International Trade in Madagascar

News Related to International Trade in Madagascar

Business outline for Madagascar

Main Industry Sectors

The most important sectors in Madagascar are agriculture (cotton, rice, wood, vanilla, minerals) and services (tourism).

Economic Overview

Madagascar's economy had a strong contraction in 2009 (-3.7%) and in 2010 (-2%).  The serious political crisis that the country is currently facing is the reason of this slowdown.  The power of the country was taken by force by Andry Rajoelina in March 2009 and it was condemned by the international community which provoked a negative impact in some sectors such as tourism, building and construction and the main financial aid sponsors suspended their involvement in the country.  The growth drivers such as private investment which consists of large mining projects have slowed down and the volume of the GDP's growth should be negative again in 2011.

The Malagasy government had established an ambitious strategy of development for 2007-2012 which remains to be developed (The Madagascar Action Plan - MAP), which is a second-generation poverty reduction strategy.  The country is still confronting big challenges such as poverty reduction, fight against corruption and reforms on land property laws. 

Madagascar, a country with a population of 19.6 million inhabitants in 2011, remains a very poor country where 85% of the population lives below the poverty line and where the inequality between rural and urban zones is very strong.

FDI in Figures

FDI inflows in Madagascar have strongly dropped in 2010 due to the effects of the global crisis, but most of all due to the major political crisis that the country is going through since 2009 and this is strongly isolating it from the global scene. 

Madagascar has a tremendous natural potential, but the low quality and high cost of its infrastructures (roads, electricity, telecommunications, ports, air freight), the limited access to credit and financial instruments as well as the poor definition of its property titles are all barriers to investment.  The political instability, a recurring problem in the country since several years, has worsened and has become another major barrier: the coming into power by force of the actual Malagasy leader has stopped all foreign aid which has blocked all public investments and provoked the departure of many investors.
The drastic reduction for the support of a "green revolution" had dramatic consequences in the agricultural sector which represents 28% of the GDP and 20% of its exports. 

France, Mauritius, China and the United States remain the main investors in Madagascar.

FDI Government Measures

Facilitate the enterprise creation.
Creation of the Economic Development Board Madagascar.

Country Strong Points

The main strong points are:
- Significant natural resources (mines, woods, water);
- Skillful and inexpensive work force;
- Its open economy.

Country Weak Points

The weak points of the country are:
- Political and social instability;
- Corruption;
- Poor condition of infrastructures.

Foreign Trade Overview

Madagascar was, just until recently, a country very open to foreign trade. The country is a member of the WTO, and of Comesa (Common Market for Eastern and Southern Africa).  However, since the country's power was taken by force by the current Malagasy leader, investments totally stopped and the country's imports and exports were reduced considerably.

Madagascar does not have significant non-tariff barriers, but they still remain very high.  The government has established a Free Zone Industrial (ZFI) to relaunch exports, in particular in the clothing manufacturing sector. Equipment and other import materials that will be used in this zone are exempt of custom duties.  Moreover, most of the products can be imported without an import license. 

The import of equipment goods for the mining projects remain very substantial and the trade deficit has increased.  In due time, this deficit is expected to reduce thanks to the potential increase of mining exports.

The main trading partners of Madagascar, that remain in normal periods, are the European Union, the United States and China. The country exports mainly coffee, vanilla, shellfish, sugar, cotton clothing, oil and mining products towards France, the United States and Germany. The country imports capital goods, oil, convenience goods and foodstuff from China, Bahrain, France, South Africa, the United States and India.