poor, with low electrification rates, a poor and limited road network, and under-developed ports. Also, many businesses were informal, and property and land rights were often ambiguous; hence entrepreneurs did not have access to capital since they had no collateral. Finally, corruption and a weak legal system were major impediments to both domestic and foreign investment.

For example, in the sapphire industry, the previous government had institutionalized smuggling, taking a cut from gem smugglers for allowing them to ship briefcases of raw uncut stones on flights out of Antananarivo. Consequently, very little value was added domestically to the stones. This was true for many exported products. In ecotourism, the poor infrastructure made it impossible to target high-end tourists, although Madagascar has an astounding total of eight plant families, four bird families, and five primate families (namely lemurs) that live nowhere else on Earth.

Trying to find and support viable businesses was difficult in such an environment. However, I felt that whatever headway I made would have a huge impact. I believe that the private sector has a pivotal role to play in increasing incomes in such countries, and these increased incomes will bring about greater political stability and respect for human rights. Donor-led initiatives to generate income for poor communities were often unsustainable. Once the donors pulled out, these initiatives often did not have a continuing source of cash.

The combination of coming from HBS and working in the UN system was also a great advantage, as I received instant credibility. I was even invited to speak at the local institute for tourism, and was invited to cocktails and had access to trade delegates, diplomats and high-level government officials. I was quite amused when I was filmed by the national TV station during one of these events.

I enjoyed the social life in the expatriate community. The community was just a bunch of people thrown together, and we got to know each other because there were so few of us around, not because we had that much in common. For example, I met people working in forestry, HIV/AIDS prevention, human rights, genocide investigation, textile manufacturing, engineering, diplomacy, venture capital, consulting, and mining. The level of professional and geographical diversity in this little microcosm was far greater than even at HBS. Almost every week, someone would throw either a farewell party or a housewarming party, since the expatriate community was so itinerant. I enjoyed meeting new people every week.

All in all, I feel that my summer was a perfect combination of education, networking, community service, travel and fun.

October 24, 2005