Madagascar WT/TPR/S/80
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IV. TRADE POLICIES BY SECTOR
(1) INTRODUCTION
1. The economic reforms undertaken by Madagascar since the mid 1990s have affected all
sectors of the economy.  Since the start of the reform process, the Government has been retreating
from involvement in most economic activities and has progressively encouraged the emergence of a
private sector.
2. The process of economic reform, including trade liberalization, and privatization has been
progressing in most sectors of the economy.  In the agriculture sector, climatical conditions, and the
weakness of transport and marketing networks have limited the impact of the reform.  The average
tariff for the agriculture sector, including hunting, forestry and fishing (Major Division 1 under ISIC
Rev.2) is 17.7%.
3. Manufacturing activities are increasingly concentrated in the export-processing zones;
textiles and clothing constitute a major subsector.  The average MFN tariff for the manufacturing
sector (Major Division 3 under ISIC Rev.2) is 16.2%.  The Government is taking steps to develop the
mining sector, which is still under-developed despite its potential.
4. The implementation of the privatization programme has contributed to the liberalization of
the services sector.  However, privatization of large parastatals (including in the services sector) has
been slow, primarily because of the difficulties associated with creating the appropriate legal and
regulatory framework necessary for the successful emergence of private-sector-led activities.  The
Government of Madagascar, with assistance from the international financial institutions, has also
committed itself to attend to the social aspects of privatization;  this has slowed the process.
(2) AGRICULTURE AND RELATED ACTIVITIES
(i) General
5. The agriculture sector, including fishery and forestry, accounts for some 30% of GDP
and generates around 40% of merchandise export earnings.  According to various estimates, between
75-80% of the population is involved in agricultural activities.  Rice is the main staple crop.  The
main agricultural exports are coffee, vanilla, cloves, cotton, sisal, sugar, pepper, cocoa, and shellfish.
About half of Madagascar's territory is cultivable, although little more than 5% is under crops atpresent.  Livestock farming dominates in the savannah regions in the western side of the country.  The
natural forests have been seriously depleted, resulting in extensive erosion.
6. Since the mid 1990s, the Malagasy economy has undergone an ongoing process of
transformation that has seen the gradual withdrawal of the Government from direct involvement in
production, processing, and marketing activities that can be performed by the private sector.  TheGovernment has liberalized the marketing of agricultural products, and input prices have been
decontrolled.  Subsidies to the agriculture community have been removed, and the monopolies of
cooperatives and marketing boards have been eliminated.  The Government has retained only its
policy formulation responsibilities.  Liberalization of farm trade and the subsequent rise in producer
prices have helped stimulate a revival of activity and modest increases in the output of most cashcrops.  Cash crop agriculture continues to suffer from the weakness of transport and marketing
networks.
7. Agricultural and rural development policy is embodied in the Action Plan for Rural
Development (Plan d'Action pour le Développement Rural, PADR) for 1992-2002.  The PADRWT/TPR/S/80 Trade Policy Review
Page 38
envisions the redefinition and improvement of the institutions and actors involved in the agriculture
sector.  The Plan was formulated to take into account the changing economic and social environment
in Madagascar and to outline objectives consistent with the development of the private sector.1  The
Government's agricultural policy encourages private-sector participation in the production and trade
of agricultural products, and outlines the Government's role as provider of support services, market
information, and a regulatory regime.  The specific objectives of PADR include:
- to improve the standard of living in rural areas;
- to increase the earnings of rural inhabitants;
- to professionalize agricultural production;
- to promote market opening initiatives;
- to exploit Madagascar's natural resources consistent with environmental protection
and sustainable development;
- to reinforce and improve the Ministry of Agriculture's activities consistent with the
State's disengagement from production and marketing;  and
- to consolidate the role of agriculture in addressing food security issues and the fight
against poverty.
8. The performance of the agriculture sector is heavily influenced by climatic conditions.  In the
south region and central parts, drought severely reduced food production.  Three successive cyclones
and tropical storms during the 2000 growing season caused severe damage to crops and agricultural
infrastructure in central and northern parts of the east coast of Madagascar. Cyclone "Hudah", one of
the most powerful registered in the Indian Ocean, struck northern Madagascar in April 2000.  The
most affected areas were the north-eastern regions which had already suffered severe damage from
Cyclone "Eline" in mid-February, and Tropical Stor m "Gloria" two weeks later.  Floods were also
reported along the north-western coast. Although the cyclones did not bring extremely heavy rains,
they soaked areas that had not yet dried out from previous floods and the high winds caused further
damage to infrastructure, housing and crops, especially tree crops.
9. The extent of the damage to agriculture from the cyclones is not yet fully known, although
production decreases of around 15% have been estimated for the year 2000.  The regions affected arethe main vanilla producing areas and an important coffee and clove growing area.  Severe losses to
these crops and serious damage to the paddy crop were reported, but statistics are not yet available.
Moreover, in the southern region of Madagascar, the 1999 crop (mainly maize) was destroyed by
locust.
10. The average MFN tariff rate (including the import tax) for the agriculture sector is 17.7%
(Table AIV.1).
2
                                                     
1 Ministry of Agriculture, (1999).
2 Including hunting, forestry and fishing.  This group corresponds to ISIC (Rev.2) Major Division 1.
The average tariff rate for Agriculture (WTO definition) is 19%.Madagascar WT/TPR/S/80
Page 39
(ii) Policy by product category
11. Traditional agricultural exports include shrimp, coffee, vanilla, cloves and clove extracts,
pepper, sugar, meat, and cocoa.  The production of these goods shows no clear trend;  annual
fluctuations are largely influenced by climatic circumstances, incidence of pests and diseases, and
short-term price variations (Table IV.1).  With only a small share of the international market (except
for vanilla), increased production of these commodities would not affect world prices.  The Ministryof Agriculture is focusing special attention on coffee and vanilla.  The Government's extension
services have also been focused on the production of litchis;  special attention is being given to the
introduction of new improved varieties.  The Ministry of Agriculture is working to improve the
handling and shipping of litchis to foreign markets;  in 1999, more than 16,580 tonnes of litchis were
exported.
Table IV.1
Exports of selected agricultural products, 1995-99(SDR million and tonnes)
1995 1996 1997 1998 1999
Vanilla
Value 27.2 13.5 7 11.8 19
Quantity 750 1,160 650 680 1,300
Coffee
Value 61.2 42.6 24 29.4 22
Quantity 39,207 44,170 25,900 30,004 27,860
Cloves
Value 7.2 3.6 8.9 6.8 24.7
Quantity 17,127 7,070 15,840 9,930 11,900
Clove essence
Value 3.7 2.9 3.8 2.8 4.3
Quantity 1,577 1,020 1,380 1,020 1,600
Sugar
Value 9.4 11.5 8.2 5 7.4
Quantity 22,274 25,650 20,560 11,630 31,230
Pepper
Value 2 2.8 2.1 0.9 1
Quantity 1,439 1,860 890 360 400
Meat
Value 5.8 2.7 0.9 0 0.8
Quantity 3,790 1,760 620 40 700
Cocoa
Value 2.5 2.3 0.6 1 0.9
Quantity 3,260 2,900 660 920 1,100
Sisal
Value 2.8 3.5 1.4 1.2 1.2
Quantity 11,196 11,020 3,820 2,660 2,700
Shrimp
Value 38.8 43.6 46.8 50.9 44.2
Quantity 8,200 8,030 8,010 8,490 7,200
Source: Central Bank of Madagascar.WT/TPR/S/80 Trade Policy Review
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(a) Coffee
12. Exports of coffee accounted for approximately 17% of Madagascar's agricultural exports
in 1999.  Export earnings from coffee have dropped in the past few years as a result of lower world
prices and reduced production.  In 1996, coffee exports totalled 44,170 tonnes, while in 1999, only
27,860 tonnes were shipped.  Annual production has been relatively flat, partially due to climactic
conditions, while exports have fluctuated more sharply as a result of world commodity price changes.
13. Coffee trade was deregulated in 1988.  Export taxes were eliminated recently.  The
Government is working with coffee growers' coopera tives to plant new stocks and to revitalize growth
of Robusta and Arabica coffee beans.  Extension services have focused on training coffee growers to
increase yields through a programme of tree pruning.  Exports of coffee are subject to mandatory
quality inspection.
14. A private association of coffee exporters – Comité National de Commercialisation du Café
(CNCC) – is responsible for exports.  CNCC pr ovides marketing advice and information on coffee
markets to national exporters.  It analyses the markets, and collects statistical data on local production,
trade, and prices of coffee.
(b) Vanilla
15. Vanilla is among Madagascar's most significant agricultural exports, although production and
revenues were erratic during 1995 to 1999.  Vanilla exports accounted for around 15% of
Madagascar's agricultural exports in 1999.
16. In the period 1995-99, exports of vanilla increased from 750 tonnes to 1,300 tonnes.
However, because of a decline in prices, vanilla export revenues fell from 27.2 million SDR in 1995
to 19 million in 1999 (Table IV.1).  In 1999, export prices fell by more than 50%.
17. Vanilla was first introduced to Madagascar in 1873.  With favourable climatic conditions,
production rapidly expanded, and Madagascar is now the world's largest vanilla producer.  Production
is located in the north-eastern part of the island, where 55,000 farmers are involved in cultivation.
The production of vanilla beans in Madagascar fluctuates depending on weather conditions.
18. The Government of Madagascar began to liberalize vanilla activities in 1995.  Official export
prices were phased out, allowing the price of vanilla to be determined by market forces.  Morerecently, the Government has been working with various farmer cooperatives, including Groupement
des Exportateurs de Vanille and Groupement des Entreprises de la SAVA, to improve vanilla
production through the provision of extension services, which include the professionalization of the
vanilla producing workforce.  The Government has also recently published and distributed a manual
on vanilla production to the growers' organi zations to improve management practices.
19. The Government sets the date and places for sales annually, to prevent excessive amounts of
immature vanilla beans being offered for sale.  This policy has resulted in a reduction of the share of
immature vanilla in total sales, from 30% in 1998 to 20% in 1999.  The Government has also set an
indicative price for vanilla at FMG 20,000/kg., although the market price fluctuated between
FMG 15,000 in 1999 and FMG 90,000 in October 2000.
20. Exports of vanilla are subject to mandatory prior inspection.  Certification attesting to the
vanilla's quality and wholesomeness is necessary before it can be exported.  Inspection posts, which
are scattered throughout the country, perform the tests necessary to receive the Certificat de Contrôle,
de Conditionnement et d'Origine (CCCO).  Vani lla is exported by private operators calledMadagascar WT/TPR/S/80
Page 41
"conditionneurs-stockeurs".  Imports of vanillin are subject to prior authorization (Chapter III(2)(vi)).
Until May 1997, a tax was levied on vanilla exports.  The state trading agency dealing with vanilla
has been abolished.
(c) Cloves and clove essence
21. Cloves are also a major contributor to Madagascar's exports.  In 1999, cloves constituted the
most important agricultural export, accounting fo r around 20% of all agricultural exports.  Clove
essence and clove leaf essence constituted about 3% of agricultural exports in 1999.  Clove
production has been cyclical (with a good harves t every two years), averaging about 13,000 tonnes
per year.  Almost all of clove production is for the export market.  Export volumes have fluctuated
since 1995, although revenues, as a result of higher prices, have increased sharply.
(d) Sugar
22. Sugar constitutes Madagascar's third largest agricultural product.  Sugar cane production has
remained essentially constant since 1995, at about 2,100 t onnes per year.  In 1999, sugar exports
accounted for around 6% of Madagascar's agricultural exports.
23. With the exception of poor harvest years, Madagascar has generally filled its quota of sugar in
foreign markets.  For fiscal year 2001 (2000/01) Madagascar's allocation for raw cane sugar, refinedsugar, and sugar-containing products amounts to 7,258 tonnes in the U.S. market, and 12,950 tonnes
to the EU.
24. Because of climatic conditions, sugar exports have fluctuated since 1995, declining
substantially in 1998, to 11,630 tonnes.  However, in 1999, exports rebounded significantly, to
31,230 tonnes, with Madagascar making up its quota levels in certain markets.
(e) Livestock
25. More than half of Madagascar's land area is used as pasture, largely for beef cattle:  cattle
raising is at the heart of the rural economy in much of western and southern Madagascar.  Production
of livestock has fluctuated;  the sector has suffered as a consequence of drought conditions in parts of
the island.  Exports of meat products have encountered difficulties because of problems associated
with sanitary requirements by importing countries ("traçabilité" and epidemiological surveillance).
Meat exports, primarily beef, account for less than 1% of agricultural exports, down from almost 6%in 1995 (Table IV.1).
(f) Fisheries and aquaculture
26. The fisheries subsector, in conjunction with livestock, contributes between 7% and 8% of
Madagascar's GDP.  Shrimp constitutes the most important export product of Madagascar, accounting
for around 33% of agricultural exports in 1999.  The value of shrimp exports in 1999 wasapproximately SDR 44.2 million down from SDR 50.9 million in 1998 (Table IV.1).
27. As an island nation, Madagascar is well endowed with water resources.  Although traditional
fishing is found in all of the coastal areas, most of the industrial and artisanal fishing is off the western
coast in the Mozambique Channel.  Aquaculture (m ainly shrimp farming) is expanding rapidly;  it
may soon become the major source of production.
28. Significant reform was introduced in the shrimp management before the start of the 2000
season. In particular, a new transparent, non-discretionary, and competitive system for managingWT/TPR/S/80 Trade Policy Review
Page 42
fishing licences and assessing the relevant fees was implemented. This auction-based system, which
was to be published in the Official Gazette  in 2000, enabled a significant increase in fees collected
from the sector;  a redistribution of the allowable catch among the four newly created areas;  and the
elimination of exclusive areas.  With regard to overall fishing exploitation, a freeze at 36 licences for
artisanal fishing and 75 for industrial fishing was agreed for the west coast, pending completion of a
scientific study on the sustainable potential for fishing.  The authorities expect the introduction of thisnew system to substantially enhance good management practices.
29. The fisheries subsector in Madagascar is operated wholly by the private sector.  There are no
restrictions on foreign direct investment in the related activities, such as fish processing.  Madagascar
does not have any restrictions on fishing licences on nationality grounds.
30. Sanitary requirements by importing countries are a major obstacle to Madagascar's ability to
export increasing quantities of fish products.  For example, exports of seafood products were
dramatically affected in 1997 as a result of a ban imposed by the European Union.  More recently
outbreaks of cholera have also limited fisheries exports.  Sanitary certificates are required for all
exportation.
(g) Forestry
31. The forestry subsector is estimated to contribu te less than 5% to Madagascar's GDP;  its
contribution to Madagascar's economy has remained relatively constant since 1995.
32. A national forestry policy was implemented in 1985.  However, the degradation of
Madagascar's forest resources has increased due to high population growth and a poorly performing
national economy.  At the same time, as the economy has been liberalized, the Government has
gradually withdrawn from forestry production activitie s, leading to a redefinition and redistribution of
responsibilities between the Government and the private sector.
33. In recent years, having realized that the 1985 forestry policy had become obsolete, the
Government has endeavoured to harmonize forest conservation aims with the concept of sustainable
development. This has evolved into the formulation of the New Forestry Policy revolving around four
main themes:  stemming the degradation of forests;  managing forest resources better;  increasing the
acreage and potential of the forestry subsector;  and improving the economic performance of thesubsector.
34. The Ministry of Forests and Water is responsible for implementation of the New Forestry
Policy.  The overall goal of the policy is to enha nce the contribution of the forestry subsector to the
sustainable development of Madagascar as well as the conservation and management of its natural
resources.
35. The Ministry is also responsible for the regulation of trade in forestry products.  Numerous
restrictions are in place due to Madagascar's biodiversity and the desire to safeguard plant species.
Many restrictions are implemented as a result of Madagascar's adherence to the Convention on
International Trade in Endangered Species of Wild Fauna and Flora (CITES).
36. Exports of forest products are subject to inspection to ensure quality and origin requirements.
Madagascar applies an export fee on raw logs and wood products.  The fee is 1.5% of the f.o.b. value
for wood products, and 4% of the f.o.b. value for raw logs;  it is deposited in a special account in
support of the forestry sector (Fonds Forestier National, FFN).  A stumpage fee is also collected.Madagascar WT/TPR/S/80
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(3) MINING AND ENERGY
(i) Mining
37. Madagascar is endowed with a wide variety of minerals, but most of the deposits are found in
scattered and relatively inaccessible locations.  The Government nationalized all mineral deposits in
1975, bringing mineral prospecting and exploitation under the National Military Office for Strategic
Industries (Office Militaire National pour les Industries Stratégiques).  Since 1985, with theintroduction of a new Investment Code, the Government has been prepared to welcome foreign
investment in mining and encourage foreign firms to prospect for minerals.  In 1990, a revised mining
investment code was implemented, which encouraged private investment and exploitation, but the
results so far have been disappointing.  As a result, a new mining code has been drafted and is likely
to be implemented soon.
38. Madagascar has substantial reserves of high quality chrome ore, graphite, mica, bauxite, and
iron ore.  In addition, it has small deposits of a wide variety of valuable minerals, including uranium,
quartz, monazite, garnet, amethyst, ilmenite, zircon, and titanium, which are being prospected for and
produced on a limited scale.  The most important mining activities in Madagascar include  chromite,
graphite, and auriferous production (Table IV.2).
Table IV.2
Mining production, 1995-98
1995 1996 1997 1998
Chromite (tonnes) 105,747 139,272 139,471 134,659
Graphite (tonnes) 16,119 16,103 14,107 18,690
Auriferous production (kg.) 38 7 8 12
Source: Madagascar's Department of Mining.
39. Chrome ore is Madagascar's major mineral (by volume) export;  Madagascar is the
10th largest chrome producer in the world (Table IV.3).  The main deposits are located at Andraimena.
Production of chromium ores and concentrates has increased in recent years.  Small quantities of
marble, garnets and amethysts are also mined.  Mi nerals contribute about 5% of export earnings.
Table IV.3
Mineral exports, 1995-98
1995 1996 1997 1998
Industrial stones (tonnes) 582 1,757 1,599 4,632
Graphite (tonnes) 18,649 14,578 15,299 9,944
Sapphires (kg.) 116 160 4,248 2,547
Gemstones (kg.) 1,337 1,290 5,069 4,388
Rubies (gr.) 13,137 4,054 18,640 29,934
Mica (tonnes) 1,314 1,133 1,142 1,051
Chromite (tonnes) 122,000 129,260 133,960 115,226
Emeralds (gr.) 734 686 695 600
Source: Data provided by Madagascar's Department of Mining.WT/TPR/S/80 Trade Policy Review
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40. Plans have been developed for bauxite production in the south-east, and for iron ore mining;
there has also been prospecting for coal, ilmenite, zircon, phosphates, titanium, lead, and zinc.  Since
the late 1970s, oil prospecting has been in progress  with the involvement of U.S. and EU companies.
Small deposits of oil and gas have been found, but it is unclear whether production will commence.
41. There is some gold production but its amount is difficult to assess because of reported
smuggling;  official gold exports are very small, but the potential has been estimated at up to 8 tons
per year.  In February 1994, the Government signed an agreement on gold and precious metals mining
with International Capital and Securities Exchange of Switzerland.
42. A new mining law was approved by the Government in 1999, and sent to the National
Assembly for approval.  In addition, the Governme nt is preparing another mining law to promote
mining projects of more than US$200 million.  The Government's vision for the mineral sector for thenext 10-30 years is to have a strong, vibrant, well-organized, private-led sector.  Encouragement is
being given both to small and large-scale mining projects with emphasis on safety and environmental
concerns.  The Government target is for the mining sector to contribute at least 10% to GDP;  the
current level is approximately 1.5%, up slightly since 1994 when its contribution was less than 1%.
43. Pursuant to Law No. 99-022 of 30 July 1999, a 2% licensing fee is collected on the value of
mineral products at first sale.  The revenue collected from the licensing fee is distributed as follows:
70% to the budget of the province involved (one third of that to the county where the minerals
originated);  15% to the Office of Mining Planing (Bureau du Cadastre Minier);  5% to the gold
agency;  and 10% to the general state budget.
44. To ensure that expansion of the mining sect or is in conformity with its environmental
conservation policies, the Government requires that investors bear the cost of producing an
environmental impact statement, and that all operations are carried out in accordance with the  Mise en
Compatibilité de l'Investissement et de l'Environnement (MECIE).
(ii) Energy
45. The Government's policy in the energy subsecto r is aimed at:  liberalization in order to
introduce competition, to the extent possible;  improving the transparency of existing regulations, with
particular emphasis on pricing policy to promote efficiency and quality of service;  protection of theenvironment and public health in all energy-related  activities;  promoting public access to electricity
and petroleum products throughout the country;  promoting the use of local sources of energy,
particularly renewable sources;  decentralizing policy formulation to promote local infrastructure
development and private-sector participation;  and promoting the efficient use of energy resources in
all economic activities.
46. Energy needs are met by electricity, petroleum products, firewood, and charcoal, which has
contributed to the precarious nature of the countr y's forests and serious erosion problems, and by the
bagasse from sugar cane used in sugar production;  two power stations using bagasse as fuel, and a
solar energy plant are planned.
47. Although there are reserves of 100 million tonnes of coal, primarily near Sakoa in the
south-west, less than 10,000 tonnes are used annua lly.  The Government seeks to expand domestic
coal use;  however, extraction of coal resources is considered to be non-economic.Madagascar WT/TPR/S/80
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(a) Electricity
48. Only 8% of Madagascar's population has access to electricity.  In rural areas, the level of
access is less than 1%.  Estimates suggest that growth in demand for electricity will be about 7% per
year for the next ten years.  Current installed capacity in Madagascar is 233 MW although actual
operating capacity is estimated to be around 100 MW.
49. Hydroelectric power currently constitutes only 106 MW of electricity generation although
there is a potential for about 7,800 MW.  About 80% of all electricity demand is met by production
from seven hydroelectric power plants that serve Antananarivo, Antsirabe, and the Andriamena
chrome mine;  the remaining 20% is met by thermal stations or other hydroelectric power.  Many
plants have their own small diesel or steam generators.
50. Madagascar introduced new legislation to open up the electricity generation market to private
sector competition.3  The Government is proceeding with the privatization of JIRAMA, which is the
state-owned electricity producer and distributor in Madagascar.  In preparation for this privatization,
the Government has been formulating sectoral policy and instituting a regulatory structure, which will
allow for competition.  It is the Government's intention to complete this privatization by 2001.
51. A major issue related to privatization will be how to address the problems of rural
electrification.  Plans are being developed to bring electricity to rural areas under a project called
PROGELEC.  Another component of this process will be the creation of an Agency for the
Development of Rural Electrification (Agence de Développement de l'Électrification Rurale, ADEER) .
52. Efforts are under way to reform JIRAMA's operations and to introduce private-sector
participation.  Plans for the privatization of power distribution are being developed first, due to the
greater economies of scale that can be achieved.  But a regulatory framework does not yet exist and is
not likely to be in place for another two to three years.  Consideration is being given to the creation ofa Rural Electrification Fund.
(b) Petroleum
53. Madagascar depends entirely on imports to satisfy its oil needs. Madagascar's only oil
refinery is at Tamatave.  It refines some imported crude petroleum for export.  Exploration results to
date have shown promising reserves of commercially exploitable heavy oil.
54. Madagascar's oil industry is considered by the Government as essential to the nation's further
economic development.  The petroleum subsector has been liberalized since 1999.
4
55. Regulation of the hydrocarbons subsector is vested in the Malagasy Office for Hydrocarbons
(Office Malgache des Hydrocarbures, OMH), which has been in existence since 1999.  The Office is
intended to protect consumers by establishing ceiling prices during a transition period as the sectormoves toward full liberalization.  The Ministry of Energy is responsible for setting national petroleum
policy, and through OMH, has the authority to grant licences for petroleum exploration and related
activities.
56. Distribution of petroleum has been in the hands of the private sector since the privatization of
SOLIMA, the state petroleum company, in 1999.
                                                     
3 Law No. 98-032 of 21 January 1999 and subsequent decrees.
4 Law No. 93-002 and Law No. 99-010 promulgated on 17 April 1999.WT/TPR/S/80 Trade Policy Review
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(4) MANUFACTURING
57. Madagascar's manufacturing sector is underdeveloped but growing in importance, primarily
as a result of significant growth in activities in  the export-processing zones (EPZs).  The sector is
dominated by food processing and beverages, agri -business, light manufacturing, construction, soaps
and detergents, packaging, textiles, and footwear.  According to the Ministry of Finance and the
Economy, the manufacturing sector contributes approximately 12% to GDP.
58. Madagascar's manufactured exports have grown since 1995, and now account for nearly 60%
of the value of merchandise exports.  Between 1995 and 1999, exports grew from SDR 169.9 million
to SDR 295.5 million, due largely to a sharp increase in textiles exports.
59. The textile and apparel subsector has become increasingly important for Madagascar,
particularly as firms have established themselves in Madagascar's EPZs.  About 50% of the EPZenterprises are in the textiles and apparel subsector.
60. Exports from Madagascar's export-processing zones constitute approximately 35% of all
merchandise exports;  the figure more than doubled between 1995 and 1999.  EPZ exports are
increasingly composed of  textiles and apparel goods;  in 1997, exports of these goods to the
European Union amounted to SDR 135.8 million.
61. The average MFN tariff (including the import tax) on manufacturing is 16.2% (Chart IV.1).
5
Average tariffs by subsector are highest for tobacco products, clothing, furniture, and beverages
(Table AIV.1).
62. Concern has been expressed by various private-sector business associations regarding the lack
of competitiveness of Madagascar businesses.  With the process of reform and trade liberalization,
businesses have seen an increase in foreign competition.  Business groups also express concern about
low domestic demand, which makes economies of scale impossible to achieve.  Poor infrastructureand Madagascar's geographic isolation add to the difficulties.  The Reflection Committee on
Competitiveness has been established to handle these issues.
(5) S
ERVICES
63. The services sector contributes around 52% to Madagascar's GDP;  tourism is the largest
component.  Madagascar's Schedule of Specific Commitments under the GATS covers only a fewbusiness services activities  (Table IV.4).
(ii) Financial services
(a) Banks and other financial institutions
64. Until the early 1990s, virtually all financial inst itutions in Madagascar were wholly owned by
the Government.  Banks' operations were under the direction of the Government and competition was
non-existent.  Due to lack of competition and perceived inefficiency in the provision of services, the
performance of the financial institutions was recognized to be a hindrance to economic development.
                                                     
5 This group corresponds to ISIC (Rev. 2) Major Division 3.  The average MFN tariff, excluding the
import tax is 6.2%.Madagascar WT/TPR/S/80
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0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0Chart IV.1
Tariff averages in the manufacturing sector, ISIC (Rev.2), 2000
Per cent
Averages includes import tax.
WTO Secretariat calculations, based on data provided b y the Ma galasy authorities.Note:
Source :Food products
Beverages
Tobacco
Textiles
Clothing
Leather products
Footwear
Wood products
Furniture except metal
Printing and publishingPaper products
Industrial chemicals
Other chemicals, incl. pharm.
Petroleum refineries
Rubber productsPetroleum and coal products
Pottery and chinaPlastic products
Other non-metallic mineral productsGlass and products
Iron and steel
Non-ferrous metals
Fabricated metal products
Non-electrical machinery incl. computers
Electrical machinery
Transport equipment
Professional and scientific equipment
Other manufactured productsTariff average for 
the manufacturing
16.2WT/TPR/S/80 Trade Policy Review
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Table IV.4
Summary of Madagascar's specific commitments in services
Modes of supply
Sector or subsector Cross-border
supplyConsumption
abroadCommercial
presencePresence of
natural persons
1. Business services Market access/National treatment
F. Other business services
(e) Technical testing and analysis 
services (CPC 8676)a
Research, analysis and control of
basic equipment in the following
sectors:U/U NL/NL LSPb/NL U/U
- preparation of products of
vegetable origin
- logging and industrial
reafforestation
- storage and packaging of food
products
(n) Maintenance and repair of equipment
(CPC 886)a
Preparation and control of basic
equipment in the following sectors:cU/U NL/NL LSPb/NL U/U
- tourism and hotels, with the
exception of transport activities
relating to tourism
- industrial fishing- packaging of food products of
animal origin
a The service sector specified represents only part of the activities covered by the corresponding heading of the CPC.
b Enterprises must obtain approval from the authorities concerned, and comply with the performance requirements set forth in the  
approval documents in accordance with the stipulated criteria, including the number of local jobs created and the national 
value-added criterion.
c These activities do not include the sale or rental of equipment or new or used parts required for maintenance activities.
Note: NL No limitations.
U Unbound.
LSP Limitations apply under specific conditions.
Source: WTO document GATS/SC/51, 15 April 1994.
65. In keeping with the Government's reform efforts and the new appreciation of the critical role
of financial institutions in the economic reform process, the subsector has been fully privatized.  Thereform was initiated with the passage of two statutes.
6  These laws and subsequent decrees and
regulations created the new structure for the subsector.  The Government of Madagascar has recently
notified to the WTO a number of regulations governing the activities of banks and financial
institutions.7
66. There are seven banks operating in Madagascar, six of which are subsidiaries of foreign
banks.  They are:  BSM (Banque de Solidarité Malgache);  BNI/CLM, which is affiliated with Crédit
Lyonnais;  BFV/SG, affiliated with  Société Générale;  BTM/BOA, affiliated with the group African
Financial Holding;  BMOI, affiliated with Banque Nationale de Paris;  UCB, affiliated with Mauritius
Commercial Bank;  and SBM, affiliated with State Bank of Mauritius.  There are also two non-bank
                                                     
6 Law No. 95/030 of 22 February 1996, and Law No. 96/020 of 4 September 1996.  The provisions of
Law No. 95/030 define its scope of application and the activities of credit institutions, specifying the categoriesinto which they fall, how they are regulated and controlled and the penalties applicable in case of violation(WTO document S/C/N/132, 6 October 2000).
7 WTO documents S/C/N/133 to 137, 6 October 2000.Madagascar WT/TPR/S/80
Page 49
financial institutions, Investco and Equipbail, and a number of credit unions and micro-finance
entities.
67. The Government still maintains shares in three of the banks:  15% in BTM/BOA, formerly
the Agricultural Bank of Madagascar;  30% in BFV/SG; and some 33% in BNI/CLM.
68. The Banking and Financial Supervision Commission (Commission de Supervision Bancaire
et Financière, CSBF) is responsible for supervision of banks and other financial institutions.  TheCommission is chaired by the Governor of the Central Bank of Madagascar;  it includes
representation from the Treasury, the Finance Ministry, and others with experience in financial
(including banking) issues.
69. The CSBF grants licences for "territorial" banks, which may provide all banking services;
"offshore" banks, which may only provide services to non-residents;  and other financial institutions.No specific limits are set on the ownership of financial institutions.  However, prior authorization by
the CSBF is required for a corporation to hold more  than 33%, an individual to hold more than 50%
and a group of individuals to hold more than 66%.
70. In order to ensure the safety and soundness of the financial sector, the regulatory and
supervisory environment is being modernized cons istent with the Basle Committee's Core Principles
for effective banking supervision.
8  Financial institutions – in particular, credit unions and institutions
in the emerging micro-finance sector – will also be governed by prudential regulations and effective
supervision, similar to those applicable to banks.
(b) Insurance services
71. The insurance market in Madagascar is regulated by Law No. 99/013.  The Act brought to an
end the Government monopoly in insurance services, which had existed since 1975.  The National
Insurance Company (NIC), a parastatal organization, is scheduled to be privatized.
72. The Ministry of Finance is responsible for licensing providers of insurance services.  Before
an insurance provider may commence operations in Madagascar, it is required to obtain approval from
the Ministry of Finance, which, in consultation wi th the Insurance Council (Conseil des Assurances),
assesses the proposed operations of the provider.  The licence may be issued for one or more types of
insurance policies.  The premium rates are set by the Council, subject to approval by the Minister ofFinance.
73. Subsidiaries of foreign insurance companies established in Madagascar are subject to the
same regulations as Malagasy companies.  Cross-border supply of insurance services is permitted for
companies established in Madagascar.  However, a Malagasy resident may not take out insurance
abroad.
74. The Government is currently developing regulations on the minimum required capitalization
of insurance providers.  Insurance providers are requ ired to maintain sufficient assets in Madagascar
to cover their obligations and to notify the Ministry of Finance of any changes in assets and ownership
of the company.
9
                                                     
8 This is in response to an IMF technical assistance mission in November 1999, which examined the
conformity of Madagascar's banking regulations with the Basel Core Principles.
9 The level of the assets will be set by the regulations under preparation.  The regulations are to be
adopted before March 2001.WT/TPR/S/80 Trade Policy Review
Page 50
75. Currently, there are three insurance services providers:  two corporations organized pursuant
to Malagasy law, ARO et NY HAVANA, and a mutual insurance company, M.AMA.  ARO and NY
HAVANA are parastatal entities operating under the umbrella of the Comité des Sociétés d'Assurance
(C.S.A.), and provide life insurance as well as other insurance policies.  M.AMA provides only
automobile insurance.  As at November 2000, no subsidiary of a foreign insurance company has been
established in Madagascar.
(iii) Tourism, restaurants, and hotels
76. The Government of Madagascar places heavy emphasis on the potential of an expanding
tourism subsector in economic development and as a source of foreign currency earnings.  In 1995, a
separate Ministry of Tourism was created to set policy for the development of the subsector.  Tourism
constitutes around 16.5% of Madagascar's GDP and employs approximately 16,000 persons.Earnings from tourism activities have increased consistently over the past decade:  in 1999, tourism
generated gross earnings of SDR 72.9 million, up from SDR 20 million in 1991 (Chart IV.2).
01020304050607080
1991 1992 1993 1994 1995 1996 1997 1998 1999Chart IV.2
Tourism service earnings in Madagascar, 1991-99
SDR million
Source : Ministry of Tourism.
77. The tourism subsector is governed by Law No. 95-017 and Decree No. 96-773.10  Because of
the difficulties related to land ownership, the Ministry of Tourism is attempting to facilitate the
process for investors in tourism activities to have access to developable land.  In collaboration with
the Ministry of Development Planning, the Ministry of Tourism is identifying parcels of land suitable
for development.  The Ministry is also trying to ad dress the lack of sufficient professionalism in the
tourism subsector by providing training to the operators.
                                                     
10 Loi No. 95-017 du 25 août 1995 portant code du tourisme;  Décret No. 96-773 du 3 septembre 1996
relatif aux normes régissant les entreprises, les établissements et opérateurs touristiques.Madagascar WT/TPR/S/80
Page 51
78. Tourism is underdeveloped and efforts are being focused both on the supply and demand side.
The Ministry of Tourism is working to further develop tourism;  it is collaborating with other relevant
ministries with the understanding that issues that are the responsibility of other ministries, such as
telecommunications, infrastructure, and immigration procedures all have an impact on tourism.  The
Ministry's objective is to develop high quality tourism, while maintaining relatively low volumes.
The Ministry set a target of  approximately 300,000 tourist visits per year by 2005.  In 1999, nearly140,000 tourists visited Madagascar, spending an average of 20 days in the country, of which four in
hotels (Table IV.5).
Table IV.5
Tourism in Madagascar, 1992-99
(Number and SDRs)
1992 1993 1994 1995 1996 1997 1998 1999
Number of tourists 53,655 55,102 65,839 74,619 82,681 100,762 121,207 138,253
Earnings (SDR million) 26.6 27.8 32.9 41.5 44.6 52.9 65.5 72.9
Average number of days per
tourist.. .. 18 18 16 15 20 20
Average stay in hotels .. .. .. 5 4 4 4 4
N u m b e r  o f  h o t e l s  ( 1 - 5  s t a r ) . .. .. .. . 1 1 1 1 1 1 1 1 1 1 1 1
Number of rooms .. .. .. .. 3,040 3,040 3,040 3,040
Average room occupancy per
year (%).. .. .. 55 57 57 58 60
Total number of employees in
tourism industry9,107 9,812 10,145 13,355 13,707 13,979 14,363 15,574
.. Not available.
Source: Ministry of Tourism.
79. A National Committee for the Development of Tourism (CNDT) was established at the end
of 1991.  The CNDT consists of representatives of the ministries involved in the tourism subsector.
The Committee proposes solutions, to the Government, to problems affecting the subsector.Moreover, Maison du Tourisme de Madagascar, a private association, is responsible for the promotion
of Madagascar as a tourist destination.  The association collects a tourism tax ranging from the
equivalent of FF 1 to FF 3 per night spent in a hotel in Madagascar;  the rate depends on the standard
of the hotel.
80. Madagascar attracts visitors from around the worl d, although the largest percentage of arrivals
are from France (54% of the total in 1999).  Other countries, individually account for less than 10% of
the total number of visitors.  The Ministry recognizes that Madagascar is still relatively unknown as atourist destination, and that distances to Madagascar make visits expensive.  Nevertheless, the
authorities are committed to the expansion of tourism in Madagascar.
81. Private investment in tourism has declined since 1996, when sector specific incentives under
the former Investment Act were discontinued.  In 1994, private investment amounted to
FMG 154.4 billion;  after reaching a high of FMG 358.7 billion in 1996, it fell to FMG 196.9 billionin 1998.
(iv) Telecommunications
82. Madagascar's telephone density is three main telephone lines per 100 people, well below the
average for near-by Seychelles (19.2), Mauritius (16.2), and South Africa (10.0).WT/TPR/S/80 Trade Policy Review
Page 52
83. Madagascar's telecommunications subsector is undergoing significant change as the
Government increasingly recognizes its vital role in economic development.  In 1993, the public
company in charge of telecommunications and postal services was split;  Telecom Malagasy (Telma),
is responsible for telecommunications services.
84. In 1996, the Government began the liberalization process in telecommunications, seeking to
improve services by restructuring the subsector and favoring development of private initiatives.Telma was partially privatized:  66% of its capital is still held by the State;  and France Cable et Radio
(FCR) holds the remainder.  Telma is the only supplier of basic telecommunications services;  it also
manages the network.  Further privatization of Telma is under preparation, following which the State
will no longer be a majority shareholder.  Moreover, four mobile telephone services suppliers (Telecel
Madagascar, Sacel Madagascar, Société Malgache de Mobiles, and Madacom) are also operating inMadagascar.
85. With the assistance of the Office Malagasy d’Études et de Régulation des
Télécommunications (OMERT), the Ministry of Post and Telecommunications is responsible for the
formulation of national telecommunication polici es, as well as network planning.  OMERT, inter alia ,
grants licences, sets and approves standards for radio and telephone equipment, manages frequencyresources, and settles disputes in the telecomm unications subsector.  OMERT is financed with
revenue from fees and taxes it collects (e.g. licence and frequency allocation fees).
86. Prior to providing any telecommunication services, or supplying any equipment, the provider
or supplier must obtain either a network licence, an  authorization to provide services, or an agreement
to supply equipment.  The procedures vary depending on the activities of the operator.
11  In principle,
in areas where the number of licences is limited for technical reasons, public tendering is required for
their allocation.12  With the exception of tariffs of mobile telephone services (freely set by the
suppliers), prices of all the other telecommunications services are subject to approval by OMERT.
Interconnection prices are negotiated between the suppliers concerned, subject to approval by
OMERT.
87. There are no plans to privatize the postal serv ice.  Upon obtaining the appropriate licence
from the Ministry of Post and Telecommunications, private enterprises are permitted to participate infunctions traditionally carried out by the postal service.  The delivery  of letters and packages
weighing less than 2 kg. (by ordinary courier) is to  remain exclusively with the State's postal service.
88. Madagascar has not made any specific servic es commitments under the GATS with respect to
telecommunications.
(v) Transportation
89. Improvement of the transportation system is among the objectives of the economic reform
programme of the Malagasy Government.  Madagascar's Ministry of Transport is moving ahead with
privatization of transport services.  Indeed, it is removing itself from the operation of any
transportation services, and is focusing its efforts on the planning, policy setting, and monitoring of
transportation services.  The private sector is expect ed to provide transport services and to participate
in provision and management of infrastructure.  New legislation and regulatory structures are being
implemented to assure standards of performance, safety, protection of infrastructure, environment,
and protection of consumers against monopolistic practices.
                                                     
11 Decree No. 97-1155 of 19 September 1997.
12 Law No. 96-034 of 27 January 1997.Madagascar WT/TPR/S/80
Page 53
(a) Land transport
90. Madagascar has a road network of approx imately 49,837 km.;  only 5,781 km. is tarred.
Significant capital investment is needed to improve the road network.
91. Madagascar's rail network consists of 883 km. of narrow gauge track.  The network is
currently state-owned.  A private company has been commissioned by the Government to manage the
network and operate rail transport in north Madagascar.  A state-owned company, Réseau Nationaldes Chemins de Fer Malagasy, is still managing the network and operating rail transport in the
Southern region.  Although, there is only one concessionary company, the Government intends to put
into place a regulatory pricing process.  Truck transportation currently competes with rail transport.
(b) Air transport
92. Domestic air travel is important in Madagascar because of the long distances between major
regions of the country and the poor ground transportation infrastructure.  Like other subsectors of the
economy in Madagascar, aviation has been undergoing reform. The ongoing liberalization of the
industry is likely to create opportunities for private-sector participation.
93. Liberalization of the air transport subsector has been under way since 1994.  In 1997,
international services were liberalized.  A new regulatory framework was established in 1999, and anew civil aviation regulatory body, Aviation civile de Madagascar, came into existence in
January 2000 as well as a new civil aviation law.
94. Air Madagascar, the national carrier, is curr ently wholly state owned.  The Government
intends to privatize Air Madagascar in 2000:  approximately 65% will be offered to the private sector;
the balance will remain in the hands of the State.   The privatization has encountered some problems
but the Government is fully committed to concluding privatization soon.
95. Before air transport services were liberalized, Madagascar's aviation arrangements with
foreign countries were governed by 24 bilateral agreements, dating back to 1962 in the case of an
agreement with France.  Madagascar is pursuing an op en-skies policy in parallel with the privatization
of Air Madagascar.  Charter companies have been permitted into the local market in order to improve
competition in domestic air transport.  Air Madagascar will continue operating eight national routes
for a period of five years, although other carriers will be allowed entry if they meet internationallyrecognized technical standards.
96. Madagascar's major airport is Antananarivo/Ivato.  The country technically contains 211
airfields, but only around half are usable, and only thirty maintain permanent-surface runways.
Madagascar's airports are currently owned and operated by the Government.  The Government is
planning to privatize airport operations through the granting of long-term concessions to privateoperators.  In addition, SOFITRANS, which operates airport duty-free shops, catering, and aircraft
handling services is also scheduled to be privatized.
97. Madagascar is a signatory to the Chicago Convention, and abides by the standards and
practices of the International Civil Aviation Organization.
(c) Maritime transport
98. Madagascar has 15 ports along its 4,828 km. coastline.  The major ports are at Antsiranana,
Antsohimbondrona, Mahajanga, Toamasina, and Toliara.WT/TPR/S/80 Trade Policy Review
Page 54
99. Consistent with reforms under way in other areas, the Government's policy is to promote
private-sector enterprises (including harbour services such as pilotage) and to improve the operation
and efficiency of Madagascar's ports. Importers and exporters are free to use the service of any freight
company.  Port facilities are in the hands of the State, and capital improvements are the responsibility
of the Government.  Port operations have been pr ivatized through a system of long-term concessions.
100. There are approximately 20 maritime transport companies. With the exception of SMTM,
which is 59% state-owned – SMTM currently manages one maritime fleet –, all the companies are
privately owned.Madagascar WT/TPR/S/80
Page 55
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