Journal Issue

Republic of Madagascar: Selected Issues and Statistical Appendix

International Monetary Fund
Published Date:
September 2005
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IV. Competitiveness and Export Performance in Madagascar11

A. Introduction

1. This section presents information on some competitiveness indicators other than the exchange rate and then provides a more detailed analysis of the evolution of Madagascar’s exports in terms of the structure and performance of exports, at the aggregate and product levels. The role played by export processing zones (EPZs) and by special factors such as textile exports driven by the African Growth and Opportunity Act (AGOA) will be discussed, as well as the implications of the termination of the Agreement on Textiles and Clothing (ATC) in 2005 and the expected termination of the third party provision under AGOA (AGOA III) in 2007. Based on qualitative information gleaned from interviews with exporters in Madagascar and on survey questionnaire responses, this chapter will discuss some underlying factors, which will determine the impact of these shocks. The results of these questionnaires are summarized in an appendix.

2. To summarize, Madagascar’s performance has been relatively weak with respect to some qualitative indicators, and the signals provided by micro-based indicators are mixed in that they indicate competitive wages but also relatively low productivity and high nonlabor costs for certain exports. The analysis of export performance indicates that the relatively strong aggregate export performance masks some vulnerabilities. Exports from Madagascar have indeed increased as a share of GDP from about 14 percent in 1991 to about 20 percent in 2004. Since 2000, the increase in nontraditional exports, especially from the EPZ which comprise mostly of manufacturing goods, has been significant. However, diversity in the value of products exported and in terms of partner countries appears to have declined, and exports have become more concentrated in a few sectors and products. Moreover, a large part of the strength appears to have been driven by changes in external trade policies such as the preferential trade treatments, including that with the United States. The possible termination of such treatment in the coming years presents some significant challenges as well as some opportunities for Madagascar.

B. Some Indicators of Competitiveness

3. External competitiveness has several facets that may not be adequately captured by the consumer price index (CPI)-based real effective exchange rate. These variables include nominal wages, costs of doing business, including infrastructure costs, and the overall quality of the business environment. These are discussed further below.

4. Competitiveness in Madagascar owing to low nominal wages is partly eroded by low productivity and high nonlabor costs. Nominal wages are low in Madagascar relative to several low-income countries. International Labor Organization (ILO) data on wages for example indicates that the average monthly wage in Madagascar is low relative to China, Kenya, and Mauritius (Figure 1).

Chapter III. Figure 1.Monthly Manufacturing Wages

(In U.S. dollars)

Sources: International Labor Organization data and staff estimates.

These are competitor countries for textile exports, but it is unclear if this advantage continues to prevail on a productivity adjusted basis. Aggregate productivity data are not available to examine this issue. Sector-specific information on productivity, wages, and nonwage costs provides useful insight. In this regard, in terms of the clothing sector (which now represents a significant share of Madagascar’s exports, as will be shown below), nominal wages are low and competitive in Madagascar relative to several countries (Table 1). Wages in Madagascar, for example, are less than half those in China. However, the labor cost per shirt is not correspondingly lower, reflecting lower productivity (for example, as measured by the number of shirts per day produced by a worker) or the lower number of working hours per week. Moreover, nonwage costs are significantly higher and substantially reduce the competitive wage cost advantage. This suggests that Madagascar will face strong competition from exporting countries in the clothing and textiles sector in the near future.

Chapter III. Table 1.Some Wage and Non-Wage Competitiveness Indicators
ChinaIndiaKenyaLesothoSri LankaMaurititiusMadagascar
Machine operator wage$150$75$65$95$65
Labor cost per shirt$0.29$0.17$0.18$0.19$0.16
Daily shirts productivity per worker2216151815
Working hrs per week45454540
Shipping costs of clothes
To Paris$400$675$820
To New York$1,000$1,395$1,350
Other logistic costs$30$40$59
Order to arrival time15 days35 days35 days
Shipping to arrival time2 days4 days7 days
Shipping time to US45 days30 days27 days47 days
Electicity rates (per kwh)
Water rates0.430.360.290.34
Industrial rents2–3.31.8–2.23.5–11

Source: Cadot and Nasir (2001), Madagascar, Diagnostic Trade Integration Study

5. Some qualitative indicators of Madagascar’s competitiveness are not very positive. While the real effective exchange rate is a sound measure of macroeconomic aspects of competitiveness, it does not capture some other critical elements of competitiveness are conducive to enhancing investment, exports, and economic growth. These include such factors as institutions, technology, rule of law, and corruption, which are important aspects of the cost of doing business. The Growth Competitiveness Index (GCI) and the Business Competitiveness Index (BCI) computed by the World Economic Forum capture some of these aspects that could have an importantlinfluence on foreign direct investment and associated exports.

6. The World Economic Forum competitiveness report ranks Madagascar low in the GCI. The Growth Competitiveness Index (Table 2) is composed of three pillars which are considered to be critical to economic growth: the quality of the macroeconomic environment, the state of the country’s public institutions, and country’s technological readiness.12 Madagascar ranks lowest amongst its Comesa partners except for Ethiopia.

Chapter III. Table 2.Growth Competitiveness Index (GCI) 2004 Comparison with Comesa Partners(Among 104 countries)
TechnologyPublic InstitutionsMacroeconomic Environment
Source: World Economic Forum

7. The Business Competitiveness Index (BCI) (Table 3) also published by the World Economic Forum serves as a complement to the more macroeconomic approach of the GCI. Here again Madagascar scores a poor ranking.13

Chapter III. Table 3.Business Competitiveness Index (BCI) 2004 Comparison with Comesa Partners(Among 104 countries)
BCI RankingCompany OperationsQuality of Business
& StrategyEnvironment
Source: World Economic Forum

C. Export Performance in Madagascar

8. The performance of exports in aggregate has generally been strong. Since 1990, aggregate exports have shown fairly robust growth, despite some disruptive factors associated with the exchange rate liberalization (1994) and the political crises (2002) (Table 4). As a percentage of GDP exports have increased since 1990 from around 14 percent to over 20 percent of GDP in 2004. At sector level, the strength in aggregate exports has been mainly driven by manufacturing sectors including the EPZ.

Chapter III. Table 4.Madagascar Structure of Exports 1/
Average annual growth ratesPercent of total exports
Merchandise exports8.713.910.4100.0100.0100.0
Of which,
Traditional exports7.
Non-traditional Exports16.123.522.246.049.370.5
Export processing Zone68.131.446.78.520.250.2
Other (inc.reexports)
Notes: Traditional exports are vanilla, cloves, pepper and coffeeNon-traditional exports: cotton cloth, pertroleum products, exports from EPZs and other.

9. While growth in aggregate exports was strong, performance in traditional exports was uneven. The reasons for the weak performance in traditional (agricultural) exports particularly from 1996 to 2000 (Table 4), are not entirely clear. Some of the weaknesses in the growth of the value of traditional agricultural exports for the period as a whole may be due to the long term decline in many agricultural commodity prices (vanilla being an exception) that are exported from Madagascar but volumes have also been weak. The value of coffee exports was weak for much of this period reflecting weak world prices but could also reflect a volume response to long term decline in coffee prices. Exports of cloves were also weak. The high growth rates of over 30 percent registered in later years in traditional exports were in large part due to increases in the price of vanilla. The volume increases in vanilla were variable and reflecting volatile production conditions due to natural factors. Indeed for most of the period Madagascar was a major supplier of vanilla and viewed as a price maker in the world markets.

10. Madagascar’s exports have in large part been driven by manufacturing exports from the EPZs. The strong growth in this sector is a positive sign of competitiveness but special factors were also at play (see below). In the initial years, the extremely high growth rates represented increases from a very small base when EPZ exports represented a small but growing share of total exports. The EPZ sector has continued to grow rapidly with important contributions from the garment sector, such that exports from EPZs now represents almost half of the value of total exports (Table 4).

11. Export performance at the product level confirms the uneven performance at the sector level, and points to weak export performance of certain products. Export performance in aggregate can often be better assessed by an examination of the products being exported. At the product level, the value of exports of many major products (shellfish, vanilla, nonmetallic minerals, and clothing and garments) in Madagascar grew robustly at over 10 percent on an annual average basis since 1990 (Table 5) and indeed exports of these products have been particularly strong since the mid-nineties despite the appreciating real effective exchange rate at that time. Exceptions have been the textiles and yarns category (which actually declined), crude materials, and to a lesser extent vegetables and fruits. Weaker performance in these categories, which include wood products, may have been due to supply constraints or structural factors. Note that domestic agricultural production was weak for much of the period. The decline in the exports of textiles and yarns could in part be attributed to increased domestic use of these products given the increase in clothing exports, although structural factors (viz. weak performance of state owned enterprises which manufactured and exported these products) may also have played a role.

Chapter III. Table 5.Selected Products: Export Performance(In millions of U.S. dollars)
Prod. Code1990199520002003Avg. Ann. Growth Rate
05Vegetables and fruit14263.829888.719382.720180.92.7
07524Cloves, whole/clove/stem19992.111269.945864.328822.02.9
2Crude mater.ex food/fuel34020.645511.742721.537679.30.8
65Textile yarn/fabric/art.13333.217849.496013.010136.4-2.1
66Non-metal mineral manuf.3975.44175.717422.214234.410.3
Total exports292422.7350420.9817262.0766015.5

12. A result of these developments is greater concentration in the value of exports, particularly in clothing. It is clear that increases in clothing have been driving aggregate exports and this product now accounts for a significant share of the exports. On the other hand, fruits and vegetables, textiles and yarns, crude materials and nonmetallic mineral products which represented more than 20 percent of total exports in 1990, currently accounts only for a little over 10 percent of total exports (Table 6).

Chapter III. Table 6.Exports of Selected Products
05Vegetables and fruit4.97.58.514.
07524Cloves, whole/clove/stem6.810.
2Crude mater.ex food/fuel11.617.913.
65Textile yarn/fabric/art.
66Non-metal mineral manuf.
Source: ComtradeA=share of total exportsB=share of the selected exports

13. The share of exports to a few partner countries has remained high(Table 7 and 8). The tables below present the major export products noted above classified by importing countries for the years 2003 and 1990. In 2003, the United States and France accounted for about 68 percent of Madagascar’s exports in the selected products, while these countries accounted for less than 50 percent of the same products in 1990. This shift may in part reflect shifts in demand conditions in partner countries. For example, exporters of shrimps indicate that the shift of shrimp exports to Europe (France in particular) reflected in part higher demand in France for the special variety of shrimps exports from Madagascar. Another important reason for the increased partner country concentration is the spectacular increase in the exports of garments to the United States.

Chapter III. Table 7.Madagascar: Geographical Distribution of Exports 2003(In percent of relevant export category)
07524Cloves, whole/clove/stem3.
2Crude mater.ex food/fuel4.
65Textile yarn/fabric0.
66Non-metal mineral manuf.7.711.
Share of importing country30.738.
Chapter III. Table 8.Madagascar: Geographical Distribution of Exports 1990.(In percent of relevant export category)
05Vegetables and fruit0.
07524Cloves, whole/clove/stem1.
2Crude mater.ex food/fuel7.734.
65Textile yarn/fabric/art.2.212.428.
66Non-metal mineral manuf.2.85.440.
Share of importing country22.525.89.910.

14. Exports of traditional agricultural products have been relatively weak. Madagascar has gained market share in one product category (i.e., shrimp), but lost market share in terms of its more traditional exports. Madagascar has lost world market share in cloves and, to a lesser extent, in vanilla. Some of the latter may have been due to a switch to lower-quality vanilla by the final consumer and purchasers of vanilla. On the other hand, Madagascar has gained a significant market share in shellfish especially in OECD markets (Table 9).

Chapter III. Table 9.World Market Shares(vanilla, cloves, shellfish)
World imports100.0100.0100.0World imports100.0100.0100.0OECD imports100.0100.0100.0
o/w Madagascar53.860.253.5o/w Madagascar57.066.039.5o/w Madagascar9.617.720.1
o/w Indonesia14.48.219.7o/w Indonesia1.15.824.4o/w Mozambique10.013.99.0
o/w Uganda5.82.60.1o/w Tanzania12.28.19.2o/w Mauritania29.317.119.0
o/w Comoros5.27.04.2o/w Comoros1.93.94.3o/w Senegal10.312.515.6

15. Despite increasing concentration in garments, Madagascar’s export base continues to be diverse. Measures of concentration, for example, a Herfindahl-Hirschman index confirms that there has been an increase in concentration in terms of products and country partners, but also that there is diversity in terms of the export base.14 Diversity is also indicated in terms of the numberof products exported and this presents a good base for future growth. For example, the number of products exported from Madagascar has remained large and stable (Table 10). To illustrate, there have been no major changes with respect to the number of products exported (measured at the 3 digit SITC product classification level for those which are greater than US$1 million). At this level of classification, the number of types of products exported has ranged between 25 to 33 over the years with no sharp declines over the period (see Table 10). The product base also remains relatively dynamic. Some products such as live animals are no longer exported but new industries and exports have developed, e.g., watches.

Chapter III. Table 10.Product Diversification in Madagascar(Products with exports greater than US$1 million)
0011Live animals except fish2047.31Live animals except fish1120.81Live animals except fish2847.4
0112Beef, fresh/chilld/frozn8809.0
1034Fish, live/frsh/chld/froz1905.52Fish, live/frsh/chld/froz3689.4
2036Crustaceans molluscs etc125931.33Crustaceans molluscs etc98198.53Crustaceans molluscs etc55046.22Crustaceans molluscs etc39387.9
3037Fish/shellfish, prep/pres41518.54Fish/shellfish, prep/pres20482.8
044Cereals/cereal preparatn1291.53Cereals/cereal preparatn4651.5
4054Vegetables, frsh/chld/frz7519.25Vegetables, frsh/chld/frz3801.55Vegetables, frsh/chld/frz9058.74Vegetables, frsh/chld/frz6311.6
5056Veg root/tuber prep/pres1143.86Veg root/tuber prep/pres1131.76Veg root/tuber prep/pres1879.5
6057Fruit/nuts, fresh/dried2009.97Fruit/nuts, fresh/dried2124.97Fruit/nuts, fresh/dried9103.55Fruit/nuts, fresh/dried4345.3
7058Fruit presvd/fruit preps9501.38Fruit presvd/fruit preps12294.08Fruit presvd/fruit preps9832.36Fruit presvd/fruit preps3438.9
9071Coffee/coffee substitute4128.210Sugar/mollasses/honey6463.910Coffee/coffee substitute82785.68Coffee/coffee substitute38896.0
1221Hide/skin/fur, raw4116.213Hide/skin/fur, raw2229.413Hide/skin/fur, raw1844.3
1324Cork and wood4680.814Cork and wood7937.414Cork and wood3167.912Cork and wood1304.2
1426Textile fibres7381.315Textile fibres6264.115Textile fibres6367.413Textile fibres5217.5
1527Crude fertilizer/mineral7790.416Crude fertilizer/mineral7295.316Crude fertilizer/mineral11579.214Crude fertilizer/mineral17437.5
1628Metal ores/metal scrap2005.717Metal ores/metal scrap7189.717Metal ores/metal scrap12720.715Metal ores/metal scrap4970.4
1729Crude anim/veg mater nes11338.418Crude anim/veg mater nes11609.818Crude anim/veg mater nes9643.616Crude anim/veg mater nes4033.1
1833Petroleum and products2703.819Petroleum and products26920.219Petroleum and products5204.717Petroleum and products1503.3
5821Plastics non-primry form1829.1
6122Leather manufactures1222.821Leather manufactures1274.819Leather manufactures1725.1
2063Cork/wood manufactures1418.723Cork/wood manufactures1619.122Cork/wood manufactures2326.9
2265Textile yarn/fabric/art.10136.425Textile yarn/fabric/art.96013.023Textile yarn/fabric/art.17849.420Textile yarn/fabric/art.13333.2
2366Non-metal mineral manuf.14234.426Non-metal mineral manuf.17422.224Non-metal mineral manuf.4175.721Non-metal mineral manuf.3975.4
2468Non-ferrous metals1586.7
2574Industrial equipment nes1030.9
7527Office/dat proc machines2510.122Office/dat proc machines1031.4
7728Electrical equipment1931.8
8730Scientific/etc instrumnt1502.0
2788Photographic equ/clocks5472.231Photographic equ/clocks3921.0
2889Misc manufactures nes10732.532Misc manufactures nes25946.826Misc manufactures nes7367.824Misc manufactures nes4419.7
299Commodities nes4104.333UN Special Code1935.427UN Special Code6030.625UN Special Code2332.8

16. The above developments, that is, increased concentration of products in garments within a broad and diverse export base, present challenges and opportunities. The export base has remained diverse but export performance has been uneven due to weak performance in some sectors with spectacular performance in others, particularly in garments. Consequently, exports in terms of value have become concentrated with a high share of garment exports. This is not in itself an adverse development. To the extent export growth of the high growth sector is sustainable, it points to specialization and a move towards areas of comparative advantage reflecting the underlying competitive conditions for Madagascar’s exports. However, it poses risks when the increases in exports are due in part to preferential arrangements of partner countries, especially when such arrangements are due to expire, as well as when they are due in part to domestic preferential tax treatments as evidenced by EPZs. These aspects of Madagascar’s export growth in the context of EPZs and regional preferential trading arrangements are examined below.

17. EPZs show a wide range of products, but textiles and clothing have been dominant. EPZs were introduced on the basis of a special regime in 1990 following the decision to encourage an export-led strategy.15 Exports from EPZs currently represent about 50 percent of total exports. A vast majority of the EPZ firms from the start of the EPZ regime have been concentrated in textiles, in terms of the number of firms, investment and employment (Table 11). As at end-2004, more than half the firms operating in the EPZs and accounting for about 80 percent of the employment were in the clothing and textile sector.

Chapter III. Table 11.Enterprises Operating in EPZs
Total as of 2004Share
(In mill.fmg)
Agro-food industry63.415.3
Leather products21.11
Wood products31.72.6
Information services126.81.7
Mining products31.71.9
Textile related products2046011.40.40.9
Source: Export Processing Zones Association and Partners.

18. Despite a favorable tax treatment, products other than textiles and shellfish have not shown sustained or strong growth in the EPZ sector. While EPZs operate in a wide range of products, growth of exports in the EPZ sector has been concentrated in shellfish, and in textiles and clothing. A range of other products are exported from this sector but they continue to be small in total values. Some of these sectors are itemized in the table below (Table 12). The products other than those itemized (shown as “other” in Table 12 below) represent a range of exported products exported often in very small quantities. In addition to some sectors indicated in the table, the “other” sector comprises of sectors that have been highly variable with no sustained export performance. In the absence of any systematic pattern across time, it is not clear whether this development is related to exchange rate competitiveness or some other structural factors.

Chapter III. Table 12.Exports from the Export Processing Zones (EPZs): By Product(By Product)
ProductsValue in Billions of FMGShare of total EPZ exports
Shell fish45.421.714.2251.6386.
Other meat and fish12141.7137.7184.3194.725.
Other clothing124.5208.6889.5940.543126.730.435.729.938.326.7
Other textile articles1.
Electrical products00.611.312.73.300.
Photographic items lens etc3.44.815138.
Watches and clocks8.58.520.128.439.
Toys and sporting goods7.16.317.813.748.
Source: INSTAT

19. Textiles and clothing, which were from the start in the early 1990s a significant share of the EPZ exports almost doubled in value in 2000 and growth has continued since then, except for the sharp drop in 2002 due to the political crises. This jump in 2000 was most likely related to partial relocation of the activities of textile firms from quota restricted countries and was buttressed in later years by the special features of AGOA. These aspects or special factors which facilitated the growth of exports are examined further below.

Textiles exports and preferential treatment

20. Madagascar enjoys a number of preferential treatment agreements. With respect to Europe it is a beneficiary of the Cotonou Agreement and is currently also eligible for EU’s Everything but Arms Initiative launched in 2001. Madagascar was declared AGOA eligible in October 2000 and was declared eligible for the apparel provision in March 2001, and it is eligible for the “third party fabric provision” (AGOA III) under which exports of garments made from imported fabrics from any country to the United States get preferred status.

21. Madagascar was quick to take advantage of the AGOA provisions. The garment industry took off in 2000 and became the second largest AGOA exporter after Lesotho. Madagascar’s utilization rate of the AGOA provisions was fast. However it suffered a major setback in 2002 when exports declined due to the political crises. In 2003, Madagascar appears to gained some ground and regained market share. Madagascar’s market share of AGOA exports even as at November 2004 was still under the peak in 2001 (Table 13). The quick recovery is a positive development and consistent with the earlier indicators that point to Madagascar’s competitiveness.16

Chapter III. Table 13.AGOA Imports(In millions of U.S. dollars)
200120022003to Nov 03to Nov 04
Total under “third party provision”264.4596.0914.3827.21199.0
Of which, (percent share )
Source: United States Commerce Dept. website on AGOA Trade Statistics

22. The success story with respect to garment exports under AGOA coexists with an element of vulnerability. A very high proportion of clothing and garments exports to the United States is under AGOA and under the third party provision which is due to expire in 2007 (Table 14).

Chapter III. Table 14.United States: Clothing Imports from Madagascar(In millions of U.S. dollars)
Of which,
Third Party Provision7269172
Source: COMTRADE, United States Commerce Dept. website on AGOA Trade Statistics

23. The high share of AGOA exports of garments under the third party provision has the potential of substantial negative impact on exports due to the upcoming AGOA III shock i.e., when the third party provision is expected to terminate in 2007. The extent of the impact of the termination of this provision will depend on whether the industry can continue to export at a competitive price when the garments made with fabric imported from any country will not longer qualify for preferential treatment. The negative impact would of course be mitigated if the companies switch to and are successful in exporting without the benefit of this provision. This would be a challenge without significant productivity enhancements and reductions in costs, particularly nonwage costs. The impact will also depend on the extent of backward integration that can be quickly developed in the sector. This is because under AGO A I, which continues until 2015, the preferential treatment will extend to exports of clothing that use yarn or fabric produced domestically or in the Sub-Saharan African (SSA) countries.

24. Interviews with exporters presented a mixed picture. A few indicated that they would continue to export using regional fabric but more have noted that they cannot be competitive as regional fabric costs are higher and the lead times are long for obtaining regional fabric, which is in short supply. The extent of the impact would also depend on the ability of Madagascar firms to switch to new higher value added or niche markets in terms of garments and also the ability to switch to other markets such as in Europe. With respect to the latter, exporters were of the view that, while they do have a niche market in terms of some value added products, they also face strong competition from low cost exporters, particularly China (See Appendix I).

25. It is also noteworthy that despite the preferential treatment accorded to Madagascar and that continues under the Cotonou Agreement, exports to Europe have been decelerating. Part of this deceleration could reflect the loss of markets due to the termination of the ATC. Indeed, the deceleration in exports has been occurring since 2001, the year that marks the beginning of the Phase III of the ATC, when quotas were being gradually removed (Table 15).

Chapter III. Table 15.OECD Country Imports of Clothing from Madagascar(In thousands of U.S. dollars)
Of which,
(Share of tot. imports)

26. The extent of the ATC shock is particularly difficult to quantify for Madagascar because of the impact of the 2002 political crisis. Madagascar is vulnerable to the expiry of the ATC given that about 87 percent of its clothing exports have been to the restricted markets. Industry surveys indicate that several African countries, including Madagascar, will experience a decline in exports to the U.S. and the EU. While Madagascar is competitive in terms of wages, it is disadvantaged in terms of other indicators such as transportation costs. In the textile market, factors such as speed of delivery are increasing in importance. More precise quantification of the impact for Madagascar is difficult but the weak performance in several EU countries noted above could be an indication of the impact of the expiry of the ATC. However, a complicating factor in assessing the ATC impact in Madagascar is the political crisis in 2002 which resulted in a drop in production. Industry experts have noted that several large buyers left Madagascar at this time and have yet to return. Thus, it would not be appropriate to attribute the entire deceleration or even a large part of the deceleration between 2001 and 2003 to the ATC shock and as being all due to lower competitiveness. Indeed, in 2003 exports picked up outside the United States and even in nonquota constrained countries such as Japan.

27. Although textile exports remained strong in 2004, preliminary data suggests that the weakness in Europe has continued in 2004. While detailed information by importing country is not available for 2004, preliminary data suggest that garment exports have registered strong growth particularly to the United States. Many exporters that participated in the staff survey and in interviews (see Appendix for summary of results), noted that exports were strong in 2004. They noted that 2005 and 2006 would be more indicative of the effects of the termination of the ATC and the AGOA third party provision termination, respectively.

28. Interviews with exporters and the results of a small sample survey show optimism in the near term, but longer term prospects are uncertain (appendix attached). Staff conducted interviews and a survey based on a questionnaire with a number of exporters of garments and textiles. The purpose was to gauge the view of the industry on the impact of the ATC termination and the upcoming termination of AGOA III. Another objective was to gain a better understanding of the obstacles for future export growth. Based on orders received in the first half of 2005, a little under half of the companies expected sales in 2005 to be higher than in 2004. On the whole, exporters did not expect a sharp decline in exports of clothing in 2005 but were less optimistic about the following years as the competition from low cost producers intensifies and the termination of AGOA III comes into effect. Exporters were concerned that the Madagascar’s competitiveness due to low wages was being eroded due to increasing nonwage costs. In this regard, they cited infrastructure, communication, and electricity costs as factors which limit competitiveness.

D. Concluding Comments

29. Madagascar’s strong export performance to date has become vulnerable. Madagascar’s export performance has been strong, particularly since 2000 and although the export base continues to be diverse in terms of the number of different products exported, the value of exports has become more concentrated over time, in terms of partner countries and products. Exports of clothing to the United States, particularly under AGOA III, now represent a fairly large share of total exports. At the same time, there are indications that Madagascar’s exports especially to Europe and France in particular (Madagascar’s largest market in Europe) are being impacted by termination of the ATC. Against this background, policy measures assume greater importance and a judicious mix of macroeconomic and structural policies will be key. In the near term, short term impediments to exports that increase costs, such as delays in customs clearance procedures, could be removed. Moreover, market participants in the clothing industry could also lay the ground work for mitigating the impact of the termination of AGOA III in 2007. AGOA III was intended to provide space for the SSA countries to develop a better backward and forward integration of the industry to increase efficiency and competitiveness of the sector. Finally, while the recent exchange rate depreciation in 2004 has improved competitiveness significantly, the authorities need to be more cognizant that this could be eroded in Madagascar by high nonwage costs and because of weak institutions. Creating an environment that favors investment will be key. Reforms will need to be geared towards improving governance and transparency of institutions.

Chapter III. Appendix I: Results of the Survey on Export Processing Zones (EPZs) on the Outlook for Garment Exports

Staff conducted interviews and a survey based on a questionnaire with a number of exporters of garments and textiles17. This appendix summarizes the results of these interviews and survey responses. This approach was used to better understand the current market conditions in the garment sector and to the main obstacles for its improved performance. The findings are based on responses from 20 companies that represent about 40 percent of total employment.

The textile market has a relatively long history in Madagascar. First, it is made up of a number of firms which have been operating in the industry before the emergence of special trade treatments such as AGO A; second, the industry is fairly diversified in both the U.S. and the European markets and third, its exports comprise basic garments and knitwear as well as exports, albeit limited, of somewhat higher value added items and some exports to “niche” markets, particularly to Europe. The survey covered companies in all of these sectors and included large (more than 1,000 employees), medium sized companies (between 500 and 1,000 employees) and smaller companies with less than 500 employees.

Sales and orders: 2004, 2005, and longer term

Almost all of the respondents reported that sales in 2004 were higher than in the earlier year, a result which is line with the preliminary data for the sector based on the latest customs data. Some of the respondents noted that this was mostly due to good performance in the first half of 2004. In any event, the good sales performance in 2004 is encouraging, as it represents a period in which the effect of the termination of the Agreement on Textiles and Clothing (ATC) would have impacted the sector. This suggests that, notwithstanding the effects of the termination of the ATC, exporters were continuing to, at least in part, hold on to their market share.

Based on orders received in the first half of 2005, a little under half of the companies expected sales in 2005 to be higher than in 2004. Most of the others indicated that they did not expect the strong performance of 2004 to continue and that sales would be flat, and a few expected sales to be lower. There is indication of a further slowing that is yet to come, as most exporters expected the competition due to the lifting of quotas (i.e., the termination of the ATC) to intensify in the coming years.

Indeed, the general slowing in the market is underscored by the fact that the majority of respondents (includingthose that were experiencing higher sales orders ) were operating at less than full capacity. Some large companies that specialized in large volumes of basic garments noted that they need high capacity utilization (“about 85 percent”) to remain profitable. A risk therefore exists that if orders do not pick up, there may be no growth or very modest growth in the EPZ garment sector for 2005 as a whole and under these circumstances, some firms may have to exit the industry. Interestingly, most of those that had expectations for higher sales for 2005 were more diversified in terms of operating in both Europe and the U.S. or had established strategies to diversify into the European markets.

The market structure in Madagascar with a number of firms exporting to both Europe and the U.S. and some firms exporting into niche and somewhat higher end-markets may serve to mitigates the extent of the ATC shock in the near term and result in the adjustments being a more drawn out process. There was no noticeable difference between the nature of the responses between large and medium size firms with respect to sales expectations for 2005.

The actual and expected loss in orders to date was attributed by most respondents to China. Whether this is based on fact or perception is unclear, but most probably this is based on the number of bids for orders which were lost to China.18 Bangladesh, India, and Vietnam were also mentioned albeit less frequently. One exporter noted a loss of market to Lesotho, which has been specializing in jeans and increasingly relying on domestic content due to some investment from Taiwanese firms. This could reduce lead times considerably a valuable feature for product market competitiveness.

China was the supplier of raw materials to a majority of firms and the sole supplier to a few respondents which were operating only under the AGOA regime. Apart from these firms, the supply of raw material was drawn from Mauritius, other Asian countries (India) and domestic sources. That some firms operate at least in part using domestic textiles is encouraging. This would allow firms to continue to export to the US under the original AGOA which will continue until 2015 and which allows the use of regional or domestic fabric. On the other hand, AGOA III, under which the fabric can be supplied by any country, expires in 2007. One producer who exports only to the U.S. under AGOA III has indicated its intention to continue production along these lines although concerns were expressed about the quality and cost of domestic textiles and the lead time taken by the few domestic firms to deliver the raw material.

Almost all of the respondents were not very optimistic about sales beyond 2005 and in the medium term.

Factors for locating in Madagascar

Low wages and the availability of tax exemptions were cited most frequently as factors for locating in Madagascar. Interestingly, lack of external demand was cited very frequently as an obstacle to immediate growth in exports. Other factors noted as obstacles to higher export performance were infrastructure costs, communication and electricity costs, and exchange rate volatility. The closing down of tax exemptions for EPZs was cited as the most important factor which would trigger relocation.

Other information

Textiles and clothing represent a price sensitive and highly competitive sector, although there is room for some niche and high quality markets which are less price sensitive. But in the current conjuncture, respondents noted that price competition was fierce and that all buyers were becoming very sensitive to prices. Madagascar is competitive in terms of wages and the quality of labor is also good or easily trained. But exporters noted that labor laws (that are more stringent relative to other countries including China) regarding the number of hours that workers can work without overtime pay, cuts into the wage competitiveness. Other costs were also going up and reaching the point where they erode the wage competitiveness. These were rents, electricity, port charges, and other “hidden costs”. The quality of service with respect to electricity and port and transportation was also cited as being poor. In the last year, these factors and weak prices for output had cut into profits of firms, making their continued operations vulnerable. In terms of relative competitiveness, costs could on the whole be lower in China mainly because of lower non-wage costs.

Respondents were mixed about the prospects beyond 2007 when AGOA III terminates. One large firm said that the large firms could “survive” the termination of ATC impact, but not the expiry of AGOA III as many companies located plants to Madagascar precisely to take advantage of this provision. On the other hand, one other large firm noted its intention to continue after AGOA III, using regional or domestic fabric. It is unclear however whether the supply of regional and domestic fabric will be adequate or cost effective.

Madagascar: Summary of the Malagasy Tax System(General Tax Code)Including the 2005 Budget
TaxType of TaxDeductions and ExemptionsTax RateTax Reporting
Corporate profit tax (IBS)Article 01.01.02Article 01.01.03Article 01.01.16Article 01.01.17
[Impôt sur les bénéfices des Sociétés—IBS] (General Budget)Annual tax on the full range of profits earned by companies headquartered in Madagascar, as well as income generated by the possession of assets or the practice of a gainful activity in Madagascar.• Income earned by partnerships, religious missions and churches, or cultural associations is exempt from tax. However, the tax is due by their establishments engaged in sales or provision of services.•Calculation of depreciation of capital goods (residential buildings, work sites, premises used for business) using the diminishing balance method

- Rate: 30 percent of the residual balance of qualifying property, regardless of its acquisition date

- Depreciation period: FY of acquisition less one full year (even if acquired in current FY). Reason for diminishing balance depreciation: investment incentive

• Prior to May 1 N (calendar year)

• Prior to November 1 N (June 30);

• Within the four months following the end of the fiscal period (plus 50 percent).
• Income earned by cooperatives and their unions.•Deficit may be carried forward over a period of 3 years

For foreign companies, the application of the 30-percent tax rate is conditional upon the simultaneous deposit of the report and statement of income from a government contract or contract with local businesses.
• Interest paid by the Caisse d’épargne de Madagascar.
• Capital gains on sales of real estate.
• Income and capital gains deriving from the sales of stocks and shares held by SCRs.Article 01.01.07 and 01.01.01: Deduction for investment (provisions revoked owing to overlap with diminishing balance depreciation)On collection:
• Income earned by nonprofit organizations or associations exclusively engaged in the promotion of SMEsArticle 01.01.16 (taxable profit rounded down to the nearest lower hundredth of an Ariary)Deduction for investment
• IBS at 30 percent for all companiesArticle 20.01.41
IBS plus 50 percent for companies not headquartered in MadagascarEstimated payments (A) Payable on a semiannual basis Article 20.01.42.
IBS at 30 percent for foreign companies operating under government contracts or contracts with local enterprises( B) Payable at customs (“acompte au cordon douanier”):
• IBS at 10 percent for rental income from developed and undeveloped real property owned by nonprofit agencies and associations that do not meet the conditions stated in paragraphs 3 and 6 of Article 01.01.03• None if registered;
• 5 percent (with no ceiling) if not registered.
Value: raw materials and consumer goods and products.
Article 01.01.06 bis
• Absorbed company taxed on actual earnings (from its activities) at the time of the merger.
• Capital gains on fixed assets and provisions no longer needed, which are usually taxable for the absorbed company shall be taxable for the acquiring company, but may be staggered over five years.
• To prevent abuses in the application of this text, if the acquiring company is sold within five years of the merger, the value of the assets of the absorbed company will be taken into account in the windfall resulting from the sale of assets.
Taxable minimum:
Ar 100,000 + 5 per milll of turnover: agriculture, crafts, industry, mining, hotel trade, tourism, or transportation.
Ar 320,000 + 5 per milll of turnover for the rest.
Enterprises exempt from IBS and from this minimum:
• New companies engaged in industry, crafts, agriculture, mining, transportation, tourism, hotel trade, if they run deficits for the first two fiscal years and 50 percent of the IBS and the taxable minimum for the third year from the date on which they were ultimately established.
TAX ON CAPITAL INCOME [Impôts sur les revenus de capitaux mobiliers—IRCM] (General Budget)Article 01.04.01Article 01.04.25 et seq.Article 01.04.07Art. 01.04.10:
Occasional tax collected on the distribution of profits.• Amortization and repayment of principal realized upon liquidation of real estate assets; and• 20 percent for corporations.Repealed
• 20 percent for individuals–the IRCM is in discharge of the IRNS on capital incomeArticle 01.04.15:
• Loans or obligations of cooperatives, central mutual credit unions.• 15 percent on interest paid on cash or cash security deposits (# interest on demand deposits) held in corporate funds by individuals or non-profit entities.- Before April 30 N or October 31. Distribution of dividends from the previous semiannual period.
Article 01.04.32 Interest on borrowing:
• Contracted for investment with external financial institutions.
TAX ON TRANSFERS ABROAD [Taxe forfaitaire sur les transferts] (General Budget)Article 01.05.01 and 01.05.02Article 01.05.03Article 01.05.05Withheld at source.
Tax payable on payments or transfers for the benefit of individuals located abroad and not taxed in Madagascar for purposes either of the income tax [Impôts sur le revenu] or the professional tax [Taxe professionnelle].• Amounts received in connection with scholarships;10 percent.
• Sale price of real or personal property;
Products already liable for the IRCM;
• Repayment of principal on loans;
• Standard price for purchases of imported merchandise;
• Interest paid by the Malagasy Treasury or the Central Bank; and
• Interest on borrowing (01.04.32)
REAL ESTATE CAPITAL GAINS TAX [Impôt sur la plus-value immobilière—IPVI] (General Budget)Article 02.12.02Article 02.12.03Article 02.12.07
Taxed assessed on transfers (for valuable consideration) of real estate assets or claims.Capital gains on sales of real estate included in current inventories [stock en cours] by Société immobilière.Capital gains trancheRate
• Ar 0.20–2,000,0005 percent
• Ar 2,000,000.20–4,000,000 percent10
• Ar 4,000,000.20–6,000,000 percent15
• Ar 6,000,000.20–8,000,000 percent20
• Ar 8,000,000 percent25
PERSONAL WAGE INCOME TAX [Impôt sur les revenus des personnes physiques—IRSA] (General Budget)Article 03.01.07Article 01.03.03Article 03.01.16Article 01.03.12
• Wage earners Tax on wages, compensation, and fringe benefits, withheld at source.• Permanent or temporary allowances for damage repair;Scale AWithheld and paid prior to the 15th of the following month.
• Allowances for dependents;• Up to Ar 50,000: Ar 300
• Compensation associated with honorary awards;Income brackets of:
• Ar 50,000.20–100,0005 percentIf amount withheld is less than Ar 5,000 or if wages are paid on a quarterly basis, tax payments may be cumulated on a quarterly basis.
• Ar 100,000.20–300,00015 percent
Article 01.03.08• Pay for citizens called to serve in the armed forces in a military or civilian capacity;• > Ar 300,00030 percent
Taxation of in kind benefits
• Ar 10,000/month/vehicle rated = 10 HP;• Civilian or military retirement pensions where the amount of the pension is determined by length of service record; and• Minimum
• Ar 16,000/month/vehicle rated > 10 HP; and• Ar 300 if ≤ Ar 100,000Withheld and paid within the first 15 days following the end of the quarter.
• 50 percent of the rent or rental value.• Ar 2,500 if > Ar 100,000
Maximum: 25 percent of compensation established in cash:• Compensation earned by majority managers-partners in limited liability companies (SARLs).• Dependent credit
Article 01.03.19
• Ar 200/month without exceeding Ar 2,400/year.
• 2 percent of compensation established in cash / domestic; and
• 3 percent for other benefits.
NONWAGE PERSONAL INCOME TAX [IRNS] (General Budget)Article 01.02.02Article 01.02.03Article 01.02.12B5
• Sole proprietorship;• Interest on saved earnings;Taxable base.Article 01.02.17
• Income earned from engaging in an independent profession;• Interest on Treasury bills and longterm government bonds [bons d’équipement];Nondeductibility of deficits incurred in connection with commercial, hotel related, tourism related, mining or transport deficits, or with land income or investment income. Deficit may be carried forward for a period of three years.Based on actuals (prior to May 1) N Prior to November 1, N, Four months from end of fiscal period plus 50 percent.
• Corporate income, not liable for IBS tax;• Interest paid by the Treasury on domestic borrowing;
• Remuneration of SARL majority managers/partners;• Interest on cash certificates [bons de caisse];Article 01.02.36:Tax scaleArticle 20.01.41
• Profits of firms engaged in industrial or commercial, crafts-related, tourism-related, or service-providing activities, or farms;• Capital gains earned on selling the property;Based on actuals [régime réel] and micro and small enterprisesAn advance payment [acompte provisionnel] is due every bimonthly period.
• Capital gains earned real estate sale;• Up to Ar 200,000: 2,000 Income brackets of:
• Income from land; and• Net income from developed real estate occupied by the owner as a principal residence.• Ar 200,000.20–500,0005 percentArticle 20.01.42
• Ar 500,000.20–4,000,00015 percentBusinesses registered for tax purposes are exempted from the advance payment at customs but unregistered businesses are taxed at
• Over Ar 4,000,00030 percent
• 5 per mill on sales• 5 percent of c.i.f. value, with no limit
• Ar 5,000 for taxpayers not subject to the professional tax
• 1 per mill on sales for taxpayers selling retail fuelValue: raw materials, consumer goods, and products.
Dependent credit
Article 01.02.43
Ar 2,400/year and per child
REGISTERED NONWAGE PERSONAL INCOME TAX [IRNS Greffé] (General Budget)Article 01.02.22Article 01.02.37
Micro and small enterprises (criteria):Minimum amounts for all activities liable for tax TP>5th category = 5 TP.
• Number of employees = 50;
• Pretax turnover of over Ar 6,000,000 to 50,000,000Article 01.02.38: Registered IRNS (minimum).Article 01.02.21
System applicable to micro and small enterprises
• Principal responsibilities in production, sale where the management is undertaken by individuals venturing their own capital.For agricultural activities:
• ½ IFT [land tax] for arable land with a surface area of less than 5 hectares;(Tax return to be filed prior to March 1, in the year in which the option is exercised).
• IFT for land between 5–10 hectares;
• 2 IFT for land exceeding 10 hectares;
• 3 TP: activities classified in the 6th , 7th and 8th categories of the TP;Article 01.02.25
• 4 TP: activities classified in the 5th category of the TP;Registered system [régime greffé] (Tax return prior to March 1).
• 5 TP: activities classified in the 4th, 3rd, 2nd and 1st categories of the TP; and
• 5 TP: livestock merchants.
If, and only if the turnover is below the thresholds indicated in the relevant column.
GLOBAL TAX [Impôt synthétique] (General Budget)Article 01.06.02Article 01.06.03Article 01.06.06Article 01.06.07
Ar 120,000/year<pretax turnover≤Ar 6,000,000/year:• Corporations; and6 percent but no less than Ar 5,000.Tax return filed prior to March 31 for persons liable for TP.
• Representative (and affording full discharge of) TP, IRNS, and TCA;• Wholesale and semi-wholesale merchants [commerçants de gros et demi-gros].
• Tax earmarked for financing regionalized investment program; andArticle 01.06.06:Article 01.06.08
• Individuals engaging in an independent activity, whether or not liable for the TP tax.Taxpayer not subject to TP, with gains less than Ar 120,000.Within three months of issue of the tax payment advice [titre de liquidation] for others.
PROFESSIONAL TAXES. PROFESSIONAL TAX [Taxe professionnelle—TP] (40 percent—Budget of the Autonomous Province; 30 percent—regions; 30 percent - communes)Article 10.01.01Article 10.01.11Article 10.01.15Article 10.01.33
Professional tax payable in connection with engaging in gainful activity in Madagascar.• Limited partners in limited partnerships [sociétés en commandite];Tables A and BBefore October 15 N.
• Wage earners;Fixed tax, according to the type of business, population of the community, place of business, number of employees and equipment used in the enterprise (Ar 300–48,000).
• University cafeterias or canteens;
• Farmers;
• Fishing and hunting concerns with a maximum staff of five;Proportional tax based on rental value of premises, including equipment used.
• Agricultural contractors;• Liberal professions: 1/10 VL;
• Artists;• Commercial activities - 1st, 2nd and 3rd category: 1/15VL;
• Directors of independent technical and general schools;• Industries, trades, and service provision - 1st category: 1/25 VL
• Newspaper and magazine salesmen;
• Agencies equated with the associations covered by Article 01.01.03(3) that occasionally engage in socially-oriented activities;• Industries, trades, and service provision (2nd and 3rd categories), commercial activities (4th and 5th categories): 1/30 VL;
• Other activities, mechanically equipped sites, as well as hotel rooms and accessory buildings:1/40 VL.
• Corporate health organizations;
• Successful bidders on government contracts markets, supplies financed by foreign aid;
• Military joint mess clubs, army residential establishments, and military rest homes.
SUPPLEMENTARY PROFESSIONAL TAX [Centimes additionnels ála taxe professionnelle] (Budget of the Autonomous Province)• 30 percent of fixed tax + proportional tax
BUSINESS LICENSE TAX [Imp^t de licence] (Budget of the Autonomous Province)Article 10.06.01Article 10.06.06Article 10.06.08Article 10.06.63
Professional tax payable on sales of alcoholic beverages.Sales by nonprofits, including:Rate as follows:In the first 20 days of each quarter for pre-existing concerns.
• University cafeterias;• Category of licenses (three categories); and
• Military mess halls;• Population of the community where the firm is located.First 20 days of operation for new sales licenses.
• Canteens, residential establishments, clubs attached to the Army;Article 10.06.09Article 10.06.64
• Pharmacists and drug depositaries in connection with retail sales of raw spirit alcohol; andLicense for fairs: Ar 5,000 per day.Prior to operation for huckster’s license tax [imp^t de licence foraine].
• Restaurateurs and hotel restaurant operators, under certain conditions.
TAXES ON PROPERTYArticle 10.02.01Article 10.02.03Article 10.02.07Article 10.02.08
Land tax [Impôt foncier sur les terrains—IFT)]Tax levied on the estimated productive value of land based on type of crop use.• Land owned by government, decentralized local authorities, or public institutions assigned to perform a public service or a service deemed to be in the public interest that generates no revenue.Rate expressed in ariary per hectare (1st-5th category), and1 percent of market value (6th category).Prior to October 15 N.
(Budget of the settlement communes [communes d’implantation])• Land earmarked (free of charge) for medical or social charities, free education, or worship; and
• Land envisaged in Article 10.03.02, liable for the IFPB.
TAX ON BUILDINGS [Impôts sur les immeubles bâtis—IFPB] (Commune Budget)Article 10.03.01Article 10.03.03Article 10.03.10Article 10.03.11
Tax levied on rental value of buildings.• Buildings owned by government, decentralized local authorities, or public institutions assigned to perform a public service or a service deemed to be in the public interest that generate no revenue; andRates set by vote (by the municipal government) based on the rental value determined by the real estate assessment committee:

Maximum rate: 5 percent

Minimum rate: 2 percent.
Prior to October 15 N.
• New constructions for a period of five years from their completion date subject to presentation of habitation or occupancy permit (Article 10.03.05).May not be less than Ar 1000 per building.
• Buildings reserved (on a free-ofcharge basis) for charities, medical activities, education, or worship.
LOCAL GOVERNMENT TAX ON BUILDINGS [Taxe annexe à l’IFPB-TAFB] (Commune Budget)Article 10.04.01Article 10.04.05
Taxes associated with the tax on buildings based on the rental value of real state.Same rules as those governing the IFPB, excluding temporary and permanent exemptions.Rates set by municipal government vote:Prior to October 15 N.
Maximum rate: 5 percent
Minimum rate: 2 percent.
SUPPLEMENTARY REGISTRATION TAX [Taxe additionnelle aux droits d’enregistrement] (Commune Budget)Article 10.05.01

Tax supplementary to the registration tax on transfers of real and personal roperty for consideration [Taxe additionnelle aux droits d’enregistrement sur les mutations àtitre onéreux des biens immeubles et meubles].
TAX ON COMPANY CARS [Taxe sur les véhicules de tourisme des sociétés] (General Budget)Article 02.08.01

Annual tax levied on all private cars

• registered in the name of a company

• on the balance sheet of individual enterprises
Article 02.08.02x

• Ar 6,000/year for all vehicles not exceeding 10 HP;

• Ar 60,000/year and per HP for vehicles exceeding 10 HP.
Article 02.08.03

• Prior to end-January N for vehicles in circulation as at January 1 of the year;
• Month purchased for vehicles purchased in the course of the year (new or used).
TAX ON MOTOR VEHICLES [Taxes sur lesvéhicules à moteur] (Tax sticker) (Budget of the Autonomous Province)Article 02.07.01Article 02.07.06Article 02.07.01Article 02.07.02
Annual tax on all vehicles in circulation.• Vehicles registered to the government;Rate in Ariary• Prior to end-June for automobiles and boats in active service;
• Vehicles exempt from tax under international conventions;HP Age1–45–910–1213–15>15• Within one month of car in circulation, or month acquired, or time of technical inspection, or time of insurance renewal for vehicles previously tax-exempt.
• Special vehicles (bulldozers, materials-handling equipment, etc.);< 5 yrs2,1002,4002,7003,9005,700
• Tractors used exclusively for agricultural activities; and5<10 yrs1,5001,8002,1003,3005,100
Vehicles intended for sale or resale (automobile dealers) and new or used mechanical engines.10≥20 yrs9001,2001,5002,1002,700
>20 yrs4506007501,5002,400
• Utility vehicle, mass transit vehicles, taxis, service vehicles of nonprofit organizations: Ar 800;
• Aircraft: Ar 120,000/year/craft.
Article 10.05.02: 2 percent
REGISTRATION DUTIES [Droits d’Enregistrement] (General Budget)Article 02.01.02Article 02.11.01Article 02.02.22
Tax levied on registration of all transactions pertaining to the transfer of property, proportional to the value of the assets in question.Special regimes and exemptions:Goodwill or patronage: 6 percent.
• Central government and decentralized local governments;Article 02.02.39:
• Societies, associations recognized as being in the public interest;Buildings: 6 percent
• Religious missions and churches;Special rates:
• Low-cost housing;Sales of real property
• Pleadings and judicial decisions with respect to electoral matters;• Association RUP = 6 percent (Art. 02.02.39);
• Certificates, records, judgments relating to civil status;• Developable land for housing ≤500m2 = 8 percent (Art. 02.02.39);
• Instruments in cases of expropriation in the public interest;• Traditional housing = 10 percent;
• Agricultural land ½ 12 percent (Art. 02.02.39)
• Instruments and transactions, contracts pertaining to agricultural or socially-oriented credit extended by banks.Other assets
• 8 percent (Art. 02.02.44);
• Negotiable securities: 4 percent (Art. 02.02.46).
• Sale of equity participation in SARL: 2 percent (Art. 02.02.46)
Estate tax : (Art. 02.03.32-A)
A—Direct line, between spouses, and collateral line Rate—Portion of net share (in Ariary):
• 2 percent - Ar 0.20–20 million;
• 5 percent -Ar 20,000,000.20–60 million;
• 10 percent - Ar 60,000,000.20–100 million;
• 15 percent - > Ar 100 million.
B—Between relatives more than 4 times removed and between unrelated persons
• 10 percent - Ar 0.20–20 million;
• 15 percent - Ar 20,000,000.20–60 million;
• 20 percent - Ar 60,000,000.20–100 million;
• 25 percent - >Ar 100 million.
C—Gift of an individual company
1. Direct line, between spouses, and collateral line
• 2 percent - Ar 0.20–2 million;
• 4 percent - Ar 2,000,000.20–4 million;
• 6 percent - Ar 4,000,000.20–6 million;
• 8 percent—Ar. 6,000,000.20–8 million;
• 10 percent - > Ar 8 million.
2. Between relatives more than 4 times removed and between unrelated persons: 10 percent
Memoranda of incorporation: (Art. 02.02.32) Rate graduated by tranche of capital:
• 1 percent - < Ar 10,000,000;
• 0.5 percent—Ar 10,000,000–100,000,000;
• 0.1 percent for amounts in excess of Ar 100,000,000.
Claims: 1.50 percent (Art. 02.02.48).
Prenuptial agreement [contrat de mariage]: 1 percent (Art. 02.02.19).
Exchange of building: 4 percent (Article 02.02.20)
Partition: 1 percent ( Art. 02.02.28).
Annuities [Rentes]: 1.5 percent (Art. 02.02.30).
Fixed-term lease: 1 percent and 2 percent (Art. 02.02.12).
Life tenancy: 8 percent and 12 percent (Art. 02.02.13).
Article 02.02.24Art. 02.02.04 through 02.02.06
Taxes on judgments, arbitration awards, and decisions resulting in conviction.Fixed taxes:
• Ar 2,000 => Supreme Court decision => administrative;
• Ar 4,000 => Decision of the Court of Appeal, Criminal Court;
• Ar 8,000 => Decision of the Supreme Court => judicial.
Transfer of lease rights: 6 percent (Art. 02.02.16)
TAX ON REAL ESTATE ADVERTISING [Taxe de publicité foncière] (General Budget)Article 02.04.01Article 02.04.09Article 02.04.05
Tax levied on:• Central government and decentralized local governments;• 1 percent of the value (for leases);
• Recording of real estate conveyancing transactions [mutations]; and• Societies, associations recognized as being in the public interest;• 2 percent in all other cases;
• Procedural steps involved in inclusion in land ownership registries [conservations].• Religious missions and churches; and• 1 percent of value in the case of unconditional partitions [partage pur et simple].
• Low-cost housing.
TAX ON INSURANCE POLICIES [Taxe sur les contrats d’assurances] (General Budget)Article 02.09.01Article 02.09.03 and Article 02.09.04Article 02.09.02Article 02.09.05
Tax levied on all insurance contracts providing coverage against risks or on annuities.• Risks covered outside of Madagascar;• 4.5 percent in general;Within the first 20 days of each quarter => estimated payment, June 15 N => general tax payment.
• Reinsurance;• Fire insurance:
• Insurance in respect of work-related accidents;- 7 percent for property damage in industrial, commercial, agricultural, artisanal, hotel, mining, tourism, or transport activities;
• Insurance against risks associated with shipping or civil aviation, whether inbound or outbound.- 20 percent in other cases;
• 3 percent for life insurance;
• 4 percent for insurance against risks associated with shipping, inland water transportation, or civil aviation;
• 5 percent for life annuities [rente viagère].
STAMP TAX [Droit de timbre] (General Budget)Article 02.06.01Article 02.06.16 Size stamp taxArticle 02.06.44
Tax levied on all paper documents intended for civil and judicial proceedings, as well as for instruments that can be produced in court and entered into evidence.Ar 400 Paper 0.42 x 0.59In the form of a statement, within the 20 days following the end of each month.
Ar 300 Paper 0.29 x 0.42
Ar 200 Paper 0.29 x 0.21
½ the tax per sheet with one page unused
Article 02.06.28 Proportional stamp tax: Ar 1 per Ar 200
Article 02.06.40 Receipt stamp tax: at the rate for the proportional tax 5 per mill
Article 02.06.66 Stamp tax on visas for foreigners and persons of undetermined nationality, in Ariary:
• Visa valid for visits ≤ 3 months30,000
• Transit visa for no more than 72 hours60,000
• Transit visa for a maximum of 72 hours for cruise ship tourism10,000
• Visa valid for visits of + 3 months—3 yrs36,000
• Visa valid for visits of + 3yrs—5yrs52,000
• Visa valid for visits of + 5 years and permanent visa60,000
• Final exit visa28,000
• Extension of travel visa28,000
These rates are reduced by half for:
• missionaries of all creeds and their spouses residing in Madagascar;
• foreign students enrolled in a Malagasy university or equivalent.
VALUE ADDED TAX [Taxe sur la valeur ajoutée—TVA] (General Budget, Budget of the Decentralized Local Governments—Article 06.01.01)Article 06.01.02 and Article 06.01.03Article 06.01.06Article 06.01.12Article 06.01.16
Tax levied on:• ExemptionsValue added tax (VAT)—0 percent;Monthly for turnover > 1 billion.
• Commercial, industrial, agricultural, crafts-related, mining, hotel-related, or service-providing transactions;1. Sports: ticket sales by amateur clubs;
2. School fees for general education or technical and vocational training;20 percent (recoverable), reduced to 18 percent starting September 1, 2005.Quarterly for turnover < 1 billion.
• Liberal professions;3. Interest paid by the Malagasy Treasury and the Caisse d’Epargne de Madagascar;
• Particular types of operations, such as imports and deliveries for personal use.4. Interest on claims, deposits, and guarantees by banking institutions headquartered in Madagascar;Article 06.02.15Article 06.02.11
5. Interest on deposits of or loans to members of mutual financial institutions;TST: 5 percent (nonrecoverable).TST: Bimonthly. Prior to the 20th of the month following each bimonthly period.
Article 06.01.356. Assets brought into companies established under Malagasy law by individuals or corporations;
7. Transactions in shares, equity participations in companies or associations, bonds and other securities;
8. Underwriting of industrial endowment life insurance;
- Underwriting of group insurance contracts;
9. Water and electricity use by:
- local authorities through water fountains, public washrooms and similar facilities, as well as lighting for streets and public spaces;
- individuals for domestic use, up to 10m3 of water and 80 kwh of electricity;
- public health centers and facilities;
- public schools;
10. Health care services;
11. Drugs, pharmaceutical products, medical equipment as per the attached list, materials and inputs for manufacturing drugs, as well as packaging for their retail sale;
12. Imports and sales of newsprint; imports, publication and sale of newspapers and magazines;
13. Postage stamps and coins that are legal tender;
14. Books, brochures, printed material for educational use;
15. Domestic kerosene and butane gas;
16. Imports and sales of corrective lenses;
17. Imports and sales of inputs exclusively for agricultural use, according to the appended list;
18. Sales of paddy and rice;
19. Imports covered in Articles 2–33 of Decree 1945 of November 17, 1960, implementing Article 163 of the Customs Code;
20. Subject to agreement to reciprocal treatment, the purchases of diplomatic missions holding diplomatic status;
21. Imports and sales of impregnated mosquito nets and coils;
22. Imports and sales of narrow fabric items, labels, kits;
23. Imports and sales of solar panels, refrigeration compressors, machines and equipment for paper manufacturing.
Article 06.01.07
Exemption for imports and sales of products subject to Law 2003-026 of August 27, 2003 on tax exemptions.
Article 06.01.08
• Exemptions:
- Wages;
- Central Bank of Madagascar discounting operations;
- Postal checking center transactions;
- Transactions by the Caisse d’Epargne de Madagascar.
TRANSACTION TAX [Taxe sur les transactions—TST] Article 06.02.01: (Budget of the Autonomous Province)Threshold: Turnover tax subject to VAT of Ar 6,000,000- r 50,000,000Articles 06.02.04 and 06.02.05Article 06.02.15Article 06.02.11
• Assets brought into companies;5 percent.In the first 20 days of the month following each bimonthly period.
• Services rendered in the context of the health-care profession;• Decision 002-, MEFB/SG/DGI/DLF 09 of February 2004 setting the schedule for lump sum payments of the transaction tax payable by passenger carriers
• School fees;
• Supply of water and electric power to public local authorities for domestic use, to medical training centers; and
• Export sales.
EXCISE TAX [Droits d’accises—DA] (General Budget)Article 03.01.01Products subject to Law 2003-026 of August 27, 2003 on tax exemptions.In accordance with excise tax table:Within the first 20 days of the month following each bimonthly period.
Tax levied on specific manufactured, prepared or imported products, such as:• Rate from 20–180 percent; and
• Alcoholic beverages or liquids;Article 03.01.02• 50 percent tax deduction for cigarettes whose reference price does not exceed Ar 200, pursuant to Decree 170/2004-MEFB/SG/DGI/DLF of January 5, 2004.
• Tobacco;Exempted subject to completing the procedures set forth in Art. 05.03.01:
• Cosmetic preparations;• Products included as raw materials in other products already subject to excise tax (DA);
• Mining products; and• Products and materials included in the manufacturing of pharmaceuticals;
• Materials for refrigerated production used by professionals.
SPECIAL TAX [Taxe spéciale] (FNPDJSL)Article 03.02.01Article 03.02.02Article 03.02.04
Tax payable by manufacturers and importers of:Rates set pursuant to regulations.Within the first 20 days of the month following the three-month period within which the product was manufactured or the revenue collected.
• Alcoholic beverages;
• Manufactured tobacco. Tax payable by operators of gambling establishments
Royalties [Redevances] (General Budget)Article 04.01.01Article 04.01.04Article 04.01.10Article 04.01.16
Levied on the following products: manufactured tobacco, chemical matches, wheat or maslin flour, alcoholic beverages (excluding group 2), sugar, and dairy products.• Same product used as raw materials;Rates set in accordance with regulations.Products imported => prior to customs clearance.
• Export sales;DECISION 001/MEFB/SG/DGI/DLF of January 1, 2004 setting the rates for fees on products, amended and supplemented by Decision 001-MEFB/SG/DGI/DELF of January 6, 2005Products manufactured locally and in accordance with special customs clearance regime [régime suspensif] => within the first 20 days of the month after the goods are released for consumption.
• Raw materials used as inputs in manufacturing drugs.
TAXES ON GAMBLING AND GAMBLING ESTABLISHMENTS [Prélèvements sur les maisons de jeux]
Annual tax on slot machines, etc. [Taxe annuelle sur les appareils automatiques] (Budget of the Autonomous Province)Article 10.07.01Article 10.07.02Article 10.07.02
Tax payable in connection with the operation of automatic devices known as “slot machines” and other such equipment.• Slot machines: Ar 400,000 per machine;On an annual basis—must be made at the time that the equipment in question is declared operational.
• Other equipment: Ar 100,000 per machine.
Stamp tax [Droit de timbre] (General Budget)Article 03.02.12Article 03.02.12Article 03.02.12
Tax payable upon admittance to gambling halls.By share:Prior to the 10th of the following month.
• Ar 10,000, pass valid for one day;
• Ar 40,000—pass valid for one week;
• Ar 140,000—pass valid for one month;
• Ar 600,000—pass valid for one year.
Tax on gambling products [Prélèvement sur les produits des jeux] (Budget of the Autonomous Province)Article 10.07.03Article 10.07.03Article 10.07.06
Tax (in full discharge of the value added tax (VAT) applied to the gross proceeds from moneygambling activities exercised clubs, gambling houses, and hotel facilities.Gambling in clubs and gambling houses, graduated by threshold of annual earnings:Within the three days after the end of the ten-day period.
• Up to Ar 2,000,00010 percent
• Ar 2,000,000.20–6,000,00020 percent
• Ar 6,000,000.20–12,000,00040 percent
• Ar 12,000,000.20–20,000,00050 percent
• Over Ar 20,000,00060 percent
Gambling in hotels, graduated by threshold of earnings:
• Up to Ar 2,000,0005 percent
• Ar 2,000,000.20–6,000,00010 percent
• Ar 6,000,000.20–12,000,00015 percent
• Ar 12,000,000.20–18,000,00020 percent
• Ar 18,000,000.20–24,000,00025 percent
• Ar 24,000,000.20–30,000,00030 percent
• Over Ar 30,000,00040 percent
ANNUAL TAX ON TELEVISIONS [Taxe annuelle sur les téléviseurs] (Commune Budget)Article 18Amending Paragraph I of Article 6 of Order [Ordonnance] 78009 of May 5, 1979.Ar 4,000 per TV per year.
II. Statistical Appendix Tables:
Table 1Madagascar: Growth and Structure of GDP, 1999–2004
199920002001200220032004 Est.
(Annual change in percent, at 1984 prices)
Primary sector3.51.04.0-
Livestock and fisheries-
Secondary sector4.37.17.5-20.714.56.6
Food, beverages, and tobacco4.36.20.9-
Export processing zone22.422.440.0-
Tertiary sector5.55.06.2-
Retail and wholesale3.33.34.3-
Other services10.09.78.4-15.510.16.2
GDP at market prices4.74.76.0-
Real GDP per capita1.61.62.9-
GDP deflator9.87.17.315.32.814.3
(In percent of GDP at current prices)
Primary sector27.526.525.729.826.826.2
Livestock and fisheries7.
Secondary sector12.212.913.513.614.114.5
Food, beverages, and tobacco5.
Export processing zone2.
Tertiary sector52.352.153.851.351.650.9
Retail and wholesale11.310.811.211.811.510.8
Other services16.917.418.317.017.416.3
Imputed charges-1.3-1.0-0.8-0.7-0.7-0.6
GDP at factor cost90.790.592.394.191.890.9
Indirect taxes9.
Net imports of goods and
nonfactor services8.
Total available resources108.0107.3103.2106.6101.8116.3
Gross investment14.915.018.514.33.627.5
Gross domestic savings6.97.715.37.71.811.1
Sources: Malagasy authorities.
Table 2Madagascar: Gross Domestic Product at Constant 1984 Prices, 1999–2004(In billions of Ariary at 1984 prices)
199920002001200220032004 Est.
Primary sector147.4148.9154.9152.9154.8159.6
Livestock and fisheries59.661.364.966.669.371.6
Secondary sector52.856.560.848.255.258.8
Food, beverages, and tobacco24.826.326.623.925.626.5
Export processing zone4.
Tertiary sector214.7225.4239.3203.3224.8238.1
Retail and wholesale48.049.051.647.849.851.5
Other services64.370.676.564.671.275.5
Imputed charges-7.8-8.6-9.3-9.8-11.0-11.6
GDP at factor cost407.1422.2445.6394.5423.8445.0
Indirect taxes38.044.048.737.150.153.8
GDP at market prices445.1466.2494.3431.6473.9498.8
Sources: Malagasy authorities.
Table 3Madagascar: Supply and Use of Resources at Current Prices, 1999–2004(In billions of Ariary)
Primary sector1,284.61,389.11,535.81,792.51,814.72,135.2
Livestock and fisheries352.7407.8433.9526.9512.4585.0
Secondary sector572.1676.8803.0815.5955.31,182.6
Food, beverages, and tobacco257.5278.9314.2302.5332.6381.0
Export processing zone93.1125.7169.7229.1309.3426.6
Tertiary sector2,445.32,735.63,214.13,084.23,499.74,148.6
Retail and wholesale526.3567.0667.2710.9781.8879.4
Other services789.7912.21,091.21,022.21,178.81,333.2
Imputed charges-61.7-54.0-46.7-39.2-45.2-52.4
GDP at factor cost4,240.34,747.55,506.25,653.16,224.57,414.0
Indirect taxes436.5500.9462.4355.3-24,343.7741.7
Gross domestic product at market prices4,676.85,248.45,968.66,008.46,778.68,155.7
Net imports of goods and nonfactor services372.9384.5191.8394.5609.11,332.0
Exports of goods and nonfactor services1,140.91,610.21,735.6961.81,564.92,582.8
Imports of goods and nonfactor services1,513.81,994.71,927.41,356.32,174.03,914.8
Total available resources5,049.75,632.96,160.46,402.87,387.79,487.7
Gross domestic savings6.97.715.37.78.911.1
Sources: Malagasy authorities.
Table 4Madagascar: Production of Rice and Other Food Crops, 1999–2004(In thousands of tons)
Sweet potatoes522.0476.0525.1493.0492.9542.2
Source: Ministry of Agriculture and Rural Development.
Table 5Madagascar: Retail Prices of Ordinary Rice, 2001–2004(In Ariary per kilogram)
Source: Malagasy authorities.
Table 5Madagascar: Retail Prices of Ordinary Rice, 2001–2004 (concluded)(In Ariary per kilogram)
Source: Malagasy authorities.
Table 6Madagascar: Production of Major Cash Crops, 1999–20041(In thousands of tons)
Export crops
Butter beansProduction8.07.5
Industrial crops
Source: Ministry of Agriculture and Rural Development.
Table 7Madagascar: Index of Industrial Production, Excluding the Export Processing Zone, 2000–2004
Agro-industry and food industries37.7100.087.9106.3108.8
Consumer goods4.4100.080.496.4100.3
Cothing and leather goods1.9100.072.893.989.8
Housing amenities0.6100.091.998.6109.5
Equipment goods2.4100.083.395.698.4
Electrical appliances0.6100.072.887.889.4
Intermediary goods21.6100.
Mineral products8.3100.080.9112.3123.1
Textile products5.6100.057.275.473.8
Wood and paper products1.3100.
Chemicals and rubber products3.4100.094.9101.9100.1
Metallurgical products3.1100.061.773.077.7
Petroleum products14.4100.052.6110.8116.2
Water, gaz, and electricity19.5100.081.4104.2104.1
Sources: Ministry of Industry; and Ministry of Energy and Mining.
Table 8Madagascar: Economic Activities of Manufacturing Enterprises in the Export Processing Zone (EPZ), 1999–2004
Cumulative EPZTotal Commitments, 1990–20011
EPZ Charters GrantedCharters GrantedEmploymentInvestment
199920002001200220032004199920002001(Individuals)(In billions of
Malagasy francs)
Agro-food processing0113132333,106113.6
Hides and skins10066676112.1
Wood processing1002222221,58943.0
Data processing2002828282,21320.9
Electrical and mechanical0004441295.0
Mineral processing10066642432.5
Enterprises promoting and-10333614228.0
managing EPZs010122106520.3
Source: Ministry of Industry.
Table 9Madagascar: Number of Enterprises with Operating Permits Under the Export Processing Zone Regime, 1999–2004
Number of manufacturing enterprises operating und267283307355377419
Textiles and hides135149164183204231
Wood processing222222252525
Food, beverages, and tobacco313233343941
Other (mainly jewelry and handicrafts)798088113109122
Total number of employees64,10081,000110,00067,20085,000115,000
(in percent)125.827.529.5
Wages paid (in billions of Ariary)202.0237.0332.083.6223.1353.0
Value added (in billions of Ariary)328.0360.0447.0170.0339.0482.7
Exports (in billions of Ariary)1,157.01,236.01,368.0658.11,167.11,791.9
Imports (in billions of Ariary)512.0599.0735.0722.01,402.92,632.4
Source: Project Madio, Le Secteur Industriel Formel á Madagascar: Caractéristiques, Performances, Perspectives , various issues, 1995–97.
Table 10Madagascar: Production and Export of Major Minerals, 1999–2003
Production (thousands of tons)
Exports (thousands of tons)
Export value (millions of SDRs)
Unit value (SDRs per ton)
Source: Ministry of Energy and Mining.
Table 11Madagascar: Tourism Indicators, 1999–2004(In thousands, unless otherwise indicated)
199920002001200220032004 Prel.
Number of tourists138.3160.1170.261.7139.2228.8
Annual growth in percent14.115.86.3-63.8125.864.3
Hotel capacity (number of rooms)
Average capacity utilization (in percent)
Number of tourist nights (in thousands)2,6273,0413,2344931,9494,347
Annual growth in percent14.115.86.3-84.7295.1123.0
Average length of stay (days)
Foreign exchange receipts from tourism
(in millions of SDRs)72.991.990.227.854.0104.3
Annual growth in percent11.326.1-1.8-
Source: Ministry of Transportation, Meteorology, and Tourism; Directorate of Tourism.
Table 12Madagascar: Production and Consumption of Electricity, 1999–2004(In millions of kilowatt-hours)
Public lighting8.
Table 12Madagascar: Production and Consumption of Electricity, 2001-04 (concluded)(In millions of kilowatt-hours)
Primary sector2.
Livestock and fisheries1.
Secondary sector221.1168.1215.2235.6
Tobacco industry1.
Cooking oil5.
Construction material17.511.615.417.7
Transport materials1.
Electrical appliances1.
Industrial paper7.
Tertiary sector65.061.971.077.3
Public works2.
Banking and insurance1.
Public services4.
Other services5.
Source: Ministry of Energy and Mining.
Table 13Madagascar: Prices of Petroleum Products, 1999–2004 1(In Ariary per liter, unless otherwise indicated)
(Regular)(Premium)Gas Oil
2 Prices are for a 12.5 kilogram container.
Table 14Madagascar: Minimum and Maximum Monthly Wages, 1994–2004 1(In Ariary)
Agricultural 2Nonagricultural 3
January 1994 - February 199512,84731,75412,66331,199
March 1995 - October 199622,48748,81622,11047,999
November 1996 - February 199824,75653,74124,31852,789
March 1998 - May 199928,45661,77626,97260,728
June 1999 - February 200031,30367,95430,76966,800
March 2000 - December 200032,51770,58932,03169,562
January 2001 - March 200134,96075,84034,45874,809
Since April 2001 - December 200336,52079,20036,01878,172
Source: Ministry of Civil Service.
Table 15Madagascar: Consumer Price Index by Product, 2002–2004(Period averages: January 2000 - December 2000 = 100)
General index10,000115.9132.7126.3125.2125.8122.9120.6122.6126.4134.7144.6154.1
Foodstuffs, Beverage and Tobacco5,007108.7123.2118.6117.6117.6112.9108.9112.3115.9127.6140.3155.0
Shelter, Water, Lighting, Gaz et other fuel1,824125.0136.0129.9127.2132.5131.4130.6133.7144.1147.7153.0158.8
Furniture, Household Equipment, Maintenanc456113.0122.2133.0133.0133.7137.5137.6136.9135.9138.3144.6148.2
Entertainment, Spectacle and Culture255112.3123.7120.2119.4117.8116.1107.6103.0103.6109.2114.1115.1
Hotel, Restaurant151114.5130.7131.2133.7131.0127.2124.7123.9124.7127.8130.5130.2
Others goods and services171112.4115.9117.8117.6126.2131.0130.4131.1132.0134.0136.2142.5
(Annual percentage change)
General index6.925.418.914.78.6-7.4-4.5-
Foodstuffs, Beverage and Tobacco-0.920.
Shelter, Water, Lighting, Gaz et other fuel17.
Furniture, Household Equipment, Maintenance9.413.
Entertainment, Spectacle and Culture10.419.
Hotel, Restaurant13.229.127.830.614.4-2.7-4.9-7.3-
Others goods and services7.
Source: National Institute of Statistics.1/ Since 2001.
Table 16Madagascar: Central Government Financial Operations, 1999–2004(In billions of Ariary)
Total revenue and grants702.0802.9838.1610.61,045.01,653.4
Total revenue533.5613.5605.8480.6698.9982.3
Budgetary revenue533.5613.5605.8480.6698.9982.3
Of which: tax revenue516.0594.4581.3460.8678.5887.1
Extrabudgetary and capital revenue0.
Current grants34.435.885.549.9171.9318.7
Project grants134.1153.6146.880.1174.2352.4
Total expenditure758.2871.41,052.5941.91,324.42,045.3
Current expenditure435.0503.6616.3621.9771.71,027.3
Budgetary expenditure434.5453.9600.2556.2751.6896.9
Other noninterest expenditure135.8152.4214.3148.3236.1257.4
Foreign interest obligations65.026.369.881.560.6113.9
Domestic interest obligations33.648.248.650.489.5125.5
Treasury operations (net) 10.541.510.940.412.1128.6
Emergency expenditure
Counterpart funds-financed operations0.
Capital expenditure323.2367.8436.2289.2531.51,018.0
Domestic financing85.9130.9188.5111.9172.3229.5
Foreign financing237.3237.0247.7177.2359.2788.5
Net cost of structural reforms-73.9-96.5-44.61.2-3.9-8.8
Exceptional revenue9.
Cost of structural reforms83.1100.
Overall balance (commitment basis)
Including grants-130.1-165.0-259.0-330.1-283.4-400.6
Excluding grants-298.6-354.4-491.3-460.2-629.5-1,071.7
Change in arrears13.5-12.6-5.4-42.5-41.0-63.2
Total overall balance (cash basis, including grants)-116.6-177.6-264.4-372.6-324.4-463.8
Foreign (net)57.091.5127.4218.8191.6518.2
Amortization due-121.5-57.6-116.2-116.6-126.9-188.5
Change in external arrears5.5-9.9-13.60.0-13.50.0
External debt relief69.868.
Domestic (net)49.376.8116.2144.5119.3-84.6
Banking system33.40.593.7144.48.8-215.6
Nonbanking system15.923.822.5-14.484.5107.9
Privatization receipts10.49.320.89.313.530.2
Sources: Ministry of Economy, Finance, and Budget; and Fund staff estimates.3 Total revenue minus expenditure, excluding foreign interest payments and foreign-financed capital expenditure.
Table 17Madagascar: Central Government Fiscal Indicators, 1999–2004(In percent of GDP, unless otherwise indicated)
Total revenue and grants15.015.314.010.215.420.3
Total revenue11.411.710.18.010.312.0
Of which: tax revenue11.
Current grants0.
Project grants2.
Total expenditures16.216.617.615.719.525.1
Current expenditure9.39.610.310.411.412.6
Noninterest expenditure7.
Other noninterest expenditure2.
Interest obligations2.
Treasury operations (net)
Emergency expenditures
Capital expenditure6.
Domestically financed expenditure1.
Foreign-financed expenditure5.
Net cost of structural reforms-1.6-1.8-0.70.0-0.1-0.1
Exceptional revenue0.
Cost of structural reforms1.
Overall balance (commitment basis)
Including grants-2.8-3.1-4.3-5.5-4.2-4.9
Excluding grants-6.4-6.8-8.2-7.7-9.3-13.1
Change in arrears0.3-0.2-0.1-0.7-0.6-0.8
Total overall balance (cash basis, including grants)-2.5-3.4-4.4-6.2-4.8-5.7
Foreign (net)
Amortization due-2.6-1.1-1.9-1.9-1.9-2.3
Change in external arrears0.1-0.2-0.20.0-0.20.0
External debt relief1.
Domestic (net)
Of which: banking system0.
Privatization receipts0.
Memorandum item:
Nominal GDP (in billions of Ariary)4,6765,2485,9696,0086,7798,156
Sources: Ministry of Economy, Finance, and Budget; and Fund staff estimates.Overall balance, excluding grants, foreign-financed capital expenditures, and foreign interest payments.
Table 18Madagascar: Budgetary Revenue, 1999–2004(In billions of Ariary)
Tax revenue515.9594.5581.3460.8678.5887.1
Taxes on net income79.693.5118.9105.5114.2159.5
Tax on income (IRNS)
Tax on wages and salaries (IRSA)4.625.333.234.336.049.1
Taxes on property5.
Taxes on goods and services132.3173.0160.8137.9207.4265.0
Value-added tax (VAT)77.8102.6105.185.6118.2173.2
Fiscal monopoly profits22.235.831.223.841.741.3
Taxes on foreign trade296.2318.2290.4208.7342.6444.9
Import duties296.2318.2290.4208.7342.6444.9
Customs duty29.724.723.312.626.329.2
Fiscal duty52.948.146.332.653.177.5
VAT on imports124.8142.3144.591.6156.2186.0
Petroleum products67.979.565.058.973.3136.4
Other taxes2.
Nontax revenue17.419.124.619.820.495.2
Budgetary revenue533.3613.5605.8480.6698.9982.3
Source: Ministry of Economy, Finance, and Budget.
Table 19Madagascar: Current Budgetary Expenditure, 1999–2004
(In billions of Ariary)
Economic classification
Current expenditure435.0503.6616.3621.9771.71,027.3
Other noninterest expenditure135.8152.4214.3160.0236.1257.4
Goods and services80.498.4137.3103.0141.9140.9
Transfers and subsidies55.454.
Interest on public debt98.674.5118.4131.9150.1239.5
Foreign interest obligations65.026.369.881.560.6113.9
Domestic interest obligations33.648.248.650.489.5125.5
Treasury operations 10.541.510.940.412.1128.6
Emergency expenditure
Functional classification
Budgetary expenditure434.5462.0605.5581.5759.6898.7
General expenditure 378.4176.0213.5156.5305.0320.4
Of which: Defense16.063.985.778.989.8101.8
Of which: Universities6.818.326.329.730.138.0
Social and community services0.
Economic services11.232.232.644.042.434.8
Of which: Agriculture 4152.116.614.515.316.414.8
Public works98.
Memorandum items:(In percent of GDP)
Noninterest budgetary expenditure7.
Social sector current expenditure
Of which: health0.
Sources: Ministry of Economy, Finance, and Budget; and Fund staff estimates.5 Including revenue sharing with local governments and payments to international organizations.
Table 20Madagascar: Central Government Capital Expenditure, 1999–2004 1
(In percent of total government capital expenditures)
General public services31.335.238.532.857.565.5
Social and community services2.
Economic services92.651.765.333.066.2161.5
Agriculture 237.220.923.515.318.336.1
Public works 340.921.029.09.731.979.2
(In billions of Ariary, unless otherwise indicated)
Budgetary capital expenditure
Domestically financed85.9130.9188.5111.9172.3229.5
Foreign Financed237.3237.0247.7177.2359.2788.5
(In percent of GDP)
Sources: Ministry of Economy, Finance, and Budget; and Fund staff estimates.
Table 21Madagascar: Central Government Personnel Expenditure and Number of Civil Servants, 1999–2004(In billions of Ariary, unless otherwise indicated)
Personnel expenditure (commitment basis) 12200.1227.1267.5276.0365.4400.0
Annual change in percent4.213.517.
In percent of current budgetary expenditure46.150.044.649.648.644.6
In percent of total government expenditure26.426.125.429.327.619.6
In percent of GDP4.
Civil servants (number at end-December) 3
Annual percent change7.9-
Memorandum items:
Average monthly civil servants’ salary
In thousand of Ariary110.7132.3
Annual change in percent18.319.5
Annual percent change in real terms 48.47.6
Total government expenditure (billions of Ariary)758.2833.7
Nominal GDP (billions of Ariary)4675.85248.4
Sources: Ministry of Economy, Finance, and Budget; and Fund staff estimates.
Table 22Madagascar: Structure and Adjustment of Public Sector Salaries, 1997–2004(In thousands of Ariary)
Jan. 1997 -Jan. 1998 -May 1998 -Mar. 1999 -Mar. 2000 -Feb. 2001 -Starting
Dec. 1997Apr. 1998Feb. 1999Feb. 2000Jan. 2001Dec. 2001Jan. 2002
Category I
Category II
Category III
Categories IV and V
Categories VI and VII
Categories VIII and IX
Category X
Sources: Ministry of Economy, Finance, and Budget.
Table 23Madagascar: Monetary Survey, 1999–2004
(In billions of Ariary; end of period)
Net foreign assets342.3401.3514.2475.6545.0953.3
Central bank211.1234.1357.5285.6316.7560.5
Commercial banks131.2167.2156.7189.9228.4392.7
Long-term foreign liabilities-52.2-45.9-52.8-43.8-49.2-67.0
Central bank-38.2-33.5-29.8-31.1-31.9-47.1
Commercial banks-14.0-12.3-23.0-12.7-17.3-19.9
Net domestic assets706.8828.01,010.11,143.91,208.71,209.9
Net credit to government343.0371.3495.4622.4697.8497.0
Net claims on government 1312.1312.7409.6541.4615.7403.8
Central bank244.1232.5241.6317.0339.5262.9
Commercial banks68.080.1168.0224.3276.2141.0
Other claims30.958.685.881.182.193.2
Credit to the economy391.1483.0555.7560.3604.1834.6
Central bank3.222.255.372.83.53.9
Commercial banks0.4460.7500.2486.9600.6830.8
Other claims387.
Other items (net)-27.3-26.4-40.9-38.9-93.2-121.7
Foreign currency adjustment13.216.911.111.0-1.7-102.9
Central bank34.338.033.246.575.0159.5
Commercial banks-74.8-81.3-85.2-96.4-166.6-178.4
Broad money (M3)996.91,183.41,471.51,575.61,704.62,096.1
Currency in circulation287.6357.3431.9466.0514.0579.0
Total deposits709.2826.01,039.61,109.61,190.61,517.2
Demand deposits429.2468.4653.2686.6662.8811.1
Quasi money280.1357.6386.4423.0527.7706.0
Of which
Resident deposits in foreign currencies122.9168.3154.8175.8217.4349.3
Short-term obligations30.433.934.535.535.428.4
Memorandum items:(Change in percent of beginning-of-period broad money stock)
Net foreign assets9.05.99.5-2.64.423.9
Net domestic assets0.912.
Net credit to government-7.82.810.58.64.8-11.8
Credit to the economy10.
Change from previous year (in percent)26.223.515.00.87.838.2
Broad money (M3)9.818.724.
Sources: Central Bank of Madagascar; and Fund staff estimates.
Table 24Madagascar: Summary Accounts of the Central Bank, 1999–2004(In billions of Ariary, unless otherwise indicated; end of period)
Net foreign assets211.1234.1357.5285.6316.7560.5
Foreign assets297.4373.4528.8463.6508.0950.2
Foreign liabilities (short term)-4.0-2.7-2.4-5.4-2.6-1.4
Poverty Reduction and Growth Facility-82.3-136.5-168.8-172.6-188.8-388.2
Long-term foreign liabilities-38.2-33.5-29.8-31.1-31.9-47.1
Net domestic assets296.6321.8349.3452.7420.1313.9
Claims on government (net)244.1232.5241.6317.0339.5262.9
Credit to government371.5404.6419.3427.5474.5379.5
Statutory advances39.575.589.7102.583.730.7
Consolidated loans219.9219.9219.9219.9219.90.0
Foreign currency loans109.0106.7108.0104.899.30.0
Government deposits-127.3-172.1-177.7-110.4-135.0-116.6
Claims on public companies and customers3.222.255.372.83.53.9
Net claims on banks15.
Claims on banks15.
Reverse auctions0.
Other items (net)34.355.144.457.473.754.8
Currency valuation adjustment15.
Net capital17.623.323.347.047.924.0
Reserve money465.0522.0677.0707.0704.9827.3
Currency outside banks287.6357.3431.9466.0514.0579.0
Currency in banks15.515.717.024.530.240.2
Bank deposits161.9149.0228.1216.5160.8208.2
Deposits of other banking institutions3.
Resident deposits in foreign currency1.
Sources: Central Bank of Madagascar; and Fund staff estimates.
Table 25Madagascar: Summary Accounts of Commercial Banks, 1999–2004(In billions of Malagasy francs, unless otherwise indicated; end of period)
Net bank liquidity279.6307.6370.6412.8405.4613.5
Net international reserves131.2167.2156.7189.9228.4392.7
Long-term foreign liabilities-14.0-12.3-23.0-12.7-17.3-19.9
Currencies in banks15.515.717.024.530.240.2
Deposits at central bank161.9149.0228.1216.5160.8208.2
Net recourse to central bank15.
Recourse to central bank15.
Reverse auctions0.
Net domestic assets393.9459.3582.8614.9785.1903.7
Claims on government (net)68.080.1168.0224.3276.2141.0
Credit to government96.2121.3236.5305.3359.7271.1
Government deposits-28.2-41.2-68.5-81.0-83.5-130.1
Of which : deposits of administrative agencies-26.5-39.4-66.6-78.3-79.9-127.1
Claims on private sector387.5460.7500.2486.9594.9814.7
Net capital-89.2-103.6-124.1-145.3-158.3-173.7
Other items (net)27.622.138.849.072.3121.7
Currency valuation adjustment-1.9-0.2-0.10.1-0.31.8
Demand deposits423.2445.8614.8659.6662.8811.1
Time deposits220.0287.3304.1332.7274.9328.4
Foreign currency121.9168.3154.7175.8217.4349.3
In millions of SDRs67.898.592.9100.5120.4120.6
Short-term bonds30.433.934.535.535.428.4
Sources: Central Bank of Madagascar; and Fund staff estimates.
Table 26Madagascar: Foreign Reserve Assets and Liabilities of the Central Bank, 1999–2004(In millions of SDRs, unless otherwise indicated; end of period)
Foreign assets165.5218.7317.5265.0269.3279.2296.1281.4326.8288.2344.1328.1
Of which: time deposits121.7129.4258.9216.7217.2190.7183.1216.1212.4203.4257.00.0
Foreign liabilities48.081.6102.8101.8100.5100.7109.1106.0130.9127.6127.8134.6
Nonresident deposits2.
International organizations0.
External payments arrears0.
Net foreign assets117.5137.1214.7163.3168.8178.5187.0175.4195.9160.6216.3193.6
Excluding IMF and arrears163.3217.1316.0261.9266.1274.4292.9280.0322.7286.0340.4327.6
Memorandum item:
Exchange rate: Malagasy francs per SDR8,9858,5388,3288,7468,8488,5578,7199,02713,08015,16715,23314,478
Source: Central Bank of Madagascar.
Table 27Madagascar: Structure of Market Interest Rates, 2000-04(In percent per annum)
Central BankMoney MarketTreasury Bills
BaseLendingOvernightLendingDepositsInter-OpenPrimary marketSecondary
rate2–10 dayslendingon bidon bidbankmarket4122452Weightedmarket
(End of period)(Weighted period average)
Source: Central Bank of Madagascar.
Table 28Madagascar: Structure of Commercial Bank Interest Rates, 2000–2004(In percent per annum)
BaseLending RatesDeposit RatesLending RatesDeposit Rates
RateShortMediumTime andForeignShortMediumTime andForeign
termterm>one yearcurrencytermterm>one yearcurrency
(Midpoint of the range; end of period) 1(Midpoint of weighted averages) 2
Source: Central Bank of Madagascar.
Table 29Madagascar: Issues and Outstandings of Treasury Bills, 2000–2004(Nominal values; in billions of Ariary, unless otherwise indicated)
Total IssueOf Which: Nonbanking Sector 1Total OutstandingOf Which: Nonbanking Sector
Treasury preannouncement 2TotalPer-BidsTotalPer-BidsPer-NetStockNetStockPercentage
TotalOf which:Per-bidcentageacceptedPer-bidcentageacceptedcentagepurchasesat end ofpurchasesat end ofof
market 3
Source: Central Bank of Madagascar.
Table 30Madagascar: Summary Balance of Payments, 1999–2004(In millions of SDRs, unless otherwise indicated)
Current account-154.3-160.2-62.1-149.6-191.7-311.3
Goods and services-217.1-209.6-115.2-170.8-351.1-480.5
Trade balance-122.3-78.511.6-36.4-135.9-303.2
Net services-94.8-131.1-126.8-134.4-215.3-177.3
Services, receipts238.5276.0275.4173.0229.3285.3
Services, payments-333.3-407.0-402.2-307.4-444.6-462.6
Investment income5.
Of which: compensation of employees8.58.58.512.85.64.6
Investment income-45.9-66.7-71.4-73.1-63.3-57.9
Of which: dividends-6.4-22.4-30.0-28.4-22.6-15.7
Current transfers93.9102.6114.774.2216.4222.7
Budget aid20.116.536.722.191.699.1
Other (net) 15.09.0-11.7-15.910.413.7
Capital and financial account135.9119.7179.570.2165.3287.3
Capital transfers94.287.088.644.663.8121.9
Project grants94.287.088.644.663.8121.9
Financial account41.732.790.925.628.9144.4
Direct investment42.752.973.
Of which: privatization receipts15.45.3
Of which: project drawings71.346.260.454.683.5153.7
budgetary support39.426.865.737.550.2
Private sector (net)2.4-9.1-4.5-7.9-7.0-9.7
Banks (net)2.4-25.0-5.016.8-20.8-11.8
Other (including errors and omissions) 28.5-53.4-97.9-20.172.621.0
Overall balance-9.9-93.919.5-99.5-26.4-24.2
Net foreign assets (increase -)-43.7-5.7-98.331.4-12.0-19.6
Use of Fund credit (net)9.734.
Other assets (net, increase -)-43.7-5.7-98.331.4-17.8-49.1
Net change in arrears (excluding the central bank)
Arrears accumulation3.10.0
Repayment of arrears0.0-5.7
Rescheduling of arrears0.00.0
Debt relief and cancellation40.859.655.857.947.843.7
Memorandum items:
External current account / GDP (in percent)
Excluding net official transfers-6.6-6.3-2.4-4.6-7.5-14.4
Including net official transfers-5.7-5.5-1.7-4.4-4.9-10.6
Scheduled debt service 3(before debt relief)17.513.6
After debt relief 8/12.00.0
Actual external debt service 9/0.0
Scheduled debt service 3 (after debt relief)11.46.9
Public sector scheduled debt service 4 (before relief)34.932.3
Annual percentage changes
Export volume10.647.620.6-50.564.0-10.6
Import volume10.629.15.5-44.974.77.3
Real GDP4.74.86.0-
Gross official reserves165.3218.7317.5265.0284.4333.5
(weeks of goods and nonfactor services imports )9.810.214.319.211.911.7
(excluding privatization receipts)14.415.7
Exchange rates
Ariary/SDR (period average)1,717.21,790.21,678.21,754.91,734.82,772.1
Ariary/USD (period average)1,256.21,357.41,318.31,318.51,240.61,870.8
Sources: Central Bank of Madagascar; and Fund staff estimates.
Table 31Madagascar: Composition of Exports, f.o.b., 1999–2004(Unless otherwise indicated, values in millions of SDRs, volumes in thousands of tons, and unit values in SDRs per kilogram)
199920002001200220032004 Prel.
Unit price0.
Unit price15.239.878.5107.7134.5113.7
Unit price1.
Unit price2.
Unit price4.
Unit price0.
Unit price1.
Unit price0.
Cotton cloth
Unit price4.
Unit price0.
Petroleum products
Unit price0.
Unit price0.
Unit price0.
Essence of cloves
Unit price2.
Other items (including reexports)
Unit price96.693.8
Exports of the export
processing zone (EPZ)
Unit price3.
Total value425.9628.6757.9375.0672.8646.4
(percentage change)10.647.620.6-50.579.5-3.9
Memorandum items:
Traditional exports 155.985.9207.8116.2165.0107.3
In percent of total13.113.727.431.024.516.6
Nontraditional exports 278.981.5100.788.251.257.2
In percent of total18.513.013.323.57.68.9
Manufactured exports 3291.1461.2449.3170.6395.4482.2
In percent of total68.473.459.345.567.874.6
Sources: Central Bank of Madagascar; and Fund staff estimates.
Table 32Madagascar: Composition of Imports, c.i.f., 1999–2004
(In millions of SDRs)
Energy (petroleum)90.2161.0131.899.2150.6145.2
Equipment goods117.1126.6128.768.8155.8245.9
Raw materials and spare parts97.6123.1103.175.7157.7181.8
Consumer goods112.785.4103.970.1144.6148.5
Other imports (including EPZ) 1193.7278.1344.8124.2259.4337.7
Total imports, c.i.f.644.9832.5878.1484.0951.41,119.6
Total imports, f.o.b.548.2707.6746.3411.4808.7949.6
(In percent of total imports, c.i.f.)
Energy (petroleum)14.019.315.020.515.813.0
Equipment goods18.215.214.714.216.422.0
Raw materials and spare parts15.114.811.715.616.616.2
Consumer goods17.510.311.814.515.213.3
Other imports (including EPZ) 130.033.439.325.727.330.2
Total imports, c.i.f.100.0100.0100.0100.0100.0100.0
Sources: Central Bank of Madagascar; and Fund staff estimates.
Table 33Madagascar: Direction of Trade, 1999–2003 1(In percent of total)
Exports, f.o.b.100.0100.0100.0100.0100.0
European Union43.346.527.431.336.0
Of which: France34.539.821.622.831.2
Other Europe0.
United States5.422.515.513.726.1
Asia and the Middle East17.111.814.218.010.1
Of which: Japan1.
Of which: Mauritius4.
Réunion (France)
Other countries24.613.333.325.120.3
Imports, c.i.f.100.0100.0100.0100.0100.0
European Union38.918.821.925.924.5
Of which: France26.814.616.920.118.3
Other Europe0.
United States3.
Asia and the Middle East27.523.331.130.628.8
Of which: Iran, Islamic Republic of0.
Of which: Mauritius3.
Réunion (France)
South Africa
Other countries19.845.639.132.037.9
Source: Central Bank of Madagascar.
Table 34Madagascar: Balance of Services, 1999–2004(In millions of SDRs, unless otherwise indicated)
199920002001200220032004 Prel.
Freight and insurance on goods4.
Other transport36.433.137.429.837.160.0
Investment income15.116.618.820.111.710.0
Other services, public26.538.360.651.349.045.0
Other services, private98.7106.980.461.284.368.6
Freight and insurance on goods88.3114.9113.085.0117.0151.4
Percent of imports, c.i.f.12.312.512.917.612.015.0
Other transport20.543.753.943.050.543.5
Investment income46.269.980.473.168.763.5
Other services, public87.696.068.062.599.7109.0
Government expenditures17.415.417.520.722.729.5
Services linked to project loans51.057.328.730.648.939.0
Services linked to project grants19.223.321.811.228.141.2
Other services, private55.667.365.346.9131.796.2
Net services-125.8-184.4-188.4-187.4-272.2-314.7
Nonfactor services-86.0-136.9-138.0-142.7-223.8-268.4
Factor services-39.8-47.5-50.4-44.7-48.4-46.3
Sources: Central Bank of Madagascar; and Fund staff estimates.
Table 35Madagascar: Stock of External Debt, 1999–2004(In millions of SDRs, unless otherwise indicated)
Medium- and long-term official debt2,562.42,668.82,676.82,755.62,861.93,470.3
Bilateral creditors1,173.41,163.91,109.61,081.51,060.51,461.1
Paris Club 11,144.71,136.21,082.01,056.91,040.71,063.9
Other countries28.627.727.624.619.8397.2
International organizations1,386.81,502.61,561.91,669.81,795.41,995.7
Of which: World Bank Group1,020.71,094.11,135.11,232.41,342.5
African Development Bank23.5248.
African Development Fund194.4229.5227.5225.5234.8
Private creditors2.
Commercial banks0.
Total arrears386.2455.0506.4574.9604.60.0
Paris Club 140.089.9143.8198.0241.50.0
Other bilateral creditors312.3345.3352.8368.1353.80.0
International organizations0.
Private creditors33.919.
Total external debt outstanding 22,948.63,123.93,183.23,330.53,466.53,470.3
Memorandum items:
Total external debt/GDP (in percent)108.3106.489.597.988.7117.7
Total external debt
(in percent of exports of goods and nonfactor services)437.5346.8308.0611.3412.6366.0
Total debt to official creditors after debt relief2,912.53,101.73,168.13,317.43,451.23,456.8
Sources: Central Bank of Madagascar; and Fund staff estimates.

Prepared by Ritha Khemani.

With respect to the last component, the GCI economies are separated into two groups: core economies, for which technological innovation is critical, and noncore economies. Noncore economies are those that can still grow by adopting technology from abroad. Relatively less weight is given to technology in computing the GCI for these economies. In any event, some of the aspects of technology would already be embodied in real equilibrium exchange rate insofar as it is reflected in productivity.

The BCI evaluates the underlying microeconomic conditions defining the current sustainable level of productivity in the country. It evaluates two specific areas: the sophistication of operating practices and strategies of companies and the quality of microeconomic business environment in the nation’s companies compete. The underlying notion is that without these complements the macroeconomic qualities and potential defined in the GCI cannot be realized.

A calculation of the Herfindahl-Hirshman concentration index based on Tables 7 and 8 above shows that product and partner country level concentration has increased from .19 and .17 respectively in 1990 to .25 and .26 respectively in 2003. The estimated level of the index is substantially below 1 and suggests diversity of the export product base.

The EPZ regime is limited to specific sectors; however, firms registered under this regime are under no obligation to locate in specific zones. They must intend to export at least 95 percent of their output. Export processing zones are exempt from all customs duties and excise taxes on import of investment and intermediate consumption goods, but are subject to VAT, which can be refunded against proof of export, and to wage taxes. Registration under the EPZ regime offers a grace period on profit taxes of two to 15 years, depending on the type of activity. At the end of the grace period, profits are taxed at 10 percent, lower than the 30 percent applicable to common law firms. EPZ firms also benefit from a reduced tax rate on dividends

Exporters that were interviewed emphasized that loss of customers in the garment industry was a serious setback as it eroded buyer confidence which could take a long time to recover.

The survey was undertaken with respect to the members of the GEFP (Groupement des Enterprises Franches et Partenaires ). Most, but not all enterprises of the Exports Processing Zones are members of the GEFP.

Buyers usually call for bids on certain orders and quote a target price. Exporters in winning or losing the bid become cognizant of the price and other non-price competition. There is also buyer feedback from which exporters derive information on the competition.

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