By Craig Thomas.

Investing in Madagascar has now become substantially easier. The previously notorious red-tape and bureaucracy has given way to investment incentives, and stringent immigration and currency exchange regulations have been relaxed.

With a population of 12m, the world's fourth largest island is potentially the biggest market among the Indian Ocean islands; and development of the country's tourism industry could pose a serious threat to the local leisure market traditionally dominated by Mauritius, Seychelles and the Comoros.

Obtaining visas for entry into the country has been facilitated by the simplification of application procedures, and the opening of additional consulates and representations abroad. Most applications for both tourist and business visas are now processed immediately, upon receipt of a completed application form, photograph and payment.

Stringent currency control regulations previously required visitors to declare the exact amount of foreign currency in their possession on arrival and further required a currency control card to be completed and authorised each time currency was exchanged on the island. Although these currency control regulations have been abolished, the Malagasy franc remains inconvertible and may not be exported in large amounts. Thanks to the favourable exchange rate against major international currencies, the Malagasy franc has substantial buying power.

Although agriculture remains the main activity on the island, serious attempts are being made to diversify into secondary and tertiary activities, including the textile and manufactured food industries. CMT, already a major force in the Mauritian textile industry, is expanding into Madagascar and is due to start producing high-quality clothing and textiles in early 1999. Apart from creating jobs in the area, much-needed capital is being injected into the local infrastructure through the construction of the company's factory and warehouse on the outskirts of Antananarivo.

Madagascar's favourable status as an emerging economy in the international community is seen to offer benefits and profits because goods exported from the country receive tax concessions from many countries.

The inflation rate, which rocketed to double-digit figures during the late 1980s and early 1990s, has been stabilised and is currently estimated to be hovering in the region of 5%. Food and locally-produced goods are very cheap, whereas imported goods are still heavily taxed, but more readily available. Plans are afoot to address the issue of heavy taxes and unreasonable import restrictions.

The country's hotel industry is already starting to benefit from increased trade and leisure traffic. Antananarivo's Hilton hotel, the largest and only international premium-brand hotel on the island, was recently refurbished and upgraded to international standards at a cost of $5m. All of the hotel's 188 rooms and public areas have been fully renovated and new technology has been introduced, in the way of computer telecommunication ports in every room, as well as card-key facilities (both firsts for Madagascar).

Although the Madagascar Hilton offers facilities comparable to other Hilton hotels world-wide, both the room rates (quoted in foreign currency) and the food and drink costs remain well below the Hilton average, due in part to the very reasonable labour costs and the well-coordinated management structures in place.

Madagascar's national airline, Air Madagascar, was recently singled out for privatisation, and is already in the process of expanding and upgrading its services. The airline recently took delivery of a new Boeing 767 twin-jet to replace its ageing Boeing 747 previously utilised on the airline's services to Europe. Non-stop services are now offered between Paris and Antananarivo, and a new service linking the capital with Rome and Munich has been inaugurated. Close cooperation with Reunion's Air Austral has allowed the carrier to introduce additional capacity between Madagascar, Reunion and South Africa. Air Madagascar's domestic route network - considered to be the densest in the world - has also received attention and two new turboprop aircraft have been introduced into the airline's fleet to increase capacity and reliability.

Although French is the country's language of commerce and industry, English is increasingly used, especially in the tourism sectors. Press freedom was given a boost with the creation, in 1995, of Madagascar's first and only privately-owned newspaper, L'Express. In just over two years, the publication has achieved a readership of over 11,000, and produces objective reading with extensive business and trade coverage.

The cellular telephone network, Telecel, currently offers complete coverage of the entire Antananarivo area, with expansion into the country's largest port, Tamatave, and other major cities due to take place shortly. Madagascar made its first commercial Internet connection recently and a cybercafe has been opened in the lobby of the Hilton hotel, allowing easy access to the Internet and e-mail.

Antananarivo's Avenue de l'Independence - once the domain of street vendors and petty thieves - has been renovated and cleaned, allowing one to imagine what the Boulevard looked like some 30 years ago when Antananarivo was known as the Paris of the Indian Ocean.

Considering the wealth of resources already at the country's disposal, these advances in communication, commerce and the mindset of the population, taken together seem to justify the fear expressed by Madagascar's regional neighbours, that the country has the potential to develop into a significant regional power.