Madagascar turns away from western donors

* Rajoelina looks elsewhere as EU blocks aid

* Saudi prince eyes investment opportunities

* Mediator Chissano expected on island

By Richard Lough

ANTANANARIVO, July 9 (Reuters) - Madagascar's diplomatically isolated leader said the Indian Ocean island will turn to new backers if traditional western donors are not ready to cooperate with his army-backed government.

Andry Rajoelina made the remarks after returning from Brussels where he failed to persuade the European Union to unblock aid worth more than 600 million euros ($835 million).

The aid was cut after Rajoelina toppled former leader Marc Ravalomanana with the help of dissident troops, in what African neighbours and foreign donors branded a coup.

"If certain (groups) don't want to work with us, it's not serious. Many others are ready to do so," Rajoelina told reporters at the airport late on Wednesday.

Rajoelina -- whose island off east Africa is attracting foreign investors eyeing oil, coal, gold, uranium, nickel and cobalt -- presented European officials in Brussels with a "roadmap" towards restoring political stability.

He is proposing an election by late 2010 but has rejected power-sharing with Ravalomanana, whose desire to retake the presidency looks less and less likely as time entrenches Rajoelina.

The EU's director general for aid and development, Stefano Manservisi, described Rajoelina's roadmap proposals as unconstitutional and said they offered no credible prospects for a return to constitutional order in the short run.

The South African Development Community (SADC) has appointed former Mozambican President Joaquim Chissano to revive deadlocked negotiations in a political crisis that has alarmed investors, scared away tourists and slowed growth.

Chissano was to arrive on Thursday for a four-day visit.

NEW PARTNERS?

Rajoelina, 35, has openly courted new partners to invest in Madagascar, and Saudi Arabia's Prince Alwaleed bin Talal, one of the world's wealthiest individuals, arrived in Madagascar on Thursday morning for a five-hour visit.

Nicknamed by U.S. media the 'Arabian Warren Buffet', the nephew of King Abdullah is a billionaire famed for his lavish lifestyle and philanthropic projects.

An earlier Saudi delegation pledged in May to invest $2 billion in Madagascar's energy, tourism and telecommunications sectors in a sign that some financiers are not shying away from Rajoelina's administration.

However, analysts have questioned how long Rajoelina's administration can survive without donor aid, which makes up some 70 percent of the country's budget.

"The government does not have much time given the significant foreign component of the budget. (However) private investment may also be a valuable alternative through FDI flows, and for an injection of foreign exchange," said Lydie Boka of the risk-consultancy StrategieCo..

Other important donors to have frozen non-emergency assistance include the International Monetary Fund (IMF), the United States and Norway. The SADC suspended Madagascar's membership after the power-grab in March.