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Madagascar at a crossroads
Feature: 3/2/2002



The economy in Madagascar is in crisis as the political situation in the country is threatening to undo six years of development and foreign investment which has created more than 100,000 jobs (director-e News, Monday 18 February).

The Indian Ocean island of Madagascar
The Indian Ocean island of Madagascar


A general strike has paralysed the capital, Antananarivo, for three weeks now, and a blockade on the road between the city and the main port has put a stranglehold on the importers and exporters who drive the country's economy.

The island's fast-growing textile industry is caught in the middle. As in many developing countries it's a fickle, branch-plant business that relies on stable politics and requires delivery to deadlines.

With the Malagasy infrastructure grinding to a halt, it's not only affecting production lines, but is also preventing clothing companies from planning their next season's lines, and discouraging new investors from moving into what's otherwise seen as a market with huge potential.

The problem is the recent presidential election. The challenger, businessman Marc Ravalomanana, won the first round in December - but the official line is that the winning margin was too narrow to avoid a runoff with incumbent Didier Ratsiraka.

Mr Ravalomanana and his supporters, who have called the general strike, say they won outright and allege vote-rigging - a charge apparently backed up by independent monitors.

A real crisis

Textile and garment maker Floreal is a typical example of the problems companies are facing. With 10,000 staff, it is the largest employer on this Indian Ocean island of 16 million people. John Hargreaves, its director general, has already had to lay off 1,000 people temporarily and is facing a real crisis.

An idyllic holiday isle - but commercially it is in crisis.
An idyllic holiday isle - but commercially it is in crisis.


"The situation is extremely serious", he said. "We are not getting any of our imports of raw materials into the country whether it be by air or by sea - by air as the customs are on strike or by sea because there's a roadblock between the port and Antananarivo.

"We have 10 or 20 working days of production ahead of us and then we will have to start closing the factories.

"Our clients worldwide in the States and Europe are worried now Madagascar is getting on the news. People putting in long term orders don't want to place them in Madagascar at the moment and will not until things settle down".

Duty free zone

At the heart of the development in Madagascar is the 'Zone Franche', a duty free zone which has created more than 100,000 jobs, allowing raw materials to be imported and finished products to be exported without duty payments.

America's African Growth and Opportunities Act (AGOA) has also helped attract investment, with clothing company Gap alone accounting for around half the island's textile business.

The political stalemate has seen the currency, the Malagasy franc, lose around 7 percent of its value against the major currencies in a month. And the World Bank has warned that 50,000 jobs are at jeopardy and the country risks falling into recession.

Hafez Ghanam, the World Bank's regional operations director, estimates the cost at about £8 to £9 million a day. "This crisis needs to be sorted out as soon as possible", he said. "Investment is coming down, companies are moving away. And Madagascar is already the eighth poorest country in the world, with 70 percent of the population living below the poverty line".

Talks are going on between the two sides in this deadlock over the presidential election result, but so far stalemate continues.

Madagascar is at a vulnerable stage of its move towards becoming a manufacturing country - dependent on the multinational corporations and on a political stability and democracy which is currently in question. It is a country at a turning point, and everyone in business at least, is holding their breath and hoping that not only can the political crisis be resolved, but that the economy can survive
Author: John Gibbon
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