Private firms will be engine of a more diverse economy

MARKET FORCE MADAGASCAR NEEDS TO DIVERSIFY AND BOOST EXPORTS TO ENJOY SUSTAINABLE GROWTH. AS THE GOVERNMENT OPENS DOORS FOR THE PRIVATE SECTOR, COMPANIES ARE SEIZING NEW OPPORTUNITIES

DAVID RAJAON Chief of Staff to the President and former Minister of Private Sector Development Industry and Handicrafts

STIMULATING the private sector is one of the government’s main aims, to boost productivity, diversify exports, and attract investment. For that to happen, there needs to be economic as well as political stability.

Chief of Staff to the President and former Minister of Private Sector Development, Industry, and Handicrafts, David Rajaon, identifies three main requirements: a balanced budget, a legislative framework favorable to investment, and access to finance.
“On the government side, we have committed ourselves to good governance and transparency,” he says. “For their part, companies must respect laws that are in force nationwide.”
Changes have been made to make Madagascar a much more investor-friendly country. Procedures have been simplified, the terms available are more generous, and the development of free trade zones has made manufacturing for export an attractive proposition.

“We’ve improved supply-chain management, by removing barriers and bottlenecks,” says Mr. Rajaon. "We also help producers, financially and technically, so they can export.”
Though Europe, other Indian Ocean states, and southern Africa have tended to be Madagascar’s main markets up until now, the government has high hopes for capturing a greater share of the U.S. market, thanks to the U.S. Africa Growth and Opportunity Act (AGOA).

ALPHONSE RALISON Former Minister of Trade

“Of the 250 or so companies in free trade zones, most are working in textiles, with AGOA in
mind,” says the former Minister of Trade, Alphonse Ralison. “But people are talking of up to 2,000 products that could benefit from AGOA.”
Mr. Ralison, who himself has a private sector background, is an enthusiastic supporter of economic liberalization, which he believes will benefit both companies and consumers. “We have drawn up laws on competition, consumer rights, new chambers of commerce and so forth,” he says.

Over the past five years, Madagascar’s exports have received a huge boost from the expansion of the export processing zone (EPZ), and foreign direct investment has been substantial.
However agriculture, including fishing and forestry, is the mainstay of the economy, producing more than 70 percent of export earnings. There is a need for diversification, and prospects for tourism, construction, and mining are regarded as particularly promising.

FRESH APPROACH Aquaculture is big business in Madagascar

A number of large Malagasy companies that started out as family businesses have seized new opportunities for growth. The Trimeta Group, for example, spans a wide range of activities, from petroleum products (under the name Galana) to construction, packaging, hardware goods, and hotels.
Trimeta’s co-Chairman, Ykbal Hiridjee, says the company has capitalized on AGOA by building factories and warehouses for export-oriented firms. It is also penetrating the U.S. market.
“A lot of American companies are buying garments in Madagascar,” says Mr. Hiridjee.
One of the big local players in the textile and garments industry is the Socota Group, but Socota has also moved successfully into the food industry. All of its foodstuffs, such as shellfish, are exported, as are around three-quarters of its textile products.

Aquaculture has become big business in Madagascar over the past decade. One of the market leaders in the sector is Unima, which has developed a global reputation for gourmet shrimp.
Currently, most of Unima’s export production goes to Europe. General Manager Amyn Ismail says the U.S. market is difficult to break into, as customers there like to buy their shrimp peeled.
“But we will lead our first assault on restaurants there, through chefs,” he says. “We have chosen an importer who is the specialist in the field for the whole United States.”