Focus on exports and investment
WAY AHEAD THE UNITED STATES IS MADAGASCAR'S PARTNER OF CHOICE FOR ITS NEXT STAGE OF DEVELOPMENT. OPPORTUNITIES FOR EXPORTS TO THE U.S. MARKET AND A CHEAP LABOR FORCE MAKE THE COUNTRY AN ATTRACTIVE PROPOSITION FOR INVESTORS

MADAGASCAR, the fourth largest island in the world, is a paradox. Though geographically and politically part of Africa, lying off the Indian Ocean coast of Mozambique, it has a population whose origins are mainly South East Asian and Polynesian. Statistics suggest it is one of the poorest nations on earth, yet its potential for development is widely recognized.

LOOMING LARGE Madagascar’s textile and apparel exports have benefitted significantly from the U.S. African Growth and Opportunity Act (AGOA)

Madagascar’s eco-system delights naturalists, as a large percentage of its flora and fauna are unique to the island. Startlingly majestic baobab trees and a dazzling variety of lemurs vie for the visitor’s camera lens. It is little wonder that the island is becoming an up-market adventure tourist destination, though the traveler has to be prepared for some rough roads, especially during the rainy season.
Not surprisingly, infrastructure projects in energy and telecommunications are an area of the economy to which American and other foreign investors are being wooed, in addition to initiatives in the mining industry. Once a bastion of revolutionary socialism, Madagascar embraced the principles of the free market in the mid-1990s, and has been reaping rewards ever since.

MARC RAVALOMANANA President of Madagascar

The island’s eligibility for benefits under the Africa Growth and Opportunity Act (AGOA) offers bright prospects for bilateral trade and investment, ushering in a new era in U.S.-Madagascar relations, to the delight of Madagascar’s President, Marc Ravalomanana.
“I am very proud of our working together,” he says. “I met President George Bush in New York, during the U.N. General Assembly. Relations with the United States are good because we have the same take on things: fighting terrorism and building a society that is strong, united, and self-confident.”
There are a number of practical reasons why Madagascar is of interest to potential investors. They include the ready availability of low-cost, hard-working employees, and a determination to maintain an annual economic growth rate of five percent or more, which has been the norm in recent years.

Prime Minister Jacques Sylla shares the President’s view that the United States is the partner of choice in the next stage of the island’s development, despite Madagascar’s French colonial heritage. “Previously, there was one point of reference for students here: the Sorbonne University in Paris,” he says. “Now, when our youngsters go abroad, what they want is an MBA.”

Andriamparany Radavidson, the Minister of Economy, Finance, and Budget, picks up the theme. “We’ve already been on the offensive,” he says. “Delegations have gone to the United States to explain what is going on in Madagascar, and to see what the possibilities are for American investors.”
Mr. Radavidson sees the rapid implementation of a program of public investment—mostly foreign-financed—as the first priority. This will create a climate favorable to private investment and form the basis for steady growth, which is forecast to rise by eight percent this year.

RAW MATERIAL Cotton production totals about 150,000 bales annually

“Secondly, as we only have a population of about 15 million, growth has to be led by production for export,” says the President. “In that sense, at the level of trade, the United States can come up trumps by integrating us into the U.S. market.”
Until now, most of Madagascar’s exports have been raw materials and cash crops, though the textile sector is taking off, selling sweaters and jeans to U.S. retail chains. Industry accounts for 12 percent of Madagascar’s gross domestic product (GDP), with textile manufacturing and the processing of agricultural products the main sub-sectors.

One of the reasons the government is so keen to see the road network improved is to facilitate the development of value added activities.
“We no longer wish to export our mineral and agricultural products in their unprocessed state, but would like to create more value added here,” Mr. Radavidson says.
President Ravalomanana is in no doubt where the impetus for such changes will come from. “In Madagascar, the motor for economic development is the private sector,” he declares.
He recognizes that many of his compatriots have yet to come to terms with this new reality. “We want to create a society led by a competitive economy,” he says. “What’s missing in Madagascar is competitiveness and competition.”

The first task on President Ravalomanana’s agenda was to heal the wounds of several months of tense stand-off bet-ween him and his predecessor, Didier Ratsiraka, who refused to accept defeat in elections held in December 2001.
The situation could all too easily have deteriorated. However, reason prevailed in the end and the crisis was resolved, with President Ravalomanana’s party winning a landslide victory in parliamentary elections in December 2002.

Today, the government has the comforting knowledge that international financial institutions as well as bilateral donors like the U.S. are on its side. Funds that were temporarily blocked during last year’s political crisis were released following the formal recognition of Mr. Ravalomanana’s presidency last July.
Moreover, the country has been able to benefit from substantial debt relief following the granting of Heavily Indebted Poor Country (HIPC) status in 2000, releasing hundreds of millions of dollars to be spent in priority areas outlined in the government’s poverty alleviation program—notably health, education and transport infrastructure.