The third Trade Policy Review of Madagascar was held on 14 and 16 July 2015. It allowed for a better understanding of the evolution of its socio-economic, trade and investment policies since its last Review in 2008, and the challenges it is facing.

Madagascar is slowly recovering from a six-year socio-political crisis that has further delayed its economic development. Its economic growth has been weak, despite increased exploitation of Madagascar's mining resources, and poverty has risen sharply. Rebuilding infrastructure, including energy and transport, would accelerate the recovery of the economy. In addition, further improvements in the investment approval process and the business environment through better enforcement of law, and facilitation of access to credit, to construction permits and to property would also help.

Members praised Madagascar for continued progress in Customs reforms. Its Electronic Single Window was operational, and paperless customs clearance procedures are very close to completion. Most border control institutions can now transmit their respective authorizations electronically to Customs. However, noting that the number of these institutions remains too high by international comparison, several Members encouraged Madagascar to restructure its border control, ratify the TFA, and take steps toward notification of its TFA commitment categories.

There is a need to upgrade the legislative and institutional framework on standards, technical regulations, and sanitary and phytosanitary measures, in order to ensure higher quality for local products and boost exports. Madagascar also needed to improve its overall business environment and make it conducive to investment as well.

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Opening statement by the representative of Madagascar

H.E. Mr Henri Rabesahala

The very first words of the delegation I am leading today are words of thanks to all attending Members and all those who have shown an active interest in Madagascar and have expressed it through the written questions we have received. Madagascar will do its utmost to be transparent, sincere and responsible both during this review and subsequently, out of respect for this distinguished Organization and for all Members that support our partners in one way or another. Indeed, Madagascar is an Aid for Trade beneficiary and the official development assistance provided by a number of developed and developing WTO Members. Our country is a supplier of services and agricultural, textile and mining products and purchases manufactures, services, hydrocarbons and heavy machinery from most of the Members here today.

Our thanks also go to the WTO Secretariat for in view of the support that it provided us in preparing this review, we have no doubt that it intends to go beyond the establishment of rules governing trade and dispute settlement. We see technical assistance and capacity building as the knock on effects of this review.

In the wake of the Fifth Global Review of Aid for Trade, and on the eve of dramatic changes such as mega deals, the establishment of the Tripartite Free Trade Area, the forthcoming Ministerial Conference in Kenya, and, at the national level, the organization of a round table meeting of Madagascar’s trading partners, we are especially proud to be with you today in order to outline our road map, answer your questions and potentially address any ambiguous situations that might arise from them.

The progress made with the recommendations put to Madagascar at its previous review in 2008 may come as a surprise to some Members, because Madagascar has suffered an unprecedented crisis in terms of length as well as consequences for the economy. It took more than five years of transition, without any actual support from its partners, before constitutional order was restored in 2014. Hence, heavy public investment, in depth transformations and international commitments were simply impossible in light of the sanctions against Madagascar’s leaders during that period.

The 2009 crisis had devastating effects on Madagascar’s relations with its trading partners and its integration in regional and international markets. The country suffered, inter alia, the consequences of cancellation of Madagascar’s participation in several summits and meetings, the suspension of preferences under the AGOA, non-disbursement of the 10th European Development Fund, and postponement of the signing of a number of trade agreements.

The difficulties arising from the country’s situation, compounded by an unfavourable international environment, have had serious consequences for the overall trade environment. These include the low rate of industrial growth, the marked deterioration of infrastructure detracting from the country’s competitiveness, inadequate access to energy, and the effects of the combined introduction of the COMESA common external tariff or the Tripartite FTA along with tariff reductions under the EPAs, which, as regimes, were not always clearly defined and communicated to the private sector. Moreover, services imports have not helped the country to innovate and move back up in the value chain as anticipated, business law reforms are not keeping pace with the rapidly rising needs and expectations of operators, and lastly, trade facilitation has led to a proliferation of imports without any genuine substitution by domestic production, or any significant expansion of exports.

Added to these structural problems are difficulties ensuing from inadequate capacities among public and semi-public trade support bodies, continuing asymmetry of information penalizing the private sector, a relatively large informal sector, absence of innovation among SMEs, difficulties in obtaining access to finance, petty squabbling between various government services, lack of coordination in the provision of trade related technical and financial assistance, and failure to make proper use of trade preferences and flexibilities secured at the bilateral, regional and multilateral levels.

Guided by President Hery Rajaonarimampianina, the two successive Governments nonetheless adopted ambitious positions and took bold decisions on rules and policies. Reforms were initiated to strengthen the rule of law, improve governance in general and public finance management in particular, increase tax and customs revenue, promote market and product diversification, revise the texts regulating a number of sectors, including e commerce, consumer protection and guarantees and public private partnership, and enhance the business environment. A whole series of other reforms are under way.

More broadly, the National Development Plan (PND) focuses on achieving sustainable and inclusive economic revival, promoting social development, bolstering security, protecting the environment, and using diplomatic mechanisms as the lynchpin of trade, tourism and investment policy. Rapid and inclusive results based methods have been adopted under the Implementation Plan (PMO) carried out by the Government.

The crisis did not prevent Madagascar from fulfilling its WTO obligations, particularly in terms of notifications, contributions, and involvement in the WTO’s work. Among other things, it communicated to the WTO its matrix of priority needs with a view to building up national capacity in order to advance acceptance and implementation of the WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS Agreement), embarking on the process of establishing a national trade facilitation committee and categorizing the measures with support from the WTO and the World Bank, identifying non-tariff barriers to trade and taking concrete steps to remove them.

The customs administration has initiated a number of reforms over the past six years in partnership with the SGS and Gasynet, using tools such as ASYCUDA++, revising the Customs Code, and reviewing tariffs and procedures that presented inconsistencies in the past, whilst introducing far reaching changes in strategic human resource planning.

The adoption in 2013 of the Sectoral Programme for Agriculture, Livestock and Fisheries under the New Partnership for Africa’s Development (NEPAD) is a major step forward in the development of productive capacity to vigorously boost exports in these sectors, the aim being to achieve Madagascar’s ambition of becoming the “breadbasket” of the Indian Ocean region. Non-food agricultural products such as ethanol have also benefited from the establishment of an enabling legal framework and the introduction of incentives, in view of their potential for job creation, preserving biodiversity and generating revenue for the public purse. Lastly, the promotion of investment in the above sectors remains a priority in order to increase agricultural and industrial production and develop related trade in services.

At the political level and in the aftermath of five years of deep crisis, Madagascar is learning to preserve peace and consolidate stability, even though some information in circulation may at times give cause for concern to its partners and potential investors. The President’s Office, the National Assembly and the Government are operating normally despite the political and labour unrest typical of any country in a post crisis situation. The State is preparing for negotiations with its technical and financial partners, particularly with a view to a meeting with the IMF in September and a donors’ conference scheduled to take place in Paris this coming November.

Improvements have been made to infrastructure and the investment environment. New target markets have been identified in the tourism sector, and the private sector has invested in quality accommodation facilities. Progressive migration towards DTTV, the launching of 4G connection and optimized use of new development oriented technologies have been put in place. The restructuring of the national water and electricity company JIRAMA is moving ahead with support from Madagascar’s partners, and hydro agricultural production sites are awaiting expressions of interest on the part of investors. International technical cooperation is reaching cruising speed in areas which include enhancing the regulatory framework for public private partnerships (PPP), public private dialogue, raising Madagascar’s Doing Business score, regulating e commerce, improving trade in environmental goods, and promoting trade in services.

In order to find sustainable solutions to its various constraints, Madagascar has opted for more effective integration of trade in national development policy, using existing and future structures at the regional and international levels in support of targeted actions to enhance coordination between the actors involved, better domestic trade performance and visible competitiveness of Malagasy SMEs. Convinced as it is that trade facilitation can also benefit exports, Madagascar intends to make substantial advances in accepting the Protocol, notifying the categories, and developing areas of cooperation with other customs administrations throughout the world. Since it believes that non-tariff barriers have a more negative impact than the tariffs themselves, Madagascar attaches the utmost importance to the work of the SPS and TBT Committees and to domestic implementation of the resolutions, tools and provisions under both Agreements.

Trade extends well beyond the issue of rules, and it encompasses investment, the business climate, the ability of the country to cease being a supplier of raw materials alone or a large assembly plant and to become a major actor in global value chains, an innovative actor that places science and technology at the service of higher value added and the promotion of its services exports. Madagascar has thus decided to enlist the support of other regional and multilateral agencies and institutions in its endeavours to achieve greater wellbeing for its population. Its UNCTAD Investment Policy Review will take place this year. An agreement has been signed with the ITC with a view to implementing a business competitiveness building programme, and our traditional partners are continuing to support us in one or more trade related sectors. We are currently seeking ways to expand the list to other countries that are already lending us trade related technical assistance, so as to broaden this partnership. We thus encourage countries that are actively involved in other areas of cooperation to appear more prominently in Madagascar’s Aid for Trade matrix.

We extend our warmest thanks to all our past, current and future partners. Madagascar does not consider this review as an end in itself. Rather, it marks the beginning of a process of alignment of the actions of bilateral and multilateral partners, with the organization of a round table meeting including all of Madagascar’s resident or non-resident partners, in order to follow up on the review’s recommendations by pooling resources, with Madagascar taking ownership of the process, and harmonizing public policies at sectoral level.

Madagascar expects a positive outcome to the ongoing Doha Development Agenda negotiations. We are hoping for a wealth of results from the Tenth Ministerial Conference and a stronger development role for the WTO despite a few past disappointments. We are confident regarding the future of trade in the post 2015 system.