Economy of Madagascar
Encyclopedia
Agriculture
Agriculture, including fishingFishing
Fishing is the activity of trying to catch wild fish. Fish are normally caught in the wild. Techniques for catching fish include hand gathering, spearing, netting, angling and trapping....
and forestry
Forestry
Forestry is the interdisciplinary profession embracing the science, art, and craft of creating, managing, using, and conserving forests and associated resources in a sustainable manner to meet desired goals, needs, and values for human benefit. Forestry is practiced in plantations and natural stands...
, is the mainstay of the Madagascar economy and the country has a great potential for growth in the sector. In 2009, agriculture accounted for 24 percent of Gross Domestic Product
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
(GDP), while commerce and services accounted for 55 percent. Agriculture employs more than 70 percent of the labour force and provides ivelihood]s to the vast majority of about 20 million inhabitants, contributing more than 70 percent to export earnings, mostly through the export of seafood
Seafood
Seafood is any form of marine life regarded as food by humans. Seafoods include fish, molluscs , crustaceans , echinoderms . Edible sea plants, such as some seaweeds and microalgae, are also seafood, and are widely eaten around the world, especially in Asia...
(mainly shrimps), vanilla
Vanilla
Vanilla is a flavoring derived from orchids of the genus Vanilla, primarily from the Mexican species, Flat-leaved Vanilla . The word vanilla derives from the Spanish word "", little pod...
, coffee
Coffee
Coffee is a brewed beverage with a dark,init brooo acidic flavor prepared from the roasted seeds of the coffee plant, colloquially called coffee beans. The beans are found in coffee cherries, which grow on trees cultivated in over 70 countries, primarily in equatorial Latin America, Southeast Asia,...
, cacao, litchi, pepper
Black pepper
Black pepper is a flowering vine in the family Piperaceae, cultivated for its fruit, which is usually dried and used as a spice and seasoning. The fruit, known as a peppercorn when dried, is approximately in diameter, dark red when fully mature, and, like all drupes, contains a single seed...
, cotton
Cotton
Cotton is a soft, fluffy staple fiber that grows in a boll, or protective capsule, around the seeds of cotton plants of the genus Gossypium. The fiber is almost pure cellulose. The botanical purpose of cotton fiber is to aid in seed dispersal....
, tobacco
Tobacco
Tobacco is an agricultural product processed from the leaves of plants in the genus Nicotiana. It can be consumed, used as a pesticide and, in the form of nicotine tartrate, used in some medicines...
, groundnut
Groundnut
Groundnut can mean:* Seeds that ripen underground, of the following plants, all in the Faboideae subfamily of the legumes:** Arachis villosulicarpa** Bambara groundnut** Hausa groundnut** Peanut* Roots and tubers:** Apios americana...
, sisal
Sisal
Sisal is an agave that yields a stiff fibre traditionally used in making twine, rope and also dartboards. The term may refer either to the plant or the fibre, depending on context...
, clove
Clove
Cloves are the aromatic dried flower buds of a tree in the family Myrtaceae. Cloves are native to the Maluku islands in Indonesia and used as a spice in cuisines all over the world...
and ylang-ylang
Ylang-ylang
Cananga odorata, commonly called Ylang-ylang , cananga tree, ilang-ilang, kenanga , fragrant cananga, Macassar-oil plant or perfume tree),is a tree valued for its perfume...
. Industry features textile manufacturing and the processing of agricultural products. Growth in output in 1992-97 averaged less than the growth rate of the population. Growth has been held back by a decline in world coffee demand, and the erratic commitment of the government to economic reform. Formidable obstacles stand in the way of Madagascar's realizing its considerable growth potential; the extent of government reforms, outside financial aid, and foreign investment will be key determinants.
Madagascar is an island endowed with a tropical climate along the coasts, a moderate climate in the highlands and an arid
Arid
A region is said to be arid when it is characterized by a severe lack of available water, to the extent of hindering or even preventing the growth and development of plant and animal life...
climate in the south. The diversity of its ecology
Ecology
Ecology is the scientific study of the relations that living organisms have with respect to each other and their natural environment. Variables of interest to ecologists include the composition, distribution, amount , number, and changing states of organisms within and among ecosystems...
and climate makes it possible to grow temperate crop
Crop
Crop may refer to:* Crop, a plant grown and harvested for agricultural use* Crop , part of the alimentary tract of some animals* Crop , a modified whip used in horseback riding or disciplining humans...
s such as apple
Apple
The apple is the pomaceous fruit of the apple tree, species Malus domestica in the rose family . It is one of the most widely cultivated tree fruits, and the most widely known of the many members of genus Malus that are used by humans. Apple grow on small, deciduous trees that blossom in the spring...
s, pear
Pear
The pear is any of several tree species of genus Pyrus and also the name of the pomaceous fruit of these trees. Several species of pear are valued by humans for their edible fruit, but the fruit of other species is small, hard, and astringent....
s, plum
Plum
A plum or gage is a stone fruit tree in the genus Prunus, subgenus Prunus. The subgenus is distinguished from other subgenera in the shoots having a terminal bud and solitary side buds , the flowers in groups of one to five together on short stems, and the fruit having a groove running down one...
s, grape
Grape
A grape is a non-climacteric fruit, specifically a berry, that grows on the perennial and deciduous woody vines of the genus Vitis. Grapes can be eaten raw or they can be used for making jam, juice, jelly, vinegar, wine, grape seed extracts, raisins, molasses and grape seed oil. Grapes are also...
and citrus fruits and tropical products such as mango
Mango
The mango is a fleshy stone fruit belonging to the genus Mangifera, consisting of numerous tropical fruiting trees in the flowering plant family Anacardiaceae. The mango is native to India from where it spread all over the world. It is also the most cultivated fruit of the tropical world. While...
es and litchi, as well as a wide variety of other crops including coffee
Coffee
Coffee is a brewed beverage with a dark,init brooo acidic flavor prepared from the roasted seeds of the coffee plant, colloquially called coffee beans. The beans are found in coffee cherries, which grow on trees cultivated in over 70 countries, primarily in equatorial Latin America, Southeast Asia,...
, clove
Clove
Cloves are the aromatic dried flower buds of a tree in the family Myrtaceae. Cloves are native to the Maluku islands in Indonesia and used as a spice in cuisines all over the world...
s, sisal
Sisal
Sisal is an agave that yields a stiff fibre traditionally used in making twine, rope and also dartboards. The term may refer either to the plant or the fibre, depending on context...
, maize
Maize
Maize known in many English-speaking countries as corn or mielie/mealie, is a grain domesticated by indigenous peoples in Mesoamerica in prehistoric times. The leafy stalk produces ears which contain seeds called kernels. Though technically a grain, maize kernels are used in cooking as a vegetable...
, tuber
Tuber
Tubers are various types of modified plant structures that are enlarged to store nutrients. They are used by plants to survive the winter or dry months and provide energy and nutrients for regrowth during the next growing season and they are a means of asexual reproduction...
s and various spice
Spice
A spice is a dried seed, fruit, root, bark, or vegetative substance used in nutritionally insignificant quantities as a food additive for flavor, color, or as a preservative that kills harmful bacteria or prevents their growth. It may be used to flavour a dish or to hide other flavours...
s.
Resources
Madagascar's sources of growth are tourismTourism
Tourism is travel for recreational, leisure or business purposes. The World Tourism Organization defines tourists as people "traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes".Tourism has become a...
; textile
Textile
A textile or cloth is a flexible woven material consisting of a network of natural or artificial fibres often referred to as thread or yarn. Yarn is produced by spinning raw fibres of wool, flax, cotton, or other material to produce long strands...
and light manufacturing exports (notably through the EPZs); agricultural products and mining. Madagascar is the world's leading producer of vanilla and accounts for about half the world's export market. Tourism targets the niche eco-tourism market, capitalizing on Madagascar's unique biodiversity, unspoiled natural habitats, national parks and lemur
Lemur
Lemurs are a clade of strepsirrhine primates endemic to the island of Madagascar. They are named after the lemures of Roman mythology due to the ghostly vocalizations, reflective eyes, and the nocturnal habits of some species...
species. Exports from the EPZs, located around Antananarivo and Antsirabe
Antsirabe
Antsirabe is the third largest city in Madagascar and has a population of approximately 183,000. It's the capital of the Vakinankaratra region...
, consist the most part of garment manufacture, targeting the US market under AGOA and the European markets under the Everything But Arms
Everything but Arms
Everything but Arms is an initiative of the European Union under which all imports to the EU from the Least Developed Countries are duty free and quota free, with the exception of armaments. EBA entered into force on 5 March 2001. There are transitional arrangements for bananas, sugar and rice...
(EBA) agreement. Agricultural exports consist of low-volume high-value products like vanilla, lychee
Lychee
The lychee is the sole member of the genus Litchi in the soapberry family, Sapindaceae. It is a tropical and subtropical fruit tree native to Southern China and Southeast Asia, and now cultivated in many parts of the world...
s and essential oil
Essential oil
An essential oil is a concentrated hydrophobic liquid containing volatile aroma compounds from plants. Essential oils are also known as volatile oils, ethereal oils or aetherolea, or simply as the "oil of" the plant from which they were extracted, such as oil of clove...
s. Madagascar has the largest cinnamon market in Africa. Madagascar also is a large exporter of coffee.
Mining
A small but growing part of the economy is based on mining of ilmeniteIlmenite
Ilmenite is a weakly magnetic titanium-iron oxide mineral which is iron-black or steel-gray. It is a crystalline iron titanium oxide . It crystallizes in the trigonal system, and it has the same crystal structure as corundum and hematite....
, with investments emerging in recent years, particularly near Tulear and Fort Dauphin
Tôlanaro
Tôlanaro or Tolagnaro is a city in Madagascar. It is the capital of Anosy Region and of Tôlanaro District. It has a port of local importance, and a new port has been built at Ehoala...
. Mining corporation Rio Tinto Group
Rio Tinto Group
The Rio Tinto Group is a diversified, British-Australian, multinational mining and resources group with headquarters in London and Melbourne. The company was founded in 1873, when a multinational consortium of investors purchased a mine complex on the Rio Tinto river, in Huelva, Spain from the...
started production at its Fort Dauphin mine in January 2009, following several years of infrastructure preparation. The mining project is highly controversial, with Friends of the Earth and other environmental organizations filing reports to detail their concerns about effects on the local environment and communities. Gemstone mining is also an important part of Madagascar's economy.
Several major projects are underway in the mining and oil
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
and gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
sectors that, if successful, will give a significant boost. In the mining sector, these include the development of coal at Sakoa and nickel near Tamatave. The Ambatovy nickel mine (Sherrit International 40%, Sumitomo 27.5%, Korea Resources 27.5%, SNC Lavelin 5%) is a huge operation having cost $4.76m to date and is due to start production in 2011. In oil, Madagascar Oil
Madagascar Oil
Madagascar Oil SA is a Malagasy company, founded by Sam Malin with South African businessman Michael Smith and Australian businessmen Robert Nelson. Madagascar Oil focuses on the development, exploration and production of petroleum. It is the principal onshore oil company in Madagascar in terms of...
is developing the massive onshore
Onshore (hydrocarbons)
Onshore, when used relative to hydrocarbons, refers to an oil, natural gas or condensate field that is under dry land or to activities or operations carried out in relation to such a field.-References:* *...
heavy oil
Heavy crude oil
Heavy crude oil or extra heavy crude oil is any type of crude oil which does not flow easily. It is referred to as "heavy" because its density or specific gravity is higher than that of light crude oil. Heavy crude oil has been defined as any liquid petroleum with an API gravity less than 20°.Extra...
field
Oil field
An oil field is a region with an abundance of oil wells extracting petroleum from below ground. Because the oil reservoirs typically extend over a large area, possibly several hundred kilometres across, full exploitation entails multiple wells scattered across the area...
at Tsimiroro
Tsimiroro
Tsimiroro is the name of a large oil field in the onshore Morondava Basin of Madagascar found south of the Bemolanga ultra heavy oil field and south of the town of Morafenobe.. It is estimated to contain as many as of heavy oil...
and ultra heavy oil
Tar sands
Bituminous sands, colloquially known as oil sands or tar sands, are a type of unconventional petroleum deposit. The sands contain naturally occurring mixtures of sand, clay, water, and a dense and extremely viscous form of petroleum technically referred to as bitumen...
field at Bemolanga
Bemolanga
Bemolanga is the name of a large tar sands deposit in the onshore Morondava Basin of Madagascar discovered in the early 1900s but known to locals for centuries. The field is located north of the Tsimiroro heavy oil field and east of the town of Morafenobe .Madagascar Oil, founded by Sam Malin, is...
.
Investment climate
Marc Ravalomanana
Marc Ravalomanana is a Malagasy politician who was the President of Madagascar from 2002 to 2009. A member of the Merina ethnic group, Ravalomanana served as Mayor of Antananarivo before becoming President in 2002...
was aggressively seeking foreign investment and had planned to tackle many of the obstacles to such investment, including combating corruption, reforming land-ownership laws, encouraging study of American and European business techniques, and active pursuit of foreign investors. President Ravalomanana rose to prominence through his agro-foods TIKO
Tiko
Tiko, Originally called ‘Keka’ by the Bakweris, is a town and important port in the southwest region of Cameroon. The settlement grew as a market town for Duala fishermen, Bakweri farmers and hunters from Molyko, Bwenga, Bulu and Bokova...
company, and is known for attempting to apply many of the lessons learned in the world of business to running the government. Prior to Ravalomanana's resignation, concerns had arisen about the conflict of interest between his policies and the activities of his firms. Most notable among them the preferential treatment for rice imports initiated by the government in late 2004 when responding to a production shortfall in the country.
Madagascar’s appeal to investors stems from its competitive, trainable work force. More than 200 investors, particularly garment manufacturers, were organized under the country’s export processing zone (EPZ) system since it was established in 1989. The absence of quota limits on textile imports to the European market under the Lome Convention
Lomé Convention
The Lomé Convention is a trade and aid agreement between the European Community and 71 African, Caribbean, and Pacific countries, first signed in February 1975 in Lomé, Togo.- History :...
helped stimulate this growth.
Since the mid-1980s, Madagascar has run sizeable balance-of-payment deficits. The current account deficit as a percentage of GDP averaged in excess of 6% during much of the 1990s and registered nearly 4 percent in 1999. Madagascar’s debt ratio, which had reached 46 percent in 1996, was estimated at 15.4% in 2000. Within an overall framework of poverty reduction, the HIPC Initiative was expected to enable the country to reduce its debt service ratio
Debt service ratio
In economics and government finance, debt service ratio is the ratio of debt service payments of a country to that country’s export earnings. A country's international finances are healthier when this ratio is low...
to 5.5% in 2003, and remain at around 5% throughout the projection period 2000-19.
During a period of solid growth from 1997 to 2001, poverty levels remained stubbornly high, especially in rural areas. A six-month political crisis triggered by a dispute over the outcome of the presidential elections held in December 2001 virtually halted economic activity in much of the country in the first half of 2002. Real GDP
Real GDP
Real Gross Domestic Product is a macroeconomic measure of the value of output economy adjusted for price changes . The adjustment transforms the money-value measure, called nominal GDP, into an index for quantity of total output...
dropped 12.7 percent in 2002, inflows of foreign investment dropped sharply, and the crisis tarnished Madagascar's budding reputation as an AGOA standout and a promising place to invest. After the crisis, the economy rebounded with GDP growth of over 10% in 2003. Currency depreciation and rising inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
in 2004 hampered economic performance, but growth for the year reached 5.3%, with inflation reaching around 25% at the end of the year. In 2005 inflation was brought under control by tight monetary policy of raising the Taux Directeur (central bank rate) to 16% and tightening reserve requirements for banks. Thus growth was expected to reach around 6.5% in 2005.
Following the 2002 political crisis, the government attempted to set a new course and build confidence, in coordination with international financial institutions and donors. Madagascar developed a recovery plan in collaboration with the private sector and donors and presented it at a "Friends of Madagascar" conference organized by the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
in Paris
Paris
Paris is the capital and largest city in France, situated on the river Seine, in northern France, at the heart of the Île-de-France region...
in July 2002. Donor countries demonstrated their confidence in the new government by pledging $1 billion in assistance over five years. The Malagasy Government identified road infrastructure as its principle priority and underlined its commitment to public-private partnership by establishing a joint public-private sector steering committee.
The Madagascar-U.S. Business Council was formed as a collaboration between the United States Agency for International Development (USAID) and Malagasian artisan producers in Madagascar in 2002. The U.S.-Madagascar Business Council was formed in the United States in May 2003, and the two organisations continue to explore ways to work for the benefit of both groups.
Food Security, Vulnerability and Risk Management
Despite a wealth of abundant and diverse natural resources, Madagascar is one of the world’s poorest countries. Madagascar holds great potential for agricultural development, mainly due to the large variety of soil types and climatic diversity. Nevertheless, natural hazards (cyclones, droughtDrought
A drought is an extended period of months or years when a region notes a deficiency in its water supply. Generally, this occurs when a region receives consistently below average precipitation. It can have a substantial impact on the ecosystem and agriculture of the affected region...
, locust
Locust
Locusts are the swarming phase of short-horned grasshoppers of the family Acrididae. These are species that can breed rapidly under suitable conditions and subsequently become gregarious and migratory...
invasions) combined with old-fashioned farming practices limit production.
The standard of living of the Malagasy population has been declining dramatically over the past 25 years. The country has gone from being a net exporter of agricultural products in the 1960s to a net importer since 1971. Inappropriate traditional agricultural methods cause soil to erode and soil quality to decline, and the basis of survival for Madagascar’s people is under serious threat.
Poverty reduction
Poverty Reduction Strategy Paper
Poverty Reduction Strategy Papers are documents required by the International Monetary Fund and World Bank before a country can be considered for debt relief within the Heavily Indebted Poor Countries initiative. PRSPs are also required before low-income countries can receive aid from most major...
(PRSP) under the Heavily Indebted Poor Countries
Heavily Indebted Poor Countries
Heavily Indebted Poor Countries is a group of 40 developing countries with high levels of poverty and debt overhang which are eligible for special assistance from the International Monetary Fund and the World Bank.- History and structure :...
(HIPC) Initiative. The boards of the IMF and of the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
concurred in December 2000 that the country was eligible under the HIPC Initiative, and Madagascar reached the decision point for debt relief. On March 1, 2001, the IMF Board granted the country $103 million for 2001-03 under the Poverty Reduction and Growth Facility (PRGR). Resources were intended for improving access to health, education, rural roads, water, and direct support to communities. In addition, on March 7, 2001, the Paris Club
Paris Club
The Paris Club is an informal group of financial officials from 19 of some of the world's biggest economies, which provides financial services such as war funding, debt restructuring, debt relief, and debt cancellation to indebted countries and their creditors...
approved a debt cancellation of $161 million. On February 28, 2001, the African Development Bank
African Development Bank
The African Development Bank Group is a development bank established in 1964 with the intention of promoting economic and social development in Africa...
(ADB) approved under the HIPC a debt cancellation of $71.46 million and granted in June 2001 an additional credit of $20 million to fight against AIDS
AIDS
Acquired immune deficiency syndrome or acquired immunodeficiency syndrome is a disease of the human immune system caused by the human immunodeficiency virus...
and poverty
Poverty
Poverty is the lack of a certain amount of material possessions or money. Absolute poverty or destitution is inability to afford basic human needs, which commonly includes clean and fresh water, nutrition, health care, education, clothing and shelter. About 1.7 billion people are estimated to live...
.
Partly as a result of these credits but also as a result of previous reforms, average GDP growth exceeded the population growth rate of 2.8% in 1997 (3.5%), 1998 (3.9%), 1999 (4.7%) and 2000 (4.8%).
In October 2004, the boards of the IMF and the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
determined that Madagascar had reached the completion point under the enhanced HIPC Initiative.
Facts and figures
Household income or consumption by percentage share:lowest 10%:
2.3%
highest 10%:
34.9% (1993)
Industrial production growth rate:
5% (1999 est.)
Electricity - production:
750 GWh (1998)
Electricity - production by source:
fossil fuel:
33.33%
hydro:
66.67%
nuclear:
0%
other:
0% (1998)
Electricity - consumption:
698 GWh (1998)
Electricity - exports:
0 kWh (1998)
Electricity - imports:
0 kWh (1998)
Exchange rates:
Malagasy francs (MGF) per US$1 – 6,302.9 (October 1999), 5,877.81 (1999), 5,441.4 (1998), 5,090.9 (1997), 4,061.3 (1996), 4,265.6 (1995)